Trane Technologies (TT) 3 May 232023 Q1 Earnings call transcript

Company Profile

Participants

Zac Nagle	Head of IR
Dave Regnery	Chair and CEO
Chris Kuehn	Executive Vice President and CFO
Scott Davis	Melius
Andy Kaplowitz	Citigroup
Julian Mitchell	Barclays
Gautam Khanna	TD Cowen
Josh Pokrzywinski	Morgan Stanley
Chris Snyder	UBS
Joe Ritchie	Goldman Sachs
Steve Tusa	JPMorgan
Jeff Sprague	Vertical Research
Nigel Coe	Wolfe Research
Deane Dray	RBC Capital Markets
Andrew Obin	Bank of America
Nicole DeBlase	Deutsche Bank
Noah Kaye	Oppenheimer

Call transcript

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Operator

Good morning. Welcome to the Trane Technologies First Quarter 2023 Earnings Conference Call. My name is Brent, and I will be your operator for the call. The call will begin in a few moments with the speaker remarks and the Q&A session. At this time, all participants are in a listen-only mode. Instructions] [Operator

my President the of now Zac over to Vice Nagle, Investor pleasure is call turn to It Relations.

Zac Nagle

call. quarter Thanks, you operator. at on We're earnings tranetechnologies.com, first accompanying find our this call also for thank is conference XXXX presentation. joining us where our webcast Good for Trane website morning, on This call and recording the archiving being you'll Technologies' website. and

a forward-looking description law. Statements X. historical are go the financial in and call that from that pursuant materially Slide not anticipated the for cause of of results. considered our tables our This attached explained Please our in to includes are harbor facts factors news which are may filings to today's actual made statements made Please presentation release. results are provisions measures, to differ of SEC some to safe also federal the non-GAAP see securities

Dave me and are Joining and Executive today's Kuehn, President CEO; Chris on and CFO. call Regnery, Chair Vice

that, Dave? over to I'll Dave. call turn With the

Dave Regnery

and everyone, for with financial call. begin and differentiated to on to over Zach, few returns long term. us on the us shareholder thoughts enables want purpose-driven a I our results today's drive strategy, joining which Thanks,

action operations, which and just helping how That's performance. is where our powerful needed Our save effects preserve our have Urgent serious our next generations. and is to which on economy their and report, strategy and limit warming positioned the improve customers is change, is to climate megatrends lead. planet Technologies health. highlights decarbonize human energy our far-reaching aligned global like continues to released environment, for the uniquely to latest ESG Trane We innovation

XX ambitions to creation innovation long-term us gigaton innovation, shareholders carbon X XXXX billion our by profile, tons This powerful We emissions our relentless tons for X flow. of is team, bold board goal demand and margins and metric the focus drive for cash creates solutions. million deliver free the value reduced and strong since have growth across XXXX. or a our our for result tremendous reducing planet. emissions our by enables sustainable on customers, our customers' superior metric end our our These towards by The

Moving to Slide number X.

ratio backlog, quarter. extremely team portfolio. Our end quarter. showcasing and XX%. points, of another be million We and backlog at Organic grew first year-end to to billion levels Adjusted a global high diverse, of execute Absolute performance. bookings our to $XXX to XXX expanded quarter at resilient continue $X.X operating up delivered strong, billion was XXXX, XXX% continues evidenced power EPS our at book-to-bill of the level up revenue strong the in by of added the our as the driving record margins $X.X of first X%. adjusted basis

continues be HVAC Demand were particularly a rates bookings long-cycle up at HVAC to stack. commercial were more to business. in Americas of and global strong HVAC addition the strength X-year gain booking levels XX% in X-year on commercial stack. to XX% growth And been more a backlog our of investors to look commercial We've understanding nearly businesses, a than complete encouraging up on bookings absolute our where

important. a of QX that good why is is example

build. products profitable with ongoing us continued for position continued book-to-bill led levels exceptional and in backlog enterprise HVAC Our regions and commercial visibility. in These XXXX demand and demonstrates of results improving services XXX% strong was innovative and all of by growth for XXXX well

with of than billion is $X.X times expect $X backlog excess anticipate X.X to we historical of norms. XXXX billion. backlog more and Further, backlog XXXX remain throughout Our elevated entering in

meet high believe a or degree is exceed give to is accomplish we floor intent first, backlog in represents billion $X the a two will goals: The clear, be the scenario investors To we of scenario. floor. confidence

The position historical scenario strong higher backlog floor a XXXX will investors is us as very with put give norms. degree second in the significantly forward high entering than revenues that a confidence a of to percentage of

balance provide million Our approximately us continue and sheet, position capital expect allocation deployed to we've and share optionality. and dividends, Year-to-date, excellent to to liquidity XXXX. in M&A, we with financial $XXX billion $X.X repurchases deploy strong

On the company precision a company the and life cooling the leading M&A technology cooling science industrial to EMEA front, vertical we process in control acquire acquired a temperature in in committed Americas.

confidence expected EPS as essentially and raising for out played year quarter first us full our in and the revenue Overall, gives growth. guidance

adjusted discuss to of in continue We or guidance equal presentation. net will to the more to be than Chris in later flow better our expect XXX% earnings. cash free detail

Please number be products broad-based Slide the across of continue and Demand go to our our highlighting segments, innovative global services X. our portfolio. to strength for

in to only in the book-to-bill backlog was strong the XXX% segment Our well, contributing elevated level enterprise quarter the as exceeded at not each portfolio. but across

HVAC commercial in exceeded and our Revenue respectively. the team absolute growth. Revenue led commercial is in up Americas, both low The revenue segment strong also XXX%, particular teens was mid-teens exceeded ratio standout businesses. strength high HVAC. commercial services, with HVAC growth robust that book-to-bill booking delivered across by with In equipment our results teens, each and strong

continue our at this manage revenue and residential the across approach Bookings in stage normalize and year. line Still, Americas revenues performed was distributors flat quarter. our IWDs we our channel business positions. our were largely early Our year-over-year. with inventory in to Sell-through in the as book-to-bill season roughly the their flat cooling and expectations

business refrigeration the first our transport Americas for Our quarter expectations growth. revenue consistent with mid-single-digit with performed

another more single and segment, with digits, commercial order quarter. up equipment be that In flat year. up timing and of were customer Americas Bookings and expect for services are bookings both We were the throughout expect nearly the the year. XX% high quarterly and in books, we worth EMEA be this lumpy delivered both XX% business transport to end backlogs. elevated robust which noting standout respectively. patterns our EMEA HVAC to outperform for also order revenues than It's to business strength the our and markets, expected

business Our up transport very revenues strong refrigeration quarter had a digits. with also mid-single

are transport single business We to this outperform down digits expect the expected be which for to to the low digits markets, year. mid-single refrigeration EMEA

our team Commercial strong by was Asia-Pacific services, by single was nearly segment, the and region. low delivered China up up revenues across high also the growth growth supported a standout broad-based digits, led results again In HVAC revenue with in change with which XX%.

