The paragraph details the introduction of Carrier's Third Quarter 2024 Earnings Conference Call, led by Sam Pearlstein, Vice President of Investor Relations and CFO of the Fire & Security segment. Sam introduces other key figures present: David Gitlin, CEO, and Patrick Goris, CFO. The call will involve discussing non-GAAP financial measures, which are reconciled with GAAP figures in the earnings presentation available on Carrier's website. The company underscores that forward-looking statements are subject to risks and uncertainties outlined in SEC filings. The Fire & Security segment is now classified as discontinued operations due to being held-for-sale, and its historical financial data is provided for comparison purposes. The continuing operations will now focus on the HVAC and Refrigeration segments, and corporate expenses previously assigned to the Fire & Security segment are reallocated.

The paragraph provides an update on Carrier's financial performance and corporate activities. Dave Gitlin, the Chairman and CEO, thanks the outgoing CFO, Sam, and welcomes his successor, Mike Rednor. The company reports strong performance with over 20% organic order growth, 4% organic sales growth, and double-digit aftermarket growth. There is strong core earnings conversion at about 40%, and Carrier repurchased $400 million in shares in Q3. With a new reauthorization, they plan to repurchase $5 billion in shares by the end of next year. The company is finalizing its transformation, including completing divestitures of certain businesses, aiming for a clean 2025.

The paragraph discusses the company's strategic achievements and future goals. They have settled legal matters related to AFFF exposure, enhancing their focus on becoming a global leader in intelligent climate and energy solutions. The company is experiencing significant growth in commercial HVAC, particularly in data centers and decarbonization infrastructure, highlighted by a major contract for a semiconductor facility. They are also expanding their connected chiller systems and digital platforms, aiming for a significant increase in connected devices. Their climate focus is exemplified by success in the U.S. Department of Energy's heat pump challenge and the introduction of a new environmentally friendly Vector Trailer Refrigeration unit.

The paragraph discusses the company's progress in reducing carbon emissions and expanding its HVAC portfolio, running ahead of its 2030 goal. It highlights efforts in Europe to transition from boilers to heat pumps and in North America to work with utilities on managing peak demand. The company is seeing success with its aftermarket growth and aims to increase coverage for chillers. Since its spin four years ago, the HVAC business revenues have nearly doubled, and the company is now positioned as a higher-growth, sustainability-focused entity. It holds strong positions in global HVAC-R markets, and has made significant progress in culture, innovation, and navigating challenges like COVID-related supply chain issues.

The paragraph discusses the company's focus on customer satisfaction, growth in aftermarket and core businesses, and capital deployment, with excitement for 2025. It mentions Viessmann Climate Solutions, noting a return to traditional business levels and improvement in market conditions. Orders in Germany were initially constrained due to delayed government subsidies, but picked up later, leading to adjusted financial expectations. Heat pump subsidy applications and VCS orders have increased significantly, indicating positive trends. The integration with Viessmann has exceeded expectations, offering benefits in technology development and platform scalability.

The paragraph discusses the company's strategies for reducing costs and increasing revenue through various synergies. It highlights plans to decrease costs per board and streamline embedded software development, improve digital connectivity, and introduce new products through the Viessmann channel. The company aims for over $100 million in revenue synergies next year, particularly through new Carrier cooling, heat pump offerings, and a Carrier-branded propane heat pump. Additionally, they target over $200 million in cost synergies by 2026. The CFO, Patrick Goris, then acknowledges the corporate finance team's success in integrating financials and handling complex transactions, expressing gratitude to key team members for their efforts.

In the reported quarter, sales reached $6 billion, a 21% increase, with organic sales up 4%. Viessmann Climate Solutions significantly contributed to this growth. Adjusted operating profit rose 19% to over $1 billion, although the adjusted operating margin fell by 40 basis points, partly due to Viessmann Climate Solutions' impact. Year-to-date, the adjusted operating margin improved by 120 basis points. Core earnings conversion was about 40% for the quarter and over 100% year-to-date. Adjusted EPS from continuing operations increased 3% to $0.77, with overall adjusted EPS at $0.83, beating expectations by $0.03. Excluded Fire & Security sales were about $500 million. Preliminary free cash flow showed an outflow of $370 million, considering significant cash taxes and restructuring costs, with underlying free cash flow performance at $700 million.

