Carrier Global Corporation

growth by delivering double-digit growth in global commercial HVAC and aftermarket, both for the fourth consecutive year, to help offset unexpected weakness in residential light commercial HVAC in Europe and China. Total company orders were up low teens, with HVAC America supplied up about 40%. Our global commercial HVAC backlog is up mid teens versus last year, positioning us for another year of double digit growth in 2025 in that business. For overall carrier, organic growth and strong productivity contributed to close to 100% core earnings conversion, 180 basis points of margin expansion, and 16% adjusted EPS growth. We delivered these strong results while we successfully completed our portfolio transformation. We integrated with Beesman Climate Solutions and executed on our divestitures, yielding over $10 billion in gross proceeds. And as committed, we paid down debt and returned to roughly 2x net leverage. We also returned over $2.6 billion to shareholders through dividends and share repurchases. Turning to slide three, I think of our year since spin in three phases. During our first phase, we built a foundation for a new carrier. We promoted and added key talent. We launched and have lived a new culture embedded in the carrier way that has given us tremendous energy and a focus on growth and innovation. We launched carrier excellence to drive operational execution, excellence, and productivity. We invested in our product portfolio and developed and implemented our aftermarket playbook to position us for sustained organic growth. We sold Chubb, added Toshiba, simplified the backed office, and paid down debt. 2023 and 2024 were defined by our mantra of performing while transforming. We sharpened our vision and successfully transformed our portfolio. We now have greater bandwidth to create even more value for our customers and thus our shareholders. Focus, simplification, differentiation, customers, win, grow. The new phase accelerating growth has begun, and there is tremendous energy within Carrier. As we navigated this transition, we have been purposefully increasing our addressable market and value proposition for our customers, as you can see on slide four. In 2020, we began to not only increase our investments in our product portfolio, we significantly increased our focus on digitally enabled lifecycle solutions. Aftermarket has increased our addressable market, contributed to margin expansion, all while creating greater customer stickiness and increasing recurring revenues. Now, in addition to driving differentiated products in aftermarket, we are introducing fully integrated systems, which further increase customer value across our three targeted ecosystems, homes, buildings, and the cold chain. For integrated systems in homes, we are significantly expanding and enhancing our European home energy management system offerings. And through a newly created business within Carrier called Carrier Energy, we are bringing similar offerings to the United States. For the U.S., we are actively working with utilities to provide an end-to-end integrated battery heat pump solution with automated controls to run the system using stored energy during peak hours, while recharging the system during the trough of energy grid usage. The interest from utilities and other customers has been very encouraging to address grid constraints and resiliency. Within building systems, one offering is our integrated cooling solution for data centers that we announced last week under the brand of Quantum Leap. By combining traditional cooling, liquid cooling, and our building and server management systems, we provide differentiated, more efficient solutions for our customers in this important and growing vertical. For cold chain solutions, we are transitioning from solely selling reefers to providing end-to-end systems enabled by our Lynx digital platform and Sensatech technologies. Selling complete, integrated systems provides us with a new and important opportunity for differentiation, customer value, and increased revenue streams. Slide five lays out our strategic focus areas and priorities for 2025. In addition to our growth initiatives that we just discussed, we also remain laser focused on margin expansion through carrier excellence while maintaining disciplined capital allocation. We deeply embed our priorities throughout our organization through a structured goal alignment process. Slide six shows how these priorities are reflected in our 2025 guidance. Given our strategic positioning, we expect organic growth of mid-single digits with our fifth consecutive year of double-digit growth in aftermarket and global commercial HVAC. We will continue to drive productivity and expect 100 basis points of year-over-year margin expansion. We expect adjusted EPS to be up 17% at the midpoint and about 100% free cash flow conversions. As we look ahead, we will continue to focus on execution with investment climate solutions, which we discuss on slide seven. Obviously, 2024 was well off what we expected coming into the year. Nevertheless, I am proud that the team controlled the controllables and drove share gains, significant cost synergies, and key new product introductions. The team also took the tough but necessary actions to significantly reduce both temporary and structural overhead costs positioning us for strong margin expansion as growth returns. Looking at our growth algorithm for 2025, given political and economic uncertainty in Europe, we assume that market volume will be flat to down mid single digits. In addition, we expect a five point full year revenue headwind associated with last year's Q1 backlog reduction, which normalized at the beginning of Q2 of last year. On the positive side, We expect continued positive mix with double digit growth in heat pumps, offsetting a modest decline in boilers. Similar to last year, we expect VCS aftermarket to grow double digits, and we also expect a point or so of price. New products introduced last year, including the 19 and 40 kilowatt heat pumps, will see a full year of sales in 2025. We are introducing a full lineup of cascadable heat pumps up to 560 kilowatts with natural refrigerants that we will be selling through the Wiesman Channel. As we think about revenue synergies, we are excited for the ISH trade show in Frankfurt in March, where we will showcase our new multi-brand products, such as our newly launched carrier branded air conditioning units that we will also be selling through the Wiesman Channel. We gained share in key European geographies last year and expect that to continue in 2025. And the team has been putting all the pieces together to significantly increase our complete home energy management system sales this year and beyond. We also remain confident in margin expansion and cost synergies. So all in, we expect a strong year across Carrier with accelerated organic growth, margin expansion, EPS growth, and strong free cash flow. With that, let me turn it over to Patrick. Patrick?

