Trane Technologies Plc · NYSE:TT
Trane Technologies — 2020 Morgan Stanley Laguna Conference
30 slides from Trane Technologies's conference presentation, Sep 11, 2020
Slide 1: Investor Presentation September 2020
Investor Presentation September 2020
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 our future performance, the COVID-19 global pandemic, capital deployment including the amount and timing of our dividends, our share repurchase
Slide 3: Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term
Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term 1. 2. 3. 4. Sustained Operational Dynamic Capital Uplifting Growth Excellence Allocation Culture Innovation at the nexus Lean methodology Reinvestment, dividends, Commitment to of sustainability and delivering margin sha
Slide 4: Pure-Play Climate Control Business with High Aftermarket Mix
Pure-Play Climate Control Business with High Aftermarket Mix Regional Segments Key Metrics Manufacturing locations worldwide 34 Total Americas EMEA $13.1B Employees ~36,000 Sales Asia Pacific Market cap ~$20B 0% 20% 40% 60% 80% 100% Revenue Streams 69% 31% Equipment Parts and Services All figures ar
Slide 5: Global Business with Strong and Growing Service / Parts Mix
Global Business with Strong and Growing Service / Parts Mix Americas EMEA Asia Pacific Transport Transport Transport Refrigeration Refrigeration Refrigeration Total Total Total $10.1B Residential $1.8B $1.3B Sales HVAC Sales Sales Commercial Commercial Commercial HVAC HVAC HVAC 0% 50% 100% 0% 50% 10
Slide 6: Trane Technologies Core Sustainability Strategy: Challenging Possible
Trane Technologies Core Sustainability Strategy: Challenging Possible GLOBAL MEGATRENDS CLIMATE CHANGE URBANIZATION RESOURCE SCARCITY DEMOGRAPHICS DIGITAL CONNECTEDNESS OUR COMMITMENTS “One company can change an industry and The Gigaton Challenge Leading by Example Opportunity for All Reducing one g
Slide 7: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Highly Regarded ESG Performance People and Citizenship 9 consecutive years Gold Medal Winner 1st in our Industry only Industrial listed in NA 35th annual award for to sign onto Paradigm for Pari
Slide 8: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC • World leader in HVAC Transport Refrigeration • World leader in refrigerated transportation Residential HVAC • Leader in HVAC solutions 8
Slide 9: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Key Examples Aligns resources for customer value • New equipment using low-global warming potential refrigerants 2 Accelerates profitable growth • Digital / controls / wireless technology • Expanded sales capabilities and channel 3 reach Embeds sustainabi
Slide 10: Strong Free Cash Flow Generation and Dynamic and Balanced Capital Deployment
Strong Free Cash Flow Generation and Dynamic and Balanced Capital Deployment ~107%* Free Cash Flow Conversion of Adj. Net Earnings Past 5 Years ~$9.7 Billion* Cash Deployed Past 5 Years Capital Share Dividends Mergers & Acquisitions Expenditures Buyback • ~$1.3B Capex • ~$2.1B dividends paid • $3.2B
Slide 11: Executing a Consistent Strategy that Delivers Profitable Growth Over the Long-Term
Executing a Consistent Strategy that Delivers Profitable Growth Over the Long-Term Strategy • Strategy tied to attractive end markets supported by global megatrends Brands • Franchise brands with leadership market positions in all regions Innovation • Sustained business investments delivering innova
Slide 12: Second-Quarter 2020 Results
Second-Quarter 2020 Results July 29, 2020
Slide 13: Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term
Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term 1. 2. 3. 4. Sustained Operational Dynamic Capital Uplifting Growth Excellence Allocation Culture Innovation at the nexus Lean methodology Reinvestment, dividends, Commitment to of sustainability and delivering margin sha
Slide 14: Strong execution in challenging pandemic environment
Strong execution in challenging pandemic environment; Remain focused on positioning business to thrive as business conditions improve • All facilities operating under new protocols and meeting market / customer demand − 1Q20 aggressive response and heavy upfront investment in world-class employee sa
Slide 15: COVID-19 Pandemic Heavily Impacted Bookings and Revenues
COVID-19 Pandemic Heavily Impacted Bookings and Revenues Q2 Organic* Y-O-Y Change Bookings Revenue Americas Enterprise -7% - 13% • CHVAC bookings down MSD; Revs down MSD supported by strong backlog; Despite COVID-19 pandemic-related building usage reductions, svc revs declined at a slower rate than
Slide 16: Q2 Operating Results Negatively Impacted by COVID-19 Pandemic
