Carel Industries

Earnings Release • Oct 31, 2023

CAREL INDUSTRIES S.p.A. 2023 – 9M Results

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31st October 2023

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Company presentation disclaimer

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Forward-Looking Statements: this document may include projections and other "forward-looking" statements within the meaning of applicable securities laws. In particular, all statements that address expectations or projections about the future, including statements about operating performance, market position, industry trends, general economic conditions, expected expenditures, cost-savings, synergies and financial results, are forward-looking statements. Consequently, any statements contained herein that are not statements of historical fact are forward-looking statements.

Forward-looking statements are based on assumptions and current expectations and involve a number of known and unknown risks, uncertainties and other factors that could cause actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forwardlooking statements. Accordingly, actual events or results or actual performance of the Company or the Group may differ significantly, positively or negatively, from those reflected or contemplated in such forward-looking statements made herein. Factors that might cause such differences include, but are not limited to, the risks that business strategy and plans may not receive the level of market acceptance anticipated; disruptions in general economic and business conditions, particularly in geographic areas where business may be concentrated (e.g. escalation of the conflict in Ukraine); impact of public health crises, such as pandemics (including Covid-19) and epidemics and any related company or government policies; higher interest rates, higher loan costs or less desirable loan terms, all of which could increase our costs of funding; continued high levels of, or increases in, unemployment and a general slowdown in commercial activity; leverage and ability to refinance existing indebtedness or incur additional indebtedness; an increase in debt service obligations; the ability to generate a sufficient amount of cash from operations to satisfy working capital requirements and to service existing and future indebtedness; the ability to achieve improvements in operating efficiency; foreign currency fluctuations; the ability to retain senior management and attract and retain qualified and experienced employees; the ability to retain existing bank partnership or develop new ones. The Group and all other persons expressly disclaim any duty, undertaking or obligation to update publicly or release any revisions to any of the information, opinions or forward-looking statements contained in this document to reflect any events or circumstances occurring after the date of the presentation of this document. No representation or warranty is made as to the achievement or reasonableness of and no reliance should be placed on such forward-looking statements.

Projections: any projection or forecast in this document is based on estimates and assumptions, described in this document, about future events and, as a consequence, is subject to significant economic and competitive uncertainty and other contingencies, none of which can be predicted with any certainty and some of which are beyond the Group's control. Each recipient of this document should be aware that these projections do not constitute a forecast or prediction of actual results and there can be no assurance that the projected results will be realized or achieved, and actual results may be higher or lower than those indicated. None of the Company, the Group, nor any of their respective security-holders, directors, officers, employees, advisors or affiliates, or any representatives or affiliates, assumes responsibility for the accuracy of the projections presented herein.

Non-IFRS measures: This Presentation contains alternative performance indicators that are not recognized by IFRS. Different companies and analysts may calculate these non-IFRS measures differently, so making comparisons among companies on this basis should be done very carefully. These non- IFRS measures have limitations as analytical tools, are not measures of performance or financial condition under IFRS and should not be considered in isolation or construed as substitutes for operating profit or net profit as an indicator of our operations in accordance with IFRS.

9M 2023 – Highlights

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CAREL reported again a double-digit organic revenue growth in Q3 2023, with a further increase in the Group adj. EBITDA margin.

• Organic growth (LFL and constant exchange rates) stood at 12.7%, in line with the guidance given in August.
• Positive overall results in the HVAC market in spite of a deceleration in the heat pumps sector. No significant signs of recovery in the Refrigeration investment cycle (compared to previous quarters) due also to the worsened economic scenario.

NFP

265
m€

• Adj. EBITDA margin equal to 22.7%, higher than 9M 2022 (21.9%) and H1 2023 (22.1%). Including the one-off costs related to M&A (~2.3m€), the EBITDA margin reported would stand at 22.3%.
• The positive operating leverage, a better product mix and the continued effects deriving from previous price-list increases offset higher costs of raw materials (persistent inflation even if lower compared to 2022).
• Excluding the impact (~184m€) of the transactions carried out in 2023 (Eurotec and Kiona) the NFP would stand at ~81m€ (vis-à-vis ~96m€ in FY 2022).
• ΔNWC substantially in line with what reported in H1 2023.
• NFP to LTM EBITDA(2) lower than 2x

