Slide 1: Fourth-Quarter 2020 Results
Fourth-Quarter 2020 Results February 5, 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
C L E A R P R IO R IT IE S 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 a
Slide 4: Strong Performance in Q4 and 2020 Against Challenging Covid-19 Backdrop
Strong Performance in Q4 and 2020 Against Challenging Covid-19 Backdrop • Resilient financial performance highlights strength of focused strategy, business operating system & high-performance culture − Broad-based outgrowth / share gain across challenging global end-markets − Strong Q4 bookings grow
Slide 5: Strong Performance and Improving Outlooks Throughout 2020 Despite COVID-19 Impacts
2 0 2 0 YE A R IN R E V IE W Strong Performance and Improving Outlooks Throughout 2020 Despite COVID-19 Impacts 2020 Scenarios (Q1)** 2020 Guidance (Q2)** 2020 Guidance (Q3)** 2020 Results Net Revenue -15% to -25% -10% to -15% -6% -5% Better Than Deleverage* ~Gross Margin % ~Gross Margin % Gross Mar
Slide 6: Bookings Growth and ~Flat Revenues, Outpacing Weak End Markets
Bookings Growth and ~Flat Revenues, Outpacing Weak End Markets Q4 Organic* Y-O-Y Change Bookings Revenue Americas • CHVAC bookings / revs down MSD on tough comps (Bookings Enterprise + 3% - 1% up ~25% across 2018/19; N.A. revs up high-teens 4Q19); Svcs performance stronger than equipment; Svcs revs
Slide 7: Consistent Execution Drives Strong Performance Despite Ongoing COVID-19 Impacts
E N TE R P R IS E Consistent Execution Drives Strong Performance Despite Ongoing COVID-19 Impacts Net Revenue Adj. EBITDA %* Adj. Operating Margin* Adj. Continuing EPS* -1% +140 +150 +12% Organic bps bps 14.4% 12.4% $1.03 $3,184 flat $3,179 10.9% $0.92 13.0% Q4 '19 Q4 '20 Q4 '19 Q4 '20 Q4 '19 Q4 '20
Slide 8: Strong Execution, Cost Controls, Productivity Deliver Margin Expansion in Every Region
Q4 S E GME NT RE S ULTS Strong Execution, Cost Controls, Productivity, Positive Price / Cost Delivers Margin Expansion in Every Region Revenue Adj. EBITDA% Adj OI% Highlights $M Org. Growth vs PY vs PY Americas $2,386 16.2% 14.0% • Market outgrowth, cost controls, productivity, price / cost drive ma
Slide 9: Expect Improving Market Conditions With Global Vaccine Administration in 2021
MA RK E T UP D ATE Expect Improving Market Conditions With Global Vaccine Administration in 2021 Commercial HVAC • Svcs resilient, growing LSD in 4Q20 despite cont’d low building occupancy; 4Q20 revs down MSD (tough comps vs 4Q19); IAQ remains long-term tailwind • End market indicators (ABI, Dodge,
Slide 10: Leveraging Value Creation Framework To Outgrow Markets With Strong Operating Leverage
2 0 2 1 G U ID A N C E Leveraging Value Creation Framework To Outgrow Markets With Strong Operating Leverage • Guidance reflects current view of market Organic + 5% to + 7%* conditions, improved pace of vaccine production, administration Revenues (Up 6.5% to 8.5% w/ M&A) • ~1.5% M&A growth Adj. EPS
Slide 11: Strong Q1 Growth and Operating Leverage
Q 1 2 0 2 1 G U ID A N C E Strong Q1 Growth and Operating Leverage • Organic ~5%* • Strong organic growth ~1.5% M&A growth • Revenues (Up ~7.5% w/ M&A & FX) ~1.0% FX growth • Operating Organic Strong enterprise leverage (includes corporate) • Leverage ~30% to ~35% Transformation savings plus higher
Slide 12: Fixed Cost Reduction Programs Delivered $100M Savings in 2020
TR A N S F O R M A TIO N S A V IN G S Fixed Cost Reduction Programs Delivered $100M Savings in 2020; On Track for $140M Run Rate Savings in 2021 & Total Transformation Savings ~ $300M Annually by 2023 1 2 3 4 Fit For Purpose Strategic Choice Repositioning Supply Chain Organizational Model Budgeting
Slide 13: 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 14: Resumption of Balanced Capital Allocation in 2020; Strong Deployment in 2021
Resumption of Balanced Capital Allocation in 2020; Strong Deployment in 2021 After Full Business Reinvestment Balanced Capital Deployment Capital Allocation (2020 & 2021) 2020 • $507M dividends • $183M M&A (primarily channel acquisitions) ~$2B+ • $300M debt retirement • $250M share repurchases ~$1.2
Slide 15: Topics of Interest
a 4 Topics of Interest TECHNOLOGIES
Slide 16: Recent Acquisitions
TO P IC S O F IN TE R E S T Recent Acquisitions 3 CHVAC Channel Acquisitions Completed Through January 2021 • ~1.5% revenue: ~80% / ~20%, Americas / EMEA • ~$0.05 EPS accretion in 2021 • Utilizing proven playbook to integrate into Trane Technologies’ business operating system • Accelerates Trane Tec
Slide 17: Strong 2021 Organic Leverage; Positive Impact from EPS Accretive M&A
TO P IC S O F IN TE R E S T Strong 2021 Organic Leverage; Positive Impact from EPS Accretive M&A in First Year of Integration FY 2021 Revenue Adj. EPS Commentary • ~30% organic leverage; transformation savings plus higher Organic + 5% to + 7% $5.25 to $5.45 Transport mix Acquisitions ~1.5% ~$0.05 •
Slide 18: North America / EMEA Transport Markets Poised for Growth in 2021
TO P IC S O F IN TE R E S T North America / EMEA Transport Markets Poised for Growth in 2021 N.A. and EMEA 2021 markets expected to emerge from N.A. and EMEA Market Results / Forecast prolonged downcycle / COVID-19 pandemic 2020 Transport N.A. 2021 Transport N.A. • Trailer/Truck/APU: ~2/3rds of Tota
Slide 19: Positioned to Outperform. Consistently.
IN S U M M A R Y 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 margins with market-leading sustainable innovations Inn
Slide 20: Appendix
Appendix Appendix
Slide 21: Trane Technologies Core Sustainability Strategy: Challenge Possible
2030 S US TAINAB ILIT Y C O MMIT ME NT 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 in leadership, op
Slide 22: Highly Regarded ESG Performance
S U S TA IN A B IL IT 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 Sus
Slide 23: Purpose Alignment Drives Uplifting Culture
S U S TA IN A B IL IT 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 Join
Slide 24: Q4 Organic Bookings Up 3% Year-Over-Year; Organic Revenues Down 1%
Q4 Organic Bookings Up 3% Year-Over-Year; Organic Revenues Down 1% Organic* 2018 2019 2020 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Americas +10% +18% +17% +27% +18% -2% -4% +2% -7% -3% +11% -5% +8% +2% +4% EMEA +16% +10% -1% -5% +5% -9% +0% -2% -1% -3% -2% -20% +6% +9% -3% Asia Pacific
Slide 25: 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 ~$4M included in Table 2 of the Q4 2020 earnings release includes ~$2M of restructuring costs related to transformation activities as well as ~$2M of restructuring cost
Slide 26: Q4 Non-GAAP Measures Definitions
Q4 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 27: Q4 Non-GAAP Measures Definitions
Q4 Non-GAAP Measures Definitions Free cash flow in 2020 and 2019 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