Trane Technologies Plc · NYSE:TT
Trane Technologies — 2022 Bank of America Global Industrials Conference
43 slides from Trane Technologies's conference presentation, March 2022
Slide 1: Investor Presentation March 2022
Investor Presentation March 2022
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 $14.1B 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: Widely Recognized for Environmental, Social and Governance Performance
S U S TA I N A B I L I T Y L E A D E R Widely Recognized for Environmental, Social and Governance Performance Business and Sustainability People and Citizenship 10 years Top Decile Globally Most Admired Companies list (5th percentile) Named to Fortune 2021 Best Workplaces in Identified as "Industry
Slide 9: Trane Technologies: Reimagined to Unlock Our Full Potential
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 100% tied
Slide 10: 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 11: 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 12: 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 13: 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 14: 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 15: Driving Sustained Growth and Operating Margin Improvement 2017-2021
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 2017-2021 15% $13 ~6% +250 CAGR 13% bps Adj. Op. Revenue* $10 11% Inc. ($B) $7 Margin † 9% $4 7% 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 112% 17% 150% Avg. +240 15% bps FCF
Slide 16: 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 2021) Dividends M&A ~12% CAGR dividend per share. ~$2.5B on 26 acquisitions Long history of growing dividend. ~23% ~26% $11B* CAPEX ~12% Capex lite business model ~1.6
Slide 17: 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 18: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Adjusted operating income in 2021 is defined as GAAP operating income plus restructuring costs, transformation costs and M&A transaction costs. Adjusted operating income 2020 is defined as GAAP operating income plus restructuring costs and transformation costs. Adjusted
Slide 19: Fourth-Quarter and Full Year 2021 Results
Fourth-Quarter and Full Year 2021 Results January 31, 2022
Slide 20: 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 21: Strong Q4 & 2021 Despite Challenging Environment; Record Bookings / Backlog
Q 4 2 0 2 1 U P D AT E Strong Q4 & 2021 Despite Challenging Environment; Record Bookings / Backlog, Healthy End Markets, Solid Foundation for 2022 & Beyond • Strong close to 2021 in Q4 • Organic bookings +27%, organic revenues +11%, adj. EPS +32% • Solid incremental margins despite mat’l inflation &
Slide 22: Strong Execution in 2021; Exceeded Financial Commitments & Delivered 37% EPS Growth
2021 YEAR IN REVIEW Strong Execution in 2021; Exceeded Financial Commitments & Delivered 37% EPS Growth Despite Dynamic Macroeconomic Landscape 2021 Initial Guidance** 2021 Results Organic Revenue* +5% to +7% +11% Organic Operating Leverage* ~30% 29% Adj EPS* $5.30 to $5.50 $6.09 ≥ 100% Adj. Net 97%
Slide 23: Leading ESG Performance in 2021; Exceeded Annual Targets
S U S TA I N A B I L I T Y L E A D E R Leading ESG Performance in 2021; Exceeded Annual Targets on Glidepath to 2030 Sustainability Commitments • Gigaton Challenge (target reduction in Recent ESG customer GHG emissions in 2021) Recognition • Carbon-neutral operations (target reduction ENVIRONMENTAL
Slide 24: Robust Bookings w/ Broad-Based Growth in All Segments
Q4 2021 ORGANIC BOOKINGS AND REVENUES Robust Bookings w/ Broad-Based Growth in All Segments; Strong Revenue Growth Despite Supply Chain Impacts Q4 Organic* Y-O-Y Change Bookings Revenue Americas • CHVAC bookings up mid 20s vs down MSD comp PY; Revs up HSD Enterprise + 27% + 11% w/ strong growth in e
Slide 25: Strong Revenue and EPS Growth Despite Challenging Macro Backdrop
ENTERPRISE Strong Revenue and EPS Growth Despite Challenging Macro Backdrop Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +11% +30 +10 +32% Organic bps bps $3,569 14.7% 12.4% 12.5% $1.36 +12% 14.4% $3,179 $1.03 Q4 '20 Q4 '21 Q4 '20 Q4 '21 Q4 '20 Q4 '21 Q4 '20 Q4 '21 • Org re
Slide 26: Q4 Segment Results: Americas, EMEA, Asia Pacific
