Q1 2024 Trane Technologies PLC Earnings Call

Operator: Good morning. Welcome to the Trane Technologies Q1 2024 Earnings Conference Call. My name is Brianna, and I will be your operator for the call. The call will begin in a few moments with the speaker's remarks and the Q&A session. At this time, all participants are in a listen-only mode. If you would like to ask a question, please press star 1 on your telephone keypad. We kindly ask that you limit yourself to one question and one follow-up. I will now turn the call over to Zach Nagle, Vice President of Investor Relations.

Good morning, welcome to the Trane technologies Q1, 'twenty 'twenty four earnings conference call.

Brianna: My name is brianna and I'll be your operator for the call.

The call will begin in a few moments with the speaker remarks, and the Q&A session.

At this time all participants are in a listen only mode.

Brianna: If you would like to ask a question. Please press star one on your telephone keypad.

Brianna: We kindly ask that you limit yourself to one question and one follow up.

Brianna: I will now turn the call over to Zac Nagle, Vice President of Investor Relations.

Zachary A. Nagle: Operator, good morning, and thank you for joining us for Trane Technologies' first quarter 2024 earnings conference call. This call is being webcast on our website at TraneTechnologies.com, where you'll find the accompanying presentation. We're also recording and archiving this call on our website; please go to slide two. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law.

Zachary A. Nagle: Thanks, operator, good morning, and thank you for joining us for <unk> technologies first quarter 2024 earnings conference call.

Zachary A. Nagle: Call is being webcast on our website at <unk> technologies Dot com, where you'll find the accompanying presentation.

Zachary A. Nagle: We are also recording and archiving this call on our website.

Zachary A. Nagle: Please go to slide two.

Brianna: Statements made in today's call that are not historical facts are considered forward looking statements and are made pursuant to the safe Harbor provisions of Federal Securities Law.

Zachary A. Nagle: Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from Anticipated Results. This presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release. Joining me on today's call are Dave Regnery, Chair and CEO, and Chris Kuehn, Executive Vice President and CFO. With that, I'll turn the call over to Dave.

Brianna: Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially.

Brianna: From anticipated results.

Brianna: This presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release.

Brianna: Joining me on today's call are Dave Regnery Chair and CEO.

David S. Regnery: This June executive Vice President and CFO.

David S. Regnery: With that I'll turn the call over to Dave.

David S. Regnery: Thanks, Zach, and thanks, everyone, for joining today's call. As we begin, I'd like to spend a few minutes on our purpose-driven strategy, which drives our engaging, uplifting culture and enables our differentiated financial results over time. Our purpose is centered on creating a more sustainable world, and our strategy is aligned to powerful megatrends like energy efficiency, decarbonization, and digital transformation. Customer demand continues to increase as the need to address climate change becomes more urgent. We need creative solutions and game-changing innovation to bend the curve on global warming.

Dave: Thanks, Zack and thanks, everyone for joining today's call.

Dave: As we begin I'd like to spend a few minutes on our purpose driven strategy, which.

Dave: Which drives our engaging uplifting culture and enables our differentiated financial results over time.

David S. Regnery: Our purpose is centered on creating a more sustainable world and our.

Dave: <unk> is aligned to powerful megatrends like energy efficiency de carbonization and digital transformation.

Dave: Customer demand continues to increase as the need to address climate change becomes more urgent.

Dave: We need creative solutions and game changing innovation to bend the curve on global warming.

David S. Regnery: And that's where Trane Technologies leads. Relentless innovation, Proven Business Optimism, and a high-performance culture enables us to consistently deliver a leading growth profile, strong margins, and powerful free cash, and the result is strong value creation across the board for our customers, our shareholders, our employees, and for the planet. Please turn to slide number four.

Dave: And Thats, where trane technologies leads.

Dave: Our relentless innovation proven business operating system and high performing culture enables us to consistently deliver a leading growth profile strong margins and powerful free cash flow.

Dave: The end result is strong value creation across the board for our customers our shareholders our employees and for the planet.

Dave: Please turn to slide number four in the first quarter, we extended our track record of strong execution of our global teams delivered robust performance across the board.

David S. Regnery: In the first quarter, we extended our track record of strong execution. Our global teams delivered robust performance across the board. Quarterly bookings of more than $5 billion were at an all-time high and up 17% organically.

Dave: Quarterly bookings of more than $5 billion were at an all time high and up 17% organically.

David S. Regnery: Organic revenues were up 14%, adjusted operating margins were up 230 basis points, and Adjusted EPS was up 38%. First quarter booking strength was again led by our commercial HVAC businesses globally, which were up over 20% with growth of more than 30% in equipment and mid-teens in service, bookings, and our America's commercial HVAC business was once again a standout, up 30% with more than 40% growth in equipment and more than 15% in service. Hooking strength was broad-based, with growth in nearly all vertical markets.

Dave: Organic revenues were up 14% adjusted operating margins were up 230 basis points.

Dave: And adjusted EPS was up 38%.

Dave: First quarter bookings strength was again led by our commercial HVAC businesses globally, which were up over 20% with growth in more than 30% in equipment and mid teens in services.

Dave: Bookings in our Americas commercial HVAC business, where once again, a standout up 30% with more than 40% growth in equipment and more than 15% in services.

Dave: Booking strength was broad based with growth in nearly all vertical markets, we delivered exceptional bookings growth across our applied solutions leveraging the power of our direct salesforce deep customer relationships and leading innovation to capitalize on increasing project complexity and high growth verticals are commercial.

