Trane Technologies (TT) 31 Jul 242024 Q2 Earnings call transcript

Company Profile

Participants

Zac Nagle	executive
David Regnery	executive
Christopher Kuehn	executive
Julian Mitchell	analyst
Scott Davis	analyst
Andrew Kaplowitz	analyst
Gautam Khanna	analyst
Damian Karas	analyst
Joseph Ritchie	analyst
C. Stephen Tusa	analyst
Jeffrey Sprague	analyst
Nigel Coe	analyst
Deane Dray	analyst
Noah Kaye	analyst

Call transcript

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Operator

Good morning. Welcome to the Trane Technologies Q2 2024 Earnings Conference Call. My name is Adam, and I'll be your operator for the call. The call will begin in a few moments with the speaker remarks and Q&A session. [Operator Instructions] I would now like to turn the call over to Zach Nagle, Vice President of Investor Relations.

Zac Nagle

operator. Thanks, thank Earnings us Conference and Second 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 David to Kuehn, over that, today's on me and and turn CEO; I'll Chair Dave. Chris Dave? Joining Vice CFO. With President are Regnery, call and the Executive

David Regnery

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

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

demand centered our and around change like transformation. We're are is we where lot taking of Most dire help sustainable about purpose mega strategy increasingly the inefficiently. efficiency, effects renewables to not Technologies is on about enough all grid. decarbonization a creating emissions. We're more management. trends and to action. companies can and significantly governments, leading-edge digital green technical is NGOs and our need energy powerful the energy Through a buildings world the hearing world controls in. Trane That's AI, Our demand seeing our sophisticated What and and aligned talking comes and climate operate up side XX% we're the invest in to reduce and solutions customers

and profile, flow. value for execution. track the In end across record planet. Please quarter, consistently to us #X. the and system powerful result is employees strong second our free Our turn board extended for deliver cash business uplifting The relentless operating of we and proven a the customers, our growth our leading margins enabled shareholders, Slide to strong our creation strong culture innovation,

of performance grow. board, the XXXX exceptional outlook healthy pipeline robust strengthening of to our performance and levels project deep relationships projections CapEx exceptionally play call power strengths. multi-year elite and outgrowth. such strengthening key to XXXX, to through quarter team but we for our businesses visibility all-time up continue continued to global the Commercial not seeing the XXXX. Bookings XX% continued our and strong up of an across HVAC top our momentum cycle the our back prior as XX% for leading our will be delivering in further high prior only Our we're half high, the unique as from delivered innovation market led X% billion centers, to growth. Notably, $X.X data complexity growth in in opportunities an ahead. positioning verticals of on us continue sales by business bolstering the accelerated year bookings to tremendous strategic to our our into investments, projects rose high P&L, continues reinvest with The where force with another and were customer XX% enable revenues capitalize year. competitive growth of execution leading our to in market strong QX heavily first adjusted Booking broad-based of for EPS versus strength up direct Organic be

Commercial in we most the the outgrowth HVAC. As driving market solution high-growth leading provider, applied significant in attractive are verticals

of solution revenue the higher-margin our X-year a XX% our that up are As estimate service of the an stack. X to on QX XXx approximately revenues Americas equipment. multiple over an systems We carry applied life example, applied of

So that we're also ahead. opportunities excited about lie the service

visibility XXXX visibility into $X.X XXXX. of remainder the momentum bookings increasing and robust billion Our backlog into strong of and exceptional provides

raising adjusted our few will our or growth. fourth deliver only see year consecutive cover EPS entering Chris halfway XXXX of of through which greater in backlog XX% and year Our All we're a we're we full detail XXXX. the EPS minutes. is in for revenue new which guidance, beyond, guidance backlog would historically and in, and level billion would includes year, in more confident $X.X a

to #X. services low bookings than In equipment Americas vertical markets Slide In up HVAC up quarter. and delivered results with XX% very Commercial mid-XXs more than up Bookings our with business up the residential, were performance. teens. than go more strong across teens. in and XX% up Please our segment, the delivered was team up Revenue more broad-based industry-leading XX% high and revenues

low the was continues EMEA, digits. down high XX% stack. on strength Bookings tough In XX% solid, also were the Turning Commercial market, a up and over were X-year digits a in quarter more down teens in to revenues growth well which than mid-teens. comp performed stacked up XX%. bookings prior high against strong, The with the of And and more X-year was single single The than expected. HVAC growth Revenues transport. ahead of XX% as business year. up were up

business revenue performed line our with modestly. expectations transport with and Our down bookings in both

for with Turning in our to were Results the quarter. Asia. second expectations line

through bookings to expect Pacific low digits. first overall. year growth. single bookings half pleased were of a on flat, were the another Asia Revenues China Pacific digits have down We're tough comp prior XX% solid while Asia were and mid-single with our year up performance

