Trane Technologies Plc · NYSE:TT
Trane Technologies — Goldman Sachs Industrials & Materials Conference (May 2022)
43 slides from Trane Technologies's conference presentation, May 4, 2022
Slide 1: Investor Presentation May 2022
Investor Presentation May 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 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 innovatio
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: First-Quarter 2022 Results
First-Quarter 2022 Results May 4, 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: Delivered Strong Q1 Results; Well-Positioned for Long-Term Success
Q 1 2 0 2 2 U P D AT E Delivered Strong Q1 Results; Well-Positioned for Long-Term Success • Strong Q1 performance; supports 1H, FY outlook • Organic revenues +12%, adj. EPS +11% • Strong price execution (+7%) and volume growth (+5%) • Strong core incremental margins on volume (~30%); Price / cost fl
Slide 22: Transform Tomorrow, Today – 2021 ESG Report
E N V I R O N M E N TA L A N D S O C I A L S U S TA I N A B I L I T Y L E A D E R Transform Tomorrow, Today – 2021 ESG Report • 50 million metric tons of CO2 reduced from our customers’ carbon footprint since 2019, contributing to Gigaton Challenge ENVIRONMENT • 3% reduction in absolute energy use i
Slide 23: Strong Bookings Drives Record Backlog; Strong Revenue Growth
Q1 2022 ORGANIC BOOKINGS AND REVENUES Strong Bookings Drives Record Backlog; Strong Revenue Growth in Dynamic Supply Chain Environment Q1 Organic* Y-O-Y Change Americas • CHVAC bookings up ~35%; bookings growth of 50+% for applied / Bookings Revenue unitary, mid-teens for svcs; Revs up low-teens w/
Slide 24: Strong Revenue / EPS Growth Despite Challenging Macro Environment
ENTERPRISE Strong Revenue / EPS Growth Despite Challenging Macro Environment Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +12% -70 -70 +11% Organic bps bps 14.5% 12.2% $1.12 $3,356 13.8% 11.5% $3,018 $1.01 Q1 '21 Q1 '22 Q1 '21 Q1 '22 Q1 '21 Q1 '22 Q1 '21 Q1 '22 • Org rev gr
Slide 25: Q1 Segment Results: Americas, EMEA, Asia Pacific
Q 1 2 0 2 2 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 • Sustainability-focused innovation, strong end markets, decarbonization, controls optimization, IAQ driving strong demand Ame
Slide 26: 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 • Record backlog; End markets remain strong, e.g., GDP growth, March ABI 58 and > 50 since Feb 2021 • Data center / warehouse / education / heal
Slide 27: On Track to Deliver FY Guidance Despite Near-Term Challenges
2 0 2 2 G U I D A N C E U P D AT E On Track to Deliver FY Guidance Despite Near-Term Challenges Prior FY Guidance Updated FY Guidance* Organic + ~10% + HSD (Up ~9% incl. FX) Revenues Add’l revs primarily from price to offset add’l mat’l infl Adj. EPS ~$6.95 to $7.15 ~$6.95 to $7.15 Operating Organic
Slide 28: Strong 1H Performance; Q2 Impacted by Asia Risk
Q2 2022 GUIDANCE Strong 1H Performance; Q2 Impacted by Asia Risk • ~10% to ~12% core growth Organic • Impacted by China lockdowns (~$80M to +HSD ~$100M revs) Revenues • Assumes reopening mid-May • No impact to full year (recoup 2H) • Price / cost limiting leverage; raising price to offset add’l mat’
Slide 29: 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 • On track to deliver ~$50M incremental savings in Transformation Savings 2022 ($240M total savings) • ~$300M transformation savings adds fuel to
Slide 30: 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 31: Deployed $0.5B in Balanced Capital Allocation in Q1 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 Deployed $0.5B in Balanced Capital Allocation in Q1 2022; ~$2.5B Expected FY 2022 Balanced Capital Deployment FY 2022 Outlook Q1 2022 FY 2022 • Balanced capital deployment of ~$2.5B • $4B remaining share repurchases Dividends $156M ~$0.6B auth
Slide 32: Topics of Interest
a 4 Topics of Interest TECHNOLOGIES
Slide 33: Global Transport Markets Remain Healthy; Forecasts Moderating in 2022
TOPICS OF INTEREST Global Transport Markets Remain Healthy; N.A. and EMEA Market Forecasts Moderating in 2022 Primarily Related to OEM Supply Constraints N.A. 2022 Strong Market Outlook N.A. and EMEA Market Results / Forecast EMEA Flat • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue 2021 Tra
Slide 34: Transport Growth Outlook: ACT / IHS Projecting Continued Growth into 2023
TOPICS OF INTEREST Transport Growth Outlook: ACT / IHS Projecting Continued Growth into 2023 North America Trailer Market Outlook N.A. / EMEA Strong 2022 / 23 Market Outlook • Underlying transport refrigeration demand remains strong 50 • 2022 N.A. OEM build capacity constrained for trailer/truck/APU
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 innovatio
Slide 36: Appendix
Appendix Appendix
Slide 37: Detailed Guidance for Modeling Purposes
2 0 2 2 G U I D A N C E U P D AT E Detailed Guidance for Modeling Purposes Updated FY Revenue Adj. EPS Commentary 2022 • Expect strong 2H w/ improving supply chain, self-help redesigns Organic + ~10% ~$7.00 to ~$7.20 • Mid-teens FY organic leverage • Expect ~1pt FX revenue headwind. FX revs expected
Slide 38: Innovation for Decarbonization
I N N O VAT I O N L E A D E R Innovation for Decarbonization Thermal Management Systems for all Climates Leading Customers’ Decarbonization Journey • Combines heating & cooling into single electric solution removing • Conduct assessment and create custom roadmap need for natural gas boilers • Set gl
Slide 39: 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 40: 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 May 4, 2022 --- NOT AN UPDATE OR REAFFIRMATION 40 40
Slide 41: Q1 Organic Bookings Up 6% Y-O-Y; Organic Revenues Up 12%
Q1 Organic Bookings Up 6% Y-O-Y; Organic Revenues Up 12% Organic* 2020 2021 2022 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Americas +11% -5% +8% +2% +4% +36% +29% +20% +31% +29% +6% EMEA -2% -20% +6% +9% -3% +18% +53% +25% +13% +27% flat Asia Pacific -17% -2% -5% +2% -6% +14% +12% +11% +18% +14% +14
Slide 42: 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 Adjusted operating income in 2022 is define
Slide 43: Q1 Non-GAAP Measures Definitions
Q1 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 QSF Funding. Free cash flow
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