Trane Technologies : First Quarter 2025 View Presentation

Published: 2025-04-30 08:53:15 ET TT

First-Quarter 2025 Results

April 30, 2025

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

Focused Strategy Delivers Differentiated Shareholder Returns

Dynamic Capital

Allocation

Continue

With

Focused

Climate Co.

Maximize

Value As

Grow Margins and Cash Via

Execution Excellence

Win Through

Sustainable Innovation

Strong business operating system and performance culture

Strong Foundation

Powerful cash flow

Uplifting culture - integrity, ingenuity, community & engagement

Q 1 2 0 2 5 U P D A T E

Strong, Broad-Based Execution Across the Portfolio. Exceptional Bookings, Particularly in

CHVAC. Q1 Book-to-Bi l of 113%, Backlog of $7.3B, up ~$500M vs Year-End 2024

Strong Q1 Performance:

Organic revenue* up 11%, adjusted EBITDA margins* up 130 basis points, and adjusted EPS* up 26%.

Book-to-bill ratio of 113%, with organic bookings* up 4%.

Ending backlog of $7.3B, up ~$500M or 8% from year-end 2024.

Exceptional Bookings and Backlog:

Led by CHVAC, especially strong in Americas.

Americas CHVAC: Record quarterly bookings, book-to-bill of 115%, backlog up ~$400M from year-end 2024

EMEA CHVAC: Book-to-bill of 130%; Asia CHVAC: Book-to-bill of 108%.

$1.5B in backlog for 2026 and beyond, enhancing future revenue visibility.

CHVAC and Services Business Durability:

Strong track record with a robust project pipeline.

Q1 Americas and EMEA CHVAC 3-year stack organic revenues up mid-50% and ~40%, respectively.

Durable services revenue stream (~1/3rd of enterprise revenues) growing at a low-teens CAGR since 2020

Operational Excellence:

Longstanding in region for region procurement and manufacturing strategy helps to mitigate external factors, such as tariffs

Sophisticated playbooks: navigate dynamic macroeconomic environments; data driven approach for surgical execution.

World class BOS: advanced mechanisms for pricing, supply chain management, operational efficiency to manage tariffs / inflation.

Proven track record: successfully mitigating inflationary pressures with robust strategies and proactive measures.

Strategic and Financial Positioning:

Purpose-driven strategy, best-in-class execution, and strong financial positioning to navigate uncertainty and outperform end markets.

Strong Q1 capital deployment; incremental share repurchases above dilution.

Robust financial position, liquidity, and balance sheet for resilience and optionality.

Guidance:

FY 2025 Guidance: Expect organic revenue and adjusted EPS towards the high end of guidance ranges (7%-8% organic revenues and $12.70−$12.90 adjusted EPS). (see p.16 for more detail)

*Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations

Q 1 2 0 2 5 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

Continued Strong Execution and Demand with Double-Digit Revenue Growth and Bookings of $5.3B, up 4%

Q1 Organic* Y-O-Y Change Bookings Revenue

Enterprise + 4% + 11%

*Organic bookings and organic revenues exclude acquisitions and currency

Americas

+ 5%

+ 13%

Commercial HVAC

Residential HVAC

Transport

All-time high CHVAC bookings: up LSD vs +~30% prior yr comp. Revs up mid-teens in equipment, low-teens in services. CHVAC book-to-bill of 115% & backlog up ~$400M vs Y/E 2024

Resi bookings up mid-teens. Revs up high-teens. Pre-buy impact not evident in Qtr

Transport bookings down LSD. Revs up MSD, significantly outperforming end markets (ACT: truck / trailer / APU down ~25% in Q1)

EMEA

+ 13%

+ 6%

Commercial HVAC

Transport

EMEA

CHVAC bookings up mid-teens. Revs up MSD, as expected (impacted by timing of customer shipments).

Transport bookings up HSD. Revs up MSD, outperforming end markets (market down ~MSD)

Asia Pacific

- 13%

- 3%

China

Rest of Asia

Asia Pacific

China bookings down low 30s, revs down high 20s, as expected vs tough PY comps for revs & bookings, both up ~20%

Cont'd strength in Rest of Asia w/ bookings up double-digits, revs up low 20s

Q1 2025 EN T ER PR ISE R ESU L T S

Performance Scoreboard: Robust Revenue Growth, Margin Expansion and EPS Growth

Net Revenue

Adj. EBITDA Margin*

Adj. Operating Margin*

Adj. Continuing EPS*

+11%

Organic*

+130

bps

+100

bps

+26%

$4,688

$4,216

Q1'24 Q1'25

18.1%

16.8%

Q1'24 Q1'25

16.2%

15.2%

Q1'24 Q1'25

$2.45

$1.94

Q1'24 Q1'25

Strong organic revenue growth in both equipment and services

Strong volume growth, positive price realization and productivity more than offset inflation and continued high levels of business reinvestment

Strong enterprise organic leverage* of ~28%

Strong execution of company's business operating system driving operational excellence throughout P&L

*Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations.

