Carrier Global Corp at Bank of America Global Industrials Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Andrew Obin - Bank of America Securities - Analyst : Yeah, thanks so much. Yeah, maybe a good place to start. We're sort of towards the end of the quarter. Lots of economic uncertainty. Maybe just give us an update. What are you seeing in the market? I think lots of concern at this event, but just general state of the US economy. Any macro read across? And just maybe give us the latest if you're seeing in your key markets, maybe US resi, US commercial, and maybe Europe. Just let's start there. We'll go.

Question: Andrew Obin - Bank of America Securities - Analyst : Well, that's a good answer. And in general, do you get a sense? Can you tell sort of volatility in the underlying economy? Can you tell from the conversations with the customers?

Question: Andrew Obin - Bank of America Securities - Analyst : Great. Thank you so much. And sort of your mid-single-digit organic growth, you have this medium-term organic guide of 6% to 8%. I know you guys are going to have an Analyst Day in May clearly. But is it reasonable to sort of to see that the company continues to accelerate over the next several years. And obviously, to sort of to hit 6% to 8%, eventually, you have to go above that. So what would drive going above that potentially in years? What trends would drive you going above that rate?

Question: Andrew Obin - Bank of America Securities - Analyst : And what percent of the company -- clearly, I mean, we were discussing last night, all of you said there's a lot more excitement about Europe and change in the sentiment. Maybe what are the key end markets for you for resi Europe? And how big is resi Europe for the company?

Question: Andrew Obin - Bank of America Securities - Analyst : Right. And resi Europe exclusive? Is this with Viessmann or -- so it is Viessman?

Question: Andrew Obin - Bank of America Securities - Analyst : Okay. I get that. Sorry about that. That makes sense. So -- and we'll talk about Viessmann. The HVAC industry has a large manufacturing presence in Mexico, Carrier included. So how big of an impact would tariff from Mexico have on you? Is the impact primarily to the resi HVAC business?

Question: Andrew Obin - Bank of America Securities - Analyst : Right. But are you comfortable about dealing with that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 8:50AM, CARR.N - Carrier Global Corp at Bank of America Global Industrials Conference

Question: Andrew Obin - Bank of America Securities - Analyst : But generally your guidance -- just to make sure, your guidance does not include tariffs on Mexico. You have playbook sort of ready, that is why that happens. And the expectation right now that you'll be able to absorb --

Question: Andrew Obin - Bank of America Securities - Analyst : Yeah. No, I totally get it. And you mentioned that you're hedged on steel. Can you just sort of tell us copper, steel, aluminum, where are you? I think you've disclosed previously, how hedged you are.

Question: Andrew Obin - Bank of America Securities - Analyst : So okay. So at this point, across the board, you're covered?

Question: Andrew Obin - Bank of America Securities - Analyst : Okay. And it's interesting, I did ask this resi HVAC question in Europe. Obviously, a tremendous amount of movement in the portfolio and the company does look quite different from when you were part of UTX, UTC. As the portfolio transformation complete, how are you thinking about potential resegmentation or the financials for the business to give us a better idea what it is you do?

Question: Andrew Obin - Bank of America Securities - Analyst : And on an annual basis, how will you be providing sort of further breakdowns by region in your --

Question: Andrew Obin - Bank of America Securities - Analyst : But I meant within Europe, would you sort of break out -- will you break out --

Question: Andrew Obin - Bank of America Securities - Analyst : No, that is fantastic. And maybe just on working capital. I think for the company days inventory still, I think, elevated versus pre-COVID. Just as a CFO, what are the expectations for sort of working capital levels '25 going forward? And how should we think about free cash flow conversion for the company? What's the right run rate?

Question: Andrew Obin - Bank of America Securities - Analyst : Excellent. So maybe just going to resi HVAC in North America. Lots of sort of concern about 410A transition, what's happening? But we have heard from distributors that -- on the resi side that, after a few years of primarily sort of repair parts growth that they actually think that '25 could be a year of equipment growth. So how does that square with what you see in the market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 8:50AM, CARR.N - Carrier Global Corp at Bank of America Global Industrials Conference And just generally, I think this repair versus replacement dynamic, I think the industry really cares about it. Maybe just talk about what it is you're seeing there.

Question: Andrew Obin - Bank of America Securities - Analyst : And the demand that you're talking about, so clearly this is -- well, I don't know if it's clear, but it sounds like it's actually a 454B product.

Question: Andrew Obin - Bank of America Securities - Analyst : But you sort of said resi is better. What's driving, resi being better because we've actually -- to be completely frank, we've been hearing about resI potentially being better since the end of last year. And the message is just the underlying demand on the channel is just not as bad as people have feared.

