Trane Technologies (TT) 30 Oct 242024 Q3 Earnings call transcript

Company Profile

Participants

Zac Nagle	executive
David Regnery	executive
Christopher Kuehn	executive
Scott Davis	analyst
Christopher Snyder	analyst
Julian Mitchell	analyst
Andrew Kaplowitz	analyst
Joseph Ritchie	analyst
Nigel Coe	analyst
Andrew Obin	analyst
Thomas Moll	analyst
Noah Kaye	analyst

Call transcript

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Operator

Good morning. Welcome to the Trane Technologies Q3 2024 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 Zac Nagle, Vice President of Investor Relations.

Zac Nagle

operator. Thanks, thank Earnings us Conference and Third 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

our Statements made pursuant today's recording this and are We historical are in go and considered are X. call forward-looking call also statements on Slide to website. not archiving facts that Please made are that some SEC provisions cause factors the securities our a federal results harbor actual results. differ may see of from filings safe of description to of to Please law. for anticipated the our materially

also measures, includes This explained presentation release. attached non-GAAP in tables the financial news are our to which

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

David Regnery

and Climate is everyone few with begin to communities enables our results today's like people affecting call. differentiated purpose-driven which around joining faster a I'd #X. and the for strategy, change Please world. financial Slide occurring time. Thanks, much turn than to anticipated, minutes our on Zach, over

Carolina, Through saw emissions a warming. in where global and North comes to and just is we As urgent limit few weeks reduce Technologies Trane That's our transformative action here in. ago, needed it's reduce massive innovation, approximately in wasted, a When opportunity. the XX% after energy we typical of our a are you helping customers is meter building, emissions. and consider that the energy

leading green build differentiated sustainable the are the ], our we execution and our a for deliver uplifting and consistent for and for financial long for [ future. to line. good and grain positioned profile over the With innovation, more And term a relentless customers, it's results good planet, bottom growth culture,

performance growth We industrials. extending to delivered third EPS of record in turn quarter, Please among leading revenue and #X. the Slide track our strong

the put $X.X team were basis revenue in history, perspective, the in XX%. strong organic XX% at second quarter were and margin X% about delivered in To XXX bookings Enterprise XX% only growth, year. very growth QX and points into of global EPS highest this organic quarter billion, quarter up EBITDA stack. expansion highest or adjusted this X-year adjusted of Our of X% bookings up bookings our million company's the below on a $XXX

Americas Organic QX were company's remain $XXX digits history, highest in only Commercial X-year very the HVAC bookings the bookings a and QX second were absolute stack. quarter highest low also mid-teens this of bookings up on strong. million Net in XXXX. quarter up in bookings below single

years, the Given timing, the tremendous X and growth order to somewhat variation be comps past will in likely we've the continue seen over lumpy.

While absolute up strong expect to $X.X $X.X to expected are billion, very exit highly backlog from remain strong, elevated remains XXXX, year-end and at at bookings with billion backlog. we very XXXX also

and inclusive of each in stack XX% to Robust quarters Americas to stack, to performance backlog, revenues quarter services. the exceptionally well. our been fourth equipment revenue absolute XX% on the investors to strong HVAC both XXXX of for as X Revenues has of a business, encourage picture clear bookings, order continues with Commercial be where by growth at rates growth look gain We along our strength. are X-year a a expect up consistent. and up and plus we on of And X-year be first revenue led

and organic over up over point, Americas strengths increasing direct record well complexity sales project service. are as in Case bookings in We and for revenue both Applied Solutions market particularly and strong to past are building X years. XXX% track the innovation a outperformance, in unique plays our of the our

of equipment. services the higher-margin installed life to Our rapidly, estimated an the over base of adding X is multiple expanding revenue XX

pace of XX% for has delivering year of plus. XXXX, our full up XXXX the while in beyond. position half long-term Our investments, leverage incremental enabled above investments strong the to and second our framework performance XXXX us further throughout We've of accelerate strengthening stepped

our in revenue are performance in we positive detail full year outlook, the our organic guidance update more and and strong Chris later adjusted our presentation. Given raising will EPS cover guidance.

services Slide has revenues delivered HVAC very In to strength revenues #X. teens. strong on with bookings strong, up the and quarter, results delivered year, high Revenue very the with nearly Americas our markets. mid-teens, segment, and I've prior respectively. the go XX% in slide, throughout the bookings Please XX% team up and vertical equipment low commercial up and across residential, with In as up broad-based highlighted nearly exceptional was XXs

up XXs. strong, our performed innovation, expected. EMEA, up single and high continues were a teens. was high as mid-single HVAC by with digits, down low in were commercial stack. our Turning Revenue Bookings consistent driven for with In up strength quarter bookings high up the also to to business digits Revenues demand on X-year teens The be strong, transport. guide.

