Q1 2025 Carrier Global Corp Earnings Call
Yeah.
Speaker Change: Good morning, and welcome to carriers first quarter 2025 earnings conference call I would like to introduce your host for today's conference Michael Ratner, Vice President of Investor Relations. Please go ahead.
Speaker Change: Good morning, and welcome to Charter's first quarter 2025 earnings conference call on the call with me today are David <unk>, Chairman and Chief Executive Officer, and Patrick <unk>, Chief Financial Officer.
Speaker Change: Where otherwise noted the company will speak to results from continuing operations, excluding restructuring costs amortization of acquired intangibles and certain significant nonrecurring items, such as acquisition and divestiture related costs. A reconciliation of these and other non-GAAP financial measures can be found in the appendix of the webcast. We also.
Speaker Change: Remind listeners that the presentation contains forward looking statements, which are subject to risks and uncertainties.
Speaker Change: Carrier SEC filings, including our Form 10-K, and quarterly reports on Form 10-Q provide details on important factors that could cause actual results to differ materially.
Speaker Change: One additional note as you probably saw on the press release and webcast presentation. This morning, we announced a revised reportable segments and segment profitability measures. So we will be speaking to financials on this basis going forward with that I'd like to turn the call over to Dave.
Mike and good morning, everyone. Let me start by thanking our 50000 teammates for delivering another strong quarter.
Speaker Change: Also like to welcome Michael <unk> to our team. He is leading our climate solutions segment, and the Asia Pacific Middle East and Africa region, and we are thrilled to have him on board.
Speaker Change: No.
Speaker Change: Strong and better than expected start to the year orders were up high single digits with double digit orders growth and climate solutions Europe and transportation.
Speaker Change: Within climate Solutions America sales in both residential and commercial were up about 20% each more than offsetting weakness in light commercial global aftermarket remains on track for another year of double digit growth following <unk> up 8%.
Speaker Change: Total company backlog was up about 10% year over year and 15% sequentially.
Speaker Change: Team continues to use carrier excellence to drive strong productivity with core earnings conversion of about 100% and 210 basis points of margin expansion, we drove 27% adjusted EPS growth on 2% organic growth pre.
Speaker Change: Free cash flow was $420 million and we returned about $1 5 billion to shareholders in the quarter through dividends and share repurchases plus paid down $1 2 billion in debt with no additional maturities until 2027.
Speaker Change: Turning to slide four.
Speaker Change: We made great progress on all three drivers of sustained growth.
Speaker Change: <unk> aftermarket and systems.
Speaker Change: In terms of differentiated products channels and brands, we introduced carrier's first air cooled commercial heat pump in Europe, delivering high temperatures increased energy efficiency noise reduction and enhanced operational performance all of which address the increased demand for district heating and cooling in Europe.
Speaker Change: Also as we displayed at the recent ice each show in Frankfurt, we are gaining traction selling our carrier branded arity are residential heat pumps in Europe, leveraging <unk> channel.
Speaker Change: Aftermarket strength continues we drove tremendous progress in the attachment rates on our commercial Chillers now surpassing 60% for the first time and we now have over 50000 connected chillers up about 5000 versus the prior quarter.
Speaker Change: Aftermarket FERC global commercial HVAC was up about 10% supported by modern upgrades, which grew about 20%.
Speaker Change: We also introduced a smart device application for linked suite, providing increased real time visibility enhanced customer operational efficiency and reduce costs, while maintaining cold chain integrity.
Speaker Change: In systems, we introduced <unk> pro fees to accelerate and expand our <unk> sales in Europe.
Speaker Change: Selling heat pumps versus boilers as the mix of sales benefit of about four to one.
Speaker Change: Selling complete systems versus boilers is the mix up benefit of closer to 8% to one with more value to the homeowner. So we see this as a significant win win opportunity for sustained growth and customer stickiness.
Speaker Change: Perhaps in the United States, we announced an exciting new partnership with Google to enhance grid resilience and support smarter energy management by.
By integrating carrier Hems technology with Google's cloud AI and analytics, we will help increase the efficiency of the existing energy infrastructure reduce grid congestion.
Speaker Change: Unlike greater energy energy utilization and reduce energy cost to the homeowner.
Speaker Change: Turning to slide five for an update on our residential and light commercial business in Europe.
Speaker Change: Organic orders were up mid teens, driven by strength in heat pumps offset by a decline in boilers, Germany heat pump subsidy applications in Q1 were up significantly the highest Q1, we have seen in the past five years.
Speaker Change: Our our LC Europe book to Bill was one three and our backlog was up 60% sequentially Org.
Organic sales were down about 10% as we expected and we project the RLC Europe business to return to modest growth in <unk>.
Speaker Change: Revenue synergies remain on track for about $100 million this year and about $200 million next year.
Speaker Change: Cost synergies also continue to be strong and we are on track to achieve more than $200 million by the end of next year.
Speaker Change: A few comments on the recent election in Germany.
We were pleased to see that the new coalition government is committed to the European Union's 2030 climate goals, which include a 55% reduction in carbon emissions, which will contribute to our continued shift to electric heating.
Speaker Change: Also encouraging is the coalition's continued support for heat pumps subsidies and its 500 billion euro infrastructure investments, including about $100 billion euros for additional green investments.
Speaker Change: Accordingly, the new government is also committed to bringing down electricity pricing by at least five <unk> per kilowatt, which is expected to bring the ratio of electricity to gas prices below three.
Speaker Change: Further improving the ratio will be etfs to wear across Europe. In 2027, we expect fossil fuel prices to increase.
Speaker Change: All in we're.
Speaker Change: We're pleased with improving heat pump demand and traction on our key growth initiatives.
Speaker Change: A word on our guidance and the macro environment on slide six.
Let me first say that we of course support free and fair trade also carriers proud to be the largest U S. Domiciled player in our industry and we've grown our domestic head count by about 20% over the past five years, and we continue to invest in our U S workforce and factories.
Speaker Change: With respect to tariffs.
Speaker Change: Virtually all of our imports from Mexico or U S MCA compliant.
Speaker Change: For the tariffs that are in effect today, China is about 80% of our exposure.
Speaker Change: As reflected in our guidance, we are fully mitigating our tariff exposure through supply chain and productivity actions with a balance of about 300 million via price, which represents a little over 1% of additional pricing.
Speaker Change: In addition, given the fluidity of the current market environment, we are taking additional cost containment measures.
Speaker Change: Our strong start to the year and current FX rates, we are increasing our full year adjusted EPS guide to $3 to $3 10.
Speaker Change: Which is up about 20% year over year.
Speaker Change: As always our team is committed to taking the actions needed to deliver on our commitments to our customers and investors.
