Good morning, and welcome to Carrier's third quarter 2022 earnings conference call. I would like to introduce your host for today's conference, Sam Pearlstein, Vice President of Investor Relations. Please go ahead, sir. Thank you, and good morning, and welcome to Carrier's third quarter 2022 earnings conference call. With me here today are David Gitlin, Chairman and Chief Executive Officer, and Patrick Goris, Chief Financial Officer. We will be discussing certain non-GAAP measures on this call, which management believes are relevant in assessing the financial performance of the business. These non-GAAP measures are reconciled to GAAP figures in our earnings presentation, which is available to download from Carrier's website at ir.carrier.com. The company reminds listeners that the sales, earnings, and cash flow expectations and any other forward-looking statements provided during the call are subject to risks and uncertainties. Carrier's SEC filings, including forms 10-K, 10-Q, and 8-K, provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Once the call is open for questions, we ask that you limit yourself to one question and one follow-up to give everyone the opportunity to participate. With that, I'd like to turn the call over to our Chairman and CEO, David Gitlin. Thank you, Sam, and good morning, everyone. Let me start by saying how proud I am of this tremendous Carrier team, which continues to deliver strong and consistent results. Turning to slide two for a summary of our Q3 results. We delivered 8% organic sales growth on the heels of continued traction on pricing. Total company organic orders were up 3% in the quarter, and our backlog is up about 10% year-over-year. Importantly, we continue to deliver double-digit aftermarket organic growth. Adjusted operating profit was slightly better than we expected, and price cost continues to be positive. We are tracking to about $300 million of gross productivity, about $100 million of which will come from G&A reductions. We generated strong free cash flow in the quarter of approximately $700 million. Supply chains are generally improving. We have increased dual sourcing for critical components and supplier on-time delivery has meaningfully improved. The improvements, though steady, have been later in the year than planned, thus impacting our full-year free cash flow forecast. As supply chain and working capital improve, we expect to return to 100% free cash flow conversion. We successfully closed the Toshiba Carrier acquisition during the quarter, and we are making important progress on integration and are starting to realize synergies. We still have plenty of capacity for additional value-add capital deployment as our balance sheet remains very solid with approximately $3 billion of cash and no debt maturities until 2025. Earlier this week, our board approved a $2 billion share repurchase authorization, which is on top of the $300 million remaining on the previous authorization. We are confident in our strategy and long-term prospects and remain committed to delivering shareholder value through disciplined capital allocation, including organic growth investments, M&A, dividends, and share buybacks. Moving to slide 3. I want to again emphasize our commitment to the value creation framework that we presented at our Investor Day earlier this year. Our team remains laser-focused on these four principles of driving above-market organic growth, expanding margins, delivering strong free cash flow, and disciplined capital allocation. We have a thorough goal alignment process that cascades our critical focus areas to each of our 55,000 team members' individual performance goals. We are making significant progress on our priorities, as you can see on slide 4. Secular trends continue to drive sticky customer demand, and one theme that certainly fits that definition is sustainability. Our customers in both the commercial and residential verticals are motivated to achieve their ESG targets and reduce their carbon footprint and energy bills, with government mandates, policies, and incentives further fueling this demand. A key sustainability enabler is the shift to electrification in buildings and cold chain distribution. Starting with buildings. In the U.S., the rapid transition to heat pumps will be further accelerated by the recently passed Inflation Reduction Act. Today, over 30% of our residential split sales include heat pumps. In Q3, our residential heat pump shipments were up over 30% compared to last year. We established our Tennessee facility as our North American Heat Pump Center of Excellence and are expanding customer financing offerings through our new EcoHome initiative. In addition to heat pumps, we continue to lead through innovation with energy-efficient solutions. The cutover to our differentiated new 2023 SEER2 compliant units has gone well, and our resi HVAC team has done a great job managing the production and inventory transition. We recently hosted 8,000 Carrier and Bryant dealers in Las Vegas, and our industry-leading dealer network is energized about the product lineup. Our new indoor and outdoor units are complete redesigns, differentiated in performance, size, and weight. In addition, a 45% SKU reduction provides flexibility and operational efficiencies to the channel and to us. We are driving aggressive cost reduction actions and are pricing the new, more efficient units at least a 10%-15% premium over previous generation products. In Europe, where we are the leader in commercial heat pumps, Q2 and Q3 heat pump orders were up 30%, and we anticipate the same magnitude for the full year. The TCC acquisition enables us to accelerate product development in the heat pump segment and become a more significant player in the fast-growing Asia VRF heat pump market. We also continue to benefit from the shift to electrification in our truck trailer business, with strong traction on our innovative Vector eCool units. Customers now operate these units in 11 countries, and our market leadership in this segment is being recognized. Just recently, Vector eCool earned the Top Product of the Year award from the Environment+Energy Leader Awards program. In addition to sustainability, we continue to lean into the opportunity presented by the increased focus on health and wellness. We are proud to partner with our friend Russell Wilson as we work with large-scale customers to provide them with safe and healthy indoor environments. Demand for our innovative solution continues to build. In Q3, healthy