David Gitlin: Yes. Look, I mean, it’s a question we get because it’s been so strong for so long. So – last year, we were up 35%. We knew we’d have a tough comp coming in into this year. But I think it’s a very nice combination of share gains, the underlying verticals that have been strong, generally remaining strong, the team performing. And of course, we don’t talk about it as much, but we’ll have the same 454B dynamic here, where we see the same kind of base price and mix increase that we’re mentioning for resi, we see for light commercial. So that 15% to 20% over two years. There won’t be the same kind of prebuy. There might be a little bit on the small rooftop units, but – so you would expect to see an even higher mix next year for 454B, which gives you a tailwind as you go into light commercial next year.
And these verticals continue to be strong. So we think it will be slightly better than down mid-single-digits this year, given more than 20% in the first quarter.
Brett Linzey: Okay. Great. And then just shifting over to container up about 50%. I guess is the worst behind us here? What are you hearing from some of those customers? And then anything on sort of the sequential trends through the – in the last couple of quarters?
David Gitlin: Yes, I do think the worst is behind us, Brett. I mean we were up significantly in the fourth quarter. We were up about 50% in the first quarter. I think for the full year, it’s probably up in the 30% range. And then you look at – the other thing that we’ve done, which is very important, is we’ve introduced a new digital platform for that space as well called Lynx, which instead of just being an equipment provider, we’re now getting subscription-based recurring revenues. And we have 130,000 subscriptions for something that we just introduced a few years ago. So hats off to the team there as well. And that will help smooth some of the cycles in that business.
Brett Linzey: Okay. Great. Yes, congrats on the strong start.
David Gitlin: Thanks Brett.
Operator: Thank you. Our next question comes from Andrew Obin with Bank of America. Your line is open.
Andrew Obin: Hi. Good morning, guys.
David Gitlin: Good morning, Andrew.
Andrew Obin: Hi. Just a question on the buyback. You guys alluded that you have capacity to start the buyback in 2024. How is it incorporated in your current outlook? Just trying to understand that? Or is that where the margin of safety comes for the guide?
Patrick Goris: Yes, Andrew, thank you for your question, and I’ll provide some context on this. So since the acquisition, we paid down about $500 million in term loans in Q1. And the three exits that we have announced will yield about $5.5 billion in net proceeds. So that’s our expectation. And what we communicated is that all of this will be used for deleveraging, although we may keep some cash as it may be economically more attractive than just paying down some of the debt. But excluding – if I look at the buybacks for this year, we have not included them in our guide for the year. But given the timing of our free cash flow, generally, it would be second half weighted. And as you probably recall, our free cash flow tends to be very heavy in Q3 and in Q4. So not included in our guide. As we resume it in the second half of the year, there might be some benefit. I think the benefit will be much more meaningful in 2025 than it will be in 2024.
Andrew Obin: Thank you, Patrick. And just a follow-up on Viessmann. What’s your ability if for whatever reason, second half orders do not pick up as you expected, what’s your ability to accelerate restructuring at Viessmann? Because I guess you guys kept the outlook for restructuring flat versus last quarter. Are you gated or limited in any way what you – on the timing what you can do in Germany? Are there levers on cost of Viessmann that you can still pull in 2024? Thank you.
David Gitlin: Yes. Andrew, I have to say I’ve been so proud of Thomas and the team working with the central apps folks at Carrier to be incredibly and appropriately aggressive on cost. And if you look at the actions that Thomas has taken, what’s been very important for that – for our 12,000 new colleagues at Viessmann that fully understand this is it has nothing to do with the combination with Carrier. It’s all actions that business would have taken because of the overall market conditions. So they’ve been very aggressive on all elements of takeout of cost, not just on basic G&A, but they’ve been aggressive on materials, logistics costs, value engineering, which is part of the benefit and insourcing part of the benefit of coming together with Carrier.
And they’re going to continue to take cost. So there’s a lot of levers that business can and will pull to take costs out of the business. There are certain kind of natural limitations in the agreement that we had with them, but those are not things that are in any way going to affect the ability for that business to take the appropriate cost actions.
Andrew Obin: So when you talk about cost synergies, that excludes whatever actions, as you have alluded, Viessmann would have taken these actions, regardless given the market conditions? Is that the fair point that there’s $200 million by year three, we have, but at the same time, Viessmann can accelerate internal cost control given the market conditions? Is that the right way to think about it? Sorry
David Gitlin: I think it’s a fair description, Andrew. Look, I think cost synergies, we have a very specific definition we use. It’s cost that’s taken out because of the combination. So there’s a bunch of examples of that where we both buy from the same supplier, and we have the ability to go renegotiate with those suppliers or the ability to get more work to certain suppliers. We have a whole lot of value engineering between Toshiba, Carrier, GWA and Viessmann. So there’s things that cost takeout that we can do because we’re now part of the same family. We see it with some of our factory optimization. So yes, there’s cost takeout that they’re doing on their own, and then there’s cost synergies on top of that.
Andrew Obin: That’s very, very helpful, Dave. Thank you. I’m glad you’re staying. Thank you. Bye-bye.
David Gitlin: Thank you. Thanks.
Operator: Thank you.
David Gitlin: Yes, thank you. And just to close it out, I want to end by thanking our customers who always support us and our team who is doing a phenomenal job. So thank you also to our investors. And as always, Sam, will be available all day for questions. Thank you, all.
Operator: Thank you for your participation. This does conclude the program. And you may now disconnect. Everyone, have a great day.
