TT - Earnings call 4 2023 | Trane Technologies plc

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Operator

Good morning. Welcome to the Trane Technologies Q4 2023 Earnings Conference Call. My name is Julianne, 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. [Operator Instructions] I will now turn the call over to Zach Nagle, Vice President, Investor Relations.

Zac Nagle

operator. Thanks, thank Earnings us Conference and Fourth Trane for XXXX Quarter Call. you morning, for joining Technologies Good This call is tranetechnologies.com where being webcast on find accompanying our the presentation. you'll website at website. Please and call archiving We're Slide also on recording our X. go this to not law. today's statements considered made to are are provisions harbor facts the are Statements made safe that of historical in pursuant call forward-looking and federal securities anticipated that to for our description of from factors SEC differ the results actual filings a may see our Please of cause results. materially some This also which explained presentation non-GAAP includes are to in measures, attached tables our the financial news release.

call Dave over Kuehn, call With today's on me and and I'll CEO; that, Chair to Chris Dave. Joining Vice CFO. President are Regnery, Dave? the and turn Executive

David Regnery

Thanks, Zach for and everyone, joining today's call.

to purpose-driven on like financial few we differentiated our begin, strategy, drives over spend our time. results I'd minutes a which As

is solutions. The trends Our energy for continue intensify strategy many and like increase weather people's These needed confirmed the positioned on events is efficiency, decarbonization world. sustainable XXXX powerful action and Urgent emissions Trane reduce lead. aligned demand to of trends to digital and extreme where Technologies That's transformation. climate as the to year to change effects is record lives. the around on the warmest was caused uniquely mitigate recently mega and our

emissions while customers' the are reduce impact broad driving through XXXX. goals X advance partner pledge our tons sustainability to by We of Challenge, own choice customers to billion our their Gigaton a metric help by

and and strong our for across cash The planet. Please customers, purpose-driven #X. board shareholders, enable strong a operating to Slide growth us the free system, relentless our our to flow. proven margins deliver and is superior the value turn employees, business result Our consistently for profile, end creation strategy, innovation powerful

or financial targets execute teams how shareholders. and across quartile set rose to our the to our our global reliably behalf and on is proud to yet targets deliver closely. revenue hit our term, top over the in adjusted and we of This the We on not we culture EPS top are believe central core global of and expect to XXXX to top and our our met quartile performance challenge portfolio. long we'll I'm consistently top core growth performance We up track our exceeded strategy against results how peer in, group And quartile our up while bottom. growth X% XX%. organic

of for in refrigeration to strong the we financial system to Americas, our as normalize Technologies. record. our we evidenced business a enabling points portfolio XXXX, have Despite And track to of and while business transport enabling and through continue culture moderate make Slide to $X.X also markets Trane flow innovation residential #X. conversion system execute global delivered term. Please accruing people us well We QX XX%, to enterprise. expected strength returning an basis deliver resilient XXX% and drive investment our transport dividend we're businesses, balanced we of continue another operating #X. In markets conversion, believe in We turn to and strong to the capital are positioned QX. expansion billion was free we XXX benefits to flow cash raising margin us by best-in-class our XXX%, leveraged to significant long delivered in turn growth for approximately to performance performance into in diversified a strong a strategy. the over residential strong Relentless free flow over as investments Slide cash of and compound and our quarter. and shareholders to M&A growth, down strategic clear move revenue cash our and cash repurchases. Please the annual operating cycle EBITDA shareholders of free see hallmarks deployment of or challenges key time, Since the share rate

Technologies down the business our customers HVAC than robust, power This bookings most to a alongside their ultra-efficient position Americas is be more working on each our of as solutions. to one and and data industrial, highest reflect continue we're that While high-tech our and these to are XX% of to commercial markets bespoke HVAC were in We're bookings verticals sales our leveraging than and XXXX. Global delivered things thriving revenue the HVAC our anticipated, commercial key stack. markets force success. To entering strong challenges commercial centers more this up bookings, into highly the Trane quarter, with context, growth strengthening solve growth does opportunities. pressing the best, such the pivot backlog in sophisticated put and direct identify X-year

applied Our multiplier over are sold, up estimate dollar we XXx to a X for where higher-margin stack. X-year services bookings, an equipment of of every on XXX%

of the pipeline composition several next to of increasingly systems. applied a As a percentage unique increasingly towards with we we $X.X the of We our XXXX over with commercial strong HVAC, long-cycle billion, markets our commercial large see years, HVAC a look entered projects backlog strengths. shifting playing at end including

backlog XXXX, in $XXX For million. HVAC commercial approximately up is

Over commercial nearly years, the HVAC X past backlog tripled. our has

Turning to guidance.

of and of #X. strong discuss the and presentation. Please products in key of $XX.XX. to to broad-based some with X% innovative performance, to EPS across for We the services expect Demand segments. organic $XX later continues our to dynamics adjusted growth be our another X% year of go will Chris financial revenue Slide

were in a mid-teens continues service mid-XXs. applied. Revenues up with growth Services in quarter, were fourth strength particular rapid outstanding, our and at Americas rate. more led mid-teens equipment, HVAC the up bookings also revenues to the HVAC was bookings During up than organic XX% our up compound were XX%, commercial stronger, In businesses. by were even as commercial up segment, business

normalize, Our residential rate but the as declined to a market faster entering than the expected, at business continues anticipated quarter.

