Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll-Rand — Morgan Stanley 7th Annual Laguna Conference 2019
40 slides from Trane Technologies's conference presentation, September 2019
Slide 1: Morgan Stanley 7th Annual Laguna Conference September 2019
Morgan Stanley 7th Annual Laguna Conference September 2019
Slide 2: Safe Harbor
Safe Harbor This presentation includes “forward-looking statements” which are statements that are not historical facts, including statements that relate to the proposed transaction between Gardner Denver Holdings, Inc. and the Company; the mix of and demand for our products; performance of the marke
Slide 3: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurcha
Slide 4: A Global Leader in Energy Efficiency and Productivity
A Global Leader in Energy Efficiency and Productivity Two Segments Key Metrics (Revenues 2018) Manufacturing locations worldwide 52 Employees ~49,000 Industrial $3.3B $12.4B Climate Market cap ~$25B # of countries we sell products 100+ 4
Slide 5: Diversified Business With High Aftermarket Mix
Diversified Business With High Aftermarket Mix Segment Distribution Regional Mix Revenue Streams 4% Latin America Industrial 13% Asia Pacific 33% Parts and Services Europe, Middle 15% East, Africa $15.7B 68% North America 67% Equipment Climate All figures are FY 2018. 5
Slide 6: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC Residential HVAC Transport Refrigeration ● World leader in HVAC ● Leader in heating and air ● World leader in refrigerated conditioning solutions transportation Industrial and Process Fluid Handling Golf and Utility Vehicles ● Leader in compression
Slide 7: Climate Segment: Diversified and Resilient Performance
Climate Segment: Diversified and Resilient Performance Segment Mix Regional Mix Revenue Streams 4% Latin America Transport Commercial 10% Asia Pacific Refrigeration HVAC 32% Parts and Services Equipment 15% Europe, Middle East, Africa $12.4B Residential HVAC 71% North America Equipment 68% Commercia
Slide 8: Industrial Segment: Diversified and Resilient Performance
Industrial Segment: Diversified and Resilient Performance Business Units Regional Mix Revenue Streams 3% India Small Electric 4% Latin America Industrial Vehicles Comp. 17% Europe, ME, Africa 39% Parts and Service 21% Asia Pacific $3.3B Industrial Engineered Products1 Comp. 61% Equipment 55% North A
Slide 9: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow (2014 – 2018) 1. Attractive, diversified 2. Leading brands, market positions end markets – outgrowing market rates $5.7 billion free cash flow over the last 5 years 5. Investing for growth 3. Focused on margin and profitability expansion (growth / op.
Slide 10: Driving Sustained Growth and Operating Margin Improvement
Driving Sustained Growth and Operating Margin Improvement In Billions Revenue Adjusted Continuing EPS $16 $6.00 14% $15 5% $5.00 CAGR CAGR $14 $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 In Billions Cumulative Free Cash Flow Adjusted Operating Marg
Slide 11: Maximizing Shareholder Value
Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value (2014 – 2018) $8.3 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$1.3B Capex • ~$1.8B dividends paid • $3.8B • ~$1.4B on 22 • ~20% CAGR dividend • ~54 million shares acquisitions per shar
Slide 12: Ingersoll Rand 2020 Targets
Ingersoll Rand 2020 Targets* Year-End 2017 to 2020 Targets Revenue Growth ~4% to ~4.5% CAGR Adjusted Operating Margins ~14.5% to ~15% in 2020 Adjusted Continuing EPS Growth ~11% to ~13% CAGR Based on ~22% tax rate Free Cash Flow (% Net Income) >=1.0 times Balanced Cap Deployment of Excess Cash ~100%
Slide 13: Global Mega Trends Play to Our Strengths
Global Mega Trends Play to Our Strengths Global Mega Trends Our Strengths • Climate change • Reduce energy demand and greenhouse gas emissions • Urbanization • Improve efficiency in: • Natural resource scarcity – Buildings • Digital connectedness and – Industrial processes technologies – Transportat
Slide 14: Significant Ongoing Business Investments Support Growth and Profitability