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

Christopher Kuehn

delivered revenue margins and up up respectively. low operating XXX services, teens both Thanks, level, This quarter in organic up EPS to top points, were and a and and #X. equipment EBITDA second Organic both bottom. turn to highlights strong mid-teens was At performance and XX%. basis were of provides growth up snapshot execution, XX%, we enterprise adjusted adjusted slide our revenues Dave. an the Slide continued Please in strong

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

business robust about of X reinvestment. #X. of of levels more the Americas realization At In incrementals than with and Slide volume our continued productivity we growth XX and price. to and level, about enterprise points price delivered turn strong inflation points positive segment, Please we volume high that offset delivered

Our margin by basis operating expansion XX Americas levels and and of delivered volume HVAC inflation was high XXX price growth, of outperformed driven volume the business more growth realization and productivity points. reinvestment. very business of Commercial offsetting Adjusted again markets strong than more than points

than about XXX growth, points high Commercial In we and point strong Adjusted of inflation our volume levels price was operating our points segment, of productivity business. of X realization delivered in of business HVAC X EMEA by and price driven margin with expansion volume and reinvestment. more offsetting volume basis

Pacific positive operating segment, business the high Asia volume more despite offset adjusted a basis of expansion points inflation and realization of our margin In than decline. mid-single-digit delivered team reinvestment. levels productivity and price XXX Strong

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

David Regnery

Please Slide Chris. turn to Thanks, #X.

notable with unchanged Our end and business market segment. outlook exceptions is Americas the in unit segment largely some

our business First, HVAC very Commercial another strong delivered quarter Americas market of outgrowth.

was year. While verticals, With to broad-based. of X-year we've we on X-year stack half approximately second key and backlog exceptional on our expect again outlook this to XX% XX% strength at and growth growth continued stack was in the growth Revenue in high strong, highlighted range a particular QX. positive position, the extremely up in remain QX both revenue

growth transition, X in year our mid-single driven We quarter, channel Second, factors: cooling season. refrigerant inventories the growth part a be second on normalization digits. residential stronger-than-expected to the start now the business expect the revenue of to and by full strong up Americas EPA clarification delivered the in

ACT Americas transport more mid-teens. has a down Third, XXXX Their softer in which their be outlook markets our expectation to transport for lowered XX%. than second to the half, project business, for is down much they

in markets transport the XXXX. outperform to expect We

XXXX, to growth Looking freight ACT approximately improve. projects rates XX% as

on All represents significant and XXXX businesses the in largely the Overall, provided outlook as guidance. net us first and the slide a raising for additional outlooks outlook reference. changes full segment performed expected our our the to our enterprise confidence year to We unchanged. positive your year Americas for are in in the half, the gives other for details

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

Christopher Kuehn

Thanks, Slide Please turn Dave. to #X.

quartile and full for on organic we're initial XXXX will EPS reflected through, exceeding top targets those believe adjusted that Our performance guidance revenue growth objectives. deliver Halfway year. the we

we're to our earnings our We're raising at $XX.XX $X.XX up exceptional approximately the positive by prior. our and XX%, to to organic midpoint share performance, $XX.XX per adjusted midpoint guidance year X% full outlook the range above points X%. $XX.XX, revenue Given of our of guidance also percentage approximately to backlog strong prior from of range X.X raising a

guidance, this share deliver per With we're updated our year growth. of poised fourth adjusted greater consecutive to XX% earnings or

M&A $XX million continue We versus impact leverage. XXXX to X a operating of X a income full impact year to to of expect approximately for with of organic adjusted leverage reported for growth point negative the negative points about from about in

the offsetting FX from also in growth expect X of effectively We negative M&A. impact about point of point XXXX,

XX% long-term the and are of to XXXX year, growth organic no Net for plus net our organic approximately target cash leverage or adjusted for to target continue reported and XXX% XX%. free revenue at with consistent greater. of earnings There's our expect flow stated conversion change to guidance the we same

EPS For the to $X.XX. and approximately expect growth adjusted approximately of third of X.X% we $X.XX quarter, revenue

may helpful for modeling Please see Page be additional for XX information that purposes.

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

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

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

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

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

Slide to turn we've Please to capital our to Year-to-date repurchases. billion provide an million on $XXX $XXX through share dividends, cash, deployment. I'll million approximately deployed July, and and $XXX million $X.X XX, to M&A with update XXXX in

$X.X trading strong share current We our optionality remaining our intrinsic attractive, calculated below have authorization, shares billion us as providing value. under the with repurchase remain

potential an value-accretive returns. pipeline to active We improve M&A to shareholder continue long-term with further have opportunities

expect deploy $X.X billion For to XXXX, approximately in cash. we

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

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

David Regnery

go transport our discussed so #X, again Please Chris. here. in markets won't to Slide outlook them We on I cover Slide the discussion #XX. Thanks,

reference. slide However, provide we your this continue to for

a We long XXXX, XXXX with transport their a rebound growth trailer horizon. great moving this business for market turn XXXX, business to through And is Slide cycle Please forecast operate projects bright forecast in continued our a term. we're future. a while mid-teens the #XX. ACT and through up down in

through our globally positioned to world-class diversified outperform have and operating portfolio. any a across We dealer business we're system environment. strong with a the innovation, well execution market network, opportunities With in transport leading to business grow

summary, time. #XX. over Please go we to to are differentiated drive positioned In well growth Slide

believe Our the leading term to performance culture, financial our reinvest innovation, long unmatched over business top-quartile best business. system days And are we proven while consistently and in deliver operating our enabled to continuing ahead. us

and track the the to XXXX leading We deliver in and record have and returns the strategy team, shareholder performance beyond. differentiated

