Honeywell International Inc.

Good day, ladies and gentlemen, and welcome to Honeywell's second quarter earnings release. At this time, all participants are in a listen-only mode, and the floor will be open for your questions following the presentation. As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Reena Vaidya, Director of Investor Relations. Please go ahead, ma'am.

Thank you, Jake. Good morning, and welcome to Honeywell's second quarter 2021 earnings conference call. On the call with me today are Chairman and CEO Dariusz Sadomczyk and Senior Vice President and Chief Financial Officer Greg Lewis. This call and webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com forward slash investor. Note that elements of this presentation contain forward-looking statements that are based on our best view of the world and of our businesses as we see them today. Those elements can change based on many factors, including changing economic and business conditions, and we ask that you interpret them in that light. We identify the principal risks and uncertainties that may affect our performance in our annual report on Form 10-K and other SEC filings. We will review our financial results for the second quarter of 2021, share our guidance for the third quarter, and provide an update to our full year 2021 outlook. As always, we'll leave time for your questions at the end. With that, I'll turn the call over to Chairman and CEO Darius Adamczyk.

Thank you, Reena, and good morning, everyone. Let's begin on slide two. We delivered another outstanding quarter that exceeded the high end of our second quarter organic sales growth, second margin, and adjusted earnings per share guidance range with top-line growth and margin expansion in all four segments. We delivered organic sales growth of 15%, led by double-digit growth in safety and productivity solutions, annual building technologies, and advanced materials and performance materials and technologies. We also returned to growth in the commercial aerospace aftermarket and UOP amid promising signs of recovery in the oil and gas and aerospace markets. Segment margin expanded 190 basis points to 20.4%, driven by the impact of higher sales volumes. Adjusted earnings per share was $2.02, up 60% year-over-year and $0.06 above the high end of our guidance range. We delivered a strong second quarter in the first half of the year. I'm pleased with our performance and confident it will continue to execute and deliver through the ongoing recovery in our end markets. We're driving near-term growth in several areas of the portfolio, including warehouse automation, productivity solutions, building products, and advanced materials, while the industries most affected by the pandemic will continue improving throughout the year and into 2022. Orders were up over 20% year-over-year organically, driven by strength in aerospace, PMT, HPT, and productivity solutions, creating a strong setup for growth. As always, we continue to execute on our rigorous and proven operating system that drives outstanding shareholder value. Now let's turn to slide three to discuss our recent leadership announcements. Last week, we announced changes to our senior leadership team that will take place over the coming weeks and months. Honeywell's consistent success is driven by our highly talented and committed workforce, which is guided by our world-class leadership team. We have a deep bench of high-quality, capable leaders, as demonstrated by the recent announcements. First, Bimal Kapoor will succeed Rajiv Gowram as President and CEO of Performance Materials and Technologies. Rajiv will retire in August after 43 years of Honeywell and will serve as President Emeritus of Honeywell PMT until the end of January to ensure a smooth transition. Rajiv has led PMT for the past five years and guided the business through a deep industry downturn in 2020 with an unwavering focus on taking care of employees and customers. We greatly appreciate Rajiv's exemplary leadership over the past four decades. Vimal will transition to PMT from his prior role as President and CEO of Honeywell Building Technologies. He has been with Honeywell for 32 years and brings outstanding leadership capabilities and a deep knowledge of our end markets to the PMT CEO role. This will mark Vimal's return to PMT, where he was previously President of Process Solutions Business. Doug Wright will succeed Vimal as president and CEO of HBT. Doug joined Honeywell in July 2020 as president of HBT's fire and security business, bringing deep industry experience and has quickly made a significant impact. Prior to joining Honeywell, Doug was president and CEO of Source Photonics, a global provider of optical communications products used in telecommunication systems and data communication networks. Prior to that, Doug spent six years at United Technologies, where he served as president of Asia, where the company's fire and security business based in Shanghai, and president of the company's $2.5 billion automation and control solutions business. Finally, Ben Driggs has been named chief operating officer of Global High Growth Regions and will succeed Shane Tetrahadi as president, Global High Growth Regions, when Shane retires at the end of 2021 after 17 years with Honeywell. Shane has played an essential role in establishing and aggressively growing Honeywell's presence in high growth regions. And we appreciate everything he has done to make Honeywell a truly global company. Shane will remain in an advisory capacity over the next three years. Ben has been with Honeywell for more than 16 years and brings a wealth of global experience to his new role as COO of Global High Growth Regions. Most recently, Ben was Vice President of Global Strategic Accounts, where he was responsible for all aspects of our relationships with key customers at a global level. Prior to this role, Ben served in a variety of positions with Honeywell, including President of Americas Aerospace, President of Honeywell Latin America, and the Vice President of Aerospace Asia Pacific. I'd like to thank Rajiv and Shane for the numerous contributions they made to Honeywell over their highly productive careers. I'd also like to congratulate Vimal, Doug, and Ben on their new roles. Let's turn to slide four and talk about another exciting recent announcement. The combination of Honeywell Quantum Solutions and Cambridge Quantum Computing, or CQC, forms the largest, most advanced standalone quantum computing company in the world. Honeywell's H-series quantum computer offers the world's highest demonstrated quantum volume of 1,024, and CQC has the first and most advanced quantum operating system. Together, they create a unique, full-stack quantum player in a league of its own. Quantum computing will absolutely remain a key breakthrough initiative for Honeywell. We will own a majority of the stake in the new company, commensurate governance rights, and we'll have a long-term agreement to help manufacture the critical ion traps needed to power the company's quantum hardware. Honeywell's business will also continue serving as a proving ground for the company's quantum offerings. The combination of Honeywell Quantum Solutions and CQC is essential to advancing the value that quantum solutions provide to customers. To advance this value, the new company will co-develop integrated quantum hardware and software solutions to enable a one-stop shop for quantum customers. Additionally, The focus will be on developing hardware agnostic software solutions and a unique quantum operating system, which is optimized for the quantum hardware on which it is used. These technologies will support customer needs for improved computation in diverse areas, including cybersecurity, drug discovery and delivery, material science, finance, and optimization across all major industrial markets. We're already working with global customers to deliver solutions for markets with massive scalable commercialization opportunity, including JP Morgan, BMW, Samsung, Google, DHL, and many others. The combined company holds over 150 technical patents and will have a staff of approximately 330 people, which is the largest pool of quantum talent in the world, more than 120 of whom hold doctorates and over 200 of whom are scientists, including some of the world's leading quantum computing experts. The long-term financial prospects of the new companies are substantial. The combination is expected to significantly accelerate the path to commercial scale, creating the potential for approximately $1 billion in sales within two to five years. We are excited about the new company's prospects, and we expect to continue to be a global quantum computing leader, shaping the future of what is projected to become a $1 trillion industry over the next 30 years. Now, let me turn it over to Greg on slide 5 to discuss our second quarter results in more detail and to provide an update on our 2021 outlook.