Good morning, everybody. I'm Tim Wojs. I cover building products here at Baird. And we're very happy to have Carrier Global join us again at our Global Industrial Conference this year. Carrier is a leading manufacturer of residential and commercial HVAC, and also transportation and refrigeration. And as I'm sure everybody's aware, they're undergoing a lot of change with the portfolio at the moment. So from the company, we have Chairman and CEO, Dave Gitlin. We have Patrick Goris, who's CFO, and then Mike Rednor, who's the new IR person, is down here in the audience. So I think Dave's going to have a couple of quick remarks, and then we will hop into Q&A. So the floor is yours, Dave. OK, well, thank you, Tim, and thank you to Baird for hosting us. We are so excited for the future as our portfolio transformation is largely behind us. The team has made tremendous progress over the past 18 months to turn Carrier into a pure-play-focused global climate and energy solutions leader. And while I've been proud of the way that we've executed up to this point, I'm more excited than ever on how we've reshaped the company to accelerate our organic growth as we look forward. So before, Tim, we go into the Q&A, let me give you some color on our new business and how we expect it to perform. When I exclude the commercial refrigeration business that we exited in October, we'll generate about $22 billion of annual sales this year. I like our balance across verticals and geographies that we have, while having leading positions in the most critical markets in our space globally, and our new portfolio is squarely tied to global secular trends. You can think of our business in five buckets: $6 billion global commercial HVAC, $7 billion residential and light commercial in North America, $4 billion residential light commercial in Europe, $2 billion residential light commercial in Asia, and $3 billion as transport refrigeration. Commercial HVAC orders year-to-date are up 16%, and our backlog is at record highs, up 30% on a two-year stack driven by data center and other key verticals. So we feel well-positioned there going into next year and beyond. Our residential light commercial businesses are shorter cycle in nature, but we do see tailwinds as we look ahead. In these businesses globally, we'll be mixing up with the continued shift to heat pumps and our very concerted push to significantly increase our aftermarket sales in these businesses. The Americas will benefit next year from the mix of 454B, which will benefit our light commercial business as well. Europe, frankly, has the benefit of easy compares. With some of the fundamentals heading in the right direction, we remain focused on controlling the controllables, around share gains, new product introductions, and revenue synergies. Asia is a mixed bag, with Southeast Asia continuing to show progress and China remaining a bit of a watch item, and in transport refrigeration, Asia remains strong, and we expect some recovery in North America next year. For our aftermarket business, which is 25% of our business and cuts across the segments above, we expect double-digit growth as we continue to successfully deploy our playbook. So as we head into 2025, we feel good about growth. In addition, we continue to drive operational excellence with at least 50 basis points of margin expansion annually. Remember, this year we're looking at about 150 basis points of margin expansion. With the benefit of our capital allocation strategy, this should lead to strong EPS growth for the next several years. So again, very proud of the entire Carrier team for the solid execution this year, along with the tremendous work in achieving a successful transformation, while setting us up well for the future. I'll tell you, I've been excited every year since coming to Carrier. 2025 is the most excited I have been. It's a year of focus, customers, execution, growth, and innovation. And with that, Tim, we'll get into the Q&A. Awesome. Thank you very much for that. If anybody has any questions, feel free to raise your hand. I'm going to start, Dave, just kind of on the portfolio. A lot of incremental change, really, over the last six or seven years, right? And so I guess as you kind of get this HVAC portfolio in the right shape, how do you kind of think about, I don't know if you want to say, giving the portfolio room to breathe? Where are your priorities going to be in 2025 and 2026? And how is that different than what they've been over the last two to three years? I'll tell you, I think that next year is all about heads-down execution. Viessmann, priority: make sure that we get back on the growth that we projected, and heads-down execution around all things Viessmann Climate Solutions. We have a lot going on in North America residential and light commercial with the transition to 454B. Make sure that we execute on that transition. Commercial HVAC presents an enormous opportunity for us as a company, especially given what we're seeing in data centers: 250% increase in orders year-to-date. We continue to win, and we continue to see that as an opportunity to really catch up to a couple of our peers in North America. Drive productivity, always, through our Carrier Excellence. There is a new frontier around Carrier Energy and a lot of focus we have on home energy management solutions. As we look ahead, if you think about the amount of time that our leadership team has had to take associated with, we've resolved AFFF. All of the divestitures are behind us. We have one more to go that's going to close here very shortly. Next year is customer-focused innovation execution differentiation. And is there still, obviously, you have some stranded costs from some of the acquisitions, but is there still a kind of core