David S. Regnery: We delivered exceptional bookings growth across our applied solutions, leveraging the power of our direct sales force, deep customer relationships, and leading innovation to capitalize on increasing project complexity and high-growth verticals. Our commercial HVAC pipeline remains robust around the world, and we see tremendous growth opportunities well into the future. Our strong growth profile provides us with excellent optionality to accelerate key investments in 2024 while delivering strong leverage, EPS, and free cash, and we put a number of high ROI investments in flight in the first quarter. With a focus on future growth, these investments include Product Innovation. Increased capacity. Sales and Service Excellence Digital and Automation

Dave: <unk> pipeline remains robust around the world and we see tremendous growth opportunities well into the future.

Dave: Our strong growth profile provides us with excellent optionality to accelerate key investments in 2024.

Dave: Delivering strong leverage EPS and free cash flow.

Dave: And we've put a number of high ROI investments in flight in the first quarter.

Dave: With a focus on future growth. These investments include <unk>.

Dave: Product innovation.

Dave: The increased capacity sales and service excellence.

Dave: Digital and automation.

David S. Regnery: Our bookie's performance further strengthens our position for 2024 and increasingly for 2025. Q1 ending backlog of $7.7 billion is up 10% from year-end 2023, and we increased our backlog for 2025 and beyond by $800 million to a total of $1.8 billion, increasing visibility to future growth. Based on our Q1 results and expectations for continued strong performance, we're raising our full year revenue and EPS guidance. Chris will cover the details in a few minutes. Please go to slide number five.

Dave: Our bookings performance further strengthens our position for 2024 and increasingly for 2025 Q.

Dave: Q1, ending backlog of $7 7 billion is up 10% from year end 2023, and we increased our backlog for 2025 and beyond by $800 million to a total of one 8 billion.

Dave: Increasing visibility to future growth.

Dave: Based on our Q1 results and expectations for continued strong performance, we're raising our full year revenue and EPS guidance.

Dave: This will cover the details in a few minutes.

Speaker Change: Please go to slide number five.

David S. Regnery: Demand for innovative solutions continues to be exceptional, with a book to bill of 120% on strong organic revenue growth of 14%. In the Americas segment, our commercial HVAC business delivered strong performance across the board. Bookings were up 30% in the quarter and up over 60% on a three-year stack, led by our Applied Solutions portfolio, which we estimate carries an 8 to 10 multiplier of higher-margin services revenue over the life of the equipment. Backlog for Applied Solutions continues to grow, which bodes well for future growth.

Dave: Demand for our innovative solutions continues to be exceptional with a book to bill of 120% on strong organic revenue growth of 14%.

Dave: In the Americas segment, our commercial HVAC business delivered strong performance across the board.

Dave: Bookings were up 30% in the quarter and up over 60% on a three year stack led by our applied solutions portfolio, which we estimate carries an 8% to 10 multiplier of higher margin services revenue over the life of the equipment.

Dave: Backlog for applied solutions continues to grow which bodes well for future growth.

David S. Regnery: Commercial HVAC revenues were up in mid-2020, with more than 35% growth in equipment and mid-teens growth in service. Compounding services revenue year after year provides strong growth in good times and is resilient in more challenging macro conditions. We're investing heavily in sales and services excellence programs to rank in our business for the long term. Turning to residential, bookings were down low single digits, and revenues were up low single digits.

Dave: Commercial HVAC revenues were up mid twenty's with more than 35% growth in equipment and mid teens growth in services. The compounding of services revenue year. After year provides strong growth in good times and is resilient and more challenging macro conditions.

Dave: <unk>.

Dave: We're investing heavily in sales and services excellence programs.

Dave: Strengthen our business for the long term.

Dave: Turning to residential bookings were down low single digits and revenues were up low single digits. The business performed stronger than our initial expectations for Q1, and we're cautiously optimistic moving forward.

David S. Regnery: The business performed stronger than our initial expectations for Q1, and we're cautiously optimistic moving forward. Our transport businesses performed as expected, with bookings down low single digits and revenues down mid-teens. While we see the down cycle in transport as modest overall, the business is facing tough comps from 2023, a plus 20% growth comp in the first half and a down 20% growth comp in the second half, which impacts the optics in the near term.

Dave: Our transport businesses performed as expected with bookings down low single digits and revenues down mid teens, while we see the downcycle in transport as modest overall the business is facing tough comps from 2023.

Dave: A plus 20% growth comp in the first half and are down 28% growth comp in the second half, which impacts the optics and the near term.

David S. Regnery: Net in 2024, we expect to see a soft first half and a strong second. Turning to EMEA, the region performed in line with our expectations. Commercial HVAC bookings and revenues were strong, up low double digits respectively, while transport bookings and revenues were down low single digits. The book to bill was very strong at approximately 120%. Returning to Asia, the team delivered strong performance consistent with our expectations for the quarter. China remains very strong, with bookings up more than 20% and revenues up high teens. Asia's book to bill was also very strong, at approximately 120%. Now, I'd like to turn the call over to Chris. Chris.

Dave: In 2024, we expect to see a soft first half and a strong second half.

Dave: Okay.

Dave: Turning to EMEA the region performed in line with our expectations commercial HVAC bookings and revenues were strong up low teens and up high single digits, respectively, while transport bookings and revenues were down low single digits.

Dave: The book to Bill was very strong at approximately 120%.

Dave: Turning to Asia, the team delivered strong performance consistent with our expectations for the quarter.

Dave: China remains very strong with bookings up more than 20% and revenues up high teens Asia book to Bill was also very strong at approximately 120%.

Dave: Now.

Dave: I'd like to turn the call over to Chris Chris.

Christopher J. Kuehn: Thanks Dave, please turn to slide number 6. This slide provides a snapshot of our performance in the first quarter and highlights strong execution top to bottom. Organic revenues were up 14%, adjusted EBITDA and operating margins were up 200 basis points and 230 basis points, respectively, and adjusted EPS was up 38%. At an enterprise level, we delivered strong organic revenue growth in equipment and services, both up low teens. Our high-performance flywheel continues to pay dividends with relentless investments in innovation driving strong top-line growth, margin expansion, and EPS growth. Please turn to slide number seven.

