Trane Technologies Plc · NYSE:TT
Trane Technologies — 2021 Morgan Stanley Laguna Conference
40 slides from Trane Technologies's conference presentation, Sep 14, 2021
Slide 1: Investor Presentation September 2021
Investor Presentation September 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
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
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 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 3rd Consecutive Year Forbes Best Employers for Diversity J
Slide 10: The New Trane Technologies: Reimagined to Unlock Our Full Potential
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
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?
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
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
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 • World class sales, service 1 2 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
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 2021 and 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
Slide 20: Second-Quarter 2021 Results
Second- Quarter 2021 Results August 4, 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 Bookings, Revenue, Margin Expansion, EPS Growth & Free Cash Flow
Q 2 2 0 2 1 U P D AT E Strong Bookings, Revenue, Margin Expansion, EPS Growth & Free Cash Flow in Q2; Expect Cont’d Strong 2H • EBITDA margin expansion of 180 bps on ~30% organic leverage; 51% Adj. EPS growth and strong FCF • Strong bookings and revenue growth across the enterprise with a book-to-bi
Slide 23: Robust Bookings w/ Growth in All Businesses
Q2 2021 ORGANIC BOOKINGS AND REVENUES Robust Bookings w/ Growth in All Businesses; Strong Revenue Outgrowth in Largely Improving End Markets Q2 Organic* Y-O-Y Change Bookings Revenue Enterprise + 30% + 18% Americas • CHVAC bookings up mid-twenties and revs up low-teens; Svcs revs up mid-teens; IAQ d
Slide 24: Consistent Execution Drives Strong Performance in Improving Markets
ENTERPRISE Consistent Execution Drives Strong Performance in Improving Markets Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +18% +180 +210 +51% Organic bps bps $3,830 17.1% +22% 19.1% $1.92 $3,139 17.3% 15.0% $1.27 Q2 '20 Q2 '21 Q2 '20 Q2 '21 Q2 '20 Q2 '21 Q2 '20 Q2 '21 • S
Slide 25: Q2 Segment Results
Q 2 2 0 2 1 S E G M E N T R E S U LT S Strong Execution, Product and Service Innovation, Productivity and Price / Cost Deliver Top-Line Growth and Margin Expansion Revenue Adj. EBITDA% Adj. OI% Highlights $M Org. Growth vs PY vs PY • Strong volume growth, productivity and cost controls, price / cost
Slide 26: End Market Improvements Expected to Continue 2H21
M A R K E T U P D AT E End Market Improvements Expected to Continue 2H21 Commercial HVAC • End markets improving; data center and warehouse remain strong; education and office demand growing; well-positioned to take advantage of stimulus spending • Vaccine distribution improving; ABI > 50 for severa
Slide 27: Leveraging Value Creation Framework to Outgrow Improving Markets
2 0 2 1 G U I D A N C E U P D AT E Leveraging Value Creation Framework to Outgrow Improving Markets to Deliver Top-Quartile EPS Growth Prior FY Guidance Updated FY Guidance Organic + ~9% + ~11% Revenues (Up ~10.5% w/ M&A) (Up ~12.5% w/ M&A) (Up ~13.5% w/ M&A & FX) ~$6.00* ~$6.05* Adj. EPS ($5.95 Org
Slide 28: Detailed Guidance for Modeling Purposes
2 0 2 1 G U I D A N C E U P D AT E Detailed Guidance for Modeling Purposes Updated FY Revenue Adj. EPS Commentary 2021 Organic + ~11% ~$5.95 • ~30+% FY organic leverage; high-teens organic leverage 2H 2021 Acquisitions ~1.5% ~$0.05 • ~5% OI contribution in year 1; impact of integration costs • Forma
Slide 29: Strong Revenue and EPS Growth Expected in 2H
2H 2021 GUIDANCE Strong Revenue and EPS Growth Expected in 2H • Strong organic growth Organic ~7% • ~1.5% M&A growth • ~0.5% FX growth Revenues (Up ~9% w/ M&A & FX) • Cadence: Supply chain constraints / customer readiness expected to drive greater rev growth in Q4 than in Q3 • Vol growth @ high 20s
Slide 30: On Track to Deliver ~$300M Total Transformation Savings
T R A N S F O R M AT I O N S AV I N G S On Track to Deliver ~$300M Total Transformation Savings by 2023; 3X Original $100M RMT Stranded Cost Reduction Target • On track to deliver ~$90M incremental savings in Transformation Savings 2021 after delivering stranded / fixed cost take-out of ~$100M in 20
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: On Track to Deploy ~$2.5B for Balanced Capital Allocation
On Track to Deploy ~$2.5B for Balanced Capital Allocation in FY 2021; Strong Deployment YTD Balanced Capital Deployment Capital Allocation YTD* 2021 FY 2021 ~$2.5B+ Dividends** $0.3B ~$0.6B Acquisitions and investments $0.1B ~$1.5B† Share repurchases $0.6B ~$1.3B Debt retirement $0.3B ~$0.4B‡ Total
Slide 33: Topics of Interest
a 4 Topics of Interest TECHNOLOGIES
Slide 34: Transport Outlook Largely Unchanged
TOPICS OF INTEREST Transport Outlook Largely Unchanged: On Track for Strong Growth in 2021; ACT Projecting Robust Growth into 2022 N.A. and EMEA 2021 Strong Market Outlook N.A. and EMEA Market Results / Forecast EMEA Slightly Stronger / N.A. Slightly Weaker • Trailer/Truck/APU: ~2/3rds of Total Tran
Slide 35: 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 36: Appendix
Appendix Appendix
Slide 37: Trane Technologies 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 38: Q2 Organic Bookings Up 30% Y-O-Y; Organic Revenues Up 18%
Q2 Organic Bookings Up 30% Y-O-Y; Organic Revenues Up 18% Organic* 2019 2020 2021 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Americas -2% -4% +2% -7% -3% +11% -5% +8% +2% +4% +36% +29% EMEA -9% +0% -2% -1% -3% -2% -20% +6% +9% -3% +18% +53% Asia Pacific +0% -6% +3% -5% -2% -17% -2% -5% +2% -6% +14
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 Adjusted operating income in 2021 and 2020
Slide 40: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Free cash flow in 2021 and 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. Working capital measures a firm’s operating liquidity positio
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