productivity opportunity that's kind of untapped with the new portfolio? Yes, so we started proactively addressing the stranded costs earlier this year. We will have taken out this year over $200 million in run rate cost. Next year, there will be some more as the TSAs run out. But from a productivity point of view, our productivity well is not empty at all. We target productivity across the company every single year. We see continued opportunities, not just in G&A, in our manufacturing footprint, in our sourcing generally. We have just started the work on global platforms for our residential and light commercial HVAC businesses globally, and so productivity will be a source of margin expansion for many years to come. On your global commercial HVAC business, obviously, data centers have been strong. Aftermarket has been strong. What else is kind of going on in the global commercial market today? And then as you think about Carrier-specific initiatives, I think you always have had aspirations to get that kind of market share in global commercial back to maybe where it was a long time ago. What are some of those initiatives that you talk about in terms of regaining some of that, recapturing some of that market share within commercial? The verticals of strength vary a bit around the world. What we're seeing generally in places like the United States, a lot of the reshoring and some of the mega projects have been coming back, and we've been winning our fair share. Data centers is a very unique opportunity because to close the gap to a couple of our peers in North American commercial HVAC, normally winning three chillers at a time would have taken a number of years. I think now that we've significantly improved the margins in the commercial HVAC business, and we've filled out the product portfolio, and we're adding capacity in North America to support the continued growth, we feel very well-positioned to significantly increase our share in North America, which I think is the one gap that we've had with a couple of our peers if you look at our portfolio globally. So we feel good about that. If you look at some of the strengths, it's been around semiconductor. Health care continues to be quite strong. Some of the renewables in China have slowed, so we've pivoted hard to things like semiconductor data centers and health care. Higher Ed and K- 12 continue to be strong as well. Then when you're talking about, I mean, when you think about service, how big is the service business within the commercial HVAC business today? I think in the past you've said double-digit forever, maybe that's the quote. But it is. We feel good about, look, we are in the early phases. I think commercial HVAC is typically 70/30 on 30% aftermarket. But a big opportunity for commercial HVAC is driving modernization. So you look at China, we're not seeing as much new construction in commercial buildings as we've seen in the past, but we're seeing significant opportunities around mods and retrofits and upgrades. So especially when you think all things energy efficiency, we see that as a big opportunity. And we do feel good about double digits this year. We feel good about double-digit aftermarket next year. And it's kind of a price of admission for us as a company. OK. OK. That goes beyond commercial HVAC? Yes. Across portfolio. Across portfolio. OK. Maybe just thinking about the residential business, obviously very topical with the A2L transition. I guess, how do you think Carrier is prepared for this transition, shifting from the old refrigerant to the new refrigerant? And maybe you can frame for us how you think this plays out over the next couple of quarters, because you have concerns about pre-buy. You have easy comps. You have some of the sales. So how do you think we kind of go through the next couple of quarters on the A2L transition? Let me address it head on, because in the past week I've been to our facilities in Monterrey, Mexico, Collierville, Tennessee. Yesterday I was in Indianapolis. First of all, on our readiness around 454B, we feel 100% very well-positioned there. In terms of supporting our customers and gaining share around some of the 410A, we feel very good about that. In terms of pricing around 454B that we've talked about, the 10% higher price, base price on 454B versus 410, plus some escalation on top of that, we feel good about that. So I think that pre-buy, in my opinion, is not the right word. What we saw was pre-ordering. So I would say when we talk about orders in 4Q for residential light commercial, ignore it. Don't look at it, because it's an irrelevant number. There was some ordering that took place in 3Q for 4Q and 1Q. That was just ordering so we could get aligned with our customers what they wanted when. I do not see a pull forward from next year into this year, so we just don't see that, and what's been strong is, and we reviewed it again yesterday, is that movement in October, movement is from our distributors to our dealers in October, was strong, so what we are doing our best to do in Resi in North America is give our customers what they feel they need, their true demand for the fourth quarter, and with strong movement, we are giving them the demand they see, and we also want to end inventory levels down, say, 5%, 10% this year versus last year, so we're trying not to build up inventory in the channel. We will have 410A inventory in our four walls going into next year. We'll ship some of it in the first quarter to support our customers. But we see 90% of the demand next year or so being 454B. Yeah, and even on a sell-out basis, I mean, the inventory is going to probably get you through, what, the second quarter, and then we're all going to be at this. Exactly. And I think something we haven't talked a lot about