building orders were up over 55% compared to last year, and our pipeline increased to about $900 million. Within the K through twelve vertical, Q3 orders were up 20%, and we are up about 35% year to date. Our intense focus on digitalization for many reasons, but at its core, we are transitioning Carrier from an equipment-centric provider to a solutions company with more aftermarket and recurring revenues. The opportunity to use digital offerings to embed ourselves in our customers' ecosystems to help them achieve specific outcomes is tremendous. Our Abound and Lynx digital platform sense and collect data and interact with key building and cold chain system technologies to provide customers with the outcomes they desire. Abound not only provides healthy and sustainable solutions. We have also introduced new applications, including Abound Predictive Insights, that reduce the total cost of asset ownership by enabling smarter, more predictive maintenance to optimize equipment health and performance. My leadership team and I are interacting directly with scale customers, and I can tell you that their willingness to make long-term commitments to Carrier is encouraging. Recent Abound wins include a nationwide drugstore chain that will add an additional 2,500 stores to our growing portfolio of managed multi-site retail locations and an installation at more than 100 commercial office buildings for a key scale customer. Our efforts here are being recognized as Abound EcoEnergy has received 5 awards in 2022 for innovation, impact, and customer service excellence, and its ability to deliver positive outcomes. Growing Abound sales will generate higher margin, more predictable recurring revenues, and a stronger pull for additional equipment sales and services. The same holds true for Lynx and our cold chain initiatives. We continue to add capabilities to our Lynx platform, focused on providing our customers with greater flexibility, visibility, and intelligence across the cold chain. Our advanced reefer equipment insights and analytic models provide early and automated detection of refrigerant loss, enabling our customers to improve their asset uptime and operational performance and to protect the invaluable refrigerated cargo. In our North American truck trailer business, Q3 saw a more than 60%, 60% year-over-year increase in service revenues driven by thousands of new Lynx subscriptions. We remain on track for 100,000 new Lynx subscriptions by year-end. Our traction on solution selling, driving more recurring revenues, is reflected in our continued aftermarket performance, as you can see on slide 5. Aftermarket was up double digits organically in the third quarter, and we continue to expect to realize over $7 billion in revenue by 2026. Connected devices are a fundamental enabler. We remain on track for about 20,000 connected chillers. Our attachment rate was 40% in the third quarter, and we expect to have 70,000 chillers under BluEdge contracts by year-end. We are also expanding our parts sales, enabled by our Breeze platform, where we onboarded 2 new national accounts. Our aftermarket playbook is deeply embedded in our DNA, and we are seeing the results quarter over quarter. Lastly, on slide 6, we continue to be confident in our ability to drive shareholder value, even in the face of economic uncertainty, by staying true to our proven strategy. We have consistently exceeded our expectations, and we will utilize that same playbook in 2023 and beyond. Driving strong and recurring growth through differentiated solutions that address secular trends and increased aftermarket opportunities, eliminating waste and driving tenacious cost reduction, and remaining disciplined in our capital allocation to accelerate growth and return capital to shareholders. As we close out Q4 and look ahead to 2023, we will control the controllables by doubling down on this proven playbook. I am deeply confident in Carrier's team ability to drive continued strong results despite challenges that may be thrown our way. With that, let me turn it over to Patrick. Patrick? Thank you, Dave, and good morning, everyone. Please turn to slide 7. Reported sales of $5 and a half billion were up 2% compared to last year, and organic sales were up 8% driven by price with volumes flat. The Chubb divestiture reduced sales by 10% and acquisitions, substantially all Toshiba Carrier, increased sales by 8%. Currency translation was a larger than expected headwind of 4%. All the segments were price cost positive in the quarter. Q3 adjusted operating margin was down 40 basis points compared to last year. The margin impact of the Chubb divestiture and the TCC acquisition at about 70 basis points each offset each other. Price cost, although positive in the quarter, is a margin headwind of about 30 basis points. The adjusted effective tax rate of 23% is in line with what we now project our ongoing annual effective tax rate to be given the Toshiba acquisition. Adjusted EPS of $0.70 was stronger than expected and includes a $0.02 benefit from Toshiba, which will reverse in Q4. In essence, timing of integration expenses. For your reference, we have a year-over-year Q3 adjusted EPS bridge in the appendix on slide 17. Free cash flow in the quarter was $699 million. While there has been some improvement in the supply chain, component shortages continue to affect deliveries and shipments and thus inventory levels. Before I move on to the segments, let me make a comment about the other income you see in our P&L. As a result of the Toshiba Carrier acquisition, we recorded a one-time gain of about $730 million in Q3, which in essence is the step-up associated with the ownership stake we already had in Toshiba Carrier. This is not a taxable event. We exclude this one-time gain and amortization related to acquired intangibles from adjusted operating profit and adjusted EPS. Moving on to the segments, starting on slide 8. HVAC reported sales were up 22% and of course reflect the impact of Toshiba, which added 12 points of year-over-year growth. HVAC organic sales were up 13%, driven by high single-digit growth in residential and strong double-digit growth in our light commercial and commercial HVAC businesses. Resi movement was down mid-single digits in the third quarter, and quarter end field inventory levels are up about 20% year-over-year. We continue to work towards balanced year-over-year field inventory levels by year-end as we transition to the new 2023 products. Residential HVAC growth was all driven by