Trane Technologies Plc · NYSE:TT
Trane Technologies — 2020 Goldman Sachs Industrials & Materials Conference
32 slides from Trane Technologies's conference presentation, May 15, 2020
Slide 1: Investor Presentation May 2020
Investor Presentation May 2020
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 statements regarding capital deployment including the amount and timing of our dividends, our share repurchase program including the amount of s
Slide 3: Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term
Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term 1. 2. 3. 4. Sustained Operational Dynamic Capital Uplifting Growth Excellence Allocation Culture Innovation at the nexus Lean methodology Reinvestment, dividends, Commitment to of sustainability and delivering margin sha
Slide 4: Pure-Play Climate Control Business with High Aftermarket Mix
Pure-Play Climate Control Business with High Aftermarket Mix Regional Segments Key Metrics Manufacturing locations worldwide 34 Total Americas EMEA $13.1B Employees ~36,000 Sales Asia Pacific Market cap ~$20B 0% 20% 40% 60% 80% 100% Revenue Streams 69% 31% Equipment Parts and Services All figures ar
Slide 5: Global Business with Strong and Growing Service / Parts Mix
Global Business with Strong and Growing Service / Parts Mix Americas EMEA Asia Pacific Transport Transport Transport Refrigeration Refrigeration Refrigeration Total Total Total $10.1B Residential $1.8B $1.3B Sales HVAC Sales Sales Commercial Commercial Commercial HVAC HVAC HVAC 0% 50% 100% 0% 50% 10
Slide 6: Trane Technologies Core Sustainability Strategy: Challenging Possible
Trane Technologies Core Sustainability Strategy: Challenging Possible GLOBAL MEGATRENDS CLIMATE CHANGE URBANIZATION RESOURCE SCARCITY DEMOGRAPHICS DIGITAL CONNECTEDNESS OUR COMMITMENTS “One company can change an industry and The Gigaton Challenge Leading by Example Opportunity for All Reducing one g
Slide 7: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Highly Regarded ESG Performance People and Citizenship 9 consecutive years Gold Medal Winner 1st in our Industry only Industrial listed in NA 35th annual award for to sign onto Paradigm for Pari
Slide 8: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC • World leader in HVAC Transport Refrigeration • World leader in refrigerated transportation Residential HVAC • Leader in HVAC solutions 8
Slide 9: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Key Examples Aligns resources for customer value • New equipment using low-global warming potential refrigerants 2 Accelerates profitable growth • Digital / controls / wireless technology • Expanded sales capabilities and channel 3 reach Embeds sustainabi
Slide 10: Strong Free Cash Flow Generation and Dynamic and Balanced Capital Deployment
Strong Free Cash Flow Generation and Dynamic and Balanced Capital Deployment ~107%* Free Cash Flow Conversion of Adj. Net Earnings Past 5 Years ~$9.7 Billion* Cash Deployed Past 5 Years Capital Share Dividends Mergers & Acquisitions Expenditures Buyback • ~$1.3B Capex • ~$2.1B dividends paid • $3.2B
Slide 11: Executing a Consistent Strategy that Delivers Profitable Growth Over the Long-Term
Executing a Consistent Strategy that Delivers Profitable Growth Over the Long-Term Strategy • Strategy tied to attractive end markets supported by global megatrends Brands • Franchise brands with leadership market positions in all regions Innovation • Sustained business investments delivering innova
Slide 12: First-Quarter 2020 Results
First-Quarter 2020 Results May 5, 2020
Slide 13: Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term
Executing a Consistent Strategy Delivering Profitable Growth Over the Long-Term 1. 2. 3. 4. Sustained Operational Dynamic Capital Uplifting Growth Excellence Allocation Culture Innovation at the nexus Lean methodology Reinvestment, dividends, Commitment to of sustainability and delivering margin sha
Slide 14: Experienced Leadership; Confident and Decisive Execution of Purpose-Driven Strategy
Experienced Leadership; Confident and Decisive Execution of Purpose-Driven Strategy Through Challenging Business Conditions • Protecting the safety & security of our employees and the foundation of our culture is paramount − Strong company culture is core to how we win and how we will outperform mar
Slide 15: COVID-19 Update: Proactive Steps Taken to Protect Employees
COVID-19 Update: Proactive Steps Taken to Protect Employees; Ready to Deliver to Our Customers • Crisis management teams activated early January with employee safety as top priority January • Supply chain crisis management team began daily cadence to manage potential risks • Closed Asia Pacific fact
Slide 16: Solutions for Pandemic Response and Recovery
Solutions for Pandemic Response and Recovery Indoor Air Quality Remote Monitoring & Controls Critical Cold Chain Healthcare Solutions | pressurization system Building Controls and Intelligence Services Cold Chain Safety through operations, sensor calibrations, rental services for ConnectedSuite™ Ass
Slide 17: Responding to Urgent Customer and Community Needs