Chris: Thanks, Dave Please turn to slide number six.

Chris: Slide provides a snapshot of our performance in the first quarter and highlight strong execution top to bottom.

Chris: Organic revenues were up 14% adjusted EBITDA and operating margins were up 200 basis points, and 230 basis points, respectively, and adjusted EPS was up 38%.

Chris: And the enterprise level, we delivered strong organic revenue growth in equipment and services, both up low teens.

Chris: Our high performance flywheel continues to pay dividends with relentless investments in innovation and driving strong top line growth margin expansion and EPS growth.

Chris: Please turn to slide number seven.

Christopher J. Kuehn: At the enterprise level, we delivered robust volume growth with strong incrementals, positive price realization, and productivity that more than offset inflation. In our America segment, we deliver at about 12 points of volume and about three points of price. There America's commercial HVAC business is delivering very strong volume growth of approximately 20 points. Strong Adjusted Operating Margin Expansion of 240 basis points was driven by strength in our commercial HVAC business, which more than offset the expected impact from revenue decline in our transport business.

Chris: At the enterprise level, we delivered robust volume growth with strong incrementals positive price realization and productivity that more than offset inflation.

Chris: In our Americas segment, we delivered about 12 points of volume and about three points of price with our Americas commercial HVAC business, delivering very strong volume growth of approximately 20 points.

Chris: Strong adjusted operating margin expansion of 240 basis points was driven by strength in our commercial HVAC business, which more than offset the expected impact from revenue decline in our transport business.

Christopher J. Kuehn: In our EMEA segment, we delivered about three points of volume and about one point of price, with stronger volume in our commercial HVAC business. Adjusted operating margins were up 30 basis points for the segment and stronger when you consider the impact of acquisitions and FX in the quarter. Excluding FX currency losses related to the devaluation in the Egyptian pound in the quarter, EMEA EBITDA margins would have been 19.5%.

Chris: In our EMEA segment, we delivered about three points of volume and about one point of price with stronger volume in our commercial HVAC business.

Chris: Adjusted operating margins were up 30 basis points for the segment and stronger when you consider the impact of acquisitions and FX in the quarter.

Chris: Excluding FX currency losses related to the devaluation in the Egyptian pound in the quarter.

Chris: EMEA EBITDA margins would've been 19, 5%.

Christopher J. Kuehn: The Asia segment delivered mid-teens revenue growth almost exclusively from higher volume. Strong volume, productivity, and modest price contributed to 310 basis points of adjusted operating margin expansion, will be reinvested heavily back into each business in the first quarter, and we expect to ramp these investments through the year to drive growth well into the future. Now, I'd like to turn the call back over to Dave. Dave?

Chris: The Asia segment delivered mid teens revenue growth almost exclusively from higher volumes strong volume productivity and modest price contributed to 310 basis points of adjusted operating margin expansion.

Chris: We reinvested heavily back into each business in the first quarter and expect to ramp these investments through the year to drive growth well into the future.

Chris: Now I'd like to turn the call back over to Dave Dave.

Chris: Dave.

David S. Regnery: Thanks, Chris. Please turn to slide number eight. Our end market segment and business unit outlook is largely unchanged from our Q4 earnings call, with a couple of notable differences. Our America's commercial HVAC business had a very strong quarter, stronger than we expected, despite a tough comp of mid-teens revenue growth in the first quarter of 2023. We were encouraged by the strong start for the business, especially when you take into account the exceptional 30% bookings growth and 125% book to bill ratio on mid-20s revenue growth in the quarter.

David S. Regnery: Thanks, Chris Please turn to slide number eight.

David S. Regnery: Our end market segment and business unit outlook is largely unchanged from our Q4 earnings call with a couple of notable differences first.

David S. Regnery: Our Americas commercial HVAC business had a very strong quarter stronger than we expected. Despite a tough comp of mid teens revenue growth in the first quarter of 2023.

Chris: We're encouraged by the strong start for the business, especially when you take into account the exceptional 30% bookings growth in 125% book to Bill ratio on mid <unk> revenue growth in the quarter.

David S. Regnery: We expect America's commercial HVAC business to remain strong throughout 2024 versus increasingly tough comps from 2023 as we move throughout the year. Second, our residential business performed stronger than we expected in the first quarter. We expected the business to be down modestly on continued destocking, and we believe the EPA clarification on sell-through helped to mitigate some of the independent wholesale distributors concerned heading into the season, while we're pleased with the results. The first quarter for residential is typically a very small percentage of the year and doesn't provide a sufficient read-through to the balance of the season.

Chris: We expect the Americas commercial HVAC business to remain strong throughout 2024 versus increasingly tough comps from 2023 as we move throughout the year.

Chris: Second our residential business performed stronger than we expected in the first quarter.

Chris: We expect the business to be down modestly on continued destocking and we believe the EPA clarification on sell through helped to mitigate some of the independent wholesale distributors concern heading into the season.

Chris: While we're pleased with the results.

Chris: The first quarter for residential is typically a very small percentage of the year and doesn't provide a sufficient read through to the balance of the season.

David S. Regnery: We believe it's prudent to move through Q2 and gain more visibility before extrapolating too much from Q1. All other businesses performed as expected, and the outlook for the year is unchanged. We provided additional details on the slide for your reference. Now, I'd like to turn the call back over to Chris.

Chris: We believe it's prudent to move through Q2 and gain more visibility before extrapolating too much from Q1.

Chris: All other businesses performed as expected and the outlook for the year are unchanged. We provided additional details on the slide for your reference now I'd like to turn the call back over to Chris Chris.