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

Operator

line the Barclays. Julian from comes question first our of Mitchell And Instructions] [Operator with

Julian Mitchell

wanted just X, and guidance. organic of so with growth Maybe at forth. stacks understand it year-on-year to sort depend if I some we're can of the sales X, start the dynamics, looking X-year

sequentially. maybe the it's think, mid-single flat quarter, I double QX And digits. easier the years sales sort it's is look So and And the guidance implied sequentially, to digits been think last sort then of of few normally, down recently, down high they're up in I sequentially implies fourth single.

a construct of standpoint, So conservative based more you're seeing just of of off from kind in sequential multiyear just the of particular it's stacks? or a wondered sort anything sort

Christopher Kuehn

prior the start. just full target basis. year and on Commercial to year our year guidance Julian, the we a -- Americas, to full start Look, Yes. going with XX%, HVAC have this Chris. growth great points with about happy of raised I'll guide. the is a they're I'll as up year half revenue forth from second X.X organic Think put we're

you versus as As the XXXX are comps of just I've year. prior tougher talked second go about the half in calls, into

low grew QX, grew As mid-XXs, the a ago, it QX business QX to that year and mid-teens and the second half reminder, XXs high teens of a XXXX, QX, in respectively. in in

It's going half to of have probably it's XX% range the second growth. So great year. to in that Think a in range. XX%

well. revenue X-year XX% second and when the XX% you we half did It's X over it's same you the is last actually what's a the the to at this, about in first years. on that XXXX revenue business, interesting, of of stack to XX% think and in year the half the growth as a look growth, XX% math when XXXX And the

going consistent really about think lot years with it peak a markets the great dealing several chain, to of a when it supply dynamic So and they're of but have last over looks you year.

called thought half we transport the the Dave ACT even the those in of be year, as markets mean year. X mid-XXs the are I than what half Think of expected markets called down his down further second in ago. out months has comments, to second of those in

down, full but to So year. that the to outperform on business expect we expect we be

leave We of And better? second that half confident middle a there it mid-single-digit I'll out. Americas, it be to the in we'll a end see then really but next year better a call year. want the we could the update is down right in But we're but very And for maybe, it be quarter. little It I'll about second we of residential, to quarter, growth second cooling it maybe half, as are bit season now. the the within things the guide and get plan better. step could you get bit plays We're maybe that of much in space. the the full where could Yes, the cautiously optimistic from

Julian Mitchell

And outlook. Chris. much, very question second operating my on the margin just Thanks

the are in So framework if aware you've margin transport in on the Maybe also back a in into be highlight a negative, mix, that year after plus anything cost and investments There's leverage else terms of of, flesh are say, the versus first we half. else full resi bit for light anything a higher should number around XXs of price side element? sort moving that mid-XXs got second perhaps, I to mix and the that out terms the half HVAC mix in around softer. tailwinds of Anything pushing Commercial half? within applied anything the suppose,

Christopher Kuehn

Good question.

the our with think is really right? actually of were about different investments, Dave half, X it's very about margins leading. and of businesses. last year really units second mix you the When Americas, mix all EBITDA about across of the business Asia businesses, think all consistent if EMEA, EBITDA less Asia But where and performance businesses. continued this across to margins think the has I advancing challenge I of fairly

of very We of the and with but see There's high those of of costly what have out as returns it long that a have little investments more and ramp bit of time them, the that's strong for half see on seen a we the we up returns. call would second quarter accelerating them first in compounding being wind half, began it really I effect this the as year. maybe investments a bit all to year, in second

leverage. XX% year in like we So full confidence the guidance and or better organic

outgrowth making where keep the see But sure continuously Dave plays and in focus Let's out. is the relentlessly years, year we pressure the invest here business and is the the for several to on. keeping driving this market next

David Regnery

sitting at I'm saying smiling Julian. here Chris, he's that, as

for able future. we've thanks our of the expect that able to results the demonstrate love investing more in business, in of we But the been been and make we've the questions. to and So we investments

Operator

Our Research. next question Melius the line comes Scott Davis from of with

Scott Davis

And today's results have been good.

