Group 1 - The core viewpoint is a hold rating for Trane Technologies plc (NYSE: TT), emphasizing the attractiveness of the long-term commercial HVAC story, particularly due to strong data center tailwinds [1] - Recent results indicate headwinds in residential, transport, and international segments, which may impact overall performance [1] - The investment approach focuses on understanding core business economics, including competitive moat, unit economics, reinvestment opportunities, and management quality, which are crucial for long-term free cash flow generation and shareholder value creation [1] Group 2 - The analyst is a fundamental, valuation-driven investor with a decade of experience, managing personal funds sourced from friends and family [1] - The motivation for writing is to share investment insights and receive feedback from fellow investors, aiming to help readers focus on drivers of long-term equity value [1] - The analysis is intended to be both analytical and accessible, providing value to readers seeking high-quality, long-term investment opportunities [1]

Core Insights - Trane Technologies Plc reported strong Q2 2025 results with adjusted EPS of $3.88, surpassing analyst estimates and reflecting an 18% year-over-year increase [1][2] - Revenue for the quarter reached $5.75 billion, an 8% increase from the previous year, although slightly below the consensus estimate [1][2] - The company has raised its full fiscal year guidance, anticipating organic revenue growth of 8% and adjusted EPS of approximately $13.05 [10] Financial Performance - Adjusted operating margin improved to 20.3%, up 0.9 percentage points from Q2 2024 [2][7] - Adjusted EBITDA for the quarter was $1.25 billion, a 12% increase year-over-year [2] - Free cash flow for the first half of the year was $841 million, reflecting a 3.8% improvement from the previous year [2][8] Business Overview - Trane Technologies designs and manufactures climate-control solutions for various applications, with brands including Trane and Thermo King [3] - The company emphasizes sustainability and innovation, with initiatives like the "Gigaton Challenge" aimed at reducing customer greenhouse gas emissions [4] Regional Performance - The Americas segment showed strong growth, particularly in Commercial HVAC, with bookings reaching $4.54 billion, an 8% increase year-over-year [5] - In contrast, the EMEA segment experienced mixed results, with bookings up only 5% and organic bookings down 2% [5] - The Asia Pacific segment faced challenges, with bookings dropping 16% and revenue declining 7% due to weaker demand in China [5] Backlog and Capital Allocation - The global backlog stood at $7.1 billion as of June 30, 2025, a 6% increase from year-end, although it decreased sequentially by about $125 million [6] - Capital allocation for the year included $1.8 billion spent on dividends, acquisitions, share buybacks, and debt reduction [8][9] Future Outlook - Management's increased guidance reflects confidence in record backlog and resilient pricing in Commercial HVAC [10] - Investors are advised to monitor the conversion of backlog to revenue, international market progress, and developments in tariff rules [11]

Core Insights - Trane Technologies plc (TT) reported mixed first-quarter 2025 results, with adjusted EPS of $3.88 exceeding the Zacks Consensus Estimate by 3.2% and increasing 17.6% year over year, while revenues of $5.75 billion slightly missed the consensus mark by 0.3% but rose 8.3% year over year [1][7] - Bookings increased by 5% year over year on a reported basis and 4% year over year organically [1] Revenue and Bookings Analysis - The Americas segment generated revenues of $4.7 billion, which was below the estimate of $4.76 billion but represented a 9% year-over-year increase on both a reported and organic basis. Bookings rose 8% on a reported basis and 7% organically to $4.54 billion [2] - The Europe, Middle East and Africa segment reported revenues of $707.9 million, up 10% year over year on a reported basis and 3% organically, surpassing the estimate of $641.2 million. Bookings increased by 5% year over year on a reported basis but decreased 2% organically to $669.4 million [3] - Revenues from the Asia Pacific segment fell 7% year over year on a reported