Carrier Global Corporation

Good morning and welcome to Carrier's second quarter 2025 earnings conference call. I would like to introduce your host for today's conference, Michael Redner, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Carrier's second quarter 2025 earnings conference call. On the call with me today are David Gitlin, Chairman and Chief Executive Officer, and Patrick Gores, Chief Financial Officer. except where otherwise noted the company will speak to results from continuing operations excluding restructuring costs amortization of acquired intangibles and certain significant non-recurring items such as acquisition and divestiture related costs a reconciliation of these and other non-gap financial measures can be found in the appendix of the webcam we also remind listeners that the presentation contains forward-looking statements which are subject to risks and uncertainties Carrier's SEC filings, including our Form 10-K and quarterly reports on Form 10-Q, provide details on important factors that could cause actual results to differ materially. In addition, we plan to file certain recast financial statements in connection with our resegmentation, which occurred during the first quarter of 2025. With that, I'd like to turn the call over to Dave. Thanks, Mike, and good morning, everyone.

Another strong quarter. My thanks to our 50,000 team members globally. for their continued great work. As expected, our organic growth picked up in 2Q. We delivered 6% organic growth with exceptional 45% growth in commercial HVAC in the Americas, total company aftermarket growth of 13%, and very strong growth in India, Japan, and the Middle East. We converted the strong organic growth to attractive earnings expanded adjusted operating margins by 130 basis points, and increased adjusted EPS by 26%. Free cash flow was also strong with first half free cash flow of about a billion dollars. We remain on track for $3 billion of buybacks this year. Turning to slide four. At our investor day on May 19th, we laid out our game plan for driving sustained 6% to 8% organic growth by exceeding customer expectations through differentiated products, double-digit aftermarket growth, and unique system solutions. On products, we continue to win. With respect to data centers, we are on track to double our revenues to $1 billion this year and are continuing to build our backlog for next year and beyond. Our non-data center commercial HVAC business is expected to grow about 10% this year. In the Americas, we have increased both chiller capacity and revenues by more than 2x over the past few years and continue to build our backlog globally. For example, we recently booked a data center order for $45 million for a customer in the Middle East. Our global commercial HVAC sales, which exclude light commercial sales, will be about $6.5 billion in 2025, up close to 20% year-over-year. New product introductions have been instrumental to our win rate. For example, our new large capacity air-cooled chiller with a proprietary magnetic bearing centrifugal compressor is both significantly more efficient than our competition and can operate at elevated ambient temperatures, both key performance requirements from our customers. We also continue to leverage Eastman and Toshiba Technologies to introduce differentiated offerings in our RLC businesses. In the Americas, we are about to launch a fully integrated air-to-water heat pump that provides heating, cooling, and domestic hot water. This all-in-one solution provides homeowners with improved energy efficiency, frees up valuable indoor square footage, and provides us with market expansion and mix-up. Our aftermarket sales are up 10% through the first half of the year, and we remain on track for our fifth year in a row of double-digit growth. Our number of connected chillers was up 40% in the quarter compared to last year, and over the last three years, we have increased the number of connected chillers by more than 3x, from roughly 20,000 to 63,000. With respect to Abound, we introduced enhancements to our Abound app that leverage AI to boost operational insights and user efficiency. For our climate solutions transportation business, link subscriptions were up significantly in 2Q and are now close to 200,000. Turning to systems. In North America, our carrier energy team is making great progress. We are working with several utility companies to initiate field testing in homes in the United States for our fully integrated battery heat pump solution this quarter. We remain on track for market introduction next year. We also continue to make significant progress with HEMS in Europe. In 2Q, sales from our Wiesman Systems Profi partners showed strong growth, significantly outperforming those of non-Profi partners. On the commercial HVAC side, we continue to build out our capabilities for data centers, including Quantum Leap and its integrated CDU offering, and are in active discussions with key customers. Outside of data centers, we recently had an important win with the Shanghai Oriental Hub infrastructure project, which includes a combination of our innovative centrifugal chillers, heat pumps, and our differentiated building management systems. By integrating these offerings, we expect to improve our customers' energy efficiency by about 20%. This is another great example of how fully integrated systems add outsized value to our customers and help us drive differentiation and an increased share of wallet. Productivity driven by carrier excellence is now deeply ingrained in our DNA as reflected in continued strong adjusted operating margin of 130 basis points, to 19.1%. Turning to slide five for a brief update on our RLC business in Europe. Though the overall European market since our combination has been more challenging than we expected, other benefits of the combination have exceeded our expectations. Our differentiated strategy around HEMS and hydronics in the Americas are made possible by Wiesman. HEMS leverages Wiesman's battery, integration, and digital expertise. Our global common design around controls and embedded software are both based on Wiesman design standards. We are deploying the underlying technology of Wiesman's one-based digital ecosystem, which connects the company, installers, and homeowners on a single platform to the Americas. Leveraging our respective supply chains is helping us drive more than $200 million of expected cost synergies by the end of next year, And our purposeful multi-brand, multi-channel strategy is yielding great results. Take, for example, the opportunity around air conditioning in Europe, where only 20% of households have air conditioning versus 90% in the United States. Earlier this year, we introduced new offerings through the Wiesman Channel, and our air conditioning sales in Europe were up over 25% in 2Q. In terms of 2Q for RLC Europe, our sales were flattish as we expected. Though Germany was down, our heat pump unit sales in Germany were up over 50%, and the ratio of heat pumps to boiler has improved from 30-70 last year to about 50-50. We like this mix-up, and combined with our expected reductions in electricity prices and easy compares, With total German heating units that are close to historic lows, the business is well positioned for a return to growth. Our RLC sales in Europe outside of Germany have returned to growth of 3% in the quarter, and we expect that to further increase in the second half of this year. The integration of RLC and commercial HVAC in Europe also presents great sales and cost opportunities. Carrier and Wiesman are both top players in commercial and residential respectively. The countries where Carrier and Wiesman are both leaders are in many cases different, which provides the opportunity to leverage each other's respective strengths. Slide six is a reminder of where we have come over the past few years. Our portfolio is much more focused and simplified with a higher growth profile. Adjusted operating margins have expanded on average over 100 basis points per year, and our adjusted EPS has grown at a high teens CAGR. Despite a few unforeseen headwinds, the team continues to control the controllables and over-deliver, and we remain on track to deliver close to 20% adjusted EPS growth this year. Our team continues to deliver strong results, and I am confident that we will do so again in the second half of 2025 and beyond. With that, I will turn it over to Patrick. Patrick?