Good morning. Welcome to Carrier's First Quarter 2023 Earnings and Strategic Update 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, good morning, and welcome to Carrier's Conference Ca ll to discuss the transactions we announced last night, along with first quarter 2023 earnings. 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. There are two presentations available there, one for the strategic actions and one for the first quarter of 2023 results. 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 opened 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, Dave Gitlin. Well, thank you, Sam. Good morning, everyone. A big day for us. We appreciate your flexibility joining us this morning on short notice. Today, we are announcing a new Carrier, a new direction, and an exciting transformation. A game-changing opportunity to acquire Europe's premier company in the most attractive market in our space, allowing us to capitalize on the energy transition in Europe. Combined with the planned exits that we are also announcing, Carrier will become a simpler, focused, pure-play leader in intelligent climate and energy solutions that generates higher growth and superior shareholder returns. Before we discuss this transformation in more detail, we will cover the highlights of our Q1 results on slide 2. In short, good news. The team executed very well. We beat our forecast on the top line with 4% organic growth, with double-digit growth in aftermarket, controls, commercial and light commercial HVAC, and global truck trailer. Orders were modestly positive in the quarter, with year-over-year orders performance improving as the year progressed. Adjusted EPS of $0.52 exceeded our projections, we generated significantly more free cash flow year-over-year. Based on our strong Q1 results, we now have confidence in the high end of our full-year adjusted EPS guidance range. Before we discuss our exciting announcement about our future, let me take a brief look back on how far we've come already on slide 3. I am so proud of our team's accomplishments since spin. In short, we do what we say we're going to do. Our commitments were to drive sustained growth, improve margins through rigorous cost reduction, increase aftermarket revenues, deliver strong free cash flow, innovate and ensure customer loyalty, energize our teams and culture, and strengthen our portfolio and balance sheet. We have grown sales at an 8% CAGR since 2020, and since 2021, we have expanded margins by 150 basis points and have driven an adjusted EPS CAGR of 19%. We have effectively driven significant productivity, grown our aftermarket double digits annually, and have introduced over 400 new products over the past three years. We launched important new platforms for our building and cold chain ecosystems, Abound and Lynx, with both getting superb traction with our customers. We dramatically improved our portfolio, positioning ourselves in the fast-growing VRF market with the acquisition of Toshiba's HVAC business and Giwee while completing the sale of Chubb and our Beijer shares. We improved our balance sheet, reducing our net debt by 50% from $10 billion to $5 billion, all while doing $2 billion of share buyback and increasing our dividend payout ratio from 17% in 2020 to a targeted 30% this year. This outstanding performance has been made possible by our world-class workforce and agile new standalone culture. As a result of all of that, Carrier's stock price has appreciated 229% since our spin date, compared to 66% appreciation for the S&P 500. With our foundation firmly in place and a track record of execution, we are now announcing a purposeful shift in our strategy, which is what you see on slide 4. We have a very clear and compelling vision: to be the world leader in intelligent climate and energy solutions. Strategically, we are positioning ourselves in the fastest-growing geographies with highly differentiated channel access and the most comprehensive and differentiated suite of sustainable technology and services. Digitally enabled lifecycle solutions will increase aftermarket and recurring revenues. Our energized team will continue to drive unparalleled customer loyalty and superior shareholder returns. This strategic shift in our vision has led us to the decision to further focus our portfolio and align it with faster-growing end markets, which leads to the announcement that we're making today on slide 5. The first is the acquisition of Viessmann Group's Climate Solutions business, the premier company in the highest growth segment in the heat pump and energy transition markets. This will also expand our capabilities as a one-stop shop for renewable and climate management solutions. We are also announcing that we are initiating the process of exiting our fire and security and commercial refrigeration businesses. The former decision was easy. Combining with the best asset in the best market could not be more compelling and exciting. The latter decision was tough. We love these businesses and our people in them. We have tremendous brands, gross margins, market positions, and customer stickiness. We saw the benefit of focus as we spun from UTC, and we are confident that further focus will create additional tremendous value. The result will be a new Carrier with higher revenue and EBITDA growth profiles, leading market positions globally, with a portfolio unlike any other company in the world. Let me start with an overview of Viessmann Climate Solutions business on slide 6. Viessmann Climate Solutions with 11,000 team members is part of the family-owned Viessmann Group, who have established market leadership over its 106-year-old history. The company has made a purposeful shift from fossil fuel boilers, such that now 70% of its portfolio consists of premier heat pumps, digitally enabled services, solar PV, and battery offerings. It also has highly differentiated boiler business that includes state-of-the-art hydrogen-ready offerings. About 40% of its sales are in Germany, with very strong positions in France, Poland, and Italy. Those four countries make up more than 50% of the heat pump installed base in Europe, with 20% annual heat pump growth rates. The combination of Carrier and Viessmann Climate Solutions creates a tremendous game-changing opportunity, as a result, the Viessmann founding family is showing great confidence in the combined entity, taking 20% of the purchase price in equity, which has been fixed at signing. We look forward to Max Viessmann joining our board of directors. Furthermore, we are excited to welcome the tremendous Viessmann team to the Carrier family to help us realize our shared vision. Carrier and Viessmann share a very similar journey, as you see on slide 7. A phrase that we have used a lot to describe Carrier is a 100-year-old startup. Interestingly, Viessmann is very much the same. Both companies had visionary founders who largely created and shaped the markets that we're in, and both of our businesses have evolved into agile, rapid innovation, climate-focused digital industrial leaders. Together, we are establishing a new global climate champion, and that is one of the many reasons why Viessmann Climate Solutions just fits like a glove as you see on slide 8. Thanks to the generations that came before us at Carrier, we have established market-leading positions globally. When we spun, we had two strategic gaps: VRF, which we have now addressed with the acquisitions of Toshiba and Giwee, and European residential light commercial heating, which we are now addressing with the premier asset in the space. These transformative moves position Carrier with market-leading positions now globally. As we look at slide 9, you see the three primary rationales for this tremendously exciting acquisition. It is the most attractive market in our space globally. Viessmann Climate Solutions is the premier asset in that market. Third, it positions our portfolio to expand into