basis and 8% organically to $346.2 million, although it exceeded the estimate of $333.3 million. Bookings declined 16% year over year on a reported basis and 17% organically to $377.7 million [4] Financial Position - At the end of the quarter, Trane had a cash balance of $774.2 million, down from $1.6 billion at the end of December 2024. The debt balance decreased to $3.9 billion from $4.3 billion in the same period [5] - The company generated $1.04 billion in cash from operating activities and reported free cash flow of $841 million for the quarter [5] 2025 Guidance - For the full year 2025, Trane expects revenue growth of approximately 9% and organic revenue growth of approximately 8% compared to 2024. Adjusted EPS is projected to be around $13.05, which is higher than the Zacks Consensus Estimate of $12.92 [6]

[PART I FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201%20-%20Financial%20Statements) Trane Technologies reported significant revenue and net earnings growth in H1 2025, with increased assets and equity, and improved operating cash flow despite substantial financing outflows [Condensed Consolidated Statements of Earnings](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Earnings) Q2 2025 net revenues grew 8.3% to $5.75 billion, with net earnings up to $874.8 million, while H1 saw 9.6% revenue growth to $10.43 billion and $1.48 billion in net earnings Consolidated Earnings Summary (in millions, except per share amounts) | Metric | Q2 2025 | Q2 2024 | YoY Change | H1 2025 | H1 2024 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Revenues** | $5,746.4 | $5,307.4 | +8.3% | $10,434.9 | $9,523.0 | +9.6% | | **Operating Income** | $1,164.2 | $1,034.2 | +12.6% | $1,983.1 | $1,668.0 | +18.9% | | **Net Earnings Attributable to Trane** | $874.8 | $755.3 | +15.8% | $1,479.7 | $1,191.6 | +24.2% | | **Diluted EPS (Continuing Operations)** | $3.87 | $3.33 | +16.2% | $6.58 | $5.25 | +25.3% | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to $21.0 billion by June 30, 2025, with liabilities rising to $13.1 billion and equity growing to $7.9 billion due to retained earnings Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $7,506.2 | $7,337.8 | | **Total Assets** | $20,990.5 | $20,146.7 | | **Total Current Liabilities** | $6,799.3 | $6,068.9 | | **Total Liabilities** | $13,135.3 | $12,659.8 | | **Total Equity** | $7,855.2 | $7,486.9 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 2025 operating cash flow increased to $1.03 billion, while investing activities used $486.0 million and financing activities used $1.48 billion, primarily for share repurchases and dividends Cash Flow Summary for Six Months Ended June 30 (in millions) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $1,031.6 | $943.1 | | **Net cash used in investing activities** | $(486.0) | $(626.6) | | **Net cash used in financing activities** | $(1,480.9) | $(504.3) | | **Net (decrease) in cash** | $(815.9) | $(220.7) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation, segment results, acquisitions like BrainBox AI, and updates on asbestos-related bankruptcy proceedings for former subsidiaries - In the first half of 2025, the company acquired BrainBox AI Inc. and multiple European distributors, recognizing a combined **$188.9 million in goodwill** and **$73.9 million in intangible assets**[70](index=70&type=chunk)[71](index=71&type=chunk) - The company is involved in Chapter 11 bankruptcy proceedings for its former subsidiaries, Aldrich and Murray, to resolve asbestos-related claims. A plan of reorganization proposes a **$545.0 million trust** to handle all current and future claims[80](index=80&type=chunk)[81](index=81&type=chunk)[87](index=87&type=chunk) Revenue by Geography for Six Months Ended June 30 (in millions) | Region | 2025 | 2024 | YoY Change | | :--- | :--- | :--- | :--- | | **Americas** | $8,493.0 | $7,625.8 | +11.4% | | **EMEA** | $1,281.4 | $1,198.7 | +6.9% | | **Asia Pacific** | $660.5 | $698.5 | -5.4% | | **Total Net Revenues** | **$10,434.9** | **$9,523.0** | **+9.6%** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202%20-%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strong Q2 and H1 2025 performance was driven by robust HVAC demand, pricing, and acquisitions, with expanded gross margins and a