Carrier Global : Q3 2020 Earnings Presentation

Q3 2020 EARNINGS CONFERENCE CALL

October 29, 2020

Cautionary Statement

This communication contains statements which, to the extent they are not statements of historical or present fact, constitute "forward-looking statements" under the securities laws. From time to time, oral or written forward- looking statements may also be included in other information released to the public. These forward-looking statements are intended to provide management's current expectations or plans for our future operating and financial performance, based on assumptions currently believed to be valid. Forward-looking statements can be identified by the use of words such as "believe," "expect," "expectations," "plans," "strategy," "prospects," "estimate," "project," "target," "anticipate," "will," "should," "see," "guidance," "outlook," "confident," "scenario" and other words of similar meaning in connection with a discussion of future operating or financial performance or the separation from United Technologies (the "Separation"). Forward-looking statements may include, among other things, statements relating to future sales, earnings, cash flow, results of operations, uses of cash, share repurchases, tax rates and other measures of financial performance or potential future plans, strategies or transactions of Carrier, the estimated costs associated with the Separation, Carrier's plans with respect to our indebtedness and other statements that are not historical facts. All forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. For those statements, we claim the protection of the safe harbor for forward-looking statements contained in the U.S. Private Securities Litigation Reform Act of 1995. Such risks, uncertainties and other factors include, without limitation: (1) the effect of economic conditions in the industries and markets in which Carrier and its businesses operate in the U.S. and globally and any changes therein, including financial market conditions, fluctuations in commodity prices, interest rates and foreign currency exchange rates, levels of end market demand in construction, the impact of weather conditions, pandemic health issues (including COVID-19 and its effects, among other things, on production and on global supply, demand, and distribution disruptions as the outbreak continues and results in an increasingly prolonged period of travel, commercial and/or other similar restrictions and limitations), natural disasters and the financial condition of our customers and suppliers; (2) challenges in the development, production, delivery, support, performance and realization of the anticipated benefits of advanced technologies and new products and services; (3) future levels of indebtedness, capital spending and research and development spending; (4) future availability of credit and factors that may

affect such availability, including credit market conditions and Carrier's capital structure and credit ratings; (5) the timing and scope of future repurchases of Carrier's common stock, including market conditions and the level

of other investing activities and uses of cash; (6) delays and disruption in the delivery of materials and services from suppliers; (7) cost reduction efforts and restructuring costs and savings and other consequences thereof;

1. new business and investment opportunities; (9) risks resulting from a less diversified business model and balance of operations across product lines, regions and industries due to the Separation; (10) the outcome of legal proceedings, investigations and other contingencies; (11) the impact of pension plan assumptions on future cash contributions and earnings; (12) the impact of the negotiation of collective bargaining agreements and labor disputes; (13) the effect of changes in political conditions in the U.S. and other countries in which Carrier and its businesses operate, including the effect of changes in U.S. trade policies or the United Kingdom's withdrawal from the European Union, on general market conditions, global trade policies and currency exchange rates in the near term and beyond; (14) the effect of changes in tax, environmental, regulatory (including among other things import/export) and other laws and regulations in the U.S. and other countries in which we and our businesses operate; (15) the ability of Carrier to retain and hire key personnel; (16) the scope, nature, impact or timing of acquisition and divestiture activity, including among other things integration of acquired businesses into existing businesses and realization of synergies and opportunities for growth and innovation and incurrence of related costs; (17) the expected benefits of the Separation; (18) a determination by the IRS and other tax authorities that the Distribution or certain related transactions should be treated as taxable transactions; (19) risks associated with indebtedness, including that incurred as a result of financing transactions undertaken in connection with the Separation, as well as our ability to reduce indebtedness and the timing thereof; (20) the risk that dis-synergy costs, costs of restructuring transactions and other costs incurred in connection with the Separation will exceed Carrier's estimates; and (21) the impact of the Separation on Carrier's business and Carrier's resources, systems, procedures and controls, diversion of management's attention and the impact on relationships with customers, suppliers, employees and other business counterparties.