Thank you, Dave, and good morning, everyone. Please turn to slide eight. In short, Q4 earnings were ahead of our expectations in the guide we provided in October. Reported sales were $5.1 billion, with 6% organic sales growth, including about two points of price and four points of volume. We had a favorable 13% net impact from acquisitions and divestitures. Organic sales were in line with expectations, driven by continued strength in global commercial and North America residential HVAC, partially offset by weakness across residential light commercial HVAC in Europe and China. Q4 adjusted operating profit was up 65% compared to last year, driven by the contribution of Wiesman Climate Solutions, the benefit of organic growth and productivity. As a result, adjusted operating margin expanded by 370 basis points compared to last year. The absence of commercial refrigeration was about a half point tailwind to margin. Adjusted EPS of 54 cents was up 50% year over year. Operational performance was in line with our guide and we benefited from discrete tax items. Net interest expense was a bit light versus our guide, given the earlier close of the commercial and residential fire business. Free cash. and are now referred to both continuing and disc ops was an outflow of about 90 million in the quarter. Full year free cash flow of $30 million was about 200 million better than we guided. Having closed residential and commercial fire in early December, we picked up the pace on share repurchases and we ended 2024 with about $1.9 billion of share repurchases, about a billion dollar more than our October guide. Moving on to the segments, starting on slide nine. The HVAC segment had another strong quarter with organic sales growth of 11%. Organic sales in the Americas were up high teens. Within the Americas, commercial was up mid-teens, and light commercial was a little better than expected and down around 10%. In the fourth quarter of 2023, light commercial was up about 20%, so certainly a tough comp. Residential was up 35%, mostly driven by strong volume compared to a very weak Q4 last year, which was about minus 20%, as our channel was in destocking mode a year ago. On the last earnings call, we mentioned that we expected no material pre-buy in Q4. The actual pre-buy was in line with expectations and movement was stronger than expected. that is sales from our distributors to installers, has continued to be strong in January this year. Organic sales in EMEA were flat, driven by double-digit growth in commercial, offset by a decline in residential and light commercial HVAC, reflecting continued market weakness. Organic sales in Asia were slightly positive, driven by strength in Japan and South Asia, partially offset by declines, in our residential and light commercial business in China. The HVAC segment adjusted operating margins were up 250 basis points, driven by the benefit of organic growth and strong productivity. As you can see at the bottom of the slide, 2024 was another great year for our HVAC business with continued growth and margin expansion. Transitioning to refrigeration on slide 10. Q4 was the first quarter without commercial refrigeration given its exit on October 1. Overall results for this segment were as expected. Our global truck and trailer business was down around 10%, with North America down about 25% and Europe down low single digits, only partially offset by high single digit growth in Asia. Container was down low single digits. Our aftermarket and sensor tech businesses were both up mid single digits. Operating margin expanded by 160 basis points year over year. For the full year, this segment was down 1% organically with container up roughly 25%, mostly offset by declines in North America truck and trailer. Margins expanded 20 basis points. Turning to slide 11. Total company orders, total company organic orders were up low teens. Overall HVAC orders were up about 5% with continued strong orders growth in the Americas at about 10%. EMEA and Asia organic orders were down mid-single digits. In Asia, weak orders in China residential light commercial HVAC were partially offset by China commercial HVAC orders and strength in other countries. Globally, commercial HVAC orders were up about 10%. Refrigeration orders were up around 55% in the quarter, mostly as a result of very strong growth in North America truck trailer on an easy comp. Truck and trailer orders in Europe were up over 20% and Asia orders were up mid single digits. Overall, we entered 2025 with robust longer cycle backlogs in commercial HVAC and orders momentum in key businesses. Moving on to slide 12, and shifting to 2025 organic sales guidance. We expect mid single digit organic growth and reported sales of between $22.5 and $23 billion. This also includes a $750 million year-over-year headwind from the commercial refrigeration exit. We expect roughly one point of price and the remaining organic growth to come from volume and mix-up. We expect currency translation to be at about a point of headwind. The organic growth for bore segments is expected to be up mid-single digits for 2025. Within HVAC, we expect the Americas to be up high single digits, driven by continued double-digit growth in commercial, high single-digit growth in residential, driven by the new refrigerant mix-up, and low to mid-single-digit growth in light commercial. We expect Europe to be up low single digits with commercial up double digits and flat sales growth in residential and light commercial. David just walked you through our assumptions for flat sales growth in this market segment. Finally, within Asia, we expect low single digit sales growth with China sales flat and mid single digit growth outside of China. Within refrigeration, we expect global truck and trailer to be up mid single digits with North America truck trailer returning to growth in the second half of the year. We expect mid to high single digit growth in container and double digit growth in sensor tech. Moving on to slide 13, profit and cash guidance. Total company adjusted operating margin is expected to be up about 100 basis points compared to 2024, with half of the increase driven by volume price and net productivity partially offset by investments the absence of commercial refrigeration contributes 50 basis points of margin expansion core earnings conversion that is excluding the impact of acquisitions divestitures and effects is expected to be about 30 percent we estimate free cash flow to be about 2.4 to be between 2.4 and 2.6 billion dollars reflecting roughly 100 conversion with normal seasonality. Finally, we intend to repurchase about $3 billion in shares. Through last week, we repurchased about 900 million of shares so far this year. We estimate that average diluted share count for 2025 will be down about 5% from 2024. Moving to slide 14. We expect adjusted EPS between $2.95 and $3.05 up 17% at the midpoint. The building blocks are identical to what we shared with you on the last earnings call, except for currency. Adjusted EPS growth includes about 30 cents of operational performance, driven by volume leverage, price and net productivity, and about $45 million of corporate stranded cost elimination, partially offset by investments. We expect foreign currency translation to represent a headwind of about five pennies. As a result of debt pay down, we expect net interest expense to be a 5 to 10 cent tailwind. Finally, we expect a lower share count, partially offset by 22% tax rate and NCI, to provide another 10 to 15 pennies of EPS benefit. With respect to capital deployment, we'll pay down 1.2 billion worth of debt this quarter. The dividend per share increases by 18%. And as I mentioned earlier, share repurchase are expected to amount to $3 billion this year. As usual, additional guide items are in the appendix on slide 17. Finally, let me provide some additional color on the first quarter. We anticipate Q1 revenues to be about flat sequentially, a little more than $5 billion, with first quarter organic revenue growth flat to up low single digits. This reflects continued strength in global commercial HVAC and a tough comparison in Resulite commercial HVAC in Europe and China. We expect organic growth for refrigeration to be about flat. We expect about 100 basis points of margin expansion in Q1 and adjusted EPS to be between 55 and 60 cents. So overall, we ended 2024 on a strong note, and expect 2025 to be another year of strong financial performance. With that, we'll open it up for questions.