Our our transport and flat. business with in performed line mid-teens bookings revenues expectations, up with

China between China a rest rest Slide of the revenues digits respectively. on mixed were Asia. Asia, had and Starting with Results low bookings solid, of quarter, discuss X. up which I'll up detail were Asia. the more digits, to mid-single and challenging single Turning and in

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

Christopher Kuehn

the was were This Thanks, continued margin strong points bottom. adjusted and provides to basis up performance adjusted XXX top EPS to up turn up revenues XX%, third Organic EBITDA #X. Dave. a quarter and XX%. snapshot Please of execution was Slide slide in our highlights

level, equipment and up At low in both an organic and growth double we enterprise revenue digits strong services, respectively. teens, delivered

the that Slide reinvestment. pay more robust delivered realization offset than positive turn continues driving productivity and investments continued #X. high-performance growth. with dividends levels price strong high innovation, and At Our with top inflation, in growth strong expansion we incrementals, business margin volume to line level, growth, Please relentless EPS enterprise of flywheel to and

operating about Adjusted margin price business. offsetting points growth, by levels points In XXX residential of expansion was growth reinvestment. our more businesses commercial of realization, productivity and and our of Americas points in HVAC by and muted segment, than high X driven our Strong partially business inflation we delivered of volume price. XX basis in volume volume and performance offset transport was

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

gross deleverage The team margin within was able rates. to

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

David Regnery

turn Please Chris. to #X. Thanks, Slide

we end the Americas strength and more Commercial Pacific into HVAC bit lot a our a of talked Asia outlook largely unchanged Our commercial and muted. won't We've at closer of business so about I is HVAC the move residential stronger as America's to with length, year detail. the go more

stacked with quarter with We expect continue to XX%, our strength quarter this each consistent revenue the approximately of in growth the year. performance fourth X-year

by on Our quarter, the slide. factors residential business highlighted the delivered stronger-than-expected driven the third growth in

a expect to modest ACT of outlook transport We to digits, XXXX, primarily expect full digits impacting We've to XXXX the up and XXXX XXXX. we continues high continue from down revenue Americas prebuy to outperform. markets in mid-single single growth QX be mid-teens, to of our up prior. XXXA business, transport forecast our year raised In

growth view. markets positioned weak the We've year. outperform. in half Americas trailer emerge in as Looking expectations reflected we And business. to our the Overall, this to to segment favorable, we changes the recover, expect guidance and well in our the to are raised outlook we transport a moderated for a investing our first their and second digits. This with been heavily ACT stronger has and largely includes low to that XXXX, single half, up agree

to Turning expected, performed there's EMEA. to The change business no outlook. as and our

overall revenue quarter, growth our the and Asia the China line with about we and continued Asia Asia. mix QX XX% our in expectations with in rest of expect of third represents rest XX% of X% as in in well. modest in about The performed

nonresidential in to as quarter, HVAC in Our below and China result. X First, deteriorated time a impacted revenues expectations the and since third related in June our negatively China commercial the factors: came bookings meaningfully the business were frame, markets primarily

policies the Despite revenue the team China, Second, to progress within our tighten in significant we down prudent decline and payments. maintained decision China, rates. primarily margin made to payments related gross credit deleverage in the

the we and market improvements customers a remain While in our as China changes. quarter dynamic teams policy and the will environment, navigate fourth sales expect some

an over the outperform that years, has many China I for leading ability in term. team's team and have results to delivered our long outstanding remain We confident in

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

Christopher Kuehn

Thanks, Dave. Slide to Please turn #X.

track for top to target year quartile performance to objectives. achieve on continue on we're full We believe revenue those EPS adjusted and and organic the growth

strong continued guidance to approximately performance, raising XX%. exceptional from our of guide positive and Given prior backlog, our we're XX% revenue our organic outlook

made small consecutive leverage in Between from which on we the to year $XX.XX year of growth performance We're earnings adjusted also of to year-to-date M&A to by basis third acquisitions our $XX.XX, versus deliver our adjusted negative points revenue to to we contribute or revenue quarter, raising fourth well XXX XX addition for to X that per points greater. per impact in full expect we approximately in of earnings XXXX, X We're strong the about result reported approximately organic positioned expect XX% year. prior. up share $X.XX share of our and the guidance

approximately guidance the same impact reported We organic also offsetting from expect XX%. X of negative a year Net point, moderate less M&A. at revenue FX for revenue the more impact the positive than effectively at and is

our from guidance year We XX% leverage prior plus. approximately up of XX%, expect organic full of

We flow conversion cash Absolute XXX% adjusted flow guidance. to continue cash expect to our adjusted higher, or higher earnings is of greater. expected free to reflecting free net be earnings

EPS XX modeling $X.XX. strong investments Please details Embedded incentive-based that expect organic be compensation, Page adjusted helpful #XX. may guidance For higher quarter, in for Please XXXX. performance growth step-up X% the we a go approximately Slide of reflecting in of additional and to see to related guidance and approximately for fourth this revenue purposes. our in is

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

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

Second, third, continued we're we expect to over our committed maintaining balance excess strong deploy to And as that evolve. sheet us with of time. cash provides markets XXX% consistently optionality a

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

Please in to $XXX million turn to to about share October, billion cash, approximately repurchases. Slide billion or $X through $XXX we've with Year-to-date to about $X committed deployed M&A and dividends, #XX. million

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

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

XXXX for deployment $X.X unchanged billion. outlook at Our cash approximately remains

us Our strong repurchase gives capital excellent optionality balance and free cash allocation sheet authorization flow, significant liquidity, moving share forward.