The above list of factors is not exhaustive or necessarily in order of importance. For additional information on identifying factors that may cause actual results to vary materially from those stated in forward-looking statements, see Carrier's registration statement on Form 10 and the reports of Carrier on Forms, 10-Q and 8-K filed with or furnished to the SEC from time to time. Any forward-looking statement speaks only as of the date on which it is made, and Carrier assumes no obligation to update or revise such statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

1

Q3 2020 Summary

Sales

$5,002M

Up 4% Y/Y

Highlights

NA residential demand remained strong

Overall business improved sequentially

Adjusted Operating	$867M
Profit1	Up 6% Y/Y

$880M

Free Cash Flow1

Up 55% Y/Y

1 See appendix for additional information regarding non-GAAP measures

Increasing Carrier 600 to Carrier 700

Continued strong free cash flow performance

Growth initiatives gaining traction

2

Driving Shareholder Returns

• Tenacious cost reduction
• Talent and inclusion
• Customer-centric
• G&A transformation and simplification
• Innovation leadership
• ESG

The Carrier Way

Performance

Culture

Enterprise			Be the world leader in healthy,
		safe, and sustainable building
Strategy
		and cold chain solutions

Growth

Growth

Focus

Areas

Disciplined Capital

Allocation

• Strengthen and grow core
• Product extensions and geographic coverage
• Grow services and digital

3

Carrier Enterprise Strategy

Healthy, Safe and Sustainable Buildings				Healthy, Safe and Sustainable Cold Chain

VENTILATION

MOISTURE

AIR QUALITY

NOISE

THERMAL

HEALTH

FILTRATION

SAFETY &

SECURITY

4

Order Trends

Orders by Key Business Line	Q2 2020	Q3 2020

(Y/Y %)

HVAC1	(5)%	25%
Residential & Light Commercial	5%	60%
Commercial HVAC1	(15)%	0%
Refrigeration	0%	15%
Transport Refrigeration	15%	30%
Commercial Refrigeration	(15)%	(10)%
Fire & Security	(25)%	(10)%
Fire & Security Products	(20)%	(10)%
Fire & Security Field	(30)%	(5)%
Total Carrier1	(10)%	15%
1Excludes NORESCO

Orders by Geography	Q2 2020	Q3 2020

(Y/Y %)

North America1

0%

30%

EMEA

(25)%

0%

China

(5)%

10%

Asia excluding China

(25)%

(20)%

5

Q3 2020 Financial Summary

	Q3 2019	Q3 2020	Y/Y %
Sales	$4,822	$5,002	4%
Organic sales1			3%
GAAP operating profit	$629	$1,081	72%
Adjusted operating2 profit 1	$818	$867	6%
GAAP EPS		$0.84
Adjusted EPS1		$0.67
Free cash flow1	$568	$880	55%

(Millions except EPS)

Residential HVAC strength continued through Q3

Improved productivity and continued cost control

Strong free cash flow helped by better than expected

earnings, working capital timing and lower capital spending

1 See appendix for additional information regarding non-GAAP measures

6

Q3 2020 Segment Results

								(Millions)
		HVAC		Refrigeration		Fire & Security
	Q3	Y/Y %		Q3	Y/Y %		Q3	Y/Y %
Sales	$2,892	11%	$876	(5)%	$1,324	(6)%
Organic sales1		11%			(6)%			(7)%
GAAP operating profit	$839	108%	$103	(18)%	$200	(2)%
Adjusted operating profit1	$598	14%	$102	(23)%	$204	(7)%

+	+	+
NA residential	Container	Residential fire
Commercial HVAC China	China	China commercial fire
Key drivers
-	-	-
Light commercial	Commercial refrigeration	Chubb
South Asia	Truck / trailer	Oil & gas / hospitality

7

1 See appendix for additional information regarding non-GAAP measures

Cost Reduction Progress

Carrier 700

Investments

Non-recurring cost containment actions

Productivity / absorption

Total

(Millions)

May 8th	July 30th	Updated 2020
Targets	Targets	Targets
~$225	~$250	~$250

~($75)~($100) ~($100)

~$300~$300~$250

~($200) ~($200) ~($150)