So been day. good it's a

substantially times of that in up complex gotten have and bigger fabs things the and overstating trying data what's largely But to changed here? Xx in dig I'm normal. centers these demand a that, is wanted solid. because because comment I'm to Xx a and more of perhaps tease are to little thinking just is folks backlogs have projects gone just get semi backlog line? want Obviously, I of normal your and lead front So and like but bit? about I'm kind bit out these

David Regnery

that's should a Lead It's I we Yes. to say X lead to back challenge normal bigger I -- normal would are say I We're what rate. obviously. a Scott. I not -- times as what's times, than -- great business a that would wouldn't years call were maybe should would say we you question, ago, lot okay? that's ourselves

to advance centers, customers data other data we sure, needs well us verticals. that the have are of say, center visibility providing for their some For in than, maybe

So that's a part of it.

strength really But verticals. almost look, seeing tremendous we're in all

was to different that a As was hard in verticals. down. looked in XX quarter, in we Commercial we find It spoke the our us vertical we business track HVAC before, think for Americas the I

we're other nice demand seeing So strength. seeing also are high-growth well. certainly like a in just have broad-based demand centers, lot data in but we verticals We as verticals the of

Scott Davis

Okay. then on b, is of a outgrowth, but side, little has China, kind I be... are there, question my is have guess you that know so Helpful. kind around is, there China probably macro would the color getting if up, But can for bottomed? of some a, I would you And it imagine sure. bookings and guys I the And lumpy some an indication be bit -- that

David Regnery

Yes, I'd back okay? the in Asia. the for would expected, Look, In XX% we revenue XX% performed were of it as some quarter, of rest choppiness XX% we that the the the China Asia revenues you than enterprise, region say is question, it's see did half the China, I towards tell less the of a Think quarter. good of Scott. flat.

our have that. eyes we So wide open on

you also would the year. guide our that tell for baked I we But into that have

I bottomed. performed well there. say So We that China wouldn't has

Our high a team executing at level. is very

team there seasoned But there, into very be a pipeline marketplace. getting they're dynamic are to the of just in China a clear, orders now. in out lot their We are innovations right pretty rolling that

Operator

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

Andrew Kaplowitz

backlog then just maintain bit I going does you another including think 'XX this a And growth relatively But bookings year even it be how what that was you up, last? could at little difficult about a but growth or should the data you've We could a do earnings strong coming over give know year? momentum point confidence strong order just centers. elevated broad-based, book-to-bill environment HVAC. long double-digit orders comparisons renewed you bookings or in at know more forward. momentum said Xx. you And Americas Dave, and more Commercial

David Regnery

booked you the going be incoming like to rest you going mean, XXXX. I about that the much that's that us number that already not the a for have for rates I'm of into backlog XXXX. that tell be I at a very We strong size $X.X billion of a in And saw will order we're our number beginning -- Yes. past. year. talked XXXX, to going of have forecast will haven't we

So we're very confident there.

As demand execute. verticals very to ability are. And just broad-based. it's And lot sales a direct has to the innovation and Look, where our that we're broad-based, opportunities far really demand. go there And of It's I right? seeing it's we're it the with the in strong high-growth seeing. lot because to emphasize with but not of we're a our do force, we our as

we're Our are and that been the be couldn't It's prouder able that to team highly technical teams And winning execute. simple. in has marketplace. of I what

we're Europe the but about extremely were up also XX%. rates that Their in I Commercial talking well. way, Americas, a HVAC by And the order business tell you lot would our performed

to So you go that could going spin always you that. where this as you that the investing And for of long-term in a flywheel, is say, payback to for and see vision that and impacts to flywheel us. that, the want seeing business, Chris as we're the having is to continue that get would

Andrew Kaplowitz

far get looks minimum conservative, the there digits mid-single year and let of the you QX, and It resi you I alluded then the that during kind cooling already Orders to growth season? like forecast but I Chris, mid-single-digit want have you're were revenues a so to up half obviously, in seeing. tried said you to for ask the the bookings. seen strength follow-up. up be the you you accelerate, what first XX%. plus. Well in so really me know to

Christopher Kuehn

bookings season. be is It's Yes, through it's important. could the probably you be it question. Could think better? less the we good the really mid-single Andy, But cooling floor business. that seeing in entire I better. as around business, know, Yes, it think for

confidence But there's As a we're into well. and you there got later years. leading plays into see let's year, it a can that. be team. that's ready market we've X.X how this a year be we out. refrigerant questions for itself better. about yes, this happening in challenging But We But for that could could answer know, that into like cooling of lot year any been the transition year, It's next of certainly kind as season feel a better,

David Regnery

Andy, why remarks, so in prepared on refrigerant the better in did is much as second X clarification in reasons I the transition. One we look, our the quarter. said resi

a certainly wholesale And at inventory distributors. that is The the the not the second start it's to have warm the I we level normal strong our is but been very like season, reason to very, in you'd talk list a but is through concerned call different start. about, that all what could channel about a would third independent very us which a we if very, been for talk like, cooling the it's weather, should

in team. team it's in start as the a this said, cautiously very great quarter, optimistic we're Chris performed So and business. for The second well that

Operator

Gautam Next from with of line question comes Cowen. TD the Khanna

Gautam Khanna

ACL was if already wondering could expectations just cetera? any prebuy of you you et your -- the I transition? And about introduced talk product, the given yes, have