Speaker Change: You saw this wouldn't be address COVID-19 and supply chain disruptions and we are confident that youll see us do the same here.
Speaker Change: Important importantly, while we remain clear eyed and prudent given the current macroeconomic uncertainty we will remain laser focused on our customers and continue to invest in differentiation and solutions to drive sustained outsized growth for years to come with that I will turn it over to Patrick Thank.
Patrick: Thank you, Dave and good morning, everyone. Please turn to slide seven.
Patrick Thank: As Dave mentioned, we had a strong start to the year with earnings ahead of our expectations in the guide we provided in February.
Patrick Thank: Reported sales were $5 2 billion with 2% organic sales growth, including about two points of price.
Patrick Thank: The impact of mix up and volume was net neutral.
Patrick Thank: We had an unfavorable 5% net impact from acquisitions and divestitures and a point of headwind from foreign currency.
Patrick Thank: Organic sales were largely in line with expectations with stronger than expected performance in climate solutions Americas, partially offset by weaker performance in climate solutions climate solutions Asia Middle East and Africa.
Patrick Thank: Europe and transportation came in largely as expected.
Patrick Thank: Q1, adjusted operating profit increased 10% compared to last year, driven by strong productivity and price.
The results adjusted operating margin expanded by 210 basis points compared to last year.
Patrick Thank: The absence of commercial refrigeration was about a 70 basis point basis point tailwind to margin.
Patrick Thank: Adjusted EPS of <unk> 65.
Patrick Thank: It was up 27% year over year and better than expected due to strong productivity performance.
Patrick Thank: Compared to last year adjusted EPS growth was driven by improved adjusted operating profit.
Patrick Thank: Lower net interest expense from deleveraging and lower share count.
Patrick Thank: We have included a year over year adjusted EPS bridge in the appendix on slide 19.
Patrick Thank: Free cash flow of $420 million in the quarter was also stronger than expected.
Patrick Thank: Given by higher net income.
Patrick Thank: Lower than expected seasonal working capital build and lower capital expenditures.
Patrick Thank: During the quarter, we repurchased $1 $3 billion worth of shares and in April we repurchased an additional $320 million worth of shares we continue to target 3 billion of share repurchases in 2025.
Patrick Thank: Moving on to the segments starting on slide eight.
Patrick Thank: These CSA segment had a very strong quarter with organic sales growth of 9%.
Patrick Thank: A bit more than half of the sales growth came from volume and mix up.
Patrick Thank: The balance from price.
Patrick Thank: Commercial ex no rescue and residential strength continued with organic sales in both businesses up around 20%.
Patrick Thank: Within residential.
Patrick Thank: Regulatory mix up was the high single digit organic growth benefit with the balance split between volume and price.
Patrick Thank: About 75% of our resi volume was $4 54, B and we are realizing the expected 10% mix up.
Patrick Thank: Light commercial came in lower than expected down around 35% with a tough compare versus prior year, which was up about 20%.
Patrick Thank: Adjusted operating margins expanded 420 basis points, driven by strong organic growth and productivity.
Patrick Thank: Overall, CSA Hasnt outstanding quarter.
Moving to CSD.
Patrick Thank: On slide nine.
Patrick Thank: About 75% of this segment sales represent residential like commercial or RLC of which about 85% is represented by piece in climate solutions and 15% legacy carrier.
Patrick Thank: Commercial represented about 25% of the segment sales.
Patrick Thank: Organic sales in CSE were down 7% with mid single digit growth in commercial offset by about a 10% decline in RLC largely in line with expectations.
Patrick Thank: Adjusted operating margin declined 390 basis points, driven by lower volume mix and investments, partially offset by favorable cost synergies.
Patrick Thank: At 9%.
Patrick Thank: We are confident that we can we can and will drive significant margin improvement in this segment.
Patrick Thank: We expect volumes to improve.
Patrick Thank: Our addressing underperformance of carriers legacy <unk> business.
Patrick Thank: Commercial margins are on an improving trend and there is significant additional opportunity to streamline and bright synergies within the region.
Patrick Thank: More on that at our upcoming Investor day in a few weeks.
Patrick Thank: Moving to the <unk> segment on slide 10.
Patrick Thank: Organic sales were down 6% driven by continued weakness in residential China and parts of southeast Asia, partially offset by growth in Japan and India.
Patrick Thank: Within China, our residential light commercial business was down around 20% and commercial was up low single digits.
Patrick Thank: Both businesses faced challenging compares versus the prior year, which were both up around 10%.
Patrick Thank: Despite the organic sales decline adjusted operating margin for this segment expanded 240 basis points as a result of productivity and the absence of a prior year unfavorable currency impact.
Patrick Thank: Moving to CSD on slide 11.
Patrick Thank: Organic sales were up 2% driven by container up 20%, partially offset by global truck and trailer, which was down low single digits with over 30% growth in Asia low single digit declines in North America and high single digit decline in Europe.
Patrick Thank: Adjusted operating margin expanded 210 basis points compared to the prior year, mainly due to the commercial refrigeration exit.
Turning to slide 12.
Total company organic orders momentum continued.
Patrick Thank: Up high single digits.
Patrick Thank: As you can see on the slide.
Patrick Thank: We had high single digit or double digit orders growth in all segments, but see us Amy.
Patrick Thank: Within A&D.
Patrick Thank: China orders were down high single digits with a high teens decline in IFC and up mid single digits and commercial where we continue to build backlog.
Patrick Thank: Within transportation within transportation orders were up double digits, driven by global truck and trailer, where North America orders were very strong compared to last year.
Patrick Thank: Overall, we ended Q1 with a robust longer cycle backlog in commercial and continued broad orders momentum in over 85% of our business.
Patrick Thank: Moving on to slide 13.
Patrick Thank: And shifting to full year organic sales guidance.
Patrick Thank: We continue to expect expect mid single digit organic sales growth.
Patrick Thank: Given current FX rates reported sales are now expected to be a bit above 23 billion compared to 22, 5% to 23 billion into February got.
Patrick Thank: Also compared to the February February guidance, we now expect slightly higher organic sales in CSA, driven by tariff related pricing to be offset by lower volume mainly in light commercial.
Patrick Thank: No other material changes in our organic growth outlook.
Patrick Thank: Moving to profit and cash guide on slide 14.
Patrick Thank: At the top of the slide you can see our margin expectations for each segment.
Total company adjusted operating margin expansion remains unchanged at about 100 basis points versus the prior year.
Patrick Thank: I will cover adjusted EPS on the next slide but before I do.
Patrick Thank: We are maintaining our estimate for free cash flow of between two four and $2 6 billion.
