Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — JP Morgan Aviation, Transportation & Industrials Conference 2019
54 slides from Trane Technologies's conference presentation, March 2019
Slide 1: JP Morgan Aviation, Transportation & Industrials Conference March 2019
JP Morgan Aviation, Transportation & Industrials Conference March 2019
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 the mix of and demand for our products; performance of the markets in which we operate; our share repurchase program including the amount of sha
Slide 3: A Global Leader in Energy Efficiency and Productivity
A Global Leader in Energy Efficiency and Productivity Two Segments Key Metrics (Revenues 2018) Manufacturing locations worldwide 52 Employees ~49,000 Industrial $3.3B $12.4B Climate Market cap ~$25B # of countries we sell products 100+ 3
Slide 4: Diversified Business With High Aftermarket Mix
Diversified Business With High Aftermarket Mix Segment Distribution Regional Mix Revenue Streams 4% Latin America Industrial 13% Asia Pacific 33% Parts and Services Europe, Middle 15% East, Africa $15.7B 68% North America 67% Equipment Climate All figures are FY 2018. 4
Slide 5: Leading Brands and Market Positions
Leading Brands and Market Positions Commercial HVAC Residential HVAC Transport Refrigeration ● World leader in HVAC ● Leader in heating and air ● World leader in refrigerated conditioning solutions transportation Industrial and Process Fluid Handling Golf and Utility Vehicles ● Leader in compression
Slide 6: Climate Segment: Diversified and Resilient Performance
Climate Segment: Diversified and Resilient Performance Segment Mix Regional Mix Revenue Streams 4% Latin America Transport Commercial 10% Asia Pacific Refrigeration HVAC 32% Parts and Services Equipment 15% Europe, Middle East, Africa $12.4B Residential HVAC 71% North America Equipment 68% Commercia
Slide 7: Industrial Segment: Diversified and Resilient Performance
Industrial Segment: Diversified and Resilient Performance Business Units Regional Mix Revenue Streams 3% India Small Electric 4% Latin America Industrial Vehicles Comp. 17% Europe, ME, Africa 39% Parts and Service 21% Asia Pacific $3.3B Industrial Engineered Products1 Comp. 61% Equipment 55% North A
Slide 8: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow (2014 – 2018) 1. Attractive, diversified 2. Leading brands, market positions end markets – outgrowing market rates $5.7 billion free cash flow over the last 5 years 5. Investing for growth 3. Focused on margin and profitability expansion (growth / op.
Slide 9: Driving Sustained Growth and Operating Margin Improvement
Driving Sustained Growth and Operating Margin Improvement In Billions Revenue Adjusted Continuing EPS $16 $6.00 14% $15 5% $5.00 CAGR CAGR $14 $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 In Billions Cumulative Free Cash Flow Adjusted Operating Marg
Slide 10: Maximizing Shareholder Value
Dynamic and Balanced Capital Deployment Focused on Maximizing Shareholder Value (2014 – 2018) $8.3 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$1.3B Capex • ~$1.8B dividends paid • $3.8B • ~$1.4B on 22 • ~20% CAGR dividend • ~54 million shares acquisitions per shar
Slide 11: Ingersoll Rand 2020 Targets
Ingersoll Rand 2020 Targets* Year-End 2017 to 2020 Targets Revenue Growth ~4% to ~4.5% CAGR Adjusted Operating Margins ~14.5% to ~15% in 2020 Adjusted Continuing EPS Growth ~11% to ~13% CAGR Based on ~22% tax rate Free Cash Flow (% Net Income) >=1.0 times Balanced Cap Deployment of Excess Cash ~100%
Slide 12: Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow
Consistent Strategy Execution Delivers Profitable Growth and Powerful Cash Flow Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurchase and integrity, ingenuity and global megatrends acquisitions engagement Susta
Slide 13: Global Mega Trends Play to Our Strengths
Global Mega Trends Play to Our Strengths Global Mega Trends Our Strengths • Climate change • Reduce energy demand and greenhouse gas emissions • Urbanization • Improve efficiency in: • Natural resource scarcity – Buildings • Digital connectedness and – Industrial processes technologies – Transportat
Slide 14: Significant Ongoing Business Investments Support Growth and Profitability