I'd Now Chris. over turn the like to to call Chris?

Chris Kuehn

highlighting Slide X. we growth in our to board. was slide both strong EBITDA an margins turn organic EPS Please and number Dave. revenue were adjusted and performance revenues X%, the were digits delivered strong points services, up XX%. the does overall basis XXX level, teens, quarter, adjusted At nice up high in a Thanks, low job equipment across single was which up This respectively. up enterprise and Organic

Our pay and to expansion flywheel margin EPS relentless high-performance with investment dividends in continues growth, growth. line driving innovation, top strong

revenue strong our than of key quarter. drivers number challenges realization, discussed in margin and the key margin quarter persistent growth the chain for on each I'll the regions, have We expansion X. Slide to each in comments to first of the turn combined business We segments so and of side Please my productivity highlighted volume dynamics focus margins. page. and inflation continued the more delivered supply on offset our the price strong right In

we previously, this expect As throughout XXXX. we've highlighted improving, trend supply to slowly the and chain continue is

leverage, as X.X points delivered each was volume in We about with partially about we which an which the HVAC is points in volume strong of to normalize. our delivered in of line those in accompanied our quarter, by business As volumes price in region expectations. commercial residential strong continue by X.X lower and largely offset our enterprise, markets growth businesses

previously, of projects. As we to we've XX earmarked incremental basis reinvestment points discussed business the accelerate approximately timing key for

our basis for points run approximately of basis XX approximately rate This of annually in a points average is total XXXX. XX above

line the of While was with first less basis XX expectations on investment it spending projects. was points quarter, in the our timing based than in

We expect basis guidance is of our XX to XX to basis change and to full no in approximately second points. points year the there up quarter ramp

to back to Now turn Dave? I'd call like Dave. the over

Dave Regnery

quarter unchanged. that very or expected, slide play changes our outlook demand see for We core stacking tailwinds continuing. to sustainability-focused and a end strong help call opportunities. our strengths markets. to and our first policy either mid-innings see on the turn our largely had as Please fourth solutions for unique strong regulatory on Chris. our We X. of to and as for our color We effect presented key future Slide positive we multiyear innovator is early markets of as climate Overall, support leading to segments number our a this quarter earnings Thanks, provide

In XXXX. to commercial strong improving outlook continue Americas supporting normalize system We of see slowly We and is and and visibility of steadily we but residential. QX. chain our balanced backlog execution supply see between improving, and the our segment, business resiliency residential XXXX our see relatively through business into and operating effect unprecedented overall tight our

Our bias prior of flat or the year revenue down or business single the minus towards single digits. for on the that low digits range now plus end our to is being of lower estimates low

modest quarter, the offsetting year. we HVAC this business than present may While strength on more to see headwind this a the full in commercial second our

performed for expect to as outperform planned first year. to Our refrigeration business the market transport continue and in we the the quarter,

QX is and was our EMEA line for and businesses, unchanged. is In both quarter the Asia-Pacific the for and year segment, our Likewise, in for outlook performance was unchanged. our the strong, year with our strong for first segment, expectations outlook our full

turn to to back the Chris? like over call Chris. I'd Now

Chris Kuehn

We're start improvement year to steady continue Slide turn Please Dave. Thanks, number we our strong supply and a to slow to chain. the to but see in off X.

and continued visibility Additionally, backlog revenues. providing EPS our revenue into bookings raising in, year with confident All full the of guidance levels end and low for we're in future improving at us XXXX. high

strong We're to range the up quarter year. We're remain organic X% expecting prior up to net X% We're adjusted a our pension guidance visibility additional cash expected exceptions, expense improving on in quarter raising higher the from in mainly revenue our few or greater guidance between XXXX. and interest to to X%, one deliver and Other modest flow unchanged equal expense to also and $X.XX associated of the to raising with guidance $X.XX X%, first free our impacts, from results earnings. of growth M&A point elements refinancing reflecting EPS than year $X.XX. to our of and $X.XX, full in to guidance debt largely related first

you your for Please see models. to Page to details related presentation the guidance of additional XX assist with

XXXX. and We the places As close believe us for and growth, as annual our of in EPS group revenue our investment cash on free we before, planning process, these to top group quartile our peer progress throughout monitor and the conversion guidance paid of the year. top attention year flow our part highlighted we've peer we full target growth quartile metrics

full may our to year QX provide a how cadence regarding high-level guidance, addition it think we useful In construct the of believe earnings. to to about be and

which the the channels, and full which XXXX. in earlier. For quarter our continued $X.XX. Dave quarter, discussed at revenue This growth spend of pricing consistent approximately down residential includes range. given and guidance with range inventory is the be XX Adjusted $X.XX, a sequentially, realized also distribution approximately as second earlier. normalization I pricing in quarter, quarter EPS the average high across full is we of earnings step percentage basis our in a between X-year $X.XX year reflects midpoint earnings, EPS very in is points our EPS high for expect versus expected first XX% second levels of reflects optimization single-digit referenced which It as to incremental also investment of year as second

by of incremental $XX including Please million rate million $XXX to go XXXX, remain XX. from track to We transformation run business savings in an XXXX. Slide on deliver number

and We invest cost other to innovation high these fuel portfolio. continue across investments the projects further to savings and ROI

operating improvement Our productivity to inflation. system, of an part mindset designed it's is drive offset year each integral to gross business other our continuous and

leverage meaningful supply has it's slowly While contributing as and chains organic to productivity in years difficult given realize been been XX%-plus is macro productivity recent extremely and our the recover of other target levels challenges, to XXXX. improving chain in supply