Christopher J. Kuehn: Thanks, Dave. Please turn to slide number nine. Our initial 2024 guidance reflected optimism about key end markets and our ability to outperform. While we're only one quarter in, our exceptional bookings, revenues, and backlog in our commercial HVAC businesses strengthen our conviction that 2024 will be another year of robust top-line and bottom-line growth. We're raising our organic revenue guidance by two percentage points to eight to nine percent from six to seven percent previously.

Chris: Thanks, Dave Please turn to slide number nine.

Speaker Change: Our initial 2024 guidance reflected optimism about key end markets and our ability to outperform.

Chris: While we're only one quarter and our exceptional bookings revenues and backlog in our commercial HVAC businesses strengthen our conviction that 2024 will be another year of robust topline and bottom line growth.

Chris: We're raising our organic revenue guidance by two percentage points to 89% from 6% to 7% prior.

Christopher J. Kuehn: We're also raising our full-year adjusted earnings per share guidance by 30 cents at the midpoint and raising the low end of our guidance range above the high end of our prior guidance. Our new adjusted EPS guidance range is narrowed to $10.40 to $10.50, up from $10 to $10.30.

Chris: We're also raising our full year adjusted earnings per share guidance by 30 at the midpoint and raising the low end of our guidance range above the high end of our prior guidance range.

Chris: Our new adjusted EPS guidance range is narrowed to $10 40 to $10 50.

Chris: <unk> from $10 to $10 30 prior.

Christopher J. Kuehn: Embedded in our guidance is our philosophy around our value creation flywheel, which builds in relentlessly high levels of business reinvestment to drive end market outgrowth, healthy leverage, and strong free cash flow. We expect to see investments continue to ramp in the second quarter and into the back half of the year, accompanied by leading growth and strong incremental. We continue to expect about one point of growth from M&A in 2024 with a negative impact of approximately $30 million to adjusted operating income for the full year, or a negative impact of about five points to reported leverage versus organic leverage. The impact is primarily related to the technology acquisition Novolo, which carries non-cash, accelerated, and tangible impairment of approximately $25 million, plus year one acquisition and integration related costs.

Chris: Embedded in our guidance is our philosophy around our value creation flywheel, which builds in relentless high levels of business reinvestment to drive end market outgrowth healthy leverage and strong free cash flow.

Chris: We expect to see investments continue to ramp in the second quarter and into the back half of the year, accompanied by a leading growth and strong incrementals.

Chris: We continue to expect about one point of growth from M&A in 2024, with a negative impact of approximately $30 million to adjusted operating income for the full year.

Chris: Or a negative impact of about five points to reported leverage versus organic leverage.

Chris: The impact is primarily related to the technology acquisition, Novo, which carries noncash accelerated intangibles amortization of approximately $25 million plus year, one acquisition and integration related costs.

Christopher J. Kuehn: We also expect a negative impact on revenues of about one percentage point from FX in 2024. However, FX is expected to offset the point of M&A revenue growth on a reported basis, meaning our organic and reported revenue growth guidance is now the same at 8 to 9% for 2024. There's been no change to our organic leverage target of 25% plus for the year, consistent with our stated long-term target. Turning to cash, we had a strong start to free cash flow generation in the first quarter, and we expect 2024 to be another year of free cash flow conversion of 100% or greater. For the second quarter, we expect revenue growth of approximately 8.5% and adjusted EPS of approximately $3.05. Please see page 17 for additional information that may be helpful for modeling purposes.

We also expected negative impact of revenues of about one percentage point from FX in 2024.

Chris: FX is expected to offset the point of M&A revenue growth on a reported basis, meaning our organic and reported revenue growth guidance is now the same at 8% to 9% for 2024.

Christopher J. Kuehn: There is no change to our organic leverage target of 25% plus for the year consistent with our stated long term target.

Chris: Turning to cash we had a strong start to free cash flow generation in the first quarter and we expect 2024 to be another year of free cash flow conversion of 100% or greater.

Christopher J. Kuehn: For the second quarter, we expect revenue growth of approximately eight 5% and adjusted EPS of approximately $3 five.

Chris: Please see page 17 for additional information that may be helpful for modeling purposes.

Christopher J. Kuehn: Please go to slide number 10. We remain committed to our balanced capital allocation strategy focused on consistently deploying excess cash to opportunities with the highest returns for shareholders. First, we continue to strengthen our core business through relentless business reinvestment. Second, we're committed to maintaining a strong balance sheet that provides us with continued optionality as our markets evolve. Third, we expect to consistently deploy 100% of excess cash over time.

Chris: Please go to slide number 10.

Christopher J. Kuehn: We remain committed to our balanced capital allocation strategy focused on consistently deploying excess cash to opportunities with the highest returns for shareholders.

Christopher J. Kuehn: First we continue to strengthen our core business through relentless business reinvestment.

Chris: Second we're committed to maintaining a strong balance sheet that provides us with continued optionality as our markets evolve.

Christopher J. Kuehn: Third we expect to consistently deploy 100% of excess cash over time.

Christopher J. Kuehn: Our balanced approach includes strategic M&A that further improves long-term shareholder returns and share repurchases as the stock trades below our calculated intrinsic value. Please turn to slide 11, and I'll provide an update on our 2024 capital deployment. Year-to-date through April, we've deployed $540 million in cash, with $190 million to dividends and $350 million to share repurchases. We have $2.1 billion remaining under the current share repurchase authorization, providing us with strong optionality as our shares remain attractive, trading below their calculated intrinsic value.

Christopher J. Kuehn: Our balanced approach includes strategic M&A to further improve long term shareholder returns and share repurchases as the stock trades below our calculated intrinsic value.