Patrick Thank: Reflecting roughly a 100% conversion.
Patrick Thank: Moving to slide 15.
Patrick Thank: We are increasing our adjusted EPS guidance range by <unk> <unk>.
Patrick Thank: To a new range of $3 to $3 10.
Patrick Thank: Longer productivity and updated currency is partially offset by slightly lower expected volumes.
Patrick Thank: The net impact of tariffs is neutral.
Patrick Thank: Some additional color on Q2.
We expect sales of about $6 billion.
Patrick Thank: 100 basis points of adjusted operating margin expansion and 20% adjusted EPS growth.
Patrick Thank: Additional guide items R&D appendix on slide 18.
Patrick Thank: In summary Q.
Patrick Thank: Q1 was a strong start to the year.
Patrick Thank: 2025, we anticipate solid mid single digit organic sales growth.
Patrick Thank: Strong margin expansion and close to 20% adjusted EPS growth.
Patrick Thank: With that I would like to ask the operator to open the line for Q&A.
Patrick Thank: Thank you to ask a question. Please press star one on your telephone and wait for your name to be announced and to withdraw. Your question. Please press star one again.
Speaker Change: And our first question comes from Nigel Coe with Wolfe Research Your line, let's say 10.
Nigel Coe: Thanks, Good morning.
Speaker Change: So take your guidance off the press.
Patrick Thank: Just wanted to confirm Patrick so pointing towards 87 <unk>.
Speaker Change: EPS base case in about 5% core growth.
So Q2, you may not Nigel for Q2, yes, because you are already five yes, yes mid single digits organic growth above sales.
Speaker Change: <unk> 6 billion.
Speaker Change: I mentioned 100 basis points of margin expansion and roughly you are close to 20%.
Speaker Change: Yes, yes, yes growth.
Speaker Change: That's great and then just given all the moving pieces across the portfolio, how does that mythical but just look across the <unk>.
Speaker Change: The new segments.
Speaker Change: For Q2 or two yes.
Speaker Change: But let's say both keeps it let's do two plus one yes, Q2 and full year alright. Thanks, I'll start with Q2, we expect organic growth to pick up in the Americas mid teens.
Speaker Change: In Europe.
Speaker Change: Europe segment, we expect Q2 to be up.
Dave: As Dave mentioned.
Speaker Change: Low to mid single digits in Asia, we expect another quarter of low single digits organic sales decline and same for transportation.
Speaker Change: The desk for the overall company to mid single digits, maybe a little bit better than that for the full year, our organic guide for the overall company remains mid single digits.
Speaker Change: For the Americas, we continue.
Speaker Change: To expect high single digits.
Speaker Change: Europe low single digits same for Asia, and Middle East and then we expect organic growth to pick up in transportation in the back half of the year and we expect transportation to be up mid single digits organic growth for the full year.
Speaker Change: That's that's great and then just a quick follow on on the.
Speaker Change: On the tariffs I think $3 million is the number that will be offset by by price any any more color in terms of what the gross impact is and how much has been offset by productivity and.
Speaker Change: On other actions.
Nigel Coe: I would say Nigel.
Nigel Coe: We don't really think of it that way because we've effectively offset whatever we saw upfront with our suppliers and with the productivity actions. So as we kind of sit here today.
Nigel Coe: We view the exposure as the $300 million that we need to go offset with price and frankly, we've already <unk>.
Nigel Coe: Implemented those price increases in our channel.
Nigel Coe: Okay. Thanks, guys.
Nigel Coe: Great. Thank you.
And the next question comes from Julian Mitchell with Barclays. Your line is open.
Julian Mitchell: Hi, good morning.
Nigel Coe: Maybe.
Nigel Coe: Just wondered if you could drill a little bit more into the.
Nigel Coe: The Americas.
Nigel Coe: The segment.
Nigel Coe: Sort of flesh out, perhaps kind of what you're seeing in the resi piece there.
Nigel Coe: In light commercial and that's that.
Nigel Coe: The two places where I suppose the fully a guidance has changed in may versus February so help us understand the drivers there and how you think about those two pieces playing out.
Nigel Coe: Balance of this year.
Nigel Coe: Yes, Julian firsthand on the resi side, we did increase from high single digits for the full year at the high single digits, perhaps low double digits. Some of the pricing on the tariff side, we will see on the resi side.
Nigel Coe: Specifically.
Nigel Coe: But <unk> was a bit of a stronger start to the year than we anticipated it was up around 20% the regulatory mix played out well it was about 75%.
Nigel Coe: Of the of the mix between $4 54, B and 410 was the $4 54 b.
Nigel Coe: And we realized a little over 10% on that and that was about.
Nigel Coe: Of course, 80% of the total volume for Etsy.
Nigel Coe: We got mid single digit price mid single digit volume and <unk> are on track probably in that 15% to 20% range.
Nigel Coe: And I think we look at the full year.
Nigel Coe: And we have much tougher comps as we get into the second half in particular as we look at the fourth quarter. Because remember we did have maybe 75 or so million of pre buy in the fourth quarter of last year. So we feel good about resi certainly in the first half and we'll keep our eye on the second half and I think we've derisked that with how we have.
Nigel Coe: Thought about high single digit to low double digits for the full year.
Nigel Coe: Commercial was worse than we thought.
Nigel Coe: And that's what's driven us to increase to decrease our guide for the full year to down.
Nigel Coe: Low double digits.
Nigel Coe: We mentioned that first quarter was much lower than we thought and it was really a combination of a couple of things some of the small and medium businesses were soft you can think about things like nail salons or a local restaurant or a barber shops. So that was a little bit softer than we thought and there were some delayed spending on K through 12, some of that bond funding was a bit.
Nigel Coe: Pause. So Q1 was softer I think we've we're looking at Q2 being down close to 20% and then you'll see the second half of the year slightly flat to slightly up a bit so that puts you at down 10% for the full year, but.
Julian Mitchell: No Julien.
Speaker Change: Commercial business is about one.
Speaker Change: 1 billion and a half of sales. So it's just about 5% of the company a little over 5%. So it could be down 10% and it impacts carriers topline by just above 5%. So we will keep an eye on it but it's something that the team is on top of and I think we've derisked in our full year plan.
Speaker Change: That's very helpful. Thank you and then.
Speaker Change: Just maybe secondly, wanting to understand.
Speaker Change: On the <unk> Americas business booking.
Speaker Change: Margin front, so very strong margins up year on year in Q1.
Speaker Change: Over 400 points to fully is guided up about 50 bps and if we just look at absolute margin there isn't much difference between what you saw in Q1, and what <unk> guided for the full year, even though perhaps one might think but the seasonality should be moving higher.
Speaker Change: Particularly second and third quarter versus <unk>.