Bookings to the return a to were plus up term We near healthy, over growth X%. but term. expect normalization to to process the long continue the GDP in medium

businesses Our X of halves. tale was transport the

of beginning market the is XX%. of half the year, back the were cycle, snap and modest which up first about of year XXXX. The QX expected in revenues a half marked XX% the back to down down

Our fourth growth against approximately quarter year XX%. a tough prior of comp XX% down was up

outperformed markets, full we down which year were XXXX, end modestly X%. For

EMEA were low flat mid-single in for segment X-year revenues XX% delivered outperforming bookings single were were a strong more digits. Commercial Our were Revenues than up performance quarter. and bookings end were up expected, digits, in down robust, digits mid-single the up Transport up and XXXX, revenues QX. which on high stack. were as markets, In mid-teens. single digits HVAC up QX

line down flat were HVAC prior single XXs. low year digits commercial up against teens high performed single to but Pacific up in with a was prior year were stack. bookings our and were comp. down mid-single Asia comp, which due Our digits Revenues on China digits low low expectations. segment Revenues up in tough a X-year

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

Christopher Kuehn

continues Thanks, revenue related respectively, single recurring digits X/X Dave. we basis respectively. Services enterprise resilient the At for enterprise margins to up up peso. points, up both Trane Argentine low an about execution organic making at higher the revenues of and of teens, time. standout, devaluation with strong delivered be growth margins low representing level, and Technologies in growth higher equipment the a more our services, Please revenues and Organic revenues includes $X.XX X%, basis over bottom. was headwind #X. to and turn up adjusted adjusted were highlights adjusted to EPS scoreboard quarter were from XXX Slide QX The XXX top and EBITDA XX%. EPS exchange points losses to a foreign strong and operating

delivered free high single enterprise #X. cash productivity than Over again the points expansion. about our volume I points for past Americas positive strong with was a years, X throughout to the growth segment, once even volume XXXX offset incrementals, rate digits. year, In but and services conversion. Please strong cash growth services of delivering flow higher, XXX free double margin business X Last we up not points delivered price of Slide of delivered least, and global the a and At basis our resulting compound XXX% digits. in realization more growth to the thank teams robust X that flow of want we price turn inflation. level, annual

digits price approximately revenues, flattish strong incrementals it's to Robust of The margin more in segment the was at important made than growth understand declines positive dynamics the to strong X quarter X segment offset of of points quarter. modestly of the expansion. up Asia growth than margin volume up organic and the M&A XX level. points leverage level, delivered high strong the organic growth expansion, than margin and of quarter residential leverage points commercial accompanied in delivered delivered EMEA volume While The the were volume growth single segment below approximately expansion by in and with segment revenues price and incrementals higher volume HVAC transport. The greater also price. approximately in in on points XX%. segment productivity Organic X with adding and

we highlighted linkage few and year, to in XXXX outgrowth, tight and As innovation opportunities automation. of faster. see between and digital XXXX throughout we've high-priority reinvested We market the are across and and and will projects we in go sales heavily in factory areas the excellence, leverage enterprise business further key services and continue accelerated in the timing a our A to XXXX. investments

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

David Regnery

to turn Please Slide Chris. Thanks, #XX.

year the our Looking ahead. and excited about we're segments at markets,

continued in markets, commercial innovative comprise and by unprecedented our strength XX% our backlog, world-class our of supported robust teams. sales about expect We revenues, end and which globally, our businesses HVAC services portfolio

may other parts of this we portfolio. We the strength to expect in more offset of see than softness the business

normalize near to We comprise XX% in XXXX. expect continue the versus term about the to XXXX our improvement significant to residential show but revenues markets, of which in

markets and growth which see mitigate to of and gross revenues the transport opportunities our deleverage to within XXXX. rates. in in further snapback with margin in about XXXX, outperform declines XX% a our impact to market modest expect We Further, globally comprise we

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

Christopher Kuehn

Thanks, Dave. to Please turn #XX. Slide

ability creation our our free around markets investment guidance end to in Embedded Our X% reflects continued cash XXXX organic flow. to strong optimism markets, and in healthy leverage flywheel, guiding builds value which philosophy to guidance our outgrowth is our key in X% in outperform. M&A our impact end $XX XXXX in across innovation, per for and We're of from target. with approximately revenue XXXX. is our in approximately earnings of to organic completed adjusted in We're growth point stated to acquisitions $XX.XX the or the XX% targeting for growth. We've EPS from XXXX, XX%-plus growth which included carryover long-term year, XX% bolt-on reflecting X consistent share leverage and our

to several M&A. we Overall, expect M&A which expect Nuvolo, and of years, strong noncash, full year, a we're plus carries we over acquisition, to $XX operating recent a XXXX to $XX transactions negative related a modest expecting impact payout income acquisition approximately costs. from million have income our headwind amortization the our in the for X to While next million, operating year and to accelerated intangibles integration-related primarily technology of leverage

this expect X, be accretive by with year consistent to our acquisition M&A EPS framework. We

Turning to cash.