~$250~$250~$250

8

Cash Flow and Balance Sheet

YTD Free Cash Flow1		Cash Balance

Strong Q3 cash generation

Up 58%

Proceeds from Beijer sale

	$3.8B
$1.3B		Declared dividend
	$2.7B

$850M

$1.3B

Plan to reduce debt by $1.5B in Q4

YTD 2019

YTD 2020

4/3/2020 6/30/2020 9/30/2020

9

1 See appendix for additional information regarding non-GAAP measures

2020 Outlook

	July 2020 Outlook	Revised
	2020 Outlook
Sales	$15.5B - $17.0B	~$17.3B

Adjusted Operating Profit1	$1.8B - $2.0B	~$2.2B

Free Cash Flow1	At least $1.1B	~$1.5B

10

1 See appendix for additional information regarding non-GAAP measures

Summary

Strong demand and execution in residential HVAC supports improved 2020 outlook

Well-positioned to drive healthy, safe, and sustainable building and cold chain solutions

Increasing Carrier 600 to Carrier 700

Continued strong free cash flow supports Q4 debt paydown

Positioned for medium term mid-single digit sales growth and high-single digit EPS growth

11

APPENDIX

Use and definitions of non-GAAP financial measures

Carrier Global Corporation ("Carrier") reports its financial results in accordance with accounting principles generally accepted in the United States ("GAAP").

We supplement the reporting of our financial information determined under GAAP with certain non-GAAP financial information. The non-GAAP information presented provides investors with additional useful information, but should not be considered in isolation or as substitutes for the related GAAP measures. Moreover, other companies may define non-GAAP measures differently, which limits the usefulness of these measures for comparisons with such other companies. We encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

Organic sales, adjusted operating profit, adjusted net income, adjusted earnings per share ("EPS"), and the adjusted effective tax rate are non-GAAP financial measures. Organic sales represents

consolidated net sales (a GAAP measure), excluding the impact of foreign currency translation, acquisitions and divestitures completed in the preceding twelve months and other significant items of a non-recurring and/or nonoperational nature (hereinafter referred to as "other significant items"). Adjusted operating profit represents operating profit (a GAAP measure), excluding restructuring costs and other significant items. Adjusted net income represents net income attributable to common shareowners (a GAAP measure), excluding restructuring costs and other significant items. Adjusted EPS represents diluted earnings per share (a GAAP measure), excluding restructuring costs and other significant items. The adjusted effective tax rate represents the effective tax rate (a GAAP measure), excluding restructuring costs and other significant items. For the business segments, when applicable, adjustments of operating profit and margins represent operating profit, excluding restructuring and other significant items. GAAP financial results include the impact of changes in foreign currency exchange rates (AFX).

We use the non-GAAP measure "at constant currency" or "CFX" to show changes in our financial results without giving effect to period-to-period currency fluctuations. Under GAAP, income statement results are translated in U.S. dollars at the average exchange rate for the period presented. Management believes that the non-GAAP measures just mentioned are useful in providing period-to-period comparisons of the results of the Company's ongoing operational performance.

Free cash flow is a non-GAAP financial measure that represents net cash flows provided by operating activities (a GAAP measure) less capital expenditures. Management believes free cash flow is a useful measure of liquidity and an additional basis for assessing Carrier's ability to fund its activities, including the financing of acquisitions, debt service, repurchases of Carrier's common stock and distribution of earnings to shareholders.

A reconciliation of the non-GAAP measures to the corresponding amounts prepared in accordance with GAAP appears in the tables in this Appendix. The tables provide additional information as to the items and amounts that have been excluded from the adjusted measures.

When we provide our expectations for adjusted EPS, adjusted operating profit, adjusted effective tax rate, organic sales and free cash flow on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures (expected diluted EPS, operating profit, the effective tax rate, sales and expected net cash flows provided by operating activities) generally is not available without unreasonable effort due to potentially high variability, complexity and low visibility as to the items that would be excluded from the GAAP measure in the relevant future period, such as unusual gains and losses, the ultimate outcome of pending litigation, fluctuations in foreign currency exchange rates, the impact and timing of potential acquisitions and divestitures, and other structural changes or their probable significance. The variability of the excluded items may have a significant, and potentially unpredictable, impact on our future GAAP results.

