Trane Technologies Plc · NYSE:TT
Trane Technologies — Investor Presentation (February 2021)
43 slides from Trane Technologies's investor presentation, February 2021
Slide 1: Investor Presentation February 2021
Investor Presentation February 2021
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, statements relating to the continued impact of the COVID-19 global pandemic, capital deployment including the amount and
Slide 3: Focused Strategy Delivers Differentiated Shareholder Returns
CLEAR PRIORITIES Focused Strategy Delivers Differentiated Shareholder Returns 1 2 3 4 Win Grow Margins Maximize Continue Through and Cash Via Value As With Sustainable Execution Focused Dynamic Capital Innovation Excellence Climate Co. Allocation Strong Foundation Strong operating system and Uplifti
Slide 4: Pure-Play Climate Control Business with Leading Brands and Market Positions
T R A N E T E C H N O L O G I E S T O D AY Pure-Play Climate Control Business with Leading Brands and Market Positions; High Aftermarket Mix Regional Segments Franchise Brands Commercial HVAC Americas Total APAC $12.5B Sales Transport Refrigeration EMEA Revenue Streams Residential HVAC 67% 33% Equip
Slide 5: Global Megatrends Continue to Intensify – Demanding Bold Action
S U S TA I N A B I L I T Y L E A D E R Global Megatrends Continue to Intensify – Demanding Bold Action Heating and Cooling Food Loss GHG Emissions Buildings Global emissions from heating / Global emissions Combined share of cooling buildings* come from food loss / waste* global emissions 15% + 10% =
Slide 6: Uniquely Positioned with Innovative Solutions to Lead a Movement to Reduce GHG Emissions
S U S TA I N A B I L I T Y L E A D E R Uniquely Positioned with Innovative Solutions to Lead a Movement to Reduce GHG Emissions Business Key Actions We Delivery on the Bending as Usual are Taking Gigaton Challenge the Curve % Global Carbon Emissions (CO2e) % Global Carbon Emissions (CO2e) from Heati
Slide 7: Our Sustainability Purpose Yields Benefits Beyond CO2e Reduction
S U S TA I N A B I L I T Y L E A D E R Our Sustainability Purpose Yields Benefits Beyond CO2e Reduction SOCIAL BENEFITS FINANCIAL BENEFITS Defines Our Culture Focuses Business Priorities Generates uplifting culture that builds More targeted investments engagement and empowers people Drives innovativ
Slide 8: Highly Regarded ESG Performance
S U S TA I N A B I L I T Y L E A D E R Highly Regarded ESG Performance 10 Years Listed on North America Index #26 On Corporate Knights Top 100 Global Most Sustainable Corporations 61% Higher score than industrial machinery average Gold Medal Winner 35th annual award for International Achievement in
Slide 9: Purpose Alignment Drives Uplifting Culture
S U S TA I N A B I L I T Y L E A D E R Purpose Alignment Drives Uplifting Culture 1st in our industry to sign on to Paradigm for Parity – A Call to Action for Gender Equality Founding Member OneTen coalition to hire 1 million Black Americans 2nd Consecutive Year Forbes Best Employers for Diversity J
Slide 10: Trane Technologies Reimagined
The New Trane Technologies: Reimagined to Unlock Our Full Potential 1 Sustainability innovation fuels our growth 2 Exceptional performance maximizes our margins 3 Structural transformation unlocks our potential Customer-focused innovation Relentlessly focused on leaning Redesigned to maximize our 10
Slide 11: Uniquely Positioned as IPO-like Climate Innovator with Proven Expertise
TRANE TECHNOLOGIES REIMAGINED Uniquely Positioned as IPO-like Climate Innovator with Proven Expertise Essence of a Credibility of a Startup Market Leader Purpose-driven alignment + Long track record of execution Fit for purpose organizational design Trusted industry & technical expertise Strategic c
Slide 12: Why Pure Play Matters? – Purpose Drives Performance
TRANE TECHNOLOGIES REIMAGINED Why Pure Play Matters? – Purpose Drives Performance 1 World class climate innovator relentlessly reinvesting to bend the curve on climate change 2 Lean-based, customer-focused model 3 Increased speed and agility in the marketplace 100% focus on sustainability drives dif
Slide 13: Business Transformation Delivers $300M in Cost Savings by 2023
TRANE TECHNOLOGIES REIMAGINED Business Transformation Delivers $300M in Cost Savings by 2023 to Fund Continued Market Outgrowth With 25% Sustainable Leverage Sustainable Operating High Performance Flywheel Leverage Improvement 1 Increased reinvestment in 25% + innovation 4 2 16% Sustainable Above ma
Slide 14: Megatrends are Powerful Drivers of Growth and Accelerate Need for Innovative Solutions
I N N O VAT I O N Megatrends are Powerful Drivers of Growth and Accelerate Need for Innovative Trane Technologies’ Solutions Continuing Megatrends Accelerating Megatrends Climate Urbanization Resource Demographics Indoor Digital Change Scarcity Environmental Connectedness Quality Driving Sustainabil
Slide 15: Proven Business Operating System Delivers Results
Proven Business Operating System Delivers Results Business Operating System Results 1 2 • World class sales, service capabilities / offerings Aligns resources Empowers • Sustained market outgrowth for customer people to solve value problems • Margin expansion • Continuous improvement and sustainable
Slide 16: Driving Sustained Growth and Operating Margin Improvement 2017-2020
C U LT U R E O F P E R F O R M A N C E E X C E L L E N C E Driving Sustained Growth and Operating Margin Improvement 2017-2020 $12 13% +110 ~4% 11% bps Revenue* $9 CAGR Adj. Op. ($B) Inc. 9% $6 Margin † 7% $3 5% 2017 2018 2019 2020 2017 2018 2019 2020 18% 160% Avg. = 16% 120% +110 FCF % of 116% Adju
Slide 17: Long Track Record of Disciplined and Balanced Capital Deployment
C U LT U R E O F P E R F O R M A N C E E X C E L L E N C E Long Track Record of Disciplined and Balanced Capital Deployment (2016 to 2020) Dividends M&A ~12% CAGR dividend per share. ~$2.2B on 25 acquisitions Long history of growing dividend. as of January 2021 ~26% ~25% $8.8B* CAPEX ~13% Capex lite
Slide 18: Positioned to Outperform. Consistently.