is we reviewed light commercial yesterday as well. That also sees the same price benefit that we're seeing on the residential side as well. And then through the same inventory dynamics, or is it pretty much going to be? No, less. Less Less on that. Less on that? OK. And then maybe just kind of thinking about Viessmann, I know you're not going to give me guidance for 2025 next year, but can you maybe give us a little bit of context around if the market for Viessmann grows X, what should Viessmann grow? Because I think in your view, you should be growing faster than the market. And how would you kind of build those pieces up? Yeah, and the framework that actually our local team is working towards is assuming a market environment in which the unit volume, the market units, are flat year over year. We don't know whether it will be flat or not, but let's assume it's flat. The management team locally is targeting double-digit revenue growth in a flat market unit environment. And there are several elements to it. The first element would be there is a mix-up benefit. Assuming the heat pumps are up 15% and boilers are down 5%, just the difference in revenue per unit, that's a 3%-4% revenue growth. So that's one. If you look at the aftermarket opportunity within Viessmann, it's about 13%-15% of their sales. It's growing double digits. That would add one to two points of organic revenue growth for Viessmann. So you're really middle digit, mid-single digit at that point. Then you're looking at share gains and revenue synergies, which combined we target to be about three, four points of growth. And then finally, pricing up to a point. And so clearly, it's a short-cycle business. We don't know how the volumes will look like next year. Clearly, given how difficult this year has been, it would be hard for us to imagine that the market would be down next year. But what the management team there is focused on is in an environment in which volumes would be flat, how to drive double-digit growth. If unit volumes in the market are better than that, then of course we would expect to do better than that. OK. OK. That's helpful. And then obviously there's been a lot of change in the regulatory environment over there. Does that change the investment case for Viessmann at all? It doesn't change the business case we're working towards, because not everything works exactly the way you intended on day one. That's why we're working on cost synergies that were not identified before. That's why there is a huge focus on revenue synergies, shipping cooling units through the Viessmann channel that was never part of the plan, but yet starting in January, that will be very active. Yes, regulations will be tweaked. They will be changed. Our job is to achieve the business case one way or the other. We continue to believe strongly, by the way, that irrespective of the outcome of the elections that were announced in Germany, Europe continues to target decarbonization and their commitment to have more heat pumps installed. The different parties in Germany that will now come up will be part of the elections. No one has stepped away from that, and so in the meanwhile, we'll see what may change regulations or incentives, but for us, the business case remains the target. We may get there a different way than we initially thought we would. OK. OK. Great. Any questions from the audience? All right. So then just when we think about the Viessmann business model, I'm very familiar with the residential HVAC business here in the U.S. I'm less familiar with the residential business in Europe. So how is Viessmann different than the other kind of players that are in the market? Especially there's been Asian competition, those types of things. So how does Viessmann really differentiate the offering, and why is it so attractive? Well, we spend a lot of time researching and frankly speaking with every residential heating player in Europe. And I will tell you, under every lens that you can look through, Viessmann was differentiated. The biggest is the moat they have around their direct-to-installer channel. They have direct relationships with 80,000 installers. I think this year it'll end up closer to 82. We've been adding a bunch of direct-to-installer relationships. And the difference in Europe versus the United States is that there, their wholesalers are typically agnostic. They may carry 10 different brands. And the way it gets into the marketplace through installers is you need pull from the installer or in some cases the homeowner. In the United States, our distributors are typically exclusive to us. So there, you're not going to just organically just show up and grow in the we looked at, can we just grow organically? The issue is you could be one of 10 brands on a shelf, but the ability to create true pull can take generations to go accomplish. What Viessmann did is created that direct-to-installer relationship. They have very differentiated products, especially at the high end, whether it's noise attenuation, aesthetics, efficiency levels. Then you look at their operational capabilities, both in Germany and in places like Poland, the brand recognition that they have. So it was a moment for us that it was very, very we looked at it. It's a market that we absolutely want to be in. Obviously, this year is not how we drew it up. I'll be I know it's sort of stating the obvious, but we didn't combine with Viessmann because of what was going to happen in 2024. We combined over the long term. There is an unambiguous trend towards heat pumps. And by the way, complete home energy management solutions, because electricity prices stay high. They are continuing high in Germany. And Germany does not want to be reliant on Russian gas. So you will continue to see a shift