price as volume was down mid-single digits. Our light commercial business grew over 20% in Q3, and field inventories remained down about 10% year over year. Commercial HVAC had a very strong quarter with double-digit growth in applied equipment, aftermarket, and controls. All regions grew mid-teens. Sales in China were up more than 50% as we recovered from the impact of the Q2 Shanghai lockdowns. Adjusted operating profit for the HVAC segment was up 6% compared to last year. As expected, operating margin was down 260 basis points, with about a 150 basis point impact from the Toshiba consolidation and 90 basis points due to price cost. The balance is unfavorable mix and lower JV income offset by good productivity. We expect the HVAC segment to remain price-cost positive for the full year and to deliver full-year margins of about 15% consistent with what I shared with you last quarter. The Toshiba acquisition has about 100 basis points dilutive impact on full-year 2022 margins for this segment. Transitioning to refrigeration on slide 9. Q3 reported sales include a significant headwind from currency translation as this segment is very global. Organic sales were down slightly given significant supply chain constraints as truck and trailer growth offset declines in container and commercial refrigeration. Within transport refrigeration, North America truck and trailer saw strong growth in the quarter, up high teens. However, supply chain issues affected Europe truck and trailer, leading to increased backlog and inventories. Container sales were down about 20% year-over-year based on demand softness as well as tough comps. Sensitech delivered another strong quarter with double-digit sales growth. Commercial refrigeration was flat year-over-year as our European food retail customers are pressured by high inflation and energy prices. Adjusted operating margins were up 80 basis points compared to last year, despite lower sales with favorable productivity, price cost, and currency translation more than offsetting the volume headwind. The segment remains on track to deliver margins of about 12.5% this year. Moving on to fire and security on slide 10. Excluding Chubb sales from the third quarter of 2021, fire and security segment sales were up 6%. Adjusted operating margins expanded 220 basis points in the quarter, mainly because of the Chubb divestiture and productivity, which more than offset the impact of negative volume. This segment is particularly impacted by supply chain challenges, especially in the higher margin access solutions business. Price cost was positive and this segment remains on track to deliver margins of about 16% this year. Slide 11 provides more details on orders performance. The total company organic orders were up low single digits for the quarter and backlog remained strong throughout all segments. Similar to last quarter, and as expected, resi HVAC orders were down in Q3 as the business continues to prioritize their order book and normalize the backlog that is still measured in months versus typically weeks. Light commercial demand remained robust and orders were up almost 50% in the quarter. Backlog is up 3.5x year-over-year within that business, which should position us for a good start to 2023. As I mentioned, commercial HVAC saw double-digit orders growth for the seventh consecutive quarter. All regions within commercial HVAC saw double-digit growth and the commercial backlog, excluding NORESCO, is now up over 35% compared to last year and extends well into 2023. Refrigeration orders were up mid to high single digits in the quarter, driven by an almost tripling of orders in North America truck and trailer as we opened the order book for the first half of 2023 in September. Given how we manage the order book, a better year-over-year comparison for North America truck and trailer is properly looking at year-to-date order performance. Through 9 months, orders are up 27% year-over-year for North America truck and trailer. The transport refrigeration's backlog remains up almost 10% year-over-year as the North America strength more than offsets some order weakness within the Europe truck and trailer business and container. Commercial refrigeration orders were down over 20% organically as the European food retail customers are impacted by energy prices and inflation, and as we continue to focus on improving profitability of this business. Finally, demand for our fire and security products remained healthy. Orders were positive in each of the businesses except for access solutions, which has been most impacted by supply chain challenges. Fire and security products backlog is up almost 40% year-over-year, with double-digit growth in all businesses except residential fire in the Americas. As you can see on both the left and right sides of the slide, we saw strong demand in many of our businesses. However, we have seen some weakness in a few areas, such as in Europe, driven by Europe truck and trailer and commercial refrigeration. In addition, the weaker container orders impact Asia excluding China, given that this business mainly books orders in Singapore. For reference, with the addition of TCC, China sales are about 9% of our total company business. Now moving on to guidance on slide 12. Compared to our prior guidance, we are reducing our full year expected sales by about $400 million, with most of the reduction due to currency translation, the balance due to slightly lower organic sales growth. Accordingly, we now expect full-year revenues of about $20.4 billion versus the prior guide of $20.8 billion. We now expect adjusted operating margin of 14.2%, up 60 basis points compared to last year and up 20 basis points compared to our prior guide. This reflects improved Q3 margin performance. Currency translation is also a minor tailwind to margins compared to our July guide. We are increasing our full-year adjusted EPS guidance range to the high end of our prior guidance or $2.30-$2.35. This is primarily due to the strong performance in the third quarter, including productivity, that more than offsets the incremental earnings headwind from slightly lower volumes and currency translation. We continue to expect the TCC acquisition to have a neutral impact on adjusted operating profit and adjusted EPS in 2022, with operating profit contribution to be mostly offset by the loss of equity income and integration expenses. However, as I mentioned earlier, the timing of the planned integration costs shifted from Q3 to Q4, causing a TCC adjusted