The paragraph reports the financial performance and sales growth of various segments within the company. Year-to-date, preliminary free cash flow is $120 million with underlying performance at $1.4 billion. In the HVAC segment, sales grew by 26%, with 6% organic growth and contributions from Viessmann Climate Solutions. In the Americas, commercial HVAC sales increased by nearly 20% while residential also grew double-digits, but light commercial dropped mid-single-digits. In EMEA, commercial HVAC grew double-digits, though residential and light commercial sales declined. In Asia-Pacific, sales decreased slightly, impacted by weak markets in China but partially offset by strong performance elsewhere in Asia. HVAC's operating margins fell by 100 basis points due to the integration of VCS. In the Refrigeration segment, both reported and organic sales grew by 1%, with transport refrigeration rising 3% and container specifically up 30%. However, global truck and trailer sales varied by region, with declines in North America and Europe but notable growth in Asia. Sensitech's sales rose double-digits, whereas commercial refrigeration sales slightly declined.

The paragraph discusses the company's financial performance and guidance. Q3 marked the last quarter including the commercial refrigeration business, which was sold on October 1. The refrigeration segment had sales of $750 million with minimal profit contribution, but margins improved by 50 basis points due to productivity. Total company orders increased by around 20% organically, with strong gains in North America resi HVAC and global commercial HVAC. For 2024, the company's guidance, excluding the Fire & Security business, anticipates reported full-year sales of $22.5 billion, a 3% organic growth, and an adjusted operating margin of 15.5%. The adjusted EPS for continuing operations is estimated at $2.50, impacted by the transition to discontinued operations for the Fire & Security exits. Slides in the appendix provide further details.

The paragraph discusses financial estimates and projections for 2024 and beyond. The company's adjusted EPS for 2024 is revised from $2.60 to $2.50 due to discontinued operations, specifically costs previously tied to the Fire & Security segment and net interest expenses. The commercial refrigeration segment's contribution to EPS is minimal and excluded from financial projections. The company's free cash flow estimate has shifted from a $400 million inflow to a $200 million outflow, largely due to tax payments related to exiting certain businesses not accounted for in previous guides. The underpinning free cash flow projection is about $2.4 billion, with capital expenditures expected to be $500 million and cash restructuring at $150 million. The company aims for a net leverage ratio of about 2x by year-end, aligning with earlier commitments. While a 2025 adjusted EPS guide will be issued in February, the company anticipates double-digit growth from organic revenue and reduced costs from the Fire & Security segment, maintaining their current 2024 adjusted EPS guide at $2.50. Additional details can be found in the appendix on Slide 26.

The company is addressing costs and expects to eliminate $200 million in run rate costs throughout 2024, with some benefits extending into 2025. A debt pay down in 2024 is anticipated to reduce net interest expense, providing a $0.05 to $0.10 tailwind for 2025. Share repurchases in late 2024 and 2025, totaling about $5 billion, aim to offset dilution from the VCS acquisition shares by the end of 2025. The company plans for strong adjusted EPS growth in 2025 and targets a sustainable dividend payout of 30%. It intends to pay down a $1.2 billion maturity early next year and refinance a €750 million debt tranche. Additionally, the company announced settlements related to AFFF, resolving estate claims and direct claims tied to UTC’s actions between 2005-2013. The cash settlement payments amount to $615 million, to be paid over time.

The paragraph discusses Carrier's financial position and settlement-related developments. Carrier anticipates that insurance payments will cover the full settlement amounts, though not immediately. The settlement allows Carrier to gain up to $2.4 billion from insurance recoveries. Alongside $615 million in cash payments, it includes $115 million from KFI net sales proceeds and a $125 million non-cash insurance recovery contribution. These settlements will not affect Carrier's capital plans, like dividends and share buybacks. The company had a successful quarter, has completed a significant transformation, and is optimistic about the future. In a Q&A session, Jeff Sprague from Vertical Research Partners asks about Viessmann's revenue outlook for 2025, to which David Gitlin responds positively, noting strong September orders.

In the article, it is mentioned that orders in October have been stronger than previous months, indicating a potential market turnaround, particularly in Europe and Germany, partly due to subsidies. Despite this, there is uncertainty about whether a market "bottom" has been reached. Jeffrey Sprague questions about a potential pre-buy situation, particularly concerning the demand for 410A refrigerant. David Gitlin confirms that while they have the capacity to meet this demand, they are focusing on building inventory based on distributor feedback and anticipated needs for next year. The movement and demand for their products have been stronger than expected, both in the third quarter and continuing into October.

The paragraph features a conversation between financial analysts discussing Carrier's inventory and financial projections for the coming year. David Gitlin and Patrick Goris from Carrier address queries from analysts Julian Mitchell and Jeffrey Sprague. The discussion touches on the company's expectations for carrying 410A refrigerant inventory into the next year based on anticipated demand for the first quarter. Additionally, Julian Mitchell asks about the discrepancies in EPS projections presented on two slides, from $2.60 to $2.50, attributed to adjustments in the allocation of corporate charges and interest expenses related to discontinued operations. Patrick Goris explains that $0.05 of the difference is due to the allocation of headquarter charges, and the other $0.05 from treating interest expense in discontinued operations.