integrated renewable offerings in a unique and differentiated way. I'll address each of these three elements, starting on slide 10, explaining why the market itself is so attractive. The megatrends that you see here are reshaping our industry: climate change and sustainability, energy security, and the rapid adoption of green energy solutions accelerated by government regulations and incentives. These secular trends are indeed global but are clearly most acute in Europe. Europe has long been out in front on sustainability. The Paris Agreement and the European Green Deal set a target for a 55% reduction in greenhouse gas emissions by 2030. Fit for 55 targeted 40% renewable energy in Europe by 2030, which was recently raised to 45% when the EU passed REPowerEU following the Russian invasion of Ukraine. REPowerEU also aims to double the current rate of individual heat pumps to reach 10 million additional units over the next 5 years. Likewise, 17 European countries have announced or implemented bans on newly installed fossil fuel heating systems for homes, which has been supported by government subsidies. The result is the massive growth that you see on slide 11. There are 8.5 million heat pumps in European homes, which is expected to increase 25% annually to 40 million by 2030. Residential battery sales are also projected to increase over 20% annually during this time frame, with a double-digit annual increase in residential solar PV sales as well. Carrier does not offer solar PV and home battery solutions today, Viessmann Climate Solutions offering provide Carrier the perfect opportunity to pursue an incremental fast-growing annual TAM of $35 billion. The shift to heat pumps is unique and compelling given the mix-up opportunity that you see on slide 12. First is the rapid adoption of heat pumps from selling about 1 million per year, going up to 10 million per year in 2030. Factor in the positive mix impact with heat pumps selling for as much as 4x per unit compared to boilers. The result of that combination is that the EU residential heat pump market is expected to grow revenues 25% annually for the coming years. The opportunity is tremendous. Turning to slide 13, let me provide some additional color on why Viessmann Climate Solutions is the premier company in this space. Thanks to Professor Dr. Martin Viessmann, who represents the third generation of the founding family, and his courageous move 30 years ago, Viessmann Climate Solutions is one of the very few companies in Europe that primarily sells directly to installers. 75,000 of them, with whom they have deep, long-standing relationships. This highly differentiated channel allows for best-in-class customer intimacy, rapid innovation in response to customer desires, and digital connectivity. Likewise, the Viessmann brand is iconic and highly trusted across Europe. It has often been compared to as the Mercedes of residential heating brands. During German Chancellor Olaf Scholz's most recent New Year's address, he singled out Viessmann as a shining example of the innovative side of Germany. It has the highest-ranked heating and energy brand in Germany and has been the most trusted OEM for almost two decades. The result, thousands of customers recognize and demand Viessmann Climate Solutions and are willing to pay a premium for it. Its excellent reputation is largely driven by its track record of product leadership and premier innovation, as you see on slide 14. Viessmann Climate Solutions has leaned into the use of natural refrigerants, and its heat pumps require 50% less floor space and installation time. They also developed a new integrated heating solution called Viessmann Invisible, a patented concept which optimizes space and aesthetics by integrating the heat pump, air handler, water tank, and accessories into a decorative indoor panel. They are at the digital forefront, providing innovative heating-as-a-service offerings and generating subscription-based recurring revenues. The result, outsized top and bottom-line growth as you see on slide 15. We expect approximately EUR 700 million of EBITDA on EUR 4 billion of sales in 2023. Fast-forward to 2025, we expect those numbers to increase to over EUR 900 million and EUR 5 billion respectively. That's double-digit top and bottom-line growth, and it's nothing new for them. They've done it in the last few years, and we expect it to continue going forward. Best asset in the best market. What's equally exciting is that the combination positions Carrier to enter an entirely new market, given that Viessmann Climate Solutions has effectively established an ecosystem approach, as you see on slide 16. Viessmann has done a masterful job of creating common and distinctive designs across its product portfolio that all interact seamlessly with one another, so the consumer becomes attached to its ecosystem with multiple interoperable products, digital and value-added services. Max Viessmann and his team have effectively implemented this strategy. Its solar PV, battery, and heat pump systems can all be installed at different times but are then seamlessly interconnected and interoperable, all underpinned by their common digital platform, One Base. One Base gives the customer an easy, reliable, and quick way to operate their energy system via an app. The platform bundles devices and electronic applications into one single climate and energy solution for the home. The beauty, as you see on slide 17, is that Viessmann Climate Solutions is the only company in the industry with such a comprehensive solution-level offering. When you combine Viessmann Climate Solutions' unique market position and breadth of offerings with Carrier's technology and global channels, the opportunity for us to create unique value to our homeowner and other customers, and importantly, the planet, is truly differentiated. Homeowners in Germany with boilers spend on average EUR 2,200 per year on gas heating. Switching to an electric heat pump can reduce the owner's cost by over 20% to 1,700 euros per year. If those same homeowners implemented a complete renewable solution with solar PV, battery storage, heat pumps, and an energy management solution with effective grid management and controls, they could reduce annual heating bills by 60%-80% to about 700 euros per year. Those same homeowners would also reduce their individual carbon footprint by about 50%. The world continues to be more electrified. Integrated solutions provide a step change in customer value and benefit to our planet. This broad suite of offerings introduces a new addressable market to Carrier, as you see on slide 18. A heat pump sells for about 4x the price of a boiler. You add solar PV, battery and accessories and services, the installed price can be as high as 15x-20x the installed price of a standalone boiler. The result is Carrier's ability to now pursue a $35 billion fast-growing market opportunity. The key to success is effectively integrating and coming together as one team. We have done it so effectively before, and I have no doubt that we'll continue to do it again, as we see here on slide 19. Viessmann Climate Solutions is a highly integrated, successful, well-run business. It has tremendous people, one ERP system, one brand, a deep well-established channel, and a strong operations and innovation. We have been very impressed with Thomas Heim, Viessmann Climate Solutions CEO, and his leadership team. Thomas will lead Carrier and Viessmann Climate Solutions Center of Excellence for our combined residential and light commercial European business, which will continue to be headquartered in Allendorf, Germany. After completing the acquisition and business exits, the vast majority of our business will be HVAC. As a result, Chris Peterson and I have collaboratively agreed to streamline the organization. Our superb HVAC business leaders will now report directly to me, and Chris will be departing Carrier next month. He has served the