EPS contribution in Q3, but a negative impact in Q4. Lastly, on free cash flow, last quarter we said achieving our free cash flow target had become more challenging given continued supply chain headwinds. While we did see supply chain improvements in Q3, the improvements are coming later than expected, and so it will not be enough to reduce our inventories by year-end to get to $1.65 billion of free cash flow. In addition, and to a lesser extent, free cash flow is negatively impacted as we acquired cash from the acquisition of TCC rather than receiving that cash through dividends from equity investments. As a result, we now expect to generate closer to $1.4 billion in free cash flow. This still includes approximately $200 million in tax payments related to the Chubb gain and $100 million unfavorable impact from the expiration of the R&D tax credits. In summary, another quarter of good performance enables us to increase our adjusted operating profit and adjusted EPS guide. The strengths we see in parts of our portfolio are helping to balance weakness in other areas such as Europe and some consumer-related end markets. Supply chain improvements are coming later in the year than we expected and are leading to elevated inventory levels impacting free cash flow. With that, I'll turn it back to Dave for slide 13. Thanks, Patrick. We have delivered very solid performance year-to-date and remain confident in our ability to close out another strong year. Demand for our innovative products remains healthy, and I'm excited for the opportunities that we have in front of us. With that, we'll open this up for questions. Thank you. As a reminder, to ask a question, please press star one one. Again, to ask a question, please press star one one. Please stand by while we compile the Q&A roster. Our first question will come from Jeffrey Sprague from Vertical Research Partners. Your line is open. Hey, thank you. Good morning, everyone. Good morning, Jeff. Hi. Dave, now that Toshiba is completely in the wheelhouse, I just wonder if you could give us a little bit more color on kind of the forward look into kind of 2023 and, you know, what you think you can do with the margins there and what the restructuring plan looks like. Sure. Well, let me start, and then Patrick can add some color. I would say that as we've looked under the covers at Toshiba, we're even more encouraged by what we see in the opportunity. I think one slight disappointment was price cost. I think the company should have reacted a little bit earlier in the year to some of the cost headwinds that we were seeing. When we closed on the deal, we did have to come in and raise prices. We are also, as we said, we were gonna be aggressive on the cost side. We talked about $100 million of run rate synergies, and I can tell you there's opportunity on top of that. The team is gonna drive that extremely aggressively. I think the most exciting thing, as you look at the integration of the business, is the VRF business is fundamentally a heat pump business. It's gonna help us with our growth not only in Asia, but also in Europe. Really differentiated products. The integration with the team has gone extremely well. I think in terms of margins, you know, if you fast-forward out, you know, five years or so, I think you're looking at an EBIT ROS that's in the mid-teens. Right. Just on the resi side of the equation, I assume it's kind of in your guidance, but it sounds like we should be expecting, you know, some absorption pressure in Q4 as you work down inventories. But also just curious, you know, maybe the apparent mismatch between backlog being very extended but maybe inventories being seasonally higher than you'd like. Is that backlog now really kind of, you know, the new SEER stuff, and we should think about that being delivered in 2023? Yes. I think that. You know, we've been watching that, you know, this very tricky balance between movement, inventory levels and the cutover quite carefully. Movement was down kind of mid-single digits in the quarter. Our key objective, working very, very carefully with our channel partners, is to make sure that we end this year with inventory in balance. That's something that's very important to our channel partners and to us. I’m confident that we will. The cutover to the new SEER units has actually gone extremely well. As you know, Jeff, we took a much more aggressive approach to drive more value add into the product. We're now 100% cut over to the new product in the South. We'll be 100% cut over to the new products here as we get in about a month from now for the North. That cutover is going very well. Almost all of the new product will be shipped next year, and that's at about a 10%-15% price premium. I think we're trying to manage that inventory balance, and we're still sitting at around 4 months of backlog when usually we'd have 4 weeks. We're carefully monitoring the fluid situation, but we feel confident where we are right now. Jeff, on the absorption, yes, there is a little bit of a headwind there, and I'd say that extends to some of the other segments as well. We just wanna make sure that we exit the year with appropriate levels of inventory. In some of our facilities, we'll take a little bit more downtime than we expected just a couple of months ago. Great. Thanks for the color, guys. Thank you. Thank you. One moment for our next question, please. We'll take our next question from Nigel Coe from Wolfe Research. Your line is open. Thanks. Good morning, everyone. Morning. Good morning. Let's talk about residential. We're seeing some pretty divergent trends between heat pumps and AC units, and I'm guessing that will continue into 2023, 2024 and beyond. Some of your competitors have weaker positions in heat pumps. You've got a very strong position. I'm just wondering, are you seeing any share shifts as this dynamic plays out? Yeah. I would say, Nigel, that if you look over last 12 months, I think it's clear we picked up, you know, I don't know, 30 or so BPS of shares. I think that our position in heat pumps has helped that. I do think that on the flip side, we are working again with our channel partners to manage their inventory levels as they head into next year. I think at a high level, you know, when you look at overall resi for the third quarter, you know, we had good price. We're sitting on backlog. We're managing the cutover. We're watching movement in field inventories. We do get, as you know, and I'm answering kind of more broadly, Nigel, than your heat pump