Significant Ongoing Business Investments Support Growth and Profitability Business Investments Key Examples ● ~90 major new products / services ~20% throughout the world in 2018 CAGR ● New low-global warming potential refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Part
Slide 15: Growth and Profitability Opportunities from Ongoing Business Investments
Growth and Profitability Opportunities from Ongoing Business Investments Subset of Incremental Opportunities Contributing to 2020 Targets* ~$200M ~$400M ~$300M ~$100M Climate Variable Refrigerant Flow Energy Services Digital Customer Experience Auxiliary Power Unit ~$40M Operating Income ~$100M ~$17
Slide 16: Business Operating System Delivers Results
Business Operating System Delivers Results 1 Drive innovation and productivity 2 Proven & unique system to accelerate profitable growth 3 Committed to sustainability and energy efficiency 4 Focus on employee engagement 16
Slide 17: Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion
Widely Recognized for Global Citizenship, Sustainability, Diversity and Inclusion and Employee Engagement Sustainability Diversity and Inclusion Citizenship 1st in our Industry to sign onto Global 100 Most Sustainable Paradigm for Parity FTSE4Good Index Series Corporations for 5th consecutive year n
Slide 18: Fourth-Quarter 2018 Results
Fourth-Quarter 2018 Results January 30, 2019
Slide 19: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurchase and integrity, ingenuity and global megatrends acquisitions engagement Sustainable growth St
Slide 20: 2018 Highlights – Execution of Strategy Continues to Deliver Top-Tier Performance
2018 Highlights – Execution of Strategy Continues to Deliver Top-Tier Operational and Financial Performance • Top-tier bookings and revenue growth with healthy end-markets in both Climate and Industrial segments − Q4 organic bookings up 17%, up 11% excluding a large Commercial HVAC order. FY 2018 up
Slide 21: 2018 Significantly Exceeded Initial Guidance Expectations
2018 Significantly Exceeded Initial Guidance Expectations 2018 Guidance Full Year 2018 Versus 2017 Net Revenue ~ 5% reported ~ 3% organic $15,668 + 10% reported + 9% organic Adj. Operating Margin* 12.5% to 13.0% 12.8% + 60 bps Adj. Continuing EPS* $5.00 to $5.20 $5.61 + 24% Free Cash Flow* > 1
Slide 22: Fundamentals Support Continued Strong Financial Performance in 2019
Fundamentals Support Continued Strong Financial Performance in 2019 ● Focused execution of our business strategy and favorable end-markets support continued growth in both Climate and Industrial segments ● Record backlog exiting 2018 providing improved visibility into 2019 ● Effectively managing kno
Slide 23: Strong Growth Continues in Healthy End Markets
Strong Growth Continues in Healthy End Markets • Global HVAC markets remain positive – strong service / equip revenue and bookings growth across virtually all regions • Europe growth solid, outlook remains positive Commercial HVAC • China mkt solid in Q4 w/ growth in equip & svcs; established direct
Slide 24: Strong Growth Continues in Healthy End Markets
Strong Growth Continues in Healthy End Markets • Global Transport business diversified and resilient across trailer, truck, APU, aftermarket • Exceptional growth in N.A. trailer and APU mkts driving outsized backlog; End-2018 backlog Transport conversion should drive healthy revenue growth in 2019 •
Slide 25: Q4 Results Deliver Strong Finish to 2018
Q4 Results Deliver Strong Finish to 2018 • Continued robust EPS growth – Q4 adjusted continuing EPS of $1.32, up 29% year over year driven by gains in both Climate and Industrial – Consistent performance delivered EPS growth over 20% in each quarter of 2018 • Strong Q4 organic revenue and bookings g
Slide 26: Strong Organic Bookings and Revenue Growth Continues in Both Segments
Strong Organic Bookings and Revenue Growth Continues in Both Segments and Across Business Units Against Tough YOY Comps Q4 Organic* Y-O-Y Change Bookings Revenue Commercial HVAC + + CHVAC Organic - North America + + EMEA Revenues: - Latin America + + - EMEA + - Europe MEA + - - Asia + + Residential
Slide 27: Q4 2018 Continued Strong Revenue Growth, Margin Expansion and EPS Growth