Speaker Change: Maybe sort of flesh out a bit how you see those margins developing over the balance of the year. Please in Americas.
Julian Mitchell: Sounds good Julien.
Julien: The way you can think about this is we do expect in Q2 the margins in the Americas to pick up by a couple of points. So it was about 22 in Q1, probably closer to 25 in Q2.
Julien: Somewhat similar in Q3, but then lower in Q4 to get to to about the $22 five and maybe some additional color on that the tariffs represent a headwind to the Americas margin.
Julien: Given that the price cost.
Julien: Neutrality, there and Thats.
Julien: Headwinds to margin of about 50 to 60 bps for the entire year and so in that range for Q2 Q3 Q4.
Julien: And so that Youll see that play out in that segment and then as Dave mentioned resin volumes in the back half of the year.
Dave: Will be lower and of course that has a margin impact as well so 22% north of 22% margin in Q1 expected to step up close to 25% in Q2 similar to Q3, and then it stepped down to get to 'twenty, two and a half of the year.
Julien: That's great Patrick Thank you.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Andy Kaplowitz with Citigroup. Your line is open.
Andy Kaplowitz: Hey, good morning, everyone.
Speaker Change: Morning morning, Andy Dave can you update us on your outlook for at least one at this point, obviously orders and backlogs are up and you said RLC Europe will return to organic growth in Q2. So do you still see flat for visa and for the year. I think you talked about 150 basis points of margin improvement and then stepping back on overall <unk>.
Speaker Change: See you talked about your work to get that margin up but maybe you can elaborate on the issues in the segment and what youre doing to address them.
Speaker Change: Yes, when you look at our overall growth algorithm for <unk>, we still feel good about flat for the full year, we think that total.
Speaker Change: Unit deliveries in Germany, maybe a little bit lower than we thought I think we were thinking more like down 7% it may be down, 10% or slightly higher but we are seeing a better mix up in Germany, We think key pumps will be up more like 30%.
Speaker Change: Versus our previous estimate of up 15%. So the benefit of the mix offsets a little bit of the volume, perhaps being a little bit lower than we thought and a lot of that lower volume is.
Speaker Change: On the boiler side as we see very very strong demand.
Speaker Change: In Germany in particular, but throughout Europe with that continued move to electrification I mentioned in my script that we were pleased.
Speaker Change: With the with the new government coalition that is doubling down on the shift to electrification doubling down on reducing electricity prices. They supported subsidies of course, we'll have to see.
Speaker Change: The clarification on the new heating law, but the rest of the algorithm stays intact was still continuing to see better price. We will continue to see aftermarket up double digits, which gives us.
Speaker Change: Another point or two in all of our initiatives that drive 4% to 5% growth whether the cost synergies the share gains the introduced introduction of systems Profi.
Speaker Change: We feel good.
Speaker Change: That all of those remain very very much on track. So we feel good about flattish in the year. We had said that the first quarter would be down 10% to 15. It was closer to 10 and the team really came through in the first quarter and we're confident that that momentum will continue we will see second quarter up up a bit.
And then the margin on the segment data.
Speaker Change: Or the Europe margins across the correct.
Speaker Change: You mean that the growth opportunity going forward or what do you think the margin improvement in that segment, Patrick we think that <unk> seen if I talk specifically about wiesemann vis men will be double digits it will be clear.
Speaker Change: To low teens this year last year, they ended up at 10%.
Speaker Change: Got it and then Dave can you give more color as to what's going on with your commercial HVAC business in the Americas given the capacity increase that you have this year I know you said you'd get datacenter to double that I assume thats still on track and then 20% growth in commercial HVAC as good I assume thats pretty sustainable moving forward given the capacity that you've added.
Speaker Change: Yes, we feel.
Speaker Change: Very good about commercial HVAC overall, you know that this will be our fifth year in a row of double digit.
Speaker Change: Growth Americas was very strong in the first quarter was up in the high teens. If you think about the global commercial HVAC business overall call it up double digits again this year.
Speaker Change: We're going to see $500 million of growth from data centers. We said that we were $500 million last year going to $1 billion and we remain very much on track with that we had a very strong first quarter for data centers I think it was something like $250 million of deliveries for data centers in the first quarter alone. So we feel good about where we are for the $1 billion of full data.
Speaker Change: Centers for this year and then for the rest of the non data center business for commercial HVAC will be up in the high single digit range. This year, so I think that.
Speaker Change: The increase in capacity, particularly in North America, where we're increasing our capacity. So much that has really freed up the sales team to go aggressively after some of the non data center work, where data centers was probably taking up more of the capacity over the past 12 months.
Speaker Change: Then it will going forward. So we see really good progress on some of the Mega projects healthcare remains strong pharma has been good electronic fab some of the higher Ed are all positive for US obviously things like commercial office buildings continues to be weak, but overall commercial HVAC is very very positive.
Speaker Change: I appreciate all the color.
Andy: Thanks, Andy.
Speaker Change: And the next question comes from staff to solve with J P. Morgan Your line is open.
Speaker Change: Hey, Steve.
Speaker Change: We'll go with that.
Speaker Change: Yes.
Speaker Change: Europe Little Euro in there.
Speaker Change: Okay.
Speaker Change: Just wanted to make sure that we're clear on the base of there's been a lot of restatements here, but like what what is the actual base for earnings for <unk> of 24 again can you just remind us what that is.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Tony.
Speaker Change: Steve.
Speaker Change: Change that will be from the prior year, Yes. There is no change I think it's low seventeens.
Speaker Change: The number of tier ones are fixed 70 373, Okay, just wanted to make sure because that like.
Speaker Change: Bloomberg still show 75, and you guys have restated a bit so just wanted to make sure we have the base.
Speaker Change: Okay.
Speaker Change: In the schedules of what we just disclosed their historical financials as well okay got it.
Speaker Change: Sorry, sorry for wasting time on the call here.
Speaker Change: Just on the.
Speaker Change: On the resi front and any any real hiccups on the.
Speaker Change: 454 B.
Speaker Change: Actual channel and like the installation.
Of the kind of dramatic price increases that we're seeing from the suppliers and I don't know there is there is limited supply of containers and things like that going on any issues there.
Speaker Change: Steve We're I mean, the short answer is we're okay I think that we have.
Speaker Change: Most of our 450 <unk> is coming from a specific supplier they.
Speaker Change: Import some of the ingredients for $4 54, B from China, and they have talked to us about passing that along and of course the teams in discussions.
Speaker Change: About that right now, but if we if we do have to get into a discussion. We don't think that will be immaterial overall I think the shortage that everyone's talking about as you said was the canisters that was affecting the overall channel and we see that resolving itself here in the second quarter.