company for 19 years so well, and we wish him nothing but the best. Another reason for confidence in the integration is how well our cultures align, as you see on slide 20. A passion for customers and results, unwavering commitment to our people, values, and purpose, innovation, community, and a deep passion for the environment. Together, we will achieve important and compelling sustainability targets. We are aligned and cannot wait to move forward together as one team. Our base business case includes the cost synergies that you see on slide 21. We have identified EUR 200 million of cost synergies, the vast majority of which will be achieved by year three, and we have a track record of overachieving our projections. At Toshiba, we committed to EUR 100 million of synergies, and we are tracking to do meaningfully better than that. Viessmann Climate Solutions is a rapidly growing business, so this is not about employment reductions. Rather, about 85% of the cost synergies are driven by procurement and insourcing. For example, we anticipate insourcing differentiated inverter drives from Toshiba, heat exchangers from our facilities in Spain and Poland, as well as other components like rotary compressors and fans. Cost synergies are expected to increase Viessmann Climate Solutions margins by over 200 basis points within three years. There are also revenue synergy opportunities which we have not included in our base estimates, such as introducing multi-tier offerings into Viessmann Climate Solutions channel and leveraging its digital ecosystem offerings and technologies more broadly across Carrier's channel. Now, I will turn it over to Patrick to take you through the transaction itself on slide 22. Thank you, Dave. The enterprise value is 12 billion EUR, which is about 13x forecasted 2023 EBITDA, assuming 200 million EUR of run rate synergies. We are very pleased that the Viessmann founding family elected to take 20% of the transaction value in Carrier equity and that the family is making a long-term holding commitment. They share our excitement about the future value we believe this transaction will provide to our stakeholders. The number of shares are based on a VWAP prior to signing and are thus fixed. The balance of the purchase price, 9.6 billion EUR, will be funded through a combination of cash on hand and debt. With respect to cash, we have $3.3 billion at the end of Q1, and we expect that to grow to about $4.5 billion by year-end, excluding the impact of the acquisition since we paused share repurchases. We have fully committed financing in place for about EUR 7 billion and have hedged the cash portion of the euro-based purchase price. Given Viessmann Climate Solutions' growth profile, the acquisition is expected to add over 100 basis points to Carrier's overall revenue and EBITDA growth profile. We expect a high single-digit free cash flow yield starting in year 5. While the acquisition is expected to be adjusted net income accretive in 2024, we expect the acquisition to be adjusted EPS accretive starting in 2025 because of the additional shares outstanding. Retaining solid investment-grade credit ratings is very important to us. Yesterday, Moody's, S&P, and Fitch have reaffirmed our current investment-grade ratings following the announcement of this transaction. Excluding proceeds from the business exits, we plan on deleveraging quickly following the transaction, returning to about 2x net leverage in 2025, after which we expect to resume share repurchases. The timing and net proceeds of the business exits may of course accelerate the timing of both the deleveraging and the resumption of share repurchases. We expect to repurchase the equivalent number of shares issued to the Viessmann founding family as soon as we reach our target leverage. This could happen as soon as 2024. Finally, we remain committed to a sustainable and growing dividend and expect the transaction to close around the end of 2023. Well, thank you, Patrick. The $1.1 billion business that we are exiting had high single-digit EBITDA margins last year. We have invested significantly in restructuring and improving the margins of the business, which will significantly benefit the business going forward. We expect to exit this business over the course of 2024. To be clear, we are retaining our cold chain solutions and transport refrigeration business, which includes truck, trailer, container, Sensitech sensors, and our Lynx platform, and all the related aftermarket and digital offerings. In summary on slide 25, these moves position us as a higher top and bottom-line growth company. Had we made these transformational moves three years ago, Carrier's revenue CAGR would have been 2x the rate that we indeed achieved, mid-teens rather than 8%. Thus giving us confidence that we are transforming into a sustained higher growth profile company. With Viessmann Climate Solutions, we are now positioning ourselves to be the global climate solutions champion. We are buying the premier asset in the premier market. We are standing by our commitment with our portfolio to be clinical and dispassionate. Though we are selling tremendous franchises, the result will be a focused, differentiated Carrier that drives higher growth and returns for our shareholders and value for our employees and customers. With that, we'll open this up for questions. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. The first question comes from Julian Mitchell with Barclays. Your line is now open. Hi, good morning and congratulations. Thanks. Morning. Good morning. Maybe just a first question around Viessmann itself. A couple of things. One was maybe if you could help us understand its market shares in the main businesses that you're most attracted to in it, for example, heat pumps. I think it's got close to maybe $1.5 billion-$2 billion of sales, and you talk about a sort of a $5 billion TAM somewhere in the deck, but I'm not sure those are apples to apples. Maybe just help us understand the market share. Also, you know, you talk about the appeal of it, the uniqueness of the sort of one-stop shop aspect within the residential building. In the non-residential world, the sort of the one-stop shop has been harder for equipment suppliers to get right. Maybe help us understand why in the residential world, you're confident that that one-stop shop approach is the one that will drive share gains and returns. Sure, Julian. In terms of their positioning, what I'll tell you is that they are the number 1 premium brand across Europe. In a premium market with heat pumps, they're number 1. Within Germany, in heat pumps, they're number 1. Across Europe for air-to-water heat pumps, they're in the top 5. In terms of the latter question, what they've done that is incredibly impressive is that they've designed it. You can think of it almost as the Apple of their space, because all of their products are seamlessly integrated into an ecosystem approach. If a homeowner can't afford to buy solar PV, battery, and a heat pump all at the same time, they pre-design them, so they're all interoperable and interconnected at the time of installation. What really makes them unique is their ability. If you only install the heat pump and the battery and a year later you install solar PV, it's then seamlessly integrated. What they've done unique is have their products interoperable, and it's underpinned by a digital solution. You have this One Base system that can control all of the various products and also provide grid management. 