Thank you. If you'd like to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Our first question comes from Jeffrey Sprague with Vertical Research. Your line is open.

Thank you. Good morning, everyone. Good morning, Jeff. Good morning, Dave, Patrick. Mike, good to hear you there, too. Can we just drill a little bit more into Resi and, you know, what you saw in the quarter? So, you're characterizing it, I guess, as no pre-buy or no significant pre-buy. Maybe you can just kind of elaborate on that. Does that suggest you're holding inventory that you'll sell into the channel in Q1 and or any other kind of color on how to kind of piece these moving parts together?

Yeah, Jeff, we'd say that we had a bit of pre-buy, basically what we thought back in October. We shipped about 75 to 100 million worth of 410A units that we would characterize were pull ahead from this year into last year. And we calculate this by looking at the inventory levels that are held by our distributors, which were Just slightly elevated versus the same time last year. And as Patrick said, movement was very strong in 4Q. Movement was up about 15% from our distributors to our dealers. And we were up about that same amount in January. The first week of February was a little bit lower than that. So look, inventory in the channel, not too high. Movement, good. So we think that nearly everything we shipped was underlying true demand with maybe 75 to 100 of pre-buy.

And Jeff, we will be selling from inventory in Q1. You will be. Yes, we will sell some 410A in Q1 from inventory.

Right. And then so getting the high single digit for the year, we've got some 410A in Q1, and then we've sort of got price-related mix effects for the balance of the year, getting us the high single digit. What do you think the – kind of realized prices on the 454B units on an all-in basis?

Yeah, Jeff, about 10%. But let me walk you through the high single digits. It's really along the lines you were saying. So we think that volume will be flat to down low single digits, which includes that modest pre-buy that I just mentioned. Then we expect base price to be up low single digits. So between those two, you're about flattish. The benefit of the mix up of the transition to be high single digits. So 80% of our volume is impacted by the refrigerant transition. 20% is not affected because they're either furnaces or things we ship to Canada. Of that 80%, Jeff, we expect about 90% of that to be 454B and about 10% to be the 410A. And of that 454B, we expect a 10% to realize a 10% price increase. So that mix-up alone, that gets you to about 7% sales growth. And then we expect modest growth in the remaining 20% of the business.

Thank you for that great color. And maybe just a quick one, and I'll pass it on. Just on the share repurchase question, You know, I think many of us thought you might do an ASR. It looks like you bought a lot regular way in Q4. Is that the plan for the balance of 2025 also, is just regular way share repo?

Yes, Jeff. Exactly as you said, we achieved the same thing without an ASR. And from now until the balance of the year, we'll expect to be in the market throughout the year.

Great. Thank you.

Thank you.

Thank you. Our next question comes from Andy Kaplowitz with Citigroup. Your line is open.

Good morning everyone.

Good morning Andy.

Dave, so maybe just a little more color into your outlook for VSIN in 25. I know for a while you were talking about a stronger potential revenue growth as possible in 25 and now you're talking about this 24 backlog reduction headwind. Of course German elections are coming up so maybe just talk about the visibility to get to that flat growth and Is it de-risked now, in your opinion, in the guide? And when you look at the items that are in your control, you know, aftermarket price synergies, how much visibility do you have in getting those pieces of growth?

Yeah, I think so. I think that it's a very balanced guide, perhaps conservative, but we'll see. I mean, look, when we look at the total market, we just have to be honest that there is a fair amount of economic and political uncertainty in Europe. So we put that volume at flat to down 5%. And we did see, I think first quarter of last year was the last quarter that I think we shipped out of some level of excess backlog. So that now normalizes in the second quarter of this year, but that will cause us about five points of total full year headwind. The stuff that, so, you know, that kind of walked us down to say five, 10, down five to 10. But when we look at what's in our control, three to four points of mix-up, that assumes double-digit heat pump growth and downs a bit in boilers. And we have pretty good visibility to that. If you look at the second half of last year, just in Germany, the subsidy applications were up around 65% year-over-year, up 60% on a two-year stack. Wiesman heat pump orders in the second half were up about 40%. You know, some early indications that there's, you know, underlying demand for heat pumps in Germany. So three to four points of mix up. We'll get a point or two of aftermarket with double digit growth, a point or so of price. And then that bucket of revenue synergies, you know, we're looking at about 100 million of revenue synergies this year around the globe, probably 70% in Europe. And I can tell you, Andy, we have that like line by line, the air conditioning units with carrier brand going through the V cement channel. We have hydronics, we have system level sales that we taking from Europe using for HEMS in the United States. We have multi-brand strategy in China. So details on the revenue synergies. System selling could be a new frontier for us this year as we really put the wheels in motion to drive that. Share gains again this year, NPI again this year. We feel good about what's in our control and we'll keep, keep an eye on the market.