We or expect cash be free flow to another year of greater. conversion of XXX% XXXX

the to see We we color some first how provide quarter. also wanted on

revenue We offset growth, growth continued expect strong markets. HVAC transport softer and commercial X%, organic by led of partially residential approximately by

adjusted of and $X.XX We between we've XX%. Please historical our reflecting #XX. adjusted Slide XXXX as to reinvestment XX% business a EPS with and earnings QX our consistent year between discussed percentage incremental earnings expect and $X.XX, high for go of full levels

$XX XXXX, savings. During an we of incremental transformation million delivered

have transformation of our program. last business top EPS the from flywheel, $XXX consistent ultimately us delivered The successfully to allowed million savings reinvest have X in which high-performance we drives quartile run growth. Over our savings years, additional rate

While focused has of cost system, part self-help programs will our the business with complete, for world-class to to through excess continue reduction our highest are deploying This returns is incremental cash been opportunities for remain to strategy, capital on future. Please as allocation We a and company with in lean-based program this a lever be the Slide #XX. strong discrete operating to go DNA. shareholders. a balanced consistently productivity margins historically committed

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

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

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

XXXX. and further returns shareholder an our repurchases long-term Our capital for I'll below includes and that for provide stock XXXX the M&A our share our balanced calculated #XX, outlook deployment as value. Please on improves trades intrinsic turn update Slide strategic approach and to

$XXX During and in XXXX including billion million January we strategic XXX% share and M&A. $X.X cash, billion in capital and approximately XXXX deploy to $X.X of targeting $XXX $XXX to approximately in XXXX, deployed expect repurchases, cash activity time. to million on excess including deployment dividends over million in We're

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

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

solutions, made investments And cooling to XXXX, process across pipeline services remains progress and energy temperature accelerate key we active. our technology. Our control in M&A industrial digital and strategic precision

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

David Regnery

Thanks, Slide #XX. globally businesses XXXX, markets. transport Chris. our delivered our Please go In end across execution to and we solid outperformed

Over the forecast an expecting years, points. a past cycle roughly by Americas outgrown end transport XXXX, our percentage weighted down Globally we're in and X we've markets average relatively shallow XX down of of an and X, we've forecasts page, digits. In table truck XX% single and included forecast APU, the reference. trailer, your the low for EMEA Big down for also the on

turn transport through our And that helpful. Please This a market XXXX long business Slide their horizon a XXXX projects projects in delever bright slide rebound XXXX, great is operate from outperform both includes businesses up segments XXXX. to in while and the modest to points margin term. XXXX, with we're to future. businesses rates. data this growth our forecast the also through for strong a XX%, a markets downturn and continued in to transport ACT additional moving may We in you gross expect We find some to #XX. within related trailer

drive across We go operating market business execution world-class globally time. the outperform to strong network, diversified and have our any environment. Please In we system dealer positioned with With summary, positioned a in innovation, #XX. over grow Slide value leading well transport a are business to opportunities to well we're through significant to portfolio.

recently Knights XXXX Corporate named XXX been proud to Global to have are List. We

Our strong continued our term. financial of purpose, customer uplifting And around and focus the to the strong our in believe us differentiated purpose continuing and now on team enable every our strength XXXX help we consistently team we'd day. performance the happy long be high over innovation performance the to fulfill demand and talented take have deliver world reinvest of our culture with This deliver business. operating the us while along in levels shareholder We your system Operator? questions. returns and to strategy, to the business

Operator

[Operator Instructions] Research. comes from first from Davis question Scott Melius Our

Scott Davis

I broken a record, et feel but quarter, cetera. year, a like good

Or structurally spread million kind -- transport something downturn cost that of kind more took, that like, and perhaps out you it that or looks clarify, As reset to $XX base the of to in cost just structurally, is is this resi? is into of out?

Christopher Kuehn

$XXX $XX million the by that achieved Scott, million final now year cost we it's let's of million the Chris. that takeout of launched run program The the rate say, $XXX XXXX. of start is, at savings end Trane Technologies

to So that of we program. just around did bit really a bow little want put a

business over driven built However, that to and a tell we've strong had you drive I would term. the long really over savings operating cost and system we've decade, the it's productivity that

company while focused term. So discrete making that of long right very structure us, leverage and behind over cost program we're would the say is I sure getting the we're the the on

structure to at look always opportunities we'll in lean organization. so And the out the

Scott Davis

you're a mean, that's there the a I problem us share guys, kind pipeline? possibles, seems think assets. is think to -- of lower through some a to with potentials to always of least that's delevered. of an buybacks is whether that a capital of and selling guys be a that or at you know And you've M&A you TAM is or help about. sense active like work? what about cash, there some be going option. sort But lot there enough in how generating out pipeline -- Give But an us higher that they're M&A and interesting competitor walk can have associated material I helpful. kind you've you of of Okay, put a high-class there that got it's obviously a kind kind

David Regnery

strong Scott, been and this Look, demonstrate. able think Dave. is our is pipeline M&A we've I to

augmenting And through I We last actually very in our Very which it the we solutions. those, I it connected we've We MTA whether I could with like learn our put recently as think channels. be that see deals had like X more think we acquired about -- Nuvolo. the from of closed AL-KO. success XXXX. we're about you year, excited Nuvolo, excited we technologies, think that products

So pipeline. very portfolio love have look, we today. we a active have the We

today. in past So heard always we're I don't do a obviously, technology for you've to do take but think where expand anything, me opportunities the channel we we say need a or looking great we what and can

to in continue expect area and So more we'll that to active be come.

Scott Davis

Best guys. enough. luck of this Fair Good year, luck.