Significant Ongoing Business Investments Support Growth and Profitability Business Investments Key Examples ● ~90 major new products / services ~20% throughout the world in 2018 CAGR ● New low-global warming potential refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Part
Slide 15: Growth and Profitability Opportunities from Ongoing Business Investments
Growth and Profitability Opportunities from Ongoing Business Investments Subset of Incremental Opportunities Contributing to 2020 Targets* ~$200M ~$400M ~$300M ~$100M Climate Variable Refrigerant Flow Energy Services Digital Customer Experience Auxiliary Power Unit ~$40M Operating Income ~$100M ~$17
Slide 16: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Drive innovation and productivity 2 Proven & unique system to accelerate profitable growth 3 Committed to sustainability and energy efficiency 4 Focus on employee engagement 16
Slide 17: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Sustainability Diversity and Inclusion Citizenship 1st in our Industry to sign onto Global 100 Most Sustainable Paradigm for Parity FTSE4Good Index Series Corporations for 5th consecutive year n
Slide 18: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth Strategy ● Strategy tied to attractive end markets supported by global mega trends Brands ● Franchise brands and businesses with leadership market positions Innovation ● Sustained business investments delivering innovation and growth, o
Slide 19: Second-Quarter 2019 Results
Second-Quarter 2019 Results July 30, 2019
Slide 20: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurcha
Slide 21: 2019 Mid-Year Update: Effectively Managing an Evolving Landscape
2019 Mid-Year Update: Effectively Managing an Evolving Landscape • Remain bullish on strategy, key end markets, execution. Expect to effectively navigate evolving 2019 landscape − Remain confident in FY rev guidance; Revenues supported by backlog, order rates and pipeline − Increasing full-year 2019
Slide 22: Strong Organic Revenue Growth led by Climate; Solid Bookings
Strong Organic Revenue Growth led by Climate; Solid Bookings in Climate (ex. Transport) and Industrial Q2 Organic* Y-O-Y Change Bookings Revenue Climate Commercial HVAC + + • Strong, broad based rev growth - N.A., - North America + + Europe and Res; all up MSD to HSD - Latin America - + • Ex. Transp
Slide 23: Continued Growth in Healthy End Markets
Continued Growth in Healthy End Markets • Major CHVAC markets remain positive for IR – cont’d strong bookings and revenue growth • N.A. and Europe growth strong, order rates, backlog pipeline support full year outlook Commercial HVAC • Q2 – modest China HVAC bookings and rev growth against double di
Slide 24: Continued Growth in Healthy End Markets
Continued Growth in Healthy End Markets • CTS organic bookings up ~MSD; organic revenues down ~LSD Compression • Monitoring China trade negotiations Technologies • Global markets impacted by short-cycle slowdown; Long-cycle broadly healthy Small Electric • Strong growth in Small Electric Vehicles le
Slide 25: Strong Q2 Financial Performance
Strong Q2 Financial Performance • Strong operating results – Adjusted continuing EPS of $2.09, up 13% year over year driven by strong performance in Climate – Raising adj. cont. EPS guidance to ~$6.40 from ~$6.35 • Solid Q2 organic revenue growth – Strong, broad-based organic rev growth in Climate,
Slide 26: Q2 2019 Strong EPS Growth from Continued Revenue Growth and Margin Expansion
ENTERPRISE Q2 2019 Strong EPS Growth from Continued Revenue Growth and Margin Expansion Net Revenue Adj. Operating Margin* Adj. Continuing EPS* +4% +80 +13% Organic bps $4,528 15.7% $2.09 $4,358 14.9% $1.85 +4% Q2 '18 Q2 '19 Q2 '18 Q2 '19 Q2 '18 Q2 '19 Highlights • Strong organic revenue growth led
Slide 27: Continued Strong Climate Performance Driving Adj. Cont. EPS +13%
ENTERPRISE Continued Strong Climate Performance Driving Adj. Cont. EPS +13% +$0.24 $0.13 $0.02 $0.05 $0.04 $2.09 $1.85 $0.05 Corp Cost $0.02 Oth Exp ($0.05) Interest $0.03 Tax rate Q2 2018 Climate Industrial Other Share Count Q2 2019 Adjusted Adjusted Continuing EPS* Continuing EPS* Highlights • Con