Speaker Change: And then just one follow up on Europe.
Speaker Change: That margin was a little bit lower than than I was expecting.
Speaker Change: What do you think is a good kind of normalized rate assuming these men grows in line with your expectations I mean that seems to be pretty depressed.
Speaker Change: Low double digit rate, maybe what would be kind of a longer term thought around that margin potential.
Speaker Change: Our intention is to get that to mid teens in the next couple of years.
Speaker Change: And so there is a lot of focus.
Speaker Change: There and next week the benefit of it now being it so.
Speaker Change: Its own segment.
Speaker Change: And maybe provide a little bit of extra color, there, but really three different businesses. Within this segment that are now under one umbrella one as vcs that as you know we acquired last year that is the commercial HVAC.
Business Jets, a little over 1 billion, where we've seen continued margin improvement, but still not where exactly where we'd like it to be and then the third part is a is the carriers legacy residential like commercial business, which is about $700 million to $100 million in sales and that business has actually been operating with.
Speaker Change: So like low single digit operating margins and so there's a lot of work being done now and we expect as I said to get that to up to mid teens operating margin in the next couple of years.
Speaker Change: Okay, great. Thanks, a lot.
Speaker Change: Thanks, Steve.
Speaker Change: And the next question comes from Jeffrey Sprague with vertical research. Your line is open.
Jeffrey Sprague: Great. Thank you and good morning, everyone.
Speaker Change: Alright.
Speaker Change: Hi, Good morning, just back to kind of the order and subsidy action.
Speaker Change: Investment in Germany.
What do you attribute the.
Speaker Change: The rush for subsidy apps application was there sort of a view that.
Speaker Change: Maybe the new government wouldn't be supportive and there was a rush to get subsidies.
Speaker Change: Just kind of wondering what the real signal from the market is in that stat is shared with us today.
Speaker Change: It could it could be some of that.
Jeff, but I will tell you that the numbers were were very overall very very encouraging it part of it could have been.
Speaker Change: Uncertainty about how the election would play out part of it.
Speaker Change: May have just been pent up demand I mean, you think about the first quarter of last year subsidy applications were something around 9000.
Speaker Change: The first quarter of this year was something like 65000. So it's just night and day, it's by far the highest first quarter a subsidy applications ever we'll have to see how <unk> plays out but given that the new.
Coalition government has said that it will continue with the subsidy rates in the same levels. They were in the 30% to 70% range gives us a lot of confidence that.
Speaker Change: That we see them continuing.
Speaker Change: And then just back to kind of the idea of gross tariffs right you kind of told US what's left on the $300 million.
Speaker Change: Obviously, you've been very very cost focus from day, one since spin I just wonder if you could give us some examples of maybe the incremental things you did.
Speaker Change: To offset whatever that residual was how much of it was inside your four walls versus.
Speaker Change: Sourcing and other changes you might have made.
Speaker Change: Yes, I would say that a lot of it was with <unk>.
Speaker Change: Working with our supply chain, but what we have been very purposeful about over the past five years is this concept of first localization and two is dual sourcing. So this idea of dual sourcing has given us a little bit of flexibility with our supply base not only in some of the negotiations and discussions we need to have.
Speaker Change: But also as we try to navigate where the work may come from as tariffs play themselves out. So a lot of it's on sourcing the team's done a great job on productivity, we continue to optimize our footprint, we've been doing that for a while or the.
Speaker Change: The amount of manufacturing we did for export out of China has come down significantly over these past few years, we still have a strong presence in China for China, and we have a China plus one strategy, but we've been very purposeful about our overall footprint strategy, we've been pushing productivity within our factories and the last is.
Speaker Change: Just basically.
Speaker Change: Tightening our belts.
Speaker Change: On overall G&A and cost.
Speaker Change: Got it thank you.
Speaker Change: Thanks, Joe.
Speaker Change: Okay.
Speaker Change: And the next question comes from Joe Ritchie with Goldman Sachs. Your line is open.
Speaker Change: Thank you good morning, guys.
Speaker Change: Hey, Joe.
Speaker Change: Can we can we talk about the 454 be transition just a little further.
Speaker Change: Clearly good strength this quarter on the Americas revenue business I'm curious, Dave do you have any kind of line of sight, how much of the strength. We saw in one queue might've been just slight this transition and your.
Speaker Change: Your distributors stocking in the $4 54 B product.
Speaker Change: Just maybe any additional color you guys just have.
Speaker Change: Inventory levels at the distributor level.
Speaker Change: Yes.
Speaker Change: Yes, I think.
Speaker Change: I will tell you that the movements generally been okay. So we continue to watch movement inventory levels are a bit elevated versus where they were at the same time last year. So that's why I think that look very strong first quarter up around 20%. We said the second quarter is going to be up 15% to 20%.
Speaker Change: You said the full year will be up high single digits or double digits and it's really for two reasons. One is maybe three one is that we are going to watch those inventory levels and we're going to try to as always be purposeful to work with our channel partners to have those inventory levels.
Speaker Change: Come back to a more balanced level to us.
Speaker Change: As you know as we get into the second half we have.
Speaker Change: Much tougher comps last last year, the third quarter was up a little over 10% in the fourth quarter was up.
Speaker Change: Around 30%. So we will just inherently have tougher comps in the second half and then we'll watch the overall economy. So we've tried to de risk the full year forecast looking at those factors for the second half, but the really good news is that we've gotten the price that we expected for the $4 54, B, we've gained 100 bps.
Speaker Change: Of share over the last year and the team is performing very very well.
Speaker Change: Okay, Great. That's helpful. And then I am sure we will talk about this more at the Investor day, but you want to maybe expand a little bit on that data center business. I know you guys are rolling out quantum leap and it looks like youre getting closer to a liquid cooling product by year end. So.
Speaker Change: Any color you can give us on how that business is how youre seeing that business over the next 12 to 24 months.
Speaker Change: Yes. This is something that we were very excited to launch quantum leap and we've been in bid proposals, especially with a couple of customers in Europe.
Speaker Change: Not only for our Cpus are cool and distribution units, but also the complete.
Speaker Change: Integrated quantum leap, which has traditional cooling and liquid cooling and ideally has rpms and at our <unk> business with our <unk> business as well, we think that's ultimately going to provide the most value to our customers.
Speaker Change: I'll tell you we're still in the first inning on that proposal, but we are getting a lot more interest and that's how a lot of these discussions start you proposed something you launch it they start to come into your factories and look at the testing with your engineers, we did do we looked at acquisitions.
Speaker Change: The liquid cooling side, but our team.
Speaker Change: In a very short period of time developed our own organic CDU and it was kind of a point designed for the sweet spot of the market.
