Trane Technologies Plc · NYSE:TT
Trane Technologies — Ingersoll Rand — Investor Day (May 2017)
131 slides from Trane Technologies's investor day presentation, May 10, 2017
Slide 1: 2017 Investor & Analyst Day
2017 Investor & Analyst Day May 10, 2017
Slide 2: Zac Nagle, Vice President, Investor Relations
Zac Nagle Vice President, Investor Relations 2
Slide 3: Safe Harbor
Safe Harbor These presentations include “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 s
Slide 4: Mike Lamach
Mike Lamach Chairman and Chief Executive Officer 4
Slide 5: Agenda
Agenda Strong and improving business Well-positioned Sustainable performance 5
Slide 6: Ingersoll Rand Today: A Global Leader in Energy Efficiency and Productivity
Ingersoll Rand Today: A Global Leader in Energy Efficiency and Productivity Two Segments Key Metrics (Revenues 2016) Manufacturing locations worldwide 51 Employees ~45,000 Industrial $3.0B $10.5B Climate Market cap ~$23B # of countries we sell products 100+ 6
Slide 7: Why Ingersoll Rand?
Why Ingersoll Rand? Multi-year top-tier • Business Operating System enables 2017-2020 performance record strong execution of company’s strategy Targets Revenue CAGR • Our people think big and bold to ~ 4 - 4.5% Inspired excellence create impactful products and services and innovation that deliver va
Slide 8: Executing a Consistent Strategy that Delivers Profitable Growth
Executing a Consistent Strategy that Delivers Profitable Growth 1. 2. 3. 4. Sustained Operational Dynamic Capital Winning Growth Excellence Allocation Culture Differentiated products Margin improvement Reinvestment, dividends, Commitment to and services deliver and powerful cash flow share repurchas
Slide 9: Operationally Integrated Company Maximized for Future Growth
Operationally Integrated Company Maximized for Future Growth Past Present Organic Growth Steady Leading Performance Profitable Top-Tier Innovation Measured Transformational Operational Excellence Beginning Core Competency Culture Siloed Collaborative Sustainability Obligation Growth Driver 9
Slide 10: Widely Recognized for Global Citizenship, Sustainability and Employee Engagement
Widely Recognized for Global Citizenship, Sustainability and Employee Engagement Citizenship Sustainability Employee Engagement Manufacturing Industry Top Quartile Corporate Responsibility magazine 2016 Dow Jones Sustainability Manufacturing 100 Best Corporate Citizens World and North America Indust
Slide 11: Strategy and Execution Deliver Differentiated Shareholder Returns
Strategy and Execution Deliver Differentiated Shareholder Returns Total Shareholder Returns Outperformed S&P 500 Index, S&P Industrials and Peer Average 600% 500% ~500% 400% Ingersoll Rand 300% ~280% Peer Average 200% ~190% S&P 500 ~160% 100% S&P Industrials 0% (100%) 2009 2010 2011 2012 2013 2014 2
Slide 12: Have Met or Exceeded Targets Set in November 2013
Have Met or Exceeded Targets Set in November 2013 Target Actual Target Met External Commitments • Organic revenue growth (CAGR) 4% - 5% 4% • Adj. EPS growth (CAGR) 15% - 20% 15.7% • Free cash flow % of net income 100% 103% Internal Goals • Dividend >= earnings growth (CAGR) > 15% 17% 3 year avg = 18
Slide 13: Agenda
Agenda Strong and improving business Well-positioned Sustainable performance 13
Slide 14: 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 15: 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 16: Continuing 146-Year Trend of Transforming Everyday Life through Innovation
Continuing 146-Year Trend of Transforming Everyday Life through Innovation More than 200 Products Introduced in Last 3 Years Product portfolio refreshed since 2012 85% Ingersoll Rand Trane Series E™ Club Car Thermo King Next Generation CenTraVac Onward SLXi Key emerging markets R-Series innovation s
Slide 17: 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 17
Slide 18: Agenda
Agenda Strong and improving business Well-positioned Sustainable performance 18
Slide 19: Continuing to Execute Consistent and Proven Strategy
Continuing to Execute Consistent and Proven Strategy 1. 2. 3. 4. Deliver Laser Focus Allocate Strong Build and Cash Flow to Sustained on Operational Maximize Leverage our Growth Excellence Shareholder Value Winning Culture Strong, globally Leading Well positioned in both recognized brands market sha
Slide 20: A Few Growth Opportunities being Highlighted Today
A Few Growth Opportunities being Highlighted Today Subset of Incremental Revenue 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 ~$175M ~$90M Indust
Slide 21: Why Invest In Ingersoll Rand?