(1)Comapred to 9M ended 30 September 2022 (Including the acquistion of Eurotec and Kiona in 2023); (2)NFP 9M 2023 – LTM EBITDA calculated as the sum of 9M 2023 reported EBITDA and Q4 2022 reported EBITDA

9M 2023 – Results

m€	9M 2022	9M 2023	Δ%
Revenue	401.1	497.2	24.0%
Organic Revenue	401.1	451.9(1)	12.7%
EBITDA	85.9	110.7	28.8%
Adj. EBITDA(2)	87.7	113.0	28.9%
Adj. EBITDA /Revenue	21.9%	22.7%
Net Profit	52.6	59.1	12.2%
Capex	15.4	15.0	-2.6%

50.8 52.1 (6.8) 497.2 KPIs 9M 2023 Revenues bridge

(1) Excl. ~52.1m€ (change in the consolidation perimeter) and ~6.8m€ (negative FX impact); (2)Adjustments mainly related to M&A costs.

• Revenue +24.0%: Q3 2023 marked another double-digit organic growth quarter (10.4%), thanks mainly to a positive performance in the HVAC sector. Expected slow-down in the heat-pumps market materialized in Europe. In the first 9M 2023 change-in-perimeter contribution equal to 52.1m€ and negative FX impact for 6.8m€
• Adj. EBITDA +28.9%: The very positive results reported in revenue were reflected in Adj. EBITDA growth. The increase in Adj. EBITDA margin was due to the operating leverage effect, to a better products mix (benefitting from the easing of the raw material shortage) and continued effects of previous price-list increases.
• Net Profit +12.2%: benefitting from the operating results. Higher tax rate (23.8%) impacted by a different country-mix and changes in regulations.
• Capex: in line with 9M 2022

9M 2023 – Revenue breakdowns

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• EMEA The combination of organic growth and M&A kept the growth rate >20%. Slow-down in the heat-pumps sector.
• APAC Excluding the negative impact of FX, growth rate was close to 25%. Excellent performance in India and South Korea plus a number of commercial opportunities seized. China's macro-economic scenario still weak.
• Americas (North) Very positive performance in Q3 2023 thanks to data centres and to some projects related to BESS (Battery Energy Storage Systems). Positive performance from SENVA.
• Americas (South) The good results reported in Brazil were partly offset by the impact of the macro-economic scenario in other regions.

• HVAC: Excellent growth confirmed also in the first 9M 2023 (~17% excluding M&A) in spite of a slow down in heat pumps.
• Refrigeration: Q3 2023 growth rate in line with what reported in H1 2023 thanks also to the contribution from Kiona. Weak demand in food service and a deceleration in the investment cycle in food retail confirmed. 6

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From EBITDA to Net Profit

K€	9M '22	9M '23	Δ%
EBITDA	85,918	110,705	28.8%
D&A	-17,033	-23,137
EBIT	68,885	87,568	27.1%
Financial (charges)/income	-2,189	-5,919
FX gains/losses	-549	-893
Companies consolidated with eq. method	2,361	292
EBT	68,508	81,048	18.3%
Taxes	-14,236	-19,325
Minorities	-1,635	-2,645
Group net profit	52,636	59,079	12.2%

• Higher D&A mainly due to the purchase price allocation amortization.
• Higher Financial charges due to the macro trend on interest rates and noncash interests linked to the put-call options on a number of minority stakes.
• Lower net gain deriving from associates (equity method) due to an extraordinary item reported in H1 2022
• Higher tax-rate (23.8%), compared to 9M 2022 (20.8%) due to a different Country-mix and a number of changes in regulations.
• Higher minorities due to strong performance reported by CFM.

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9M 2023 – NFP Bridge

• Total NFP equal to 265m€, including 184m€ coming from M&A (Kiona and Eurotec). NFP to LTM EBITDA* lower than 2x

• ΔNWC +38.1m€: Substantially in line with what reported in H1 2023. The growth compared to FY 2022 was driven by higher receivables due to higher revenues and an increase in inventory (~25m€) mainly linked to the raw material shortage phenomenon reported in the last two years and to the desire to increase supply resilience.
• 34.1m€ related to IFRS 16 accounting effect.