Slide to capital to deploying balanced XX. go allocation focused to cash strategy, remain with the consistently Please highest excess for our opportunities returns number shareholders. We committed on

relentless through First, business reinvestment. we continue core to strengthen our business

to evolve. our Second, strong a sheet as that committed us with optionality balance we're maintaining markets continued provides

consistently to excess of cash time. deploy we Third, over expect XXX%

intrinsic value. improves Our and repurchases below stock includes further as share balanced shareholder M&A that trades returns calculated strategic the approach our long-term

$XXX Please turn repurchases. deployment million I'll Year-to-date million cash provide to update and Slide our deployed share number to $XXX XX, dividends, May, an XXXX. through capital for of million million and we with on $XXX in $XXX

$X.X with intrinsic shares our our calculated repurchase trading value. powder remaining have attractive the and We dry billion significant authorization, under current below share remain

bolt-on and million on process we a acquisitions in and pipeline earlier, closed our year-to-date mentioned remains which or investments, will $XXX May complement and leading which EMEA deployed two approximately including technology technology M&A to equity portfolio Dave have committed of active Our commercial industrial business cooling HVAC business. X leading our

track on we're billion approximately XXXX. cash in, to All in $X.X in deploy

us to forward. strong Our free and moving liquidity balance excellent flow, give optionality allocation sheet cash continue capital

to the I'd back to turn call Now over Dave? Dave. like

Dave Regnery

both Please Chris. Slide refrigeration The Thanks, outperform we our in each for and turn remain XX. and Thermo XXXX. America forecasts to King EMEA market to North takeaway transport is for that number business key the market unchanged, expect

to meet through these Our expectations. performance the on quarter is first track

to provide transparency key shows on slide reference data on the specifically The markets King information. additional and and Thermo points

Act One and the through XX. strong long-term XXXX, and strong Act growing ACT The through data and which or a highlighting been units, XX,XXX projecting market represents we've mid-XX,XXX view XXXX. increased their continue few a the has their are unit XX% digits XX,XXX market now demand a Slide X% that up that In time this to number XX,XXX refrigerated key versus turn single Please percentage they units, for units decline updated forecasts is XXXX plus for some an points. supports to from trailers, is decline. forecast XXXX. to to has low forecast X% increase return to takeaway minus

businesses leading and and their to term. is us to for strong a We GDP are Americas innovation continue outperform through execution. King Both over markets this our end plus-plus business believe the EMEA Thermo long poised

Slide megatrends continue and our over and intensify, products to turn decarbonization are Energy services. Please summary, outperform number efficiency, XX. increased we to In demand long to positioned sustainability the innovative driving term. for

address the engaging are and to our progress, these innovation underpinned uplifting accelerate world's delivering culture. We and technology trends by leading

revenue diverse best solid first and returns year we We deliver in raising strong long team the our and term. foundation believe guidance. Our in conversion reaffirming flow guidance performance, have year differentiated quarter us portfolio confidence full and unprecedented and our performance XXXX strategy, strong shareholder to full cash resilient over and backlog right gives the EPS in the and place free a

And now happy we'd your be questions. Operator? take to

Operator

[Operator Melius. the first from is Instructions] Your of line with question Scott Davis

Your line is open.

Scott Davis

I of the But great about facilities of folks lot and fabs and the really detail that a needs facilities? list EV starting specifically. questions, HVAC helpful. stuff in the when heard these which giant backlogs? haven't projects think spec a and your this give about, everything that is of is move is always to answer talk lot Are mega on about guys You I talking semi out those kind you into to starting are people And

regard. the requires an of complicated. kind imagine And super to if that engineering these and just are incredible to so, in I'm guys get semi I a fab guessing have have you advantage cooling pretty some perhaps right,

open up just to I'll it So that.

Dave Regnery

look, we -- early of number a vertical, in it, orders that we have this high-tech answer we Yes, for And have starting is, years. vertical to lot to as big in, a of we see big specifically CHIPS Science the industrial call coming closing of I and stages happen, even short strength some are once projects. front starts see of And is to things. side that fab you're of the of But think us. plant really some of on going Act really the in again, greater these and we're

it's So lot front a I of in us. think of

been in kind the engineering, sophisticated future. of strength the some these operations are right, but not we'll EV of cookie-cutter there's strength, allows been unique this we -- of expertise things. as a nice it's this And And us. that you require again, everyone lot vertical battery have certainly to certainly always execute in that's high-tech detail us all also to it think, so a And classify you're and seeing really is as to of continue industrial might are seeing We vertical, our this We're plants. on a some.

Scott Davis

those start chips, there's little of the to level still when of of it's go a lot about, AI, that this whether cooling? heat hybrid of other X-kilowatt there's And sky, is something there's like all working kind cooling I But XXX-kilowatt of I'm the because, in at whether all space frankly, involved a you cooling are we of or to some lot you all chips -- but technologies on a pie liquid the And and solutions. guys at CHIP told talking white is going the in be involved there. think

Dave Regnery

absolutely. Yes,

yes, the You're we're cooling, there. very on cutting And that's talking certainly edge. about immersion and active

we made Stack, of partnering that's Liquid called In that fact, -- is leading investment edge technology. the really a with their company which them. yes, And on in we're equity an We're certainly expertise.

Operator

next line of Kaplowitz comes Your with the question from Andy Citigroup.

Your line is open.

Andy Kaplowitz

bookings growth has of is Americas. maybe bit Americas? really seen tough verticals against any you little the growth it teens in any talked comps Or the low slowing your in Dave, Have slowing commercial HVAC as about HVAC EMEA remained you tough a commercial just strong, despite comps? really in main in

And difference if system U.S. of your in are the in the are there? you bringing in you then EAME it that thermal where buildout? you it management is, would into say the And terms And is where of out main strength

Dave Regnery

We Andy, in to Well, mega thing. And low us. strong the Order single the the and had a up that's grew, continue HVAC very were but start digits, it's a the backlog think they think I decarbonization, around intensify. commercial here year has I -- trends strong for rates been great Americas. globally to

mean, at with winning differentiated have it, just technology right? systems I team yes, level. And go management performing to there -- we're and I Thermal high our very hit a customers. If is we a mean, the you you EMEA, is

think we EMEA If commercial you was XXXX business quarter, XX%. the the were first up up about in HVAC XX%. In

up commercial HVAC, to Our equipment we're XX%. mean, orders for close I

this team So great. The well. is I mean, is executing

out too, The point that other is well. margins in thing, were as very I'd Europe strong very,

in chain remember we and expedited -- buys we talking spot year freight. And ago, more supply higher to were problems Europe you are cost acute with a customers. our If a about serve and

pulling productivity deliver. has the that through team able You see that to now been with

really in EMEA, broad-based Asia-Pacific up China. performed China in So also Order Americas both and strong teens very in strong were the too, well. quite rates outside and and of very low

in certainly -- a commercial our So a seeing for XXXX. is we're start of HVAC to off great business products. And here lot demand