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

David Regnery

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

projects in to strong turn cycle Please business continue a to XXXX, this #XX. bright and our XXXX ACT market However, mid-teens this XXXX, down provide and a in And great the Slide through term. is a rebound trailer manage details additional will continued for modest growth convenience. with long with for we continued while in a XXXX we've business XXXX We slide and operate your in markets transport XXXX. future. to

these directionally with We're aligned projections.

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

to Turning Slide #XX.

on our fourth provide call. quarter to expect XXXX guidance earnings We

views and growing early our on it opportunities, year has provide of We into as bookings, growth. be visibility another to constructive of backlog thought XXXX given XXXX strong would increased. our steadily However, healthy pipeline

businesses Our are well. commercial HVAC executing

clear sales advantage, vertical direct service world-class markets pivot capture enabling us a to across teams quickly opportunities. competitive growth are Our and to

the the business in portfolio for and innovative and have broadest our industry, relentlessly We in we're reinvesting growth. most

square backlog the market look decarbonize strengths, our in opportunities, of cycle. multiyear, billions at and innings built Increasing opportunities unique of a we're seeing also bookings, of early we're projects. innings the across the of hundreds journey complexity environment. we our pipeline As We're and these strong project on of in in to early CapEx plays to feet this

which and Asia see and ahead for we macro year dynamic. specifically, Americas China, HVAC Net, is HVAC, is the commercial in the EMEA. more strong commercial than XX% more In another more in

However, offset portfolio, we with roughly of in China the challenging the expect region. than strength backdrop Americas at for and to more X% a our EMEA

believe We've and framework. period residential. and XXXX we a to plus to in through returning Turning XXXX, moved of normalization GDP we're a

first a quarter expect XXXX, we impact Pricing as in moderate differentials transition of move should as the revenues largely we prebuy also a to this XXXX. act While tailwind AXL the through in expect XXXX. amount of we from

the ACT revenues, a which the of enterprise. largely our Turning half to second modest is in our growth, tailwind be Americas about Transport XXXX will is of X% projecting That business, for modest XXXX.

healthy which operating about lead our business. X and single-digit to resilient and prime our pricing opportunities, past growth stay high system Services to revenues enterprise continue of services enterprise with is of our the inflationary Underpinning years. has ahead averaged innovation, pressures. is our growth business yields comprise X/X over We

We for digital large our strong demand we demand where services excited see growth XXXX. with focus to across increased Please business energy for on and services portfolio. opportunities seeing optimization All base our for In continued about commercial increased in performance decarbonization. in, side growth in expect again our Slide performance shines. go and in management, strong #XX. the we're with opportunities HVAC installed We're businesses our growing particular,

and members in returns of I in see record the record customers engagement our I'm our system survey, that we XXXX beyond. to in performance was to track our recently combined at our and proud firsthand well differentiated consistent days are the annual top compared believe ahead. results when and business I proven We and leading continues shareholder brightest to leading companies. our engagement the summary, positioned That with are engaging around of engagement us quartile external operating with apart. and world. a engage team employee level received deliver set team's experienced innovation culture, and

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

Operator

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

Scott Davis

specifically can just of, to with your next arms so you whether the around are a get to topical give I'm context my center trying numbers out it's perhaps, it's just that good. the data algorithm. you now. little just since I'm trying year. some us, important figure bit right Anything orders, materiality is for growth, how to guys can around for you help

David Regnery

now, Look, Scott. decades we've in question, okay. Scott, centers strong been for Good Sure. data

that strong early think that So had dedicated always vertical really kind a were been remain the which data centers, very just a we in very I strong continue for to this on in us And team has We has us. adopters allowed focused of center. data to vertical.

strong you you continue this be data been the you If mid-teens you're mean, of if to there, numbers for at Technologies for the very, be vertical going expect to foreseeable middle a time. that's as is there, and long projection the at And lot the vertical centers, growth Trane take to I there's data out center look projected, growing future. will going have should very the that in we a see

to that that what build, the lot on using working Chris, be I help So know they're we that the it's the important particular system. to at through when optionality centers, using entire don't that going We you at probably be level, systems the for. and data really to most components their We like okay? want you it customers for. within hear thinking they're system about about does system direct the a think add... of in based exists needs customers. You'll on a think for depend We like okay? data it if what data with going look complex they're center And center it different

Christopher Kuehn

aggregate Yes. is are verticals data those business, What growth a when rest would Americas bookings. commercial very our bookings, the I you in centers But in have year-to-date from remove of lot data add, up HVAC the of strong. Scott, centers to provided also

for our is been So one vertical, the direct release, have number broad-based almost we highlighted strength. sales verticals in centers of year, that we nearly as year-to-date strong showing a of of there's like us focus them force. this all our strong Data

Scott Davis

you'd that, to us, fine. do totally if understand size you wish I but want I And it it's don't helpful. That's for Okay.

been market to at have term? little Just stable base see projects and guys you perhaps, pretty China, a that and now where Is over services point I disappear XX% of a retrofit a can we more mature strong pretty installed to start the that can there. guys. been to enough understand this bit moving decades it, have couple big longer moving more down being It's quickly and there. pretty

more kind that you becoming that forward? something is see market So going of that a mature

