Trane Technologies(TT) - 2025 Q2 - Quarterly Results

Financial & Operational Highlights 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] - Performance was led by Americas Commercial HVAC, with orders for bespoke applied solutions up over 60%, enhancing visibility for future revenues[5] Segment Performance Review 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 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] - Margin expansion was driven by strong volume growth, positive price realization, and productivity, which more than offset inflation and business reinvestment[11] Europe, Middle East and Africa (EMEA) Segment 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] Asia Pacific Segment 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] Financial Position and Cash Flow 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] - Capital deployment included ~$420 million for dividends, $275 million for M&A, $1 billion for share repurchases, and $150 million for debt retirement[24] Full-Year 2025 Guidance 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] - The company expects full-year 2025 GAAP continuing EPS of approximately $13.30 and adjusted continuing EPS of approximately $13.05[24] Financial Statements and Reconciliations 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 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 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] - 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] Condensed Consolidated Balance Sheets 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 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 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 |