Carrier Global Corporation

Good morning and welcome to Carrier's first quarter 2026 earnings conference call. I would like to introduce you to today's host for the conference, Michael Redner, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to Carrier's first quarter 2026 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 and certain significant non-recurring items. A reconciliation of these and other non-GAAP financial measures can be found in the appendix of the webcast. 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. With that, I'd like to turn the call over to Dave. Thanks, Mike, and good morning, everyone.

Let me start by thanking our team globally who continue to deliver differentiated solutions for our customers and help preserve the planet for generations to come, while also delivering financial results that exceeded our expectations. Demand for our commercial HVAC and aftermarket solutions remains strong, while our shorter cycle businesses have performed better than expected. Company orders in 1Q were up 11%, led by global CHVAC up 35%, including CSA commercial HVAC up over 80%. Global data center orders were up over 500%, reflecting continued customer demand for our differentiated solutions. Our current data center backlog now fully covers our expected $1.5 billion of data center sales this year. Of course, we are targeting to exceed that number. Organic sales were about flat as CSA Resi and Light Commercial both performed better than expected. CSA Resi movement was better than expected and field inventory levels remain healthy. CSA Light Commercial was up nearly 10%, driven by share gains in large retail accounts and continued traction from our recently introduced highly efficient hybrid fuel rooftop units. In Europe, encouragingly, the increase in natural gas prices supported strong demand for heat pumps. With the ratio of electricity to natural gas in Germany below three for the first time since early 2023, strong demand for heat pumps has continued into April in Germany and across Europe. Both EPS and free cash flow were better than expected, and we returned about $500 million to shareholders through dividends and share buybacks. In summary, I am proud of our team for navigating macro headwinds and delivering better than expected results. Our growth algorithm is centered on products, aftermarket, and system differentiation, and we are making strong progress across all three. I'll start with products on slide four. Our CSA RLC business is a superb business with high share and strong margins, ROIC, and free cash flow, and we continue to invest in differentiation. On the product side, for example, we recently introduced a new highly efficient fan coil with a significantly smaller footprint and lower weight, which is very attractive to our extensive dealer network as it is easier to install and service. We are also expanding our TAM with new system offerings focused on hydronics. Last year, we introduced an air-to-water heat pump that delivers heating, cooling, and domestic hot water. In 2027, we will expand the Wiesman boiler lineup with an entry-tier offering and will then further expand into the attractive North America domestic hot water adjacency through a differentiated system solution that combines our air-to-air heat pump expertise with Wiesman's deep knowledge of hydronics. Carrier energy continues to progress well with utilities and key hyperscalers, and we plan to introduce our Gen 1 units in the market this summer. The resi digital ecosystem is another key opportunity. We expect that connecting homeowners, dealers, distributors, and carrier into a single 360-degree digital stack will provide greater customer satisfaction, increased renewal rates, and parts capture, as well as improved forecasting and working capital performance across the value chain. In light commercial, we're executing the same discipline playbook. Our field retrofit kit is converting existing rooftop units into connected assets, improving operational insights and expanding parts, service, and aftermarket opportunities. Our recently launched multi-stage ultra high efficiency weather master platform has the best in class efficiency to weight ratio. While I am highlighting CSA RLC as an example of product differentiation, we're seeing similar progress globally. In the fall, ahead of the heating season, CSERLC will be introducing a new, differentiated, high-tier Wiesman-branded heat pump that is complementary to our current premium offering. Our CSAME business introduced a new Toshiba-branded side discharge VRF platform featuring best-in-class efficiency, distinctive aesthetics, low-noise performance, and high reliability. So... Product differentiation is a consistent theme across the portfolio. Turning to slide five. On the CHVAC side, our product portfolio, field network support, and operational capacity are night and day versus where we were at spin. We now not only have a comprehensive product portfolio, we are winning head-to-head what you see in our orders, share gains, and backlogs. We've invested in the right products with new offerings such as two and three megawatt maglev bearing air cooled chillers with free cooling and a range of water cooled chillers enabling reliable data center operation in high ambient environments. And by the end of this year, we will have introduced an expanded suite of very attractive CDU offerings. Our high margin controls business has also significantly increased share in the U.S. and is a key differentiator in our system wide offerings. Significant capacity expansion and superb technical talent additions have supported growth in this important business. The team's great work and investments are driving results, as you can see on slide six. Sales in our global CHVAC business are up 80% since spin. Our backlog is up 130%. We've gained 500 basis points of share, and our margins are up 3X. Not only is the applied business driving great growth for today, the related aftermarket business will drive great growth for years to come. And the good news is that we have the aftermarket playbook to ensure that we capture the opportunity as you see on slide seven. Similar to our commercial HVAC business, we have transformed the way we think about aftermarket. Our playbook starts with how we design products with aftermarket as a focus. We continue to expand our parts capture availability and partnerships to deliver growth. We've added highly scaled salespeople and technicians globally, and we are focused on providing solutions for customers that meet their mid and late life upgrade and modification needs. Importantly, we continue to lean into the opportunities created by AI and digital connectivity with the number of connected devices in the field up over 25% in the quarter. All segments have plans to deliver on their aftermarket targets, and we feel good about our start to the year and our expectation to deliver our sixth year in a row of double-digit growth. Last on systems on slide eight. Data centers present a clear opportunity to bring together the full power of one carrier to provide our customers with unique solutions. Our quantum leap offering leverages our unique capabilities and is gaining great traction with our customers. Since launching this integrated holistic offering about a year ago, we've won hundreds of millions of dollars in orders. Our differentiation lies in integrating previously discrete systems, including chillers, CDUs, our Enlight data center infrastructure management system, our building management system leveraging new digital twin capabilities, air handlers, and complete lifecycle support. Earlier this week, we announced our expanded investment and partnership with Zootercore, which will further enhance our technology differentiation in this space. In transportation, we've been building visibility across the cold chain, which creates value for our customers and drives subscription and aftermarket revenues for us. Our link subscriptions cover nearly 240,000 units, and we expect to triple this number in the next few years. Before I turn it over to Patrick, a brief comment on our full year outlook. Compared to our February guide, we are seeing an increase in input costs as a result of new tariffs, fuel, and raw material prices. We expect to offset these headwinds dollar for dollar through supply chain actions, cost reduction, and increased pricing. On the latter, we now expect to realize an additional two points of pricing globally this year. I am pleased with the better than expected start to this year, but with just one quarter behind us and still a lot of macro uncertainty, we are reaffirming our full year guide. With that, I will turn it over to Patrick.