Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — Goldman Sachs Industrials & Materials Conference 2019
38 slides from Trane Technologies's conference presentation, May 15, 2019
Slide 1: Goldman Sachs Industrials & Materials Conference
Goldman Sachs Industrials & Materials Conference May 15, 2019
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 the proposed transaction between Gardner Denver Holdings, Inc. and the Company; the mix of and demand for our products; performance of the marke
Slide 3: A Global Leader in Energy Efficiency and Productivity
A Global Leader in Energy Efficiency and Productivity Two Segments Key Metrics (Revenues 2018) Manufacturing locations 52 worldwide Employees ~49,000 Industrial $3.3B $12.4B Climate Market cap ~$25B # of countries we sell products 100+ 3
Slide 4: Diversified Business With High Aftermarket Mix
Diversified Business With High Aftermarket Mix Segment Distribution Regional Mix Revenue Streams 4% Latin America Industrial 13% Asia Pacific 33% Parts and Services Europe, Middle 15% East, Africa $15.7B 68% North America 67% Equipment Climate All figures are FY 2018. 4
Slide 5: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC Residential HVAC Transport Refrigeration ● World leader in HVAC ● Leader in heating and air ● World leader in refrigerated conditioning solutions transportation Industrial and Process Fluid Handling Golf and Utility Vehicles ● Leader in compression
Slide 6: Climate Segment: Diversified and Resilient Performance
Climate Segment: Diversified and Resilient Performance Segment Mix Regional Mix Revenue Streams 4% Latin America Transport Commercial 10% Asia Pacific Refrigeration HVAC 32% Parts and Services Equipment 15% Europe, Middle East, Africa $12.4B Residential HVAC 71% North America Equipment 68% Commercia
Slide 7: Industrial Segment: Diversified and Resilient Performance
Industrial Segment: Diversified and Resilient Performance Business Units Regional Mix Revenue Streams 3% India Small Electric 4% Latin America Industrial Vehicles 17% Comp. Europe, ME, Africa 39% Parts and Service 21% Asia Pacific $3.3B Industrial Engineered Products1 Comp. 61% Equipment 55% North A
Slide 8: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow (2014 – 2018) 1. Attractive, diversified 2. Leading brands, market positions end markets – outgrowing market rates $5.7 billion free cash flow over the last 5 years 5. Investing for growth 3. Focused on margin and profitability expansion (growth / op.
Slide 9: Driving Sustained Growth and Operating Margin Improvement
Driving Sustained Growth and Operating Margin Improvement In Billions Revenue Adjusted Continuing EPS $16 $6.00 14% $15 5% $5.00 CAGR CAGR $14 $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 In Billions Cumulative Free Cash Flow Adjusted Operating Marg
Slide 10: Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value
Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value (2014 – 2018) $8.3 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$1.3B Capex • ~$1.8B dividends paid • $3.8B • ~$1.4B on 22 • ~20% CAGR dividend • ~54 million shares acquisitions per shar
Slide 11: Ingersoll Rand 2020 Targets
Ingersoll Rand 2020 Targets* Year-End 2017 to 2020 Targets Revenue Growth ~4% to ~4.5% CAGR Adjusted Operating Margins ~14.5% to ~15% in 2020 Adjusted Continuing EPS Growth ~11% to ~13% CAGR Based on ~22% tax rate Free Cash Flow (% Net Income) >=1.0 times Balanced Cap Deployment of Excess Cash ~100%
Slide 12: Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow
Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurchase and integrity, ingenuity and global megatrends acquisitions engagement Susta
Slide 13: Global Mega Trends Play to Our Strengths