Andy Kaplowitz

to up And of I comments sort cost the follow benefit want year. talk EMEA Maybe for on Chris, about for in price the your on margin. versus QX you

I why and in margins EMEA and the X% And more against carryover mentioned, Asia, the the XXXX. those you're other as regions? of up it sort think previously to you is bit? much a gone reasons you in versus comping regions those big chains of sort embedded X.X% Americas? Or the easier that really versus better and in were than that's in are mentioned maybe stronger the price Has Americas Dave are supply investing

Chris Kuehn

you'll and a great with leverage, And the it and acute a lowering gets get our leverage customers. this If X ago, holding I productivity very improving the very region we question. mean, X.X we see EMEA but issues margins It in that in back go also a to you're strong product I growth in a starting if door, impacting volume. it's region. that was and a year points come What slowly first through lot the ago, to of year and to out serve here of supply see revenue quarter, seeing will see coming with cost about Andy, of filed, supply in within additional some volumes. came get came difficult chain. volume guys really through go unfortunately EMEA chain that back first, to points and And we're XX-Q you the I price saw that

well. volume margins basis, in about region think stronger incrementals remain as the a good with on I the to continues pricing productivity So around improvements and year-over-year strong

start that nice really to team. So

full volume for think XXX you year, our probably full question on basis would mentioned in price we're price. points on I on Enterprise-wide And overall growth the a XXX year full company. maybe full year. more to I the a year that side than the side to revenue the bias basis on to still price points the

Operator

Barclays. question is with next Julian the from of Your Mitchell line

Your line is open.

Julian Mitchell

orders wanted of Maybe just over ratio, say, outlook when terms orders. if your sort backlog floor in down about how the start book-to-bill balance the Dave, a little of at thinking commentary at But we year-end number. about look versus market the and $X the the the not is are you with to guess And better, the the commercial being approach you're perhaps year, just thinking color sort one I by of quarter. they're that let's just transport? -- to in backlog billion book-to-bill trying understand around of Any bit region as or a report

Dave Regnery

the our quarter backlog were order for okay, flattish, Look, actually but first $XXX increased by Yes. rates our million.

backlog at we it's now thought had a billion, real high we the billion. $X.X of XXXX at $X.X end So

will a inflated strength. And to kind billion with of using XXXX We enter as -- $X backlog. the just demonstrate we're just very

think into excess of XXXX. of revenue. represents XX% be in about far that you go typically backlog the We'll the going we into, any forward If year about

first book-to-bill, -- was it and revenue, we the come would midpoint on we're at simple than quarter down bit thought, bit if you I now. exceptional looking So would standpoint. while stronger tell especially we're from just our HVAC it you, on a do a right little our was the seeing math what But yes, commercial the even

stack Our a business on it's X-year commercial orders. for the in first up HVAC quarter, XX%

to projects beyond. of XXXX be a of the in of that and come, Science with and the Scott about That will Act mega and to here that are starts see quarter. it seeing there as it's additional lot kick in the an to demand. going into tailwinds heard -- hopefully, you we're I IRA strong fourth now CHIPS out the and tailwind the some talk right very, So And mean we're very some

Julian Mitchell

on the operating question be Then my would second for the year. Americas margin just

half investors the one, the leverage the good So I sort transformation, last volume you'd may in price the some thought have as maybe bout suppose first of tailwinds to of and mid-XXs of of have think number because growth. and I as margins sort savings higher operating cost, well

the I that reference of else made. margin? investment that sort on Chris had understand So in Anything going Americas

also, first And operating half the you've stay about mid-XXs does rate half? thinking the at sort of got we're when leverage Anything in second Americas, in that that that moving around there?

Chris Kuehn

Julian, jump this expansion, XX in. declines quarter, the Americas right in King first plus minus. expansion with in our our commercial the the quarter, Thermo basis is and op Yes, was line I'll in XX expansion residential led expectations, nice Chris. basis points margin business. margin HVAC about or We EBITDA saw saw in a really margin by points

HVAC. So strong think it's commercial we mix but of the very residential really the in in I just growth combination where were the down saw quarter, volumes

guide full both and year as a half. think raised in the QX I'll and half tell confident guide, of suggest the second it's year, earnings our on guided full little lower I the maybe you, we're would very guide. But leverage, some we've the on revenue then end low versus first on

XXXX into very we expect talked the And backlog performance as the to the strong out, going think the into got high And second Dave very same as be entering was a we've quarter guide time, well. quarter. for the strong. I in first backlog the at

year in of a we So the lot full guide. have confidence

the of months. really basis. quarter it's full couple with a about of smallest of our where we're we'll quarter, season a update into really year. year earnings first started. on in our cooling you happy get we The XX% But let's And the It's and

Operator

Khanna is question next Your Gautam Cowen. with TD of line the from

line open. is Your

Gautam Khanna

I across price industry, just the price movements downward. bit of sort residential seeing the -- a or any little channel evidence volumes any just if the are wanted of competitive to you're lower given ask elasticity in

Chris Kuehn

the hand, to. as ready season. Gautam, it's not in seeing disciplined cooling Chris. I residential. quarter expected Things for as with Look, that and the have to today, be and referring a for we to the the price ready pricing think We're we're continues cooling very on strong inventory perspective but anything season I'll be elasticity we see we're we remain from for you're start.

Gautam Khanna

technology on just things with could more in of the is add-ons, anything might you you're we've looking at. And And talk seen attractive? if quick the about pipeline, a that what pipeline follow-up kinds M&A be sizable what of it before

Dave Regnery

into Yes. the enterprise. about Gautam, strong end major great of a we're global what an example quickly. to see able strong with At we we're the level, industrial and player. scale they to that. do process A a EMEA, the an on day, MTA. really our with for talked the scale technology at we nicely I'll or announced first everything actually as well. cooling, of acquisitions our is are nice, in This yesterday. channel, the quarter opportunity in quite going is great Chris start In here, the quarter it's fit get -- technology to second Margins HVAC that business we've in enterprise announced the revenue -- these less X% than

been disciplined, and the to we've we're lot of be We'll strategy that execute too, continue everything. we've at look with to success executing a had we'll going So it. and

Operator

the of Your next Pokrzywinski question Stanley. is from Morgan line Josh with

Your line is open.