David Regnery

question. And in change, commercial that Yes. for product a a Gautam, affected. is scroll target in compressor that the brush. our broad We've introduced half a a of be uses it, any just refrigerant business introduced about okay? good would we've think So products about

commercial side, we've it's actually So we're selling our both. half of introduced, about it on

resi haven't the out the introduced well it. back in In XXXB, That selling new we as half business, our as still XXX. of yet, the we're be not rolling year. So refrigerant will

their properly. that products on inventory rolls pre-buys look, that sell timing to helping the as But business in forecasting distributors that far really sure As year. our the and There's too independent not our We'll focus towards not right your year a the now, wholesale large out. much we're in to see residential work how our you all pre-buy we're anticipating you of just is go, through that. make end transition on could have

is the right with XXXX. sure be cooling they're in year season make our working focus for progresses ready So the as now. here that we'll that's to where And them really

But least the we operations you both manufacture big that our to able answer way would dent. a we So At products. prebuy. one I not to don't have we're question, designed tell large your

was but know, that because you'll to useful lines, pay model that mixed we little more for life into of product. the components area, believe bit have our future resi over will sure make we upfront service of So that which some XXX the could providing we investment in a the cost, be product as time you

Operator

of comes question the from next line Damian with Karas Our UBS.

Damian Karas

Congrats wondering quarter. on XX% help the a us growth bit. organic the I unpack you if was little could maybe

for versus of through thinking driven Just give line a some about this volumes that benefits? us sense us of much now? by and for how mix price you're full top being kind year And just walk the maybe how

Christopher Kuehn

Damian, the quarter, of X start. it's as price. a think Chris, I'll for Yes, over little of it bit points

the of XX this filed about XX-Q gets that see You'll later today, volume. in points

So productivity. that we anticipated been contributor, into we to saw contributor to but be a offset in that That's a year, the a offset of was improved coming XXXX and that less price has and knew going dovetailing. to XXXX. what nice And than as we the been

last the And last so year, largely on of the we're to improvements came of resolved, continuing middle kind year as challenges of see productivity side. out at end chain supply with

steel I of inflationary up out getting step inflation. flat, down, being somewhat fair. think inflation really costs margin refrigerants It aluminum up dollars wage if to be with and up, right ultimately If copper we're about there back, So combination to Tier X is price, above the up. I and

very price is the we quarter was making very, with inflation. projects on year. high and for investments. It productivity like I inflationary us All this of continued another with business are stronger are getting be The that a But think we investment of sure still that we're strong. is versus to funding a bit quarter where investment and high going

lower landing -- points that little or where that us around as the XX gives on year. On lot look volume second the view that bit half, XX That points volume revenue were price Commercial the in in second Americas. the into points points half first X points we're will of that And well. points sorry, of volume we year of a X in the -- confident think XX full HVAC growth, growth quarter, should full of the the year price, of on ultimately of XX I'm a as of versus around be of

bit that hopefully color. you a So gives of little

David Regnery

A lot of volume, Damian.

Damian Karas

thing. your opportunities, I bad with able kind That then things wanted investment be in see of Cooling, you these you early-stage if a will, of color are down progressing And like how helpful. would potential deployment growth partnership, to share to Not things the might Yes. your being road? you emerging envision was on opportunities some Immersion some if capital AI

David Regnery

answer The that's of that past, the through to said first work in our here. Immersion I've the Cooling, some And as sort we're partner I'll question -- there. of that's working that got through. hurdles with still needs some

I mainstream. what would that's not So call

going to help our like see there. And As far is what did, really the the as really we excel solutions. us like AI tools Nuvolo we this connected acquisition it's but asset early days, we

side perform the consumed is right? So don't that in I a demand that's that's now side if you're XX% are people about the lot opening But connected right people not are you're What all to that talking it that lot building demand about realize generation the the And that. about to lot a of energy remarks, A going asset we're that, of building, building, people management, talking connected wasted, to of was asset, is of is you're power. way ensure in about a designed. and my talked coming. to able talking the if or the

but to energy of number, some a XX% of massive show amount is stats, And our that you love I'd this saved. this can be

going data help do And at to lot what going in about on right We're what you're generation, centers really not solutions. we we're a know we're doing that's in we see really with. it's bullish because coming, to It's just bullish that's we what Trane I And side now. on today think and years management demand our efficient So with lot demand like be how Nuvolo. Technology our about coming a about happy. way. the more about all more could forecasting the really not you We're customers use we're generating hear just connected it's a

Operator

Next line with Joe from question Ritchie comes the of Goldman Sachs.