13

2020 Key Items

Shares outstanding

(diluted)

Corporate expenses / eliminations

Interest expense

Adjusted effective tax rate1

Capital expenditures

Depreciation & amortization

~880M

~$225M

~$285M

~26%

~$275M

~ $320M

14

1See page 13 and page 18 for additional information regarding non-GAAP measures

Carrier Q3 2020 vs Q3 2019 Sales Reconciliation

Y/Y %

Three Months Ended September 30, 2020 Compared with Three Months Ended September 30, 2019

					(Unaudited)
			Factors Contributing to Total % change in Net Sales
			FX		Acquisitions /
	Organic		Translation		Divestitures, net		Other		Total
HVAC	11 %		- %		- %		- %	11 %
Refrigeration	(6)%	2 %	(1)%		- %	(5)%
Fire & Security	(7)%	1 %		- %		- %	(6)%
Consolidated	3 %	1 %		- %		- %	4 %

Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019

					(Unaudited)
			Factors Contributing to Total % change in Net Sales
			FX		Acquisitions /
	Organic		Translation		Divestitures, net		Other		Total
HVAC	(4)%	(1)%		- %		- %	(5)%
Refrigeration	(15)%	(1)%		- %		- %	(16)%
Fire & Security	(11)%	(1)%		- %		- %	(12)%
Consolidated	(8)%	(1)%		- %		- %	(9)%

15

See page 13 for additional information regarding non-GAAP measures

Segment Adjusted Operating Profit Reconciliation

					(Unaudited)
		For the Three Months Ended		For the Nine Months Ended
		September 30,			September 30,
(dollars in millions- Income(Expense))		2020			2019			2020			2019
HVAC
Net sales	$	2,892		$	2,602		$	7,142		$	7,505
Operating profit	$	839	$	404	$	1,364	$	1,242
Restructuring		-			(12)			(3)			(47)
Impairment charge on minority owned joint venture		-			(108)			(71)			(108)
investment
Gain on sale of investment		252			-			252			34
Separation costs		-			-			(2)			-
Charge resulting from a litigation matter		(11)			-			(11)			-
Adjusted operating profit	$	598	$	524	$	1,199	$	1,363
Adjusted operating profit margin		20.7 %			20.1 %			16.8 %			18.2 %
Refrigeration
Net sales	$	876		$	922		$	2,384		$	2,839
Operating profit	$	103	$	125	$	263	$	373
Restructuring		1			(7)			(2)			(14)
Adjusted operating profit	$	102	$	132	$	265	$	387
Adjusted operating profit margin		11.6 %			14.3 %			11.1 %			13.6 %
Fire & Security
Net sales	$	1,324		$	1,402		$	3,587		$	4,078
Operating profit	$	200	$	205	$	426	$	521
Restructuring		(4)			(14)			(13)			(35)
Separation costs		-			-			(3)			-
Adjusted operating profit	$	204	$	219	$	442	$	556
Adjusted operating profit margin		15.4 %			15.6 %			12.3 %			13.6 %

							(Unaudited)
		For the Three Months Ended				For the Nine Months
			September 30,				SeptemberEnded 30,
(dollars in millions - Income (Expense))			2020				2019				2020				2019
General Corporate Expenses and Eliminations and Other
Net sales	$	(90)		$	(104)		$	(251)		$	(315)
Operating profit	$	(61)	$	(105)	$	(215)	$	(202)
Restructuring		-				(1)				(1)				(1)
Consultant contract termination		-				(34)				-				(34)
Separation costs		(24)				(13)				(87)				(13)
Adjusted operating profit	$	(37)	$	(57)	$	(127)	$	(154)
Carrier
Net sales	$	5,002		$	4,822		$	12,862		$	14,107
Operating profit	$	1,081	$	629	$	1,838	$	1,934
Total restructuring costs		(3)				(34)				(19)				(97)
Total non-recurring and non-operational items		217				(155)				78				(121)
Adjusted operating profit	$	867	$	818	$	1,779	$	2,152

16

See page 13 for additional information regarding non-GAAP measures

Constant Currency Reconciliation

		For the Quarters Ended September 30th
(dollars in millions)		2020		2019	% YoY
HVAC
Adjusted Operating Profit	$	598	$	524	14 %
Impact of Foreign Exchange		(5)
Adjusted Operating Profit at constant currency	$	603	$	524	15 %
Refrigeration
Adjusted Operating Profit	$	102	$	132	(23)%
Impact of Foreign Exchange		2
Adjusted Operating Profit at constant currency	$	100	$	132	(24)%
Fire and Security
Adjusted Operating Profit	$	204	$	219	(7)%
Impact of Foreign Exchange		1
Adjusted Operating Profit at constant currency	$	203	$	219	(7)%