Josh Pokrzywinski

So lot the lower trends? commercial also backlog. have in be where some seemed of But improving in of talk and on for trends the impressive talked I that story. a to bit backlog. like more like there us terms I'd HVAC, service. you would I today means as backlog Clearly, what revenue little paid of look, that maybe a in about are you the you're in imagine we get touched is some these what about for larger opposing chain backlog thinking And already how like have that I'm answers these cost, and the and you margins carve forces on the where I longer price of guess margin where upfront is tail coming would from the they supply margin have things How should about where probably trended. that it maybe guess projects, a

Chris Kuehn

nonresidential. Josh, the is it's Chris. still XX% start. I'll over backlog see We

So that we businesses going the tougher transport like But comp throughout would our price plus remember work the the we be price/cost, a primarily in to as But margins globally. commercial scenario, that's backlog. HVAC be balance of year. that

investors, Just really to with price XXXX. led remind we in

tough on going throughout And incremental a the year to so as we're comp we work price. have

couple product outstanding a staying job Our over positive and last and have a inflation margin ahead an were price in quarter the years, basis. of teams first management basis done cost on dollar we the of

opportunity. an that's think I So

comp But the again, a number as year. that throughout headline work we price to tougher is be going

confidence multiple XX% We We're to or on over have cost. of the leverage to the price XX a of parts going lot full better points right? XX in that that's bridge, year, and of from come confident basis operating the

start drive productivity gives full But confidence us expect and see incremental we basis. parts performance of quarter a on to that really leverage the to the normalizes good volume, all year supply return some on first The go on the P&L as chain for year.

Josh Pokrzywinski

fast we going But from wrench and coming situation to the And rates can the some retrofit. for Obviously, bigger turn the And like some guess, of policy-led on same stimulus so guess of versus sticking tougher the out banks. around do labor interest don't projects. focus these that's higher lot have think follow-up private? and only still the stuff on relevant I between know kind maybe a how How questions crowding regional the then and with I you about just bottlenecks. be of HVAC of the of liquidity I more

X? IRA out over you think maybe happens crowding there the of the guys versus Is on demand a more year stuff private next or that here kind

Dave Regnery

we date, as Well, labor we are day, a level. in far Josh. -- at we of of to think in employees we that many really at place grassroots programs they the And But opportunities end are Yes. really as so all all train us. It's the our front question. haven't of now have to good shortages, seen

our as the a far So happening rates those EMEA right there able that's And about right what results. capitalize managers, order we're it able verticals they're talk we're but other tremendous our able I any do and and that that's able drive to out policy trained and starting at I that really team, opportunities meet right mean, us, are -- now. seeing account and this, demand, what for go over IRA, you see most And are now. now as crowding And our about attractive and right right? it. we're not now they've being to concerned sales that there's our in all And to well look all we and And just are really team demand. better drive to to get in in the helping lot are to demand. they're upon Europe been they're our

Operator

question Your next with from the is of Snyder Chris UBS. line

Your line is open.

Chris Snyder

Obviously, ask were you bunch things, do customers, when lead reflect it's any macro higher orders to demand, commercial just a with speaking uncertainty wanted can HVAC you demand. of sense of cost on of I or whether of But times. comps, the easing financing? result

Dave Regnery

some the very see we in And fact, haven't Chris, of have a take strong think that on we realize decarbonize Look, that, need is warmer, environment. world we our seen that continue. good whole and right there and continue built we yet. can around customers question. megatrends more to out the decarbonization solutions the how have getting and impact now And And to dramatic action demand. I we

seen not down slowing have we So anything right now.

basis on a for global business. is commercial really our HVAC that And

the at look we verticals. across all play Americas, you If

in we've very I with year. strong think of XX to again, many strength that Education start that we verticals talked in there's but Europe, verticals earlier. of track. we high bit the a really to continues there. there's In there's been Asia-Pacific, solutions a like different office, across strong. strong our Maybe softness tech little lot be about

year seen full haven't but it's slowing any year to Chris, great start the a it Trane we us yet, and a in our for lot of confidence So Technologies, guide. gives

Chris Snyder

change running how thinking cost staying positive. kind staying in then maintain you're that. we The following reflation company ahead had that as of the cost that price Appreciate of about year-to-date price on metal, to in try incremental on or up you ahead cost. price kind And later does When 'XX been into price see 'XX?

Chris Kuehn

Yes.

in, jump Chris. me Let

could X and So the it's we X started metals, around in through. dynamic hasn't a deflationary year that really and ago, be months market we thinking a really environment proven Tier X,

the We be team on job that first a to us quarter on staying gives points some energy, product baked movement the things members cost a outstanding basis work inputs, we XX we guide. our were in the or price. the management to on Tier pricing more confidence year. If positive price/cost price/cost said confident to as and wage comp the in commodities start in We throughout nimble. inflation to going and around have The lot the become full But of inflationary customer ahead to basis year points spread I XX into to an of But As earlier, X have we the gets be value done further certainly thinking that remain about if know we're there's inflationary. tougher guide. continue we see remain which have that year. we

think we've the proven We company, I effectively. have the in the priced nimbleness that and track record

to confidence have staying going marketplace. on of what the on nimble just full be So year we where to we're in the a ultimately and very happens lot

Operator

Your of next Ritchie the Sachs. question from line is with Joe Goldman

line is open. Your

Joe Ritchie

maybe on So start HVAC. resi just I'll Dave,

mid-single digits. assuming So quarter your but was up. flat, I'm be interesting had see growth this to organic to pricing it down

my volumes probably were math Americas. So It volumes in first, direct did I seems double digits, double down right? digits get the down like were

right? is, question my So that is

to you of what secondly, then that embedded kind and guide? do sight the have in of line improving what's And