Very helpful, Dave. And then David Patrick, it looks like you're forecasting some like low thirties, incrementals for HVAC and 25, maybe puts and takes to get there, especially because it's topical around tariffs. How do you account in your bridge? Do you put the China in there? And then there's obviously steel and aluminum that just got passed. Can you remind us of the cost structure on that side of the business?

Yeah, I'll just talk very high level on the tariffs. We have embedded into our guide what's happened with the tariffs related to China, and those are fully mitigated in our guide for this year. With respect to what has happened more recently about some of the materials, most of the materials we purchase, such as steel, actually come from US vendors. In addition to that, we are pretty well blocked for the full year in North America. I think we're blocked for about close to 80% of our steel volume. So generally, we think we're in a pretty good position there. With respect to your questions on the margins for next year, and I'll talk at the overall company level because given the size of HVAC, it applies to that as well. What you can think about is differently than in 24. In 25, we expect a bigger contribution from organic sales growth. That's both volume and, of course, the mix-up. That combined with strong productivity, those are the main drivers of margin expansion, and that then would be offset by reinvestments in our business. And so it's really driven by organic growth, continued strong productivity, The impact of the mix-up, of course, offset by reinvestments in our business.

Appreciate all the color.

Thanks, Andy. Thanks, Andy.

Thank you. Our next question comes from Julian Mitchell with Barclays. Your line is open.

Hi, good morning.

Morning.

morning maybe just first off on the organic sales guide for the year so you're starting out with sort of flat up slightly in the first quarter total company the years up mid single digits so maybe walk us through kind of how we think about growth for the the rest of the year after q1 and you know maybe put a finer point on a cadence of a couple of the businesses most in focus which of these men and and the Americas Resi HVAC, please.

Yes, so Julian, from an overall company point of view, so I said flat to low single digits in Q1. That would also, as I mentioned, mean refrigeration flattish and HVAC, therefore low single digits. Within Q1, VCS, because of the tough comp that Dave referred to, likely between 10% and 15% down in Q1. And then starting in Q2, we expect sales growth to be in the high single-digit range for the overall company. And that includes or is particularly the case for HVAC and also for Wiesman. We expect Wiesman in Q2 to be mid-single digits of growth and then the rest of HVAC to be pretty strong as well. And so that takes you Q2 in the high single-digit range. We expect that to continue into Q3. and then the Q4 sales growth to maybe taper down a little bit to the mid-single digits.

That's very helpful. Thank you. And then maybe if you could focus for a second just on the light commercial business in the Americas. There's often a lot of investor concerns around decline there, and obviously the orders quarter to quarter are lumpy. Your guiding for revenue is, growth, I think, you know, low to mid-single digits for this year ahead in America's light commercials. Maybe just help us understand kind of how you see the market dynamics there. Any concerns around the education vertical given ESRA funding moving lower? Any color on that vertical would be great.

Yeah. Let me just say in terms of the latter piece, specifically with the ESSER funding, even though that will start to, you know, obviously come to its end, it's going to be replaced with the bond funding from the states, which could be about $76 billion of the bond referendums that have been passed in 30 states or so. So I'll tell you, Julian, we've seen great growth in K through 12. Orders for us last year were up 20%. So we feel good about the growth in 25, 26. When we look at light commercial overall, we expect sales growth to be up low to mid-single digits. And kind of like Rezzy, it's driven by the mix-up of 454B. We assume a flattish market. Actually, the first quarter will be our toughest compare. So we think that will be down, say, 5% to 10% in light commercial. And then when we think about the full year, the benefit from the mix-up is is somewhat similar to what we said on resi but ninety percent of our volume impacted by the refrigerant transition so that ten percent excludes sales for example to canada uh other sales outside the us of that ninety percent we expect eighty percent of that to be 454b and we expect mid to high single digit price increase there and then the twenty percent will be 410a in 2025. so Like I said, K through 12 looks pretty good. Some of the other verticals are good. Some are in decline that have been in decline, like commercial real estate and warehouse. So we feel balanced on the year at that low to mid single digits.

Great. Thank you.

Yep. Thank you.

Thank you. Our next question comes from Steve Tusa with JP Morgan. Your line is open.

Hi. Good morning.

Morning.

Just on the resi side, the HRI data is obviously up pretty substantially. You guys are talking like others about a more modest degree of pre-buy. Do you think you're kind of in line with the industry? Is there somebody else that may be selling more and maybe just talk about how you see the competitive environment playing out in the first half?

Well, look, we have tools where we look at by distributor exactly how much inventory they're holding. And we're looking at inventory levels underlying demand driven and looking at movement. And when we do not a top down assessment, but a true bottoms up assessment of what we think in the market. And what we think the true demand is from our distributors, that's how we got to the 75 to 100. I will say that on a 12-month roll, when we look at last year, we did gain around 100 bps of share, but that's our assessment of what we think the pre-buy was.