Chris: Please turn to slide number 11, and I'll provide an update on our 2020 for capital deployment.

Christopher J. Kuehn: Year to date through April we have deployed $540 million in cash with $190 million of dividends and $350 million to share repurchases.

Dave: We have $2 $1 billion remaining under the current share repurchases authorization, providing us with strong optionality as our shares remain attractive trading below our calculated intrinsic value.

Christopher J. Kuehn: Our M&A pipeline remains active. We continue to see potential opportunities for value-accretive M&A, as we did in 2023, where we made key strategic investments to accelerate our progress across energy services and digital solutions, industrial process cooling, and precision temperature control technology. For 2024, we expect to deploy approximately $2.5 billion in cash. Strong free cash flow, liquidity, and balance sheet give us excellent capital allocation optionality moving forward. I'd like to turn the call back over to Dave. Dave?

Christopher J. Kuehn: Our M&A pipeline remains active.

Christopher J. Kuehn: To see potential opportunities for value accretive M&A as we did in 2023, where we made key strategic investments to accelerate our progress across energy services and digital solutions industrial process cooling and precision temperature control technology.

Dave: For 2024, we expect to deploy approximately $2 5 billion in cash are.

Christopher J. Kuehn: Our strong free cash flow liquidity and balance sheet give us excellent capital allocation Optionality moving forward.

Christopher J. Kuehn: I would like to turn the call back over to Dave.

Christopher J. Kuehn: Dave.

David S. Regnery: Thanks, Chris. Please go to slide number 13. As discussed, our transport performance in Q1 was as expected, and there's no change to our outlook for the year. The overall markets are expected to be down modestly, and we expect to outperform in both regions. We've continued to provide this slide in the deck for your reference. Please turn to slide number 14.

Dave: Thanks, Chris Please go to slide number 13.

David S. Regnery: As discussed our transport performance in Q1 was as expected and there is no change to our outlook for the year.

David S. Regnery: The overall markets are expected to be down modestly and we expect to outperform in both regions.

David S. Regnery: We've continued to provide this slide in the deck for your reference.

David S. Regnery: Please turn to slide number 14.

David S. Regnery: We operate our transport business for the long term, and while we're moving through a modest downturn in 2024, this is a great business with a bright future. Act projects a strong trailer market rebound from 2024 into 2025, up 19%, and projects continued growth through their forecast horizon in 2029.

David S. Regnery: We operate our transport business for the long term and while we're moving through a modest downturn in 2024. This is a great business with a bright future.

David S. Regnery: Act projects, a strong trailer market rebound from 2024 into 2025 up 19% and projects continued growth through their forecast horizon in 2029.

David S. Regnery: We have a diversified transport business goal, with opportunities to grow across the portfolio. With leading innovation, strong execution through our business operating system, and a world-class dealer network, we're well-positioned to outperform in any market environment. Please go to slide number 15. In summary, we are well positioned to drive differentiated growth and value over time and are leading innovation. Proven business operations and Unmatched Culture enables us to consistently deliver top quartile financial performance over the long term while continuing to reinvest in our business, and I believe our best days are ahead. We have the team, the strategy, and the track record to deliver a leading performance in 2024 and differentiated shareholder returns over the long term. And now, we'd be happy to take your questions. Operator.

David S. Regnery: We have a diversified transport business globally with opportunities to grow across the portfolio with leading innovation strong execution through our business operating system and our world class dealer network, we are well positioned to outperform in any market environment.

David S. Regnery: Please go to slide number 15 and.

David S. Regnery: In summary, we are well positioned to drive differentiated growth and value over time.

David S. Regnery: Our leading innovation proven business operating system and unmatched culture enables us to consistently deliver top quartile financial performance over the long term, while continuing to reinvest in our business.

David S. Regnery: And I believe our best days are ahead.

David S. Regnery: Have the team the strategy and the track record to deliver leading performance in 2024 and differentiated shareholder returns over the long term.

David S. Regnery: And now we'd be happy to take your questions operator.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.

Speaker Change: Thank you we will now begin the question and answer session.

Operator: If you have dialed in and we'd like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Operator: If you'd like to withdraw your question simply press Star one again.

Operator: If you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Operator: In the interest of time, we kindly ask that you limit yourself to one question and one follow-up question. Thank you. Your first question comes from Andy Kaplowitz with Citigroup. Please go ahead.

Operator: In the interest of time, we kindly ask that you limit yourself to one question and one follow up question. Thank you.

Operator: Your first question comes from Andy Kaplowitz with Citigroup. Please go ahead good morning, everyone.

Andrew Alec Kaplowitz: Dave, can you give us a little more color on your order momentum and backlog growth? You obviously enjoyed significant acceleration orders, and you mentioned the strength and applied.

Andrew Alec Kaplowitz: Hey, good morning, Dave.

Andrew Alec Kaplowitz: Dave can you give us a little more color into your order momentum and backlog growth you. Obviously enjoyed significant acceleration in orders in the you mentioned the strength in applied so can you give us any more color to how much of the continuing Americas orders acceleration is coming from data centers. Do you think you can continue to grow your backlog from here and maybe your thoughts on the duration of this quarter.

Andrew Alec Kaplowitz: So, can you give us any more color on how much of the Continuing America's orders acceleration is coming from data centers? Do you think you can continue to grow your backlog from here? And maybe your thoughts on the duration of this order cycle if it is, in fact, data-centered?

Andrew Alec Kaplowitz: Cycle. If it is in fact data center led.

David S. Regnery: Yeah, thanks for the question, Andy. It's a good question.

Speaker Change: Yeah. Thanks for the question Ed Good question look in the quarter, we saw broad based growth.