strong liquidity position supporting capital allocation [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q2 2025 net revenues grew 8.3% (6.6% organic) and H1 2025 revenues grew 9.6% (8.6% organic), driven by volume and pricing, with gross profit margin improving due to productivity Q2 2025 Revenue Growth Breakdown | Component | Contribution | | :--- | :--- | | Volume | 3.0% | | Pricing | 3.6% | | **Organic Revenue** | **6.6%** | | Acquisitions | 1.1% | | Currency Translation | 0.6% | | **Total** | **8.3%** | H1 2025 Revenue Growth Breakdown | Component | Contribution | | :--- | :--- | | Volume | 5.3% | | Pricing | 3.3% | | **Organic Revenue** | **8.6%** | | Acquisitions | 1.0% | | Currency Translation | 0.0% | | **Total** | **9.6%** | - Gross profit margin increased by **110 basis points in Q2 2025** and **120 basis points in H1 2025** compared to the same periods in 2024, primarily due to gross productivity and price realization, which offset inflation[123](index=123&type=chunk)[137](index=137&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintained strong liquidity with $774.2 million cash and $2.0 billion in credit, using cash for share repurchases, dividends, and acquisitions, while free cash flow increased to $841.4 million - During the six months ended June 30, 2025, the company repurchased approximately **$880 million of its ordinary shares**. An additional **$120 million** was repurchased between July 1 and July 30, 2025[150](index=150&type=chunk) - The quarterly dividend has been increased by **77% since March 2020**, from **$0.53 to $0.94 per share**[151](index=151&type=chunk) Free Cash Flow Reconciliation for Six Months Ended June 30 (in millions) | Description | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by continuing operating activities | $1,043.5 | $958.6 | | Capital expenditures | $(208.8) | $(156.7) | | Other adjustments | $6.7 | $8.2 | | **Free cash flow (Non-GAAP)** | **$841.4** | **$810.1** | [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203%20-%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) Market risk disclosures remain materially unchanged from the 2024 Annual Report on Form 10-K, which provides a comprehensive discussion of the company's market risk exposure - The company refers to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, for its discussion of exposure to market risk, indicating no material changes during the quarter[183](index=183&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204%20-%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during Q2 2025 - The CEO and CFO concluded that as of June 30, 2025, the company's disclosure controls and procedures are effective[184](index=184&type=chunk) - No changes occurred in the company's internal control over financial reporting during the second quarter of 2025 that have materially affected, or are reasonably likely to materially affect, these controls[185](index=185&type=chunk) [PART II OTHER INFORMATION](index=44&type=section&id=PART%20II%20OTHER%20INFORMATION) [Legal Proceedings](index=44&type=section&id=Item%201%20-%20Legal%20Proceedings) The company is involved in various legal proceedings, with the most significant being asbestos-related bankruptcy cases for former subsidiaries, not expected to materially impact financial condition - The most significant legal matter facing the company is the asbestos-related bankruptcy cases of its former subsidiaries, Aldrich and Murray[189](index=189&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A%20-%20Risk%20Factors) Three risk factors from the 2020 Reverse Morris Trust transaction are no longer material due to expired statutes of limitation, with no other material changes to 2024 10-K risk factors - Three risk factors related to the tax implications of the 2020 Reverse Morris Trust transaction are no longer considered material risks to the company due to the expiration of the statutes of limitation[190](index=190&type=chunk)[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=45&type=section&id=Item%202%20-%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q2 2025, Trane Technologies repurchased 1,058,200 ordinary shares for approximately $402.0 million, with $0.4 billion remaining under the 2022 authorization and $5.0 billion under the 2024 authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased (000's) | Average Price Paid per Share | Total Value ($ millions) | | :--- | :--- | :--- | :--- | | April 2025 | 515.1 | $334.88 | ~$172.5 | | May 2025 | 274.6 | $417.96 | ~$114.8 | | June 2025 | 268.5 | $427.37 | ~$114.8 | | **Total Q2** | **1,058.2** | **$379.96** | **~$402.0** | [Other Information](index=46&type=section&id=Item%205%20-%20Other%20Information) Several executives, including the Chair and CEO, adopted Rule 10b5-1 trading plans for future stock sales during Q2 2025, with no terminations by directors or Section 16 officers - Chair and CEO David S. Regnery, along with other Section 16 officers, adopted Rule 10b5-1 trading plans during the quarter ended June 30, 2025, for the sale of company stock[196](index=196&type=chunk) [Exhibits](index=47&type=section&id=Item%206%20-%20Exhibits) This section lists Form 10-Q exhibits, including a new Credit Agreement, CEO/CFO Sarbanes-Oxley certifications, and iXBRL formatted financial statements - Key exhibits filed include a new Credit Agreement from May 2025, CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906, and iXBRL data files[197](index=197&type=chunk)[203](index=203&type=chunk)

Financial Data and Key Metrics Changes - Q2 2025 marked record bookings and revenues, with an 18% growth in adjusted EPS and a 90 basis point expansion in adjusted operating margins [8][11] - The backlog increased to $7.1 billion, up 6% compared to year-end 2024, despite a sequential decline of approximately $125 million due to expected reductions in shorter cycle businesses [9][11] - Organic revenues increased by 7%, with adjusted EBITDA margins expanding by 70 basis points [18] Business Line Data and Key Metrics Changes - Americas commercial HVAC organic bookings reached all-time highs, with a 20% increase in Q2, while applied solutions orders surged over 60% [8][12] - The services business represented one-third of enterprise revenues, delivering low teens growth, maintaining a low teens compound annual growth rate since 2020 [10][18] - Residential HVAC revenues fell mid-single digits due to a shortage of refrigerant cylinders, but year-to-date revenues were up 3% [14][56] Market Data and Key Metrics Changes - In EMEA, commercial HVAC bookings were down low single digits against a tough prior year growth comp of 20%, but two-year stack bookings were strong, up high teens [15] - In Asia Pacific, revenue declined by high single digits, primarily due to lower volumes in China, but the region is expected to meet full-year 2025 expectations for flat revenues [20][70] Company Strategy and Development Direction - The company is focused on a purpose-driven strategy addressing energy waste in buildings, aiming for sustainable solutions and long-term shareholder value [6][7] - Strategic investments in channel and M&A integrations are being made to support growth, despite impacting margins in the short term [19] - The company anticipates a strong rebound in the Americas transport refrigeration markets for 2026 and 2027, projecting over 20% growth each year [28] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising full-year revenue and EPS guidance, citing strong performance in the Americas commercial HVAC business [11][22] - Temporary headwinds in residential HVAC are expected to improve in Q3, with a forecasted revenue impact of approximately $150 million for the second half [20][21] - The company remains committed to a balanced capital allocation strategy, targeting organic leverage of 25% or higher for the year [24][26] Other Important Information - The company has deployed approximately $1.5 billion through its capital allocation strategy year-to-date, including $900 million for share repurchases [27] - The M&A pipeline remains active, with a disciplined approach to enhance long-term returns [27] Q&A Session Summary Question: What is driving the acceleration in commercial HVAC orders? - Management noted broad-based growth across various verticals, including healthcare, government, and data centers, with applied solutions leading the charge [32][34] Question: What is the outlook for service revenue growth? - Management indicated that service revenue growth is expected to continue, driven by applied solutions and connected