And as far as heading into this year and pricing in the marketplace, do you see anybody, you know, obviously there was some big share shifts last year.

one of your major competitors um what are you seeing in the channel there and you concerned at all about um you know any efforts there to regain that share look that that's something that's come up every year for like the last five years we get a variation of that question which is you know we've we've announced pricing do we think it will stick because someone else may end up being more aggressive and every year about what we thought we'd get in price we've gotten in price so we think um we'll realize about 10 from 454b Whether or not everyone in the industry is at that level, it's hard for me to say.

Right. Okay.

Thanks.

Thank you. Thank you. Our next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Hey, guys. Good morning.

Hey, Joe. Good morning.

Hey, can you guys give us just an update on your capacity additions on America's commercial market? I think I recall you guys pretty significantly increasing your capacity. And then ultimately, what does that ultimately mean for being able to maybe convert your backlog faster in the next 12 to 24 months?

Yeah, it's a really big deal for us, Joe. I honestly could not be more proud. of our operations team because we've basically stood up a brand new facility in North America for commercial HVAC, something that would normally take maybe 18 to 24 months. We did in about seven to eight months. So we're ready. We're shipping our first units out of our new North American facility. We're maxing out our Charlotte, North Carolina facility. So with the capacity that we've now built, we have the ability to significantly increase our Charlotte output probably by about 50%. And then we have the ability to get to that same level, if not more, from our new facility. So we can more than double our output for North America. And the demand has been great. The only thing, frankly, that's been constraining our demand has been our capacity. And now with the increased capacity, we're starting to bid out of it, assuming that increased capacity, which really positions us for great growth in commercial HVAC out of North America.

Great to hear. And then just my quick follow-up on Beesman. You guys gave a lot of color around your growth expectations for the year. Can you maybe give us a little bit more on just the margins and the work that you've done from a cost structure standpoint and how we should expect those margins to improve in 2025?

Yeah, we ended last year with our EBITDA ROS in the low teens. We think that with the actions that we've taken and will take, that'll get to the mid-teens this year. Last year, we were looking at about 75 of cost synergies on a run rate basis. We expect that to be 150 this year. So Thomas and the team took out, as I mentioned, a lot of temporary and structural costs. And we're continuing to drive costs and then Again, we won't see the kind of top line growth that we know we'll see in future years, but the cost takeout has been significant and will continue to be significant.

Okay, great. Thank you. Thank you.

Thank you. Our next question comes from Nigel Coe with Wolf Research. Your line is open.

Thanks. Good morning, everyone. Got a lot of ground here, so just a couple of quick cleanups. I think Patrick said 10% of the units this year will be 410A versus 454B. So I'm guessing that the flush through of 410A units held inventory, that's the 10% that happens in one queue. Just wanted to confirm that. And then the mid-teens movement is something that's getting a lot of attention out there in the market. So just maybe just you know, why do you think that's so strong? Maybe to talk about, you know, some market share gains perhaps. So maybe, you know, do you think that there's contractors of pre-bought units and holding them in inventory or install them? Just wonder if there's any intel on what's happened at the contract level.

You know, Nigel, I mentioned, I was mentioning to Steve that, yeah, we do think with high confidence that we gained about 100 bps of share last year. And credit goes to the transition we did back in 23 and 25, very seamless transition with the sewer change. And the team did a great job with the refrigerant change leading into this year. We had the capacity, we had the 410A units, so we were able to produce both sets of units. We have near perfect visibility into the inventory in our distribution channel. We do not have perfect visibility into the inventory in our dealer channel. We have anecdotal visibility in general. We have, you know, we can have about a hundred thousand dealers and many of them typically hold very, very little inventory for a whole bunch of reasons. But can I tell you with certainty exactly how much they're holding? No, but it would be unusual for them to stock too much. So we feel very balanced on the mix that we've laid out for this year versus last year.

Then, Nigel, the answer to your first question is yes. We expect all 410A to be flushed out in Q1 for resin.

Okay. Thanks a lot. That was two questions. Leave it there. Thanks.

Thanks. Thank you. Thank you. Our next question comes from Dean Dre with RBC. Your line is open.

Thank you. Good morning, everyone.

Hey, Dean.

Hey, we'd like to drill down a bit on Quantum Leap Initiative, if we could. Just give us a sense of... the contribution from data center for 24 how much did it grow with expectations for 25 and Anything you can give us an update on the SLA partnership how that's going and it looks like you've broadened Some of the product lines within that business as well Yeah, let me start with data centers overall Dean last year