Question: Andrew Obin - Bank of America Securities - Analyst : But basically, are you sort of going to be exiting the quarter already shipping a fair amount of 454B?

Question: Andrew Obin - Bank of America Securities - Analyst : Excellent. And maybe with the funds from the IRS here and homes rebate programs starting to be distributed by states, how much of an impact do you expect this to have on your resi business?

Question: Andrew Obin - Bank of America Securities - Analyst : Excellent. And this is an interesting discussion. For the new refrigerant units, right, there's a discussion of the lack of 454B refrigerant. Is that something impacting you at the manufacturing level or any of your distributors?

Question: Andrew Obin - Bank of America Securities - Analyst : Great answer. And given the increased pricing of residential units, well, I guess you -- given the Trump administration rollback of efficiency standards on several products, including central air conditioning, could you see a scenario where the market starts remaking lower SEER units?

Question: Andrew Obin - Bank of America Securities - Analyst : And I guess last question in resi for me for North America. As heat pup adoption rises in the US, how do you see competition evolving from new lower-priced entrants? And specifically, when we were at the AHR Show, every -- and there you just see bigger and better booths with players from China. What a lot of distributors tell us, they got quite good sort of doing white label for a lot of major US manufacturers. So they actually know what the requirements are. It's the same product. And they are now starting to build out their own channels. With some of your large distributors, frankly, right, for the booth of staff, you going to the boost on their staff as like North American distributors. So from that perspective, clearly, you're uniquely positioned with Toshiba and, I guess, Giwee. You actually have made proactive moves. So maybe just, A, how do you see this competition dynamic evolving with more product out of China coming into North America? And clearly, you have thought about it, right? You have the high-end product from Japan, you have the low-end product from China. Just maybe sort of -- because I think you're uniquely positioned. And clearly, you also have Viessmann. So like nobody has done what you have.

Question: Andrew Obin - Bank of America Securities - Analyst : And just fundamentally, this was another sort of takeaway from the AHR. Do you think the market is changing? Because of the major manufacturers, what we've heard, you only want to make sort of real investment in the channel. You continue to sort of to let your dealers save. And we've heard REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 8:50AM, CARR.N - Carrier Global Corp at Bank of America Global Industrials Conference that a lot of other -- well, some of your competitors, went through direct model, which sort of works well, but you sort of lose maybe contact with the channel. And you have more Asian players. And it just seems it's going to be a different market 5 or 10 years from now versus where it may have been five years ago. Could you just talk about that? And you really -- the comment we get that Carrier is the one company that has thought about it.

Question: Andrew Obin - Bank of America Securities - Analyst : Maybe just we should talk about Viessmann. Clearly, last year was a year of adjustment. Can you just talk about, A, how have you recalibrated maybe your view on European market, just the size of the European market, right? Because the numbers I have, I think, we were thinking 4 million to 6 million units by '27, 6 million to 10 million units by 2030. What are these numbers look now? And maybe just talk about how do you see the European market evolve because we're sort of here that the inventory has been flushed out. And clearly, you have a different business model. But yeah, just maybe talk about pump market in Europe.

Question: Andrew Obin - Bank of America Securities - Analyst : But effectively Viessmann could turn flat by a second quarter and this should grow in the second half. Is that --

Question: Andrew Obin - Bank of America Securities - Analyst : Yeah, that's what. Okay, fine. Maybe in the remaining time, let's get data center. Just you have talked about sort of AI solutions for a while. Do you need new cooling solutions to service the AI data center market? And you sort of have highlighted your business should double next year. But maybe just talk about what technologies can you add to your product stack to be a better player, right, because you have a couple of your peers. You're definitely in the game, but clearly you have higher aspirations. Maybe talk about the roadmap.

Question: Andrew Obin - Bank of America Securities - Analyst : And who is your typical customer? Is it like -- it sounds like it's maybe 50 megawatt colo? Is that would be sort of a typical --

Question: Andrew Obin - Bank of America Securities - Analyst : And just maybe in the remaining minute, light commercial, you sort of said maybe down. Could you just walk us through what are the key verticals for you within light commercial? Why has it been so strong? Pump is clearly an issue. But maybe which verticals are down and which verticals are still strong?

Question: Andrew Obin - Bank of America Securities - Analyst : That's terrific. Well, thanks so much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MARCH 20, 2025 / 8:50AM, CARR.N - Carrier Global Corp at Bank of America Global Industrials Conference