question, but we get a lot of questions about resi overall. Just a bit of a reminder for folks is that some perspective, it's, say, 25% of our sales. I think the thing as we look at next year that'll be most acutely under pressure will be the residential new construction piece. That's a quarter of the residential business. So that means it's about 5% of our total business, which means that if that residential new construction piece, just pick a number, was down 10%, that would impact our top line by 0.5%. You have these countervailing things like what you're bringing up, which is we have a number of positive mix stories, which is the shift to heat pumps. It's whether it's cooling only to heat pumps where we're doing particularly well, especially 'cause we have outsized share in Florida and places in the South. We have the new SEER units coming in, and then we also have, depending on how the Inflation Reduction Act plays out, you have the heat pump mix from entry level to higher efficiency. We are watching some of the concerns around volume overall, but there are some, I guess, encouraging counter forces that should position us well as we go into next year. Okay. That's great. Then Patrick, you mentioned, you know, some absorption issues, you know, as you've worked on inventory in the channel. When we take a step back and think about the new 15 SEER units going into the South, is there a learning curve to think about for those units as well? I mean, obviously, you manufacture 15 SEER for a long time, but you know, as you put these new units in, is there a learning curve impact there as well? We started selling them in, I believe it was July, Nigel. I think, yes, we worked on this, but we've worked on this for a long period of time, and we're there. I don't see that at all as a headwind to our performance in our facilities. Maybe a couple of questions or a couple of points to the question you had about heat pumps. We believe we are the number one in U.S. resi heat pumps. As we mentioned, sales up 30% year-over-year in the quarter. Really well positioned there. We believe we're number one in Europe commercial HVAC heat pumps. We mentioned they're up 30% in the quarter. Of course, with the TCC acquisition, we even further strengthen our heat pump position that we can benefit from not only in Asia, but also in Europe with the residential opportunity over there. That's great. Thank you very much, guys. Thank you. One moment for our next question, please. Our next question will come from Julian Mitchell from Barclays. Your line is open. Hi. Good morning. Maybe just want to start off with the assumptions for the Q4 organic sales growth. I think you're assuming sort of mid- to high-single-digit organic growth in the fourth quarter, company-wide. Within that, are we assuming that sort of HVAC's up high single? Is that the right way to think about it? Are you embedding resi volumes get worse year-over-year in HVAC in Q4? Yeah, Nigel. Sorry, Julian. Patrick here. You're right. For Q4, we expect organic growth to be high single digits, a little bit down from what we reported in Q3 organic growth. In terms of volumes versus price in Q4, again, we expect volume to be about flattish, so most of the organic sales growth driven by price. Actually, we do expect to have some volume growth in HVAC in the fourth quarter of the year. Very modest. Thanks, Patrick. HVAC again, high single digits. Got it. That HVAC slight volume growth, how are we thinking sort of very strong commercial and then resi volumes down mid-single, similar to Q3? Generally, we would expect to have continued growth in commercial, in light commercial, two businesses that are doing really well with strong backlog. We would expect again to have volume within resi to be flat to slightly down. That's helpful. Thank you. Just switching tack to Europe for a second. You know, we saw the orders down in EMEIA about 10%. They've been down in the second quarter as well. How are you seeing kind of the broad demand environment there? It looks like refrigeration in particular is being hit hard, maybe something, you know, idiosyncratic to that market. Just yeah, any broad perspectives on kind of how you see the pace of that Europe slowdown playing out? Yeah, Julian, it's kind of a mixed bag for us in Europe. First, I just mentioned for context that it's about 20% of our total sales. You'll recall when we had Chubb and before Toshiba was closer to 27%. Our exposure to Europe is down from what it was a year ago. Having said that, you know, we have been pleased with the orders in key parts of our business. Commercial HVAC, fire and security have done quite well on orders in Europe. The things we watch, as you said, is really in the refrigeration side, in both European truck trailer and CCR. European truck trailer, I think that our sense is, as of right now, our lead times have increased a bit because of supply chain. Our customers are pretty well booked for the coming months. We're not as concerned right now about the orders trends because of the significant backlog as we look out some months on ETT, but of course, that's something we have to keep an eye on. Clearly, the CCR piece is down. Some of our customers there are surely affected by some of the energy prices. That was down in part because of the market. I think in part because we are going to great lengths to improve our margins, so there's probably a bit of a mix in there, but too early to say that's a trend, but there are a couple of watch areas for sure there. That's great. Thank you. Thank you. Thank you, John. Thank you. One moment for our next question, please. Our next question comes from Deane Dray from RBC Capital Markets. Your line is open. Thank you. Good morning, everyone. Morning. Morning, Deane. Hey. Can we start with the healthy building orders up 55%? That's pretty impressive. You know, frankly, we've been waiting for this type of surge post-COVID. Was there a particular driver here where you saw these orders come through? Is there any of the government funding adding a boost, but any color would be helpful. Well, Deane, K-12 is clearly helping. I think there's gonna be impetus for them to continue to pick up the rate of spend in K-12. Orders year to date in K-12 up 35%. I'll tell you, a chunk of that has to do with this drive for healthy buildings. You know, we now sit on a pipeline of $900 million, it's up 40%. You know, we signed. You know, I can't mention the name of the customer, but we have a customer in particular that's a really