it was about a half a billion dollars of sales for us for data centers. And this year we think it'll double. So we're looking at, you know, a billion dollars of data center sales this year. So it went from about 10% of our CHFAC total sales to probably around 15% this year. And remember, the really exciting thing down the road will be the aftermarket sales. So we've done I got to give credit to the team that we stood up our first programmatic team that's focused on a single vertical data centers Christian to new and the team under garan's leadership. Have one had great wins with the hyper scalars and we're applying that same intensity to the colos not only in the United States, but globally so. I think we're really in the first inning of some of the key wins that we've had there, and I just see an opportunity for outsized growth in data centers in 25 and beyond. The STL partnership that you mentioned is exciting because we're starting to do more in liquid cooling. STL, in our single phase, we have a new investment that we're making in a two-phase solution, which is a refrigerant-based solution. And then we recently launched, we announced Quantum Leap, which is very exciting because the whole idea is that we can be a one-stop shop for all the cooling needs that you would have for a data center. So you're looking at traditional cooling, the chillers and the air handlers. You're looking at Enlite, which can do server management. You're looking at BMS through our ALC business. And then combining the traditional liquid cooling loop with the traditional cooling loop with liquid cooling that we're now introducing our own cdus right now so the idea for hyperscalers and certainly the colos is to say you worry about running the data centers let us worry about all the cooling you need by having optimized integrated cooling systems so we're excited about data centers we're very excited about the orders growth that we've seen we feel really well positioned for this year and frankly that's going to continue to grow as we get into 26 and 27.

Yeah, that's all really good to hear, especially because that's what we're hearing from the hyperscale players who want an end-to-end solution on the cooling side. So if you have that with global scale, then you should see that type of growth. And just as a follow-up for Patrick, it's a headwind for everyone, but just kind of give us a sense of the setup on FX, the headwind, and just remind us about any type of hedging that you do.

Yes, so for this year versus the prior year, the sales headwind is about $200 million. And then, as I mentioned, it's about five pennies. That's mostly translation. And then on transaction side, we do hedge the transactions. And so there is some protection, of course, there, given all the transactions we go through. And then, of course, given some of the currency streams we have going on in the world, we do also some natural hedging as well. that's taking place as well. So I'll leave it at that. Great. Thank you. Thanks, Dean. Thanks, Dean.

Thank you. Our next question comes from Joe O'Day with Wells Fargo. Your line is open.

Hi. Good morning. Could you just talk about the tariff considerations? I think you touched on China and said actions have been taken there, but as it relates to Mexico, just how you're approaching that situation and size it for us.

Yeah, Joe, let me start more broadly and just say that we're proud to be the largest U.S. domiciled company in our industry, period. Also, I do want to mention that we have about 10 000 people in the united states which is up about 20 percent over the last five years on a comparable basis and we just recently launched an initiative to add a thousand technicians so we are invested in the u.s and will continue to be heavily invested in the united states i think a terrorist right now in three categories the first is what's been implemented which is what patrick talked about we know about china we know about steel and aluminum and we're confident that we have that mitigated the second I would put in the category of things other than Mexico that have been discussed, like Canada and Europe. And based on what we know on these categories, we feel confident that we can and will mitigate those as well. As you mentioned, the big one that we have to keep an eye on is Mexico because we have operations down there, and we purchase a lot from there and do export into the United States. Here's the deal. We do not know. There's so much we don't know. We don't know if they will go in place. We don't know if there will be exemptions at all. So there's a lot that we don't know. What I can tell you is the team is all over it. We are looking at price actions that we clearly would have to take. We're looking at operational actions that we would take, especially with our suppliers. And we're also looking at that we would contemplate other actions that we would take unrelated to tariffs to make sure that we could mitigate any impact that We can't fully mitigate through pricing and supply chain issues. So what I'll tell you, Joe, is this is not the first time that we've dealt with tariffs. The team's incredibly focused on making sure that we deliver that $3 a share no matter what comes our way. So do we have everything figured out if there's a 25% tariff in Mexico? We don't have it figured out exactly yet, but what I will tell you, is that this team will go to tremendous lengths to make sure that we do mitigate it and ensure that we hit the $3 a share. I will also tell you that we are leaning into our factories in the United States. So for example, we're significantly increasing our output out of Charlotte this year.

I appreciate all that color. And then I wanted to ask on the HVAC margin bridge, so the 50 to 75 bps, can you just give a little bit more color on puts and takes there when we think about new visman synergy 454b mix i presume at a pretty decent incremental productivity um it would seem like there's some building blocks to do better than that 50 to 75 and so just any any offsets to that um sure the the way you can think about it is the um the benefit of productivity uh the price including the mix up uh

Think of these as being about 150 BIPs year over year. And we're making significant investments as we do each year. And the investments this year actually are going to be more focused on the sales side than just on the R&D side. So it's pretty well balanced this year. And that offsets those tailwinds to get to the margin expansion that I just referred to.

Got it. Thank you.

You're welcome. Thank you. Our next question comes from Andrew Obin with Bank of America. Your line is open.

Hi, guys. Good morning.

Good morning, Andrew.

Yes, you sort of highlighted this one percentage point of price for 25, if I'm correct. Are there any regions where you do not expect to get price or any verticals where price is flat to negative? I appreciate that there is. you know, that the mix is in a separate bucket, but just any sort of discrepancy on pricing between regions or vertical. Thank you.

I'd say there are probably two areas where pricing might be a little less than that. One would be REF. Generally, in that segment, we think it's going to be about flattish. This year, there'll be some differences by region. The other one is in Asia. Given, of course, what's happening, the residential light commercial in China, the price might be a little lighter there as well.

Thank you. And just to follow up on aftermarket progress, I think you guys have provided some KPIs, but can you just give us an update, just a more thorough update on the progress? Attachment rates, maybe services, percent of commercial HVAC business. How has that initiative evolved? Because, you know, before all the debate about residency and visa, that was the key focus. It seems like you guys are making very good progress. If you could give us some numbers there. Thank you.