'Cause if you fast-forward to the future, we're all gonna get to a point someday where you get home at the same time, you plug in your car, you turn on your heating system, you're putting a lot of reliance on the grid all at the same time. Being able to do grid management and have their products interoperable is very, very unique, and they're the only one in the world that does it. That's helpful. Thank you. Then just my follow-up would be on the exit side of things, fire and security and commercial refrigeration. You know, investors may be concerned that you're buying Viessmann for sort of, you know, 17 times or so headline, ex synergy EBITDA, and worry about sort of the selling prices of FNS and commercial refrigeration versus that. Maybe help us understand kind of how you're thinking about the exit route for those in terms of spins or outright divestment and how you're confident that as we go through this process of sort of $4 billion of sales out, $4 billion of sales in, that the returns and sort of financial criteria looks okay. A few things, Julian. First of all, we think of it as buying 13x a fully synergized number. Second, we are gonna be bringing in just on a base level more EBITDA than we're selling, and then you add synergies to it, and it's even more. The growth rate of Viessmann is far higher than anything else on a sustained basis that we have in the portfolio, including the businesses that we're exiting. In terms of the price that we'll realize on these divestitures, we'll have to see. What I'd remind folks is that when we sold Chubb, we sold that for a 13x multiple. As great as a business Chubb is with 240 branches, it's largely an installation and services business. Here, you're dealing with, especially on the fire and security side, highly differentiated, high gross margin businesses, usually with, you know, three to five competitors in their spaces. They're gonna be hugely sought after. We're gonna see how, as we go through the process, what's the best way to sell. We may sell it its entirety, we may do a spin, we may sell it off in various pieces, some quicker than others. We'll go through the process, but I think it would be very surprising for us to get anywhere close to the multiple on Chubb or lower. We would expect it to be materially higher. That's great. Thank you. Thank you. Please stand by for our next question. The next question comes from Nigel Coe with Wolfe Research. Your line is now open. Thanks. Good morning, and thanks for the question. Morning. Good morning. Just wanted to talk about the, maybe just dig into the free cash flow, the high single-digits free cash flow target in year 5. Can you maybe just talk about, you know, the free cash flow profile for Viessmann over the past several years? Obviously, the growth's been very impressive. How's the free cash flow and the CapEx been trending? Maybe more importantly going forward, you know, what sort of CapEx investment do you see required to sort of execute on this plan? Yes, Nigel. Patrick here. 2023 is still ongoing, of course, but the two prior years, we believe that their free cash flow conversion has been in the mid-nineties, so 90%-95% of net income. Clearly, we believe that there is a continued path to have a combined company that'll be in the about a 100% free cash flow conversion range. As to CapEx investments, clearly given the significant opportunity in heat pumps, there have been heavy capital investments made by Viessmann, including in 2023. We have that dialed into our numbers. As I said, we expect going forward to continue to be a company that converts about a 100% of net income into free cash flow. Okay. That's helpful. Let me just know extraordinary investment requirements. That's what I heard from there, but maybe just clarify that. Just wanna pick up on Julian's question about the format for the exits. Lots of questions about spin versus sale. Have you ruled out a spin at this point? Is a sale of fire and security the preferred option? If you do sell, it seems like you've got the capacity to buy more than the 50 odd million shares a year issuing. Is that the upper limit of the buyback or could the buyback scale up? It could scale up, Nigel, very clearly. The first part of your comment was related to sale versus spin. At the end of day, we're evaluating the exits and ultimately we'll pick whatever the exit is that delivers the best after-tax value to Carrier. Whether that's a sale or a spin, that is what we're focused on. You're right. If it is a sale, we certainly see a path with expected proceeds that would enable us to buy more shares than the equivalent shares issued to Viessmann family. Okay. Thank you very much. Thank you. Thanks, Julian. Please, please stand by for our next question. The next question comes from Jeffrey Sprague with Vertical Research Partners. Your line is now open. Hey, thank you. Good morning, everyone. Morning. Hey, Jeff. Just back to the deal math. You know, even kinda looking at the shares issued, particularly given, you know, the $1 billion or so of cash you're gonna generate year to date, it actually looks to me like there's a path that, you know, first year all-in EPS accretion. I just wonder if there's something in, you know, I don't know how these guys report. It's a private company, right? If we're talking IFRS or something else. Is there, you know, is there just something in the way they report where we've got to normalize the numbers to conform to a Carrier basis? Or, you know, how would you respond to maybe the, you know, the potential of upside to, you know, what you're saying on accretion versus dilution? Jeff, we believe as we have shared on the slide that in year one, let's assume 2024, that we'll be modestly diluted. That would include, and as I mentioned, net income accretive, adjusted net income accretive to the company, but given additional shares, adjusted EPS modestly diluted in year one, accretive thereafter. Year one, we do expect some integration or cost to implement some of the synergies. We think the cost to get to the synergies are relatively modest. We have $200 million of run rate synergies. We think the cost to get to these is maybe a quarter of those. In addition to that, we have. Integration expenses that are probably about $100 million or so. We'll see some of that in year 1, and so that may impact the EPS dilution as well that you calculate in year 1. Okay. Then just on the exits, you know, Patrick, I think you appropriately said best after-tax path. Can you just give us a sense of, you know, what the tax basis is in the targeted companies? I would assume it's low in certainly some of them, but perhaps not. You do have, obviously, some legacy liability in there, right? Kind of the whole PFAS question. How might you address that as part of the exit equation? Yeah. If there is a sales path or assuming a sales path, we would expect there to be some leakage. We estimate maybe in the mid-teens, given a modest tax basis in the assets. That's the first part of your question. I think when you were referring to some of the legacy liabilities, I assume you were referring to AFFF, Jeff? Yes. Yes. To the extent there is any AFFF liability at all, we believe it resides within Kidde-Fenwal. Just as we plan to exit fire and security, we plan to exit Kidde-Fenwal too. Regardless of how we exit fire and security Kidde-Fenwal, we expect to exit, and at the end of the day, this to be a clean exit. Thank you. Thank you, Jeff. Please stand by for our next question. The next question comes from Joe Ritchie with Goldman Sachs. Your line is now open. Thank you. Good morning. Congratulations, everyone. Thanks, Joe. Good morning, Joe. Hey, Dave, can you can you maybe just take a step back for us here and talk through how this deal came together? You know, when we had dinner about a year ago, you talked about wanting to scale into a European HVAC. I'm just also curious whether there's any, you know, potential risk associated with, you know, another bidder coming in. It doesn't sound like it, just walk us through some of the history and that last piece of the question. We, Joe, we have a pretty rigorous strat review process. It was clear from our very early days that we had two big gaps. We had VRF, we had European residential heating. We wanted to start with VRF because of the underlying technology that it brings. We were fortunate with both Giwee and