Dave Regnery

about is right. math your Yes,

time positive mid-teens. first less we how we strong right? average, a So in little we falling were now So happened sell-through, bit a the basis, mid-single digits, flat, down a But have really unit this we you which it is comps about here that's were see Pricing which in we're some was right a it business. off in don't than while. down very The again, on cliff. the resi business in looking business. at was There's think revenue is basis the the company the a on

they're levels through our at normalize a a lot bit look but you in maybe QX, If innovation a This of that inventory IWD, have nothing that high is our business through. we coming independent alarming. will wholesale distributors,

great products, and distributors some management brands, team. a great great some great have We

It's quarter. So year. first it's the the in early

in to business And -- have this gives don't we the how what have cooling it season see see cliff. projected wait with starts. our we we right us this we'll a guide So guide So now. okay? confidence guide, falling But off in our

Joe Ritchie

point occurred but going easier of you year, XX% mean, of in revenue/volumes I a back year the is higher the is pretty issues be like to that rest year? three business. of margin quarters. some still are the And that last for the know to the the in jumping EMEA, I an comp the is, my off guess remaining just assuming I'm good. through darn margins had then question now kind -- because of that going the start Because The I of

it the just margins And year? so of in floor EMEA kind like the for for

Chris Kuehn

the year the hurt hard first the the ago. versus growth be strong a is we comp had XXXX. XX% Joe, year were it's you Yes. we The easier a the fourth said expectation commercial to our to business, Look, quarter, it's HVAC nice in But in got commented or for full of as leverage an as a our challenges chain year. part before, Chris. better really supply the on got some better Supply from EMEA QX revenue on really and full and end we -- we leverage they as real that region challenges. would saw chain off they'll start. business deliver with and organic

we grow confidence a the deliver their and lot So year have that innovative this of backlog to with continues products. can team

basis it expected on for deliver plays improvement digits. markets And the a region. kind to be keep there going mid-single low But how out. mind, down see strong in EMEA let's we're margin TK of are we're to So confident to full year

We this expect have in, segment EMEA to to we a all expect strong in outperform. the year But year.

Dave Regnery

again, Joe, able a I'm start what to really to so you're of has team Joe, proud just our great is. right. that deliver. it been --

So fantastic.

Operator

Your the Tusa JPMorgan. next question Steve of from with line is

line open. Your is

Steve Tusa

on the execution the Congrats on quarter.

Dave Regnery

Appreciate it.

Chris Kuehn

Thanks.

Steve Tusa

know I was the wait what So the can it Q, for in in price X% we EMEA, other two segments? but

Chris Kuehn

Chris. it's Steve, Yes,

points X in little was So a Americas. over it

X So the with think price that Asia Americas, points enterprise. the around the as X points quarter. much EMEA, points X.X price, price and of of in of in line of said was in we pretty

Steve Tusa

kind here, in back And comps then strange just of there's from half year. like the last

-- I quarter. you like But had well Europe China to to pretty a half the How know don't we volume. had you good by guide second singles. You kind as high dynamics. like on do guided of

so You're far. half running singles in the at high first

and is expect half just it Are in Maybe the help Or there organic the pretty X that back year-over-year any businesses with smooth? in how volatile? to are out non-U.S. growth comps out you and play us XQ.

Chris Kuehn

Yes.

the given was year to second to last in very well, muted The as me fourth right, able of saw a recover QX think and quarter business I in lockdowns quarter quarter the we let -- year. ago. with get fourth start third the nicely the Asia, growth We in XXXX.

We're of out I COVID year business for earnings commercial bit HVAC, and lockdowns how just year challenges. of acute tougher third saw of the get played here and chain quarter, little had a last played but we the in have to may supply Asia in ago. from of through getting the EMEA, quarter well. in So out earlier really out China that that mentioned woods in first the comps given half a yet, continued very better better cadence the second just quarter the the the as some not fourth in

strong to a the very Americas see a Americas there. get in the be we're I saw of business that year-over-year. in a a little go be if So the quarter the fingers house, bit year. that a on I and the side TK, a year half continues bit as think you of for we But last will But the later I for crossed, think quarter headwinds TK tailwind the year, growth fourth the Americas, begin -- comp, to you'll the in fourth tough to back of of third nice

businesses HVAC half commercial really yes, full the well have such there of little as that in a coming we the confident of in the strength few in tough businesses guide. comps So was the but a bit in year we're second

Steve Tusa

resi And then to clarify these numbers. just some I just on -- want of

said revs sell-through you mid-singles. units? being flat, that comment is So is down that or The revenue

Dave Regnery

be be revenue, will revenue. That That Steve. would

Steve Tusa

independence, the was through I your through like that, down independents? probably more XX% your like just like like, know, So or volume something basically, don't

Dave Regnery

know, season is starts their normalized certainly earlier, Like the it it on this We'll and high, kicks off. said quarter. I first you inventory real starts, cooling a the be We've the soon. really inventory the depends season until They that right? hopefully, cooling And but bit It's happen. as the seen quarter. how quarter. first in may wait smallest

Steve Tusa

April far? so How's

Dave Regnery

cooling the -- it's season hasn't started. think I

we'll we're part It's here that forecasted to warm the in But real see. of shoulder in year. get So still May.

how So it we'll goes. see

Operator

comes question next with Sprague Your from Research. Jeff Vertical

Your line is open.

Jeff Sprague

just one a topic follow-up on the and then M&A different on resi you. Just from

when still you range, price you in say change that. perhaps little in you're what's resi little on clarify the given Maybe to bit going older the including maybe and Could you're quarter. lot that a the price, with the X.X% year below associated just surprised a hear mix mix Just units of not effect the selling or there?

Chris Kuehn

that benefit the that change in number. price of part from We consider SEER the as volume. price including not We're right. you're Jeff,

this pure a more basis. year-over-year on would be So

Dave Regnery

mix, that Jeff. Put as

Jeff Sprague

billion revenue like million We'll deals, year revenue revenue amount call $XXX base spent. that then for dollar that's on sounds expended. right, $XXX of sales mix. you're impact million guiding it just deals, the the chunk $XX on good for That last on a And the a on X% year, partial right pretty of of

close? math on be expect what year? in you the Do So I percentage does little do to that the What rates have in this When margin maybe announced just year a the stuff these you actually just of color businesses. right?