In the paragraph, the discussion focuses on financial projections and expectations for the business's performance. A $0.10 improvement in adjusted EPS is noted, with contributions from a $0.05 to $0.10 improvement in net interest expenses. The operational performance is anticipated to improve by $0.40 of adjusted EPS based on the $2.20 continuing operations, with a previous quarter improvement of $0.55 that included contributions from the Fire & Security segment. Patrick Goris outlines expectations for the fourth quarter, predicting mid-single digit organic growth and a mid-teens operating margin. HVAC growth is forecasted to be close to 10%, while refrigeration is expected to decline by mid-single digits, mainly due to North America's truck and trailer segment. Adjusted EPS is expected to be slightly less than $0.50, representing a 33% year-over-year increase, with operating margins improving by over 300 basis points, driven by stronger volume and mix, favorable pricing, and productivity gains.

In the paragraph, Andrew Kaplowitz from Citigroup asks about the growth prospects for Carrier in 2025, mentioning a 6% to 8% organic growth profile and a significant backlog increase. Patrick Goris responds by indicating that, while not providing specific guidance, they expect double-digit EPS growth from organic growth, citing strong performance in Commercial HVAC and a return to growth in Residential HVAC. He also highlights the continued strong performance and growth in their portfolio, suggesting confidence in achieving double-digit adjusted EPS growth next year.

The paragraph discusses the company's market share gains in both residential and light commercial sectors. In residential, the company has gained over 100 basis points in market share, partly due to its ability to support customers with 410A refrigerant compared to some competitors. Light commercial performance has exceeded expectations, initially projected to decrease but is now expected to see low-single-digit growth, assuming a 15% decline in Q4. The company anticipates ending the year with balanced inventory and believes that next year will be easier in terms of growth comparison. They attribute their success to share gains, new product introductions, and national accounts. Overall, the team is performing well, with particular success in residential.

The paragraph discusses the current and expected business performance in the HVAC and refrigeration sectors, particularly focusing on the transition to using the 454B refrigerant and managing inventory levels. It mentions expectations for high-single-digit growth, balanced inventory levels, and the projected operating margins for the fourth quarter, with HVAC margins expected to be around 15-15.5% and refrigeration around 13%. Additionally, the conversation touches upon the non-impact of Viessmann on overall company margins but notes it as a slight headwind for the HVAC segment. There's also a reference to ongoing share buybacks.

The paragraph discusses a financial update where Patrick Goris states the company repurchased about $400 million in stock during the third quarter and plans to buy back approximately $1 billion total this year, with $600 million remaining to be repurchased in the current quarter. The plans include open market purchases and possibly an accelerated share repurchase (ASR), depending on the timing of proceeds from their final exit and market conditions. Nigel Coe and Deane Dray ask questions, with Dray inquiring about data center sales. David Gitlin responds, discussing a 5x sales multiplier for HVAC equipment in data centers, noting its advantage over one-time electrical equipment sales. He also mentions the equipment can be customized based on specific requirements for hyperscalers.

The paragraph discusses the company's advancements and successes with their water-cooled and air-cooled chillers, tailored to meet specific requirements of hyperscalers and other customers. The engineering team has excelled in creating customized solutions, such as chillers operating at low capacities without shutting down completely. Despite order numbers not fully reflecting commitments, orders have risen by 250% year-to-date. The company has seen significant progress and wins in the United States and internationally, notably with colocation providers. The initial target for increasing market share has been surpassed, indicating strong future confidence.

The paragraph discusses Carrier's anticipated aftermarket opportunities, which they believe will be transformative in supporting customers worldwide. This involves a comprehensive support system, including real-time equipment monitoring and on-site technicians available 24/7. They are planning to offer this service under a premium "power by the hour" agreement and expect its value to be significantly greater than the equipment itself, potentially reaching five times the equipment value. The conversation then shifts to a legal matter involving Patrick and a settlement related to AFFF, with potential insurance recoveries exceeding $2.5 billion. David Gitlin highlights the complexity of navigating legal claims and the important role of Kevin O'Connor and the legal team in managing these liabilities, given the bankruptcy of KFI.

In the article's paragraph 22, the speakers, David Gitlin and Patrick Goris, discuss putting behind legal claims related to the manufacturer sale of AFFF, pending court approval. They express optimism about settling these claims, despite them being tenuous and related to United Technologies Corporation’s (UTC) actions over a decade ago. They aim to start 2025 with this matter resolved, focusing on growth, execution, and innovation. Joe Ritchie from Goldman Sachs asks about residential HVAC performance, to which Patrick Goris responds that the business was up 11% in Q3 and is expected to rise 20-30% in Q4, largely due to weak performance in the previous year's Q4 rather than a prebuy, which is not factored into their guidance.