Toshiba to be able to enter that market. It was really all hands on deck on European residential heating. You know, clearly no overlap, no antitrust issues. If you look across our space and you did a chart showing growth rates, predictable growth rates over the next 10 years in every single space in which we compete, the single most attractive market is European residential heating. We don't have a real presence there. We started meeting with effectively every single company across Europe. I had dinners with virtually every CEO in the space. They're a very, very impressive group. It's just very, very difficult to break into that market because they're traditionally, you know, multi-generation, family-owned businesses. Max and I had dinner about 1 year ago in Allendorf, Germany. I think that we hit it off because we both had this common realization of the art of what's possible. They truly are world-class. I mean, they are the leader. If you could pick any company to come together with in European residential heating, it would clearly be Viessmann. They have the best brand, the best channel, the best technology. They are a very, very unique asset with great people. As we continued to develop the relationship, our whole premise was that 1 plus 1 had to be something greater than 4. If you look at the combination of Carrier and Viessmann Climate Solutions, we said that we can do something that no other company in the world can do to create value for our people, our shareholders, our customers and the planet. You know, we probably had 15 dinners over the course of the last year as we continued to evolve what this relationship could be. I think the contract is very, you know, manages this idea of a potential interloper. Clearly, there'd be a lot of people interested in Viessmann, but we're just thrilled that Max shared the same vision that we had in the art of what's possible for the future. That's a super helpful answer. Thank you. Maybe just a quick follow-up to that. You've given us the projections, on what you expect the heat pump market to do and your opportunity there. I'm just curious, just on the, on the core business, you know, if you went back a decade on this on Viessmann's business, like what did Viessmann grow? You know, how cyclical was it? I'm really just trying to understand, you know, what the, you know, as we see the progression, the acceleration in the heat pump market, you know, how we should be thinking about their growth rate. Well, it's such a unique phenomenon with the shift to heat pumps. They've traditionally grown. The market's a lot like the US, where it's an 80% replacement market. People need heating fails, you replace it. The most amazing thing is given that 17 countries in Europe have either announced or banned fossil fuel heating, you know, if you picture you're in a European home, you take a wall-hung boiler off the wall of your bathroom or your utility room, you're going to put in a heat pump. Instead of spending a few K, you're gonna spend 10 K. If you pictured no unit rate of growth and the only thing you had was mixing up, they'd be growing double digits. You put on top of that all of their other venues that they have for growth between solar PV and battery. That's why they have consistently been growing over recent years in these mid-teens. If you look at their forecast, it continues to grow at least double-digit rates for the foreseeable future. I could tell you that there's many parts of our market, if you ask me, what are they gonna grow in 2025? It would be very difficult for me to answer that sitting here today. This is probably, given the energy transition happening in Europe, I would say this is the most predictable sustained growth market in the world. We could give you very high confidence this is gonna grow clearly double digits in 2025, in 2026, because of the underlying dynamics of the mixing up that you're seeing and the additional value add that they provide. Super helpful. I'll leave it there. Please stand by for our next question. The next question comes from Tommy Moll with Stephens. Your line is now open. Good morning, thanks for taking my questions. Hey, Tommy. Dave, congrats on the deal. Now I wanted to talk about Resi North America, if that's all right. Yeah. Just kidding. Let's stick on Viessmann here. I was interested in any more context you could share on their direct-to-installer model. How long ago did they pivot in that direction? Is that primarily only within Germany, or does it also apply outside of Germany? Just any context you can give us there would be appreciated. Sure. It started about 30 years ago with Professor Dr. Martin Viessmann. Professor Dr. Martin Viessmann really had the courage to see the value in going to this direct-to-installer model. If you think about Europe, in many cases, folks sell to distributors who sell to wholesalers who sell to installers who sell to the homeowner. Both in Germany and many of its other countries, Viessmann Climate Solutions did establish this direct-to-installer model, which has so many advantages in Germany and in Europe. Not only the obvious that they, you know, from a margin perspective, but even more importantly is that they end up with a lot of customer intimacy. What's also happening is that the demand for these heat pumps is so acute throughout Europe that their installers are struggling to just keep up with the underlying demand. Viessmann themselves have been in there with the homeowners, not only helping with some of the replacements, but helping with the new installation. It has created so much value just having that direct installation customer intimacy. Again, it is not a model that they have that's unique to Germany. They have it in many other countries as well. I think one of the things that really attracted to us, many of the things that attracted us to Viessmann is they're in all the best countries. When you look at the countries that are making the most rapid transition to heat pumps, and you look at the countries that have the highest demand, it is countries like Germany and Poland and Italy and France. They're really well positioned globally, but certainly within Europe. That's helpful. Thank you, Dave. I wanna follow up, just talking about the market opportunity that you described, which if you think about the spend on a per household basis, it's a 20x multiplier potentially, in a large and fast-growing market. Every other major player in the world is looking at the same market. If you had to identify what is the core element of the Viessmann moat around this opportunity and how being part of Carrier potentially can help deepen that, what would you point us to? I'd first point to the channel. Anyone can develop technology. The hardest thing is to access the channel. That's true in Europe, it's true in the United States. You need access because these are highly installed, highly configured systems, so you need highly trained installers that actually have access to the homeowner. That's what they have. Viessmann spends a lot of resources investing in training its extensive installation network. First is they have access, and they have the best access because of their very unique channel model. The second thing is they have the brand. That not only in Germany, but it has that German technology. There's a lot of pull for that Viessmann brand. Third is they have the technology. I mentioned Viessmann Invisible. I mentioned that how they've designed their digital overlay and their interconnected system. They put a lot of energy into natural refrigerants and hydrogen-enriched boilers. A lot of what they've done to build a moat is interconnecting channel, brand, technology, holistic, and ecosystem-level offerings to really make them a very, very unique asset. Again, not just in Germany, but across Europe. Thanks, Dave. I'll turn it back. Thanks, Tommy. Please stand by for our next question. The next question comes from Noah Kaye with