IN SUMMARY Positioned to Outperform. Consistently. Secular The markets we serve will continue to outgrow GDP fueled Tailwinds by long-term sustainability megatrends Sustainability We are positioned to outgrow the market and expand Focused Innovation margins with market-leading sustainable innovation
Slide 19: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Adjusted operating income in 2020 is defined as GAAP operating income plus restructuring costs and transformation costs. Adjusted operating income in 2019, 2018 and 2017 is defined as GAAP operating income plus restructuring costs. Adjusted operating margin is defined a
Slide 20: Fourth-Quarter 2020 Results
Fourth-Quarter 2020 Results February 5, 2021
Slide 21: Focused Strategy Delivers Differentiated Shareholder Returns
CLEAR PRIORITIES Focused Strategy Delivers Differentiated Shareholder Returns 1 2 3 4 Win Grow Margins Maximize Continue Through and Cash Via Value As With Sustainable Execution Focused Dynamic Capital Innovation Excellence Climate Co. Allocation Strong Foundation Strong operating system and Uplifti
Slide 22: Strong Performance in Q4 and 2020 Against Challenging Covid-19 Backdrop
Strong Performance in Q4 and 2020 Against Challenging Covid-19 Backdrop • Resilient financial performance highlights strength of focused strategy, business operating system & high-performance culture − Broad-based outgrowth / share gain across challenging global end-markets − Strong Q4 bookings grow
Slide 23: Strong Performance and Improving Outlooks Throughout 2020 Despite COVID-19 Impacts
2020 YEAR IN REVIEW Strong Performance and Improving Outlooks Throughout 2020 Despite COVID-19 Impacts 2020 Scenarios (Q1)** 2020 Guidance (Q2)** 2020 Guidance (Q3)** 2020 Results Net Revenue -15% to -25% -10% to -15% -6% -5% Better Than Deleverage* ~Gross Margin % ~Gross Margin % Gross Margin % ~13
Slide 24: Bookings Growth and ~Flat Revenues, Outpacing Weak End Markets
Bookings Growth and ~Flat Revenues, Outpacing Weak End Markets Q4 Organic* Y-O-Y Change Bookings Revenue Americas • CHVAC bookings / revs down MSD on tough comps (Bookings Enterprise + 3% - 1% up ~25% across 2018/19; N.A. revs up high-teens 4Q19); Svcs performance stronger than equipment; Svcs revs
Slide 25: Consistent Execution Drives Strong Performance Despite Ongoing COVID-19 Impacts
ENTERPRISE Consistent Execution Drives Strong Performance Despite Ongoing COVID-19 Impacts Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* -1% +140 +150 +12% Organic bps bps 14.4% 12.4% $1.03 $3,184 flat $3,179 10.9% $0.92 13.0% Q4 '19 Q4 '20 Q4 '19 Q4 '20 Q4 '19 Q4 '20 Q4 '19
Slide 26: Americas, EMEA and Asia Pacific Segment Results
Q 4 S E G M E N T R E S U LT S Strong Execution, Cost Controls, Productivity, Positive Price / Cost Delivers Margin Expansion in Every Region Revenue Adj. EBITDA% Adj OI% Highlights $M Org. Growth vs PY vs PY Americas $2,386 16.2% 14.0% • Market outgrowth, cost controls, productivity, price / cost d
Slide 27: Expect Improving Market Conditions With Global Vaccine Administration in 2021
M A R K E T U P D AT E Expect Improving Market Conditions With Global Vaccine Administration in 2021 Commercial HVAC • Svcs resilient, growing LSD in 4Q20 despite cont’d low building occupancy; 4Q20 revs down MSD (tough comps vs 4Q19); IAQ remains long-term tailwind • End market indicators (ABI, Dod
Slide 28: 2021 Guidance: Outgrow Markets With Strong Operating Leverage
2021 GUIDANCE Leveraging Value Creation Framework To Outgrow Markets With Strong Operating Leverage • Guidance reflects current view of market Organic + 5% to + 7%* conditions, improved pace of vaccine production, administration Revenues (Up 6.5% to 8.5% w/ M&A) • ~1.5% M&A growth Adj. EPS $5.30 to
Slide 29: Q1 2021 Guidance: Strong Q1 Growth and Operating Leverage
Q1 2021 GUIDANCE Strong Q1 Growth and Operating Leverage Organic ~5%* • • Strong organic growth ~1.5% M&A growth Revenues (Up ~7.5% w/ M&A & FX) • ~1.0% FX growth Operating Organic • Strong enterprise leverage (includes corporate) Leverage ~30% to ~35% • Transformation savings plus higher Transport
Slide 30: Fixed Cost Reduction Programs Delivered $100M Savings in 2020