Slide 28: Strong Price and Productivity Driving 80 bps Margin Expansion
ENTERPRISE Strong Price and Productivity Driving 80 bps Margin Expansion +80 bps 0.4 (0.4) flat 0.8 15.7% 14.9% Q2 2018 Vol / Mix / FX / Acq Price / Material Productivity / Other Investment / Other Q2 2019 Adjusted Operating Inflation Inflation Adjusted Operating Margin* Margin* Highlights • Strong
Slide 29: Climate Segment: Q2 Continued Strong Revenue Growth and Margin Improvement
CLIMATE SEGMENT Q2 Continued Strong Revenue Growth and Margin Improvement Net Revenue Adj. Operating Margin* Adj. EBITDA %** +5% +50 +30 Organic bps bps $3,618 17.3% 18.9% $3,494 18.6% 16.8% +4% Q2 '18 Q2 '19 Q2 '18 Q2 '19 Q2 '18 Q2 '19 Highlights • Continued broad based organic rev growth across vi
Slide 30: Industrial Segment: Q2 Solid Organic Revenue Growth Against Tough Compares
INDUSTRIAL SEGMENT Q2 Solid Organic Revenue Growth Against Tough Compares (PY +9%) Net Revenue Adj. Operating Margin* Adj. EBITDA %** +2% +10 +60 Organic bps bps $910 $864 16.3% 16.9% 14.2% 14.3% +5% Q2 '18 Q2 '19 Q2 '18 Q2 '19 Q2 '18 Q2 '19 Highlights • Organic revenue growth from CTS service and S
Slide 31: Continued Execution of Balanced Capital Allocation Strategy
Continued Execution of Balanced Capital Allocation Strategy • Strengthen the core business and extend product & market leadership 1 Invest for Growth • • Invest in new technology and innovation Strategic acquisitions - pipeline remains active • Completed PFS acquisition • Drive FCF conversion of gre
Slide 32: Topics of Interest
am) Ingersoll Rand Inspiring Progress™ Topics of Interest teeta bid trol!
Slide 33: Topics of Interest
Topics of Interest Key impacts* vs. Q1 2019 Earnings Call: • Precision Flow Systems Closed − Acquisition closed May 15, 2019 for ~$1.45B − Integration with existing ARO business underway, progressing according to plan − 2019 guidance update, consistent with business case • ~$250M in revenue expected
Slide 34: Revenue Impact of PFS Acquisition
Revenue Impact of PFS Acquisition Original 2019 FY Guidance Add PFS 2019 FY Guidance (Jan 2019) Acquisition (incl. PFS) Climate Industrial Enterprise Industrial Enterprise Reported Revenue 4.0% to 5.0% 3.0% to 4.0% 4.0% to 5.0% +$250M 10.5% to 11.5% 5.5% to 6.5% Organic* Revenue 5.0% to 6.0% 4.5% to
Slide 35: Topics of Interest (cont.) Industrial Segment Transaction Update
Topics of Interest (cont.) • Industrial Segment Transaction Update − Regulatory Approvals • Expiration of the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act) waiting period; Expiration of the HSR Act waiting period satisfies one of the conditions to closing of the transaction. • The proposed
Slide 36: Summary: Expect Strong Rev, EPS and Free Cash Flow in 2019
Summary: Expect Strong Rev, EPS and Free Cash Flow in 2019; Adj Cont EPS Guidance Raised to ~$6.40 Strategy ● Strategy tied to attractive end markets supported by global mega trends Brands ● Franchise brands and businesses with leadership market positions Innovation ● Sustained business investments
Slide 37: Appendix
am) Ingersoll Rand Inspiring Progress™ Appendix
Slide 38: Q2 Organic Revenue Up 4% Year-Over-Year; Organic Bookings Down 2%
Q2 Organic Revenue Up 4% Year-Over-Year Organic Bookings Down 2% Against Tough Comparison Organic* 2017 2018 2019 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Climate 6% 3% 5% 7% 5% 11% 17% 12% 20% 15% -3% -4% Industrial 9% 5% 5% 12% 8% 5% 8% 7% 6% 6% 1% 8% Total 7% 4% 5% 8% 6% 9% 15% 11% 17% 13% -2
Slide 39: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Organic bookings is defined as reported orders in the current period adjusted for the impact of currency and acquisitions. Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions. • Currency impacts on net revenues and boo
Slide 40: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Free cash flow in 2019 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for PFS acquisition-related transaction costs, Industrial Segment separation-related costs and restructuring. Free cash
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