David Regnery

you're here you business Yes. would Look, China, China, specifically I of the same we as it's service not it's in growing. a see have aware, that pre-reports mean lot the know I Americas the in a at I've in but level here. read

were Let our me just think be obviously that. very Look, specific. China, we the what's business and China, I by all we understand in in in markets happening impacted

it payments was for payments. that second we thought our down policies around prudent us is progress credit specifically to and very and The tighten

ship to us and example, accept will for give with order. and product progress a payment ship order don't provide to have us that, they customer. that's complete to customer if product the down the the that not payments, and customer a payment an ready we So we or a If proper wants give to the -- will we not customer doesn't down the

long look, to we make. term, the decision know right is this So

well China. have have performed market period continue for the a outperform I confidence long to a in time. we'll great We exceptionally And team there. It's of that XXX%

are make Thanks, in just it's to Scott. changes. region look, right going be that time. working at this to and See December. particular these particular teams in fourth And through Our this quarter for the decision the

Operator

Chris Stanley. from Our next comes from question Snyder Morgan

Christopher Snyder

is in you revenue. seems talk lot when margins. it is the that you the service the to lag QX. making a talk service Can be wanted like ask here about really between service the the you What business? the side. I equipment service which to it And about again of to little bit on on of then low maybe strong, when sell just teens a starts is could services, company generating continues up in mechanics Anything reinvestment

better revenue? position that to on company capture of So just more to are what the you spending

David Regnery

I'll of Chris and over our last start margin I'll digits. the answer the But X And of very, look, resilient, it's very questions. we It's annual compound growth business. love let single is X/X okay, Sure. high the rate it's service some company. years,

extended that side specifically That's extended it on starts, to continue as to as competitive that to, have product A say year vary of X, the around very, in year think particular it product. warranty, X we're depending the you've to systems applied lot will today way, warranty So as or applied Trane we varies. it's The than on obviously, to more cases. within products world. it's PM as And a a service starts why years by many when installed, these are timing would if invest up. we the much work very varies, have . Look, customers Technologies. And of But it what were going on the gets the I when far just so even ago. weapon is be noted, heavily under on it doing X, a X okay, And in sophisticated ramp it. they warranties.

a And and demanding designed. to are And performing make they're I OEMs Chris, sure on service future. the our customers you the these that, business lot they're way to in fundamental spoke about connected And systems that really do that the going always the to be the solutions service drive you in continue the we so tell would to I past. that's how

it making growth. you certainly the base asset is energy -- and was and could But solutions at consuming I that connected continue That's way always our that understand performing sure to important. that the drive is designed will is increasing. that think so level installed the the

cooling heating hundreds ventilating performing not meter say in the bit asset too is. you being if only not XX% using think the where wasted. that that's only And but conservative audits of it's done the have not that if it's after about opportunity and And isn't and it's if the properly, buildings, of we not know I'll be only not if we it's properly, much little energy energy. an that, not here a properly, into and energy is future, HVAC Today certainly if

going for an into connected are designed our was asset, that could to to the the it if future. you ensure and performing well be you a service to that's tailwind way continue business significant it's always However,

you So if I talk don't to Chris, know about want margins?

Christopher Kuehn

that said, I'll the base add the The years, well little Chris, we a bodes out, with as over ramp Services Dave years And that in margins of as build installed on the over bit X revenues. to I'd Yes. past applied think maturing. it, a X starts call XXX%, higher business, X services obviously growth about to the average.

that of for it's second year. a but reason so into years, So investments the example of few And we like over even that half we've more well. the perfect where business last accelerated this as

team. talked capacity to digital to plant we're way and Dave that focus up about connected sales service, not to going as base. That's about service but support employees tools capacity. And adding think on verticals when technicians from about covering absolutely I'm support solutions. installed as then higher the factories you I'm we're it people. to investments in That's really one investments to think sales with our well. going service continuing on making and to and focus or adding customers where area inflect X the

tools, we're coming So going it. investments years. it's and be couple on name growth tools, a sales second such intake Dave over we're It's some these give strong accelerate of just to to of the of investing further relationship the keep speed tools, whether of of the us going collections, quarter, said business out support confidence you what it. part and even billing, But I order all it'd next in customer

David Regnery

I tell service of Yes. some point, associates. Chris, other best technicians always sales One our are our that that people

They customers. are in about improvements the building see think service relationship make our with customer with day, techs As and can trusted their own it, our customers that every opportunities facilities. often that adviser they're our you

business of a even do the of today being it But Trane part a and is strong think us. they Technologies So for stronger tomorrow. fantastic service job

Christopher Snyder

even, lag, to on over we've data that lot it the a about Really, we really certainly appreciate seen of center up service all X- in orders center think following X-year growth in would If the revenue just of and XX the that kind XX, is Maybe Can data I side because, on asked its everything. of that. guess, last imply service these are into obviously, efficiencies even customers there yet. very elsewhere. in different process it And data months [indiscernible] just found is more hasn't just elsewhere. about that talk are Energy maybe uptime center important you way I than service sophisticated, really specifically.