Sure, Andrew. I will tell you that it still is the key focus. There are all hands on deck on us driving double-digit aftermarket growth forever. Everyone that joins the company or is within the company knows that that's our mandate as a team. And all the underlying metrics on our control towers have been positive. We have nearly 50% attachment rate. It was up from 44%. uh earlier our total coverage for chillers we said it was it'd be uh around 80 000 it's in that range i think it was just under by a thousand or two so it's in that range we talked about um getting number of connected uh chillers out there we continue uh i think we connected around 45 000 chillers uh last year so All of the underlying things, driving Abound and Lynx as our digital platform, driving attachment rates, driving coverage, driving connectivity, we feel really good about it, and we feel really good about double digits again this year.

So where are we as a percent of commercially tracked revenues to date?

I would say for Carrier, we are in the range of 27%. I think it's just there. And I think we're pushing to get it to closer to 30% over these next few years. And commercial HVAC. Perfect. Thanks. And then Patrick just added, I guess it's a little bit higher for commercial HVAC as a percent.

Thank you, Andy.

Thank you.

Thanks, Andrew.

Thank you. Our next question comes from Chris Snyder with Morgan Stanley. Your line is open.

Thank you. I wanted to ask about America's resi, which came in, I think, a bit stronger, 35% this quarter. I think the expectation was 20 to 30. It sounds like the pre-buy was moderate. I guess, did that come in maybe a little bit ahead of where you thought three months ago, was just kind of end demand stronger, you know, with some of the movement in the channel you were highlighting? Thank you.

Yeah, I think, Chris, it's really a combination of the higher movement than we thought it, than we had expected. We had some share gains. And I think just the overall underlying demand was a bit higher than we thought. And just remember, we were coming off such an easy compare from the fourth quarter of 2023, where We were down – I think our volume was down something like 28%. Our total sales were down around 18%. So we had an easy compare, and the underlying demand was a bit more positive than we thought. Thank you.

I appreciate that. And then, Dave, I guess when you either talk to kind of your channel partners or the dealers, is there any concern around – the consumer and the homeowner, and, you know, maybe pushing a little bit more towards repair versus replace or just trading down. You know, obviously, you know, we're pushing through refrigerant change over 10% this year, normal price, low single digits. The whole resi HVAC industry is relying on Mexico. So, you know, it seems like there's probably another, you know, price increase potentially coming over the next 12 months. Are you hearing any of that? And is that a concern in your conversation? Thank you.

You know, Chris, we look at that very deeply. We look at our elasticity curves. And the homeowners have been through a lot of price increases over these last few years, for sure. So it's something that we watch carefully, and certainly tariffs would not help on the pricing side. So the first thing we look at is, are we seeing a big switchover to repair versus replace, we have not seen that. We ask that of ourselves and our channel partners every month, every quarter. We've been paranoid about it, but we honestly have just not seen that. Um, we will see, um, an occasional mix down at the margin, but nothing overly material. So it's something that we watch, we watch carefully. We, I think it's appropriate with price increases, uh, and to always look at the, uh, the consumer, but we feel, uh, Right now, we feel very good. Patrick, do you want to add something?

No, just a reminder that the cost to the homeowner, only about a third of that or less, is actually the cost of the equipment that's ours.

Thank you, guys. I appreciate all that.

Yeah, thanks, Chris.

Thank you. Our next question comes from Tommy Mull with Stevens. Your line is open.

Good morning, and thank you for taking my questions.

Hey, Tommy.

David, I wanted to start on the comment you made about the movement for your resi channel in the quarter of 15. We've hit this from a couple different angles, but I think it will attract a lot of attention today, so worth revisiting here. Are you able to share what the comp was last year or any other context that might help explain that comment you made? Thank you.

I I don't think I have at my fingertips movement in the fourth quarter of 23. I don't think we have that number handy. I don't have that on my fingertips, Tommy. But the best that we can do is when you think about resi for the full year, it ended up being up high single digits. I think that we were up around 9% last year. And it's basically, to the team's credit, the algorithms they've used to anticipate things like inventory and movement, orders, and the translation into total sales. I can tell you that in my five years of Carrier, our algorithms around being able to anticipate things, it's far from a perfect science in a very short cycle business, but They're far better now than they were even just a handful of years ago. So, you know, we're, we're guiding to the HSD for this year. We think that, you know, one thing that people would worry about with a big pre-buy would be that we would be talking down one queue, which we're not. In fact, I think the first quarter should be up double digits. So I think we feel calibrated between the share gains, the inventory levels, the movement, the orders that we've seen and the sales into our channel. We've gone out of our way to try to be as judicious and balanced as we can. And we feel good about the guide for this year because basically that HSD is really driven by mix and price realization. So we think the volume assumptions for the year are fairly balanced.

And Tommy, we have that number. The movement in Q4 of 23 was down low teens. So down low teens and then Q4 of 24 up mid-teens.

Thank you, Patrick. Dave, just to anticipate another line of questions for all of us today, on your A2L commentary for the 10% price, there's been a lot of confusion there just because of things such as what's the base here we're all using and all kinds of noise around this one. But just to give you the opportunity, has anything changed there versus what you expected a quarter, a couple quarters ago? And, um, you know, there's, there's also been some questions around one of the larger players in the market, potentially getting a little more aggressive on price. Um, but really the, the core of the question is what, if anything has changed?