Oppenheimer. Your line is now open. Thanks, Dave. Congratulations. You know, I'm likewise intrigued by the commentary around the battery storage and solar PV opportunity. I think you said in your prepared remarks, there was an opportunity to take You know, offerings more broadly across Carrier. You know, I know maybe it's early days of thinking about this, but how might you actually implement that? How might you architect, you know, similar offerings for the company in North America or other markets? Is this sort of a, you know, we learn at the start here and then build that over time? I think so, Noah. You know, we have long been studying how do we connect these dots in North America. We've been in discussions with solar providers. We've been having a series, even with our board just last week, a series of strategy discussions around battery because it's not whether, it's when these systems get interconnected. When you think about an electric heat pump, you think about solar that relies on DC, solar producing DC, avoiding DC to AC conversion, DC solar, you know, feeding batteries for storage, feeding into the heat pumps. These systems are inevitably gonna be connected. There are probably more channel complexities in the US than there are in Europe. We have been working on strategies to really enter the US with a holistic offering. What's really unique about Viessmann is they have a very unique battery capability. They only buy the cells, but they have a modular concept where they can actually customize the batteries to any size home for any demand they have. Their battery design and capabilities are a bit unique. That may be an initial easier putt for the US, and then solar may follow. The first order of business, expand all of their capabilities and investments throughout Europe. Second will be take it to places like the US and globally, and we'll have to do that in a phased approach. Again, you know, when we showed our $250 billion TAM at our investor day last year, we never included solar PV and battery. That just introduces close to another $50 billion TAM, which is tremendous upside and importantly differentiating. If we can talk about heat pump technology and development for a minute. You know, there are some differences obviously between your product portfolio and Viessmann's. As you've actually mentioned, they've been a very vocal advocate for natural refrigerants. How do we think about, you know, some of the ways in which their portfolio complements your existing one? How do we think about maybe some product development synergies over time? I think that's one of the most exciting things. We haven't factored in any of the revenue synergies into the EUR 200 million estimate that we gave. You think about some of the things they do very well. They are very much out in front on natural refrigerants. I mentioned that in terms of their heat pump, it actually uses 50% less floor space, and it uses significantly less installation time, which again, when you have a shortage of qualified installers or across Europe, that's enormously differentiating, and that can provide a lot of value to us per Carrier outside of Viessmann. On the flip side, with companies like Toshiba, we have world-class inverter technology. We've invested so much over the years in heat exchangers, fans, air handlers. There's a lot of technology that we put, you know, with our 5,000 engineers today at Carrier, a lot of resources into developing world-class compressor designs, how we bring that into the Viessmann portfolio as well. The technology synergies added on with the digital synergies because they have One Base, we have Abound. A lot of the digital subscription type offerings and digital platforms will really cut across both entities seamlessly. That's great, Colin. Thanks. Thank you. Thanks, Noah. Please stand by for our next question. The next question comes from Deane Dray with RBC. Your line is open. Thank you. Good morning, everyone. Andrew, my congratulations. Thanks, Deane. Hey, I might have missed this, but for Patrick, are you going to move fire and security and commercial refrigeration to discontinued? You know, what would that process be and timing? We will do that at the right point. My expectation is that's several quarters away, and there are some specific requirements that need to be met for us to get there. If it happens at all, it's gonna happen several quarters from now. Got it. Then, maybe just give us a perspective on Viessmann, how they fared during the whole supply chain pressures, how did they do in price cost, and any sense about their backlog and past due? I would say they're very similar to what us and many other companies experienced. I think the good news is that they'll be coming in with backlog because they experienced, you know, some of the same supply chain issues that we all experienced. They navigated it as well, if not better than anyone. Look, we all ran into some of the same constraints. They're price cost positive. They've. One of the very, I think exciting, many exciting things is that they clearly can charge a premium. They have. They will continue to be able to do so. Pricing's not an issue for them. I think that one of the exciting things on the combination is I think we'll bring a lot of value on the cost side with our supply chain. Keep in mind that if you look at the last few years, despite all the supply chain, they've been growing 15% sales and EBIT CAGR between 2020 and 2023, and their margins have improved during this time. In fact, Max just told me two nights ago that their margins were exceeded their expectations for March. They continue to underpromise and overdeliver, and I expect that they will continue to do so. That's really helpful. Can you just clarify in your answer to Tommy's question regarding the distribution model, you know, just going directly to 75,000 installers, you know, if it works for them, that's great. I don't think you would try to fix something that's not broken. But, you know, how does that strike you in terms of efficiency? Well, look, it's extremely efficient in the European market. You know, one of the things that is in Europe is, which is a little bit different than the United States, is that you know, first you start with distributors, then you have wholesalers. The wholesalers there are typically agnostic. You know, they will carry multiple different brands, and they will provide the installer what the installer calls for. Our distribution channel here in the United States, it's typically exclusive. Our distributors are exclusively us and our brands. I think it's an extremely efficient model there. Our only goal would be to expand it. Expand it, invest in it, continue to grow it. They've done a phenomenal job getting it from where it was 30 years ago to where it is today. We just want to invest in expanding it and continue to make it, the truly differentiated channel that it is. Thank you. Thank you. Please stand by for the next question. The next question comes from Josh Pokrzywinski with Morgan Stanley. Your line is now open. Hey, good morning, guys. Congrats on the deal. Hey. Hey, Dave, I know there's been a lot of, you know, stimulus and, you know, kind of REPowerEU and, you know, elements like that that are encouraging, you know, kind of the electrification of heat, you know, chatter about European IRA. Where does the product portfolio fit into that? I got to imagine it's on, you know, kind of the virtuous side of it, but anything in particular that, you know, you're excited about in terms of their lineup that, you know, captures something that is gonna be, you know, a policy target? Well, if you think about, there's really, with all the different legislation throughout Europe, either at an EU level or within the countries, there's really two aspects to it, whether it's the European Green Deal or Fit for 55 or REPowerEU, it all really comes down to two things. One is the rapid adoption of renewables, and