Operator

Our next Barclays. comes question Mitchell from from Julian

Julian Mitchell

framework around Maybe just first the year. question for organic growth the the

by we're assume right you is geographic rate down maybe globally, is X% framework? vertical, in end digits flattish When than thinking and sort embedding it rather commercial of that let's the X% growth segments, your maybe So that, guide. HVAC, to XX% sort the in have in of to then fair you're resi market X%, roughly say, that single TK

David Regnery

You're there, you're pretty Julian. so on there, spot close

Julian Mitchell

in like the price/cost framework? reinvestment Or specific organic to on the Okay, about I And there follow-up anything step in your versus but tailwind run my, would year? when quick is the guess, say, that's terms much rate realized so out of, The just that, be early XXXX of last from was reason operating got accelerating it's on leverage XXXX. in point. leverage maybe you'd down, just you've XX%-plus, call from the helpful. what of operating diverge normal in step spend? year smaller is something going that organic mix a sort leverage The that long-term no then Anything down a or that's thinking

Christopher Kuehn

the XXXX market part a gives you, it's us Yes. be of for back really of Look, and our It's to lots Chris. leverage into businesses lot was. just see better, long-term increased Thanks, right, of invest rate drive to a investments back We our or opportunities and to in our organic of a guide It year And at I'll within optionality target our outgrowth. you're Julian. company expect XX% we XXXX. steady businesses. invest tell do continue XXXX like to the

the self-help we up X of transport sure in put years our Think got infrastructure examples terms cooling automation. in of the and And to the looking investment. out electrification And keep some always factory mean, I there, out portfolios products, X about heating, and the to making there's demand. that continued we're innovation demand with we've of around

end So about digital continue us the big controls. can in digital I'll about really service We factory think continue in X/X services, we just that revenues. we're keep down services space expanding into investments running X like a CAGR see It's driving acquisition our with enterprise really is but as investment excited We sales overall as well. there, XXXX. Digital, high list Nuvolo the investments. we making opportunities. for single-digit over investment I automation digital twin Dave talked about very now and that years of growth. about

to investments will So that in from fact started earlier means with get the payback that the come the those we want earlier start. that sooner year

reasons some So want to where the today. to the frankly, to catch our anyone want make are is And investments always XX%-plus. We but relentlessly those guide don't of are we investing. we're sure up

David Regnery

really that's to to today say, going a gives see for top you the look lot And great everyone confident growth line believe quality it's or by and a I'll at Yes, EPS we've pretty look look We okay, that growth I that X% at of our be free look then us in determine else have that's of top top We proxy earnings, I'm I quartile. results, our and I'm period, we not you year as model be of the going XX% at to CEO, flow right? will free cash that greater a at use XXX%. line, have XX%. growth. And year. like X-year look Julian, we're consecutive when [indiscernible] the as cash flow sure And a you question. a that we XX%-plus. optionality. And at over will third the had way, with the EPS It the bottom I quartile. the of

our and and around about brightest we're and we're our Technologies. very future, us. have But that very we our take at very still the and that which Trane happy people in wrap you We're So happy of uplifting is days can-do past. it excited performance in I culture, with with are model you front a the always culture the tell

growth expect and So us innovate the more expect more to to for expect investment, industry. continue

Julian Mitchell

X Transport a lot year? makes now, year-on-year second Dave. terms of versus the tiny any the on steady Or half through looks That of sales down big sort half had single there? in just pretty divergence sense. I down the first it outlook, digits, right follow-up of

David Regnery

No.

the I the think that has comps. be will lot second do A than half tougher the okay? with first half, to of

EMEA the I this As Look, be actually, prepared little better Thermo as dealer do great digits. will the it's right XX%. down our think our the in than to it's I'm after do great we'll it's meeting, bit in business. said a King down low better that than in We'll that, a single Americas. weighted -- in network is the after King remarks, We'll Americas average joining well. outperform. And Thermo be business, of a going fact, --

slight before. back. downturns great dealer there. We've will through these We been snap such This network have a

and at then coming have this XXXX well in through growth [indiscernible] future. with XXXX, what today what's XXXX. we're into not look and innovation of that projecting it's that you only we've the ACT's very If down is already back great now, And lot business, a launched a right optimistic the they into but

Operator

Our next UBS. from comes Snyder from question Chris

Christopher Snyder

a any to half that AI that data we've the that orders Is ask it seen pickup investment peers. we're kind seeing we strong, of X lined in could to on and data The center last that's anything with bifurcated feels of center or the when you months? And look of have back I been because at it like specifically? there up anything about of orders. a year, benchmark the has the orders over industry of specific lot sort seen and we've ramp comment really in lot incredibly compared wanted driving

David Regnery

question. strong I'll the has team Also Very pivot right really And now. I'll be sales use about verticals. where our the and our with many our think are customers' And direct the here, to semiconductor but force, XX some -- the centers, high with great care to very about. cases, we're And sales is. verticals, Data start to in technical direct think spoke Americas you to at -- just and expectations. we opportunity Chris, there in another, very high it, and we a the or health Yes. verticals with of education's space. sales strong level, those We're track just tech, really you force able opportunities different able is that exceed capture very another, track exceed, that. force, executed are able meet very

way, or being people was have in already about By that's the very business Asia. XX%. growth on with where So that team year know continued a very Americas. Very that's were I heard Europe. we're in occurred, an in the X-year well. happy lot happy with what a very on Asia, That perform well And we've order has calls as of lot the last doing a the seen there's stack, have well to Asia And we there, standpoint from Asia leadership in different we've XX%. revenue our talking down as team Asia in in in -- growth our

-- service what have, business So I'd over up rate service be our high in continues happening business, business I as see very annual we last -- the the compound our well that a In a been On installed it's there. And could service could be up digits. in business the was tailwind service very, applied basis, able also on the years, to really prouder you to space, been global the have within single And in team teens. that service. of do. really our the performs has XXXX, growth X increase our base not

XXXX. order with and that going results visibility It our a have the book with happy very XXXX. we lot very into gives happy of into us So

Christopher Snyder

innings there following very, I is appreciate center. Trane's very does any that is early we're way that. market, new, the forward very seem opportunity but positioning And But up the see in also in frame going just just then that know you that could data I maybe AI. And very on on because you it it significant?