Why Invest In Ingersoll Rand? 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, operating excellence and improving
Slide 22: Didier Teirlinck
Didier Teirlinck Executive Vice President – Climate Segment 22
Slide 23: Agenda
Agenda The business today Performance highlights Strategy and outlook Strategic growth programs 23
Slide 24: Industry Leading Portfolio of Brands and Services
Industry Leading Portfolio of Brands and Services $10.5B Group of Three HVAC and Transport Refrigeration Businesses Commercial HVAC Residential HVAC Transport Refrigeration 24
Slide 25: The Business Today: Diversifying for Resilient Performance
The Business Today: Diversifying for Resilient Performance Business Units Regional Mix Revenue Streams 4% Latin America Transport Commercial 11% Asia Pacific Refrigeration HVAC 30% Parts and Services Equipment 14% Europe, Middle East, Africa $10.5B Residential HVAC 71% North America 70% Equipment Co
Slide 26: Agenda
Agenda The business today Performance highlights Strategy and outlook Strategic growth programs 26
Slide 27: Proven and Sustainable Financial Performance Over Time
Proven and Sustainable Financial Performance Over Time Adjusted Operating 14.6% Income % 12.8% 12.2% +7.7PPts 10.5% 8.9% 9.3% Revenue $B 8.8% $10.5 6.9% $10.2 $9.9 +4.5% $9.4 CAGR $9.1 $9.0 $8.4 $7.8 2009 2010 2011 2012 2013 2014 2015 2016 27
Slide 28: Dramatic Transformation of Global Commercial HVAC Business
Dramatic Transformation of Global Commercial HVAC Business ● 20% renewal of products each year for past 3 years ● Leading with low-global warming potential products that Growth & Innovation use next-generation refrigerants – EcoWise™ ● 50% of total investment going to building channel capabilities 2
Slide 29: Successfully Expanding Residential HVAC Business
Successfully Expanding Residential HVAC Business ● Comprehensive product portfolio serving diverse markets and applications Growth & ● 80%+ of revenue from new products launched Innovation in the last 36 months ● Leadership in energy efficient systems ● Best in class Connected Home solutions 2012-20
Slide 30: Diversified Transport Refrigeration Business for Reduced Cyclicality
Diversified Transport Refrigeration Business for Reduced Cyclicality ● 35% of revenue from new products launched in the last 36 months Growth & ● Leading with low-global warming potential products Innovation that use next-generation refrigerants – EcoWise™ ● Significant investment in next-generation
Slide 31: Agenda
Agenda The business today Performance highlights Strategy and outlook Strategic growth programs 31
Slide 32: Strategy Aligned with Core Mega Trends
Strategy Aligned with Core Mega Trends Trend Response • Efficient systems and controls technology • Holistic building energy management solutions and services Sustainability • Connected building technology and capabilities • Utility solutions and grid management; Buildings as a Resource (BaaR) • Dis
Slide 33: Our Three Point Climate Growth Strategy
Our Three Point Climate Growth Strategy Core Growth Expansion New Frontiers Industry leading systems Power management Customer experience efficiency enhancements through digital Variable refrigerant flow / solutions Service recurring revenue streams variable water flow (ductless) Connect
Slide 34: Outlook: Continued Growth and Margin Expansion
Outlook: Continued Growth and Margin Expansion Revenue Growth* Margin Expansion* Key Margin Drivers ~4.5% 2017 Adj. 2020 CAGR ~14.9% ~16.5% • New product development ~$12.4B margin improvement ~$10.9B • Productivity through + ~160 bps operational excellence • Accretive Energy Services and Controls g
Slide 35: Agenda
Agenda The business today Performance highlights Strategy and outlook Strategic growth programs 35
Slide 36: Strategic Growth Programs
Strategic Growth Programs Snapshot of our Innovation, Customer Satisfaction and Impact ● Focused on large market opportunities ● Building on strong capabilities and differentiated positions ● Momentum is building, early success is evident ● The future is bright for climate segment 36
Slide 37: Thermo King Auxiliary Power Unit Growth Story
Thermo King Auxiliary Power Unit Growth Story Ray Pittard, President – Transport Solutions North America, Europe, Middle East, Africa 37
Slide 38: Significant Opportunity to Grow Market Share and Expand Customer Base