So any model color center would be the just how on service data differs helpful.

David Regnery

said the think I As tend systems sophisticated to the the product, to more deploy. I of be OEM it greater the most that of the as centers do earlier, the And appetite data for is service. sophisticated some the we

over So last have we're I remember, centers by for But the and time, beginning. very has strong data in in been the And that growth been centers this long around there since and fantastic years -- way, know strong vertical we've a been very the data the several data for service. the centers. in

servicing tremendous though growth, installed also So have in we data today. that a big we're even base seen we've we centers -- have

Operator

from Mitchell from comes question next Barclays. Our Julian

Julian Mitchell

Maybe I just wanted to start Slide XX. with

-- talk very us You useful some on year. next pointers give

in kind of XX% of terms year out calling now. how you sort guided us in like guess should strong second organic to of some be any next markets sort that I of you're kind get a mixed is think looks leverage operating around Any think give transport reason transition. thinking to? operating operating expect mix. anything you we more want I turn half. could when all as It within Just color of, we're from high say, leverage. in This rolling 'XX? tailwind, may that perhaps, Trying -- as to the year, about There together, at AXL not leverage for to resi about about the

Christopher Kuehn

free start. of quartile I'll for conversion going over or XXXX line last at that top average we so and targeting on business. this call in Chris. long-term We bit making had and fund in to We'll and it's thing top We the going the The bottom operating look really in as at do . one leverage excellent investments quarter, the that financial the I line. cash to a going we targeting think, look cash be line, provide really that strong earnings we've better far we're and our have top XXXX. XX% so We're be around XXXX ability would conversion. performance. is, like detail sure the algorithm Julian, to flow fourth well. XXX% more for into year, years conversion X the line bottom cash but

would we of We The services be about seen backlog remain us last a confidence a So that. HVAC growth high commercial over single-digit -- the that years of us expect just and to we've should around strong. visibility talked confidence lot lot gives the X continue. gives

low-single refrigerated be it's think modest digits, about not up could the a And of those We like year. some around nice being trailers of I we it into just Americas going investments next tailwind than probably first into headwind, Americas half. on Transport, a keep But in going XX% the tailwinds and next year, given think expectation second algorithm the coming. or greater we year the more half got leverage, the

Julian Mitchell

the maybe HVAC resi I my Maybe assumption this far. which U.S. And the in questions you understand, just help think don't us on has your business for been I think, slight question Dave, around year. that revenue just touched second market, increase so to mentioned then the behavior And despite it wondered all. you pretty decent could growth or color XXXX, again to of some confident distributors on revenue share I flesh if you're like prebuy. in out, just tied of that in sort the please, general. sounds at that that. gain by Was Any

David Regnery

CNBC I saw other you Yes, did the nice job Julian, day. of job. sure. all, a Well, on first fantastic

we refrigerant We a kind just go on then resi digits. inventory the year the and thinking That transition. channel, help. EPA said, see. a first that be or look, thought was let's in look, the plus we And the minus that around nice resi, of So the Look, going nice help. clarification was were to low quarter, single We back. end to so was at started of the that had normalized

very well. a it cooling warm a as certainly had summer and we hot then very drove I right? growth that think And So season, was

goes, As far have we're gains. sure we've -- saying share but heard gains, I'm as I've nice everyone yes, say nice they had

sure and has sort that out. that in where But that we confident happy I'm not So the that with been able to the that, make. will team share and we're space very have progress we're

right able of team our And manufacturing at paying really not level executing be some a to more high been what are is to. execute residential really made in proud our investments that dividends. there could We've Look, in I has that team now.

we're very seeing happy So residential. we're in with what

As XXXX believe saying goes, that business back that is plus working a to our that's we're far as think long time framework we'll I a been I've look, for And the get in that through XXXX. business. GDP resi I that

look, prebuy, is we through to be significant there's future. get the something, right that the going on a to continue since will think it and into prebuy January. as operating saying fourth There don't I business quarter. be look, cylinders expect we But we'll that resi The clarify now, all

Operator

from comes Andy from question Kaplowitz Citi. next Our

Andrew Kaplowitz

verticals. Dave, already bit. look, know mentioned talked you little your data you in But interestingly, about a I other centers presentation,

we're seeing HVAC what mentioned given also as tail Maybe on K-XX, what education-related XXXX? for You've mean health you're there. but end office. you then at mentioned that you you're the before education, elaborate spending can in care, for could spend And

David Regnery

page. of first noticing thanks all, office on for Look, the

a still sound in through how And high. and you right? very particular doing because also standpoint. their office a kind in helping really visit our Class a really got it And you Having the to get is we're sales see navigate us that from up there back could Actually, in space. in opportunity this job expertise A into domain York, customers deep is in I a force have as had it well, a New happening of good buildings. office. think order And city and if you what's although about they with year-to-date talked it, counterintuitive to And about rate click you tenants know office to But vacancy say, critical, direct long firsthand, had right? we're rates you go quite time. lower, an quarter strong we are you haven't We may sit

what navigate help customer and, the the tenants that right how so what space. could we their can decisions they sticks are, get are make carrots more back importantly, We so into to that know the the

force. opportunities speak our speak growing. that's I about It's can't they to I centers enough direct enough just pivot it's where the how. sales about about data just So how can't not and -- are

commercial really or and by track do For verticals. a order team it's XX verticals, doing the speak of were our about HVAC, them was was looking was and we almost from I rates, study, of a us, year-to-date study one the from all positive XX different I those. and had I office I'll of lot,

and our we So strength you where the of navigate that have ability are. opportunities the to to it the shows just broad-based teams really

could there. office I be and on with not level high to So seeing continues happier a the the execute team page, at

