Trane Technologies : Presentation PDF 3.97 MB

Second-Quarter 2021 Results

August 4, 2021

Safe Harbor

This presentation includes "forward-looking statements" which are statements that are not historical facts, including statements that relate to our future performance, statements relating to the continued impact of the COVID-19 global pandemic, capital deployment including the amount and timing of our dividends, our share repurchase program including the amount of shares to be repurchased and the timing of such repurchases and our capital allocation strategy including acquisitions (if any); our projected free cash flow and usage of such cash; our available liquidity; performance of the markets in which we operate; restructuring activity and cost savings associated with such activity; our projected financial performance and targets including assumptions regarding our effective tax rate.

These forward-looking statements are based on our current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from our current expectations. Such factors include, but are not limited to, the impact of the global COVID-19 pandemic on our business, our suppliers and our customers, global economic conditions taking into account the global COVID-19 pandemic, disruption and volatility in the financial markets due to the COVID-19 pandemic, improvement in market conditions (if any) with global vaccine administration, the outcome of any litigation, the outcome of the Chapter 11 proceedings for our deconsolidated subsidiaries Aldrich Pump LLC and Murray Boiler LLC, demand for our products and services, and tax audits and tax law changes and interpretations. Additional factors that could cause such differences can be found in our Form 10-K for the year ended December 31, 2020, as well as our subsequent reports on Form 10-Q and other SEC filings. We assume no obligation to update these forward-looking statements.

This presentation also includes non-GAAP financial information which should be considered supplemental to, not a substitute for, or superior to, the financial measure calculated in accordance with GAAP. The definitions of our non-GAAP financial information are included as an appendix in our presentation and reconciliations can be found in our earnings releases for the relevant periods located on our website at www.tranetechnologies.com. Unless otherwise indicated, all data beyond the second quarter of 2021 are estimates.

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C L E A R P R I O R I T I E S

Focused Strategy Delivers Differentiated Shareholder Returns

1	2	3	4
	Win		Grow Margins			Maximize		Continue
	Through		and Cash Via			Value As		With
	Sustainable		Execution			Focused		Dynamic Capital
	Innovation		Excellence			Climate Co.		Allocation

		Strong Foundation
Strong operating system and		Powerful cash flow		Uplifting culture - integrity, ingenuity,
performance culture			community & engagement

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Q 2 2 0 2 1 U P D A T E

Strong Bookings, Revenue, Margin Expansion, EPS Growth & Free Cash Flow in Q2; Expect Cont'd Strong 2H

• EBITDA margin expansion of 180 bps on ~30% organic leverage; 51% Adj. EPS growth and strong FCF
• Strong bookings and revenue growth across the enterprise with a book-to-bill ratio of 114%
• • Organic bookings and revenues up 30% and 18%, respectively. Particular strength in the Americas and Europe
• Very strong backlog exiting Q2 supporting improved visibility into 2021, early visibility into 2022, and confidence in health of underlying end-market conditions and continued TT innovation-driven market outgrowth
• • Record enterprise backlog, up more than 50% vs year-end 2020 and up more than 50% vs any quarter in 2019, pre-pandemic
• Utilizing our lean business operating system to meet strong customer demand in increasingly challenging operating environment
• • Continued escalation in velocity / steep slope of material inflation; Delivering unprecedented pricing to offset inflation at zero margin, net impact = lower operating leverage in near-term. Historically a tailwind over long-term.
  • Managing increasingly strained supply chains, logistics systems which are driving higher costs and inefficiencies
• Transformation self-help savings helping to mitigate challenging operating environment
• • On track for ~$90M incremental savings in 2021 after delivering stranded / fixed cost take-out of $100M in 2020; $300M by 2023
• Modestly raising 2021 revenue guidance - continue to execute to top quartile EPS growth
• • Primarily reflects higher organic growth from add'l pricing; ~$150M add'l pricing to offset ~$150M add'l material inflation
• Powerful FCF, financial position, liquidity and balance sheet optionality support balanced capital allocation strategy
• • Deployed ~$1.3B YTD; expect to deploy ~$2.5B+ FY 2021
• Purpose-drivensustainability strategy remains focused on long-term secular tailwinds towards sustainability megatrends
• • Leader in addressing sustainability challenges, delivering top-tier financial performance & differentiated shareholder returns
  • • Includes certain Non-GAAP financial measures. See the company's Q2 2021 earnings release for additional details and reconciliations.

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Q 2 2 0 2 1 O R G A N I C B O O K I N G S A N D R E V E N U E S

Robust Bookings w/ Growth in All Businesses; Strong Revenue Outgrowth in Largely Improving End Markets

Q2 Organic* Y-O-Y Change

		Bookings	Revenue
Enterprise		+ 30%	+ 18%
Americas		+ 29%	+ 19%
Commercial HVAC		+	+
Residential HVAC		+	+
Transport		+	+
EMEA		+ 53%	+ 28%
Commercial HVAC		+	+
Transport		+	+
Asia Pacific		+ 12%	+ 2%
Commercial HVAC	+	+
Transport		+	+

Americas

• CHVAC bookings up mid-twenties and revs up low-teens; Svcs revs up mid-teens; IAQ demand remains healthy
• Res HVAC bookings up high-thirties on cont'd strong end- market demand; Independent distributor sell-through up high- twenties; Record backlog entering 2H
• Transport bookings up LSD - reflects pause in ordering as industry production capacity limits 2021 revs and focus largely shifts to 2022; revs up 30+%, outpacing strong transport markets (ACT Q2 trailer build up high-twenties)

EMEA

• CHVAC bookings and revenues up substantially w/ double digit growth in both equipment and services
• Transport bookings and revenues up substantially

Asia Pacific

• CHVAC bookings up low-teens; Revs up LSD
• Transport bookings up MSD and revs up LSD
• COVID-19pandemic remains challenge in the region overall

*Organic bookings and organic revenues exclude acquisitions and currency

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