Q 1 2 0 2 5 S E G M E N T R E S U L T S

Highlights

Adj. OI*% vs PY

Adj.

EBITDA*%

vs PY

Revenue Org.* Growth

Double-Digit Revenue Growth and Strong Margin Expansion

Americas

$3,801

+13%

EMEA

$573

+6%

Asia Pacific

$314

-3%

19.8%

+170 bps

16.1%

-190 bps

22.5%

+90 bps

17.8%

+140 bps

14.5%

-280 bps

21.2%

+90 bps

Strong margin expansion in Americas and Asia

Strong volume growth, positive price realization and productivity more than offset inflation in Americas

• Strong margin expansion on price and volume growth

• Strong volume growth, positive price realization and productivity more than offset material and other inflation related to supply chain challenges and higher costs to serve customers including spot buys and expedited freight

• Continued business reinvestment supporting sustainability strategy

EMEA margins impacted by higher business reinvestment in shoulder season; confident in strong margin performance in 2025

Productivity offset lower volumes and inflation in Asia

High incremental business reinvestment in each segment supporting innovation, growth initiatives and organizational capabilities

* Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations.

M A R K E T U P D A T E

Market Outlook Largely Unchanged From Year-End. Continued Strength in Commercial HVAC Markets. Transport Market Rebound Expected in 2026.

Americas

Commercial HVAC

Exceptional Q1 performance combined with robust outlook. Broad-based strength across core verticals. Particular strength in services, data centers / education / healthcare

Book-to-bill of 115%, on low-teens revenue growth. 2 yr / 3 yr stack applied revs up nearly 90% and up >130%, respectively (avg > 40%/yr) w/ 8-10x service tail

World-class direct salesforce leveraging unique market / customer insights & leading innovation to optimize opportunities and drive market outgrowth

Targeting second consecutive year of CHVAC 3 yr stack revs up ~50% in 2025, w/ 2025 rev growth of ~HSD to ~10%

Residential HVAC

Strong Q1 w/ revs up high teens. Anticipated headwind from 2024 pre-buy not evident in Q1 results

2025 - continue to expect GDP+ market framework, w/ tailwinds from low GWP mix. Modestly elevated channel Inv. (~$75-$100M) a watch item moving forward

Transport

ACT revised 2025 trailer mkt fcst to ~30K+ units from ~36K+ units prior (down ~15% vs down ~LSD% prior)

TT internal models point to downside scenario of ~28K units (down ~mid-twenties) & company guide incorporates this scenario

Expect to outperform transport markets in 2025 and in 2Q'25, both expected to be down appx 20%

ACT forecasts >20% trailer growth in 2026-27 and cont'd growth 2028-29, w/ freight mkt recovery & strong replacement cycle

Continue driving high levels of investment in innovation to drive market outperformance as they recover

Commercial HVAC

Strong Q1 performance on bookings; revs consistent w/ expectations given timing of customer shipments in 2025

Continued robust demand for innovative products and services led by compelling paybacks; momentum continues for Thermal Management Systems

Transport

2025 market expected to be down ~LSD, from ~flat to + ~LSD, prior. Expect TK to outperform through innovation-led, diversified, resilient portfolio

EMEA

Asia

China

Expect market to remain challenging throughout 2025

Continued market opportunities in key verticals, including data centers, electronics and pharma

Rest of Asia

Expect strong performance largely offsetting challenges in China - pockets of strength in data centers, high tech industrials and healthcare

Pacific

2 0 2 5 G U I D A N C E

Expect Continued Strong Execution Through Dynamic Macro Environment and Performance Towards Higher End of Guidance

Organic

Revenues**

January 30th FY Guidance

Current FY Guidance*

+7% to +8%

(~+6.5% to ~+7.5% reported, incl. M&A & FX)

+7% to +8%

(~+7.5% to ~+8.5% reported, incl. M&A & FX) Q2'25 expect ~+8%

Adj. EPS**

$12.70 to $12.90

(+13% to +15%)

$12.70 to $12.90

(+13% to +15%)