services, with a compounding effect from past equipment sales [41][45] Question: How is the company addressing the residential HVAC cylinder shortage? - Management confirmed that the issue is largely resolved, with expectations for inventory normalization and a return to GDP-plus growth in the long term [56][58] Question: What are the expectations for the second half of the year regarding organic sales growth? - Guidance for Q3 is approximately 6% organic revenue growth, with expectations for low double digits in commercial HVAC [50][52] Question: How does the company view pricing and demand in the residential market? - Management believes the residential market will return to a GDP-plus growth trajectory, emphasizing that current challenges are temporary and not indicative of structural issues [107][108]

Financial Data and Key Metrics Changes - Q2 2025 marked record bookings and revenues, with an 18% growth in adjusted EPS and a 90 basis point expansion in adjusted operating margins [7][11][18] - Organic revenues increased by 7%, and adjusted EBITDA margins expanded by 70 basis points [18][19] - The backlog remains strong at $7.1 billion, up 6% compared to year-end 2024 [8][11] Business Line Data and Key Metrics Changes - Americas commercial HVAC organic bookings reached all-time highs with increases of over 20%, while applied solutions orders surged by over 60% in the quarter [7][12][13] - The services business represented one-third of enterprise revenues, delivering low teens growth [9][18] - Residential HVAC revenues fell mid-single digits due to a shortage of refrigerant cylinders, but year-to-date residential revenues are up 3% [14][56] Market Data and Key Metrics Changes - In EMEA, commercial HVAC bookings were down low single digits against a tough prior year growth comp of 20%, but two-year stack bookings were strong, up high teens [15] - In Asia Pacific, revenue declined by high single digits, primarily due to lower volumes in China, but the region is on track to meet full-year expectations for flat revenues [16][19] Company Strategy and Development Direction - The company is focused on a purpose-driven strategy that addresses energy waste in buildings, aiming to provide sustainable solutions and differentiated shareholder value [6][28] - Strategic investments in channel and M&A integrations are expected to support growth and position the company for future opportunities [19][25] - The company is committed to a balanced capital allocation strategy, including reinvestment in core business and share repurchases [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in raising full-year revenue and EPS guidance, despite temporary challenges in residential HVAC due to refrigerant shortages [11][21] - The Americas commercial HVAC business continues to exceed expectations, particularly in complex applied solutions, with a positive long-term outlook [21][22] - Management anticipates a return to a GDP-plus growth framework for residential HVAC in the long term [21][111] Other Important Information - The company expects approximately $150 million revenue impact in the second half due to inventory normalization and cylinder shortages [21][56] - The estimated cost impact from tariffs in 2025 is approximately $140 million, which is half of the previous estimate [24] Q&A Session Summary Question: What end markets are driving the acceleration in commercial HVAC? - Management noted broad-based growth across various verticals, including healthcare, government, and data centers, with applied solutions leading the way [32][33] Question: What does the service revenue outlook look like? - Management indicated that service revenue is expected to grow in the low teens, with a compounding effect from applied solutions driving future growth [41][42] Question: Can you clarify the guidance increase? - The guidance increase reflects strong operational performance, particularly in commercial HVAC, and adjustments for residential revenue expectations due to the refrigerant issue [102][104] Question: How is the company positioned in the data center market? - Management highlighted ongoing collaboration with data center customers and innovations in cooling solutions, positioning the company well for growth in this sector [80][84]

