Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll-Rand — Q1 2017 Earnings Presentation
30 slides from Trane Technologies's earnings presentation, Apr 26, 2017
Slide 1: First-Quarter 2017 Results
First-Quarter 2017 Results April 26, 2017
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 sh
Slide 3: Strategic Foundation Continues to Underpin Top-Quartile Performance
Strategic Foundation Continues to Underpin Top-Quartile Performance Sustainable and Profitable Growth, Cash Flow and Shareholder Value Sustained Operational Capital Winning Growth Excellence Allocation Culture Well positioned in both Strong, recognized brands Leading market shares geographic and end
Slide 4: 2017 Forecast for End-Market Performance Largely Unchanged
2017 Forecast for End-Market Performance Largely Unchanged End Markets Organic Revenue Americas EMEA Asia Guidance Commercial HVAC Up mid-single digits Residential HVAC Up mid-single digits Transport Down low-single digits Compression-related Down low-single digits & Industrial Products Golf / Utili
Slide 5: Key Takeaways Q1 2017
Key Takeaways Q1 2017 • Continued strong operating results – Adjusted EPS of $0.57, up 14% year-over-year – Adjusted margin improvement in both segments • Robust Commercial & Residential performance – Commercial and Residential revenue and bookings up high-single digits – Adjusted margin expansion i
Slide 6: Q1 2017 Continued Strong Operational Results
Q1 2017 Continued Strong Operational Results Net Revenue Adj. Operating Margin* Adjusted EPS* +4% 20 bps +14% $0.57 $2,894 $3,001 8.1% 8.3% +4% $0.50 Organic Q1'16 Q1 '17 Q1 '16 Q1 '17 Q1 '16 Q1 '17 Highlights • Company continues to innovate with leading products and services in durable end markets
Slide 7: Strong Q1 Bookings Led by Commercial and Residential HVAC, Compressor and Small Electric Vehicles
Strong Q1 Bookings Led by Commercial and Residential HVAC, Compressor and Small Electric Vehicles Businesses Climate C Y-O-Y Change in Organic Bookings Y-O-Y Commercial HVAC + high-single digits % Reported Organic Change - N. America + high-single digits - L. America + mid-single digits Q1 2016 1% 4
Slide 8: Q1 Segment Organic Revenue Growth Led by N.A. Climate, Asia and Latin America
CONSOLIDATED RESULTS Q1 Segment Organic Revenue Growth Led by N.A. Climate, Asia and Latin America Europe North America Climate Climate Industrial Industrial Middle East/Africa Asia Climate Latin America Industrial Climate Climate Industrial Industrial Revenue change Y-O-Y Q1 Reported Q1 Organic Cli
Slide 9: Innovation, Operational Excellence and Productivity Continue to Drive Adjusted Margin Expansion
Enterprise Innovation, Operational Excellence and Productivity Continue to Drive Adjusted Margin Expansion +20bps 0.7 0.5 (0.5) (0.5) 8.1% 8.3% (0.4) Investment (0.1) Other 1Q 2016 Volume / Mix / FX Price/Material Productivity/Other Investment/Other 1Q 2017 Adjusted Inflation Inflation Adjusted Oper
Slide 10: Q1 Strong Commercial and Residential HVAC Partially Offset by Softer Transport Results
CLIMATE SEGMENT Q1 Strong Commercial and Residential HVAC Partially Offset by Softer Transport Results Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +70 bps 13.2% 12.5% +5% $2,324 +70 bps $2,214 10.6% 9.9% +6% Organic Q1 '16 Q1 '17 Q1 '16 Q1 '17 Q1 '16 Q1 '17 Highlights • Strong Commercial gr
Slide 11: Q1 Solid Margin Expansion
INDUSTRIAL SEGMENT Q1 Solid Margin Expansion Net Revenue Adj. Operating Margin* Adj. OI + D&A %** +100 bps 13.2% -1% 12.2% $681 $676 +60bps 10.4% +1% 9.8% Organic Q1 '16 Q1 '17 Q1 '16 Q1 '17 Q1 '16 Q1 '17 Highlights • Significant aftermarket growth in Compression Technologies and continued growth at
Slide 12: Strong Balance Sheet and Free Cash Flow
Strong Balance Sheet and Free Cash Flow $Mil YE 15 Q1 16 Q2 16 Q3 16 YE 16 Q1 17 Cash 737 613 929 1,505 1,715 1,322 Debt 4,218 4,473 4,086 4,070 4,070 4,072 Net Debt 3,481 3,860 3,157 2,565 2,355 2,750 $ Millions Free Cash Flow 1,345** 1,151* 1.1B to 1.2B** 985** 810 862 Post Security Spin 2013 2014
Slide 13: Dynamic Capital Allocation Focused on Delivering High Returns
Dynamic Capital Allocation Focused on Delivering High Returns; 2017 Plan to Deploy $415M for Dividends and $1.5B for Share Repurchase and Acquisitions Strategic Business Maintained Strong Competitive Dividend Payout Investment Balance Sheet $1.60 $1.36 at BBB Metrics $1.16 $1.00 $0.84 $0.64 2012 201
Slide 14: Guidance
LEY Ingersoll Rand. Guidance