In the conversation, Joe Ritchie asks about the potential challenges and strategies related to the transition to R-454B refrigerants, given the market dynamics and inventory of existing R-410A units. David Gitlin responds by indicating that sales of R-410A units are anticipated to occur in the first quarter of the coming year, as distributors will have stock. He mentions that while there might be concerns about selling 410A units ahead of schedule from 2025, the current sales and inventory data do not indicate a significant pull-forward effect. The company expects a balanced year-end and the transition to R-454B to include double-digit pricing expectations, focusing on underlying demand and inventory levels.

In the paragraph, David Gitlin discusses the pricing strategy for the 454B system, which will be 10% higher than the 410A, with an escalation of 15% to 20% over two years due to additional costs from parts and controls for the A2L system. He believes this pricing approach is appropriate. Stephen Tusa from JPMorgan asks about the impact on the light commercial business and mentions the ESSER funding cliff. Gitlin notes it's too early to predict for next year but aims to balance inventory levels, with a 15% reduction in the fourth quarter. ESSER funding, totaling $190 billion, will continue to support spending through 2025, with requirements to spend by March 2026, and some states are seeking extensions.

The paragraph discusses various aspects of a business's financial performance and strategic focus. It highlights significant achievements in sectors like K-12 in states such as California and Arizona and notes that these have contributed to the company's success. The business is expected to grow by low-single digits in the current year, with a focus on reducing inventory levels in small rooftop units. The conversation shifts to margins, with Stephen Tusa estimating a 10% adjusted operating profit margin for the third quarter and 11% for the year, which Patrick Goris confirms as accurate. EBITDA is described as being in the mid-teens. The dialogue then moves to Noah Kaye's inquiry about the refrigeration business, specifically its margin profile and business trends, as they prepare to enter 2025, suggesting that refrigeration margins might be around 14% excluding CCR, and noting positive trends in truck trailers and flex orders.

David Gitlin and Patrick Goris discuss the company's outlook for the North American truck trailer business and refrigeration margins. Gitlin notes that while order numbers for NATT were high, they're not overly optimistic due to easy comparisons and anticipate a challenging year. However, they're positioning for growth in the next year, with ACT predicting modest mid-single-digit growth. They aim for additional growth beyond these projections. Goris mentions that refrigeration margins, excluding commercial refrigeration, will rise by about 300 basis points. Despite a $750 million revenue loss in CCR, the operating margin should increase by 50 basis points next year. In response to Noah Kaye, Gitlin confirms an expected $75 million in cost synergies for VCS this year, potentially more, with similar gains anticipated in 2025.

The team has successfully reduced costs on the material side, both direct and indirect, due to aggressive cost-cutting measures driven by lower-than-expected sales. This cost reduction is expected to contribute to higher profit margins moving forward. During a Q&A section, Andrew Obin from Bank of America asks about the Educational Stabilization Fund under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (ESSER) being supplemented by other funding sources like the Inflation Reduction Act (IRA). David Gitlin responds that increased funding, particularly for K-12 education, has supported strong performance in this sector and is expected to continue. Local school budgets have been underspent due to reliance on federal funds, leading to a potential for increased spending capacity in 2026 and beyond.

In this exchange during an analyst call, Patrick Goris discusses the expectations for free cash flow in 2025 following the Viessmann acquisition, indicating that there are no significant one-time items to consider and the company aims to achieve 100% of adjusted income, accounting for restructuring charges. The conversation shifts to Chris Snyder from Morgan Stanley asking about order trends, noting a nearly 20% increase but mentioning previous indications of a 20-30% rise. David Gitlin clarifies that the discrepancy is due to residential (resi) orders, which surged in the first two months but slowed in September, resulting in overall order growth aligning at around 20%.

In the paragraph, David Gitlin discusses the evolution of Carrier's aftermarket strategy from a foundational "1.0" approach established in 2019-2020, to a more advanced "2.0" strategy. The initial strategy focused on ensuring parts were available within the system, developing a tiered offering, digital connectivity, and tracking key metrics. The new strategy aims to enhance sophistication by optimizing inventory placement, using algorithms, and connecting equipment like chillers to generate valuable data for customers. This includes predictive maintenance, diagnostics, and carbon tracking services. Though it involves modest investments, the aftermarket strategy is attractive due to its higher margins compared to the base business.

The paragraph discusses the focus on daily efforts by everyone in the business to drive results, particularly noting that Viessmann Climate Solutions will contribute to significant aftermarket growth with a strong residential portfolio. This focus permeates throughout the 50,000 employees in the company. Chris Snyder and David Gitlin express gratitude towards the team, customers, and shareholders, highlighting the company's transformation and performance. The company is enthusiastic about finishing the year strong and achieving significant results by 2025. The call ends with the operator concluding the conference.

This summary was generated with AI and may contain some inaccuracies.