Summary of Trane Technologies (TT) FY Conference Call - May 21, 2025 Company Overview - **Company**: Trane Technologies (TT) - **Industry**: Commercial HVAC and related technologies Key Financial Performance - **Revenue Growth**: Reported a 12% CAGR over the last four years [4] - **EPS Growth**: Achieved over 20% EPS growth each year for the past four years [5] - **Free Cash Flow**: Average of 108% free cash flow as a percentage of net income over the last four years [5] - **2025 Guidance**: Expected revenue growth of 78% and EPS between $12.70 to $12.90, with a strong outlook for free cash flow [5] Business Segments and Market Trends - **Americas Focus**: The Americas is the largest and most important region for Trane, with a strong emphasis on customer service and innovation [8][9] - **Commercial HVAC Growth**: Significant growth in the commercial HVAC sector, with applied business growth of 200% over the last four years [10] - **Product Innovation**: Launched 190 new products last year, indicating a strong innovation pipeline [10] - **Residential Market**: Experienced high teens growth in the first quarter, but expects mid-single digits for the total year due to market conditions [14][16] - **Tariff Impact**: Estimated unmitigated impact from tariffs at $250 to $275 million, with recent changes potentially reducing this amount [21][22] Competitive Advantages - **Manufacturing Strategy**: 95% of products sold in the U.S. are manufactured domestically, providing a competitive edge over competitors reliant on imports [25][32] - **Supply Chain Resilience**: Focus on regional manufacturing and a robust supply chain strategy to mitigate tariff impacts and ensure operational flexibility [23][24] Market Dynamics - **Transport Market**: Anticipated decline of 20% in the transport market, with expectations of recovery in 2026 and 2027 [39][40] - **Applied Systems**: Strong growth in applied systems, with a healthy pipeline and a focus on diverse verticals [46][48] - **K-12 Education**: Stable environment in K-12 education, with ongoing opportunities despite reduced funding from ESSER [52][54] Technology and Future Outlook - **Brainbox AI Acquisition**: Acquisition of Brainbox AI enhances building automation capabilities, expected to save customers up to 25% on energy costs [80][81] - **Cloud-Based Solutions**: Introduction of cloud-based building management systems to improve operational efficiency [82] - **Long-Term Growth**: Confidence in continued growth across various verticals, with a focus on innovation and customer service [46][60] Additional Insights - **Market Divergence**: Notable divergence in market performance across different sectors, with some experiencing growth while others face challenges [13] - **Data Center Growth**: Data centers remain a strong vertical, with normalized order rates providing better visibility for future growth [61] This summary encapsulates the key points discussed during the Trane Technologies FY Conference Call, highlighting the company's financial performance, market dynamics, competitive advantages, and future growth strategies.

Financial Data and Key Metrics Changes - The company achieved 11% organic revenue growth, 130 basis points of adjusted EBITDA margin expansion, and 26% adjusted EPS growth in Q1 2025 [9][15][22] - Bookings increased by 4%, with a book-to-bill ratio of 113% for the enterprise and 100% or more across all segments [9][12] - The backlog increased by approximately $500 million from year-end 2024, including about $400 million in the Americas commercial HVAC business [9][26] Business Line Data and Key Metrics Changes - In the Americas segment, commercial HVAC bookings set a new quarterly record, with mid-teens growth in equipment and low-teens growth in services [11][12] - Residential bookings were up mid-teens, and revenues increased by high-teens [12] - Transport refrigeration bookings were down low single digits, while revenues were up mid single digits, significantly outperforming end markets [12] - In the EMEA segment, commercial HVAC bookings were up mid-teens, with revenues up mid single digits [12][16] - In Asia Pacific, bookings and revenues in the rest of Asia were strong, up double digits and low 20s respectively, while in China, bookings and revenues were down low 30s and high 20s respectively [13] Market Data and Key Metrics Changes - The Americas market showed strong momentum, particularly in commercial HVAC, with a proven track record of rapid growth [18] - The EMEA transport markets are expected to decline low single digits in 2025, while Asia's overall market is anticipated to be flat [20][21] Company Strategy and Development Direction - The company focuses on a purpose-driven strategy that emphasizes innovation for a sustainable world, aiming to drive customer demand and deliver shareholder value [6][7] - The direct sales strategy allows the company to capture more market opportunities and consistently outperform end markets [10] - The company is committed to a balanced capital allocation strategy, including strategic M&A and share repurchases [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to outperform despite a dynamic macroeconomic environment, with expectations to deliver results towards the higher end of full-year revenue and EPS guidance [10][17] - The company anticipates a strong market rebound in transport refrigeration in 2026 and beyond, while maintaining a cautious outlook for 2025 [20][28] Other Important Information - The company expects approximately 8% organic revenue growth and approximately $3.75 in adjusted EPS for Q2 2025 [24] - The company has approximately $5.6 billion remaining under share repurchase authorizations, providing significant flexibility moving forward [26] Q&A Session Summary Question: Insights on commercial HVAC markets in the Americas - Management noted record order rates in commercial HVAC, with broad-based strength across various verticals, including data centers, healthcare, and education [31][32] Question: Pricing actions to offset tariff headwinds - Management explained that they are implementing price increases and surcharges to offset estimated tariff costs of $250 million to $275 million, while remaining flexible in their pricing strategy [37][38] Question: Residential market strength and inventory levels - Management confirmed that residential business is expected to grow in the mid-single digits for the full year, with elevated inventory levels anticipated to normalize [41][43] Question: Demand concentration in specific verticals - Management indicated that growth is broad-based across 14 different verticals, with no significant concentration in any one area [58][59] Question: European margins and investment cycle - Management discussed ongoing investments in Europe, with confidence in future margin recovery as order rates remain strong [100][101] Question: Tariff impacts and pricing strategies - Management clarified that tariff costs are not currently embedded in revenue guidance, but they are confident in their ability to offset these costs through pricing actions [120][122]