Andrew Kaplowitz

Great. me you just about context And China ask the let in of.

decremental obviously there. somewhat margins had You high

you've again, made. a choices you've time. Do China been in long the Some -- of you that is for

is You was did and can of more once about Do just higher should how way, moved a Or this really if that think we cost either you that. business? cyclical? sales everything out more Or see it offset to that to you take structural And issue? as decrementals? it good is direct you

David Regnery

the of gross within Yes. a They team I even performed down. mean, well were well, revenues though the margins standpoint. were first deleverage on all, quite

So through that good we're see. this China. Look, going in was to work to just

been for and payments people in I see we've decision. will think we decision Long business, be a the great and the And time. a will our progress around in policy, specifically have and payments. right credit there, change down that We've term, this made future. China team We a a great to overperforming have long

at working a through now, here executed our for world But I are time right great outperforming But level, change. team to high through work the of to back we're that's the it. going the all future. this right and teams now, that they'll future. get that in I the more in a in have a But long confidence expect there

Operator

Ritchie Joe from comes question next Goldman Our from Sachs.

Joseph Ritchie

talk office. the activity, that's been humming there's the commercial how some bit you kind about business centers. of of data just coming along. mega know We about through, about talked maybe it's I plants, project talked We on some delays plants. a Clearly, Can little whether HVAC semiconductor is EV

would be Just helpful. around any commentary that

David Regnery

delayed, don't dynamic, are that getting up. look, others we've projects favorite always are in, maybe and my project right? are that very really imagine, projects But bit like. pulled Mega term, strong few it's a verticals have I could Yes, happening Yes. is we mega a in that talked been as you little about you've

especially have a battery on We EV of have canceled. them, been the side, actually, couple some,

ones we But in. are that new coming also have

in a But So project lot but Again, mega we've to strong these on decisions in. it's continue dynamic, basis. global verticals been win the right? always space, made of are we a

world. know have very So sales I in could triage we'll parts decision be those in Again, important. decision very makers anticipate, direct help as makers different successful, a is and the successful you been well. extremely that we've force of that live and the I future And

Joseph Ritchie

the helpful. system residential I That's a business the the prebuy pretty year side this a ] half next will be of go in market the business, just think the of of to seeing how kind look, back manufacture of your your curious about to like and product growth that XXXA next thoughts? the this versus do XX% is through as And kind on how much I'm few think their yet the be in year, it. is of their product the talking one of business hitting you is of R-XXB Got of of much not significant next know year. Any saying of are the it saying going talking year year. going R-XXB about the you business resi you're their since that competitors about industry With is other resi [ XX% kind and you'll one

David Regnery

you to inventory inventory channel, about about the think good if X a in months is mean use. I of average think probably Yes.

So at XX%. going to by be you're definition,

where half. it the it in be back linear, Now all will be probably won't

the of But XX%, wants some look, and have probably no You'll XXX by that refrigerant lot the higher, side. think obviously range through the be XX% well In commercial, in one be will sell in year. a commercial commercial, unitary will of to the percent And on went that the a resi. change take that throughout XX-plus way, that one also but range. in one we'll

Operator

Research. Next question comes Wolfe Nigel Coe from from

Nigel Coe

Look, to [indiscernible] now some I markets APAC long I for time. know for because you, I in and that took the we've back know China terrible guess China But is this. are surprise very so seen it so small

you've sense, That broke this string obviously, been makes but So -- mentioned you outperforming. the quarter.

you has through market. So it of kind if elective, that cycle deterioration enforcing how of the have that? much would procedures no There's you this more seems credit to -- XXXX. gauge guessing of correction And I'm genuine spring sort to in gauge stringent How this is into back versus here.

there. thoughts any Just

David Regnery

I of I will quarter -- first fourth third Nigel, mean, hit China all. than I just is think I of the our mean, be Look, kind you Yes. stronger the quarter. it. mean of revenue, X%

policy of So is our say is to related that. more portion downturn market probably we because that. always to the much maybe in don't revenue, at just short policy hard to change the little bit but our XX-XX, And how have change, term, least weighted I small know, it it's of through a a work it's it's versus important. it's

as are. to the customers have what our educate We expectations to

have our little into than will a see can third have work quarter, they through how good. said, fourth stronger, think, quarter. conversation, why baked the be as are I understand a really the we'll And direct we bit that direct guide. So that's teams Again, sales what it. our the we force We'll and can

Nigel Coe

Okay.

