Carel Industries

Earnings Release • Mar 2, 2023

CAREL INDUSTRIES S.p.A. 2022 – FY Results

This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.

2 nd March 2023

FY 2022 – Main achievements

• Completion of a new building in Croatia: additional 5,200 square-meters production plant to increase CAREL's flexibility and capacity in order to support its development in Europe.
• Completion of two new high-efficiency buildings in the HQ (Padua) with new offices, a new conference and training centre, new technology showroom and a brand new thermodynamic research laboratory 2x times the size of the current one.
• Implementation of the 1° wave of the PLM (Product Lifecycle Management) project, with the objective to drastically reduce the lead-time for product customization.

• The Company joined the UN Global Compact in July to reaffirm its commitment towards environmental and social sustainability.

• All the ESG ratings improved (MSCI; Sustainalytics; CDP) confirming the effort of the company in integrating business and sustainability.

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ESG

• CAREL completed 4 bolt-on transactions and the M&A pipeline remains active
• Acquisition of 70% of the share capital of Sauber
• Acquisition of a further 30% stake in Arion
• Acquisition of 100% of Klingenburg
• Acquisition of 100% of Senva

FY 2022 – Highlights

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For the second consecutive year CAREL reported a FY revenue growth rate close to 30% maintaining a profitability higher than 20% and an NFP/EBITDA ratio <1x.

Adding to this the strong effort in M&A activity (4 deals completed) and a continuous commitment in ESG.

• On a like-for-like basis growth would have been 20.8%. Organic revenue (LFL basis and constant FX) reported growth rate is +17.7%.

• All the sectors and all the regions contributed to the 2022 excellent results in spite of a challenging scenario both in terms of geopolitical tensions and in terms of supply chain constraints. The latter prevented the company from expressing completely its potential in presence of very positive trends in a certain number of applications in HVAC (Heat pumps; Indoor Air Quality; Data centres) and in Refrigeration.

• EBITDA margin equal to 20.5%, slightly higher on FY 2021 (20.3%). Net of ~3.0m€ nonrecurring M&A activity costs, the EBITDA margin would have been 21.1%.

• The partial deployment of the effects deriving from previous price-list increases and the positive operating leverage offset higher raw materials cost due to the shortage.
• Very solid balance-sheet. Robust cash generation maintained NFP lower than 100m€ and NFP/EBITDA ratio lower than 1x.
• Excluding the purely accounting IFRS 16 effect, the NFP would stand at ~63m€, bringing NFP/EBITDA ratio at 0.5x

FY 2022 – Results

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m€	FY 2021	FY 2022	Δ%
Revenue	420.4	544.9(1)	29.6%
Revenue FX Adj.	420.4	532.0	26.5%
Revenue (no M&A)	420.4	507.8	20.8%
EBITDA	85.3	111.7(2)	31.0%
EBITDA adj.	88.2	114.7(3)	30.1%
EBITDA adj. Revenue	21.0%	21.1%
Net Profit	49.1	62.1	26.6%
Capex	18.7	26.8	43.3%

420.4 74.5 37.1 12.9 544.9 Revenues FY 2021 Organic Growth M&A FX Revenues FY 2022 KPIs FY 2022 Revenues bridge m€

(1) Incl. ~37.1m€ (change in the consolidation perimeter); (2) Incl. ~7.5m€ (change in the consolidation perimeter); (3) Incl. ~3.0m€ (M&A expenses)

• Revenue +29.6%: Solid 2022 performance driven by a generalized growth across the board along with the contribution of the companies acquired in the last 18 months (CFM; Enginia; Arion; Sauber; Klingenburg; Senva). Expected slight deceleration in the organic growth rate in Q4 2022 due to a seasonal effect (Q4 usually being one of the softest) and an electronic material shortage issue hitting mainly the Refrigeration sector.
• EBITDA +31.0%: The very positive results reported in revenues were reflected in the EBITDA growth rate thanks to the full deployment of previous price-list increases, along with operating leverage which helped in recovering part of the raw material cost inflation. Q4 2022 EBITDA margin (~18%) broadly in line with Q4 2021.
• Net Profit +26.6%: benefitting from the operating results. 22.3% tax-rate (19.6% in 2021) impacted by a different country-mix and changes in regulations.
• Capex: higher capex including the new production plant in Croatia and the new buildings in the HQ.
• Dividend: 0.18€ per share proposed dividend (+20% compared to 2021); ~30% pay-out ratio

FY 2022 – Revenue breakdowns

• EMEA Very solid growth in the biggest geographic area in all the segments. LFL growth rate close to 18%.
• APAC Significant growth in spite of a challenging macro scenario in China (2022 GDP growth equal to 3%). South APAC over-performed (growth rate >30%)
• Americas (North) Even excluding M&A contribution and the positive FX impact, the growth rate reported would have been >20%.

