Trane Technologies Plc · NYSE:TT
Trane Technologies — Morgan Stanley Laguna Conference 2022
40 slides from Trane Technologies's conference presentation, Sep 7, 2022
Slide 1: Investor Presentation September 2022
Investor Presentation September 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
C L E A R P RI ORI T I E S 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 a
Slide 4: Pure-Play Climate Control Business with Leading Brands and Market Positions
TRA N E TE C H N O L O GI E S TOD 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% Equipment A
Slide 5: Global Megatrends Continue to Intensify – Demanding Bold Action
S U S TA I N A B I L I T Y LEADER 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% = 25%
Slide 6: Uniquely Positioned with Innovative Solutions to Reduce GHG Emissions
S U S TA I N A B I L I T Y LEADER 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 Heating an
Slide 7: Our Sustainability Purpose Yields Benefits Beyond CO2e Reduction
S U S TA I N A B I L I T Y LEADER 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 innovative sol
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 in Placed 2nd in the Industrial Machinery 11 Consecutive Years ind
Slide 9: Trane Technologies Reimagined
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
TRA N E TE C HN O L O GI E S RE I MA GI N E D 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 exper
Slide 11: Why Pure Play Matters? – Purpose Drives Performance
TRA N E TE C H N O L O GI E S RE I MA GI N E D 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 sustaina
Slide 12: Business Transformation Delivers $300M in Cost Savings by 2023
TRA N E TE C H N O L O GI E S RE I MA GI N E D 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% Sus
Slide 13: Megatrends are Powerful Drivers of Growth
IN N O VATIO 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 Sustainability
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 ULT U R E OF P E RF O R M A N C E EXCELLENCE 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 % of 100% Ad
Slide 16: Long Track Record of Disciplined and Balanced Capital Deployment
C ULT U R E OF P E RF O R M A N C E EXCELLENCE 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% of revenue
Slide 17: Positioned to Outperform. Consistently.
I N S UMM A RY 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 innov
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: Second-Quarter 2022 Results
Second-Quarter 2022 Results August 3, 2022
Slide 20: Focused Strategy Delivers Differentiated Shareholder Returns
C L E AR P R IO R I T I E S 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
Slide 21: Strong Q2 Results. Raising FY Revenue & EPS Guidance
Q 2 2 0 2 2 U P D AT E Strong Q2 Results. Raising FY Revenue & EPS Guidance • Strong execution across portfolio delivers record Q2 performance • Organic Bookings* up ~7%, Organic Revenue* up ~11%, adj. EPS* up 13% • Robust and broad-based demand for Trane Technologies’ innovative products and servic
Slide 22: Highest Bookings Quarter of All Time - Drives Unprecedented Backlog
Q 2 2 0 2 2 O R G AN IC B O O K I N G S AN D R E V E N U E S Highest Bookings Quarter of All Time - Drives Unprecedented Backlog; Strong Revenue Growth in Dynamic Supply Chain Environment Q2 Organic* Y-O-Y Change Bookings Revenue Americas Enterprise + 7% + 11% • CHVAC bookings up mid-teens, 2-yr sta
Slide 23: Strong Revenue / EPS Growth Despite Challenging Macro Environment
ENT ERPR IS E Strong Revenue / EPS Growth Despite Challenging Macro Environment Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +11% -40 -20 +13% Organic bps bps $4,190 19.1% 17.1% 16.9% $2.16 18.7% $3,830 $1.92 Q2 '21 Q2 '22 Q2 '21 Q2 '22 Q2 '21 Q2 '22 Q2 '21 Q2 '22 • Strong
Slide 24: Segment Results: Americas, EMEA, Asia Pacific
Q 2 2 0 2 2 S E G M E N T R E S U LT S Strong Organic Revenue Growth in Dynamic Macro Environment. Higher Costs to Serve Customers Impacting Margins Near Term Adj. Revenue Adj. OI*% EBITDA*% Highlights Org.* Growth vs PY $M vs PY • Sustainability-focused innovation, strong end markets, decarbonizati