(*)NFP 9M 2023 – LTM EBITDA calculated as the sum of 9M 2023 reported EBITDA and Q4 2022 reported EBITDA

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Closing Remarks

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• Macro-economic scenario deteriorated in the last months and volatility greatly increased. • In heat pumps, despite the presence of a solid structural trend, a temporary deceleration in the • In spite of a deterioration of the macro-economic scenario, CAREL reported again a double-digit organic revenues growth in Q3 2023 compared to Q3 2022. • Balanced mix between organic growth and M&A contribution led to a 24% growth in total revenues compared to 9M 2022. • Further increase in EBITDA margin both as adjusted (22.7%) and as reported (22.3%). • Completion of the Kiona acquisition (and Eurotec acquisition in January 2023) • The target date already disclosed to complete the rights issue by the end of this year is confirmed (subject to the market conditions and regulatory bodies approval). 9M 2023 Results Capital Increase
  • Outlook
• growth rate is materializing in some European countries.
• In Refrigeration the weak demand trend reported in H1 2023 continued in Q3 2023 and no significant signs of recovery in the investment cycle have materialized so far.

Guidance

9 Taking the above into account and excluding any further worsening of the economic scenario, the Group expects total revenue of approximately 646m€ for FY 2023 with a +2%/-2% variability on this central value following the significant volatility present today on the market, which could lead to the postponement of some deliveries to 2024. The Group adj. EBITDA margin in FY 2023 is expected to be between 20.5% - 21.5%.

Annexes

Shareholding structure (>3% voting rights)

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Income statement and Balance Sheet

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Income statement Balance sheet

K€	9M 2023	9M 2022	Delta %
Revenues	497,213	401,076	24.0%
Other revenues	3,712	3,179	16.7%
Operating costs	(390,220)	(318,337)	22.6%
Operating costs adj.	(387,902)	(316,566)	22.5%
EBITDA	110,705	85,918	28.8%
EBITDA ADJ.	113,023	87,689	28.9%
Depreciation and impairments	(23,137)	(17,033)	35.8%
EBIT	87,568	68,885	27.1%
EBT	81,048	68,508	18.3%
Taxes	(19,325)	(14,236)	35.7%
Net result of the period	61,724	54,271	13.7%
Non controlling interest	2,645	1,635	61.7%
Group net result	59,079	52,636	12.2%

K€	9M 2023	FY 2022*	Delta %
Fixed Capital	492,426	313,282	57.2%
Working Capital	109,579	85,899	27.6%
Employees defined benefit plans	(8,171)	(8,129)	0.5%
Net invested capital	593,834	391,053	51.9%
Equity	184,313	221,247	(16.7%)
Non currrent liabilities	144,198	73,965	95.0%
Net financial position (asset)	265,322	95,841	176.8%
Total	593,834	391,053	51.9%

*Restated

Company Profile

Leading provider of advanced control solutions for HVAC/R

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Note: 1) avg. 2015A-22A – In 2020-2022 the R&D/revenue avg. ratio was ~4.5% due to a strong growth in revenue.

Note: financial data refer to consolidated accounts of CAREL Industries S.p.a. 2015-2022 IFRS. Comparability might be affected by change in consolidation perimeter

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We operate in attractive niches across a wide range of end-markets…

Source: Company information

…through a one-stop-shop portfolio of components and platforms

Distinctive ability to meet customers' demand for tailored integrated solutions using standard platforms

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Source: Company information Note: 1) developed with partners

Long track record of revenue growth

Well-articulated strategies to continue the growth track record

• Consolidation of HVAC market leadership
• Growth in Refrigeration driven by technology leadership
• Upselling and cross-selling
• Global penetration
• Connectivity, IoT and AI capabilities already developed
• Advanced monitoring and optimization services to end customers to represent one of CAREL's organic growth drivers
• Maintain innovation leadership
• Deliver strong profitability
• Leveraging the current production capacity, further enhancing flexibility
• Develop talent
• Disciplined bolt-on M&A activity focused on complementing corebusiness in Europe, on expanding in US and APAC and on adjacent capabilities, leveraging on solid balance sheet

CAREL general strategy for 2023-2026 will be oriented to the research for new innovative technological solutions with a major focus on energy saving, transition to natural refrigerants, widening high-efficiency solutions offer and geographical expansion

Source: Company information

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B

C

Leading provider of advanced energy efficient control solutions

¹ High-tech leader in attractive niches of the HVAC/R industry

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In Europe

Source: Company elaborations as of 31 December 2022 based on Building Services Research and Information Association data as of 31 December 2021