ENTERPRISE Q2 Operating Results Negatively Impacted by COVID-19 Pandemic Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* -13% -80 -100 -26% Organic bps bps $3,618 $1.72 18.1% 16.0% 17.3% 15.0% $3,139 $1.27 Q2 '19 Q2 '20 Q2 '19 Q2 '20 Q2 '19 Q2 '20 Q2 '19 Q2 '20 • Global equip
Slide 17: Americas Segment Results
SEGMENT RESULTS Strong Price / Cost and Productivity Partially Offset Lower Volume from Pandemic Impacts to Deliver Enterprise Deleverage Better than GM% Target Levels Revenue Adj. EBITDA% Adj OI% Highlights $M Org. Growth vs PY vs PY • Solid price / cost and productivity partially offset COVID-19 A
Slide 18: Expect Continued Market Outperformance; Demand Outlook Remains Limited
MARKET UPDATE Expect Continued Market Outperformance; Demand Outlook Remains Limited by Pandemic-Related Economic / End Market Uncertainty • CHVAC equipment applied revenues resilient from strong backlog; End market indicators (ABI, Dodge) remain soft; visibility limited by pandemic-related market u
Slide 19: Playing Aggressive Offense During Downturn with Innovative Products and Services
Playing Aggressive Offense During Downturn with Innovative Products and Services Indoor air quality assessments build 4 pipe chiller simultaneously heats confidence for building occupants and cools buildings with zero direct greenhouse gas emissions Comprehensive, layered approach balances IAQ and e
Slide 20: Further Accelerating Reductions of Fixed Costs
Further Accelerating Reductions of Fixed Costs Stranded Cost Reductions Stranded Cost Savings ($M) 160 • Accelerated stranded cost reduction actions to 140 eliminate entire ~$100M target in 2020 120 $100M Savings Target 40 − Up from 1Q guide of ~$90M & from initial guide of 100 ~$40M 80 30 140 • 202
Slide 21: Balance Sheet and Liquidity: Operating from Position of Strength
Balance Sheet and Liquidity: Operating from Position of Strength STRONG FINANCIAL POSITION / BALANCE SHEET / LIQUIDITY ADDITIONAL DETAILS • Consistent, strong free cash flow generation = / > 100% of Adj. net earnings over time (5 yr avg of 107%, 2019 118%)** Cash On Hand Credit Facilities − FCF expe
Slide 22: Balancing Capital Allocation Priorities through COVID-19 Crisis
Balancing Capital Allocation Priorities through COVID-19 Crisis • Have consistently maintained balanced approach to capital deployment − Focus on deployment of excess cash through reinvestment in the business, dividends, share repurchases and acquisitions • Continue to reinvest in the business − Acc
Slide 23: 2020 Revenues on Pace to Perform Better than Down 15% and Down 25% Scenarios
2020 Revenues on Pace to Perform Better than the Down 15% and Down 25% Scenarios Outlined on 1Q20 Earnings Call 2020 Revenues - Current View (based on current pace of economies reopening) • Down 25% scenario unlikely w/out major add’l COVID-19 disruption Reference: Scenarios from Q1 Earnings Call •
Slide 24: Confident in Long-Term Outlook for Trane Technologies to Deliver Profitable Growth
Confident in Long-Term Outlook for Trane Technologies to Deliver Profitable Growth Strategy • Strategy tied to attractive end markets supported by global mega trends Brands • Franchise brands with leadership market positions in all regions Innovation • Sustained business investments delivering innov
Slide 25: Appendix
Appendix Appendix
Slide 26: 2020 Transport Market Forecasts Significantly Impacted by COVID-19 Pandemic
2020 Transport Market Forecasts Significantly Impacted by COVID-19 Pandemic; Greater Depth / Duration of Correction Cycle Prior to Return to Growth in 2021 2020 Transport North America Outlook Pandemic significantly impacting market demand Trailer APU* Truck in N.A. and EMEA -3% -19% • Expect to out
Slide 27: Q2 Organic Bookings Down 7% Year-Over-Year; Organic Revenues Down 13%
Q2 Organic Bookings Down 7% Year-Over-Year; Organic Revenues Down 13% Organic* 2018 2019 2020 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Americas +10% +18% +17% +27% +18% -2% -4% +2% -7% -3% +11% -5% EMEA +16% +10% -1% -5% +5% -9% +0% -2% -1% -3% -2% -20% Asia Pacific +10% +18% +0% +8% +9% +0% -6%
Slide 28: Appendix: Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments
Appendix: Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments Restructuring and Transformation Costs • Restructuring costs of ~$37M included in Table 2 of the Q2 2020 earnings release includes ~$34M of restructuring costs related to transformation activities as well as ~$3M of restru
Slide 29: 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 book
Slide 30: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Free cash flow in 2020 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring costs and transformation costs. Free cash flow in 2019 is defined as net cash provided by (used in) co
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