Joseph Ritchie

to again, centers on seeing in that, just I'm are I bit that, topic centers? quickly. that in of can So of across broad-based the your going the HVAC growth late. bookings business maybe just little margin been And look, just any Commercial for on touch you curious, you constraint know just data though, the Americas. data the talk I that's that profile then vertical? hot know you're also, a booking about I'm

David Regnery

about from let made I'll constraints capacity mean several we've in the standpoint, no. start. a -- capacity talk But I margins. years. last Chris I'll over expansions

we're feel shape we We're It's just level, It's the within as entire the there. system a this really here, want a you this about long working bit the is the add been center. in margins server good very system customers. cooling of working a not something space this very time. within but at steal strong very look building the or a data center. our more for with and I'll we've really strong servers are We like data themselves, the good Chris's that in this service provides. Chris, we we're do tail attractive that the the component about with at supplier and level whether to So this at thunder anything? more and in cooling we're vertical vertical, you're in

Christopher Kuehn

go, to Dave. going was I where That's

centers, you're the for about these systems most part. again, applied data customized talking generally I think, highly are when

'XX a pricing generating Dave's the revenue in the nice locations, have so are us. products And is think we've applied customers and that's we're a while front also life. still the we here. that you're sure point, a make for to customers for to ending not revenues, and want are from got 'XX. opportunity in multiple front putting innovation, we only to bit multiple as still sure systems These with making solution in equipment, data in deploy of and years centers, for but a as that factor with more of services this all be see X in from into now, of opportunity today's would we to that us to services about centers. And an to front a suggest the opportunity That's of that X order space, of us projections year, a data years, well multiyear that order, of be in of still X the growth but in growth XXx dollar is we're typical what with going And market that, starting can

Joseph Ritchie

Got And helpful, better guys. of quick public was far. your reported That's so peers HVAC what some it. quarter just much growth other then follow-up. this Resi my have than

any of Dave, public you -- that wondering, or So quarter, just nonpublic was in I'm good. share. took I you was you And noticed why it there disruption the was of any referenced maybe like looks quarter? your with this some I know, the but the comps grew surprisingly like you just some reasons growth

David Regnery

well. Look, mean team Yes. a Joe, a residential period very I've for look executed than over the been to share just I quarter. longer in saying you got at long time, a the

optimistic look long one the we've over on other I cautiously well. me I Tell the happy on very quarter. any quarter, that didn't do look that but here. comment So you've a Look it the our answer done you But am better our over been a very what know don't pleased results did am models, the at the in with long and Don't just get to look, if wrong you there's demonstrate. results. But term. at at able I competitors sell-in different with share particular just I do we're term? that can't So of was there you quarter?

Operator

next comes JPMorgan. of Tusa question with Steve line Our from the

C. Stephen Tusa

of guys kind you Are bored results? these up of putting getting yet

David Regnery

Steve, of up about, the flywheel results. Chris great never bored putting talks get right? It's that I

C. Stephen Tusa

we Congrats applied breakdown difference on what the then in of equipment half and get And Could X? great the quarter? a you're in between very results. those unitary the strong just and for execution expecting second

Christopher Kuehn

that. performance Equipment with up Yes, by I'd and XX%, and was Steve, unitary, maybe I'll of over quarter strong. than businesses up Commercial to up in much. both the unitary say bit not but We both talked Happy about applied, applied in revenues start. contributing a HVAC those stronger with both XX%

of of to HVAC with Americas. by call performance from, year I'll have this about great XX% year it, terms that's tougher is the Commercial in mid-XXs last to in the XX% quarter beyond, spoke the growth all half. our service that's even HVAC. great with in have fourth last about already that Commercially revenue of year, don't all -- half that equipment. team described XXXX Dave that, and start more quarter I of up XX% of for last Think excited in earlier, We in second about, billion mid-teens first year we a and backlog, Second comps think to in we're year. the HVAC, Commercial of That is backlog going and have that all year, of the the $X.X the

and for into to going us So a this the question. strong next confidence kind to really a it's Hopeful going answers lot year, year. growth that it's follow-on of be given of

C. Stephen Tusa

applied tougher but the the stuff really any is data the obviously, bit half? maybe should the And -- stuff, diverge like, second these to think what seems business -- Is will grow they slows mean business the given a bit will in we it about diverge comps. center and backlog-related I the short-cycle strongly applied? that with unitarian how continuing a more

Christopher Kuehn

as don't I going second in bit. the each was the contributor going to they're mid-teens, the the up second mean, half a Enterprise wouldn't the say second that to up nice we well. to I the divergence second a quarter to half. be teens. be the in is if think big be being with other a business in We're they'll there's more in know saw to tracking, in going here I maybe [indiscernible] a for strong quarter, up somewhat second But Services diverge well. high as half. was bit I Americas be second half as unitary to close

David Regnery

I Chris. would agree,

it's not Steve, quarter than growing applied. we're results, way we verticals could our that both satisfied that applied we and that large we're base But again, right, were systems. because are so unitary that broad see different -- despite demonstrate think to I in actually I this you in the very we than have unitary, different in applied of types look with said, And products. at continue broad-based that you fact -- think backlogs as the talk about selling the we were that that, we when stronger Chris growth, and really business second unitary,