17

See page 13 for additional information regarding non-GAAP measures

2020 EPS Reconciliation

(dollars in millions - Income (Expense))

Net income attributable to common shareowners

Total restructuring costs

Total non-recurring and non-operational items included in operating profit Non-recurring and non-operational items included in Interest expense, net:

(Unaudited)

	For the Three Months Ended			For the Nine Months Ended
	S eptember 30,				S eptember 30,
	2020			2019			2020			2019
$	741	$	492	$	1,098	$	1,676
	(3)			(34)			(19)			(97)
	217			(155)			78			(121)

Interest income associated with participation in amnesty settlement		-				-				-				8
Interest income associated with IRS settlement		-				-				-				8
Debt issuance costs relating to Carrier's separation from UTC		-				-				(5)				-
Non-recurring and non-operational items included in Interest expense, net		-				-				(5)				16
Tax effect of restructuring and non-recurring and non-operational items		(51)				22				(29)				31
S ignificant non-recurring and non-operational items included in Income tax expense:
Favorable income tax adjustments related to tax amnesty		-				-				-				95
Adjustments related to tax settlements		-				-				-				54
Deferred tax adjustment resulting from the UTC separation		-				19				-				19
Adjustment related to a valuation allowance recorded against a United Kingdom tax loss and credit carryforward as a result of separation related activities		-				-				(51)				-
Adjustment resulting from Carrier's decision to no longer permanently reinvest certain pre-2018 unremitted non-U.S. earnings		-				-				(46)				-
Deferred tax adjustment resulting from United Kingdom legislative change		(12)				-				(12)				-
S ignificant non-recurring and non-operational items included in Income tax expense		(12)				19				(109)				168
Total Non-recurring and non-operational items - Non-controlling interest		-				-				-				-
Total significant non-recurring and non-operational items		151				(148)				(84)				(3)
Adjusted net income attributable to common shareowners	$	590		$	640		$	1,182		$	1,679
Diluted earnings per share	$	0.84		$	0.57		$	1.25		$	1.94
Impact on diluted earnings per share		0.17				(0.17)				(0.10)				(0.01)
Adjusted diluted earnings per share	$	0.67		$	0.74		$	1.35		$	1.95
Effective tax rate		25.9	%			25.8	%			33.4	%			18.3	%
Impact on effective tax rate		(1.0)	%			(0.9)	%			(7.4)	%			7.1	%
Adjusted effective tax rate		24.9	%			24.9	%			26.0	%			25.4	%	18

See page 13 for additional information regarding non-GAAP measures

Free Cash Flow Reconciliation

					(Unaudited)
		For the Three Months Ended March 31,
(dollars in millions)		2020				2019
Net income attributable to common shareowners
$	96				$	400
Net cash flows provided by operating activities	$	47			$	(183)
Less: Capital expenditures		48						41
Free cash flow	$	(1)			$	(224)
Free cash flow as a percentage of net income attributable to common shareowners					(1)%				(56)%

				(Unaudited)
		For the Three Months Ended June 30,
(dollars in millions)		2020			2019
Net income attributable to common shareowners	$	261				$	784
Net cash flows provided by operating activities	$	509			$	554
Less: Capital expenditures		46					48
Free cash flow	$	463				$	506
Free cash flow as a percentage of net income attributable to common shareowners			177%				65%
				(Unaudited)
		For the Three Months Ended September 30,
(dollars in millions)		2020			2019
Net income attributable to common shareowners
$	741				$	492
Net cash flows provided by operating activities	$	937			$	618
Less: Capital expenditures		57					50
Free cash flow	$	880			$	568
Free cash flow as a percentage of net income attributable to common shareowners			119%				115%
				(Unaudited)
		For the Nine Months Ended September 30,
(dollars in millions)		2020			2019
Net income attributable to common shareowners
$	1,098				$	1,676
Net cash flows provided by operating activities	$	1,493			$	989
Less: Capital expenditures		151					139
Free cash flow	$	1,342				$	850
Free cash flow as a percentage of net income attributable to common shareowners			122%				51%

19

See page 13 for additional information regarding non-GAAP measures