• Americas (South) Very positive performance in particular outside Brazil, in those regions heavily impacted by pandemic.

• HVAC: Excellent growth confirmed (>20% excluding M&A and FX), driven by a strong demand across the board also in Q4 (particularly strong in heat pumps, Indoor air quality and data centers).

• Refrigeration: Excluding M&A and FX the growth rate would have been ~10%. Q4 2022 was heavily impacted by a temporary tightening of the electronic material shortage phenomenon. 5

From EBITDA to Net Profit

• Higher D&A mainly due to the purchase price allocation amortization
• Higher Financial charges due to the macro trend on interest rates.
• Fair value from options on minorities related to CFM
• The growth in Companies consolidated with equity method is due to the application of the fair-value principle on Arion stake, following the related M&A transaction.
• Higher tax-rate (22.3%), compared to FY 2021 (19.6%) due to a different Country-mix and a number of changes in regulations.

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FY 2022 – NFP Bridge

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• Robust cash generation covering ΔNWC, Capex, Dividends and partly M&A.
• ΔNWC +24.8m€: due to higher revenues (DSO are lower on 2021) and a strategic consolidation of the safety stock (~15m€). It is worth nothing that the level of NWC decreased by ~15m€ compared to 9M 2022.
• Approximately 35% of the total FY 2022 NFP is related to IFRS 16 accounting effect.

ESG rating - Update

Closing Remarks

Annexes

Shareholding structure (>3% voting rights)

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Income statement and Balance Sheet

Income statement Balance sheet

K€	FY 2022	FY 2021	Delta %
Revenues	544,852	420,418	29.6%
Other revenues	5,780	5,779	0.0%
Operating costs	438,906	340,895	28.8%
EBITDA	111,725	85,302	31.0%
Depreciation and impairments	(24,414)	(20,844)	17.1%
EBIT	87,311	64,457	35.5%
EBT	83,402	61,055	36.6%
Taxes	(18,603)	(11,967)	55.5%
Net result of the period	64,799	49,088	32.0%
Non controlling interest	2,675	29	>100%
Group net result	62,124	49,059	26.6%

K€	FY 2022	FY 2021	Delta %
Fixed Capital	300,499	230,338	30.5%
Working Capital	89,926	55,591	61.8%
Employees defined benefit plans	(8,129)	(8,612)	(5.6%)
Net invested capital	382,296	277,317	37.9%
Equity	221,247	169,875	30.2%
Non currrent liabilities	65,208	49,602	31.5%
Net financial position (asset)	95,841	57,841	65.7%
Total	382,296	277,317	37.9%

Company Profile

Leading provider of advanced control solutions for HVAC/R

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This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.

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

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Source: Company information as of Mar-22

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

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Source: Company information as of Mar-22 Note: 1) developed with partners

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 as of Mar-23

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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 information as of Mar-2023, BSRIA (Dec.-21)

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

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Leadership position in HVAC OEM premium niches… 3

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Source: Management elaborations based on BSRIA data for the year 2021

This document and all of its contents are property of CAREL. All unauthorised use, reproduction or distribution of this document or the information contained in it, by anyone other than CAREL, is severely forbidden.

…and leading in innovation in the refrigeration market 3

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Source: Company info; Management elaborations

4 Highly efficient global operations serving locally…

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4 …diversified blue-chip customers

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Well-established relationships oriented to preserve and enhance the CUSTOMER LIFE-TIME VALUE

Source: Company information as of March.23;

Note: 1) as% of 2022 Revenues 2) as of 2021 revenues for each market 3) Top 40 customers accounting for approx. 50% of total revenue for each market

Track record of profitable growth

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

Source: Company information as of Mar-23

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;

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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 – 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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• Key Data:

• Enterprise value (100%) = 34-38m€
• 2021 Revenues = ~13m USD
• EBITDA (TTM) = 3.1m USD

• Employees = ~65

• Bolt-on acquisition

• Strong complementarity with CAREL's product line-up
• Strong cross-selling and channel/geographical expansion opportunities
• Financial fitting:
• ~12x EV/EBITDA
• Low impact on Carel's NFP

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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• Key Data:

