Earnings Release

• Sales of $8.9 Billion, Reported Sales Up 6%, Organic¹ Sales Up 8%
• Operating Margin up 390 Basis Points to 19.1%; Segment Margin¹ up 90 Basis Points to 22.0%
• Earnings Per Share and Adjusted Earnings Per Share¹ of $2.07, Exceeding High End of Guidance by 11 Cents
• Backlog² Increased to a Record $30.3 Billion, Up 6% Year over Year
• Announced $670 Million Acquisition of Compressor Controls Corporation
• Company Raises Midpoint of Full-Year Adjusted EPS³ Guidance by 13 Cents; Reaffirms Full-Year Cash Flow¹ Guidance

CHARLOTTE, N.C., April 27, 2023 /PRNewswire/ -- Honeywell (NASDAQ: HON) today announced results for the first quarter that exceeded the company's guidance across all metrics. The company also raised the midpoint of its full-year organic¹ growth, segment margin³, and adjusted EPS³ guidance ranges.

The company reported first-quarter year-over-year sales growth of 6% and organic¹ sales growth of 8%, with another quarter of double-digit organic sales growth in Performance Materials and Technologies and Aerospace. Operating margin expanded 390 basis points to 19.1% and segment margin¹ expanded by 90 basis points to 22.0%, led by continued robust expansion in Safety and Productivity Solutions and Honeywell Building Technologies. Honeywell first-quarter earnings per share was $2.07, up 26% year over year, or up 8% adjusted¹ year over year. Operating cash flow was negative $0.8 billion and free cash flow¹ was negative $1.0 billion. Excluding the net impact of settlements signed in the fourth quarter of 2022, the company generated $0.3 billion of free cash flow¹ in the first quarter, $250 million better than the first quarter of 2022.

"Honeywell delivered an outstanding start to 2023, exceeding expectations for all guided metrics in the first quarter," said Darius Adamczyk, chairman and chief executive officer of Honeywell. "Organic sales growth¹ was underpinned by double-digit growth in our commercial aviation, UOP, process solutions, building solutions, and advanced materials businesses. Backlog² increased to a record $30.3 billion, up 6% year over year, with particular strength in our aerospace business that gives us confidence in our full-year guidance. Our continued focus on commercial excellence and productivity enabled us to remain ahead of the inflation curve and overdeliver on our segment margin³ and earnings per share³ guidance. Excluding the net impact of settlements signed in the fourth quarter of 2022, we delivered free cash flow¹ of $0.3 billion. We also continued to leverage our strong balance sheet, deploying $1.6 billion in the quarter to share repurchases, dividends, and capex. In addition, we announced the acquisition of Compressor Controls Corporation, a leading provider of turbomachinery controls and automation solutions, which combined with our process solutions installed base and Honeywell Forge capabilities will help customers accelerate their energy transition."

Adamczyk continued, "As we look to the rest of 2023, we are well positioned to continue outperforming despite an uncertain macroeconomic environment. Our businesses are poised for sustained growth, our backlog will support our projections, and our technologically differentiated portfolio of solutions is allowing us to address the world's toughest automation, digitalization, and sustainability challenges. This setup is enabling us to raise our full-year 2023 guidance, and I am confident that Honeywell will continue to outperform under Vimal Kapur's leadership. I am grateful for the opportunity I have had to lead Honeywell, and I know our future is bright."

As a result of the company's first-quarter performance and management's outlook for the remainder of the year, Honeywell raised the midpoint of its full-year sales, segment margin³, and adjusted earnings per share³ guidance. Full-year sales are now expected to be $36.5 billion to $37.3 billion with organic¹ sales growth in the range of 3% to 6%. Segment margin³ is now expected to be in the range of 22.3% to 22.6%, with segment margin expansion³ of 60 to 90 basis points. Adjusted earnings per share^3,4 is now expected to be in the range of $9.00 to $9.25, up 20 cents on the low end and 5 cents on the high end from the prior guidance range. Operating cash flow is still expected to be in the range of $4.9 billion to $5.3 billion. Free cash flow¹ is still expected to be in the range of $3.9 billion to $4.3 billion, or $5.1 billion to $5.5 billion excluding the net impact of settlements signed in the fourth quarter of 2022. A summary of the company's full-year guidance changes can be found in Table 1.