Chris Kuehn

we leading October of acquisition last of revenue Yes, Jeff, to year. to growth that's in is roughly from XXXX. that One three really acquisitions X the points it ALCO closed of in M&A contribution the relates

So that process just in of Dave results. you've an is on yesterday. industrial as be comp X closed be coming business just would out our Fourth got calling of mentioned, cooling MTA we're would part about through organic XXXX that we a quarter months revenue just EMEA. inorganic. It in

And up of announced life X sciences vertical this So picking about that in the in Americas, closed the a also acquisition yet. it not as business, months we'll partial year. then we've from the revenue that's revenues Think that year. pending start the

expect sometime quarter. to close the second in that We

We estimate made in the year. that an of here full

acquisitions those it's of costs. bolt-on very have really all great look, the and integration a in, us ultimately forces sales the record growth. strong driving bringing taking robust in channels, and points we But with that's X through And low contribution year combination into of getting of margin revenue track the them So selling to returns given our businesses in our roughly it's X subsequent just years. one,

about positive but kind basis in accretive $X.XX year. and the positive plays out the still So it's ultimately, what leverage. on slightly by the of for year, year, we'll an EPS with it's see that And

Operator

of the Nigel with is question next line from Coe Wolfe Your Research.

is line Your open.

Jeff Sprague

Dave, I pretty know cold your neighborhood still here. but up but don't about

[Indiscernible] sure make week. you So

Dave Regnery

up. Nigel. It's warming warming It's up,

Jeff Sprague

Okay. it's it's coming, coming.

multi-billion the be obviously, deal, one a of pretty but opportunities of a European is to do player not residential making scale, specifically? in How big Trane splash saying you residential you your a markets. competitors So in player smaller dollar I'm importance see do characterize heating in European a perhaps? a being there

Dave Regnery

portfolio we in our Yes, Europe. great like question. mean, really I

success. of in play, think we about lot You having it we're the space commercial where HVAC a

the to eliminated mean, we've our could said first in need able differentiated fossil revenue, all provide significantly systems earlier, team's thermal XX%. equipment results. geographic customers. have in our XX%, We or XX%, reduced offerings revenue see And fuel up the the there, quarter, you climates. for XXXX, you I our I like see And for that results. And management we're to heating

to our strategy we're So in continue going Europe. execute to on

to and that continue Technologies well. high-powered we deals I I to being And we'll shareholders. and look make innovation excited a to a opportunity is a we'll of talking team success. HVAC lot the it. Trane make And sure having of just extremely the continue We're do right the global that that's get get M&A and about we'll for investments our lot at player, so And as be The and earlier, disciplined. through performing pipeline coming much we said have we

Jeff Sprague

kind maybe your it's like is the to big We're of Chris. it? the part of This see savings. Or way perhaps the the then do of end million up kind the of of this of And $X you Is initiatives? move? for end another program transformation the potential

Chris Kuehn

be portfolio through the million question. incremental track and XX% this really us into $XX We business to Nigel, gives in good we're deploy confidence year, the that delivering a innovation in on continue the has on we the full better opportunities on thanks look, always or also would back cost reinvestment and for Look, the on I to for on savings But realize And drive move to going company that thinking. us operating to tell lean the improvements. there's year. as itself always you forward, lean leverage operations prided

those plays we'll see would of for And But seeing quarter past offsetting markets that bit talked the serve our through exposed that we're to customers. of I Dave out in basics, higher with productivity on the for And challenges, to cost great how you to off EMEA little business. the is as throughout higher come ability years challenged productivity company that the tell over think excited for inflation. call business. are commercial very to I'm back few out take last of to year, and a company chain kind been another first I opportunity work a have area excited you lot more some still the opportunities deliver update more we'll get in the costs the and about costs. we of side the I'm Those back the on to in get being back and to really -- calls to productivity but the supply on really that's year. spot we buys opportunities

Operator

Your next RBC question Deane is Capital Markets. from the with Dray line of

open. Your line is

Deane Dray

you quality. is about whole the the showcased originally, a of But that at makes a quite XXX all? sense. period theme faded? around indoor Question decarbonization you've urgency of the benefits point were for Has that faded basis about time. indoor quality, and driver lift air all change, talking air Because that and And understandably, perfect climate has

Dave Regnery

used I just question. good systems. care indoor vertical. we've into this quality air a it's Deane, in -- been quality mean I've time, health the air indoor conversation our about industry in we XX a you ago, embedded the I have tell to that long And applied years would

We have that now in verticals. all

not and So balance the about of talk that still our with importance think the being quality, but us. you helping about importance I we done energy about job on would tell it great air educated indoor I of you talk able with it read mean, might prevalent it's a customers they our fresher that. with and work customers. And through consumption been of it, I importance -- we've the exchange, to of everyone's

business. our certainly and part customers. So part no, our mind of offering of it's It's top it's our many of of certainly of

Deane Dray

stimulus Yes. it's And the top one I see with that priorities. that of education the spending usually

Dave Regnery

Absolutely, absolutely.

Deane Dray

us reinvestment. you give Can spending points where of And a examples going some returns? then of the on second XX question sense basis of that's and incremental the

Dave Regnery

our some the our on the on Three full. like customers really actually times optimizing very We hours digital with But could just our impact engineers to because it's innovation automation, a the the robust. and save and like really few. just in a quality. not air that see of Yes. dive portfolio. only quarter It's like to we four they've built really We it so best operations have have and space. deep costs really what environment invented electrification exciting I year, spend a the our We indoor the to is energy very I pipeline times decarbonizing talk on It's to pipeline. to improve get helping our innovation name -- our

to our robust here, love very the it's invest business. future proven to right that as in It's more to So do -- a well. record in and We going track have continue we're now. we

Chris Kuehn

expect I'd see just highlight to up that to that the still We we level XX points. ramp quarter, in the normal Deane, for that into the but continue full around year, investments see to a do as on the add of ramp-up basis points that had into level first as being we very investments a QX projects, second basis side, quarter, we will wanted to investment be outlined. Dave strong XX of

first a King and growth around to know to highlight, back well. HVAC just just And as that business. quarter, margins, Thermo to we be Europe saw in EMEA questions come Thermo I commercial comment mid-single. let me know a to the expected down in EMEA lot in of are the markets on the maybe low Important in both King to

to the the be year see expecting every nice quarter balance to in not probably and see going we're that each Thermo QX. about a that lumpy outgrowth how see the deliver for and choppy of as year. area of King out. Thermo we'll in That's the be think both But So year. plays we businesses to little will an King But

Operator

of Your with Obin Bank next the of comes question line Andrew from America.

open. is line Your

Andrew Obin

or in key of Because can spending? about But market. talked there a follow-up Are with end budgetary of trouble? you about. still a talk about just during was hospital talk -- spending. could on happening you market are what's sort Just we institutional pullback I Can just clearly you've If the a the know again issues. cumulative chat you key hospitals seeing COVID because catch-up that schools

Dave Regnery

we've strong mean, care I forever. vertical the health in been Yes.