• Enterprise value (100%) = 12m€
• 2021 Revenues = ~30m€
• EBITDA = 2.4m€

• Employees = ~200

• Bolt-on acquisition

• Strong complementarity with Recuperator's product line-up
• Strong cross-selling and geographical expansion opportunities
• Financial fitting:
• ~5x EV/EBITDA
• Low impact on Carel's NFP

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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• Key Data:

• Equity value (70%) = 3.6m€
• 2021 Revenues = 7.6m€
• EBITDA = 0.8m€

• Employees = ~55

• Bolt-on acquisition

• Strong know-how in on-field services and energy savings
• Strong possible synergies with Iot/Digital services provided by CAREL
• Financial fitting:
• ~7x EV/EBITDA
• Low impact on Carel's NFP

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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• Key Data:

• Equity value (30%) = 1.2m€
• 2021 Revenues = 2.7m€
• 2020 EBITDA = 0.5m€
• Employees = 6
• Industrial fitting:
• Bolt-on acquisition
• Enabler of digital services
• Focus on those applications presenting higher growth trends
• Secure supply-chain in critical technology
• Financial fitting:
• ~7x EV/EBITDA Low impact on Carel's NFP

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 takes 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 crossoption mechanism between the parties, exercisable between 2024 and 2027.

• Key Data:

• Enterprise value (51%) = 23.1m€
• 2020 Revenues = 14.5m€
• EBITDA = 5.0m€

• Employees = ~34

• Bolt-on acquisition

• Footprint expansion outside Western Europe
• Strong know-how in digital and onfield services
• Financial fitting:
• ~9x EV/EBITDA
• Low impact on Carel's NFP

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.

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• Key Data:

• Enterprise value* = 12.4m€
• 2020 Revenues = 12.3m€
• 2020 EBITDA = 1.5m€

• Employees = 46

• Bolt-on acquisition

• Completing CAREL's product range for AHU
• Significant synergies with CAREL/Recuperator
• Financial fitting:
• ~8x EV/EBITDA* Low impact on Carel's NFP

M&A – 2018 – Recuperator

• Key Data:

• Cash-out for equity = 25.7m€
• Company positive net-cash = 6.9m€
• 2017 Revenues = 16.4m€
• EBITDA = 1.7m€
• Employees = ~60

• Industrial fitting:

• Small-size Company
• Complementary products
• Carel's commercial strength
• Cross-selling

• Financial fitting:

• ~11x EV/EBITDA vs. CAREL's ~15x
• Net-Cash in the BS
• Low impact on Carel's NFP

M&A – 2018 – HygroMatik

• Key Data:

• Cash-out for equity = 56.1m€
• Enterprise Value = 59.0m€
• 2017 Revenues = 15.0m€
• EBITDA = 4.7m€
• Employees = ~60

• Industrial fitting:

• Small-size Company
• Interesting geographic positioning
• Strong in after-sale services

Cross-selling

• Financial fitting:

• ~12.5x EV/EBITDA vs. CAREL's ~15x
• HygroMatik NFP substantially neutral.

Disclaimer

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This document has been prepared by CAREL Industries S.p.A for use during meetings with investors and financial analysts and is solely for information purposes. The information set out here in has not been verified by an independent audit company.

Neither the Company nor any of its subsidiaries, affiliates, branches, representative offices (the "Group"), as well as any of their directors, officers, employees, advisers or agents (the "Group Representatives") accepts any responsibility for/or makes any representation or warranty, express or implied, as to the accuracy, timeliness or completeness of the information set out herein or any other related information regarding the Group, whether written, oral or in visual or electronic form, transmitted or made available.

This document may contain forward-looking statements about the Company and/or the Group based on current expectations and opinions developed by the Company, as well as based on current plans, estimates, projections and projects of the Group. These forward-looking statements are subject to significant risks and uncertainties (many of which are outside the control of the Company and/or the Group) which could cause a material difference between forward-looking information and actual future results.

The information set out in this document is provided as of the date indicated herein. Except as required by applicable laws and regulations, the Company assumes no obligation to provide updates of any of the aforesaid forward-looking statements.

Under no circumstances shall the Group and/or any of the Group Representatives beheld liable (for negligence or otherwise) for any loss or damage howsoever arising from any use of this document or its contents or otherwise in connection with the document or the aforesaid forward looking statements. This document does not constitute an offer to sell or a solicitation to buy or subscribe to Company shares and neither this entire document or a portion of it may constitute a recommendation to effect any transaction or to conclude any legal act of any kind whatsoever.

This document may not be reproduced or distributed, in whole or in part, by any person other than the Company. By viewing and/or accepting a copy of this document, you agree to be bound by the foregoing limitations