Significant Opportunity to Grow Market Share and Expand Customer Base The Business Thermo King Auxiliary Power Units (APU) provide HVAC and hotel power to the sleeper cab: • Reduces engine idle-time • Increases fuel efficiency • Lowers maintenance costs • Maximizes driver comfort and retention • Inc
Slide 39: Growing Class 8 Sleeper Cab Market Opportunity
Growing Class 8 Sleeper Cab Market Opportunity ~17% ~$1.1B CAGR Opportunities $652 • Expand in diesel ~$680M No APU • Leverage strengths into battery • Grow APU in non-APU $416 segment $154 Battery $88 $295 Diesel $175 2017* 2020 • Current Thermo King share: ~60% of diesel, ~15% of total sleeper cab
Slide 40: Significant Opportunity to Grow APU Business in Non-Refrigerated Sleeper Cab Fleets
Significant Opportunity to Grow APU Business in Non-Refrigerated Sleeper Cab Fleets Expanding Strong Position in Large Untapped Opportunity in Sleeper Cabs, Refrigerated Fleets Sleeper Cabs, Non-Refrigerated Fleets (25% of Market) (75% of Market) ~$500M ~$170M ~$75M ~$30M Refrigerated Thermo King No
Slide 41: How Thermo King Will Win in the Market: A Differentiated Position
How Thermo King Will Win in the Market: A Differentiated Position Differentiator Ingersoll Rand Company A Company B Performance Channel / Sales & Service Reliability Residual Value Total Cost of Ownership 41
Slide 42: Product Performance Drives Customer Satisfaction: Customer Case Study
Product Performance Drives Customer Satisfaction: Customer Case Study Client: Situation: • Needed to improve fuel efficiency, reduce idle-time and increase driver satisfaction Solution: • Purchased >2,500 units since 2005 Result: Decreased fleet’s engine idle-time to single digits Increased fuel
Slide 43: Business Growth with Expanded APU Portfolio
Business Growth with Expanded APU Portfolio The Opportunity Initiatives ~$200M Capture market share with TriPac portfolio of diesel and electrified products to meet the needs of different segments Leverage strong channel to increase the APU adoption-rate among refrigerated and non-refrigerated custo
Slide 44: Leveraging Digital Tools for an Improved Customer Experience
Leveraging Digital Tools for an Improved Customer Experience Gary Michel, President – Residential HVAC & Supply 44
Slide 45: Strong Portfolio with Significant Growth Potential
Strong Portfolio with Significant Growth Potential Leading Vitality Index Opportunity in Solid (Since 2012) Underserved Markets Performance Consecutive quarters of share growth 10 82% 18% 85% 15% Adj. OI improvement since 2012 14 pts Revenue from New Products Owner Occupied Market Revenue from Exist
Slide 46: Customer Experience Prime for Disruption Across Channels
Customer Experience Prime for Disruption Across Channels The Opportunity The Channels ● Customer segments have different needs Distributor and expectations ● Differentiated customer experience: Dealer – Create value and loyalty – Increase distributor, dealer, contractor and customer satisfaction Con
Slide 47: Our Approach: Creating Differentiation with Digital Capabilities
Our Approach: Creating Differentiation with Digital Capabilities Audience B2B Consumer Customer Portal Process Buying Search Ecommerce Website Experience Mobile Apps Application Trane Go Informational Tools Our Solutions Products / Services Connected Products Connected Products Nexia Diagnostics & S
Slide 48: Mobile Apps as a Differentiator: Improving Productivity of Distributors, Dealers and Contractors
Mobile Apps as a Differentiator: Improving Productivity of Distributors, Dealers and Contractors ● 33K+ unique users ● Rich functionality – Ordering capability – Product availability – System configurator – Product information ● Increases dealer efficiency: – Access to information anywhere, at anyti
Slide 49: Gaps in Homeowner Purchasing Process Today Creates Opportunity for Trane Go
Gaps in Homeowner Purchasing Process Today Creates Opportunity for Trane Go 52% 58% 70% Homeowners conduct Visit manufacturer Consumer drop off online research prior to website between online research engaging dealer and call to dealer Unanswered Questions: • What do I need for my home? • How much d
Slide 50: Trane Go: Proven Technologies; New Application in HVAC Space
Trane Go: Proven Technologies; New Application in HVAC Space A New Buying Experience for Consumers Differentiator Trane Competitors Online product recommendation based on current home inputs Pricing transparency Online dealer scheduler Real time communication from dealer Ability to rate deal
Slide 51: Customer Experience: Converting Leads in The Future