Core Insights - Trane Technologies reported revenue of $5.75 billion for the quarter ended June 2025, reflecting an 8.3% increase year-over-year, with EPS at $3.88 compared to $3.30 in the same quarter last year [1] - The revenue slightly missed the Zacks Consensus Estimate of $5.76 billion by 0.27%, while the EPS exceeded the consensus estimate of $3.76 by 3.19% [1] Financial Performance - Total bookings for the quarter were $5.63 billion, slightly below the average estimate of $5.65 billion [4] - Revenue from the Americas was $4.69 billion, compared to the average estimate of $4.72 billion, marking a year-over-year increase of 9.4% [4] - Revenue from EMEA was $707.9 million, exceeding the estimated $677.48 million, with a year-over-year change of 9.7% [4] - Revenue from Asia Pacific was $346.2 million, below the average estimate of $355.27 million, representing a year-over-year decline of 6.7% [4] Market Performance - Trane Technologies' shares have returned 8.5% over the past month, outperforming the Zacks S&P 500 composite's 3.4% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating expected performance in line with the broader market in the near term [3]

Financial Performance - The company reported record enterprise bookings of $5.6 billion, a 5% increase, with organic bookings up by 4%[10] - Organic revenue increased by 7%, and adjusted EPS rose by 18%[10] - The company is raising its full-year 2025 guidance, expecting organic revenue growth of approximately 8% and adjusted EPS of around $13.05[9] - Q2 2025 net revenue reached $5.746 billion, a 7% organic increase compared to $5.307 billion in Q2 2024[16] Segment Results - Americas segment saw a revenue increase of 9% with adjusted operating income margin up 120 basis points[18] - EMEA segment revenue increased by 3%, but adjusted operating income margin decreased by 200 basis points due to shipment timing and investments[18] - Asia Pacific segment revenue decreased by 8%, with adjusted operating income margin down 220 basis points due to lower volumes and inflation[18] Market Dynamics - Americas Commercial HVAC bookings experienced all-time highs, increasing by over 20%, with a two-year stack increase of over 40%[14] - Residential HVAC revenues were down MSD (mid-single digits), but year-to-date revenues were up 3%[14] - The company expects a ~$150 million revenue impact in the second half of the year due to industry-wide R454B cylinder shortages and channel inventory normalization in residential HVAC[20] Capital Allocation - The company has deployed approximately $1.5 billion in capital year-to-date, including ~$420 million in dividends and ~$900 million in share repurchases[28, 29] - The company anticipates deploying between $2.5 billion and $3.0 billion in capital throughout 2025[27, 28]

Company Performance - Trane Technologies reported quarterly earnings of $3.88 per share, exceeding the Zacks Consensus Estimate of $3.76 per share, and up from $3.3 per share a year ago, representing an earnings surprise of +3.19% [1] - The company posted revenues of $5.75 billion for the quarter ended June 2025, slightly missing the Zacks Consensus Estimate by 0.27%, but up from $5.31 billion year-over-year [2] - Over the last four quarters, Trane Technologies has surpassed consensus EPS estimates four times and topped consensus revenue estimates three times [2] Stock Performance - Trane Technologies shares have increased approximately 27.5% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.3% [3] - The current status of estimate revisions for Trane Technologies is mixed, resulting in a Zacks Rank 3 (Hold) for the stock, indicating expected performance in line with the market in the near future [6] Future Outlook - The current consensus EPS estimate for the upcoming quarter is $3.79 on revenues of $5.87 billion, and for the current fiscal year, it is $12.92 on revenues of $21.57 billion [7] - The outlook for the industry, specifically the Building Products - Air Conditioner and Heating sector, is favorable, ranking in the top 37% of over 250 Zacks industries, suggesting potential for outperformance [8]

