Trane Technologies Plc · NYSE:TT
Trane Technologies — Morgan Stanley Laguna Conference 2023
38 slides from Trane Technologies's conference presentation, September 2023
Slide 1: Investor Presentation September 2023
Investor Presentation September 2023
Slide 2: Forward-Looking Statements
Forward-Looking Statements This news release includes “forward-looking" statements within the meaning of securities laws, which are statements that are not historical facts, including statements that relate to our future financial performance and targets, including revenue, EPS, operating income, op
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 Lead a Movement 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
SUSTAINABILITY LEADER 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 the industrial indu
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 in Innovation 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: Second-Quarter 2023 Results
Second-Quarter 2023 Results August 2, 2023
Slide 18: Focused Strategy Delivers Differentiated Shareholder Returns
C LEAR PR I O R I T I ES 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
Slide 19: Strong Q2 & 1H Results. Raising FY 2023 Guidance
Q 2 2 0 2 3 U PDATE Strong Q2 & 1H Results. Raising FY 2023 Guidance on Strong Execution, Healthy Markets & Exceptional Backlog Visibility • Strong Q2 performance across diversified and resilient global portfolio • Organic revenues* up 11%; adj. operating margins* up 110 basis points; adj EPS* up 24
Slide 20: Strong Broad-Based Revenue Growth; Robust Absolute Bookings Levels
Q 2 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 Strong Broad-Based Revenue Growth; Robust Absolute Bookings Levels in Healthy End Markets. Backlog of $7B is 2.5X Historical Norms Q2 Organic* Y-O-Y Change Bookings Revenue Americas – bookings down 8%, ex-resi down LSD; revs up 9% Enterpris
Slide 21: Robust Revenue Growth, Margin Expansion and EPS Growth
Q 2 2 0 2 3 E N T E R P R I S E R E S U LT S Robust Revenue Growth, Margin Expansion and EPS Growth Net Revenue Adj. EBITDA Margin* Adj. Operating Margin* Adj. Continuing EPS* +11% +100 +110 +24% Organic* bps bps $2.68 $4,705 19.7% $4,190 18.7% $2.16 16.9% 18.0% Q2 '22 Q2 '23 Q2 '22 Q2 '23 Q2 '22 Q2
Slide 22: Strong Broad-Based Organic Revenue Growth and Margin Expansion
Q 2 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 $3,693 21.4% 19.8% • Strong broad based margin expansion +9% +70 bps +100 bps • Strong volume growth and backlog margi
Slide 23: Outlook for Healthy 2023 Growth and Continued Strong Underlying Demand
M A R K E T U P D AT E Outlook for Healthy 2023 Growth and Continued Strong Underlying Demand for Sustainable Solutions Commercial HVAC • Strong demand for innovative solutions driving robust backlog; Data center / education / healthcare / high-tech industrial - all remain strong • Leading systems &
Slide 24: Raising FY’23 Revenue & EPS Guidance
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 Favorable Outlook and Continued Strong Execution Prior FY Guidance Updated FY Guidance* Organic +7% to +8% ~+8% (+9% to +10% reported, incl. M&A)** (~+10% reported, incl. M&A) Revenues Expect Q3 ~+7% $8.30 to $8.50 $8
Slide 25: 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 26: Strong FCF Drives Continued Balanced Capital Deployment Strategy
Strong FCF Drives Continued Balanced Capital Deployment Strategy 1 2 3 Maintain Healthy, Return Capital to Invest for 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 27: Deployed ~$1.2B in Balanced Capital Allocation YTD Jun 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 ~$1.2B in Balanced CapitalAllocation YTD Jun 2023; ~$2.5B Expected FY 2023 Balanced Capital Deployment Capital Deployment • Q2 dividends of $171M (YTD $341M); increased dividend 12% to $3.00 per share annualized in Actual YTD Target FY March
Slide 28: Topics of Interest
4. Topics of Interest cM hae
Slide 29: Transport Market Outlook Modestly Lower Per ACT in North America
TOPICS OF INTEREST Transport Market Outlook Modestly Lower Per ACT in North America; Unchanged in EMEA. Expect Outperformance in Both Regions in 2023 N.A., EMEA Markets Expected to be N.A. and EMEA Market Results / Forecast Modestly Lower in 2023 • Trailer/Truck/APU: ~2/3rds of Total Transport Reven
Slide 30: ACT Projects North America Refrigerated Trailer Market to Remain Robust
TOPICS OF INTEREST ACT Projects North America Refrigerated Trailer Market to Remain Robust, Above 40k units 2023 through 2028 ACT North America Trailer Market Outlook Comments • ACT 2023 North America Trailer forecast decreased 50 to 42.5k from 45k units on OEM capacity constraints 40 (down 4% from
Slide 31: Positioned to Outperform Over the Long-Term
I N 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 i
Slide 32: Appendix
Appendix
Slide 33: FY’23 Detailed Guidance for Modeling Purposes
2 0 2 3 G U I DAN C E FY’23 Detailed Guidance for Modeling Purposes Metric FY Guidance Commentary Organic Revenue* ~8% • 30%+ organic leverage (increased from 25%+ prior) • M&A carries ~3% leverage - nominal contribution given year 1 integration costs. M&A +2% FY impact to enterprise reported levera
Slide 34: Trane Technologies Core Sustainability Strategy: Challenge Possible
SUSTAINABILITY COMMITMENTS 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, operations,
Slide 35: 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 36: Q2 Organic Revenues up 11% Y-O-Y; Bookings Down 5%
Q2 Organic Revenues up 11% Y-O-Y; Bookings Down 5% Organic* Revenue 2020 2021 2022 2023 Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Q3 Q4 FY Q1 Q2 Americas -2% -13% +2% +1% -3% +9% +19% +4% +14% +11% +13% +13% +19% +14% +15% +8% +9% EMEA -3% -15% -6% -6% -8% +12% +28% +8% +5% +13% +6% +11% +18% +23% +15% +1
Slide 37: Q2 Non-GAAP Measures Definitions
Q2 Non-GAAP Measures Definitions Adjusted operating income in 2023 is defined as GAAP operating income adjusted for restructuring costs, transformation costs, non-cash adjustment for contingent consideration and merger and acquisition related costs. Adjusted operating income in 2022 is defined as GA
Slide 38: Q2 Non-GAAP Measures Definitions
Q2 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 adjustment for contingent consideration, and merger and acquisition related costs
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