Customer Experience: Converting Leads in The Future Incremental Revenue Outlook Drivers • Growth in underserved segments ~$300M Revenue • Focus on customer experience at all touch points • Technology based solutions with differentiated experiences • Increased lead conversion • Dealer self-servicing
Slide 52: Variable Refrigerant Flow (VRF) Systems in North America
Variable Refrigerant Flow (VRF) Systems in North America Dave Regnery, President – Commercial HVAC North America, Europe, Middle East, Africa 52
Slide 53: Difference Between Ducted Systems and Ductless Systems
Difference Between Ducted Systems and Ductless Systems Ducted System Variable Refrigerant Flow (VRF) • Blows outside air through the system • Type of ductless system using specific compressor to simultaneously heat and cool 53
Slide 54: North America HVAC Market: VRF… A Fast Growing Segment
North America HVAC Market: VRF… A Fast Growing Segment Large North America HVAC Market Fast Growing VRF Segment $6.5B +14% CAGR +16% $800M CAGR $550M Applied 30% $390M Unitary 49% 2014 2016 2020 Ductless - Mini Splits Why VRF is attractive to Trane: 12% VRF • Growth rate is roughly 5x market rate 9%
Slide 55: Why We Win: Customers Buy Solutions
Why We Win: Customers Buy Solutions – Trane Offers the Broadest Product Portfolio in the Industry Customer Requirements Climate characteristics, owner needs, future serviceability Application Expertise 100 years of Trane, unmatched application experience, industry-leading modeling tools & expertise
Slide 56: Trane Approach: Case Study
Trane Approach: Case Study Application Expertise is Used to Design the Right Customer Solution VRF is the Right Solution VRF is Not the Right Solution Client: • K-12 School District (TN) Client: • Hospital Expands Surgical Suite • School expansion to eliminate • Critically controlled spaces portable
Slide 57: How We Are Differentiated
How We Are Differentiated – Trane has Leading Capabilities and Strengths Modeling Integrated Application Service Technical Hybrid Equipment Controls Expertise Capability Support Systems OTHER C O M PA N I E S Company A [Asia] Company B [Asia] Company C Company D Company E Equal to or Half as Minimal
Slide 58: Another Breakthrough Technology: Variable Flow (VF) Systems (Four Pipe Chiller)
Another Breakthrough Technology: Variable Flow (VF) Systems (Four Pipe Chiller) The Product / Technology Advantages ● Energy efficiency ● Water replaces refrigerant in variable flow applications ● Can be used in both ducted and ductless environments ● Eliminates / reduces the need for traditional bo
Slide 59: Variable Flow Technology Offers Incremental Growth Opportunity
Variable Flow Technology Offers Incremental Growth Opportunity Market Share Revenue Drivers Applied ● Application knowledge ● Integrated controls Unitary VRF ● Service capabilities ● Hybrid systems VRF 2017 2020 ~$200M incremental revenue opportunity by 2020 59
Slide 60: Trane Energy Services and Controls (ES&C) in North America
Trane Energy Services and Controls (ES&C) in North America Jason Bingham, Vice President – Trane Digital, Energy Services and Controls 60
Slide 61: Energy Services: Significant Market Opportunity
Energy Services: Significant Market Opportunity Internet of Building Utility Business Corporate Regulations Building Energy Things (IoBT) Model Sustainability and Policy Consumption Evolving customer Convergence Companies serious Accelerates evolution Buildings consume +40% expectations of energy ab
Slide 62: Trane Energy Services and Controls – The Business Today
Trane Energy Services and Controls – The Business Today Core Capabilities Performance Highlights Since 2013 Building Controls and Automation 50% growth in Energy Services Digital Solutions +3 pts controls market share Energy Contracting 1,500 buildings software as a service Renewable Energy & Sustai
Slide 63: Momentum is Rapidly Accelerating
Momentum is Rapidly Accelerating Connected Buildings 9,000 8,000 7,000 6,000 7,500 + 5,000 today 4,000 3,000 2,000 1,000 0 2010 2011 2012 2013 2014 2015 2016 2017 Creating Customers for Life 63
Slide 64: How We Are Differentiated
How We Are Differentiated – Building Provider with Full Set of Offerings CONSTRUCTION OPERATIONS Equipment Service Energy Services Digital OTHER C O M PA N I E S Facility Management Multi-function Electric / Controls Technology Equipment 64
Slide 65: Trane Approach: Case Study