David Regnery

new us. market, for to strong I in difficult. data it's There's mean, that's size I information been data a it's mean, in long that we've there lot a trying We're centers center time. not to somewhat public Yes. and very vertical. out of the

got $XX range, it, billion. out. But the billion up get market but of information -- You triangulate the data to nature, reports, if kind because by variations big want lot a confidential a you market They just in a those lot -- to you look reports very at just of you a okay? center is global don't providers, anywhere data between that it's I to $X.X center of it's mean,

growth going mean, a growth conservative a years. I you X for big you it's And the most you're take growth look the So there. if rate mid-teens annual teens, next compound if to range high at maybe growth on see rates, out rate,

vertical on do So our anticipate in with well very very the is We it strong strong strong data future. this sales today. into very today a and very team well it technical them. very, working center It's with being calling and customers

Operator

move Sachs. Joe Ritchie on to We'll from Goldman

Joseph Ritchie

continues accelerate you look, for nice Dave, yet growth XXXX. guys to the several double-digit we've number years. been for is now and pretty year. to impressive. talked It's And in The the service great end about business

that then digital how continue how how could accelerate business around putting it something you're growth offering, to -- -- here? maybe you you in connecting, Just you're in and there this maybe -- that acceleration Like your just much years? allowing that's like of do like the out playing what's Is is feet on in it out see connected what coming point kind -- service And that you much business? driving the street? is to

David Regnery

Yes. the question. for Joe, thanks

great. our business And things to yes, yes, say detailed our probably you great to I'd operating think tracking success. on went around starts of system service you'd system of our leads and different track service, offices, a our our It okay? We business. I which if It's very XX that KPIs. see service yes, with a makes one really

getting populate you our systems So disclose you but much you have said systems. service I we're around as could of now our our very too would equipment, the see to it at in as over I every business business. about our this okay? see being opening continue and business. life that business. in detailed X business, system, results. And $X applied in I applied our built that start see in it's our a And to for playbook that a rate, we And could think about flywheel our you great tail our think that's XXx our is it Think of service really service tell an created about playbook, applied to the remarks, don't about service increasing

great So business today.

opportunities As X/X future there's because as and of in a Chris about investing the know it said, nicely lot enterprise, it's well. in heavily of we're the we growing

Joseph Ritchie

Can like to in for be of a impacting growth drag or office companies. whether investor that's news business And a I ultimately, XXXX specifically I guess, in and there's there's this That's maybe your that just market some lot market 'XX? healthiness print. great a look, address lot how to around the to on of concern the that's hear. going of expected that know you and in good

David Regnery

recovery right XXXX. a going at is Joe. through But progresses vertical opportunity. about back XXXX. in that year that's -- be be behaving. There's our to will now, But got so we'll office guide, it's the in lot come speak believe baked how in soft, the to least as it weakness I into soft opportunity it's news XX Yes. one it see do, I sales report earlier, Americas, all the mean, the and some and track And verticals. back. think we're our we to different We to right Office said point, weaker is And at the direct pivot that with continue we'll now, of forecasting about I XXXX. will one do -- to force, as but that at ones that that XXXX. in We'll of capture I'll

you -- into verticals to account. we're we're vertical. tell what seeing be we've the I in some are strength that's that that in more And compensate other than the seeing going would taken office that So

Operator

from from Our comes next JPMorgan. Tusa question Steve

C. Stephen Tusa

'XX. a on strong Congrats very

David Regnery

Thanks, it. Steve. Appreciate

C. Stephen Tusa

embedding guys embedding for general in your this mean, the for Americas? What what in year think, I it I you you guide? are the are for but said you price was 'XX X% quarter,

Christopher Kuehn

contribution has QX, Steve, we started had through as points enterprise than X the X we ended Chris. price. the a of to we've with it of off fourth of quarters. Think at level be XXXX, about price and as point the little it's than But price, We that. points level throughout in seen quarter less over around move price could XXXX better the

but than carry dialing into bit could we're enterprise we better X the XXXX, over around in So at level, It point. that. be little probably a

C. Stephen Tusa

And of inflation would stable, kind is Okay. your I assume?

Christopher Kuehn

we're looking and And that on updates out put a order work be through we're Yes. to appreciate inflation, Tier weekend our read. with of commodities. demand with wage we right, space, putting examples as notes or vendors growth. is to every Tier fairly on I refrigerants that the X, happens X in inflationary, our continue stable. couple a It's close the you with at

normally we year in like we've things business another do we XX the price that. the to Where we into remain So to a basis us I a bit make adjustment, track But need Tier points least with very and on a see is operating side. But could cost say system we're Freight in got for at we positive get price right? bit 'XX, the over on target. would turn X XX, to overall, flexible, XXXX be little inflationary. cost inflationary going would

C. Stephen Tusa

follow-up -- just that commercial. assume I majority on price. on So a the would in sorry, of I would that price coming still is the

when about number guess, -- resi, So you're what's the I that revenue kind question? flat in split resi, like is that is volume price for you the talk basically that of assuming

Christopher Kuehn

flat a year. in dialing we're -- it's resi, for in All

to point. lot this what but volume would account or less a take not level a resi. of going the X digits depend to expect at be through necessarily really minus is year kind in revenues at of on we the for that on for plus into I'd think full Our or coming year price low guide residential, single price for

C. Stephen Tusa

XX% And guys everybody the to the XX% -- for XX%? you to price going like then 'XX, AXL are else, push through

Christopher Kuehn

If it's don't into conversion Yes. does to lot the impact, have on We XXXB. an baked that have XXXX year, half of quarter a think the we certainly second impact. maybe fourth

the what products. pricing. have the it's do dialed that But the around ballpark said as in exactly of We'll pricing year. in launch with that. how others ready see haven't we on We we'll XXXB to through of kind update We'll And how year product demand But the we we'll the versus see the as plays transition. XXXA get go the the evolves.