to not only heat pumps, but other solutions as well, like HEMS. And there's no company that's better positioned in Europe than Viessmann. We'll have to see exactly how next year plays out. Patrick shared the model that we look at. But we feel really good about this company. And there's so many intangible benefits we've seen through this combination. Right. And even with the lower sales base this year, it seems like the cost synergies are on track. And it does seem like you're actually pulling forward some revenue synergies. So from a bottom-line perspective over the next couple of years, Viessmann should be still kind of in the realm of where you thought it was going to be when you acquired the business, right? We would expect obviously this year we're not. Probably next year wouldn't be either, unless there is a very sharp pickup in volume, but we absolutely have a path over the next three to five years to get back to the business case operating profit. As I said, how we get there is probably different than what we first imagined. On the data center business within commercial HVAC, how are you differentiating yourself? Do you have customer relationships that are unique to Carrier? Do you have products that are unique to data centers for there? And as you think about going from the chiller business to maybe doing more inside the data center, is there an opportunity for you to play there as well? I think one of the things that I think is very different for Carrier today than four or five years ago, I think, is the breadth of our product portfolio. We've invested significantly, even through COVID, through some of the supply chain challenges. Our R&D, as a percent of sales, is frankly, in some cases, a bit higher than some of our peers. And we really had to prime the pump on some of those investments. So we feel very good about not only the portfolio, but we have a group within Carrier that does application-specific engineering. They understand the specific requirements of our data center customers. And we've been able, in a short period of time, to really surpass the requirements that not only the hyperscalers have been giving us, but also many of the colos as well. We're building up the capacity here in North America to support North America. So between product portfolio, aftermarket support, very customized service programs that we've put in place, and then the capacity, we've been pleased with the wins we've had. And there's more to come. OK. And then can you give us some context around how much capacity you guys are adding within the chiller business? I would say we're effectively today in North America, we have a great facility in Charlotte, North Carolina, that's made great improvements, and we're effectively going to double the capacity. Double the capacity. the capacity. OK. Not only in Charlotte, but also in North America so if you look at the North American capacity, our plan is to at least increase it by 2X for chillers. That's without rooftops. That's adding lines, increasing efficiency, but we're not adding plants. Yeah, we repurpose the facility so it's not more bigger and more different. You're actually adding square footage and just repurposing it. I got you. OK. Any questions? Subir? We can switch our focus to what election impact tariffs do have to do to kind of have an idea of how that's going to affect the country. Yeah, we're looking at that. The question for those that didn't hear was about tariffs and with the election and specifically Mexico. We've been working very hard to drive less reliance on any single source of failure. If you look at, I think about China and then I'll get to Mexico. If I look at where we were a handful of years ago, where we are today, we import from China into the United States a fraction of what we used to. And that was not necessarily because of tariffs, but we really did a China plus one policy. So we've tried to make it not only China for China, but where we have suppliers in China that export that are doing fine, that's great. Keep it going, but also have another source. So we'll monitor where tariffs go. But we feel that we're covered in terms of China. Mexico, we have a phenomenal workforce in Monterrey. Again, I was there last week in Monterrey, Mexico. I would say it's some of the best-in-class manufacturing that you'll see in the world, and we have phenomenal facilities here in the United States. I was just in two sites in Tennessee. I was in Indianapolis, so we'll find that right balance, but we feel like we can protect ourselves from wherever the tariffs go, but we continue to be very pleased with our Mexican operations. Is your footprint just in general much different than the overall HVAC industry? No. If there is sort of tariffs, I mean, everybody will probably use price as a lever or those types of things. Exactly. OK. I I guess when you think about capital allocation, obviously a lot of change going on. What are some of the near-term priorities on the capital allocation side that we should think about? Yeah. So post the exits, what we said is we want to return to about 2x net debt as quickly as possible. We're there now. We just refinanced a spring 2025 maturity. We're going to pay down $1.2 billion of debt, USD bond in the spring. After that, deleveraging is behind us. Then what we said is we want to repurchase by the end of 2025 the equivalent shares we issued for the VCS, the Viessmann acquisition. That's a little less than 60 million shares. And what we said is we have a path and we see a way of doing that before the end of 2025. After that, frankly, our priorities remain unchanged. We're funding organic growth, inorganic investments, then a growing and sustainable dividend. We're at about a 30% or so payout. I expect us to stay in that