C. Stephen Tusa

lumpy, seems last growth the more One you key growth. mean, just to it's of a just Is What on rate pretty break that's nice just repair I that. a would you anything business. not services strong and higher the growth, these question obviously, way driver just what but guys. you seems rates of here? These usually credit steady seemingly than it run recurring for rates, types be consider standing more very services, like than they're stable. think stuff is there being of they're like solid but like growth Because It out? services to of types services

David Regnery

Steve, question, great growth a noticing rates you It's high I there. appreciate our and

And makes remind Just operating back everyone, high we rate business second our annual compound service quarter, system digits. I'll the things mid-teens, our In just of X a years we've right? go last to growth system, It's were had a over right? great. that of to the single up

it's also energy there's way business our about different growth growing performing your to and of you think a installed and/or because start For we or is not heating applied service around cooling base. But tell our potential it's that a keep when built an way. mindset you not is helps when have is sure, of you properly thinking that would base applied much really installed asset lot using when too that I it, it the

Operator

next line of Our the with Sprague question from Jeff Vertical Partners. Research comes

Jeffrey Sprague

a back up look your data picture, your talking maybe are A B too, bit of and You kind there's are the the standardizing maybe to question. or centers, outgrowing stuff come to little around are my competitive carrier strong kind behavior gold mixed and to of go at kind customer in Just peers want I a on in a particular, like based very but on seems is, them, looking question kind just and customers bigger to end time? of also at does in hyperscalers OEMs? and fleets Obviously, probably nature this up. of deliver hyperscaler you rush can hard we like it general to sense of It point growth. you're it's about tell. But almost what expand in as this people dominating it us of hyperscaler give plenty

is behavior and Just landscape customer how the unfolding? competitive

David Regnery

the the Yes. envelope like system. of hyperscales, to I'd first they of increase and and they say trying all, technology pushing always efficiency the like

that be tomorrow. and our things have that may on we system us with of a efficient have competitors there they really And is working working a to as lot sure always we well make with them. working cool they're can So a with we're more

which the that, And things is some outside of they at that some it the past. Look, are I've a in the recovery as like heat talked includes of resiliency customers, well. maybe about of hyperscale bit little day, end these things, side which of the

we've seen pick then just innovative you that they'll and behalf. typically they'll on their a secondary. really, really, they And a would behavior like And really So pick before. prime prudent tell that's But technologies. I

Jeffrey Sprague

way really trajectory other megawatt -- revenue and capacity the served kind looking that? kind to available as think deployed the game is be for of to you here, kind of you market Dave, metric, could us about a at? just need help you of there try dollars plan some per might Anyway And frame your or you

David Regnery

it's have share of something are, working mean you that what kind would forecast units that we're into marketplace. back pushing think with We getting okay, bigger, of like look, think pushing demands That's their the heat getting would based into units kind of us? some I certainly talking be trend to of it our that think the certainly of units more us internal we're then understanding results. won't and I a that's for models tell what on able with But customers to and on added that features and complex allowed you to help seeing, our recovery. that customers,

Operator

from comes the Nigel Coe line Our of next Research. with question Wolfe

Nigel Coe

Great quarter, everything good. Look, is really obviously.

So right aren't great to couple of a on so I'm going focus of now. that areas --

et Americas of TK how in And performing spare declines bus, just does year the down NAFTA, the top trailer and Dave, that, verticals So XX% in parts? maybe perform? are other on cetera, at rail, this of in world how

David Regnery

customers career, is in come it's have say, I [ a past. back come come would my that in on back innovation I a markets of into to ], could your back. it's XXXX I when they'll that Americas guide. tuned strong had down tell ]. the projected mean our to We'll downturns would through going you I've you're in you continue To now, projecting cycle. baked ACT And what going more is a more these that's tell will it's the half to in these stay that. But right strong. in back, even to a And our be the XXXX very we back win these And this whole really what Look, is to the our opportunity to you in full that transport business down do to business. that's now. Commercial the business plan little markets be business. the And And to early portfolio than of that models is business. And the Nigel, allows bit down cycle. internal this XX%. right key come is able I invest question. cyclical be fair when that, And back, delight business this our they're down year And with Yes. be year that. seen you're run the [ markets than when come HVAC you Look, fair, when

the been in investing making. we've not big and back, And to to excited a the the the that, going be of King business. business. TK markets ready. going is that's stopping when innovation about that those we're out come come As And said, pipeline in Chris Thermo we're part investments I'm We're heavily

other big trailer. a follow and -- that to but tend I mean, to cycle. the as they trailers same the mean far -- tend As they're follow one, not I businesses, they they start capacity so. to get we'll I And we know freight if to channel, see the rates improve, the coming of get market start to to will, start out We rebound.