Trane Approach: Case Study Client: • Movie theater company Situation: • Building automation high installed cost • Decentralized Our • Factory mounted building automation Solution: • Digital / cloud based centralization • Integration with Point of Sales (POS) system Result: • Increase customer satisf
Slide 66: Profitable Growth from Energy Services
Profitable Growth from Energy Services Energy Services Growth Forecast Our Focus ● Traditional systems ~15% − The largest installed base CAGR ● Connected buildings − 35% annual growth ● Energy services − 4X $ per Client 2013 2017 2020 ~$400M incremental revenue opportunity by 2020 66
Slide 67: Didier Teirlinck, Executive Vice President – Climate Segment
Didier Teirlinck Executive Vice President – Climate Segment 67
Slide 68: Well-Positioned for Growth and Margin Expansion
SUMMARY Well-Positioned for Growth and Margin Expansion Strong Products, business models, channel, talent and business operating system Aligned Aligned strategy to climate mega trends Strategic Strategy to grow the core, expand into adjacencies, and explore new frontiers Future Unleash unlim
Slide 69: 2017 Investor & Analyst Day Q&A
2017 Investor & Analyst Day Q&A 69
Slide 70: BREAK
2017 Investor & Analyst Day BREAK 70
Slide 71: Robert Zafari
Robert Zafari Executive Vice President – Industrial Segment 71
Slide 72: Agenda
Agenda The business today Strategy and outlook Strategic growth examples 72
Slide 73: Balanced Profile with Resilient Aftermarket
Balanced Profile with Resilient Aftermarket Business Units Regional Mix Revenue Streams 3% India Small Electric 5% Latin America Industrial Vehicles Comp. 18% Europe, ME, Africa 37% Parts and Service 19% Asia Pacific $3.0B Industrial Engineered Products1 Comp. Equipment 63% 55% North America Parts &
Slide 74: A Strong Portfolio with Leading Brands in Diverse End Markets
A Strong Portfolio with Leading Brands in Diverse End Markets Strong Portfolio Leading Brands Compression Technologies Power Tools Fluid Management Material Handling Small Electric Vehicles & Services Manufacturing, Commercial, and Consumer Extraction Utilities Motor Vehicle Food & Beverage Chemical
Slide 75: Strengthened the Business Through the Cycle
Strengthened the Business Through the Cycle Maintained or gained market share in all three businesses since 2013 ~20% of portfolio transformed via new product development since 2013 Commercial Continuous record booking for CARE service suite since launch in 2007 28% CAGR of Power Tools sales
Slide 76: Significant Headroom in Current Markets and High Margin Niches
Significant Headroom in Current Markets and High Margin Niches Compression Industrial Small Electric Technologies & Services Products Vehicles Total Addressable ~$14B ~$7B ~$7B Market (1) Ingersoll Rand size ~$1.9B ~$0.5B ~$0.6B Market growth Low-to mid-single digits Low-to mid-single digits Low-to
Slide 77: Agenda
Agenda The business today Strategy and outlook Strategic growth examples 77
Slide 78: Strategy Aligns with and Leverages Current Mega Trends
Strategy Aligns with and Leverages Current Mega Trends Trend Response • Local industrial and food & beverage production • Pharmaceutical growth Demographics • Energy industry expansion and shift to renewables • Small electric consumer vehicles • Clean air and water management Urbanization • Small co
Slide 79: An Evolving Growth Strategy for Evolving Markets
An Evolving Growth Strategy for Evolving Markets Core Growth Expansion New Frontiers • Compressor efficiency • Compression end-to-end • Big data and related sciences • Oil-free leadership efficiency with industrial IOT • New business and distribution • CARE service programs • Smart and connected veh
Slide 80: Financial Outlook: Solid Growth and Margin Expansion
Financial Outlook: Solid Growth and Margin Expansion Revenue Growth* Margin Expansion* Drivers Revenue drivers ~4% 2017 Adj. 2020 • Compressor Technologies & Services: CAGR services, oil-free compressors and $3.3B ~11.6% ~15% energy efficient equipment • Industrial Products: intelligent and $2.9B co
Slide 81: Agenda
Agenda The business today Strategy and outlook Strategic growth examples 81
Slide 82: Strategic Growth Programs
Strategic Growth Programs Snapshot of our Innovation, Customer Satisfaction and Impact • Focused on large market opportunities • Building on strong capabilities and differentiated positions • Momentum is building, early success is evident • The future is bright for the Industrial Segment 82
Slide 83: Industrial Products: New Growth Opportunities