'XX ] the XXXX. pieces. follow-up was back it as a then $XXX as corporate, in Chris. low at maybe And Not great. guidance, running million asking ] On just now but some That's [ for million the XXXX, Okay. of moving [ $XXX

So sense And it looks in good for what corporate. down comes amort run any like would ] a [ then be on rate 'XX.

just think We in acquisition, roll November, year? should expect correct? [ got interest the up So to little very expense Trane think, small, to some but of then amort that go I finally, I off. Is next ] we coming interest. a bit refi up a And starting on

Christopher Kuehn

run for this year probably is little think, the driving we corporate, million $XXX mean where of I and I the Yes, a rate a good expense longer-term that think enterprise are company. of number. times investments some higher corporate where as have Nigel. we're like bit there

funded. a So of work those that we always are throughout decisions making that, as we'll year make getting pipeline is sure investments

few into be there's of new start. place done good in. yes, that to I you going . On that think from probably XXXX, now. M&A We'll look roll-off at have few We'd get million months [indiscernible] we've across together as a over update amortization, going to we're in to a amortization. that we on a -- little last a $XXX bit all So but the and years the the dial is train

out we say due So to days. if this a any comes then balance that we derisk proactively interest yes, in that had actually this $XXX side, I to year debt is that million come this took of we'll some on yes, few year. of through a refinance months, over guided here We interest give expense going earlier year. just you for couple the the more see there's input M&A the on some more of would next And

this on we held offering cash We've June. to the here. in It's interest that from bond year actually net a positive did net on

next down earned we have I down deploy probably And would So it XXXX. firepower in. lot is, well interest maybe we've more cash year, a of very on that is strong as interest far of is that into going we'll generated see. normal. for cash pay income generated bit The and dial go that we've this as have the maybe sheet, XXXX this bond XXXX. not But cash. It's balance But to a that year. maybe for we year, lot for of earlier balance in number But pay thing a that We'll what off pristine than we'll good sheet, is year. little is next say a ballpark leverage it

Operator

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

Unknown Analyst

but the question is smaller increased have particularly there China, receivables play any Deane This of government or [ out? Dray. how is on understanding write-downs actions business, any you doing reserves? it's Manocha part the are a taken for My China Sahil verticals Chinese And weakness And of might ] in in stimulus worse? on

Christopher Kuehn

Chris. start, Why this don't I is

We've any no. debt not material write-downs or is answer bad first seen The reserves.

I there in business is sure were these tightened quarter, with deploying working the of they the to think second of make the the key at really that China end second team our policies out quarter. coming credit

be waiting And to we'll the so in, deliver that got delivered. are And cash we've them. orders comes when

seeing and we're those have largely been, that. non-resi in smaller the no, at seen with last downturn. generally business. are a several the have a months, markets the of are not markets We a that the just here you may nonresi as HVAC And China this point, So commercial transport in play in markets seeing bit

outperforming for So some we've time. been

problem quality months customers, it driving problem point, X prior up have got to don't a a some on a orders, . little the also and cash. want you that's deal bit. X, But road, Dave's short-term sure with then booking down to ultimately term does wind making quality making revenue you or that We focused we've sure quality with create At receivables the a X, comments, up the -- with. catch we're We're here. you to we're long

Joseph Ritchie

investment Really helpful. provide one on an centers. And your stack? cooling liquid in then data more you Could liquid on update

David Regnery

Yes.

pick an still of far work really We as I kind that now. stack. you update there. extended period some partners through are with we're starting of now liquid up keep orders and not to activity -- right posted, them, with concerned. think as the to is we'll but for We're there's them working with an any time been We've But continue hurdles

Operator

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

Andrew Obin

did your you, was if for exposure you to right want have And as weakness I about because for the yes, bit belabor My this not of there. of I going China China more. China think little buildings. that office exposure. the performance And commercial prior was a was to understand to was these that because, better mostly sort point understanding industrial way I the thinking it. in was that's the just said, am fact nonresidential I explanation right

But was just it not I developments. did this the really we're commercial response We're mostly on playing industrial understand Your side. wrong? on

David Regnery

about think in -- HVAC, our applied okay, about it's about systems. business mostly XX% think China, commercial No,

So as customer there. if payment, in we've That's to China. the payment, the universal shipped, But what's even to down though to Look, wasn't a on downturn, spot happening okay, are markets held okay? down, Andrew, said provide progress or ready it, okay? pretty I be as you're going product earlier, the the the was

long get about that. was making. And before we off answer that until the it we're bad the it, is this progress Dean ship individual we in asking future. quarter anything falloff to have in going that And is But the in because to and debt. written don't term, of not acute And no, a we again, We're decision payment. saw the you the prudent intend

Andrew Obin

was China centers. commercial understand, nonindustrial is all but real data XX% that along business commercial answer your not estate. real I the It's No, facilities, not factories, mostly estate

get Just point. Is correct? that that to want

David Regnery

that's don't really the in commercial No, the we're false. No, real We reverse. place. play estate actually

these Okay, applied systems. are

industrial of semiconductor, them of think think So them applications.

Andrew Obin

No, exactly was understanding. that I my that's asking. was what Yes,

Okay.

Okay, fine.

estate market the weakness real it's that's getting you So industrial outside down. really It's weakness.