Nigel Coe

Okay. That's certainly will absolutely.

reasonable the down to back teens would high for half of Americas year? mid- be like for So the TK

Christopher Kuehn

sure balance And got the Yes, be make low years. business the the I in be far, think business. this sure making the mean, as range high do outperform. Chris. of markets decrementals down to manage year to run in for to probably of to expect many, the year. while going the down continues we down And that the key had to many the are year pipeline is and here for so investments that it single in it's we have second and a is is and down we're could trailer of I to that we've expect it year, doubles the the digits to we again, innovation if mid-teens, investment this that's that mean half the in Nigel, mid-single we've double they expect I the on we

Just do mean several recover, the what last markets when than I we're ready. Could know the had multiple so for these of thinking To down and capacity be want fair, has make revisions now. and the right be like but I it we're that market ECT mid-teens? still we that we in more over each businesses we Commercial to our Dave's plans our HVAC, business about June, investing that's called we months. only this one all markets long-range not our of point, sure in units, finished to is here

this it's X X think I already. year or

down little would bit models it's that. a suggest maybe than more internal Our

So sure guide our at this bake making we're point. we into that

expect expect we comps prior, down be but it on do we year the from a market. the outperform to of to down half Second year,

Nigel Coe

a question, there. answer, it. so a leave had I great Got I'll Okay. it that follow-up but was

Operator

comes RBC. of Our next Deane line question Dray from the with

Deane Dray

want to on unitary. back just I circle

really the change into don't would you be Just talked economic the that share. returns? any any your making emergency dynamics of quarter here? about from One said market. this have How unitary competitors any competitive a they push comments they might helpful. where And into of replacement

David Regnery

they're we're on a not tell strong you to planning one That's unitary. what I'm me that sure answer. for would very in tough doing. I

very, the summer. hand and yes, stops it goes, be work far available having to the is thinking lean we And as with the of programs, important. our replacement stock, and we very replaced, -- if unit ship win space. of That's allows in market the us manufacturing As also have this and which quick really lot unit carry the in a on heat and to needs inventory

Deane Dray

business is that half today? is Or of fair basically emergency say market that it Is to the replacement overstated? the

David Regnery

would that, be on it depend -- comment the can't okay. think year, really would time it I I of -- and it would on

planned a well. replacement as have also You market

just things a of that are there's made. that part So statement of lot you that

really depends. it So

Deane Dray

all helpful. seeing bidding any right. updates Are I mega the any you That's understand. helpful. of on then All Any would through? And question, projects? be second updates coming

David Regnery

to continue I've track to we in mega the always that tend projects. in be were And we mean I said projects as mega verticals past, strong in. Yes.

space. and So them pipeline. still right that of our been have it's teams it hard but many But to say the of what's incremental in are XXX now, over are closed, tracking in projects, some

but allows the information our the that all customer are is, all customer could the force with of also really part process. Austin, sales required. The especially help that about in these advantages mega is needs, space. decision really that's a was to any mechanic give projects project things Asia. I was an have in had decision-maker semiconductor engineer in tend you we that triage different Texas. the focused We the direct I'll they Seattle, on And the makers, of mean, it the One to Washington one that different the individuals us of of of and example. be have was the And lots we

of like actually So well. And we are products, really sophisticated projects very lot engineered our mega these which a positioning our as to projects. mega strength with plays these

Operator

Oppenheimer. comes Our from Noah the line Kaye of final with question

Noah Kaye

I'll around here. David, goes to back just underappreciated as an lever one demand it opening ask comments your question. And management side

just to dots your on becoming flexible Commercial capacity additional and could heating. I on a how power wallet bit district of largest and you in of help these revenue your How trends. and maybe expand assets much can do the the You're one business. quantify to some hoping HVAC grid the virtual us of they is terms frame ability in share? up play of the and you connect this sitting management of more us for distributed some facets us you're meaningful for expanding plants bookings resource Anything the was

David Regnery

Yes. I the appreciate Noah. question,

we still an York early and innings. and sound they in were early know we're working connected more may we're customer their it And but we customer, education the energy if a were not New City. It's were saved lot, think wasted in I large digital process. the the a this. energy a customer, was in I their it have right, to We on that like about would created connected $XXX,XXX, we twin building. particular innings with watching And I for that in solution. we we like mean, consumption particular weren't a

opportunity it's mean, feet, okay, the about think space So I about -- the the square crazy exists. and commercial you XXX universe, you at think if that billion

right? is opportunity. more don't about algorithms and for to planet customers So new readily the look, well. as technology technology this from able which a you carbon, now adding This connected for about massive to unstructured to a help our structured which going being which been our you're the AI And for management, tools, data dial side saving standpoint, developed, lot a be to is it. available Demand thing that's we've wait with energy, data neat really a we're good is in while, save hear is it in a but really is to we're have

Operator

closing now Nagle back call will for Zach turn the remarks. I to over

Zac Nagle

thank I'd everyone to joining on like today's for call.

may around be always, As have. that questions you we'll any for

and So to conference well. be circuit, some coming see the feel on obviously, you to we'll the in conference we up of the and hope us months, as free circuit then ring on

thanks great So have for a and joining, day.

Operator

call. concludes you joining. that Ladies for today's and Thank all gentlemen,

You disconnect. may now

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