Q2'25 expect ~$3.75

Operating Leverage**

Organic 25%+

Q2'25 expect ~25%

Free Cash Flow**

≥ Adj. Net Earnings

*See page 16 for additional details including tariff impact

** Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations

Strong FCF Drives Continued Balanced Capital Deployment Strategy

Strengthen the core business and extend product & market leadership

Invest in new technology and innovation

Strategic investments in value-accretive M&A

Expect to deliver FCF* ≥ 100% of adjusted net earnings

Strengthening balance sheet

Strong A3/BBB+ investment grade rating offers optionality as markets evolve

Expect to consistently deploy 100% of excess cash over time

Pay competitive and growing dividend over time

Repurchase shares when stock is trading below our calculated intrinsic value

* Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations

B A L A N C E D C A P I T A L D E P L O Y M E N T

Strong, Balanced Capital Allocation; On Track to Deploy ~$2.5B to ~$3.0B in 2025

Balanced Capital Deployment

~$1.5B to ~$2.0B

Debt retirement - ~$150M

Total Capital Deployed ~$775M ~$2.5B to ~$3.0B

Q1 dividends of $210M; increased dividend 12% in February 2025 to $3.76 per share annualized, up 77% since the launch of Trane Technologies (March 2020)

Actual YTD Apr 2025

Target FY 2025

Dividends

~$210M

~$0.8B

M&A, investments

~$15M*

YTD April share repurchases accelerated to

$550M** to leverage opportunities from share price trading below intrinsic value; $5.6B remaining under repurchase authorizations

Share repurchases

~$550M**

M&A pipeline remains active; maintain disciplined approach

Shares remain attractive, trading below our calculated intrinsic value

*Excludes $260M that was included in FY 2024 total capital deployed

**Excludes Jan 2025 share repurchases of $100M that were included in FY 2024 total capital deployed

Topics of Interest

T O P I C S O F I N T E R E S T

ACT Projects Robust Growth in 2026 - 2029 (above 40k units)

ACT North America Trailer Market Outlook

Comments

* Forecast shown in grey

Source: ACT April 2025 Forecast

ACT updated 2025 trailer mkt fcst to ~30K+, down from ~36K+ prior (down ~15% from down ~1% prior), with market bottoming in 1H, slight improvement in 2H

We estimate trailer mkt forecast of ~28K units (down

~mid-twenties), or 2K units lower vs. ACT for 2025

ACT expects >20% growth in 2026-2027 and continued strong growth in 2028-2029, which is largely aligned with our market view

Underlying refrigerated trailer demand remains high, average ~43k units per year

Diversified Americas / EMEA Thermo King businesses poised to outperform end markets through continued innovation / execution

I N S U M M A R Y

Positioned to Outperform Over the Long-Term

Secular Tailwinds

The markets we serve expected to continue to outgrow GDP, fueled by long-term sustainability megatrends

Sustainability Focused Innovation

We are positioned to outgrow the market and expand margins with market-leading sustainable innovations

Margin Expansion

Financial Strength

Our best-in-class business operating system and uplifting culture enables us to maximize margins and cash generation

Our strong balance sheet, exceptional cash generation and balanced capital allocation strategy deliver significant value to shareholders

Appendix

2 0 2 5 G U I D A N C E

FY'25 Detailed Guidance for Modeling Purposes

Metric

FY Guidance

2025 Commentary / Tariff Impact

Organic Revenue*

+7% to +8%

Expect to perform toward high-end of revenue and EPS guidance

~25%+ organic leverage* for FY'25

~+100 bps M&A offset by minus ~50 bps FX.

FY'25 expect ~$0.20 negative impact to adj. EPS from M&A / FX. M&A primarily related to technology acq. BrainBox AI, with accelerated intangibles amortization and year one acquisition and integration related costs. In Q1, acquired add'l 50 bps M&A in 2025, driving add'l ~$0.05 neg impact related to year-one acquisition and integration costs. FX now -50bps, vs -100bps prior (-$0.05 vs -$0.10 prior)

Expect acquisitions to be EPS accretive by year 3

FY 2025 Tariff Impact: We estimate the cost impact for all tariffs implemented to be ~$250M-$275M, EPS guidance for full-year 2025 accounts for all tariffs implemented as of April 30

M&A

~+100 bps

(Neg ~-$0.15 EPS impact)

minus ~50 bps

(Neg ~-$0.05 EPS impact)

Reported Revenue

+7.5% to +8.5%

Other Items

2Q'25: expect ~8% organic revenue growth, Adj. EPS ~$3.75. Expect ~+100 bps M&A or ~$0.03 negative impact to Adj EPS.

