Trane Technologies Plc · NYSE:TT
Trane Technologies — Wolfe Research Global Transportation & Industrials Conference 2023
37 slides from Trane Technologies's conference presentation, May 23, 2023
Slide 1: Investor Presentation May 2023
Investor Presentation May 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation includes “forward-looking statements,” which are statements that are not historical facts, including statements that relate to our future financial performance and targets, including revenue, EPS and operating income; our business operations; demand for o
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 $16B Sales Transport Refrigeration EMEA Revenue Streams Residential HVAC 68% 32% Equipme
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 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: Widely Recognized for Sustainability, Citizenship, Diversity, Inclusion & Engagement
S U S TA I N A B I L I T Y L E A D E R Widely Recognized for Sustainability, Citizenship, Diversity, Inclusion & Engagement Highly Regarded ESG Performance People and Citizenship 12 Consecutive Years 11 years Performed in the 97th 72% percentile listed on most admired percentile in the Capital in th
Slide 9: Trane Technologies: Reimagined to Unlock Our Full Potential
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 100% tied
Slide 10: 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 11: 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 12: Business Transformation Delivers $300M in Cost Savings by YE 2023
TRANE TECHNOLOGIES REIMAGINED Business Transformation Delivers $300M in Cost Savings by YE 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
Slide 13: 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 14: 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 15: Relentless Investments Driving Top-Quartile Financial Performance
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 Relentless Investments in Innovation, Customer Focus and Best-in-Class Business Operating System Driving Top-Quartile Financial Performance 17% ~7% +250 $13 CAGR bps 15% Revenue* $10 Adjusted 13% ($B) EBITDA $7 Margin †† 11% $4 9% 2017 2018
Slide 16: 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 innovatio
Slide 17: First-Quarter 2023 Results
First-Quarter 2023 Results May 3, 2023
Slide 18: Strong Results, Improving Visibility, Confidently Raising FY 2023 Guidance
Q1 202 3 UPDATE Strong Results, Improving Visibility, Confidently Raising FY 2023 Guidance • Strong Q1 performance • Organic revenues* up 9%; adj. operating margins* up 140 basis points, adj. EPS* up 26% • Strong bookings w/ book-to-bill of 117%; backlog up $400M sequentially to a record $7.3B, impr
Slide 19: Bookings Momentum Continues with Enterprise Book-to-Bill of 117%
Q 1 2 0 2 3 O R GAN I C B O OK I N G S AN D R E V E N U E S Bookings Momentum Continues with Enterprise Book-to-Bill of 117% on 9% Revenue Growth; Backlog Up $400M Sequentially to $7.3B Q1 Organic* Y-O-Y Change Bookings Revenue Enterprise -1% + 9% Americas book-to-bill > 115%, backlog up sequentiall
Slide 20: Strong Revenue Growth, Margin Expansion and EPS Growth
Q 1 2 0 2 3 E N T E R P R I S E R E S U LT S Strong Revenue Growth, Margin Expansion and EPS Growth Net Revenue Adj. EBITDA Margin* Adj. Operating Margin* Adj. Continuing EPS* +9% +100 +140 +26% Organic* bps bps 14.8% 13.8% 12.9% $1.41 $3,666 11.5% $3,356 $1.12 Q1 '22 Q1 '23 Q1 '22 Q1 '23 Q1 '22 Q1
Slide 21: Q1 Segment Results: Americas, EMEA, Asia Pacific
Q 1 2 0 2 3 S E G M E N T R E S U LT S Strong Broad-Based Organic Revenue Growth and Margin Expansion Adj. Revenue Adj. OI*% EBITDA*% Highlights $M Org.* Growth vs PY vs PY Americas $2,861 15.9% 14.0% • Strong broad-based margin expansion +8% +50 bps +90 bps • Strong positive price realization, volu
Slide 22: Strong Underlying Demand Supports Healthy End Markets in FY'23/'24
M A R K E T U P D AT E Strong Underlying Demand for Sustainability-Focused Systems and Services Support Healthy End Markets in FY’23/’24 and Beyond Commercial HVAC • Strong demand for innovative solutions driving all-time high backlog; Data center / education / healthcare / high tech industrial - al
Slide 23: Raising FY'23 Revenue & EPS Guidance to Reflect Strong Execution
2 0 2 3 G U I D A N C E U P D AT E Raising FY’23 Revenue & EPS Guidance to Reflect Strong Execution Prior FY Guidance Updated FY Guidance* Organic +6% to +8% +7% to +8% (+7% to +9% reported, incl. M&A)** (+9% to +10% reported, incl. M&A)** Revenues Expect Q2 +HSD Adj. EPS $8.20 to $8.50 $8.30 to $8.