respected key scale customer, technology customer. That is encouraging people to come back to the office, and as they do that, they have 100 office buildings they're gonna be putting Abound in. In part, they wanna use it to give their employees confidence as they come back to the office around the indoor air quality. They're gonna put the monitors in the lobbies. We're gonna work to try to make it mobile accessibility, so you can see the healthy indoor air quality metrics on your phone. We're working with them on that. We're starting to see more and more demand. We had a nice win in China. It was about a $5 million win. We had an exhibition center there that had new air handling units where there's a big focus in China. ALC, our controls business, has done well. They had a key win in Georgia with a lot of IAQ solutions. Honestly, Deane, I think it's a trend that's here to stay. That's great to hear. Follow-up question on the chiller attachment rate of 40%. What's your expectation? Is that you would expect, given the kinda payback, that attachment rate would be higher at this stage? Maybe it's still early, but what are the reasons the customers are not giving you that order at the time of sale? Well, by the way, if just to clarify, it's not necessarily up 40%. It's at, At 40%. 40%. Yeah. Yes. Yeah, yeah. I'm sorry. Look, we said that we were gonna improve our attachment rate by, you know, 5 percentage points a year, and that would put us at year-end in the low forties. I just think we continue to drive the playbook, where when it comes off warranty, we are there to get a long-term agreement. We continue to see traction as we add salespeople in the right cities, in the right locations with the right digitally enabled offerings. We're pleased with the progress. You know, we take a very strict interpretation of what we call an attachment rate. You know, 'cause if we look at after we sell a chiller, do we get predictable sales? That's 100% of the time. If that's what the definition is that we wanna use, it's 100% because we always get part sales, we always get service sale, we always get certain amount of sales. We want a long-term agreement that's sticky, that's recurring revenues, and that's the definition we use, and that, under the BluEdge playbook, is growing 5 percentage points a year. The other one we really look at is total chillers under some form of LTA, and that's growing 10,000 chillers a year, and that'll be 7,000 by year-end. Thank you. Yep, thank you. Thank you. One moment for our next question, please. Our next question will come from Joe Ritchie from Goldman Sachs. Your line is open. Thanks. Good morning, guys. Hey, Joe. Morning. Morning. Hey, can we start on price cost? Looks like it was positive across each of the segments. Just any potential quantification on how positive it was for the quarter, and then as you're thinking about the carryover effect into 2023, maybe just provide some color on that as well. Yes, Joe. The price cost impact to margins in the quarter was unfavorable 30 basis points, but from a dollar perspective, it was favorable. Think, give or take about $50 million in Q3 alone. With respect to carryover, based on prices that we have already implemented, we would expect carryover next year to be several hundred million dollars. At the same time, I'll have to say, though, that we would also expect some carryover inflation next year, especially inflation related to purchases where we have material pricing formulas. There is a little bit of a lag there. The net impact to the P&L, the price cost tail for next year will be lower than just a few hundred million dollars of good news. Of course, we continue to target price cost neutral at worst. I'll also say that, for next year, of course, what we're looking forward to is a potential good impact from commodity cost tailwinds. Got it. That's super helpful, Patrick. Maybe just kinda my next question, really focusing on the strength that you're seeing on the commercial HVAC markets, obviously, you know, double-digit orders now for seven quarters in a row. There's a lot of concern that, like, you know, commercial is gonna follow resi into a downturn. Dave, I'd love to just kinda hear your thoughts on that, what your expectations would be as we kinda head into 2023 as well. Let me tell you what we're seeing, Joe, is that you mentioned the seven quarters of double-digit orders growth, and the nice thing is that it's across the globe. North American was up something like 20%. China was up double digits. Asia Pacific, outside of China, was up close to 20%. Europe was up double digits. So it's pretty broad-based. Certain verticals do better than others, but, you know, K through twelve healthcare data centers, some of the industrial areas, especially even in China, where we pivoted from property to industrial very purposefully there, they continue to be quite positive. So we're quite well booked for next year in commercial HVAC, where our backlog is up 30% year-over-year. Healthy buildings is strong, as we said, the shift to sustainability and the focus there is strong. The other thing I would mention is that ABI, as you know, Joe, is a nice leading indicator, and that's been above 50 now for 20 months straight. You know, it toggles between 52, 53, 54. For it to be above 50 for 20 months in a row is encouraging. We have a lot of investments around Abound that's gonna create a lot of pull for long-term, sticky revenues, but also some of our products. I would tell you on CHVAC, and of course, the same is true for light commercial, encouraging trends. Great to hear. Thanks, guys. Thank you, Joe. Thank you. One moment for our next question. Our next question will come from Josh Pokrzywnski from Morgan Stanley. Your line is open. Hey, good morning, guys. It's actually Gustavo Gonzalez on for Josh. Thanks for all the color and for taking our questions. Just sort of looking at the various pieces of stimulus into next year, how are you sort of thinking about that, and how much do you think that sort of adds to sort of the demand pipeline or even addressable market for 2023? Well, there's a couple things at play. I would say three things. You have the Inflation Reduction Act, you have the infrastructure bill, and then you have what's happening in K through twelve. If we start with K through twelve, you know, the ESSER funds, they've only spent very little of the $190 billion that's been allocated towards the school. I do expect, as strong as our orders have been, that spending continue to