FY'25 Other Items (unchanged):

~$315M corporate costs - Continued above-average incremental high ROI investment (normal range ~40 bps year) including digital, factory automation, sales force excellence, service business excellence, product innovation

~$235M interest expense

~20% adj. effective tax rate

~226M diluted shares

Expect Cap Ex at high-end of 1% to 2% of revenues in 2025

FY'25 Other income / expense of ~$20M; includes pension expense of ~$5M per quarter. Other items in other inc. / exp. such as FX impacts are unknown / not forecastable

Adj. EPS*

$12.70 to $12.90

+13% to +15%

*Includes certain Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations.

SUSTAINABILITY COMMITMENTS

Trane Technologies Core Sustainability Strategy: Challenge Possible

Global Megatrends

Our 2030 Commitments

The Gigaton Challenge

Reduce one gigaton of carbon

Leading by Example

Achieve carbon neutral operations,

Opportunity for All

Invest in our people, culture and

CLIMATE CHANGE

DEMOGRAPHICS

emissions (CO2e) from our customers' footprint

Where We Focus Our Efforts

zero waste to landfill, and reduce embodied carbon by 40%

communities, build the workforce of the future

URBANIZATION

RESOURCE SCARCITY

DIGITAL CONNECTEDNESS

INDOOR AIR QUALITY (IAQ)

Operations

Emissions & energy reduction

Renewable energy Water usage

Products & Services

Technology & innovation Energy efficiency

Low-emission products

Electrification & digital enablement

Product life cycle & circularity

Supply Chain

Responsible sourcing

Supplier diversity

Employees

Engagement Inclusion

Ethics & integrity Safety Development

Communities

Access to cooling, food & wellness

Education

Workforce development

Governance

Board oversight

Financial performance

Public policy

Targets Align

with Global Priorities

Zero Hunger

Quality Education

Gender Equality

Clean Water & Sanitation

Affordable & Clean Energy

Decent Work & Economic Growth

Industry, Innovation & Infrastructure

Sustainable Cities & Communities

Responsible Consumption & Production

Climate Action

We believe in ambitious goals founded in science.

Trane Technologies is 1st in industry to be 2050 Net-Zero Approved by the Science-Based Targets Initiative (SBTi)

A LEGACY OF ACTION

SUSTAINABILITY LEADER

Widely Recognized for Sustainability Leadership and Uplifting Culture

Highly Regarded Sustainability Performance

14 Consecutive Years on the North America Index 4th consecutive year on the World Index

Ethisphere 2025 World's

Most Ethical Companies®

Second Consecutive Year

2025 JUST 100:

Ranked 6thoverall; Industry Leader for 3rd consecutive year

Corporate Knights'

2025 Global 100 Second consecutive year, ranked 26thoverall

Named to Climate A List

One of 362 companies currently on the A List

Recognized in the

inaugural edition

Ranks companies who promote corporate responsibility & advance sustainable practices

94th Percentile

74/100; Silver Medal

2024 All-America Executive Team

Rated Top 3 in sector for Best CEO, CFO, Company Board, IR Program, IR Team and ESG

People and Citizenship

Fortune World's Most

Admired Companies

13 consecutive years

U.S. News & World Report

Best Companies to Work For Also named to the Best Companies to Work For - Manufacturing list

TIME World's Best Companies

2ndconsecutive year, ranking climbed 369 spots from 2023

Fortune Best Workplaces in

Manufacturing & Production

Ranked 5thoverall in 2024, our highest ever ranking

"World's Most Ethical Companies" and "Ethisphere" names and marks are registered trademarks of Ethisphere LLC.

From Fortune: ©2024 Fortune Media IP Limited. All rights reserved. Used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse the products or services of Trane Technologies.

Q1 YoY Organic Revenues up 11%; Bookings up 4%

Organic* Revenue

2022

2023

2024

2025

Americas

+13%

+19%

+14%

+15%

+8%

+9%

+11%

+7%

+9%

+15%

+16%

+15%

+11%

+14%

+13%

EMEA

+6%

+11%

+18%

+23%

+15%

+8%

+3%

+8%

+4%

+5%

+8%

+7%

+6%

Asia Pacific

+14%

-12%

+28%

+19%

+12%

+8%

+41%

-1%

flat

+10%

+16%

-3%

-21%

+1%

-3%

Total

+12%

+11%

+19%

+16%

+15%

+9%

+11%

+9%

+6%

+9%

+14%

+13%

+11%

+10%

+12%

+11%

Organic* Bookings

2022

2023

2024

2025

Americas

+6%

+10%

+11%

flat

+7%

-4%

-8%

+7%

+13%

+2%

+20%

+23%

+8%

+1%

+13%

+5%

EMEA

flat

-12%

-10%

+2%

-5%

+10%

+14%

+12%

+10%

+11%

+7%

+10%

+9%

+13%

Asia Pacific

+14%

+16%

+3%

-6%

+7%

+13%

+6%

+12%

+2%

+8%

+6%

flat

-31%

+8%

-5%

-13%

Total

+6%

+7%

+8%

flat

+5%

-1%

-5%

+8%

+12%

+3%

+17%

+19%

+5%

+2%

+11%

+4%

*Non-GAAP financial measures. See the company's Q1 2025 earnings release for additional details and reconciliations.