[Financial & Operational Highlights](index=1&type=section&id=Financial%20%26%20Operational%20Highlights) Trane Technologies reported strong Q2 2025 results with record bookings and revenue, achieving an 18% increase in adjusted EPS to **$3.88** and raising full-year guidance Financial & Operational Highlights Summary | Financial Metric | Q2 2025 | Q2 2024 | Y-O-Y Change | Organic Y-O-Y Change | | :--- | :--- | :--- | :--- | :--- | | Bookings | $5,626M | $5,340M | 5% | 4% | | Net Revenues | $5,746M | $5,307M | 8% | 7% | | GAAP Operating Margin | 20.3% | 19.5% | +80 bps | | | Adjusted Operating Margin | 20.3% | 19.4% | +90 bps | | | GAAP Continuing EPS | $3.87 | $3.33 | 16% | | | Adjusted Continuing EPS | $3.88 | $3.30 | 18% | | - Record enterprise bookings reached **$5.6 billion**, up **5%** (**4%** organically), and the enterprise backlog grew to **$7.1 billion**, up **6%** from year-end 2024[6](index=6&type=chunk) - Performance was led by Americas Commercial HVAC, with orders for bespoke applied solutions up **over 60%**, enhancing visibility for future revenues[5](index=5&type=chunk) [Segment Performance Review](index=2&type=section&id=Segment%20Performance%20Review) This section reviews segment performance, highlighting strong growth in Americas, modest organic growth with margin contraction in EMEA, and declines in Asia Pacific [Americas Segment](index=2&type=section&id=Americas%20Segment) The Americas segment delivered strong performance with **9%** revenue growth and a **130 basis point** expansion in adjusted operating margin, driven by robust Commercial HVAC demand Americas Segment Performance | Americas Segment | Q2 2025 | Q2 2024 | Y-O-Y Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Bookings | $4,543.5M | $4,221.9M | 8% | 7% | | Net Revenues | $4,692.3M | $4,290.9M | 9% | 9% | | GAAP Operating Margin | 22.4% | 21.3% | +110 bps | | | Adjusted Operating Margin | 22.4% | 21.1% | +130 bps | | - Bookings strength was led by Americas Commercial HVAC, which was up **over 20%**[11](index=11&type=chunk) - Margin expansion was driven by strong volume growth, positive price realization, and productivity, which more than offset inflation and business reinvestment[11](index=11&type=chunk) [Europe, Middle East and Africa (EMEA) Segment](index=3&type=section&id=Europe%2C%20Middle%20East%20and%20Africa%20%28EMEA%29%20Segment) The EMEA segment saw reported revenue growth of **10%** (3% organic), but organic bookings declined by **2%**, and adjusted operating margin contracted by **150 basis points** due to reinvestment and inflation EMEA Segment Performance | EMEA Segment | Q2 2025 | Q2 2024 | Y-O-Y Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Bookings | $704.7M | $669.4M | 5% | -2% | | Net Revenues | $707.9M | $645.3M | 10% | 3% | | GAAP Operating Margin | 17.3% | 18.7% | -140 bps | | | Adjusted Operating Margin | 17.3% | 18.8% | -150 bps | | - Margin pressure resulted from high levels of business reinvestment and inflation, which offset volume growth and productivity gains[16](index=16&type=chunk) [Asia Pacific Segment](index=3&type=section&id=Asia%20Pacific%20Segment) The Asia Pacific segment experienced challenges with organic bookings and revenues declining by **17%** and **8%**, respectively, leading to a **250 basis point** drop in adjusted operating margin Asia Pacific Segment Performance | Asia Pacific Segment | Q2 2025 | Q2 2024 | Y-O-Y Change | Organic Change | | :--- | :--- | :--- | :--- | :--- | | Bookings | $377.7M | $448.8M | -16% | -17% | | Net Revenues | $346.2M | $371.2M | -7% | -8% | | GAAP Operating Margin | 21.3% | 24.1% | -280 bps | | | Adjusted Operating Margin | 21.6% | 24.1% | -250 bps | | - The decline in margins was attributed to continued high levels of business reinvestment, lower volumes, and inflation that offset productivity efforts[17](index=17&type=chunk) [Financial Position and Cash Flow](index=4&type=section&id=Financial%20Position%20and%20Cash%20Flow) The company generated **$841 million** in year-to-date free cash flow, maintaining a solid balance sheet with **$774 million** cash and **$4.6 billion** total debt, while deploying approximately **$1.8 billion** in capital Financial Position and Cash Flow Summary | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash From Continuing Operating Activities Y-T-D | $1,044M | $959M | | Free Cash Flow Y-T-D | $841M | $810M | | Cash Balance | $774M | $1,326M | | Debt Balance | $4,615M | $5,268M | - Year-to-date