Honeywell International Inc.

Thank you for standing by, and welcome to the Honeywell first quarter 2023 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. Please be advised that today's call is being recorded. I would now like to hand the call over to Sean Mecham, Vice President of Investor Relations. Please go ahead.

Thank you, Liz. Good morning, and welcome to Honeywell's first quarter 2023 earnings conference call. On the call with me today are Chairman and CEO Darius Adamczyk, Senior Vice President and Chief Financial Officer Greg Lewis, President and Chief Operating Officer Vimal Kapoor, and Senior Vice President and General Counsel Ann Madden. This webcast and the presentation materials, including non-GAAP reconciliations, are available on our investor relations website. From time to time, we post new information that may be of interest or material to our investors on this website. Our discussion today includes forward-looking statements that are based on our best view of the world and of the businesses as we see them today and are subject to risks and uncertainties, including the ones described in our SEC filings. This morning, we will review our financial results for the first quarter, share our guidance for the second quarter, and provide our update to our full year 2023 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, Sean, and good morning, everyone. Let's begin on slide two. To open today's discussion, I'd like to take a moment to reflect on what our company has accomplished over the past seven years. We've consistently outperformed against the market and our peers, doubling our share price over that timeframe. We undertook a radical transformation agenda, dramatically simplifying and digitizing our operations and supply chain, resulting in a much more contemporary company, which is a platform for growth. We launched a software business, Honeywell Connected Enterprise, that continues to generate not only value for our customers, but accretive growth and profitability for Honeywell. We also reshaped the portfolio, spinning off three sizable businesses while selling to others and adding 16 successful acquisitions, reducing cyclicality and enhancing our margins. We reconfigured our strategic business groups to better align with end market opportunities and customer needs. We built that culture of innovation that has led to significant new breakthrough technologies and ultimately meaningfully stronger organic growth. Last, and I'm not breaking any news here, this will be my last earnings call as the CEO of Honeywell. As BIML transitions into the CEO role in just over a month and I become executive chairman, it's a great example of the emphasis Honeywell places on leadership development and succession planning. With his decades of experience and success leading businesses across our portfolio, Vimal is absolutely the right person to take on the CEO mantle for Honeywell into the next phase of our transformation. I look forward to supporting him over the next year, providing him with additional bandwidth by helping with mergers and acquisitions activity, spending time with customers, and strategic planning. Our future is bright. With that said, the present is pretty good too. Let's turn to slide three to discuss our first quarter performance. We delivered a very strong first quarter, exceeding the high end of our first quarter organic sales, segment margin, and adjusted earnings per share guidance, despite ongoing macroeconomic challenges. I'm pleased with our disciplined execution and differentiated technologies that enable us to overdeliver on our commitments. First quarter organic sales were up 8% year-over-year, led by double-digit growth in our aerospace and PMT businesses, underpinned by a rigorous operational execution. The first quarter backlog grew to a new record of $30.3 billion, up 6% year-over-year and 2% sequentially due to continued strength in aerospace and performance materials and technologies. Similar to last quarter, orders remain a very positive story in aero and PMT, up double digits organically in each. leading to 1% organic growth and 8% sequential growth overall in the first quarter, overcoming the difficult year-over-year constant HBT and SPS. We remain confident in our 2023 setup as we capitalize on recovering end markets combined with solid operational execution. Our segment margin expanded 90 basis points year-over-year, led by robust expansion safety and productivity solutions and honeywell building technologies. is our strategic pricing actions enable us to remain ahead of the inflation curve, and we benefit from our productivity actions. Excluding the net impact of the settlements, as we discussed in our guide, free cash flow was $300 million in the first quarter, in line with our expectations, and operationally stronger than 2022. We deployed $1.6 billion to dividends, growth capex, and share repurchases, including opportunistically repurchasing 3.5 million shares throughout the quarter, reducing our weighted average share count to 673 million. We also announced the acquisition of Compressor Controls Corporation this week, which BIMO will provide more detail on shortly. Looking forward, I am encouraged by the strength we're seeing in many areas of our portfolio. We continue to execute our proven value creation framework, which is underpinned by our accelerator operating system. I am proud of our ability to over-deliver another quarter amidst a challenging external environment. Next, let's turn to Vimal to discuss some exciting recent announcements.