David Regnery

is this specific, XXXX. sure, in we'll But see Yes, to for be Dave. that Steve,

Operator

Andy comes Kaplowitz Citigroup. next Our from from question

Andrew Kaplowitz

Dave, in can possible systems Is us and thermal about of in the a some growth us the from quantify color coming bringing bringing point more are EMEA systems the here on thermal out of you color this U.S.? management on management it the you're in terms in thermal where to much think you your management making the U.S.? of give to or give EMEA is how at it least business in how traction at systems progress to your and

David Regnery

it's a great mean, Yes. I question.

do to well has results. to Europe, thermal as some see electrification obviously, system, with our Obviously, continue in that heating. and do management you really is We in of which very

help very different the data electrify the significantly strong in not buildings heating around in the with we're that like and U.S. reduce just of there's bringing to that are migrating do tremendous We're footprint technology it carbon It's world. to also of electronics. Look, Some to it parts key and verticals and some centers for has We a them the Asia. to globe. think opportunity decarbonize

different in that already as stopped XXXX. And we've products in you That continue well. have that continues regions. several think will We because trend want way, Europe innovating introduced in don't I the to by

like time of it or our happening there. what's fifth last generation on I was fourth there, our think -- we're I the was

excuse evolving is for know getting the on So future, there's incentives are the about for their solutions like, projects an -- I'm have this lot our day opportunity, was market. tailwinds. me, We great paybacks. have I great the incentives other the mean, believe but some of great this. people that asked paybacks a it's customers a we such that tremendous yes, stand own. I of But I -- around are these

are them If you're in and as money for actually they're the our help and these able fantastic to efficiency customers Xx, well to X, the by really save Trane Technologies decarbonize process. fantastic opportunities opportunities for increase

thermal expect systems the world. around see about and to excited really we're So management more

Andrew Kaplowitz

Very on helpful. particular. and Asia Then Dave, comments click I wanted in around to double your China,

one China. you As had China barely peers you deterioration relatively down, of I said, But mentioned, bookings sharp bookings in your up. think in revenue as a

there. that mentioned about and durability growth the team see Maybe growth. the your that what there talk You to you're strength you of of doing sustain

David Regnery

our Yes. what do I'm has of Asia. in proud been to so team able

In I call a.m. about fact, team. excited super Thursday And they have forward. X:XX with they're morning, Asia see the my what moving

think going in I and I right, see you we're headlines space the the it to tell centers. strong -- you what's strong. semiconductor, that in pharmaceutical, to it there. of at it is continue And verticals that look down specific, get the you're really is be you if you GDP happening that China data residential sometimes is would the coming see out

we great win. and have to there offerings We continue

about So exist opportunities in the front of we're that excited us there.

Andrew Kaplowitz

the good Awesome. Keep work. up

Operator

Jeff Research. comes from Our Sprague Vertical question from next

Jeffrey Sprague

end late. geographically, did X on X%. within How X% I kind regions you guide? outlook fit was of the to within Sorry, market X% the got organic that, minutes how the X% address about few of a to kind the

Christopher Kuehn

calling into the in that Americas it market What that guiding Yes. we XX those average down blended points Jeff, flat, we'll markets we're we in around to continue also year. then in is but plus if markets. we're Asia, versus to down LSD, got And commercial up and the then Think performance slides single I of outperform the the we're is Americas. And to the a of really we're talked a really in the Chris. with team again think basis. our digits from are little for somewhere in of high and the of point, mid-singles putting if market In with the resi, TK around in outperform guide the or digits probably minus to flat confidence it's the businesses that. history we performance EMEA Americas like kind transport seeing We'll and transport And about single maybe mid-single XXXX. But gives EMEA to investments us on of than years just we Americas that. go make outperform the of low was ability flat. a HVAC, down as made that one then around is can EMEA really bit market with we see our and digits market the low for really lot materials a singles, down there, over within range. Dave's the great better we've

before gives little close the it asked got but he when hopefully, it context. a here. Julian So of of you question bit that pretty I'll summarize to just kind

David Regnery

about just globally. commercial around of a lot strength think And Jeff, HVAC

Jeffrey Sprague

kind trying that just on were X versus just of that little backlog to the that I in bit have would bit actually is sounds, little of volume new price you I better got kind maybe the X% to you a the things inflation HVAC react is up on do more. Maybe bit X%, price to less of Enterprise be commercial price. a talk price, resi it X%-plus about? guess, Dave, than implied. kind with Yes, Can Tier up would a that price like TK's commercial the talking pressures. to little maybe up thought you're is