Slide 25: Record Bookings & Backlog Support 2H 2022 Outlook
M A R K E T U P D AT E Record Bookings & Backlog, Leading Innovation, Strong Financial Position Support 2H 2022 Outlook and Strong Foundation for 2023 Commercial HVAC • Record demand for innovative solutions driving increasing, unprecedented backlog; End markets remain healthy, e.g., June ABI 53.2 a
Slide 26: Raising FY 2022 Revenue & EPS Guidance
2 0 2 2 G U I D A N C E U P D AT E Raising FY 2022 Revenue & EPS Guidance Reflecting Greater Visibility and Improved Outlook Prior FY Guidance* Updated FY Guidance* Organic + ~10% + ~12% (Up ~9% incl. FX) (Up ~11% incl. FX) Revenues Adj. EPS ~$6.95 to $7.15 ~$7.05 to $7.15 Operating Organic Mid-Teen
Slide 27: On Track to Deliver ~$300M Total Transformation Savings by 2023
T R A N S F O R M AT I O N S A V I N G S On Track to Deliver ~$300M Total Transformation Savings by 2023; Fueling Innovation / Investments Across Portfolio • On track to deliver ~$50M incremental savings in Transformation Savings 2022 ($240M total savings) • ~$300M transformation savings adds fuel t
Slide 28: 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 29: Strong, Balanced Capital Allocation YTD; On Track to Deploy ~$2.5B FY 2022
2 0 2 2 B A L A N C E D C A P I TA L D E P L O Y M E N T Strong, Balanced Capital Allocation YTD; On Track to Deploy ~$2.5B FY 2022 Balanced Capital Deployment FY 2022 Outlook • Balanced capital deployment of ~$2.5B YTD 2022 FY 2022 • Q2 Share repurchases of $300 million (YTD Dividends $311M ~$0.6B
Slide 30: Topics of Interest
a 4 Topics of Interest TECHNCLCGIES
Slide 31: N.A. Transport Market Outlook Remains Strong; EMEA Flat
TOPICS O F INTE REST N.A. Transport Market Outlook Remains Strong; EMEA Market Outlook Flat To Prior (ex-Russia) N.A. 2022 Strong Market Outlook N.A. and EMEA Market Results / Forecast EMEA Market Reflects Exclusion of Russia • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue 2021 Transport N.A
Slide 32: Transport Growth Outlook: ACT Projecting Continued Growth in 2023
TOP IC S OF I NT ERE ST Transport Growth Outlook: ACT Projecting Continued Growth in 2023 North America Trailer Market Outlook N.A. Healthy 2023 Market Outlook • Underlying transport refrigeration demand remains strong 50 • 2022 N.A. OEM build capacity constrained for trailer/truck/APU 40 • Underlyi
Slide 33: Positioned to Outperform. Consistently.
I N S U M MA RY 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 inno
Slide 34: Appendix
Appendix
Slide 35: Guidance Increased ~$0.05 at Mid-Point Including FX Impact; Plus M&A
2 0 2 2 G U I D A N C E U P D AT E Guidance Increased ~$0.05 at Mid-Point Including > FX Impact; Plus M&A Updated FY Revenue Adj. EPS* Commentary 2022 • Expect strong 2H w/ improving supply chain, strong price execution Organic + ~12% ~$7.15 to ~$7.25 • Mid-teens FY organic leverage consistent with
Slide 36: 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 37: Driving Performance Through Sustainability
S U S TA I N A B I L I T Y L E A D E R Driving Performance Through Sustainability Note: Information as of August 3, 2022 --- NOT AN UPDATE OR REAFFIRMATION 3 20 37
Slide 38: Q2 Organic Bookings Up 7% Y-O-Y; Organic Revenues Up 11%
Q2 Organic Bookings Up 7% Y-O-Y; Organic Revenues Up 11% Organic* 2020 2021 2022 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Americas +11% -5% +8% +2% +4% +36% +29% +20% +31% +29% +6% +10% EMEA -2% -20% +6% +9% -3% +18% +53% +25% +13% +27% flat -12% Asia Pacific -17% -2% -5% +2% -6% +14% +12% +11%
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 2022 is define
Slide 40: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Free cash flow in 2022 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring costs, transformation costs and the continuing operations component of the qualified settlement fund (
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