Speaker Change: So we're very excited about it I would tell you that we haven't gotten a lot of sales yet from it but we're optimistic given the nature of the value proposition and some of the ongoing discussions that that could that could be a bit of a game changer.
Speaker Change: Okay, great to hear thank you.
Joe Ritchie: Thanks, Thanks, Joe.
Speaker Change: And the next question comes from Deane Dray with RBC. Your line is open.
Deane Dray: Good morning, everyone.
Speaker Change: Thank you.
Speaker Change: It was hoping Patrick can take us through the free cash flow dynamics in the quarter was a bit light versus seasonal you just mentioned that a bit higher inventory and you reaffirmed free cash flow for the year, but.
Speaker Change: What was unique about this quarter.
Deane Dray: Actually Dean actually.
Deane Dray: I think it's actually seasonally a stronger than typical Q1 Q1 tends to be somewhat light. What I mentioned was that in this Q1 net working capital was less of a use of cash than it typically is.
Deane Dray: <unk>.
Deane Dray: Particularly on the payable side, so actually we're quite pleased to start out the year with over $400 million in free cash flow, which as I mentioned I think the last.
Deane Dray: Three four years were a little lighter than that on inventory again nothing unusual in Q1. There is the seasonal buildup that starts in Q1, and then we expect to burn some of it will quite a balance of the year and generally there remains opportunity in our overall inventory levels.
Speaker Change: Great. Thanks for that clarification, and then can you just expand on services.
Speaker Change: Did well this quarter just the plan for the year any new initiatives there.
Speaker Change: Yes. This is this is just become such a part of our DNA that we have this mantra, we use internally, which I've been using externally, which is this double digit forever.
Speaker Change: So one of the big changes that we saw was we launched initiative in the United States, where we really tried to harmonize every single branch around not only the specific metrics that we're driving but institutionalize it in the apps and the tools that all of our service technicians and sales folks use and now were cascade.
Speaker Change: Seeing that globally. So just the amount of rigor we have around productivity unique offerings and of course, our same old playbook, which is blue edge multi you have based offerings mid tier high end offerings driving attachment rates, we had the best growth in attachment rates that in a quarter that we've ever seen we went from like 48.
Percent to 60% in the quarter using the rigor around the tools. The truth is we wanted to get that to a 100% that every time you sell a chiller. It comes with a long term agreement, but I will tell you the progress to 60% in a short period of time has been encouraging and I think one of the things you'll be hearing from us a lot more on as mods and.
Speaker Change: You know a lot of the as new construction and some of the major cities in the world have become a little bit slower.
Speaker Change: We see a huge opportunity in certain places in the world around mods and upgrades. So we view our country like Saudi to be a lot more new construction, but it may be that Dubai is more mods and upgrades. So that's been very encouraging and it's across all of our businesses. So I'm confident this year will be double digits again.
Great. Thank you.
Speaker Change: Thank you.
Speaker Change: And the next question will come from Joseph <unk> with Wells Fargo. Your line this has been.
Joseph <unk>: Hi, good morning, Thanks for taking my questions.
Joseph <unk>: Can you can you unpack that tariffs a little bit just in terms of sizing the cost headwind to this year and then that breakdown of what youre doing on the cost and price side, and then any specifics on the China component of that cost headwind as well as any other color you can give.
Joseph <unk>: And the last part of it is what does this mean for resi pricing. If we think about back half of the year 454 be normal pricing and then now. The addition, what kind of pricing your price mix Youre looking at on a resi in the back half.
Joe Ritchie: Look Joe the team's done a great job.
Joe Ritchie: I think addressing tariffs hit on head on I would tell you on the on the U S. MCA for example.
Joe Ritchie: We're now just under 100% U S. MCA compliant and that's a group of folks across our supply chain team across our customs and legal team folks working.
Joe Ritchie: Very well together to make sure that we of course are U S. MCA compliant virtually across the board when we look at it we looked at the tariffs as they exist today and we've frankly have as we look at the cost actions, we've taken whether with our supply chain or in our own productivity your own factories or other actions.
Joe Ritchie: We've effectively mitigated all but 300 of it in that 300, we said we would mitigate through price that is going to be a lot of price in the Americas and the price will be a lot in in <unk>. So we feel that the team has been very effective at working very transparently and collaboratively.
With our channel obviously, no one likes.
Joe Ritchie: Price increases are channel.
Joe Ritchie: But has been very clear eyed and understanding of the fact that we've done our best to mitigate as much as we can through cost and then the rest we've done through price.
Joe Ritchie: Got it that's helpful and then.
Joe Ritchie: On the commercial.
Joe Ritchie: Commercial HVAC in Americas, the non data center business up high single digit.
Joe Ritchie: Actually a little bit more surprising I would say than the data center growth can you unpack that a little bit from renovation new construction price I'd say some of the non res macro indicators aren't exactly encouraging but that growth rate is pretty good and so what what youre doing versus what you see in the market.
Joe Ritchie: Yes.
Joe Ritchie: Part of it frankly is freeing up capacity I would say that now that we were going to increase our capacity for water cooled chillers by Forex over a period of a few years here in the Americas, because we effectively are expanding our facility.
Joe Ritchie: In Charlotte North Carolina, and then we're adding we've repurposed another facility for both water cooled and air cooled and that's freed up.
Joe Ritchie: Our internal sales force and our channel partners to go more aggressively after some of the opportunities. The Mega projects had been very strong for us so that dedicated vertical team that we have focused on data centers also focuses on the mega projects with some of the re shoring activity that we've been seeing here in the United States Health care pharma or both.
Joe Ritchie: Drawing as I mentioned and we've been getting very good share on some of the electronic fab that we've seen going up. So you are right that Abi has been weak commercial real estate has continued to be weak year. After year recently over these last few years, but we've been offsetting some of the areas that are very visibly weak with areas that are sort of quietly strong.
Joe Ritchie: Got it thanks a lot.
Joe Ritchie: Thank you.
Speaker Change: And the next question comes from Chris Snyder with Morgan Stanley. Your line is <unk> 10.
Speaker Change: Thank you for the question I wanted to ask on America's Ramsey.
Speaker Change: The $75 million or so that you guys kind of called out in Q4 as pre buy did that come out in Q1 and was just overwhelmed by strengths in mixed tailwind elsewhere.
Speaker Change: Or is that expected to come out in Q2, even with this 15%, 20% Americas guide or do you just maybe don't even think it comes out anymore. Thank you.
Speaker Change: It's honestly not a very perfect science, because what you're really trying to figure out with pre buy were where people.