pick up, which of course, regardless of economic cycles, government-funded spending on K through twelve should withstand, you know, whatever happens in the broader economy. That's encouraging. On the Inflation Reduction Act, the big thing that'll play out over the next couple of months is whether the $2,000 a year incentive applies to both the kind of the mid-tier SEER units, as well as sort of the higher-end SEER. If that happens, I think you're gonna see a very broad-based upgrading from your entry-level heat pumps to the, you know, to that mid-tier heat pumps, which would be obviously good for the planet, good for our customers' energy bills, and frankly, good for us as well. Then there's just the broader infrastructure act has provided some tailwind as well. Then we see similar things happening in Europe. I think, you know, regulation and incentives is very thematic for us. It does help during different economic cycles. Thank you. One moment for our next question. Our next question will come from Tommy Moll from Stephens Inc. Your line is open. Morning, and thanks for taking my questions. Hey, Tommy. Hey, Tommy. As part of your value creation framework, you've talked about using productivity to fund some investments. I wondered if you could bring us in on what the planning could look like there for a potential recession scenario. Just to the extent that volumes were pressured in a potential recession, how much more difficult is it to realize some of those productivity objectives? Are there different buckets of investments that would be, you know, highest priority, not willing to sacrifice versus more discretionary or relatively lower priority that could potentially get pushed out if necessary? Just some of the push and pull there would be helpful for your planning. Thanks. Yes, Tommy. Let me start by talking about productivity for this year. We started out by saying that we would target $300 million in productivity, and that remains our target for the year. Frankly, we're on a path to achieve that for the full year. Now, in case of a potential recession, couple of things. One is we continue to have tremendous opportunity to take costs out of our system, whether it's our factory footprint, whether it is from a sourcing point of view, we still have way too many vendors that we intend to consolidate over time or a G&A opportunity. In addition, I will say that what we've been struggling with the last year or year and a half is tremendous inefficiencies in our factories, shortages of parts, causing inefficient manufacturing operations, expedited freight, logistics. Wherever we look, we have probably significant pockets where we are less efficient now than we were two years ago or maybe even three years ago. If there would be a downturn, not only would we expect to continue to go after costs that we see today, we would expect to get back to much higher levels of efficiency in some of our facilities. Then, of course, what we have not talked about, which is the whole price-cost equation. We expect, of course, we see important input costs come down. We don't see a significant impact on this year just because of our hedged or our locked positions. Clearly, in an environment where we might see a revenue decline, we would expect commodity input costs to further go down, and we would expect to benefit from that as we've been very clear that we would have no intention of giving up price. Very helpful. Thank you. I wanted to pivot to the repurchase authorization that you announced. I think it was another $2 billion that the board approved. You know, your cash flow guidance was reduced, but you're still expecting a pretty significant haul for this year, especially in the back half. So how should we think about the cadence of repurchases, the level of priority there? Any change to what you've communicated before or more steady as she goes? The way you can think about it, Tommy, is from a capital deployment priority point of view, very clear and no change. Funding organic growth, inorganic, for example, what we've done with TCC, a growing and sustainable dividend, and then share repurchases. You mentioned $1.4 billion of free cash this year, so we're counting on a big last quarter of the year. That is not unheard of. As of today, we have $3 billion in cash, and all in, we expect to end the year with about $3.3 billion in cash. In terms of the new authorization, so in addition to what's remaining of the prior authorization, we have about $2.3 billion left for share repurchases. Think about that authorization taking us through all of 2023 and into 2024. The way we're thinking about this, obviously, is depending on opportunities for M&A or what the share price does, or of course, the general macro outlook, we'll either lean in more or we'll pull back a little bit. We have plenty of flexibility there. Thanks, Patrick. I appreciate it, and I'll turn it back. Thank you, Tommy. Thank you. One moment for our next question. Our next question will come from Steve Tusa from J.P. Morgan. Your line is open. Hey, good morning. Good morning. Morning, Steve. Morning. Just on kind of the market call for next year, so you mentioned new housing being down, and I guess you didn't really touch on. Actually, I didn't. What I said, Steve, is that if it, I gave a hypothetical. Right. Right. Right. I said if it was. Sorry. Yeah. Got it. Yeah. So that's kind of like, you know, looks pretty likely given what we're seeing in the data, right? But you didn't say that. True. What's your call on the- No, I know you've been saying that for a while. Yep. Well, I think new housing's the obvious one. It's the debate is really around the replacement market. What's kind of the feedback you're hearing from the channel on how people feel about the replacement side of that market for next year? What's kind of the latest and greatest there? I would say it's early to say. As you know, we're coming off some really strong years there. It's something that we're gonna have to watch 'cause there's just a lot of moving parts in the system. You have these three different mix changes that are playing out, the mix to the higher SEER, the mix from cooling only to heat pumps, the mix from potentially entry-level heat pumps to the higher efficiency one. You have all those underlying trends that we've seen that in some respects continue to go into 2023, like people working from home and, in some cases, making up. Will there be some volume pressures on the replacement market? Potentially on the volume side, but