through July, the company deployed or committed approximately **$1.8 billion** of capital[24](index=24&type=chunk) - Capital deployment included **~$420 million** for dividends, **$275 million** for M&A, **$1 billion** for share repurchases, and **$150 million** for debt retirement[24](index=24&type=chunk) [Full-Year 2025 Guidance](index=4&type=section&id=Company%20Raises%20Full-Year%202025%20Guidance) Trane Technologies raised its full-year 2025 guidance, now expecting approximately **9%** reported revenue growth and adjusted continuing EPS of approximately **$13.05** - Full-year 2025 reported revenue growth is now expected to be approximately **9%**, with organic revenue growth of approximately **8%**[24](index=24&type=chunk) - The company expects full-year 2025 GAAP continuing EPS of approximately **$13.30** and adjusted continuing EPS of approximately **$13.05**[24](index=24&type=chunk) [Financial Statements and Reconciliations](index=7&type=section&id=Financial%20Statements%20and%20Reconciliations) This section presents detailed unaudited financial statements for Q2 and H1 2025, including income statement, balance sheet, and cash flow, along with GAAP to non-GAAP reconciliations [Condensed Consolidated Income Statement](index=7&type=section&id=Condensed%20Consolidated%20Income%20Statement) For Q2 2025, Net Revenues reached **$5,746.4 million**, Operating Income increased to **$1,164.2 million**, and Diluted EPS from continuing operations rose to **$3.87** Condensed Consolidated Income Statement (Q2) | Income Statement (Q2) | 2025 | 2024 | | :--- | :--- | :--- | | Net revenues | $5,746.4M | $5,307.4M | | Operating income | $1,164.2M | $1,034.2M | | Earnings from continuing operations | $876.0M | $766.8M | | Diluted EPS (Continuing ops) | $3.87 | $3.33 | [Reconciliation of GAAP to Non-GAAP Measures](index=8&type=section&id=Reconciliation%20of%20GAAP%20to%20Non-GAAP%20Measures) This section details adjustments from GAAP to non-GAAP measures, showing pre-tax adjustments of **$2.0 million** for Q2 2025 and **$(7.1) million** for Q2 2024 - For Q2 2025, GAAP operating income of **$1,164.2 million** was adjusted by **$2.0 million** (for restructuring and M&A costs) to arrive at an adjusted operating income of **$1,166.2 million**[47](index=47&type=chunk) - For Q2 2024, GAAP operating income of **$1,034.2 million** was adjusted by **$(7.1) million** to arrive at an adjusted operating income of **$1,027.1 million**[50](index=50&type=chunk) [Condensed Consolidated Balance Sheets](index=12&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$20.99 billion**, total equity **$7.86 billion**, cash **$774.2 million**, and total debt **$4.615 billion** Condensed Consolidated Balance Sheets | Balance Sheet | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total current assets | $7,506.2M | $7,337.8M | | Total assets | $20,990.5M | $20,146.7M | | Total current liabilities | $6,799.3M | $6,068.9M | | Total equity | $7,855.2M | $7,486.9M | [Condensed Consolidated Statement of Cash Flows](index=13&type=section&id=Condensed%20Consolidated%20Statement%20of%20Cash%20Flows) For the six months ended June 30, 2025, net cash from continuing operating activities was **$1.04 billion**, with significant cash usage in investing and financing activities Condensed Consolidated Statement of Cash Flows (Six Months Ended June 30) | Cash Flow (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from continuing operating activities | $1,043.5M | $958.6M | | Net cash used in investing activities | ($486.0M) | ($626.6M) | | Net cash used in financing activities | ($1,480.9M) | ($504.3M) | | Net decrease in cash | ($815.9M) | ($220.7M) | [Balance Sheet Metrics and Free Cash Flow](index=14&type=section&id=Balance%20Sheet%20Metrics%20and%20Free%20Cash%20Flow) For the six months ended June 30, 2025, free cash flow increased to **$841.4 million**, with key working capital metrics remaining relatively stable year-over-year Free Cash Flow (Six Months Ended June 30) | Free Cash Flow (Six Months Ended June 30) | 2025 | 2024 | | :--- | :--- | :--- | | Net cash flow from continuing operating activities | $1,043.5M | $958.6M | | Capital expenditures | ($208.8M) | ($156.7M) | | Other adjustments | $6.7M | $8.2M | | **Free cash flow** | **$841.4M** | **$810.1M** |