Note: 1) the rest of the market is mainly driven by proprietary solutions 2) tested by third-party laboratory compared to Top-ten EU benchmarks; 3) compared to average semi-hermetic

² Attractive market growth supported by secular trends

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Source: Company information

Growth is driven by market trends and focused strategic actions… 2

wallet

innovations, such as energy saving features, digitalisation and environmental focus

Expansion of market of reference Market of reference for applications CAREL can address

CAREL share of applications market

…and favoured by up-selling and cross-selling 2

FROM PRODUCT PLATFORMS TO INTEGRATED ELECTRONIC SOLUTIONS…

…IN THE HVAC AND REFRIGERATION MARKETS

Positioning and innovation capability hard to replicate 3

Leadership position in HVAC OEM premium niches… 3

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Source: Company elaborations as of 31 December 2022 based on Building Services Research and Information Association data as of 31 December 2021

…and leading in innovation in the refrigeration market 3

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Source: Company information and elaborations

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4 Highly efficient global operations

Track record of profitable growth

Resulting in a solid balance sheet and strong value creation to shareholders

Source: Company information Note: 2015-2022 IFRS

Note: 1) Including the contribution from M&A and the impact of the non recurring IPO Costs (~8m€ in 2018) 2) Operating cash calculated as cash flow from operations – Net Capex;

Global expansion, innovation and services 6 A

Pursuing additional opportunities improving services offer with IoT and advanced monitoring solutions

Cross-selling and upselling exploiting high-efficiency trends

Consolidation of leadership positions in HVAC Growth in Refrigeration

Geographical expansion through the introduction of innovative solutions in new geographies

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Pursuing external growth through disciplined bolt-on M&A 6 B

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CAREL has performed detailed analyses and scouting of potential targets, thus promoting an opportunistic approach with a focus on 3 MAIN EXPANSION AREAS:

M&A

M&A – 2023 – Kiona

• Company profile: Kiona is a leading Norway-based Software as a Service ("SaaS") provider of property technologies solutions for energy consumption optimization and building digitalization in retail & industrial refrigeration, public, commercial and multiresidential facilities.
• Rationale: The transaction serves as a strategic move to further strengthen CAREL's positioning as a global leader in the HVAC-R industry, addressing the increasing digitalization and shift towards servitization of the sector, as Kiona is expected to materially enhance and accelerate the development of CAREL's software and digital services offering.
• Transaction structure: Carel Industries S.p.A acquired 82.4% of Kiona on the 31st of August 2023. The acquisition consideration implies a 100% Enterprise Value of NOK 2.35 billion (c. €210m). Each of the founder & CEO and other minor shareholders retained a significant portion of their stake, which on an aggregate basis accounts for a c. 17.6% minority stake subject to a 3-years lock up period followed by a put and call option scheme.

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• Industrial fitting:

• Increasing R&D fire-power in digital solutions by joining CAREL and Kiona teams.
• Strengthening CAREL capabilities to develop and sell digital services.
• Opening new commercial opportunities for Kiona
• Developing technological synergies between the Kiona system at the installation level and the CAREL controls on the HVAC/R units

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M&A – 2022 – Senva

• Company profile: SENVA is a US company located in Oregon specialising in the design and manufacture of a wide range of sensors, mainly in the air-conditioning and ventilation sectors, and with a significant presence in indoor air quality.
• Rationale: the acquisition of SENVA is a further step towards the process of external growth through complementary products in reference applications that began in 2018. As in the case of Arion's acquisition (April 2022), the focus in the sensors segment is key to making products more efficient and more connected to their ecosystem, while also facilitating the activation of digital services. Furthermore, Numerous synergies can be achieved through the integration of CAREL and SENVA
• Transaction structure: Carel Industries S.p.A acquires all SENVA Inc.'s business through a SPV held by Carel USA Inc., Carel Industries S.p.A.'s US subsidiary. That acquisition is valued at USD 34 million. CAREL will also make an additional payment of up to USD 4 million tied to certain EBITDA results, for a total potential acquisition value of USD 38 million.

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M&A – 2022 – Klingenburg

• Company profile: Klingenburg GmbH and Klingenburg International Sp. Z.o.o. are leading producers of a wide range of products used mainly for heat recovery in ventilation and humidification systems, adiabatic cooling and air purification.