David Regnery

You it. got

Okay.

Andrew Obin

No, maybe a exactly and just There's pricing. AXL that's points. -- what been data lot of

is right, increase much. maybe not those think you they different to refrigerant Daikin, a I of that going use because prices as their

in it, What do do guys, guys digits, single missed around peers you pricing but are I if saying fall and you into think this I high your on sort AXL of XX% what I 'XX? apologize maybe.

Christopher Kuehn

products new the high et Yes, cetera. the more really single-digit is introduced of many There Andrew, with I associated pricing the for mean, refrigerant, reasons, range. the products the in being up cost refrigerant the sensors, for think

that high is be margin for to as us end we and here target single-digit up it pricing about think cost of But customers. for neutral Our think in range.

the visibility in we furnaces. all not to of know, little XXXB the that next guide outlined of be much sell subject Dave like residential we we'll XXXA. I know, year, how then will product dial on as previously better bit is you As versus the refrigerant a And percentages based new

for will for is tailwind kind what a be it you contribution through think year. next price of So we next but that we'll walk year,

Andrew Obin

really Terrific. this China. clarification And appreciate I in

Operator

Moll question from Stephens. next Tommy Our from comes

Thomas Moll

about We've talked a China. lot

sequentially on is Obviously, I learn? pretty little past? XXXX, large can the be commercial the X particularly was curious, deeper one Just a wanted glean. positive to go cycle are you've one HVAC. you is up a And a in So there, ordering terms layer we you've earlier by called of why composition for learn today, we back out can in anything is talked But maybe in what strong circle we there verticals just of next can from if the as amount. anything about look than may topics backlog strong I'm bit which we year there, the the which for customers what at

David Regnery

Yes.

verticals. And is order close very I this other an earlier, all about I actually for about that you think, is the I'll in before commercial our if have and in HVAC something order the talked becomes right? think up is strong, said as the talk they're that so about broad-based. Tommy, to I our rates, XX% haven't thing, It's systems. basically We Americas, It's CRM year. sophisticated pipeline, extremely

XXXX extremely but as we should we And So expecting not be which the it worked confidence me business. strong, to is that the being for on. in into what's only quarter know what gives fourth

-- we it's million hard normal. as if to into it's what's our We'll But in look but So up historical we normal say I'm It's norms, over year-to-date. quarter our earnings. get look, very bullish backlog X.Xx that on at it's -- fourth now, dial is XXXX. what's $XXX a

with the right very, across now. strong We activity, year verticals strong is go very the next very market activity into a will backlog and all

Thomas Moll

got to my leads Which airtime Dave. a earlier. follow-up, Office little

XXXX we feels about rest we've Am has some you don't commercial the and centers, think the gotten I office correctly business trends like we ex hearing orders in covered, much. And commercial other progressed? about as the if these discuss that of data talk terms which just stronger that of so and of has as verticals it that actually

David Regnery

office Certainly, has.

growth, for portfolio except of year-over-year encouraging. But to a Our it comes kind as growth products which broad-based. on who broad-based, very positive back of right? had we Technologies, is our again, basis, and all Trane We verticals positive have of are services one, think right? is are I

on become I and it future. And not are We strong like have very it's know certainly And expertise centers we've the all that any one. in strong, be very in data verticals. over-indexed will

have on center. there a data the team works We great that

that work by We if expertise. make they're that way, great they that also can go going it and that have really pivot teams And the customer. have opportunity other the on after they verticals see win to opportunities, and with to sure and

very very this right strong. an we're is strong is and So Backlog seeing is we're extremely before now. activity, order bullish. strong,

Operator

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

Noah Kaye

question. look at point, this comments to cascading little know at But your I around fundamental will just talked are as those we've are policy the bit X And of decarbonization and seeing. actually going extent impacts we ESSER activity, impact bookings Dave, CHIPS policies of and give a of pipeline lot about the here the and it pipeline say, paybacks. around 'XX in to improved efficiency there a impacting to or a I from, the drivers what past, IRA. you're

level on set us of help they're having Just kind what business? impact actually the

David Regnery

I'm they tailwind. sure have a

again, backlog is time, I year way Certainly, know probably them there attractive, great funding funding. like some our those great you schools. paybacks certainly But to the it orders it work when part existing not like be have example that the ESSER all or paybacks a students -- has we want but Obviously, solutions make schools, we next more the have backlog. in We'll for great of the a of fulfilling where with -- whether of the without part to have our in sounds And remember, tailwind a school. it ESSER our or do lot been tend but tailwinds. have long tailwind that's through about Okay. do, of aren't to for is in a the

we'll season it well attractive of who the regardless like what the not, in we'll party next the be are, that but happens but Washington, see successful tailwinds to what are be summer. policies or optimistic we'll school with we're But paybacks into the continue future. have they So whether in look, the is will

Operator

over the We Nagle for turn would call are Zac for to of back closing remarks. questions. time out I like to

Zac Nagle

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

on the at As any always, time. forward We'll questions fourth many also quite on road. the in seeing and be a bit of to we'll you look available quarter, for be the road we

So have a great day. Thanks.

Operator

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

You disconnect. now may

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