Slide 24: On Track For ~$300M Total Transformation Savings by Year-End
T R A N S F O R M AT I O N S AV I N G S On Track For ~$300M Total Transformation Savings by Year-End; Business Operating System to Drive Strong Productivity / Cost Savings Over Long Term • Targeting delivery of incremental savings of ~$60M in 2023 Transformation Savings • ~$300M transformation savin
Slide 25: 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 26: Deployed ~$720M in Balanced Capital Allocation YTD May 2023
B A L A N C E D C A P I TA L D E P L O Y M E N T Deployed ~$720M in Balanced CapitalAllocation YTD May 2023; ~$2.5B Expected FY 2023 Balanced Capital Deployment Capital Deployment • Q1 dividends of $170M; increased dividend 12% Actual Target FY to $3.00 per share annualized, up 42% since the launch
Slide 27: Topics of Interest
4. Topics of Interest TECHNOLOGIES
Slide 28: Global Transport Market Outlook Unchanged; Expect Continued Outperformance
TOPICS OF INTEREST Global Transport Market Outlook Unchanged; Expect Continued Outperformance in FY’23 N.A., EMEA Markets Expected to be Flat to N.A. and EMEA Market Results / Forecast Modestly Lower in 2023 • Trailer/Truck/APU: ~2/3rds of Total Transport Revenue Actual 2022 Transport 2023 Transport
Slide 29: ACT Projects North America Refrigerated Trailer Outlook to Remain Robust
TOPICS OF INTEREST ACT Projects North America Refrigerated Trailer Outlook to Remain Robust 2023 through 2028 ACT North America Trailer Market Outlook Comments North America 2024 ACT Forecast 50 Increased to 42k from 40k units • ACT 2024 North America Trailer forecast increased to 42k units from 40k
Slide 30: Positioned to Outperform Over the Long-Term
IN S U M MARY Positioned to Outperform Over the Long-Term 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 in
Slide 31: Appendix
Appendix
Slide 32: FY'23 Detailed Guidance for Modeling Purposes
2023 GUIDANCE FY’23 Detailed Guidance for Modeling Purposes Metric FY Guidance Commentary Organic Revenue* +7% to +8% • 25%+ organic leverage • M&A moves from +1% to +2% to include M&A completed and committed as of May (appx. $500M in bolt on technology-focused M&A (see p.12)) M&A +2% • M&A carries
Slide 33: Core Sustainability Strategy: Challenge Possible
SUSTAI NA BILITY CO MMITMENTS Trane Technologies Core Sustainability Strategy: Challenge Possible Global Megatrends Our 2030 Commitments The Gigaton Challenge Leading by Example Opportunity for All Achieving carbon neutral Reducing one gigaton of carbon Creating gender parity in leadership, operatio
Slide 34: Driving Performance Through Sustainability
SUSTAINABILITY LEADERSHIP Driving Performance Before 2010 2010 Through Sustainability Focus on environmental and safety compliance Center for Energy Efficiency & Sustainability (CEES) is founded and begins operating 2011 Launched the first Launched internal Diversity & Inclusion Council ‘Sustainabil
Slide 35: Q1 Organic Revenues up 9% Y-O-Y; Bookings Down 1 Percent
Q1 Organic Revenues up 9% Y-O-Y; Bookings Down 1 Percent Organic* Revenue 2020 2021 2022 2023 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Americas -2% -13% +2% +1% -3% +9% +19% +4% +14% +11% +13% +13% +19% +14% +15% +8% EMEA -3% -15% -6% -6% -8% +12% +28% +8% +5% +13% +6% +11% +18% +23% +15% +15
Slide 36: Q1 Non-GAAP Measures Definitions
Q1 Non-GAAP Measures Definitions Adjusted operating income in 2023 is defined as GAAP operating income adjusted for restructuring costs, transformation costs, non-cash adjustments for contingent consideration and merger and acquisition related costs. Adjusted operating income in 2022 is defined as G
Slide 37: Q1 Non-GAAP Measures Definitions
Q1 Non-GAAP Measures Definitions Adjusted effective tax rate for 2023 is defined as the ratio of income tax expense adjusted for the net tax effect of adjustments for restructuring costs, transformation costs, non-cash adjustments for contingent consideration, and merger and acquisition related cost
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