I think.

is reason have we it's Andy, health varying air especially in. all I hospitals, fresh complex there, we strength have lot that around we but And strength one of different requirements, certainly track -- degrees As it sale. And exchange. of a why have said, the the care verticals, a XX really they

in a you're hospital suite you're going have room. surgical a So versus to different application a to going have in

are seeing really health built of that still we've in to complex care kind around always But strength those care. capitalize we're So on. our able fair, in be strength situations health because solutions we're seen to more

Andrew Obin

Yes.

U.S. think on the Headlines follow-up. Just resi I side. Daikin on introduce in product pricing lower-priced a the

side. the that price yesterday rescinded we've heard price first actually they of commercial meeting the a Aon, think I at sort on it's the increase --

chains do Or looser, steady more supply can support getting demand still pricing? As are enough people think that competitive? get you you there feel to there's

Chris Kuehn

they look, that is remains an on throughout about we retains price. demand and the say, price it's actions talk pricing may won't and -- necessarily disciplined I'd year. strong, industry do typically I potential Andrew,

outstanding product business well. in as first As I to inputs teams, quarter units have performance strong mentioned on all and here last our the before, job in an a lead two good done management taking price the our the years,

I we'll really points can cost speaks points of remain to track and our think lot in be the I of price a that think proactive prudent. record for basis do over hopefully So itself year. have And the confidence basis XX XX we on

Operator

Bank. from the of line Your question DeBlase next is Nicole Deutsche with

Your line open. is

Nicole DeBlase

a but and leverage call, Asia-Pac the of the also So been just -- strong. there's margins focus on was EMEA really, operating margins the lot on this really

about talk of how through are So the you can guys that we the year? seeing just progressing rest

Chris Kuehn

quarter Yes, these Nicole, COVID year and parts first China the would it's last we certainly I economy the saw of Chris. say, even second quarter, some lockdowns. but the in

money cost to against to keep the get could bit And of a entered limited XXXX. easier happy a lockdown, little you we and now into out first half situations. more trying comping we're comps think as we in it as so lot certainly And products customers about where

first off, So very Asia the in demand remains strong.

nearly on look, the the Asia. not were second but teens strong We But in XXXX. saw first up partial in performance Comps great the reopening given continue up team, second XX% a in growth, HVAC quarter. we in revenue to very the commercial strong probably from a better for bookings expect quarter. the side, half they bit were the high half very and had get little Services of only

team great in, very play the in And verticals our So and innovation we really the that year. think in well our I Asia job played then there. by through

Dave Regnery

all year. noticing for I Asia, sometimes train have the just the with our portfolio we executed the just Thanks to they in And talk we a it in start gives just very technology about guide. and team to quarter. Nicole. us great speaks year the of our in leaders to it lots And have enough really mean, first well be resiliency our of and confidence really But segments a don't fair, been team extremely innovation what there. And executed great Yes. it. leadership the quarter, of full strongly for

So I question. certainly appreciate the

Nicole DeBlase

order out I open actually And TK the XXXX? booked the you guys of fully on guess to book? new are the orders? what's order then And status it book, now Is to accept

Chris Kuehn

Yes. of Nicole, the book up we so the opened late mid- half year March. second to order

and first little So we bit of we from QX the entering can in come to year. both in we look really outperform up the guide what the that quarter, the orders forward with in quarter. and And in EMEA we're would full that Americas the expect get for our filled the the in to full see markets that have to lot a a in going started backlog the year, but confidence second

Operator

next line with question Noah of Your Oppenheimer. from Kaye the is

Your line is open.

Noah Kaye

love in expect to that services how played China, comment. Would that dig into just in mean, the the you trends the extent a can over reopening trend course maybe to I trend you into But and overall XX% the of more. little and that the year-over-year to year. that bit services

Dave Regnery

Trane in of first we've business. a double total were digits. of quarter, at globally single period, Technologies. a Yes. rate you I over compound if In in the represents about It high X-year we had one-third growth look a business it digits. is And our service our great services mean, part annual

business. strong So really us China, I really in really to mean, It differentiates it's our start year. the with customers yes, a strong

the lot time in obviously, was that of this of China a specifically year-over-year at comps because year. Some still, restrictions there's just last

require And our that it's and business products to where service well and tell invest service didn't these resilient is a customers. COVID was great very, And our provide would a our able heavily they service XXXX OEM and And we access very I business strong business. you, have our in a even buildings, during to business. very -- as many We more flat. it's business. just today, But service for are sophisticated more we're it's

who the Trane for thanks is part we as question. service of mean, So big I Technologies. are a

Noah Kaye

actually the next question. that into And ties Yes.

about some and out pulling the I forward investments of maybe spend, the think that. talking called you incremental in digital

the to Just extent the understanding of at the to would plays we over map and share Are course some road can or with the meaningful services of strategy. that additions love you how the into digital the suite year? an us refreshes looking

Dave Regnery

our to and No. We're over is nothing Trane Technologies. to it Look, new now, connected assets. being assets different over, number XX,XXX connected what millions well buildings is to of

you to efficiently. data and So about all think you now connected the that you we being buildings have, think more smarter have even our And how about is, do could operate love how assets. the actually with get next

working digital, when things It's something because the those when is on. that about we're no it's too and our service, properly. much space like the I not into service deployed space really to business. and that's talk longer tech digital a the are here. so And we're gets operating is And using it not properly It's the service we energy. operating And really tailwind that

Operator

Zac remarks. Nagle would I like for turn to closing to Mr. At time, back this the call

Zac Nagle

Thank the days we'll you. at on for have today well, be and conferences. on coming around call. and road always, as joining thank us that I'd couple today's the next any the -- next you over also to a answer And like to of everyone questions we'll weeks. And be

So person folks in variety have or great to day. looking Thanks, forward of be the a events we'll a road on seeing soon. and through

Operator

this call. Ladies and gentlemen, concludes conference today's

may disconnect. You now

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