First-Quarter Performance
Honeywell sales for the first quarter were up 6% year over year on a reported basis and 8% year over year on an organic¹ basis. The first-quarter financial results can be found in Tables 2 and 3.

Aerospace sales for the first quarter were up 14% year over year on an organic¹ basis led by commercial aviation. Commercial aviation aftermarket sales grew over 20%, supported by continued flight hour recovery in air transport. Commercial original equipment also had double-digit sales growth in the quarter, including over 30% growth in business and general aviation original equipment. Defense and space sales returned to growth in the first quarter and maintained a book-to-bill greater than one. Segment margin contracted 80 basis points to 26.6%, driven by higher sales of lower margin products partially offset by commercial excellence.

Honeywell Building Technologies sales for the first quarter were up 9% on an organic¹ basis year over year. Building solutions grew 13% organically driven by the fourth consecutive quarter of double-digit project sales growth. Strong demand for our fire offerings resulted in 7% organic sales growth in building products. Segment margin expanded 170 basis points to 25.2% due to commercial excellence partially offset by cost inflation.

Performance Materials and Technologies sales for the first quarter were up 15% on an organic¹ basis year over year. Sales growth was led by UOP, which grew 19% organically due to strength in refining catalyst shipments and gas processing. In HPS, strength in projects and smart energy led to 16% organic growth in the quarter. Demand remained robust in fluorine products, which led to 12% growth in advanced materials. Segment margin contracted 20 basis points to 20.6% as a result of cost inflation and higher sales of lower margin products, partially offset by commercial excellence and volume leverage.

Safety and Productivity Solutions sales for the first quarter decreased 11% on an organic¹ basis year over year. Sales declines were led by lower volumes in warehouse and workflow solutions and productivity solutions and services, partially offset by the sensing portion of sensing and safety technologies. Segment margin remained a positive contributor to Honeywell, expanding 270 basis points year over year to 17.2%, driven by productivity actions and commercial excellence, partially offset by lower volume leverage and cost inflation.

Conference Call Details
Honeywell will discuss its first-quarter results and updated full-year 2023 guidance during an investor conference call starting at 8:30 a.m. Eastern Daylight Time today. A live webcast of the investor call as well as related presentation materials will be available through the Investor Relations section of the company's website (www.honeywell.com/investor). A replay of the webcast will be available for 30 days following the presentation.

TABLE 1: FULL-YEAR 2023 GUIDANCE³

TABLE 2: SUMMARY OF HONEYWELL FINANCIAL RESULTS

TABLE 3: SUMMARY OF SEGMENT FINANCIAL RESULTS

Honeywell (www.honeywell.com) delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials globally. Our technologies help everything from aircraft, buildings, manufacturing plants, supply chains, and workers become more connected to make our world smarter, safer, and more sustainable. For more news and information on Honeywell, please visit www.honeywell.com/newsroom.

Honeywell uses our Investor Relations website, www.honeywell.com/investor, as a means of disclosing information which may be of interest or material to our investors and for complying with disclosure obligations under Regulation FD. Accordingly, investors should monitor our Investor Relations website, in addition to following our press releases, SEC filings, public conference calls, webcasts, and social media.

We describe many of the trends and other factors that drive our business and future results in this release. Such discussions contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are those that address activities, events, or developments that management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management's assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance, and actual results, developments and business decisions may differ significantly from those envisaged by our forward-looking statements. We do not undertake to update or revise any of our forward-looking statements, except as required by applicable securities law. Our forward-looking statements are also subject to material risks and uncertainties that can affect our performance in both the near- and long-term. In addition, no assurance can be given that any plan, initiative, projection, goal, commitment, expectation, or prospect set forth in this release can or will be achieved. These forward-looking statements should be considered in light of the information included in this release, our Form 10-K and other filings with the Securities and Exchange Commission. Any forward-looking plans described herein are not final and may be modified or abandoned at any time.

This release contains financial measures presented on a non-GAAP basis. Honeywell's non-GAAP financial measures used in this release are as follows:

• Segment profit, on an overall Honeywell basis;
• Segment margin, on an overall Honeywell basis;
• Organic sales growth;
• Free cash flow;
• Free cash flow excluding impact of settlements;
• Adjusted earnings per share; and
• Adjusted earnings per share excluding pension headwind.

Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Refer to the Appendix attached to this release for reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures.