two is the rapid deployment of heat pumps. Viessmann is the only one that's well positioned in both of those. What's really exciting is if you overlay that with the regulations that these 17 countries are passing, it's literally a once in a generation opportunity. You do not see markets where they're basically forcing you to transition from legacy fossil fuel boilers to heat pumps, and you're gonna be charging about up to 4x the price for that replacement. That's a mix-up that is unlike any other industry in the world that's anywhere close to our space. It's why it is a such a unique phenomenon and such a, an attractive and compelling reason to wanna get in. To Max's credit, they were the first to see the truly value add that you can create for the homeowner by interconnecting these systems. I mentioned that your energy bill can be 80% less if you buy all of these systems together, which is a huge, huge number. You add onto it this existential risk with, you know, a year ago, half of the gas for Europe coming from Russia. The imperatives to become energy independent and rapidly transition to heat pumps and renewables, it's not a nice to have, it's a must-have for Europe. We all know Europe dodged a bit of a bullet this past year 'cause it was a fairly mild winter. The clock is ticking on energy independence in Europe, so countries are pushing it, and there is no one better positioned to lead in that transition than Viessmann. Got it. That's helpful. Then just to follow up on the pricing comment, I think from Deane Dray's question. You know, I think in the U.S., you know, there aren't a lot of markets out there that have, I'll call it, lack of transparency to the end consumer the way resi HVAC does, in a good way, in terms of, you know, not a lot of pushback, not a lot of context what these things should cost. How does that work in Europe for the Viessmann product? Is it sort of just, you know, hey, a list price, this is what you pay? You know, is there a little bit of kinda configuration and, you know, kinda extra costs that, you know, maybe cloud that a bit? Yeah. I mean, these are highly configured systems. I think the dynamic is very much what you see in the United States. Even, you know, I'll just take the small example of battery. You can have different size home with different size demands, and that's why they have Viessmann innovated a modular design because every home is slightly different. They are typically customized, highly configured, highly technical, and the price is really something that's between the homeowner and the installer. There is a lot of variability and not as much, I guess, ubiquitous transparency. Got it. Congrats again. Thanks a lot. Thanks, Josh. Please stand by for the next question. The next question comes from Brett Linzey with Mizuho. Your line is now open. Good morning and congratulations. Thanks, Brett. Hey, wanted to just come back to the revenue synergies. You know, understand you're not contemplating in the deal framework, but are you able to maybe dimension what the potential revenue synergies could look like as you know, propagate some of the legacy technologies in the different markets? You know, internally, Brett, we have some numbers that we put on it. I think it's early days. We need to let the team get in there and really, and drive them. As we get traction, we'll start to put more meat on the bone on dimensionalizing those. If you think about it, their channel with these 75,000 installers that they have these intimate relationship with, that we could clearly introduce a second brand into their channel, whether it's Carrier or Toshiba, that would be a very, very exciting opportunity. You think about their digital connectivity, they have a whole bunch of, I would say, world-class digital solutions. They have smart thermostats that we could really use very much throughout Europe, but outside of Europe. We could bring that into North America, we could bring that into Asia. One of the things we've been working on is digital connectivity with our distributor and dealer network, but also potentially with the homeowner as well. As we bring their technology outside into our channel, we bring some of our brands into their channel, we leverage our respective underlying technologies. I think the revenue synergies will end up being far more exciting when we look back five years from now. We will have gotten truthfully, we'll have exceeded our cost synergies because that's what we do. What we will end up being more excited about is the revenue synergies. Yep, no, that makes sense. Maybe just one on the quarter. You know, HVAC orders were up double digits organically, commercial backlog up. I guess, as you think about the HVAC commercial business, I mean, are you seeing any, you know, cracks from the bank turmoil? Then I guess secondarily, you know, with the supply chains improving and the shipments out of backlog improving, you know, where do you see backlog landing at the end of the year in the commercial business? Look, backlog, you know, when we look at commercial HVAC, backlog was up 20% organically. We had very strong orders in the quarter for commercial HVAC. You know, what we're seeing is continued growth across the globe, frankly. We saw sales up mid-teens in the quarter. Aftermarket was up just under 20%. Controls was up just under 20% and commercial applied was up in the mid-teens. When we look at orders, we're very pleased with what we're seeing, especially North America. China orders were a bit down in the quarter, but we think that is timing. We think we're very bullish on what we're gonna see for China orders this year because as that country starts to come back. I'll tell you interestingly, in the middle of all the banking issues that we were all watching, March was the first month since September of last year where the Architecture Billings Index was north of 50. I think we're all watching whether or not that could create some constraints on demand. We've seen none of it in the underlying business. Okay, great. I'll leave it there. Thanks. Thanks, Brett. Please stand by for the next question. The next question comes from Andrew Obin with Bank of America. Your line is now open. Hey, guys, good morning and congratulations. Thanks, Andrew. Hey, just a question. Can you talk a little bit more about, you know, the solar business? It's a fairly large chunk of the company, and I just want to understand better what it is the company does there, and I guess how does it fit strategically with your HVAC vision? Thank you. Well, you know, the beauty of their solar PV that they've gotten into recently is it's really part of a broader solution. You know, there's a lot of players globally that do some level of solar PV. The issue with Viessmann is they're the only player kind of directly in our space that has it as a core offering. The reason that's important is it's part of a broader ecosystem of offerings. It's not that people should think of them as a pure play solar PV. Someone should think about them as a energy management solution provider. As more and more regulations are passed throughout Europe, they're saying, "Here's how much heating you can use. Here's how much, you as a homeowner, here's how much carbon emissions that you're allowed to have." A typical homeowner has no idea how to navigate achieving certain targets that are being given. What you really want is a one-stop shop. You want someone who can come in and say, "I can help you achieve these objectives that you have. Instead of reducing your thermostat to 64 degrees in the middle of a cold winter, here's how you can achieve the objectives that the government has set out for you." It's that interconnectivity of a solar PV that seamlessly interacts with a wall-hung battery plus the heat pump, plus a grid management, energy management digital solution. It's that interconnectivity that makes it such an important part of their portfolio. Gotcha. Just a