T R A N S F O R M AT I O N S AV I N G S Fixed Cost Reduction Programs Delivered $100M Savings in 2020; On Track for $140M Run Rate Savings in 2021 & Total Transformation Savings ~ $300M Annually by 2023 1 2 3 4 Fit For Purpose Strategic Choice Repositioning Supply Chain Organizational Model Budgetin
Slide 31: Strong FCF Drives Continued Balanced Capital Deployment Strategy
Strong FCF Drives Continued Balanced Capital Deployment Strategy 1 2 3 Invest for Maintain Healthy, Return Capital to Growth Efficient Balance Sheet Shareholders • Strengthen the core business • Expect to deliver FCF ≥ 100% • Expect to consistently deploy and extend product & market of adjusted net
Slide 32: Resumption of Balanced Capital Allocation in 2020; Strong Deployment in 2021
Resumption of Balanced Capital Allocation in 2020; Strong Deployment in 2021 After Full Business Reinvestment Balanced Capital Deployment Capital Allocation (2020 & 2021) 2020 • $507M dividends • $183M M&A (primarily channel acquisitions) ~$2B+ • $300M debt retirement • $250M share repurchases ~$1.2
Slide 33: Topics of Interest
4 Topics of Interest TECHNOLOGIES
Slide 34: Recent Acquisitions
TOPICS OF INTEREST Recent Acquisitions 3 CHVAC Channel Acquisitions Completed Through January 2021 • ~1.5% revenue: ~80% / ~20%, Americas / EMEA • ~$0.05 EPS accretion in 2021 • Utilizing proven playbook to integrate into Trane Technologies’ business operating system • Accelerates Trane Technologies
Slide 35: Strong 2021 Organic Leverage; Positive Impact from EPS Accretive M&A
TOPICS OF INTEREST Strong 2021 Organic Leverage; Positive Impact from EPS Accretive M&A in First Year of Integration FY 2021 Revenue Adj. EPS Commentary • ~30% organic leverage; transformation savings plus higher Organic + 5% to + 7% $5.25 to $5.45 Transport mix Acquisitions ~1.5% ~$0.05 • ~5% OI co
Slide 36: North America / EMEA Transport Markets Poised for Growth in 2021
TOPICS OF INTEREST North America / EMEA Transport Markets Poised for Growth in 2021 N.A. and EMEA 2021 markets expected to emerge from N.A. and EMEA Market Results / Forecast prolonged downcycle / COVID-19 pandemic 2020 Transport N.A. 2021 Transport N.A. • Trailer/Truck/APU: ~2/3rds of Total Transpo
Slide 37: Positioned to Outperform. Consistently.
IN SUMMARY Positioned to Outperform. Consistently. Secular The markets we serve will continue to outgrow GDP fueled Tailwinds by long-term sustainability megatrends Sustainability We are positioned to outgrow the market and expand Focused Innovation margins with market-leading sustainable innovation
Slide 38: Appendix
Appendix Appendix
Slide 39: Core Sustainability Strategy: Challenge Possible
2 0 3 0 S U S TA I N A B I L I T Y C O M M I T M E N T S Trane Technologies Core Sustainability Strategy: Challenge Possible Global Megatrends Our Commitments The Gigaton Challenge Leading by Example Opportunity for All Achieving carbon neutral Reducing one gigaton of carbon Creating gender parity i
Slide 40: Q4 Organic Bookings Up 3% Year-Over-Year; Organic Revenues Down 1%
Q4 Organic Bookings Up 3% Year-Over-Year; Organic Revenues Down 1% Organic* 2018 2019 2020 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Americas +10% +18% +17% +27% +18% -2% -4% +2% -7% -3% +11% -5% +8% +2% +4% EMEA +16% +10% -1% -5% +5% -9% +0% -2% -1% -3% -2% -20% +6% +9% -3% Asia Pacific
Slide 41: Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments
Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments Restructuring and Transformation Costs • Restructuring costs of ~$4M included in Table 2 of the Q4 2020 earnings release includes ~$2M of restructuring costs related to transformation activities as well as ~$2M of restructuring cost
Slide 42: Q4 Non-GAAP Measures Definitions
Q4 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 43: Q4 Non-GAAP Measures Definitions
Q4 Non-GAAP Measures Definitions Free cash flow in 2020 and 2019 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring costs and transformation costs. Working capital measures a firm’s operating liquidity positio
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