Christopher Kuehn

now, Could We our move through it's we'll as would on little we a the cost. there, flexible in it remain like year. we'll the bit year be target the Yes. dynamics opportunities. to be But But nimble a any it's and got early we've flat we X% Chris. the in full for on I spread a guide positive guide basis. on better look that? of it the right at growth than mean, see we Resi look, year maybe the year. price Yes, year. even We'll get comments, full calling we're in Jeff, and if a

we So meet as basis, a just we can full as it like think or guidance start exceed go you of the on year we'll out update through. of putting we that and the year,

Jeffrey Sprague

quick right A the just comments follow-up. lock making your lot with sales of your kind X maybe and own call earlier everything. the And of Dave. about force Great. on

of benefits? You system? may see don't of sort And you your stimulus seeing Like if what's nice IRA one might be the actually on way really your but it. would view how tangible we are on competitors any yesterday, some its heard it of happens the the have like something gave up through work

David Regnery

with Look, Yes. are in I hope it space commercial tax some out seeing we we're of XXXD credit. holding okay? the the still mean,

I've going tailwinds, about some to okay? On that, could customers been the driving a could this to heat that's through. importance We're heat past, still yes, that is that we in of work be still bit help the and So key and on little resi and marketing We're IRA the how is Jeff. hopeful the side, pumps muted. them. The pumps said

to the got You to it. its that simple. because simple, it make way they let It's understand complex. right? to make Don't want complexity customer So it make

been the of out taking intricate going more complexity key to to good we've these be policies. And with success. the really that's of So some

for starts opening both the commercial. a residential tailwind answer that later. sooner we just So the believe short going tailwind. pipe We is, and in hope residential It's still be it's versus a to for

Operator

from question from RBC Markets. Deane Dray comes Capital next Our

Deane Dray

about the might think So long what inventory into it surprised you resi you has how and extend process normalization 'XX? do

David Regnery

me little taken What's maybe amount a burn of off. surprised it's is time the bit to

-- in complete the was not we quarter we'd that's the thought I at in be you heard think and third our case. me QX, call

business. now, look, snap start to first the that. resi of quarter, It's is you And changed. But align hasn't in go going half. inventory a of That great the at eventually. think GDP-plus first now, residential. first distributor optimistic will remind said will the on time a quarter, really long Right least demand. a channel for It's the off I'll burn we're the It through to independent will wholesale this and to back. I've business. always So it's

get here as happens So what we we'll into see peak season.

So we get quarter first we'll earnings our to as update call. give you an

Deane Dray

be center data to where times all Liquid up great and business XX% in do cooling. a you see can come have really in where -- seeing have investment growth would And where but you all And you're in fragmented. Stack. I The to invest be is happening the the already that fastest technology? That's opportunities And years know further a what looks hear. next is to you several you'll to plus right for right you there you multiple that's business that invest. good then because And and to is win in still liquid the growth made has just

what are just So expectations? the

David Regnery

appreciate Yes. I insights in mean, your I Deane, cooling. immersion

educating think we're industry cooling. very I immersion we on the that with you did I possibilities great that, bullish. a that, the have appreciate still Look, so really piece on

the technology, working fluid really changed. through We're hasn't view okay, on Our itself. the

So the if right said, And to that be in to those we're of bullish you're that's choose it's market or think you about technology technologies And to future. next years the it, rates in that's teens the a immersion the evolve. growth It's middle right, about today. and rate as mean, high X large think happen And I the you continue Think compound we're of a evolve. that. the we believe to whether a think about massive going opportunity. And it's it, you growth annual data on big going over XXs, cooling growth and I centers. could also is continuing to But going continue number. of to the be one certainly

Operator

Our from from Wolfe Research. Nigel Coe next question comes

Nigel Coe

increases larger a very, your questions Look, significant a really competitors, you've increases. couple let's pretty very and some with your pricing is out actually competitors some of building kind of of been that message have today, different. more is So for realized price very questions. what's And price, few struck guiding on going aggressive your me price so really are

divergence situations And seen like has share market to you have to tend the gap here. lead it's just experience, where price? this does your in it So feels on this unsustainable, shifts? It

you've be expect with of obviously of kind to a So mean, there. pricing inflation be would any X%? service that sub-question that just lot deal service fleets, would the a the then thoughts? And got I you to than labor better to

David Regnery

Yes.

I'll start just me Chris let and about price. then talk Let

important it's at always So history I the on to pricing. look think

you if system, with early right? that we business see corner. able really So And were that's around remember, we pricing, our really of operating were because to

a at of back of our up on look in history what little So to are maybe competitors bit. did go kind we versus catching some you have really early and

the So let Chris, the you of rest question. I'll answer

Christopher Kuehn

I where there. led starts, 'XX, around 'XX, on it think right, even we price saw that's 'XX, where we Dave, really

inflation we at Again, we the right it's customers there gouge the we've So the to our customers. we there out we're in pricing we're ago move But is not price. what years, at also year. and not out guide said try We do is this think services, now, look What would early year X% being look strategic, marketplace Nigel, a about life. the throughout we look want for that. we're as we years really and in how we're as with do few We'll demand many make sure the inflation, offset for see appropriately. We're for year. at trying the to there, wage to

again, just move businesses. backwards process in as to see X% moving throughout don't through we in you But the we we'll But And update think it. going here. that so about the the move early as year, it's guide, we we're the pricing here

Nigel Coe

And we do what how move be going -- I billion much of asked cash consideration? is of that is to question But buybacks EPS, about in that's M&A. to to know this year, a sounds more consistent but tough burden deployment capital $X.X did to Obviously guidance with last M&A, amort a know but I to EPS. as under the your billion, GAAP you something increasingly be your in Okay. of going XXXX, it obviously, $X.X that's 'XX. versus