ENTERPRISE Q4 2018 Continued Strong Revenue Growth, Margin Expansion and EPS Growth Net Revenue Adj. Operating Margin* Adj. Continuing EPS* +8% +90 +29% Organic bps $1.32 $3,895 12.0% $3,618 11.1% $1.02 +8% Q4 '17 Q4 '18 Q4 '17 Q4 '18 Q4 '17 Q4 '18 Highlights • Ongoing business investments in NPD, c
Slide 28: Focused Execution of Business Strategy Delivering Strong Q4 Results
ENTERPRISE Focused Execution of Business Strategy Delivering Strong Q4 Results +$0.30 $0.11 $0.03 $1.32 $0.03 $1.02 $0.13 $0.05 Corp Cost ($0.04) Oth Exp $0.02 Interest $0.08 Tax rate Q4 2017 Climate Industrial Other Share Count Q4 2018 Adjusted Adjusted Continuing EPS* Continuing EPS* Highlights •
Slide 29: Strong Volume, Positive Price vs Material Inflation Driving 90 bps Margin Expansion
ENTERPRISE Strong Volume, Positive Price vs Material Inflation and Productivity vs Other Inflation Spreads Driving 90 bps Margin Expansion +90 bps 0.3 (0.6) 0.4 12.0% 11.1% 0.8 Q4 2017 Vol / Mix / FX / Acq Price / Material Productivity / Other Investment / Other Q4 2018 Adjusted Operating Inflation
Slide 30: Climate Segment: Q4 Strong Broad-Based Revenue Growth and Improved Margins
CLIMATE SEGMENT Q4 Continued Strong, Broad-Based Revenue Growth and Improved Margins Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +9% +40 +20 Organic bps bps $3,002 12.9% 13.3% $2,760 15.2% 15.4% +9% Q4 '17 Q4 '18 Q4 '17 Q4 '18 Q4 '17 Q4 '18 Highlights • Continued exceptional, broad based re
Slide 31: Industrial Segment: Q4 Strong Revenue Growth and Continued Margin Expansion
INDUSTRIAL SEGMENT Q4 Strong Revenue Growth and Continued Margin Expansion Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +6% +40 +10 Organic bps bps $858 $894 13.2% 13.6% 15.6% 15.7% +4% Q4 '17 Q4 '18 Q4 '17 Q4 '18 Q4 '17 Q4 '18 Highlights • Broad based revenue growth w/ particular strength i
Slide 32: Continued Execution of Balanced Capital Allocation Strategy
Continued Execution of Balanced Capital Allocation Strategy • Strengthen the core business and extend product & market leadership 1 Invest for Growth • • Invest in new technology and innovation Strategic acquisitions - pipeline remains active • ~ $285M cash outlay for acquisitions in 2018 2 • Drive
Slide 33: Guidance
am) Ingersoll Rand Inspiring Progress™ Guidance
Slide 34: 2019 Enterprise Guidance
2019 Enterprise Guidance Full Year Guidance Reported Organic Adjusted Revenue Revenue Operating Margin Climate 4.0% to 5.0% 5.0% to 6.0% 14.7% to 15.2% Industrial 3.0% to 4.0% 4.5% to 5.5% 14.2% to 14.7% Enterprise* 4.0% to 5.0% 5.0% to 6.0% 13.1% to 13.6% * Enterprise organic revenue adjusted for ~
Slide 35: 2019 Guidance: Full-year Continuing Adjusted EPS $6.15 to $6.35
2019 Guidance: Full-year Continuing Adjusted EPS $6.15 to $6.35 Full Year Y-O-Y change in revenue • Reported 4.0% to 5.0% • Organic 5.0% to 6.0% EPS continuing $5.90 to $6.10 Restructuring – (add back) ($0.25) EPS continuing – adjusted $6.15 to $6.35 EPS – discontinued ($0.14) Share Count – Millions
Slide 36: Topics of Interest
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Slide 37: Topics of Interest
Topics of Interest • Effectively Managing Tariffs and Inflation − 2019 EPS guidance includes Sec. 232 and sec. 301 list 1, 2 and 3 tariffs (incl. 10% to 25% March increase), China retaliatory actions and tariff-related inflationary impacts − Actively managing tariff and inflation impacts • Rigorousl
Slide 38: Summary: Expect Continued Strong Financial Performance in 2019
Summary: Expect Continued Strong Financial Performance in 2019 Strategy ● Strategy tied to attractive end markets supported by global mega trends Brands ● Franchise brands and businesses with leadership market positions Innovation ● Sustained business investments delivering innovation and growth, op
Slide 39: Appendix
am) Ingersoll Rand Inspiring Progress™ Appendix
Slide 40: Q4 Organic Bookings Up 17%; Revenue Up 8% Year-Over-Year
Q4 Organic Bookings Up 17%; Revenue Up 8% Year-Over-Year Organic* 2016 2017 2018 Bookings Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Climate 6% 6% 4% 10% 6% 6% 3% 5% 7% 5% 11% 17% 12% 20% 15% Industrial (5%) (5%) (1%) (1%) (3%) 9% 5% 5% 12% 8% 5% 8% 7% 6% 6% Total 4% 3% 3% 7% 4% 7% 4% 5% 8% 6% 9%
Slide 41: 2019 Forecast for End-Market Performance