Global Mega Trends Play to Our Strengths Global Mega Trends Our Strengths • Climate change • Reduce energy demand and greenhouse gas emissions • Urbanization • Improve efficiency in: • Natural resource scarcity – Buildings • Digital connectedness and – Industrial processes technologies – Transportat
Slide 14: Significant Ongoing Business Investments Support Growth and Profitability
Significant Ongoing Business Investments Support Growth and Profitability Business Investments Key Examples ● ~90 major new products / services ~20% throughout the world in 2018 CAGR ● New low-global warming potential refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Part
Slide 15: Growth and Profitability Opportunities from Ongoing Business Investments
Growth and Profitability Opportunities from Ongoing Business Investments Subset of Incremental Opportunities Contributing to 2020 Targets* ~$200M ~$400M ~$300M ~$100M Climate Variable Refrigerant Flow Energy Services Digital Customer Experience Auxiliary Power Unit ~$40M Operating Income ~$100M ~$17
Slide 16: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Drive innovation and productivity 2 Proven & unique system to accelerate profitable growth 3 Committed to sustainability and energy efficiency 4 Focus on employee engagement 16
Slide 17: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Sustainability Diversity and Inclusion Citizenship 1st in our Industry to sign onto Global 100 Most Sustainable Paradigm for Parity FTSE4Good Index Series Corporations for 5th consecutive year 2
Slide 18: First-Quarter 2019 Results
First-Quarter 2019 Results April 30, 2019
Slide 19: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurcha
Slide 20: First Quarter 2019 Summary: Strong Start to the Year
First Quarter 2019 Summary: Strong Start to the Year • Top-tier EPS growth driven by solid execution − Adj. cont. EPS up 27% yoy • Robust revenue growth led by Climate segment despite tough yoy comps − Enterprise organic rev up 8% against 8% PY growth; Climate up 10% vs. 8% comp, Industrial up 3% vs
Slide 21: Solid Organic Revenue Growth Continues in Both Segments; Backlog at Record High
Solid Organic Revenue Growth Continues in Both Segments and Across Business Units; Backlog at Record High Q1 Organic* Y-O-Y Change Bookings Revenue Commercial HVAC + + Climate - North America + + • Robust, broad based rev growth against tough yoy comp (+8% Q1 ‘18) - Latin America + + • Strong HVAC b
Slide 22: Healthy End Markets - No Significant Change to Expectations
Healthy End Markets - No Significant Change to Expectations • Major CHVAC markets remain positive – cont’d solid bookings and revenue growth • N.A. and Europe growth strong, outlook remains healthy Commercial HVAC • China demand strengthened throughout qtr, flat-ish growth against tough prior year c
Slide 23: Healthy End Markets - No Significant Change to Expectations
Healthy End Markets - No Significant Change to Expectations • Global mkts mixed w/ solid Q1 growth in equip / svcs; cont’d strength in N.A. mkts Compression • EMEA flat-ish, consistent w/ expectations for a softer mkt in 2019 Technologies • China flat-ish; demand strengthened throughout qtr; cautiou
Slide 24: Q1 Results Deliver Strong Start to 2019
Q1 Results Deliver Strong Start to 2019 • Strong operating results – Adjusted continuing EPS of $0.89, up 27% year over year driven by strong performance in Climate – Early stages, but confident in raising adj. cont. EPS guidance from $6.15 - $6.35 to ~$6.35 • Solid Q1 organic revenue growth in both
Slide 25: Q1 2019 Continued Strong Revenue Growth, Margin Expansion and EPS Growth
ENTERPRISE Q1 2019 Continued Strong Revenue Growth, Margin Expansion and EPS Growth Net Revenue Adj. Operating Margin* Adj. Continuing EPS* +8% +90 +27% Organic bps $3,576 9.4% $3,385 $0.89 8.5% $0.70 +6% Q1 '18 Q1 '19 Q1 '18 Q1 '19 Q1 '18 Q1 '19 Highlights • Strong organic revenue growth across all