David S. Regnery: Look, in the quarter, we saw broad-based growth, and it wasn't necessarily concentrated in any one vertical. I mean, we certainly had strength in data centers, we certainly had strength in education, healthcare, and high-tech industrials. It was almost hard for us to find a vertical that we didn't grow in.

David S. Regnery: And it wasn't concentrated necessarily any one vertical I mean, we certainly had strength in data centers is certainly a strength in education health care High Tech industrials.

David S. Regnery: It was on this hard for us to find a vertical that we didn't grow in.

David S. Regnery: We did have a bit of weakness, and I guess you would say conventional office space and some in lodging. But for the most part, it was broad-based growth, and it was really on a global level. So a lot of strength in our commercial HVAC businesses, and you know, the good news is our pipeline is also very strong. So this would be before an order actually comes in to be a booking. This is what our sales teams are working on, and that continues to be very strong as well. So look, there's a lot of innovation. I'm certainly proud of what the team's been able to deliver, and we're executing at a very high level.

David S. Regnery: We did have a bit of weakness and I guess, you would say conventional office.

David S. Regnery: And some in lodging, but for the most part it was broad based growth and it was really on a global level. So a lot of strength in our commercial HVAC businesses.

David S. Regnery: <unk>.

David S. Regnery: The good news is our pipeline is also very strong. So this would be for an order actually comes in to be a booking.

David S. Regnery: This is what our sales teams are working on that continues to be very strong as well. So it gets a lot of innovation.

David S. Regnery: I'm certainly proud of what the team's been able to deliver and.

David S. Regnery: We're executing at a very high level right now.

Christopher J. Kuehn: David, we definitely can appreciate that. So on that note, you know, organic incremental margins continue to trend higher, you know, than your 25%. Given the strength in your markets and your overall ability to execute, why isn't 30 or 35, as you've been able to record for a while now, the new 25 for Trane? And then where are you on, let's say, the slope of the productivity projects that you've been undertaking? Because we know you've been really focused on productivity after not being able to do as much during the pandemic.

David S. Regnery: If I definitely can appreciate that some of that node.

Christopher J. Kuehn: Ganic incremental margins continue to trend higher than your 25% given the strength in your markets and the overall ability to execute why isn't 30 years 35, as you've been able to record for a while now the new 25 for the train and then where are you on let's say the slope of productivity projects that you've been undertaking because we know that <unk> been really focused on.

Christopher J. Kuehn: Activity after not being able to do as much during the pandemic.

Christopher J. Kuehn: Hey Andy, it's Chris. I'll start, and then Dave may jump in. So, you know, as we think about the first quarter, investments back into the business began to ramp really stronger into February and March than, say, the start of the quarter, and our run rate exiting Q1 is stronger than when we started. The pipeline for investments continues to grow, and these are across multiple categories. So, to your question, we really like the long-term framework or the 25% or better incrementals. That's what we're continuing to guide for 2024.

Christopher J. Kuehn: Andy It's Chris I'll start and then Dave May jump in so as we think about the first quarter investments back into the business began to ramp.

Christopher J. Kuehn: Really stronger into February and March than say the start of the quarter and our run rate exiting Q1 is stronger than when we started.

Christopher J. Kuehn: The pipeline for investments continues to grow and these are across multiple categories. So to your question, we really like the long term framework of the 25% or better Incrementals that we're continuing to guide for 2024, but the investment pipeline and where we can see the market outgrowth here.

Christopher J. Kuehn: But the investment pipeline and where we can see the market outgrowth here and the order rates and the revenue rates, I think just tells us we want to keep investing back in the business. You know, think of these investments, again, around innovation, sales, and service investments that Dave talked about in the comments. These are upfront tools as well as people investments. Making sure we've got capacity investments, automation in the factory, digital, the list goes on, and we want to make sure we're always funding back into the business. On the productivity side, we're not there yet. We're getting better at gross productivity, but there are still more opportunities for us going forward. Thanks for that, Chris.

Christopher J. Kuehn: And the order rates in the revenue rates.

Christopher J. Kuehn: I think just tells US we want to keep investing back in the business and I think of these investments again around innovation.

Christopher J. Kuehn: Sales and service investments that Dave talked about in the comments. These are upfront tools as well as people investments made.

Christopher J. Kuehn: Making sure we've got capacity investments automation in our factory digital the list goes on and we want to make sure we're always funding back into the business.

Christopher J. Kuehn: On the productivity side, we're not there yet where we're getting better on the gross productivity, but theres still more opportunities for us going forward.

Speaker Change: Thanks for that Chris Great quarter.

Christopher J. Kuehn: Thanks for that, Chris; a great quarter.

Chris: Thanks, Andy Thank you.

Operator: Your next question comes from Scott Davis with Melius Research. Please go ahead.

Christopher J. Kuehn: Your next question comes from Scott Davis with Melius Research. Please go ahead.

Scott Reed Davis: Hey, good morning, guys. Dave, Chris. Good morning.

Scott Reed Davis: Hey, good morning, guys, David Chris Good morning.

Scott Reed Davis: Got it.

Scott Reed Davis: Hey, guys, just following up on Andy's question a little bit, but can you mark the market where you are on data center capability? I know you made that investment in LiquidStack, I think it's called. Do you have kind of, are you developing kind of soup-to-nuts capabilities in the data center to be able to handle some of these newer, hotter chips?

Scott Reed Davis: Hey, guys just following up on Andy's question, a little bit, but can you mark to market, where youre at and datacenter capability I know you've made that investment in liquid stack I think it's called.

Scott Reed Davis: Hi.

Scott Reed Davis: Do you have kind of are you developing kind of soup to nuts capabilities in the data center to be able to handle some of these newer hotter.