there's a lot of things that whether you put it in price or mix are tailwind. It's a bit early to say exactly what's gonna happen on the volume side for the replacement side. Okay. Then just on, like, commercial, looks like Lennox bounced back a little bit in their production, but we're hearing that Trane is, you know, now having, you know, materially extended lead times. You know, where is I assume you guys feel like you're taking market share there. Is, you know, are we right that there's, you know, still some choppiness in that supply chain perhaps for others? You guys look like you're kind of skating through that on, like, commercial. Yeah. I would tell you that we've all had our challenges. I don't wanna pretend that we've been challenge-free, and you saw that kind of in the second quarter. I would say that we have seen, you know, material progress, you know. When we're seeing orders up 50%, we're seeing sales up 25%, which we saw in the third quarter, we're very, very well positioned there. I think if you look over a, you know, a 12-, 24-month period, I think folks would agree that we've taken share and we continue, I think, to benefit from not only some operational performance, but we've introduced a new product that is 40% more efficient than the one that it replaced. I think new product, a little bit of continuous improvement on the operations side, it puts us in a position for light commercial, Steve, where our backlog is at record levels. You know, Patrick said it in the script, but our backlog is up 3.5x versus the third quarter of last year. You know, that does position us well, obviously for Q4 too, but as we head into next year. Sorry, one last quick one. Just on this, the transport refrigeration stuff all in, what's kind of the latest and greatest view on that? Obviously, the orders are very strong in North America, but there's perhaps some timing around, you know, opening up those order books. Europe looks a little weaker. You know, ACT has it up next year, but they cut their number. Some stuff moving around there. What's the latest on your market view, for that one into next year globally? You know, it's fluid, as you just said, Steve. I mean, container is definitely a watch item, you know? I mean, the container piece is a business that, you know, we are dealing with really tough comps because last year was a record year. You know, this year we did see, you know, we expected it, but Q3 was down something like 20%. Container, we continue to watch. We've gotten, you know, some recent orders, but it's something that we do have to watch. NATT was up strong, high teens. As Patrick said in his script, you know, we can't really look at those strong orders in the third quarter. We have to look at it kind of year to date, where I think it was up in the mid-20s. European truck trailer, you know, you look at that and the orders were down, but I mentioned the very strong backlog position. It's a little bit early to say, but we know there's broader economic concerns in Europe, so too early to say there. I think a real positive helping transport is this shift to Lynx and our Sensitech business doing quite well. You know, the good news is global truck trailer, our backlog's up 15% year-over-year. I saw the same stuff you just mentioned with ACT taking down some of their numbers for next year, but it would still be positive over this year for NATT, and we're sitting on good backlog. A bit early to say, but it's something that we are sitting on strong backlog. Great. Thanks, David Gitlin. Really appreciate it. Thank you, Steve. Thank you. We'll take our last question from Gautam Khanna from Cowen. Your line is open. Thanks. Good morning, guys. Morning. Wanted to just follow up on your comments on resi next year. You know, it sounds like the volume decline or increase or whatever is uncertain, but you know, can you talk a little bit quantitatively about price cost? You know, if you kind of snap the line on commodities today and where your hedge positions are, where you think some of the other components may shake out in terms of inflation year to year. You know, what's the size of that opportunity next year? Then if you could just talk about pricing and what informs your confidence that pricing will hold if in fact industry volumes are down mid to high single digits, you know, pick a number. Thanks. Well, let me start with the latter and then turn it over to Patrick for the former. Look, I would say for resi, but more broadly, for Carrier. I think one of the big targets that we have for ourselves for next year is to maintain the pricing. We're gonna have to keep an eye on commodities, but that should be copper, steel, and aluminum. That should be coming down for next year. It's a little bit too early to say, but that spread could be a positive story for us as we go into next year, not only for resi, but more globally. Patrick mentioned that we have some tier one carryover cost increases that we have to contend with from some of our suppliers. Our job through Carrier Alliance is to manage those suppliers. We'll either have suppliers that support us on our journey or that don't. Those that don't, we're gonna have to deal with aggressively. Those that do, we'll lean into and give them more business. That's our job in terms of execution. Commodities I think will certainly be down next year, and we have to maintain price. In the middle of all of that is you're gonna get a mix up from a number of these changes that we're not only seeing in resi, but you're also seeing as you look at things like the shift to electrification in our transport business as well. Patrick, you wanna hit the first part of Gautam's question? Yeah. We touched a little bit on that, on the potential tailwind from the commodity, but as Dave said, it's significant. It's too early for us to quantify. Thank you. Okay, thanks. Well, listen, I just wanna close by saying thanks to all of you on the call, and thanks to the Carrier team. You know, if you look at things over the last couple years, this team has gone through the same kind of macro challenges all of our peers have gone through with COVID supply chain challenges. I can tell you to a person that our 55,000 people come in every day determined to be best in class in everything we do, and we're seeing it in our results. I know there's certain folks have anxiety as they look at 2023. We have optimism because of this great team. Thank you, everyone. Of course, Sam is available. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.