Responding to Urgent Customer and Community Needs Trane Technologies Helping Hand Fund Food Where it’s Needed Most Urgent Support for Healthcare Helping our own people deal with Providing food to nearly 6,000 people at a Accelerated responses for hospitals and other increasing demands on their resou
Slide 18: Balance Sheet and Liquidity: Operating from Position of Strength
Balance Sheet and Liquidity: Operating from Position of Strength STRONG FINANCIAL POSITION / BALANCE SHEET / LIQUIDITY ADDITIONAL DETAILS • Consistent, strong free cash flow generation = / > 100% of Adj. net earnings over time (5 yr avg of 107%, 2019 118%)** Cash On Hand Credit Facilities − FCF expe
Slide 19: HVAC Markets Remained Healthy in Q1; COVID-19 Heavily Impacted Bookings and Revenues
HVAC Markets Remained Healthy in Q1; COVID-19 Heavily Impacted Bookings and Revenues • Pre-COVID-19, bookings & revenues on par / ahead of our expectations • COVID-19 demand impact & proactive facility safety measures implemented limiting uptime & utilization • Americas HVAC backlog up double digits
Slide 20: Q1 Operating Results Negatively Impacted by COVID-19
ENTERPRISE Q1 Operating Results Negatively Impacted by COVID-19 Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* -5% -60 -150 -30% Organic bps bps $0.61 $2,804 $2,641 10.5% 9.9% 8.7% $0.43 7.2% -6% Q1 '19 Q1 '20 Q1 '19 Q1 '20 Q1 '19 Q1 '20 Q1 '19 Q1 '20 • Global equip / svc rev
Slide 21: Segment Results: Americas, EMEA, Asia Pacific
SEGMENT RESULTS Strong Execution of Cost-Reduction Programs Delivered Enterprise Deleverage in Line with Gross Margin on Lower Volume Revenue Adj. EBITDA% Adj OI% Highlights $M Org. Growth vs PY vs PY Adj. EBITDA / Adj. OI margins impacted by: • Transport revs down ~30% at ~GM% deleverage Americas •
Slide 22: Aggressively Moving to Eliminate ~$90M of $100M in Stranded Costs in 2020
Aggressively Moving to Eliminate ~$90M of $100M in Stranded Costs in 2020 and Deliver Run-Rate Reduction of ~$110M in 2021 Stranded Cost Reductions • Completed Industrial Spin RMT transaction in 10 months • Simultaneously created margin improvement transformation office to: • Remove $100M of strande
Slide 23: Balancing Capital Allocation Priorities through COVID-19 Crisis
Balancing Capital Allocation Priorities through COVID-19 Crisis • Have consistently maintained balanced approach to capital deployment − Focus on deployment of excess cash through reinvestment in the business, dividends, share repurchases and acquisitions • Continue to reinvest in the business − Acc
Slide 24: Current Trends / Visibility: COVID-19 Negatively Impacting April Orders
Current Trends / Visibility: COVID-19 Negatively Impacting April Orders, down ~20%; Demand Outlook Limited by Market Uncertainty AMERICAS MARKETS EMEA MARKETS COVID-19 significantly impacting market demand COVID-19 disruptions significant in France, Italy, Spain & Portugal • CHVAC equipment applied
Slide 25: 2020 Transport Market Forecasts Significantly Reduced
2020 Transport Market Forecasts Significantly Reduced; Greater Depth / Duration of Correction Cycle Prior to Return to Growth 2020 Transport North America Outlook Pandemic driving further declines in 2020; Market estimates during Q1 Trailer APU* Truck • Reduced demand in North America from distribut
Slide 26: Stress Test Examples: Well Positioned to Play Offense Through Downturn Scenarios
Stress Test Examples: Well Positioned to Play Offense Through Significant Downturn Scenarios Core Principles Scenario #1 #2 • Remain true to purpose-driven strategy – culture, ethics, safety, sustainability, communities FY Revenue ~$11B ~$10B • Operating from position of financial strength vs Prior
Slide 27: 2020: Leveraging Financial Strength, Seizing Opportunities to Emerge Stronger
2020: Leveraging Financial Strength, Staying True to Core Principles, Seizing Opportunities to Emerge Stronger Than Ever Strategy • Strategy tied to attractive end markets supported by global megatrends Brands • Franchise brands with leadership market positions in all regions Innovation • Sustained
Slide 28: Appendix
Appendix Appendix
Slide 29: Q1 Organic Bookings Up 6% Year-Over-Year; Organic Revenues Down (5%)
Q1 Organic Bookings Up 6% Year-Over-Year; Organic Revenues Down (5%) Organic* 2018 2019 2020 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Americas +10% +18% +17% +27% +18% -2% -4% +2% -7% -3% +11% EMEA +16% +10% -1% -5% +5% -9% +0% -2% -1% -3% -2% Asia Pacific +10% +18% +0% +8% +9% +0% -6% +3% -5% -2%
Slide 30: Appendix: GAAP to Non-GAAP Adjustments
Appendix: Table 2 GAAP to Non-GAAP Adjustments Restructuring and Transformation Costs • Restructuring costs of ~$26M included in Table 2 of the Q1 2020 earnings release includes ~$20M of restructuring costs related to transformation activities as well as ~$6M of restructuring costs supporting other
Slide 31: 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 book
Slide 32: Q1 Non-GAAP Measures Definitions
Q1 Non-GAAP Measures Definitions Free cash flow in 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. Free cash flow in 2019 is defined as net cash provided by (used in) co
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