Honeywell International Inc.

Thank you for standing by, and welcome to the Honeywell Fourth 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, Camilla. Good morning, and welcome to Honeywell's fourth quarter 2023 earnings and 2024 outlook conference call. On the call with me today are Chief Executive Officer Vimal Kapoor and Senior Vice President and Chief Financial Officer Greg Lewis. 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 our 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 fourth quarter and full year 23, discuss our outlook for the year, and share our guidance for the first quarter and full year 2024. As always, we'll leave time for your questions at the end. With that, I'll turn the call over to CEO, Dhimo Kapoor.

Thank you, Sean, and good morning, everyone. To start, I would like to acknowledge some important leadership changes announced this morning. First, Honeywell's board of directors has elected me to take on additional role of chairman when our current executive chairman, Darius Adamczyk, retires from the board in June. Additionally, Bill Ayer has been elected to succeed Scott Davis as independent lead director of the board effective this May. First, I want to thank Darius for his innumerable contribution to Honeywell as well as his mentorship over the past two years in particular. I would also like to thank Scott for his insights over the past four years as independent director and leadership throughout the CEO succession process. Congratulations to Bill for his appointment as our new lead director. I look forward to partnering with him in achieving Honeywell's strategic growth initiatives. Lastly, I would like to thank Darius and the board for their support in naming me chairman. I'm humbled and honored to lead this great company and wake up every day energized to take on world's toughest challenges along with our 100,000 future shapers. Now let's turn to the main topic of today and discussion on slide three. We had a solid finish to another challenging year, delivering on our 2023 commitments. Honeywell's world-class accelerator operating system and differentiated portfolio of technology enabled us to achieve our initial full-year guidance for organic growth, adjusted earnings per share, and free cash flow, and surpass the high end of our original guidance for segment margin expansion. Fullier's organic growth of 4% year-on-year was a strong demonstration of resiliency by our long-cycle aerospace and energy-oriented businesses, while we await acceleration in some of our short-cycle businesses as markets continue to normalize. Before we get into a more detailed discussion on 2023 results and 2024 outlook expectations, let me take a minute to revisit my priorities for Honeywell. First, our aim is to deliver the upper end of our long-term organic sales growth target range of 4% to 7%. In order to achieve that, we are enhancing our innovation playbook, accelerating our offering in sustainability and software, monetizing our install base, and leveraging our leadership position in high-growth regions. Second, over the last six years, the effort of the great integration have transformed Honeywell into an integrated operating company that deploys world-class capability at scale and multiple growth enablers that benefit the entire enterprise. We are evolving Honeywell Accelerator version 3.0 of our operating system to drive further value through standardization by business model built on our contemporary digital backbone. In addition to making this organization simple and more efficient to operate, Accelerator is a powerful source of profitable growth, all of our businesses and potential addition to our portfolio. Third, we continue to evaluate and undertake actions to optimize our portfolio. We'll do so by executing on strategic bolt-on acquisitions while divesting non-core lines of business to consistently upgrade the quality of the portfolio and accelerate value creation. This is a powerful combination which delivers profitable growth and strong cash generation, creating a compelling long-term value proposition for our shareholders. Now let's turn to slide four to discuss our progress on portfolio shaping goals. In the fourth quarter, we announced the acquisition of Carrier's global access solution business for nearly $5 billion, enabling Honeywell to become a leader in security solution for the digital age. This transaction, which is clearly in line with our strategic bolt on M&A framework, further enhances our equipment agnostic, high margin product business mix within building automation. Honeywell's overall security portfolio will be more than a billion dollars in sales, one the deed closes this year, growing at a creative rate to support Honeywell long-term growth framework. In addition, earlier in January, Continuum announced its first equity rate since the merger of Honeywell Quantum Solution and Cambridge Quantum Computing in late 2021, securing $300 million at a pre-money valuation of $5 billion demonstrating Continuum's leading position on fault-tolerant quantum computing. The round was anchored by Continuum's strategic partner, JPMorgan Chase, with additional participation from Mitsui and Company, Amgen, and Honeywell. This investment brings the total capital raised by Continuum since inception to approximately $625 million. Quantum computing is a key enabler for AI to reach its scale potential, and Continuum is a pioneering key breakthrough and expanding use cases across a number of industries. Honeywell remains the majority owner with over 50% equity ownership, and we are committed to demonstrating a path to monetization of our stake within the next 18 months. With the recent portfolio announcement, we are on a track to accelerate capital deployment and exceed our commitment to deploy at least $25 billion of capital in 2023 through 2025 with a bias towards high-value, creative M&A. Our balance sheet trend continues to give us meaningful capacity for both opportunistic share repurchases and M&A and the ongoing relatively favorable deep environment in 2024 will support the execution of our M&A strategy on a consistent basis. Before I hand over to Greg, let me turn to slide five to review some of our recent exciting wins. Let me briefly highlight some of our recent commercial proof points. These wins demonstrate innovation across our portfolio and support Honeywell's recently announced plans to align its portfolio to three compelling megatrends, automation, future of aviation, and energy transition, all underpinned by robust digitalization capability and solutions. In Aero, we secured over $1 billion in new avionics and mechanical wins directly with airlines carriers in 2023, representing over 2,500 aircrafts. With a strong start to 2024, United chose Honeywell to provide a wide range of advanced avionics for close to 350 aircraft that will enter into service over the next decade. This win is another encouraging demand signal and demonstrates the strength of our offering in the marketplace. In the energy space, our battery energy storage solution will be deployed to six solar parks in U.S. Virgin Islands. When completed, our automation solution will boost the island's decarbonization effort by fulfilling 30% of the energy need through renewable sources, lowering both emission and consumer energy costs. We remain excited about our sustainable solutions portfolio and Honeywell's position at the forefront of world's ongoing energy transition. Finally, we'll be incorporating our hydrogen purification and carbon capture technologies into a multibillion-dollar low-carbon ammonia project. Through this, up to 97% of the plant's carbon dioxide emission can be sequestered, and the project could remove up to 7 million tons of CO2 pollution over per year. This project is yet another example of Honeywell's ability to help solve our customers' tougher challenges and a sign of what's to come for our energy and sustainability solutions business. Now let me turn it over to Greg on slide six to discuss our fourth quarter and full year 2023 results in more detail and also provide guidance for 2024.