Trane Technologies Plc · NYSE:TT
Trane Technologies — J.P. Morgan 2023 Industrials Conference
38 slides from Trane Technologies's conference presentation, Mar 22, 2023
Slide 1: Investor Presentation March 2023
Investor Presentation March 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes “forward-looking statements” which are statements that are not historical facts, including statements that relate to our future financial performance and targets, including revenue, EPS and operating income; our business operations; demand for ou
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 $16B Sales Transport Refrigeration EMEA Revenue Streams Residential HVAC 68% 32% Equipme
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 Sustainability, Citizenship, Diversity, Inclusion & Engagement
S U S TA I N A B I L I T Y L E A D E R Widely Recognized for Sustainability, Citizenship, Diversity, Inclusion & Engagement Highly Regarded ESG Performance People and Citizenship 12 Consecutive Years 62% higher 11 years Performed in the 97th score than industry listed on most admired percentile in t
Slide 9: Trane Technologies Reimagined: 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 YE 2023
TRANE TECHNOLOGIES REIMAGINED Business Transformation Delivers $300M in Cost Savings by YE 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
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: Relentless Investments in Innovation, Customer Focus and Best-in-Class Business Operating System
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 Relentless Investments in Innovation, Customer Focus and Best-in-Class Business Operating System Driving Top-Quartile Financial Performance 17% ~7% +250 $13 CAGR bps 15% Revenue* $10 Adjusted 13% ($B) EBITDA $7 Margin †† 11% $4 9% 2017 2018
Slide 16: 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 17: Fourth-Quarter and Full Year 2022 Results
Fourth-Quarter and Full Year 2022 Results February 2, 2023
Slide 18: Top Quartile Q4 & 2022; Robust Backlog Supports Strong 2023 Outlook
Q 4 2 0 2 2 U P DAT E Top Quartile Q4 & 2022; Robust Backlog Supports Strong 2023 Outlook Underpinned by Growing Demand for Sustainable Solutions • Strong execution in Q4 and close to 2022 • 2022 organic revenues* up 15%; adj. EPS* up 21%; organic bookings* up 5% (2-yr stack up 32%) • Q4 organic rev
Slide 19: Strong Execution in 2022; Exceeded Financial Commitments & Delivered 20+% Adj. EPS Growth
2022 YEAR IN REVIEW Strong Execution in 2022; Exceeded Financial Commitments & Delivered 20+% Adj. EPS Growth Despite Challenging Macroenvironment 2022 Initial Guidance** 2022 Actual Results* Organic Revenue* +HSD +15% + Organic Operating Leverage* ~20% 18% Adj. EPS* $6.95 to $7.15 $7.36 + ≥ Adj. Ne
Slide 20: Robust Bookings and Backlog Entering 2023; Strong Revenue Growth and Demand
Q 4 2 0 2 2 O R GAN I C B O OK I N G S AN D R E V E N U E S Robust Bookings and Backlog Entering 2023; Strong Revenue Growth and Demand Q4 Organic* Y-O-Y Change Bookings Revenue Enterprise flat + 16% Americas • CHVAC bookings up low-teens, 2-yr stack up nearly 40%; Revs up mid-teens Americas flat +
Slide 21: Strong Revenue Growth, Margin Expansion and EPS Growth
Q 4 2 0 2 2 E N T E R P R I S E R E S U LT S Strong Revenue Growth, Margin Expansion and EPS Growth Net Revenue Adj. EBITDA Margin* Adj. Operating Margin* Adj. Continuing EPS* +16% +100 +120 +34% Organic* bps bps $1.82 $4,074 +14% $1.36 $3,569 15.7% 13.7% 14.7% 12.5% Q4 '21 Q4 '22 Q4 '21 Q4 '22 Q4 '
Slide 22: Q4 Segment Results: Americas
Q 4 2 0 2 2 S E G M E N T R E S U LT S Strong Broad-Based Organic Revenue Growth and Margin Expansion Adj. Revenue Adj. OI*% EBITDA*% Highlights $M Org.* Growth vs PY vs PY Americas $3,140 16.6% 14.6% • Strong broad-based margin expansion +14% +70 bps +100 bps • Robust volume growth, positive price
Slide 23: Strong Bookings & Backlog, Leading Innovation, Strong Market Positioning Provides Solid Foundation for 2023