• Rationale: The transaction rationale is mainly attributable to the high degree of complementarity between Recuperator and Klingenburg in relation to the respective technologies of specialisation (plate exchangers for Recuperator and rotary for Klingenburg) and to the application areas. Furthermore it will strengthen CAREL's profile as a supplier of complete control solutions with high added value in the conditioning and refrigeration industry, with energy efficiency as one of their main characteristics.
• Transaction structure: The transaction, through which CAREL Industries S.p.A. takes over control of Klingenburg GmbH and Klingenburg International Sp. Z.o.o. via the acquisition of 100% of the share capital of the German and Polish companies, took place in response to an Enterprise Value of Euro 12.0 million (adjusted for approximately 2 million deferred capex).

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M&A – 2022 – Sauber

• Company profile: Sauber is based in Porto Mantovano (Mantua) and is active mainly in the sector of on-field installation and maintenance services for HVAC/humidification systems in commercial and residential buildings, with a strong focus on energy saving and optimization.
• Rationale: the transaction can be traced back to the implementation of one of the main pillars of CAREL's strategy of strengthening its services area (digital, onfield and consulting) both by internal activities and through acquisitions.
• Transaction structure: Carel takes over control of Sauber through the acquisition of 70% of its share capital. The acquisition of the remaining 30%, the valuation of which is tied to Sauber future results, is governed by a cross-option mechanism between the parties, exercisable in 2025.

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M&A – 2022 – Arion

• Company profile: Arion is the joint venture based in Bolgare (Bergamo Province - Italy), established in 2015 between CAREL and Bridgeport S.p.A. with the aim of developing sensor technology expressly dedicated to the air conditioning and refrigeration sectors.
• Rationale: The transaction is consistent with the Group's long-term strategy since the use of increasingly advanced sensors will make the equipment more efficient, more reliable and more connected with the eco-system in which they are inserted, also facilitating the activation of digital services.
• Transaction structure: Carel acquired a further 30% of the share capital of Arion reaching a 70% stake.

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M&A – 2021 – CFM

• Company profile: a long-standing distributor and partner in Turkey as well as a provider of digital and on-field services and complete high added value solutions dedicated to OEMs, contractors and end users in the Turkish HVAC (Heating, Ventilation and Air conditioning) and Refrigeration market.
• Transaction structure: Carel took control of CFM through the acquisition of 51% of the share capital of the company The acquisition of the remaining 49% of CFM, the valuation of which is tied to CFM future results, is governed by a cross-option mechanism between the parties, exercisable between 2024 and 2027.

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M&A – 2021 – Enginia

• Company profile: Enginia has been operating in the AHU sector since 1997 and has grown year after year to become a recognized leader, particularly as regards the manufacture production of dampers for air handling units.
• Rationale: expansion of the product portfolio in the HVAC market, consolidating CAREL's role as a supplier of complete solutions to manufacturers of air handling units through advanced solutions in terms of performance and energy efficiency.
• Transaction structure: Carel, through its subsidiary Recuperator, acquired 100% of the share capital of Enginia.

*The transaction included the real estate complex that houses the company's headquarters, which was valued separately.

M&A – 2018 – Recuperator

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• Company profile: Recuperator is an Italy-based company active in the design, production and sale of "air-to-air" heat exchangers.
• Rationale: Integration with Recuperator expands CAREL's product portfolio in the HVAC market, consolidating its role as a supplier of complete solutions to manufacturers of air handling units, providing them with ever better solutions in terms of performance and energy efficiency.
• Transaction structure: The purchase price for the entire share capital of Recuperator is EUR 25.7 million, financed through the use of CAREL's own funds and bank loans

M&A – 2018 – HygroMatik

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• Company profile: Hygromatik is based in Henstedt-Ulzburg, near Hamburg. It designs, produces and markets humidifiers and related accessories, in the industrial, commercial and wellness field.
• Rationale: integration with HygroMatik will consolidate Carel's positioning in German-speaking countries and in northern Europe thanks to the strong penetration of the acquired company in these markets and will allow for a better positioning in the context of different applications, leveraging the strength of the brand, the industrial excellence and specialised expertise in the field of humidification of one of the main players in the sector
• Transaction structure: The purchase price and the related cash-out for the entire share capital of HygroMatik GmbH amounted to EUR 56.1 million, financed through the use of own funds and bank loans,

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