range. And then it's share repurchases. In reality, it will probably be a toggle between acquisitions and share repurchases depending on market conditions and what's in the pipeline. As Dave said, it's very much focused on execution now and running the business. We expect that at some point in 2025, our capital deployment will also return to what our priorities are. OK. And you've talked about the new portfolio really growing 6%-8% over time. What are the key pieces to that growth when you look at each of the businesses that you outlined? Yeah, I can provide some color from the overall company point of view on what the building blocks are. But think of the 6%-8%. It assumes 3%-4% GDP growth. Then about 2% of call it initiatives, geographic expansion. We have the big focus, as you know, on aftermarket, always looking, of course, at how we can invest and see if there are adjacencies that are of interest to us. And then sustainability adds an additional point or two to it. And by that, I mean you heard us talk earlier about a mix shift. Every time one of our customers moves towards a more efficient unit, the price per unit tends to be higher because the benefits are, of course, more attractive and more important to the customer as well. And so the more we move towards a mix-up or the more we see a drive towards higher efficiency units, we get an actual benefit from that from a revenue point of view as well. And that takes us to the 6%-8% that we continue to target as the long-range target for our company. On decarbonization, I mean, this has always been kind of a payback industry in terms of replacement, right? Especially on the commercial and the global commercial sides. What has decarbonization or the idea of decarbonization done to those payback periods? Has it made them a little looser so the payback periods may be a little bit more graceful and that's driving demand? Or do you really need the incentives and things like that to drive the replacement? I'm just kind of curious overall how the payback periods are kind of changing and I guess the customer view on the payback period in general. Yep. So one of the drivers of commercial HVAC has been companies across different verticals upgrading their systems and replacing older units with new units. Some countries may have incentives different than other countries. But what we see globally as a payback, a payback period of about two to three years is not unusual. And frankly, for companies as a financial investment, that is not an unattractive investment. But too, many of these companies have made commitments in terms of decarbonization. And given how much HVAC systems consume or create as a footprint, as a percent of the total, it is an important way for companies to address their decarbonization targets. And so we've seen that across industries. But two to three years payback is not unusual at all. That's not unusual. And of course, it depends where, it depends on how old the prior unit is. But that's a good ballpark figure. And I think that explains why we've seen strong demand in commercial HVAC across different regions and verticals. Do you think the model for commercial HVAC evolves over time, where somebody like yourself is, I don't know, if it's performance contracting-like, but you're starting to deliver a certain set of energy savings to a customer versus just kind of installing a new chiller and kind of servicing? Do you think there's a performance angle to this business that you can capitalize on over time? The answer is yes, and the answer is we're already doing some of that today. So it's still very small scale, but we do cooling as a service. Also, for one of the larger companies, the Home Depot type companies, not to name a name, we already manage their HVAC assets. They will pay us a fee for us basically to manage their HVAC assets and to help them reduce energy consumption. We like doing that because it creates some recurring revenue streams. We get to better know the assets that they have because they're not all Carrier assets. Then, of course, if an asset needs to be replaced or we see an attractive payback that the customer may have an interest in, we're there for the customer to make the case. OK. So I would expect that to continue to pick up. Pick up. Any questions? Is there a pickup in kind of the replacement cycle that goes beyond economics that's tied to technology and innovation? Is there any change in that? Certainly on the commercial side. If you look at the age of the units that are out there, the average age has come down, I think, in a fairly recognizable way because of these early upgrades. On the residential side, we used to say in the United States, 17 and a half years. Now we think it's closer to 15 years. So we do think for either because of usage rates or because of some of the benefits of an early replacement, we do see average age coming down. Some of that kind of data-driven where people see it now on their phones instead of on the monthly bill, which they may or may not pay attention to and are sort of more aware? 100%. Yeah, we see the people just not only paying attention to HVAC. This is also why we see a real benefit around complete home energy management solutions. So we've been talking more recently, especially internally, about what we're calling Carrier Energy, which has a dedicated leader for us, Hakan Yilmaz, who's been our Chief Technology and Sustainability Officer, leading a really focused effort in the United States around complete home energy management solutions. We've been meeting with utilities. There's a lot of interest in that because obviously the capacity of the grid can't support the demand in the United States with the increased demand from data centers. So we think we have unique solutions.