Carrier Global Corporation Morgan Stanley's 14th Annual Laguna Conference

Well, Joe, thank you so much. Thanks to Morgan Stanley for hosting us. Let me just start by saying that I have never felt more confident in our company's growth trajectory. We have record backlogs in our long-cycle businesses. We continue to drive double-digit aftermarket growth, and our resi and light commercial businesses in the Americas and Europe are rebounding. That combination sets us up very well. Let me start with commercial HVAC. We are clearly winning more than our fair share. Our global HVAC orders in the first half were up over 50%, with exceptional growth in data center orders, leading to total company record backlogs of about $8 billion, which for us, when we talk backlog, that excludes minimum volume commitments without POs. We expect order intake to again be very strong here in Q3. Our HVAC business is night and day versus when we spun.

We invested significantly in our product portfolio to drive differentiation and win, and we are seeing that in the results. Let me give you an example of differentiation. We recently committed to a hyperscaler to achieve specs for a new 3-megawatt air-cooled chiller that exceeded the capabilities of our competitors. Three weeks ago, this customer witnessed the first-of-kind test for the state-of-the-art product. We passed with flying colors, meeting or exceeding all of the technical requirements, including chiller restart time and operating at full capacity at higher ambient temperatures, all contributing to our record backlog levels and expanded pipeline. In addition to product differentiation, we continue to make great progress on QuantumLeap system offering. Our controls business continues to outperform and help us differentiate at a systems level.

We have added a significant number of skilled technicians to our field network, and our performance and tenacity to please our customers with great delivery quality and responsiveness has been differentiating. Given the very strong backlog, we are continuing to add capacity. We previously announced that we are building a new site in India, and we plan to announce a new site here in the United States in the next coming weeks, all to support customer demand in 2027 and beyond. We are expanding capacity not just for data centers, but also to support other key verticals such as high-tech manufacturing, renewable energy, higher education, healthcare, K-12, and infrastructure. We like our balance between commercial and resi. In the Americas, for example, we expect sales in our commercial business to exceed our resi business just in the next couple of years.

On the resi and light commercial side, our businesses here in the Americas has been recovering faster than we planned, with now both expected to be up high single digits this year. In Europe, the combination of very strong demand for heat pumps, air conditioning, and system solutions, along with overall markets starting to rebound towards traditional average levels, has positioned us for the very strong growth that we expected when we purchased Viessmann. Turning to the near term, we said on our last earnings call that we expect Q3 sales to be about $6 billion and adjusted EPS to be about $0.75. We expect to come in a bit higher on sales as we have been working to balance sales between Q3 and Q4 to de-risk Q4 while we remain on track for that $0.75. I remain very grateful to our team.

We continue to control the controllables and position ourselves for very strong growth over these coming years. Joe, with that, Patrick and I are happy to get into the questions.

Yeah. The good news is it's fully in our control. We have the coverage. We've de-risked on the technical side because we fundamentally passed the key tests that we have to pass that are witnessed by the customers. I will say that usually when you build your first units, it's hard to dual source or multi-source the components until you kind of get past that first build. What we're doing in the process to de-risk right now is we have started, in some cases, there are some components where we'll have four sources. We're trying to dual source all of the key components. We're working on different stocking strategies in terms of parts, where we pull inventory to have it when we need it. We've gone to great lengths to make sure that we have capacity in our lines. We have fully trained technicians for every shift.

Those are all fine. We will not achieve the results because of our factories. We are very well-positioned there. The thing we watch every day is supply chain challenges, but we have come a really long way, and when we look at our lines of balance from the suppliers, we look at where we stand quarter to date and what's in front of us, we feel very confident that we're going to achieve the $1.5 billion. Look, anyone that's been through a ramp in operations, on any given Sunday, you wake up to a surprise from a supplier. It's not a layup, but we're tracking to our commitments, and we feel good about the $1.5 billion in the second half.

Look, if we do $1.5 billion, or once we do $1.5 billion in the second half of this year, you would assume that the minimum for next year between the pipeline that we have, the coverage that we already have for next year, the backlog we have, that would be a minimum of $3 billion. Obviously, when you look at the fact that we have built up a fair amount of capacity here in the Americas just over these last couple of years, we're going to announce this new site in either Texas or Alabama in the next few weeks. That new site doubles the capacity that we already have. So you would think that we would be able to do at least three, and we wouldn't be building the new site if we didn't have very strong pipeline end coverage.

We feel good about the growth for next year. As we get into the end of this year, early next year, we'll be more specific on that number.

You can think about our data center business. First of all, it's about 70%-80% or so is in the Americas. And of our business, it's about 50/50 hypers and colos. So we have kind of a nice mix there. The other mix that we're driving is non-data center wins as well because we know that the data center business has been phenomenal. This year we'll probably, on the non-data center business, grow low single digits, but we've constrained ourselves. What we've been very purposeful about is as we build the new site and the existing sites we have, every single line, whether it's an air-cooled or water-cooled chiller, every line is going to be mixed model so we can flow data center and non-data center product through those lines. The other thing is we build for fungibility.