question on synergies. I completely appreciate that the deal is a lot more about, you know, heat pump market tripling in Europe and channel synergies, et cetera, et cetera, and revenue synergies. Totally get it. You know, 5%, you know, recent deals were more like 8%-10% in the industry. I'm thinking about 5%, and we're also been questioning, getting questions on the headline in the FT that Germany will review sale of Viessmann. How does that, you know, just basically buying a storied Mittelstand German company, how does that figure into your approach to costs in this deal, and what can you do going forward? Thank you. Yeah. What I'd say, Andrew, is first, your observation that 5% seems conservative, I would agree with. You know, I do think your typical synergies are in the high single digits, and that's been. I think our experience. I think that. Is it conservative that we would get to $200 million, the vast majority of which is by year three? Perhaps. I do think we were pragmatic and very focused on what we're trying to do with this integration. We are not coming in guns a-blazing. This is a very well-run business. This has, as I mentioned, one ERP system. This is a phenomenal business. This is not about headcount reductions. They have 11,000 people. We are not coming in to reduce SG&A heads. We're not coming in to close factories. It's the opposite. We're coming in to invest in Germany, invest in the workforce, invest in growth. The worst thing you can do in the middle, at the very outset of a huge growth opportunity is start to squeeze costs and not build for the capacity to keep up with the demand that is so clearly in front of them. We got low-hanging fruit on the synergies with the insourcing procurement. That's an easy go-do. We know how to do that. Viessmann knows how to do that together. We're just gonna go make that happen. Will the number end up being higher? We'll see. Our focus will be on those two pieces of the synergies, and then equally important will be driving the revenue synergies. Great answer. Congratulations. I know how impossible these companies to get, and great. Congratulations on getting this deal done. Thank you, Andrew. Please stand by for the next question. The next question comes from Nicole DeBlase with Deutsche Bank. Your line is now open. Yeah, good morning. Thanks for taking my questions, guys. Yes. Just a couple of more financial questions. Going back to, I think Jeffrey Sprague asked this question towards the beginning of the call. Do we need to make any adjustments to the EBITDA figure that you guys included in the slides, as presumably Viessmann would need to transition from IFRS to GAAP? We, Nicole, Patrick here. We believe that there is a good approximation of U.S. GAAP. Okay. From all the due diligence that we've done work, yes. Okay, thank you for confirming that. With respect to the synergies, the $200 million, how should we think about the phasing of that? I think typically sourcing can take a little bit longer, like tends to be towards the end of a synergy process in a deal. Is that more back-end loaded across the three years, or will you start to get some of those synergies upfront? Thank you. Nicole. We expect that by year three, the vast majority of those synergies will be achieved, so think about 75%. What I'd say is the phasing is the interesting is a go do, you know. There might be some minor tweaking to the product, but Toshiba's already in Europe, so in terms of qualification, I don't see that as a major issue. I think that insourcing will be, I think, relatively quick. Sourcing, frankly, could be relatively quick as well. I think, you know, what typically takes longer is if you start closing factories and things like that is not part of any part of our calculation. I think achieving these relatively within the next couple years is quite doable. Thank you. I'll pass it on. Thank you. Please stand by for the next question. The next question comes from Stephen Tusa with J.P. Morgan. Your line is now open. Hey, good morning. Congrats. Good morning. Thanks, Steve. Any margin differences between these various businesses within Viessmann? You know, the pie chart there? No. I'd say that the margins for things like boilers, heat pump services are all similar. Batteries might be slightly lower, solar a bit lower than that. I think the nice thing is that the margins on boilers and heat pumps, because we are going through that transition, are very similar. Got it. Just Patrick, on the guidance, any moving parts on bridge items and then just any color on kind of the cadence first quarter to second quarter, the seasonality that you guys expect this year? Yes, Steve. In essence, our prior guide assumed $1.5 billion-$2 billion in share repurchases. We are pausing that. With that, we lose about $0.04 or $0.05 versus our February guide. That being offset given Q1 performance, but also some adjustments on interest income, for example, that you see in the back of the slide deck. In terms of timing for the balance of the year, the way we think about this, in February, I mentioned that first half adjusted EPS would be a little less than half of the full year. Given our performance in Q1, we think that first half and second half EPS will be very similar, at the midpoint of our guidance of $2.55. Okay. Just any update on price cost and the spread there? What was that in the first quarter, what do you expect now for the year? Price cost was slightly positive in Q1, and we expected Q1 price cost to be the most difficult per what we said in February. We expect price cost for the full year to be positive, and we expect it also to have a slightly positive impact on margins. One last one. How much price do you now expect for the year? We still expect most of the organic growth for this year to be price, it's now call it in the $400 million-$500 million range, Steve. Okay, great. Thanks for all the details. Congrats again on the deal. I think everybody covered most of the questions I had. Thanks. Thank you, Steve. I was handed a note by Sam that my mic cut out during fire and security. I apologize for that. What I was basically saying is what's on the slide. That for fire and security, it's great businesses, great teams, great leading positions. You all know the brands and how the great the growth potential. I was clarifying that even though it's $3.6 billion of sales, we're going to retain the UTEC business, which makes controls for HVAC and refrigeration. It's a natural part to keep in our portfolio. The business we're exiting, therefore, is about $3.1 billion, and it has EBITDA margins in the high teens. It's split between fire at $2.1 billion, security is around $1 billion. Like I said up front, this was a very, very difficult decision. Juergen and his team have done a phenomenal job creating a world-class business that's highly differentiated, and it's a true unique asset that I know many will be extremely interested. Just because it's such a phenomenal business doesn't mean that it belongs in our portfolio. Excuse me, we had to make the very tough decision to exit those businesses, and we'll use those proceeds, as Patrick said. We'll pay down some debt, we'll do a buyback, and then we'll continue to invest in our core business of being the global leader in intelligent climate and energy solutions. A tough decision, but I think the right decision for the long term of the business. With that, we will leave it there. I do thank all of you for your flexibility moving this up a day. I just wanna reiterate my thanks to our employees and to the 11,000 Viessmann employees that will become part of our family. You know, I think this is a once in a generation opportunity to truly bring two world-class phenomenal organizations together to be an unambiguous global leader, and I couldn't be excited about the days that lay ahead. My thanks to all of you. This concludes today's conference call. Thank you for participating. You may now disconnect.