Appendix

Non-GAAP Financial Measures

The following information provides definitions and reconciliations of certain non-GAAP financial measures presented in this press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP).

Management believes that, when considered together with reported amounts, these measures are useful to investors and management in understanding our ongoing operations and in the analysis of ongoing operating trends. These measures should be considered in addition to, and not as replacements for, the most comparable GAAP measure. Certain measures presented on a non-GAAP basis represent the impact of adjusting items net of tax. The tax-effect for adjusting items is determined individually and on a case-by-case basis. Included below are reconciliations of non-GAAP financial measures to the most directly comparable GAAP measures. Other companies may calculate these non-GAAP measures differently, limiting the usefulness of these measures for comparative purposes.

Management does not consider these non-GAAP measures in isolation or as an alternative to financial measures determined in accordance with GAAP. The principal limitations of these non-GAAP financial measures are that they exclude significant expenses and income that are required by GAAP to be recognized in the consolidated financial statements. In addition, they are subject to inherent limitations as they reflect the exercise of judgments by management about which expenses and income are excluded or included in determining these non-GAAP financial measures. Investors are urged to review the reconciliation of the non-GAAP financial measures to the comparable GAAP financial measures and not to rely on any single financial measure to evaluate Honeywell's business.

We define organic sales percentage as the year-over-year change in reported sales relative to the comparable period, excluding the impact on sales from foreign currency translation and acquisitions, net of divestitures, for the first 12 months following the transaction date. We believe this measure is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of reported sales percent change to organic sales percent change has not been provided for forward-looking measures of organic sales percent change because management cannot reliably predict or estimate, without unreasonable effort, the fluctuations in global currency markets that impact foreign currency translation, nor is it reasonable for management to predict the timing, occurrence and impact of acquisition and divestiture transactions, all of which could significantly impact our reported sales percent change.

We define segment profit, on an overall Honeywell basis, as operating income, excluding stock compensation expense, pension and other postretirement service costs, and repositioning and other charges. We define segment profit margin, on an overall Honeywell basis, as segment profit divided by net sales. We believe these measures are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

A quantitative reconciliation of operating income to segment profit, on an overall Honeywell basis, has not been provided for all forward-looking measures of segment profit and segment margin included herein. Management cannot reliably predict or estimate, without unreasonable effort, the impact and timing on future operating results arising from items excluded from segment profit. The information that is unavailable to provide a quantitative reconciliation could have a significant impact on our reported financial results. To the extent quantitative information becomes available without unreasonable effort in the future, and closer to the period to which the forward-looking measures pertain, a reconciliation of operating income to segment profit will be included within future filings.

We define adjusted earnings per share as diluted earnings per share adjusted to exclude various charges as listed above. We define adjusted earnings per share excluding pension headwind as adjusted earnings per share adjusted for an actual or forecasted decline of pension ongoing income between the comparative periods in 2022 and 2023. We believe adjusted earnings per share and adjusted earnings per share excluding pension headwind are measures that are useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. For forward-looking information, management cannot reliably predict or estimate, without unreasonable effort, the pension mark-to-market expense as it is dependent on macroeconomic factors, such as interest rates and the return generated on invested pension plan assets. We therefore do not include an estimate for the pension mark-to-market expense. Based on economic and industry conditions, future developments, and other relevant factors, these assumptions are subject to change.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus cash receipts from Garrett.

We believe that free cash flow is a non-GAAP measure that is useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. This measure can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus cash receipts from Garrett. We define free cash flow excluding impact of settlements as free cash flow less settlements related to the NARCO Buyout, HWI Sale, and UOP Matters.

We believe that free cash flow and free cash flow excluding impact of settlements are non-GAAP measures that are useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. These measures can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

We define free cash flow as cash provided by operating activities less cash expenditures for property, plant and equipment plus anticipated cash receipts from Garrett. We define free cash flow excluding impact of settlements as free cash flow less settlements related to the NARCO Buyout, HWI Sale, and UOP Matters.

We believe that free cash flow and free cash flow excluding impact of settlements are non-GAAP measures that are useful to investors and management as a measure of cash generated by operations that will be used to repay scheduled debt maturities and can be used to invest in future growth through new business development activities or acquisitions, pay dividends, repurchase stock, or repay debt obligations prior to their maturities. These measures can also be used to evaluate our ability to generate cash flow from operations and the impact that this cash flow has on our liquidity.

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