Industrial Products: New Growth Opportunities Donny Simmons, President – Fluid Management, Power Tools and Material Handling 83
Slide 84: Fluid Management and Power Tools – Specialized Businesses with High Margins
Fluid Management and Power Tools – Specialized Businesses with High Margins Fluid Management Why We Like These Businesses Niche markets within broad segments ~$1.5B Addressable Market Mission-critical applications High barriers to entry ~4-5% Undergoing digital transformation Growth CAGR A
Slide 85: Industry Trends Creating Significant Opportunities
FLUID MANAGEMENT Industry Trends Creating Significant Opportunities The Business • We design, manufacture and market pumps globally for specialized industrial fluid handling applications primarily in the chemical processing, manufacturing, wastewater treatment and other niche industries Industry Tre
Slide 86: Customer Success: Case Study
FLUID MANAGEMENT Customer Success: Case Study An $8B Global Ceramic Firm Results Customer Need • 69% reduction of clay transfer time • Automation to improve process (from 90 to 28 minutes) • Application: transfer of clay batches • Elimination of waste due to increased to production plant transfer pr
Slide 87: Industry Trends Creating Significant Opportunities
POWER TOOLS Industry Trends Creating Significant Opportunities The Business • A leading global provider of industrial-grade fastening and bolting tools and equipment for three specialized market segments: industrial, assembly and vehicle repair Industry Trends Ingersoll Rand Opportunities Demand f
Slide 88: Technology-Enabled New Market Entry
POWER TOOLS Technology-Enabled New Market Entry New Market Opportunity Differentiated Solution High torque controlled industrial bolting First to market with a high torque intelligent cordless tool Market size ~$1.2B Delivers accurate torque with Representative vertical Wind energy traceab
Slide 89: Significant Growth from High Margin Products
Significant Growth from High Margin Products Revenue Drivers ~$90M • Favorable industry trends Revenue • Differentiated positions • Digital products and go-to-market models XX% 2017 2020 ~$90M incremental revenue opportunity by 2020 89
Slide 90: Opportunity for Services and Engineered Oil-Free Markets
Opportunity for Services and Engineered Oil-Free Markets Todd Wyman, President – Compression Technologies & Services 90
Slide 91: Significant Services Organic Growth Opportunity
Significant Services Organic Growth Opportunity The Opportunity Growth Levers Increase service attachment Global installed base ~280k 1 rate on Ingersoll Rand units installed base Opportunity ~$1B 2 Increase share of wallet 91
Slide 92: Growing Services Through Improved Sales Effectiveness and Expanded Customer Solutions
Growing Services Through Improved Sales Effectiveness and Expanded Customer Solutions From To Lever Sales • Individually defined route planning • System-enabled route optimization Productivity • Inquiry to order • Inside sales supported 1 Sales Coverage • Individually defined • Standard prioritized
Slide 93: Two Levers Providing Path for Transformation
Two Levers Providing Path for Transformation 1 Attachment Rate 2 Share of Wallet >50% ~16% Increase CAGR since Visits inception August 2016 March 2017 launch of model 2009 2016 Quotes Wins • 32% bookings growth in European • Q1 record bookings in North America model channel • 31% YOY growth rate 93
Slide 94: Significant High-Margin Services Opportunity
Significant High-Margin Services Opportunity Services Revenue Drivers ~$175M • Sales productivity • Sales coverage • Expanded offerings 2017 2020 ~$175M Incremental Revenue Opportunity by 2020 94
Slide 95: Engineered Oil-Free Compressed Air Growth Opportunity
Engineered Oil-Free Compressed Air Growth Opportunity A Demanding Market Space ● Complex specifications ● Risk averse customers ● Time sensitive large projects Opportunity to expand ● Intensive technical documentation requirements margins ● Complexity leads to underserved markets 95
Slide 96: Engineered Oil-Free Compressed Air Market Opportunity
Engineered Oil-Free Compressed Air Market Opportunity Total Oil-Free Market $1.7 Billion Air Separation Food & Beverage Engineered Oil-Free Market $0.9 Billion Pharmaceutical Power Generation *includes equipment in these ranges: 37-18,000 kW (50-25,000 hp) 96
Slide 97: Providing Holistic Customer Solutions in a Demanding Space
