Free Cash Flow Outlook
Q: What's the outlook for free cash flow next year?
A: Despite timing differences this year, management believes they have a good path to end next year at an exit rate of about $1 billion in free cash flow, as previously communicated. " Primary drivers include decreasing cash interest and taxes, reducing cash restructuring, and expected working capital benefits. "

EBITDA Margin Expansion Next Year
Q: Is a 200 bps margin expansion next year realistic?
A: Management confirms expectations of approximately 200 basis points of EBITDA margin improvement next year. " This includes around 100 bps from synergies and additional gains from volume leverage and lower interest expense. "

Residential HVAC Demand Surge and Preparedness
Q: Why weren't you prepared for HVAC demand uptick?
A: The sudden surge in residential HVAC demand was unexpected after two years of weak demand and false starts on recovery. " Capacity ramp is lagging, but they expect to catch up by end of the fourth quarter. " OEMs kept their strategies around the 2L transition under wraps, limiting visibility. "

Cross-Selling Synergies in IPS
Q: What benefits are you seeing from cross-selling in IPS?
A: Cross-selling and industrial powertrain initiatives contributed about 1 to 2 percentage points of growth in IPS this quarter. " Only 15% of customers buy two or more products, so there's significant opportunity for further growth. "

European and Chinese Market Outlook
Q: What's the outlook for Europe and China markets in PES?
A: Management sees continued pressure in Europe and China, with ISM indices below 50 in both regions. " They don't expect significant improvement in these markets next year and plan to be measured in their approach for 2025. "

Discrete Automation Orders and Outlook
Q: What are you seeing in discrete automation orders?
A: Longer-cycle orders are strong, with increased win rates and funnels, giving confidence into 2025. " Short-cycle orders remain soft, and interest rate cuts haven't spurred expected capital projects due to market uncertainty. "

Residential HVAC Sales Growth Clarification
Q: Was the 10% revenue increase in resi HVAC year-over-year?
A: The 10% increase mentioned was sequential, indicating ramping improvement. " Management expects continued sequential growth into the fourth quarter. "

Resi HVAC Inventory Levels and Next Year Outlook
Q: Are higher inventories at OEMs affecting next year’s outlook?
A: Higher inventory levels, especially in smaller systems, may soften next year’s demand. " Management doesn't expect significant growth in 2025 due to inventory resets and flat end-market demand. "

AMC Margins and Discrete Automation Outlook
Q: Was the third quarter the bottom for discrete automation?
A: Management believes the third quarter was likely the bottom for discrete automation. " They expect sequential margin improvement in the fourth quarter due to backlog, cost synergies, and better sales leverage. "

Long-cycle Orders in IPS and 2025 Outlook
Q: Do strong long-cycle orders in IPS suggest strength into 2025?
A: Longer-cycle orders, particularly in AMC sectors like factory automation, give confidence into 2025. " IPS continues to outperform despite macro indicators like ISM below 50, reinforcing the value of recent acquisitions. "

Commercial Aspects of PES and International Performance
Q: What's impacting international commercial and general commercial in PES?
A: General commercial (31% of PES) correlates with ISM and is under pressure. " Commercial HVAC outside North America (23% of PES) is down high single to low double digits in EMEA and Asia. " Residential HVAC improvement is expected to uplift the segment into Q4 and 2025. "

Fourth Quarter Forecast for PES Segment
Q: How does the fourth quarter forecast look for PES?
A: Management forecasts mid-single-digit growth for PES in the fourth quarter. " While last year had an OEM shutdown, they expect the quarter to be up year-over-year, noting the historical seasonality of Q4. "

Risks from Lagging Deliveries to Resi HVAC OEMs
Q: Are there risks from delayed deliveries to OEMs?
A: Management doesn't foresee material impact from lagging deliveries. " They maintain strong relationships with OEMs and continue to grow in air moving solutions, feeling positive about long-term partnerships. "

Order-Revenue Gap and Business Cycle
Q: When will the gap between orders and revenue align?
A: The business has evolved, especially in AMC, which now has a backlog of around six months. " Longer-cycle businesses like data center and aerospace have over a year of backlog, affecting alignment between orders and revenue. "

Growth Outlook for Next Year
Q: Is the 'limited growth' comment about organic growth?
A: Yes, the limited growth comment pertains to organic growth. " Management plans to approach next year incrementally measured due to market uncertainties and the election results. "