Honeywell International Inc.

Good day, and thank you for standing by. Welcome to the Honeywell First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Sean Mecham. Vice President of Investor Relations. Please go ahead.

Thank you, Shannon. Good morning and welcome to Honeywell's first quarter 2022 earnings. On the call with me today are Chairman and CEO Darius Adamczyk and Senior Vice President and Chief Financial Officer Greg Lewis. Also joining us are Senior Vice President and General Counsel Ann Madden and Senior Vice President and Chief Supply Chain Officer Torsten Pils. This call and webcast, including any non-GAAP reconciliations, are available on our website at www.honeywell.com forward slash investor. Honeywell also uses our website as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our investor relations website in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media. 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. This morning, we will review our financial results for the first quarter of 2022, share our guidance for the second quarter, and provide an update on our full year 2022 outlook. As always, we'll leave time for your questions at the end. With that, I'll turn the call over to our Chairman and CEO, Dariusz Adamczyk.

Thank you, Sean, and good morning, everyone. Let's begin on slide two. First off, our collective thoughts are the millions of Ukrainian refugees, and we hope to see a peaceful resolution quickly. A number one priority continues to be the safety and security of our employees, and partners in the region and respond to their immediate needs. That said, we delivered a very strong first quarter despite a challenging backdrop that included ongoing supply chain constraints, inflation headwinds, and global unrest. I'm pleased with our disciplined execution as we navigate these dynamics and capitalize on the ongoing recovery in our end markets. We met or exceeded our first quarter commitments despite these challenges with adjusted earnings per share of $1.91, down 1% year-over-year, about 1 cent above the high end of our guidance range. Organic sales grew by 1% year-over-year, and our commercial aviation aftermarket, building products, productivity solutions and services, advanced materials, and recurring connected software businesses all delivered double-digit organic growth. This was partially offset by 2% percentage point impact from lower COVID-related masks, sales, as we lapped the height of the demand in 2021. Our strong price realization allowed us to stay ahead of the inflation curve. We expanded segment margin by 10 basis points year over year, 10 basis points above the high end of our guidance range. Excluding the impact of our investment in Quantinium, the margin expansion rate would have been 40 basis points year over year. Orders in backlog growth accelerated in the first quarter, indicating strong demand momentum despite macro headwinds, led by strength in Arrow, HVT, and PMT, our end markets continue to recover. We'll go into more details on orders and backlog trends on the next slide. The first quarter is seasonally our lowest from a cash perspective, and as we communicated, this year it is being exacerbated by the supply chain impacts and strong collections in Q4. We generated $50 million of free cash flow in the quarter. These results do not change our full-year free cash flow guidance range of $4.7 billion to $5.1 billion, which Greg will discuss later. We continue to leverage our strong balance sheet, deploying $2 billion of total capital in the first quarter, including $1 billion allocated to share repurchases as we began execution of our recently updated commitment to buy back $4 billion in shares in 2022. From an M&A perspective, we closed the acquisition of U.S. Digital Designs, a public safety communications hardware and software solutions provider. Looking forward, I continue to be encouraged by the strength we're seeing in many areas of our portfolio as we execute our rigorous and proven value creation framework. Our accelerator operating system is driving outstanding shareholder value. Now let me turn to slide three to discuss our orders and backlog trends. First quarter orders across Honeywell grew 13%, the strongest growth we have since the start of 2021, with the exception of second Q21 growth, which benefited from 2020 COVID-related lows. Despite ongoing macro challenges of the last few years, our book-to-bill ratio has been greater than one for the last several quarters, indicating the strength of our demand and commercial success. Long cycle orders grew over 20% in the first quarter, led by strength in the overall aerospace portfolio, P&P process solutions projects, and SPS warehouse automation, which will help facilitate sustained growth through the coming years. First quarter backlog increased 9% year over year to $28.5 billion, or up 10% excluding the impact of approximately $300 million of backlog removed due to the Russia conflict. Backlog growth has also been accelerating consistently over the last two years as our end markets recover, giving us confidence in increased sales growth as the supply chain environment eases. Now let's turn to slide four to discuss some exciting recent announcements. Last month, we announced a strategic collaboration of Automotors, a division of ClearPath Robotics that gives warehouse and distribution centers throughout North America an automated option to handle some of the most labor-intensive roles in an increasingly scarce job market. The collaboration enables Honeywell customers to increase efficiency, reduce errors, and improve safety by deploying Autos autonomous mobile robots in their facilities. These autonomous mobile robots handle repetitive and often time-consuming tasks and allow scarce labor resources to be shifted to higher-value jobs. This helps boost worker satisfaction while reducing injuries and turnover rates. The pandemic and its lasting effects on labor shortages is causing companies to reconsider the way they operate, and companies are more willing than ever to invest in automation. We also recently announced that we'll support supply Hekate Energy's energy storage system for a solar park located in northern New Mexico. When completed in mid-2022, the 50-megawatt solar farm will be capable of supplying enough electricity to power up to 16,000 average New Mexico homes, which will help meet the state's decarbonization goals. When combining with Honeywell's Experian energy control systems, the energy storage systems will enable customers to accurately forecast and optimize energy costs at the site and will support access to reliable and cost-effective clean energy. Honeywell remains on the forefront of innovation that is leading the energy transition. Energy storage will play a critical role in renewable power generation and will be vital to the decarbonization of global power systems. Lastly, We are teaming up with World Energy, our carbon net zero solution provider, and Air Products, the world's largest hydrogen producer, to build one of the most technologically advanced sustainable aviation fuel production and distribution sites ever constructed. The facility will produce fuels that will displace over 76 million metric tons of carbon dioxide by 2050, the equivalent of 3.8 million carbon net zero flights from LA to New York. World Energy and Honeywell collaborated over the past nine years, and this long-term engagement will continue to transform the industry, support the growth of zero carbon economy, and help accelerate the decarbonization of the aviation industry. These exciting announcements reinforce our message at Investor Day, that our innovative culture our commitment to providing efficient and sustainable solutions to meet the needs of our customers, and our new technologies will be integral to the next leg of growth. Now, let me turn it over to Greg on slide five to discuss our first quarter results in more detail and to provide an update on our 2022 outlook.