David S. Regnery: Yeah, great question, Scott. I think, you know, we've been very well positioned in the data center vertical for a long time, and I think you know this, but technology tends to move pretty fast in this vertical compared to others. And we're certainly aware of these new technologies that are being developed really at the terminal side of cooling. So think of that as, you know, direct cooling to the chip, or think of it as immersion cooling at the rack level. One of the things that we do really, really well at Trane Technologies is we think about systems. And if you think about a data center's cooling system, You need to think about the entire picture.

Scott Reed Davis: Chips.

Speaker Change: Yes, Great question, Scott I think we've been very well positioned in the data center vertical for a long time.

David S. Regnery: I think you know this but technology tends to move pretty fast in this vertical compared to others.

David S. Regnery: We're certainly aware of these new technologies that are being developed really at the terminal side of cooling.

David S. Regnery: So think of that as direct cooling to the chip or think of it as immersion cooling at the rack level what are the things that we do really really well at trane technologies as we think about systems.

David S. Regnery: Think about a data centers cooling systems, we need to think about the entire system. So some of it certainly is what we would call the terminal side and that's what we just referred to.

David S. Regnery: So some of it certainly is what we would call the terminal side, and that's what we just referred to. But these systems also require sophisticated air handling. They also require high-efficiency chillers, and we look at the entire system to really help the customer think through the entire energy needs for that, for the whole data center. The other thing that's really emerging, and you're going to hear more about this, is that when we think of the data center, we think of it as a thermal management system.

David S. Regnery: These systems also require sophisticated air handling they also require high efficiency chillers.

David S. Regnery: And we look at the entire system to really help the customer think through the entire energy needs for that for the whole data center. The other thing Thats really emerging youre going to hear more about this as we think of the data center I think of it as a thermal management system. So I know you know this but when you're cooling of space, you're removing heat from it.

David S. Regnery: So I know you know this, but when you're cooling a space, you're removing heat from it. Data centers have a lot of heat. What do you do with that heat that you're removing? Conventional thinking would be that it gets emitted back into the atmosphere. But how can you repurpose it?

David S. Regnery: Data centers have a lot of heat what do you do with that heat that you are removing conventional thinking would be it gets there.

David S. Regnery: Admitted back onto the atmosphere.

David S. Regnery: But how can you repurpose that heat and we've done some projects still early stages here, where we're creating district heating loops from the heat that would normally just be wasted and reusing it as an asset.

David S. Regnery: And we've done some projects, still in the early stages here, where we're creating district heating loops from the heat that would normally just be wasted and reusing it as an asset. So it's a very dynamic space. It's obviously growing at a nice clip, and it will grow at a nice rate for the foreseeable future. And we're right in the middle of it. And it's always been a very strong vertical, and it will be in the future.

David S. Regnery: It's a very dynamic space.

David S. Regnery: It's obviously growing at a at a nice and a nice clip it will grow at a nice rate for the continued future at worst spot in the middle of it and it's always been a very strong vertical and it will be in the future.

Scott Reed Davis: That makes sense, Dave, and just a little bit about pie in the sky here. But does it make more sense to think about you guys in a data center partnering with somebody like Vertiv or explicitly competing against them? It seems like you both have very different capabilities, but obviously overlap. There are some critical apps there. So how how do you guys think about that opportunity when you think about these giant giants? [inaudible] presumably almost rely on maybe more than one supplier, not just one. Is that accurate, Dave, or am I thinking about it wrong?

Speaker Change: That makes sense, David and just.

Scott Reed Davis: A little bit about <unk>.

Scott Reed Davis: Pie in the Sky here, but.

Scott Reed Davis: Does it make more sense to think about.

Scott Reed Davis: You guys.

Scott Reed Davis: And then data center partnering with somebody like furtive or explicitly compete against them because it seems like you've both at very different capabilities, but obviously overlap on.

Scott Reed Davis: Some critical apps there. So how do you guys think about that opportunity and when you think about these giant giant.

Scott Reed Davis: One gigawatt datacenter something where.

Scott Reed Davis: The engineering capabilities.

Dave: I would.

Scott Reed Davis: Presumably almost can't rely on maybe more than one supplier not just one.

Scott Reed Davis: Is that accurate, Dave or am I thinking about it wrong.

David S. Regnery: Yeah, I wouldn't call out any particular company here, but I would tell you that we have technology partners that we work with because you're spot on. It's a cooling system, right? It's no different than, you know, think about a system that exists within a building, right? We may not have every component. But we would have a partner that would have that component, but we would help integrate it into a system that would be operating in an efficient way for

Scott Reed Davis: I wouldn't call out any particular.

David S. Regnery: Company here, but I would tell you that we have technology partners that we work with because you're spot on it's a cooling system right. It's no different than.

David S. Regnery: Think about a system that exists within a building right. We may not have every component.

David S. Regnery: But we would have a partner that would have that component, but we would help integrated into a.

David S. Regnery: A system that would be operating in an efficient way for the customer.

Scott Reed Davis: Very fair. Thank you. Best of luck, guys. Congratulations on the start of the year.

Speaker Change: Very fair. Thank you best of luck guys. Congrats on the start.

Scott Reed Davis: Yeah.

Operator: Your next question comes from Julian Mitchell with Barclays. Please go ahead.

Scott Reed Davis: Your next question comes from Julian Mitchell with Barclays. Please go ahead.

Julian C.H. Mitchell: Hi, good morning. Hey, good, thank you.

Julian C.H. Mitchell: Hi, good morning.

Operator: Yes.

Julian C.H. Mitchell: Hey, good. Thank you maybe just a first question on the organic sales guide for the year. So it looks like the first half year up maybe about.

Julian C.H. Mitchell: Maybe just the first question on the organic sales guide for the year. So it looks like the first half you're up maybe about 11% based on the guidance for the full year. Unknown Attendee, Mark Koznarek, Trane Tech, Unknown Attendee, Mark Koznarek, Unknown Attendee, Because I would have thought Resi and TK would have had better year-on-year sales in the back half versus the first half. So with the total enterprise sort of going from 11 to 6, is it just really that commercial HVAC piece just battling the tough comps?