Providing Holistic Customer Solutions in a Demanding Space Lever Improving customer experience Gates 0-3 Gates 4-5 Gate 6 Gate 7 1 and margins through operational Inquiry to order acceptance Engineering & Production Shipment Project closure & lessons learned excellence Lever Serving all customers th
Slide 98: Significant Margin Expansion Opportunity Through Engineered Oil-Free
Significant Margin Expansion Opportunity Through Engineered Oil-Free Operating Income Growth Drivers • Standard rigorous gate process ~$40M • Complete technology agnostic offering • Improved localized footprint • Increased services revenue per unit 2017 2020 ~$40 million incremental operating income
Slide 99: Personal Transportation Vehicle (PTV) Opportunity
Personal Transportation Vehicle (PTV) Opportunity Marc Dufour, President – Club Car 99
Slide 100: Club Car – Global Leader in Golf and Utility Vehicles
Club Car – Global Leader in Golf and Utility Vehicles ● Market share leader in golf ● “Own The Address” ● Visage™ – industry-leading connected golf offering ● Carryall utility vehicles and fit-to-task options ● Vehicles manufactured in Augusta, GA and Wujiang, China ● Onward™ personal transportation
Slide 101: Target Demographic for Personal Transportation Vehicle
Target Demographic for Personal Transportation Vehicle ● Key segment: 5.4M young families ● Children under 18 at home ● Access to neighborhood amenities ● Customer uses: driving for pleasure, social interaction, family time ● Personalization and customization 101
Slide 102: Attractive Market Opportunity for Personal Transportation Vehicles
Attractive Market Opportunity for Personal Transportation Vehicles ● $1B total market including accessories PTV Market Growth New and Used Vehicles ● High growth segment ($ in millions) ● Geographic concentration in U.S. 5-7% ● Ideal for master planned communities CAGR and open neighborhoods $600 $4
Slide 103: How We Win: Club Car Onward PTV
How We Win: Club Car Onward™ PTV New look and style – lifted and non-lifted options Features catering to pleasure, family and social experience Highly customizable with integrated accessories to create your own personal Onward™ Unique digital experience Strong brand awareness among target segment Su
Slide 104: Well Positioned for PTV Growth and Share Gain
Well Positioned for PTV Growth and Share Gain Onward™ Market Share Revenue Drivers • Strong Club Car brand equity • PTV market growth ~2X • Innovative design and accessories • Differentiated digital experience 2016 2020 ~$100M incremental revenue opportunity by 2020 104
Slide 105: Robert Zafari, Executive Vice President – Industrial Segment
Robert Zafari Executive Vice President – Industrial Segment 105
Slide 106: Well-Positioned for Renewed Growth and Margin Expansion
SUMMARY Well-Positioned for Renewed Growth and Margin Expansion Balanced Balanced portfolio, strong brands, diverse end markets and resilient aftermarket Stronger Strengthened our commercial and operational advantage during the slowdown Aligned Aligned strategy to industrial mega trends Strate
Slide 107: 2017 Investor & Analyst Day Q&A
2017 Investor & Analyst Day Q&A 107
Slide 108: BREAK
2017 Investor & Analyst Day BREAK 108
Slide 109: Sue Carter, Chief Financial Officer
Sue Carter Chief Financial Officer 109
Slide 110: Agenda
Agenda The business today Capital allocation Going forward 110
Slide 111: Robust Financial Model Drives Powerful Cash Flow
Robust Financial Model Drives Powerful Cash Flow 1. Attractive, diversified 2. Leading brands, market positions end markets – outgrowing market rates $4.3 billion free cash flow over the last 4 years 5. Investing for growth 3. Focused on margin and profitability expansion (growth / op. excellence) 4
Slide 112: Attractive Markets, Diversified Revenue Sources
1. Attractive Markets, Diversified Revenue Sources* Industrial Service 22% 32% Segments Service Mix Climate Equipment 78% 68% Golf and Utility Non-Res Building 5% N. America 33% International Industrial 36% and Process 17% End Markets Regions Transport Non-Res Building Refrigeration International Un
Slide 113: Leading Brands and Market Positions
2. Leading Brands and Market Positions Commercial HVAC Residential HVAC Transport Refrigeration ● World leader in HVAC ● Leader in heating and air ● World leader in conditioning solutions refrigerated transportation Industrial and Process Fluid Handling Golf and Utility Vehicles ● Leader in compress
Slide 114: Leading Brands and Business Operating System Driving Sustained Growth and Operating Margin Improvement