Speaker Change: Buying for demand that otherwise would've been in 'twenty five but they bought it in 24. So what we really have to do is look at movement and look at the underlying demand so the movement.
Speaker Change: In the first quarter was about what we thought so the movement from our distributors to the dealers.
Speaker Change: Has been fine it's been up in April the movement has been up.
Speaker Change: In the mid single digit range. The thing that we really have to watch and that we continue to watch is the base inventory levels on some of the split side they are higher than where they were at the same time last year. So maybe theres. Some of that that's kind of made its way into the inventory level. So we will want to want to be careful with our partner.
Speaker Change: How much debt, we ship in and then making sure that that movement continues because we are we have much better tools now than we used to have to make sure that inventory levels in the channel are about what we thought and we're very purposeful with our channel partners to control that in fact, the team and I will be with our distribution partners.
Speaker Change: This weekend and we will will be deep diving all of this but a very strong start to the year of 15% to 20% is what we expect here in <unk> and I think we will be measured as we get into the second half, but overall another good year for <unk> and that 10% range give or take a point or two.
Alright. Thank you I appreciate that I wanted to follow up on service and clearly the focus there has driven great growth for the service business the double digit.
Speaker Change: Forever mantra holding strong, but I guess my question is is it also helping you win on the equipment side for some of the bigger applied projects like having the stronger service offering just any anything you could talk about the flywheel of actually driving equipment on the back of service. Thank you.
Speaker Change: Yes, 100%, we look at.
Speaker Change: We look at our commercial HVAC business overall, I would say the team has really differentiated ourselves in Europe and in Asia, where I think that that flywheel in our presence not only the upfront, but the spec engineers upfront the sales force our customer intimacy our relationships our.
Speaker Change: Our brand that's made us traditionally number one or two in Asia and in Europe, we've been very.
Speaker Change: <unk> that we've been number three.
Speaker Change: In the Americas, and that's been the opportunity in front of us and the team in the Americas has really been turning around that business. We've been we've said that we're going to add 1000 technicians over the next five years in the United States. We've said that we are adding salespeople our relationship with not only our direct sales force, but to some extent we go through distribution in the United States only.
Speaker Change: Where it makes sense in those distribution partners have good relationship with the mechanical contractors and our ability to provide connected devices to provide a bound and to be able to support the customers throughout the lifecycle is clearly advantageous. It is an entire flywheel, we recognize that we've been investing in the <unk>.
Speaker Change: Resources to build out that flywheel and now I would say, we are winning more than our fair share in the Americas, I think you've seen and you'll continue to see in our numbers.
Speaker Change: Thank you Dave I appreciate that.
Speaker Change: Yes. Thank you.
Speaker Change: And our next question comes from Amit Mehrotra with UBS. Your line is open.
Speaker Change: Thanks, Patrick can you just I just wanted to come back to the new <unk> Americas Guide.
Speaker Change: High single low double I think in your previous.
Speaker Change: Guidance of high single it was all kind of price mix and volume of units were flat to down can you just update that in terms of what youre assuming in them obviously.
Speaker Change: Europe Razee. Unlike commercial orders are just a lot stronger than the organic growth right now and I don't know if thats a comp issue or maybe if thats a fair assumption that we should expect a decent sequential uptick in revenue as we progress through the year.
Patrick Thank: Yes look let me take the first one and Patrick.
Patrick Thank: The second if when we said high single digits, we assume that almost all of that came from mix because we assume that you get with about 10%.
Patrick Thank: Price on the <unk> hundred 54, B, then the 410, a and if you assume that that becomes 70, 80% 80% of the total volume for the year, you Amit you're into that range.
Patrick Thank: Seven 8% from just regulatory mix.
Patrick Thank: What we've seen is probably a little bit better on the price side overall part of that because of that's where tariffs landed and part of it is.
Patrick Thank: Because we've seen better price realization and we'll probably get a little bit more full year volume than we originally anticipated.
Speaker Change: And then Patrick on the on the Europe comment.
Speaker Change: The way you can think about it so Q1 was down about 7% of sales with commercial HVAC up.
Speaker Change: Mid single digits, Rajiv like commercial a little more than 10 about 10.
Speaker Change: We expect growth next week to start in Q2 for the balance of the year and that will continue we think for both commercial HVAC and Rajiv.
Speaker Change: Actually commercial HVAC in Europe, we have a strong pipeline and we think that the growth will accelerate in the mid single digits in Q1 and will end up double digits in the second half of the year and double digits for the year.
Speaker Change: And then.
Speaker Change: With respect to the resi part of our European segment, we think that will be low single digits for the.
Speaker Change: For the balance of the year, starting in Q2, as Dave mentioned modest growth in Q2 and continue for the balance of the year. So overall full year double digit growth in commercial HVAC within the region and <unk> about flat leading to overall segment grew low single digits.
Speaker Change: Got it so just can you just circling back on what you said it looks like.
Speaker Change: Both volume and mix as it is an attribution to the revision of the HVAC, which is top line, which is great.
Speaker Change: One final question, if I could just maybe high level and listen you don't have to comment on and if you don't want to but you have this proxy target out there of $3.60 of earnings.
Speaker Change: Really hard to forecast that far out, but maybe just give us some puts and takes on.
Speaker Change: Your confidence around that number in terms of above the line versus below the line items I know you've got some tax dynamics too would be spin tax losses things like that but just talk about why you put that out there why was that the right number and maybe the confidence around below or above or below or above the line items on that.
Speaker Change: So I won't comment on why the number is out there and so on and I think that was very well described in the proxy, but and we will talk about the framework at the upcoming.
Speaker Change: Upcoming Investor day in mid in mid May.
Speaker Change: But.
Speaker Change: The way, we're thinking about our business and Thats, our current value creation framework.
Speaker Change: We target organic growth of 6% to 8% over the medium term. This year organic growth was mid single digits. You also heard us say that we target over 50 50 basis points of margin expansion each year.
Speaker Change: We've done better than that the last several years and this year again, we will do better than that than 50 bps and so clearly we would expect all else equal to continue on that path, so organic growth at attractive rates.
Speaker Change: Attractive margin expansion.
Speaker Change: As well as so earnings conversion close to 30% that's aligned with that on top of that we will have the benefit of the repo from this year that will carryover next year.
Speaker Change: As you probably know our free cash flow generation is quite strong after paying the dividend that is still well over $1 $5 billion of free cash available for acquisitions or share repurchases and then the last item you mentioned, which relates to tax I think it is known we've disclosed that we have a tax benefit.
Speaker Change: We have.
Speaker Change: On the on the books and of course, we would like to monetize that and working hard to make that happen and to bring down our effective tax rate going forward and I think with those building blocks.
Speaker Change: I think it's not unreasonable to see a path towards $3 60.