Uh, nothing. I mean, from our perspective, um, I think that, you know, Steve asked the variation of that as well, Tommy, I look, I've heard the same things listening to some of our peers' calls as well and in, you know, chatter in the marketplace. But what I can tell you is that every year we've seen, we've been paranoid about one thing or another and things have sort of manifested themselves on the price side the way we anticipate. And the 10% is fairly straightforward. If you take the list price for a 410A unit, we're pricing a 454B unit in that same category as 10% higher. And then we've said 15 to 20 over two years, which is on top of the base 10%, you know, two to three points of base pricing. So we think that we're fairly balanced on market value, market volume, you know, being flat to down a little bit, then a little bit of pricing, a little bit of growth on the furnace side. And then we expect that 10% to stick, and we think that we've tried to even build a little bit of contingency into that 10%. So we feel good about the price sticking. Exactly what every competitor will do, I don't know, obviously, but we feel good about how we've calibrated our pricing and our pricing with our channel partners.

Thank you. I'll turn it back.

Thank you. Our next question comes from Noah K. with Oppenheimer & Company. Your line is open.

Thanks for taking the questions. You know, you gave some good color on the VCS sales walk by line of business. I wonder if it would be possible to get a little bit better view at sort of country-level dynamics, or at least kind of how you think about the rest of Europe versus Germany in the outlook, just kind of given the swing factor in policy for Germany specifically.

Yeah, look, Germany, we clearly have a watch on right now. You know, I think that the good news about the – pull up of the election to February 23rd is that one way or another, we're going to get more certainty. And uncertainty has not been our friend in Germany about policy. So having some level of certainty is good. I think if I may, at a high level in Europe, say that regardless of what's happening country to country, because we will watch France and Poland where there's been some suspension of subsidies, which we expect to resume as we get into the summertime. We know that there's going to be things that happen in Germany that we have to keep a watch on. I will say at a high level, number one, the European Union remains committed to the 2030 goals, 55% renewables by 2030. Remember in 2027, There's going to be the fossil fuel costs across Europe will start to increase then because we see the expanded scope of the emissions trading system, which is introduced for CO2 emissions across all European countries, which is going to trigger, I think, a heightened transition from boilers to heat pumps. There is uncertainty in Germany right now. We did see that increase in subsidy applications and orders in the second half of last year. It was a little bit slower, I think, in Rob Leibowitz, Jr.: : January, but I do think people were trying to get their subsidy applications in before the election so we'll see if that translates into positivity as we get into two Q and three Q. Rob Leibowitz, Jr.: : But I do know that, with a potentially new government will have to see exactly how things play out what I will tell you at the highest level when you hear us at our investor day as we get into may. Rob Leibowitz, Jr.: : Is that we want to get to a point. where we are not talking about elections in Germany or France. We are talking about driving solutions for the customer that are independent of regulation and subsidies. So if you start looking at complete PV, heat pump, battery, digital overlay sales in Europe, which you're going to be hearing us talk a lot more about, that's driving solutions for the customer, potentially with bank financing that are independent of subsidies or regulations that is good for the consumer and it's good for the environment and it's good for us. So we'll continue to try to influence and monitor policy from country to country. The EU is going to continue to move in this direction. We've seen gas prices going up more recently. That could continue. I don't think the EU wants to be reliant on importing gas from the United States or from Russia. So that electricity to gas ratio starts to come down a little bit. And we're going to continue to push solutions that are independent of policy from country to country.

Thanks, David. I'm glad you mentioned that because you started the call by talking about, you know, really this emphasis and this opportunity around the home energy management offerings. It was something you talked about even in sort of the initial deal announcement. But if you just give us a little bit more color on what you think this means for, you know, your wallet share or your expansion opportunity, you know, among the different channels that you already have, it would be helpful not to steal too much thunder from Investor Day.

Yeah, I look, I think. At the end of the day, when we look at VCS, we'll be the first to say that obviously not only were we not pleased that last year was down more than we thought, but we dropped it a few times during the course of the year. We've tried to come into this year very calibrated, very conservative. Patrick and I are very deeply tied in with Thomas and Chris Shepard and the team over in Europe. So we've tried to be very balanced. and very bottoms up on our assumptions. When we look at VCS overall, we're very, very happy that we are in residential in Europe. Not necessarily last year, but overall, this is a great, great market to be in. The underlying dynamics are exactly what we see in the United States of a highly customized, configured, differentiated product offering that is very reliant on a differentiated channel. So we like the market. We like the transition to heat pumps. We like the transition to overall system solutions over time. And there's no better company in this space in Europe than Wiesman. Hard stop. The most differentiated channel that there is. So when we start putting some of our commercial HVAC products through that channel or a newly branded carrier air conditioning product through that channel, our ability to drive revenue synergy, share gain, new product introductions is unparalleled. So we're excited to have them part of the family. They have made Carrier such a better company. And one small example is the head of engineering for Wiesman Climate Solutions is leading engineering for all of Carrier with respect to our centers of excellence. And it's making us a more platform company and a better technologically differentiated company across all of Carrier. So We feel balanced for this year. We're going to control the controllables, and we're going to see growth for years to come.

Thanks, Dave. Appreciate it.

Thank you. So, Mike, welcome to Carrier. It's great to have you on board. Patrick, thank you. And thanks to our 50,000 team members globally. Last year, everyone performed while transforming, and we feel very well positioned for a very strong year in 25. And thank you to our investors as well. Thank you all.

Thank you for your participation. This does conclude the program. You may now disconnect.

Good day.