2019 Forecast for End-Market Performance End Markets Growth Flat / mixed Negative Americas EMEA Asia Global Mkt Outlook Commercial HVAC Up low to mid-single digits Residential HVAC N/A N/A Up low to mid-single digits Transport Up low to mid-single digits Compression-related & Up low to mid-single di
Slide 42: Q4 Non-GAAP Measures Definitions
Q4 Non-GAAP Measures Definitions Organic bookings is defined as reported orders closed/completed 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
Slide 43: Q4 Non-GAAP Measures Definitions
Q4 Non-GAAP Measures Definitions Working capital measures a firm’s operating liquidity position and its overall effectiveness in managing the enterprises’ current accounts. • Working capital is calculated by adding net accounts and notes receivables and inventories and subtracting total current liab
Slide 44: Ingersoll Rand's Acquisition of Precision Flow Systems (PFS)
Ingersoll Rand’s Acquisition of Precision Flow Systems (PFS) February 11, 2019
Slide 45: Safe Harbor
Safe Harbor This presentation contains “forward-looking statements,” which are statements that are not historical facts, including without limitation statements about the proposed transaction and the anticipated timing thereof; the expected benefits of the proposed transaction, the impact of the tra
Slide 46: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth Nexus of sustainability Margin improvement Reinvestment, dividends, Commitment to and energy efficiency and powerful cash flow share repurchase and integrity, ingenuity and global megatrends acquisitions engagement Sustainable growth St
Slide 47: Enhancing the Portfolio – Precision Flow Systems Acquisition Accelerates Fluid Management Strategy
Enhancing the Portfolio – Precision Flow Systems Acquisition Accelerates Fluid Management Strategy with Mission-Critical Brands and Accretive Financials ✓ Enhances Ingersoll Rand’s Portfolio of Core Strategic Assets Deep industry knowledge and differentiated technology in growth markets with a rep
Slide 48: Summary Transaction Terms
Summary Transaction Terms • $1.45B purchase price Transaction Terms • Approximately 11x 2019E EBITDA net of synergies • ~$400M revenue Financial Benefits • Accretive to EBITDA margins of the Transaction • Accretive to EPS and cash flow ROIC in year one • Expect to generate meaningful synergies Poten
Slide 49: Precision Flow Systems: Differentiated Industry Leader in Mission-Critical Applications
Precision Flow Systems: Differentiated Industry Leader in Mission-Critical Applications Business Overview By Geography¹ By End-Market¹ By OE / Aftermarket¹ ● Designs, manufactures, supports highly LatAm Midstream Other engineered positive displacement pumps, boosters, mixers and systems for water, f
Slide 50: Precision Flow Systems: Technically Differentiated, Mission Critical Applications
Precision Flow Systems: Technically Differentiated, Mission Critical Applications with High Recurring Revenue Water Specialty Process Industries Dosatron YZ t Key Products Pumps, Mixers and Aerospace, Defense, Pumps, Mixers and Water-powered, Odorization and Gas / Systems Pumps and Valves Systems No
Slide 51: PFS Accelerates Strong Fluid Management Platform
PFS Accelerates Strong Fluid Management Platform Fluid Management is an Integral Part of …and PFS is a Compelling Fit Our Industrial Business… ● Attractive market segment with robust growth above ● Creates a highly profitable, globally competitive flow GDP and stability over long term business of sc
Slide 52: Combined, Diverse Pumps Business Creates Platform for Growth
Combined, Diverse Pumps Business Creates Platform for Growth Pump Top Ancillary Technology End-Markets Offerings • Chemical / Pharma • Air treatment devices (filters, regulators) • Air powered • Industrial • Valves • Diaphragm and piston pumps • Wastewater • Cylinders • Odor injection • Electric, wa
Slide 53: Summary: PFS Acquisition Aligns with Ingersoll Rand's Strategy
Summary: PFS Acquisition Aligns with Ingersoll Rand’s Strategy for Value Creation for Shareholders Ingersoll Rand PFS • Strategy tied to attractive end markets Strategy supported by global mega trends ✓ Strategic addition to our Industrial business and fluid capabilities, foothold in water • Franchi
Slide 54: Ingersoll Rand
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Ingersoll Rand — JP Morgan Aviation, Transportation & Industrials Conference 2019 on 6ix