Q1 Non-GAAP Measures Definitions

Adjusted operating income in 2025 is defined as GAAP operating income adjusted for merger and acquisition transaction costs and a non-cash adjustment for contingent consideration. Adjusted operating income in 2024 is defined as GAAP operating income adjusted for restructuring costs and legacy legal liability. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 2, 3 and 4 of the news release.

Adjusted operating margin is defined as the ratio of adjusted operating income divided by net revenues.

Adjusted earnings from continuing operations attributable to Trane Technologies plc (Adjusted net earnings) in 2025 is defined as GAAP earnings from continuing operations attributable to Trane Technologies plc adjusted for net of tax impacts of merger and acquisition transaction costs and a non-cash adjustment for contingent consideration. Adjusted net earnings in 2024 is defined as GAAP earnings from continuing operations attributable to Trane Technologies plc adjusted for net of tax impacts of restructuring costs and legacy legal liability. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 2 and 3 of the news release.

Adjusted continuing EPS in 2025 is defined as GAAP continuing operations attributable to Trane Technologies plc adjusted for net of tax impacts of merger and acquisition transaction costs and a non-cash adjustment for contingent consideration. Adjusted continuing EPS in 2024 is defined as GAAP continuing operations attributable to Trane Technologies plc adjusted for net of tax impacts of restructuring costs and legacy legal liability. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 2 and 3 of the news release.

Adjusted EBITDA in 2025 is defined as adjusted operating income adjusted to exclude depreciation and amortization expense and include other income / (expense), net. Adjusted EBITDA in 2024 is defined as adjusted operating income adjusted to exclude depreciation and amortization expense and include other income / (expense), net. Other income / (expense), net mainly comprises interest income, foreign currency exchange gains and losses and certain components pension and postretirement benefit costs. Please refer to the reconciliation of GAAP to non-GAAP measures on tables 4 and 5 of the news release.

Adjusted EBITDA margin is defined as the ratio of adjusted EBITDA divided by net revenues.

Q1 Non-GAAP Measures Definitions

Adjusted effective tax rate for 2025 is defined as the ratio of income tax expense adjusted for the net tax effect of adjustments for merger and acquisition transaction divided by adjusted net earnings. Adjusted effective tax rate for 2024 is defined as the ratio of income tax expense adjusted for the net tax effect of adjustments for restructuring costs and legacy legal liability divided by adjusted net earnings. This measure allows for a direct comparison of the effective tax rate between periods.

Free cash flow in 2025 is defined as net cash provided by (used in) continuing operating activities adjusted for capital expenditures, cash payments for restructuring costs, legacy legal liability, and merger and acquisition transaction costs. Free cash flow in 2024 is defined as net cash provided by (used in) continuing operating activities adjusted for capital expenditures, cash payments for restructuring costs, legacy legal liability, and merger and acquisition transaction costs. Please refer to the free cash flow reconciliation on table 8 of the news release

Free cash flow conversion is defined as the ratio of free cash flow divided by adjusted net earnings

Operating leverage is defined as the ratio of the change in adjusted operating income for the current period (e.g. Q1 2025) less the prior period (e.g. Q1 2024), divided by the change in net revenues for the current period less the prior period.

Organic revenue is defined as GAAP net revenues adjusted for the impact of currency and acquisitions.

Organic bookings is defined as reported orders in the current period adjusted for the impact of currency and acquisitions.

Working capital measures a firm's operating liquidity position and its overall effectiveness in managing the enterprise's current accounts.

Working capital is calculated by adding net accounts and notes receivables and inventories and subtracting total current liabilities that exclude short-term debt, dividend payable and income tax payables.

Working capital as a percent of revenue is calculated by dividing the working capital balance (e.g. as of March 31) by the annualized revenue for the period (e.g. reported revenues for the three months ended March 31 multiplied by 4 to annualize for a full year)

Disclaimer

Trane Technologies plc published this content on April 30, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on April 30, 2025 at 12:33 UTC.