Christopher Kuehn

some as thought move give We'll it we throughout.

of I forward. our as amortization, yes, we'll go we I those amortization. that's rule-based cash with youngest technology in watch a shorter-lived up. going XXXX. our that question call assets your to You're Nuvolo in right come with high business to It's it really I out terms on our how income, XXX% with amortize main the really higher With actually cash on you we wanted net But driver EPS EPS. accounting the noncash cash acquisition was like company. conversion like calculated knowing to after that

look in against be tailwind, so roll in opportunities that move forward. We Trane in may the we within the working to out that noise see on nice But capital, well, It start we of But opportunity the income. going will And we're still acquisition some off another start why have years, the level move as of set. showing also make as the have we to for that here into seeing we as some future, sure margins to for out a future cash inventory not like into So and lots could takes out operating we starting much being on XXXX. out just especially we let's to the as our years, on that that right? us say, at that's But point, we look investors, future right? at. amortization EBITDA metric a right, amortization, comping gives going

Operator

Our from from Bank next question comes America. Andrew of Obin

Andrew Obin

on a question TMS. Just

sort I this quiver guess. North of change Does that to incentive. a and work arrows That's last I was tax provide for it us I qualifies with just game in ITC, in Or to potential highlighted it's and back there more And TMS the changer? that Is good clarified solution back just think the on a think, think game understanding to you November. America? your in I your my question, customers are more And it year. them.

David Regnery

is reduce about a of think footprint of changer thinking and have carbon a very significantly very, versus management when I and it being a building certainly a efficient you game conventional thermal start electrification and system. system able heating systems to the

way it if world making it's to different we as in regions see you I'd sure, think around the the in it absolutely, future. continue of launch I its say all more together, that game and and a wrap It's changer. So

Andrew Obin

credit Yes. changer? to know I was the is No, technology. game guess excited about a tax I you're I referring the

David Regnery

or only I I become driver. the any tailwinds. policy tax think don't think credit

driver be without it's sustainable, think that's efficient, with tax credit. it of of paybacks policy I very a systems very or thing and the the very, is or they main these Yes, kind any benefit will not rate they're to great have only tax but driving.

Andrew Obin

and the you No, commercial, we in And it how as on light And refrigerant sort do second unitary on light on but you the inventory addressed what a qualifies commercial? to playing you see -- and down then think I first the sense. versus business? do that makes different pin half it channel of residential, question, light how about hard both inventory out think seasonality then residential half I see introduce as And for the does second know commercial. it's change

David Regnery

I really Yes. don't.

that. to of kind was complete, out see then We came the that We do last have year, It sell-through. end I a and EPA that clarified to so this support XXXX, the all the a the of the good through channel as ruling EPA. until gives sell-through. proper think you time can by and manufacture you year -- do

any that there we less I'm I different than as all And So don't light unitary as see defining light tons. XX see unitary. positive. on the dynamic

res. really in we're it be will dynamic seeing that the So same

Andrew Obin

under And XX for is how you? big tons

David Regnery

business, portion even bigger. of large Andrew, we have applied that's but business, unitary great a also It's our this

Operator

Oppenheimer. question Noah from come last today Kaye will Our from

Noah Kaye

which So some you Officer milestone. December, a digital seemed and about talked the year, you Digital you're appointed making a like significant in earlier investments Chief of this pretty

more digital investments, Or some little digital you is of areas internally those next years? bit adding the there understand, et deeper can a more get digital the a quiver? this cetera. cyber, us few offerings twin, into help Maybe just transformation is focus about your to opportunity for So over of

David Regnery

the Yes. are we've us. time, I solutions digital to tell digital are twins in to for not new So not space Connected long would new a okay? you, been us.

that just which and exist. board, early believe opportunities a just is Riaz big bringing see part And to is that a a digitalization is It's is going think he's us focus. I days that and our help on creating Riaz a doing great huge of the future, we fantastic just talent job.

of about with seeing, about opportunities the think there. You a digital doing on, Nuvolo application take with you added there's growth that in lot with seeing And that rates stronger Riaz, just twins, today, even business you you our level we've in getting take service of the digital what we're that think the we're we're think the future.

Noah Kaye

the Maybe Dave. that, Appreciate last question.

this would around last you year, think I with view backlog your where end. time shared of us

billion You 'XX, greater than exiting billion. I said $X.X $X think

you you surpassed today see that. share us So with clearly it ending where you Can 'XX?

David Regnery

XXXX. say Yes. the It's we billion right remain $X.X same expect at to now. when I periods. just elevated our we're were would level backlog for Look, that at we several entered

very strong. it's So

it. tail as now X with thing would that is long it's associated composition which is that I think bit. say And of changing a applied the of systems, XX%-plus And backlog I the quite service commercial like think as has XXXX, went HVAC. we through

of that data centers, applied verticals, So -- lot demand in cetera, the systems. in require those really et

our happy So we're performance very with there.

Operator

back concludes This turn to today's for remarks. call Nagle the I would to Zac session. over closing like Q&A

Zac Nagle

everyone today's call. Thanks, thank operator. joining for I'd like to

the As number always, to to great season, We'll the have we'll there conference of as and upcoming Have and many connect a soon. and answer to the you with in soon. we of days you you around opportunity hope be enter questions a weeks. talk we'll be big any have coming the attending day, conferences also to we

Operator

you participation. for call. Thank your concludes today's This conference

You may now disconnect.

Trane Technologies (TT) 1 Feb 242023 Q4 Earnings call transcript