M A R K E T U P D AT E Strong Bookings & Backlog, Leading Innovation, Strong Market Positioning Provides Solid Foundation and Visibility for 2023 Commercial HVAC • Expect continued strong growth in 2023 • Strong demand for innovative solutions driving all-time high backlog; Data center / education /
Slide 24: Leveraging Value Creation Flywheel to Drive Strong Revenue, EPS Growth and FCF in 2023
2023 GUIDANCE Leveraging Value Creation Flywheel to Drive Strong Revenue, EPS Growth and FCF in 2023 • Continued high levels of demand; share gain Organic +6% to +8% • Record backlog ~$7B • Revenues* (+7% to +9% reported) Reported includes ~+1 point M&A • Strong organic leverage, margin expansion Ad
Slide 25: On Track For ~$300M Total Transformation Savings by Year-End
T R A N S F O R M AT I O N S AV I N G S On Track For ~$300M Total Transformation Savings by Year-End; Business Operating System to Drive Strong Productivity / Cost Savings Over Long Term • Delivered ~$50M incremental savings in 2022 Transformation Savings • Targeting delivery of incremental savings
Slide 26: 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 27: Strong, Balanced Capital Allocation in 2022; Targeting Additional Deployment of ~$2.5B in 2023
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 in 2022; Targeting Additional Deployment of ~$2.5B in 2023 Balanced Capital Deployment Capital Deployment • Q4 Share repurchases of $300M (FY Actual FY Target FY $1.2B); ~$3.2B remaining authorization 2022 2023 • Q4
Slide 28: Topics of Interest
a 4 Topics of Interest TECHNOLCG ES
Slide 29: Thermo King Significantly Outperformed End Markets in 2022; Expect Continued Outperformance in 2023
TOPICS OF INTEREST Thermo King Significantly Outperformed End Markets in 2022; Expect Continued Outperformance in 2023 N.A., EMEA Markets Expected to be Flat to N.A. and EMEA Market Results / Forecast Modestly Lower in 2023 • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue Actual 2022 Transpor
Slide 30: North America Refrigerated Trailer Outlook – ACT Forecasts
TOPICS OF INTEREST North America Refrigerated Trailer Outlook – ACT Forecasts Dips to 40K Units in 2024, Rebounds in 2025, Growth in 2026 and 2027 North America Trailer Market Outlook Comments 50 • Underlying refrigerated trailer demand remains high, 45K units / year 40 • Strong demand forecast thro
Slide 31: Positioned to Outperform. Consistently.
I N S U M MARY 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 32: Appendix
Appendix
Slide 33: FY 2023 Detailed Guidance for Modeling Purposes
2023 GUIDANCE FY 2023 Detailed Guidance for Modeling Purposes Metric FY Guidance Commentary Organic Revenue* +6% to +8% • 25%+ organic leverage • M&A carries 3% leverage - nominal contribution given year 1 integration M&A +1% costs. Impact to total company leverage is minus ~(2) points Reported Reve
Slide 34: 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 35: Presented by His Majesty King Charles III
Presented by His Majesty King Charles III, in his former role as HRH the Prince of Wales Note: Information as of February 2, 2023 --- NOT AN UPDATE OR REAFFIRMATION 35
Slide 36: Q4 Organic Bookings Flat Y-O-Y; Organic Revenues Up 16%
Q4 Organic Bookings Flat Y-O-Y; Organic Revenues Up 16% Organic* Bookings 2020 2021 2022 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Americas +11% -5% +8% +2% +4% +36% +29% +20% +31% +29% +6% +10% +11% flat +7% EMEA -2% -20% +6% +9% -3% +18% +53% +25% +13% +27% flat -12% -10% +2% -5% Asia Pacific -
Slide 37: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Adjusted operating income in 2022 is defined as GAAP operating income adjusted for restructuring costs, transformation costs, merger and acquisition related costs, non-cash adjustments for contingent consideration, a settlement charge for a compensation related payment
Slide 38: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Adjusted EBITDA margin is defined as the ratio of adjusted EBITDA divided by net revenues. Adjusted effective tax rate for 2022 is defined as the ratio of income tax expense adjusted for the net tax effect of adjustments for restructuring costs, transformation costs, me
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