Speaker Change: Very clear thank you very much appreciate it.
Speaker Change: Thank you.
Speaker Change: And the next question comes from Stephen Volkmann with Jefferies. Your line is open.
Stephen Volkmann: Hi, Good morning, guys. Thanks for taking the question I'm wondering.
Stephen Volkmann: If we can just look at CST, a little bit the mid single digit growth forecast kind of unchanged, but it feels like some of the industry forecast surround things like truck have deteriorated. So I know your mix is a little different than some others, but maybe just call out a little bit what's driving that mid single digit growth in <unk>.
Stephen Volkmann: Ste.
Stephen Volkmann: Yes, when we look at.
Speaker Change: I think some of that refers specifically to the north American truck trailer business, where.
Speaker Change: He did say that the full year for trailer would be down 15% and I would say when we look at there is two things number one is trailers just a subset of the overall <unk> market.
Speaker Change: Two is we're not really sure we believe the number so I think when we look at it.
Speaker Change: We think that you have this dichotomy, where theres a lot of pent up demand for trailers, because it's a very old fleet.
Speaker Change: But you'll also see this overall issue with people looking at what's happening with tariffs in the economy and I think theyre trying to.
Speaker Change: Be judicious.
Speaker Change: Some of their spend to update some of those fleet. So as that plays itself out we'll have to see how the year plays out, but we expect for the full year in North American truck trailer to be up in.
Speaker Change: In the mid single digit range, we expect European truck trailer to be closer to flattish.
Speaker Change: Probably volumes down a bit and we will see aftermarket growth there, but you have a similar dynamic you have some aging fleets, but there is some.
Speaker Change: Questions around the economy container will be strong we had a very strong first quarter up around 20%, we think it'll be up in the high single digit range and like every part of the business aftermarket will be up to double digits and driving and the team have done a great job expanding our links links offering and really pushing some of the upgrade.
Speaker Change: <unk>, So we think that Ah.
Speaker Change: That the trends the overall transportation.
Speaker Change: <unk> is poised for mid single digit growth this year.
Great. That's helpful. Thanks, and then it looks like margin is also going to be sort of on the upswing here as the year progresses.
Speaker Change: Any sense of how we should kind of model that cadence.
Speaker Change: Actually we expect so Steve Patrick here. So we're about 15% in Q1, we would expect that to pick up by.
Speaker Change: About 200 bps or so in Q2 and stay at about that level for the balance of the year, maybe Q4, a little lighter.
Speaker Change: Perfect. Thank you guys.
Speaker Change: Thank you.
Tommy Moll: And our next question comes from Tommy Moll with Stephens. Your line is open.
Tommy Moll: Good morning, and thank you for taking my questions.
Speaker Change: Hey, Tommy.
Speaker Change: Dave I wanted to start on your Americas light commercial business.
Speaker Change: Noting the comps there can be tricky.
Speaker Change: But I'm just observing that the outlook was reduced pretty significantly from.
Speaker Change: Low to mid singles last time, we spoke and now we're looking at down doubles.
Speaker Change: What were some of the factors that change there in your outlook.
Speaker Change: Okay.
Speaker Change: I think it's a combination of a couple of things.
Speaker Change: I would say the first thing is that.
Speaker Change: The first quarter surprised us to the downside there Tommy we did not we did not anticipate that the first quarter was going to be down as much as it was and then we look at <unk> here.
Speaker Change: And.
Speaker Change: The start to the quarter has not seen an appreciable uptake. So we balance the first quarter. The first half of the year to be down we think the second half will recover a bit.
Speaker Change: But I think that there were some of some of the customers.
Speaker Change: That again are on that small and medium type business I think they really did slow some of their spending here in <unk> and we think that continues into the second quarter and I think K through 12, some of the pausing on some of the bond funding that's coming at the state level and the local level.
Speaker Change: That slowed a bit more than we thought look this is not something that we are in in panic mode. On it's a great business high margins, we're coming off a few years of phenomenal growth, especially 'twenty one through 'twenty. Three I think we took a lot of share we reduced our lead times, probably earlier than some of our peers, which gave us some lift and now.
Speaker Change: They are shipping.
Speaker Change: Out of some of the backlog that they had built which is which is fine.
Speaker Change: We have a good product line, we have some differentiated products, we have a great channel, we got great brands and look the market will loosen itself up as we get into the second half and I think we tried to de risk the full year planned by saying it would be down double digits.
Speaker Change: Thanks for the detail, Dave I wanted to pivot to a question on the Google partnership that you discussed earlier in the call is this participation of demand response program or what additional detail can you give particularly particularly around the monetization opportunity there.
Speaker Change: Thank you.
Speaker Change: Yes, we've been working closely with carrier energy with the utilities and the whole concept.
Speaker Change: Is that we can have an appreciable impact on the grid, especially during peak hours. If you think about the demand that is being added.
Speaker Change: The data centers to the grid.
Speaker Change: You really have the biggest challenge for the utilities is during peak and you think about what most of the demand is during peach during peak, it's your HVAC system, which is now because more than 40% of our sales or our heat pumps.
Speaker Change: Both cooling and heating putting demand on the grid during peak hours.
Speaker Change: What we need is more intelligence as we connect those devices then it would be look at had at <unk>.
Speaker Change: Control of those in an automated fashion, we have an opportunity to partner with Google to use their AI and analytics tools, which are phenomenal and work.
Speaker Change: With them as the company work with there.
Speaker Change: With them as a cloud partner as well and be able to provide more value and you think about the digitization of energy and Digitization of cooling devices. This is all about using traditional might've been appliances to use digital to create analytics to create more value and we see this Google partnership.
Speaker Change: As a tremendous win win opportunity not only for us and Google, but for our utility partners as well in fact, we had a call with Google yesterday and we're in the early phases of this relationship but as you think about the use cases the opportunities is very encouraging.
Speaker Change: Thanks, Dave I'll turn it back.
Dave: Thanks Tommy.
Speaker Change: Okay as well.
Speaker Change: Yes go ahead.
Speaker Change: No go ahead please.
Speaker Change: Okay I got it so we want to thank you all.
Patrick Thank: Joining us today as a quick reminder, before we wrap we will be in New York City May 19th 830 for our Investor Day, we encourage you to join us and listen and our whole focus will be on accelerating growth youre going to be hearing from not only Patrick and myself, but we will have our.
Patrick Thank: <unk> segment leaders, there as well and you'll hear from them with some really exciting initiatives, we have to drive sustained growth over the long term. So thank you all for joining us today and we'll see you on may 19th.
Patrick Thank: This does concludes today's conference call. Thank you for participating you may now disconnect.
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