3. Leading Brands and Business Operating System Driving Sustained Growth and Operating Margin Improvement In Billions Organic Revenue Adjusted EPS $15 $6.00 $14 3% $5.00 16% CAGR CAGR $4.00 $13 $3.00 $12 $2.00 $11 $1.00 $10 $0.00 2013 2014 2015 2016 2013 2014 2015 2016 Cash Flow ROIC Adjusted Operat
Slide 115: Delivering Powerful Free Cash Flow
4. Delivering Powerful Free Cash Flow Free Cash Flow ($ millions) $1,345** $1,100 to $1,151* $1,200 $985** $810 $862 Post Security Spin 2013 2014 2015 2016 2017F Cash flow has been stable and recurring * Reported – includes Allegion security business and excludes restructuring and one-time spin cost
Slide 116: Investing for Growth and Profitability
5. Investing for Growth and Profitability Business Investments Key Examples ● New low-global warming potential ~15% refrigerants ● Digital / controls / wireless technology ● Channel expansion ● Parts and services capabilities / offerings ● Sales and services capabilities ● Operating system expansion
Slide 117: Agenda
Agenda The business today Capital allocation Going forward 117
Slide 118: Capital Allocation Principles: A Dynamic Approach
Capital Allocation Principles: A Dynamic Approach • Strengthen the core business and extend product & market leadership 1 • Invest in new technology and innovation Invest for Growth • Ensure no meaningful gaps exist in product portfolio • Acquire products, channels and business adjacencies where mor
Slide 119: M&A Framework – Clear Criteria
M&A Framework – Clear Criteria Business Criteria Financial Criteria Strong position – no major gaps to fill IRR > WACC Strengthening our core or extend leadership in product, channel or technology ROIC: Accretive < 3 years Must be clear strategic fit for Ingersoll Rand EPS accretive < 3 years and cl
Slide 120: Capital Deployment 2013-2016: Focused on Maximizing Shareholder Value
Capital Deployment 2013-2016: Focused on Maximizing Shareholder Value $6.3 Billion Capital Share Mergers & Dividends Expenditures Buyback Acquisitions • ~$900M in Capex • $1.2B in dividends paid • $3.1B • Spent $981 million – 17% CAGR • 53 million shares on 10 acquisitions • Long history of repurcha
Slide 121: Agenda
Agenda The business today Capital allocation Going forward 121
Slide 122: Continuing Top-Tier Performance 2017 to 2020
Continuing Top-Tier Performance 2017 to 2020 Organic Revenue Growth Adjusted Operating Income Growth ~10% ~4% - 4.5% CAGR CAGR ~3% ~6% 2017 Guidance 2017-2020 2017 Guidance 2017-2020 Adjusted Operating Margin % Adjusted EPS Growth ~11% - 13% ~14.5% - 15% 12.4% - 12.8% CAGR 5% - 9% 2017 Guidance 2020
Slide 123: Continuing Top-Tier Performance 2017 to 2020
Continuing Top-Tier Performance 2017 to 2020 Climate Adjusted Operating Margin % Industrial Adjusted Operating Margin % ~16.5% 14.6% - 15.1% ~15.0% 11.1% - 12.1% 2017 Guidance 2020 2017 Guidance 2020 Cash ROIC % ROIC % ~14.5% ~25% ~10.5% ~20% 2017 Guidance 2020 2017 Guidance 2020 Continuing to targe
Slide 124: Strong Free Cash Flow of ~$4 Billion 2018 to 2020 Drives Dynamic Capital Allocation
Strong Free Cash Flow of ~$4 Billion 2018 to 2020 Drives Dynamic Capital Allocation Strong Cash Flow Business Investment D&A CAPEX Free Cash Flow 1% - 2% of W/C Revenues FCF >= Maintain W/C Net Income 2018–2020 at 3-4% of Earnings Revenues 4% to 4.5% 2018-2020 • Competitive dividend; Revenue CAGR
Slide 125: Key Messages
IN SUMMARY Key Messages ● Attractive financial model drives powerful cash flow ● Ongoing business investments strengthen our core and extend our leadership positions ● Multi-year track record of delivering consistent, top-tier results ● Significant opportunities for growth and margin expansion going
Slide 126: Appendix
Appendix am Ingersoll Rand Inspiring Progress™
Slide 127: Ingersoll Rand Targets 2017 to 2020
Ingersoll Rand Targets 2017 to 2020 2017-2020 Targets Revenue Growth 4%-4.5% CAGR Operating Income Growth ~10% CAGR Operating Margins ~14.5%-15% in 2020 EPS Growth 11% to 13% CAGR Based on ~22% tax rate Business Unit Operating Margins - Climate ~16.5% in 2020 - Industrial ~15% in 2020 Cash Generatio
Slide 128: 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 129: 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 130: Why Invest In Ingersoll Rand?
Why Invest In Ingersoll Rand? 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, operating excellence and improving
Slide 131: 2017 Investor & Analyst Day Q&A
2017 Investor & Analyst Day Q&A 131