Trane Technologies Plc · NYSE:TT
Trane Technologies — UBS Global Industrials and Transportation Virtual Conference 2021
40 slides from Trane Technologies's conference presentation, Jun 9, 2021
Slide 1: Investor Presentation
Investor Presentation June 2021
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 $12.5B 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 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: Highly Regarded ESG Performance
S U S TA I N A B I L I T Y L E A D E R Highly Regarded ESG Performance 10 Years Listed on North America Index #26 On Corporate Knights Top 100 Global Most Sustainable Corporations 61% Higher score than industrial machinery average Gold Medal Winner 35th annual award for International Achievement in
Slide 9: Purpose Alignment Drives Uplifting Culture
S U S TA I N A B I L I T Y L E A D E R Purpose Alignment Drives Uplifting Culture 1st in our industry to sign on to Paradigm for Parity – A Call to Action for Gender Equality Founding Member OneTen coalition to hire 1 million Black Americans 2nd Consecutive Year Forbes Best Employers for Diversity J
Slide 10: Trane Technologies Reimagined: Streamlined, Customer-Focused Climate Innovator
The New 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 10
Slide 11: 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 12: 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 13: 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 14: 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 15: 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 16: Driving Sustained Growth and Operating Margin Improvement 2017-2020
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 2017-2020 $12 13% +110 ~4% 11% bps Revenue* $9 CAGR Adj. Op. ($B) Inc. 9% $6 Margin † 7% $3 5% 2017 2018 2019 2020 2017 2018 2019 2020 18% 160% Avg. = 16% 120% +110 FCF % of 116% Adju
Slide 17: 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 2020) Dividends M&A ~12% CAGR dividend per share. ~$2.2B on 25 acquisitions Long history of growing dividend. as of January 2021 ~26% ~25% $8.8B* CAPEX ~13% Capex lite
Slide 18: 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 innovation
Slide 19: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Adjusted operating income in 2021 and 2020 is defined as GAAP operating income plus restructuring costs and transformation costs. Adjusted operating income in 2019, 2018 and 2017 is defined as GAAP operating income plus restructuring costs. Adjusted operating margin is
Slide 20: First-Quarter 2021 Results
First-Quarter 2021 Results May 5, 2021
Slide 21: 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 22: Exceptional Q1 2021 Performance; Raising FY Revenue and EPS Guidance
Q1 2021 E xceptional Q1 2021 Performance and Steadily Improving End Markets; Raising FY Revenue and EPS Guidance Above Prior Range • Exceptional financial performance highlights strength of focused strategy, business operating system & high-performance culture − Broad-based outgrowth / share gains a
Slide 23: Robust Bookings w/ Growth in All Businesses; Strong Revenue Outgrowth
Q1 2021 ORGANIC BOOKINGS AND REVENUES Robust Bookings w/ Growth in All Businesses; Strong Revenue Outgrowth in Improving End Markets Q1 Organic* Y-O-Y Change Bookings Revenue Americas Enterprise + 31% + 11% • CHVAC bookings up LSD and revs flat on tough comps (2-year stack bookings of high-teens, HS
Slide 24: Consistent Execution Drives Strong Performance in Improving Markets
ENTERPRISE Consistent Execution Drives Strong Performance in Improving Markets Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* +11% +460 +500 +135% Organic bps bps 14.5% 12.2% $1.01 $3,018 +14% $2,641 9.9% 7.2% $0.43 Q1 '20 Q1 '21 Q1 '20 Q1 '21 Q1 '20 Q1 '21 Q1 '20 Q1 '21 • St
Slide 25: Q1 Segment Results: Americas, EMEA, Asia Pacific
Q 1 2 0 2 1 S E G M E N T R E S U LT S Strong Execution, Product and Service Innovation, Productivity and Price / Cost Deliver Significant Growth and Margin Expansion Revenue Adj. EBITDA% Adj OI% Highlights $M Org. Growth vs PY vs PY • Market outgrowth including strong Res HVAC and Transport America
Slide 26: Market Improvements Expected w/ Global Vaccinations in 2021
M A R K E T U P D AT E Market Improvements Expected w/ Global Vaccinations in 2021 Commercial HVAC • IAQ demand strong for systems-focused solutions; IAQ remains long-term tailwind • End markets mixed; data center and warehouse remain strong; education outlook improving on IAQ stimulus, however full
Slide 27: Leveraging Value Creation Framework to Outgrow Improving Markets
2 0 2 1 G U I D A N C E U P D AT E Leveraging Value Creation Framework to Outgrow Improving Markets with Strong Operating Leverage Prior FY Guidance Updated FY Guidance Organic + 5% to + 7% + ~9% Revenues (Up 6.5% to 8.5% w/ M&A) (Up ~10.5% w/ M&A) Adj. EPS $5.30 to $5.50* ~$6.00* w/ M&A ($5.25 to $
Slide 28: 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; 3X Original $100M RMT Stranded Cost Reduction Target • On track to deliver ~$90M incremental savings in Transformation Savings 2021 after delivering stranded / fixed cost take-out of ~$100M in 20
Slide 29: 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 30: Increased Target to ~$2.5B for Balanced Capital Allocation in FY 2021
Increased Target to ~$2.5B for Balanced Capital Allocation in FY 2021, up $500M vs prior guidance; Strong Deployment in Q1 Balanced Capital Deployment Capital Allocation Q1 2021 FY 2021 ~$2.5B+ Dividends* $140M ~$564M Acquisitions and investments $70M ~$1.5B** Share repurchases $104M Debt retirement
Slide 31: Topics of Interest
a 4 Topics of Interest TECHNOLOGIES
Slide 32: Strong 2021 Organic Leverage on Growth in Improving Markets
TOPICS OF INTEREST Strong 2021 Organic Leverage on Growth in Improving Markets; Positive Impact from EPS-Accretive M&A in First Year of Integration Updated FY Revenue Adj. EPS Commentary 2021 • ~30% organic leverage through balance of 2021; transformation Organic + ~9% ~$5.95 savings plus higher Tra
Slide 33: Continued Strong North America / EMEA Transport Markets Primed for Growth
TOPICS OF INTEREST Continued Strong North America / EMEA Transport Markets Primed for Growth in 2021; FY Outlook Reiterated N.A. and EMEA Market Results / Forecast N.A. and EMEA 2021 Strong Market Outlook 2020 Transport N.A. 2021 Transport N.A. • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue
Slide 34: 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 innovation
Slide 35: Appendix
Appendix Appendix
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: Q1 Organic Bookings Up 31% Year-Over-Year; Organic Revenues Up 11%
Q1 Organic Bookings Up 31% Year-Over-Year; Organic Revenues Up 11% Organic* 2019 2020 2021 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Americas -2% -4% +2% -7% -3% +11% -5% +8% +2% +4% +36% EMEA -9% +0% -2% -1% -3% -2% -20% +6% +9% -3% +18% Asia Pacific +0% -6% +3% -5% -2% -17% -2% -5% +2% -6% +14% To
Slide 38: Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments
Restructuring and Transformation Costs GAAP to Non-GAAP Adjustments Restructuring and Transformation Costs • Restructuring costs of ~$10M included in Table 2 of the Q1 2021 earnings release includes ~$9M of restructuring costs related to transformation activities as well as ~$1M of restructuring cos
Slide 39: 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 2021 and 2020
Slide 40: Q1 Non-GAAP Measures Definitions
Q1 Non-GAAP Measures Definitions Free cash flow in 2021 and 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. Working capital measures a firm’s operating liquidity positio
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