Q 4 2 0 2 1 S E G M E N T R E S U LT S Strong Organic Revenue Growth in Dynamic Macroeconomic Environment Revenue Adj. EBITDA% Adj. OI% Highlights $M Org. Growth vs PY vs PY • Strong incrementals from volume growth / positive price / cost Americas offset by significant productivity impacts from supp
Slide 27: Record Backlog, Strong Underlying Demand Support 2022 / 2023 Outlook
M A R K E T U P D AT E Record Backlog, Strong Underlying Demand for Sustainability-Focused Systems and Services Support 2022 / 2023 Outlook Commercial HVAC • Strong backlog entering 2022; End markets improving, e.g., strong GDP growth, ABI > 50 since Feb 2021 • Data center / warehouse / education /
Slide 28: 2022 Guidance: Leveraging Value Creation Framework to Outgrow Markets
2022 GUIDANCE Leveraging Value Creation Framework to Outgrow Markets In Dynamic Environment Organic • Guidance reflects strong end mkt demand / + HSD* opening backlog / supply chain constraints Revenues • Expect strong 2H w/ easing inflation and Adj. EPS $6.95 to $7.15* improving supply chain (+14%
Slide 29: Q1 2022 Guidance
Q1 2022 GUIDANCE Leveraging Proven Business Operating System in Challenging Macroeconomic Environment • Supply chain, logistics, labor avail (Omicron) Organic constrained output level +LSD to +MSD • Revenues Growth largely from strong price realization, unit volume flat to modestly down • Expect OI
Slide 30: On Track to Deliver ~$300M Total Transformation Savings by 2023
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; Fueling Innovation / Investments Across Portfolio • Delivered ~$90M incremental savings in 2021 Transformation Savings after delivering stranded / fixed cost take-out of ~$100M in 2020; 2021 tota
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: Deployed $2.4B in Balanced Capital Allocation in FY 2021; ~$2.5B Expected in 2022
2 0 2 1 B A L A N C E D C A P I TA L D E P L O Y M E N T Deployed $2.4B in Balanced Capital Allocation in FY 2021; ~$2.5B Expected in 2022 Balanced Capital Deployment FY 2022 Outlook • Balanced capital deployment of ~$2.5B FY 2021 FY 2022 • Announced intended 14% 1Q 2022 Dividends $0.6B ~$0.6B quart
Slide 33: Topics of Interest
a 4 Topics of Interest TECHNOLOGIES
Slide 34: Significant Market Outgrowth in 2021; Expect Continued Market Growth in 2022
TOPICS OF INTEREST Significant Market Outgrowth in 2021; Expect Continued Market Growth in 2022 N.A. and EMEA 2022 Strong Market Outlook N.A. and EMEA Market Results / Forecast EMEA / N.A. Expected Growth in 2022 & 2023 • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue 2021 Transport N.A. 2022
Slide 35: Transport Growth Outlook: ACT / IHS Projecting Continued Growth into 2022 / 2023
TOPICS OF INTEREST Transport Growth Outlook: ACT / IHS Projecting Continued Growth into 2022 / 2023 North America Trailer Market Outlook N.A. / EMEA Strong Market Outlook into 2022 / 23 • Underlying transport refrigeration demand remains strong 50 • 2021 N.A. OEM build capacity constrained for trail
Slide 36: 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 37: Appendix
Appendix Appendix
Slide 38: FY 2022 Detailed Guidance for Modeling Purposes
2 0 2 2 G U I D A N C E U P D AT E FY 2022 Detailed Guidance for Modeling Purposes Organic Adj. EPS Commentary Revenue • Expect strong 2H w/ easing inflation and improving supply chain + HSD $6.95 to $7.15 • ~20% FY organic leverage Other Items • ~$240M Corporate Costs • ~$225M Interest Expense • ~1
Slide 39: Strong Execution in 2021; Delivered 37% EPS Growth
ENTERPRISE 2021 FINANCIAL PERFORMANCE Strong Execution in 2021; Delivered 37% EPS Growth Despite Dynamic Macroeconomic Landscape Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +11% +130 +140 +37% Organic bps bps $14,136 16.7% 14.6% $6.09 $12,455 15.4% +13% 13.2% $4.46 FY '20
Slide 40: 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 41: Q4 Organic Bookings Up 27% Y-O-Y; Organic Revenues Up 11%
Q4 Organic Bookings Up 27% Y-O-Y; Organic Revenues Up 11% Organic* 2019 2020 2021 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Americas -2% -4% +2% -7% -3% +11% -5% +8% +2% +4% +36% +29% +20% +31% +29% EMEA -9% +0% -2% -1% -3% -2% -20% +6% +9% -3% +18% +53% +25% +13% +27% Asia Pacific +0% -
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 Adjusted operating income in 2021 and 2020
Slide 43: Q4 Non-GAAP Measures Definitions
Q4 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
Trane Technologies — 2022 Bank of America Global Industrials Conference on 6ix