Slide 26: Strong Climate Performance Driving Adj. Cont. EPS +27%
ENTERPRISE Strong Climate Performance Driving Adj. Cont. EPS +27% +$0.19 $0.17 $0.00 ($0.01) $0.03 $0.89 $0.70 ($0.01) Corp Cost ($0.05) Oth Exp $0.02 Interest $0.03 Tax rate Q1 2018 Climate Industrial Other Share Count Q1 2019 Adjusted Adjusted Continuing EPS* Continuing EPS* Highlights • Strong pe
Slide 27: Strong Price vs Material Inflation Spreads Driving 90 bps Margin Expansion
ENTERPRISE Strong Price vs Material Inflation, Volume and Productivity vs Other Inflation Spreads Driving 90 bps Margin Expansion +90 bps 0.5 (0.5) 9.4% 0.2 0.7 8.5% Q1 2018 Vol / Mix / FX / Acq Price / Material Productivity / Other Investment / Other Q1 2019 Adjusted Operating Inflation Inflation A
Slide 28: Climate Segment: Strong Revenue Growth and Significant Margin Improvement
CLIMATE SEGMENT Q1 Continued Strong Revenue Growth and Significant Margin Improvement Net Revenue Adj. Operating Margin* Adj. EBITDA %** +10% +130 +70 Organic bps bps $2,804 11.4% 13.2% $2,610 12.5% 10.1% +7% Q1 '18 Q1 '19 Q1 '18 Q1 '19 Q1 '18 Q1 '19 Highlights • Continued exceptional, broad based o
Slide 29: Industrial Segment: Solid Organic Revenue Growth Against Tough Compares
INDUSTRIAL SEGMENT Q1 Solid Organic Revenue Growth Against Tough Compares (PY +9%) Net Revenue Adj. Operating Margin* Adj. EBITDA %** +3% flat -50 Organic bps 14.9% 14.4% 12.3% 12.3% $775 $772 flat Q1 '18 Q1 '19 Q1 '18 Q1 '19 Q1 '18 Q1 '19 Highlights • Balanced revenue growth across Compression Tech
Slide 30: Continued Execution of Balanced Capital Allocation Strategy
Continued Execution of Balanced Capital Allocation Strategy 30 Note: Information as of April 30, 2019 --- NOT AN UPDATE OR REAFFIRMATION
Slide 31: Topics of Interest
am Ingersoll Rand Inspiring Progress™ Topics of Interest
Slide 32: Topics of Interest: Transport Order Rates
Topics of Interest • Transport Order Rates − Tight trucking capacity, U. S. regulatory changes and U. S. tax law changes drove strong demand for class 8 trailers in each quarter of 2018 − OEM constraints led to significant pre-orders of Trailer refrigerated units and auxiliary power units driving re
Slide 33: Topics of Interest (cont.): Full Year Price / Cost Outlook
Topics of Interest (cont.) • Full Year Price / Cost Outlook of +20 bps to +30 bps − Q1 price / cost +70 bps driven by carryover of strong PY pricing and 2019 pricing actions − PY pricing comps strengthen beginning in Q2; Full PY pricing laps in Q3 / Q4 − Expect cont’d commodity inflation in Q2 w/ mo
Slide 34: Summary: Expect Cont'd Strong Rev, EPS and Free Cash Flow in 2019
Summary: Expect Cont’d Strong Rev, EPS and Free Cash Flow in 2019 Strategy ● Strategy tied to attractive end markets supported by global mega trends Brands ● Franchise brands and businesses with leadership market positions Innovation ● Sustained business investments delivering innovation and growth,
Slide 35: Appendix
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Slide 36: Q1 Organic Revenue Up 8% Year-Over-Year; Organic Bookings Down 2%
Q1 Organic Revenue Up 8% Year-Over-Year Organic Bookings Down 2% Against Tough Comparison Organic* 2017 2018 2019 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Climate 6% 3% 5% 7% 5% 11% 17% 12% 20% 15% -3% Industrial 9% 5% 5% 12% 8% 5% 8% 7% 6% 6% 1% Total 7% 4% 5% 8% 6% 9% 15% 11% 17% 13% -2% Organic*
Slide 37: Q1 Non-GAAP Measures Definitions
Q1 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 boo
Slide 38: Q1 Non-GAAP Measures Definitions
Q1 Non-GAAP Measures Definitions Free cash flow in 2019 and 2018 is defined as net cash provided by (used in) continuing operating activities, less capital expenditures, plus cash payments for restructuring. In 2018, the Company updated its definition of free cash flow to exclude the impacts of disc
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