Slide 15: 2017 Enterprise Guidance
2017 Enterprise Guidance Original FY Guidance With Pension Adj.* Climate ‒ Revenue Reported ~3% ~3% ‒ Revenue Organic ~4% ~4% Adjusted Operating Margin 14.5% to 15.0% 14.6% to 15.1% Industrial ‒ Revenue Reported ~-2% ~-2% ‒ Revenue Organic ~-1% ~-1% Adjusted Operating Margin 11.0% to 12.0% 11.1% to
Slide 16: 2017 Guidance: Full-year Continuing Adjusted EPS Increases to $4.35 to $4.50
2017 Guidance: Full-year Continuing Adjusted EPS Increases to $4.35 to $4.50 Full Year Y-O-Y change in revenue • Reported ~2% • Organic ~3% EPS continuing $4.20 to $4.35 Restructuring – (add back) ($0.15) EPS continuing – adjusted $4.35 to $4.50 EPS – discontinued ($0.13) Share Count – Millions ~261
Slide 17: Accounting Changes in Q1
Accounting Changes in Q1 • Stock Options Expense – Accounting Standard Update (ASU) 2016-09 - Included in initial tax guidance for 2017 - $15 million benefit to Q1 tax rate - 2017 full-year tax rate remains in the range of 21% to 22% • Pension and Postretirement Accounting – ASU 2017-07 - Standard r
Slide 18: Restructuring and Corporate Costs
Restructuring and Corporate Costs • Restructuring Costs in Q1 - Planned restructuring costs $32.7M or $(0.10) of EPS vs $8.4M for Q1 2016 - Was included in 2017 guidance - Consolidated three plants and distributed product to other plants in region. Cash payback period less than 5 years - Continue to
Slide 19: Topics of Interest
LEY Ingersoll Rand. Topics of Interest
Slide 20: Topics of Interest
Topics of Interest • Currency Impact on 2017 - Net currency had a ~1 percentage point drag on Q1 revenue - Full year currency drag expected to be ~1 percentage point - Expected ~(10) cent negative impact on full-year 2017 EPS • Price and Material inflation in 2017 - Targeting positive price/material
Slide 21: Topics of Interest (Continued)
Topics of Interest (Continued) • Transport Business - Q1 on track with expectations - Have built a more diversified, durable Transport business over time - Continue to expect annual revenues down low-single digits with a minor decline in adjusted operating margins despite a declining N. America Trai
Slide 22: Summary: 2017 Expected to be Another Strong Year With Top Quartile Performance
Summary: 2017 Expected to be Another Strong Year With Top Quartile Performance • Continued strong Q1 results indicative of successful execution of our strategy and performance of our business operating system • Commercial and Residential HVAC businesses expected to remain robust • Continued improvem
Slide 23: Appendix
LEY Ingersoll Rand. Appendix
Slide 24: Q1 Organic Revenue Up 4% Year-Over-Year
Q1 Organic Revenue Up 4% Year-Over-Year Reported 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Climate 6% 2% 4% 2% 3% 3% 4% 3% 3% 3% 5% Industrial 7% (1%) (2%) 5% 2% (7%) (4%) Flat (4%) (4%) (1%) Total 6% 2% 3% 3% 3% Flat 2% 2% 1% 2% 4% 2013 Organic* 2015 2016 2017 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1
Slide 25: Q1 Revenue Up 4% and Organic Up 4%
Q1 Revenue Up 4% and Organic Up 4% Segment Revenue Change 5% Climate 6% Reported -1% Organic* Industrial 1% Geographic Revenue Change N.A. Organic +6% 6% Americas 5% Europe, Middle -6% East, Africa Reported -3% Organic* Asia 5% 8% 25 *Organic revenues excludes acquisitions and currency
Slide 26: Q1 2017 Y-O-Y Revenue Change
Q1 2017 Y-O-Y Revenue Change Reported Organic Climate - Commercial HVAC + High-single + High-single - Residential HVAC + High- single + High-single - Transport - Mid-single - Mid-single Total Climate + 5% + 6% Industrial - Compression-related Products - Low-single + Low-single - Industrial Products
Slide 27: Volume and Cost Reduction Initiatives Offset by Discrete Restructuring Expense and Inflation Headwinds
Enterprise Volume and Cost Reduction Initiatives Offset by Discrete Restructuring Expense and Inflation Headwinds -60 bps 0.7 0.5 (0.5) (1.3) 7.8% 7.2% (0.4) Investment (0.8) Restructuring (0.1) Other 1Q 2016 Volume / Mix / FX Price/Material Productivity/Other Investment/Other 1Q 2017 GAAP Operating
Slide 28: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions. Organic bookings is defined as reported orders closed/completed in the current period adjusted for the impact of currency and acquisitions. • Currency impacts on net re
Slide 29: Non-GAAP Measures Definitions
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 liabili
Slide 30: HP ingersott Rand.
HP ingersott Rand. am) Ingersoll Rand.