Julian C.H. Mitchell: 11%.

Julian C.H. Mitchell: Based on the guidance the full year.

Julian C.H. Mitchell: You have got up sort of high single so second half is there it may be 6% or so is the way to think about that and I understand we haven't yet seen cooling season, and so forth, but it is the way to think about that revenue guide framework, it's a big slowdown in commercial HVAC versus Q1 because of the extremely tough.

Julian C.H. Mitchell: Comps.

Julian C.H. Mitchell: Because I would've thought Ramsey and Teekay would look better year on year sales in the back half versus the first half.

Julian C.H. Mitchell: So of the total enterprise sort of going from 11% to six or is it just really that commercial HVAC piece, just battling the tough comps.

Christopher J. Kuehn: Hey Julian, it's Chris. I'll start. It is tough competition for commercial HVAC and especially in the Americas. They're going to have a great year on a full year basis, but when you think about, go back a year. In the first quarter of 2023, the growth there in commercial HVAC Americas was around mid-teens, and then by the fourth quarter of last year, the growth was mid-20s. So think of that as a 10-point increase in terms of growth and revenue throughout last year.

Julian C.H. Mitchell: Hey, Julien, it's Chris I'll start.

Speaker Change: It is tough comps for commercial HVAC.

Christopher J. Kuehn: And especially the Americas theyre going to have a great year on a full year basis, but when you think about go back a year in the first quarter of 2023 the growth there in commercial HVAC Americas is around mid teens, and then by the fourth quarter of last year. The growth was mid Twenty's. So think of that as a 10 point increase in terms of <unk>.

Christopher J. Kuehn: Growth in revenue throughout last year, so the comps do get tougher as we work through 2024, but again theyre going to have an outstanding year. This year, but youre right. It is a bit of a tough comps in commercial HVAC.

Christopher J. Kuehn: So the comps do get tougher as we work through 2024, but again, they're going to have an outstanding year this year, but you're right, it is a bit of a tough comp in commercial HVAC. Transport Americas, we do expect the second half to be stronger than the first half. That was also due to tough comps. The business was up 20% in the first half of 23, but down 20% in the second half of 23. So the comps get easier as we go throughout the year. But you're right; you've dialed it in a little bit there.

Christopher J. Kuehn: Transport Americas, we do expect the second half to be stronger than the first half that is also due to tough comps the business was up 20% the first half of 'twenty three.

Christopher J. Kuehn: Down 20% in the second half of 'twenty three so the comps get easier as we go throughout the year.

Christopher J. Kuehn: But youre right, you've dialed that in a little bit there and look we feel comfortable with the guide.

Christopher J. Kuehn: And look, we feel comfortable with the guide that we put out there now and our ability to meet or exceed that guide for the full year. Let us get through another quarter of results here in the second quarter. As you know, the first quarter within Trane Technologies is generally our smallest quarter of the year. Now, let us get through the second quarter. We'll give a better insight into the second half of the year then. But we feel very confident with the guide that we just released today.

Christopher J. Kuehn: We put out there now and our ability to meet or exceed that guide on the full year.

Christopher J. Kuehn: Let us get through another quarter of results here in the second quarter as you know the first quarter.

Christopher J. Kuehn: Within Trane technologies is generally our smallest quarter of the year, let us get through the second quarter, we will give a better insight on the second half of the year at that time.

Christopher J. Kuehn: Feel very confident with the guide that we just released today.

Christopher J. Kuehn: Thank you, Chris. And maybe just my follow-up would be on the sort of price and price mix outlook. So I think in the first quarter, maybe price was about a two point tailwind to revenue. Maybe remind us kind of what you're embedding for the year as a whole. And has there been any shift in the expectations on the sort of price mix tailwind in light commercial and residential HVAC from the refrigerant change and the sort of various, you know, EPA movements on that? Yeah, Julian. So, first of all,

Christopher J. Kuehn: Yeah.

Speaker Change: Thank you, Chris and maybe just my follow up would be on the sort of price and price mix outlook. So I think in the first quarter, maybe price was about a two point.

Christopher J. Kuehn: Tailwind to revenue.

Julian: Maybe remind us kind of what you're embedding for the year as a whole.

Christopher J. Kuehn: And has there been any shift in the expectations on the sort of price mix tailwind in light commercial and resi HVAC from the refrigerant change in the sort of various EPA movements on that.

Christopher J. Kuehn: Julian, so in the first quarter at an enterprise level, we delivered about three points of price. Those comps get tougher as we move throughout the years.

Julian: Yeah, Julien so in the first quarter at an enterprise level, we delivered about three points of price.

Julian: Comps get tougher as you move throughout the year as we start getting into a bit more of a normalization of price.

Christopher J. Kuehn: We start getting into a little bit more of a normalization of price. Think of the full year now; we're guiding to about two points of price. It was certainly a question on the call that we had a few months ago about our full year guide to price. We thought we could maybe do a little bit better there.

Christopher J. Kuehn: Think of the full year now we're guiding to about two points of price.

Christopher J. Kuehn: It was certainly a question on the call that we had a few months ago on our full year guide on price. We felt we could maybe do a little bit better there and delivering on Q1 gives us the confidence to raise our full year revenue by two points think of that as a point of price and a point of volume.

Christopher J. Kuehn: And delivering on Q1 gives us the confidence to raise our full-year revenue by two points. Think of that as a point of price and a point of volume. In the Americas, we've led with price. In the Americas, that's generally been the model within the company. And within that, commercial HVAC would have been stronger.

Christopher J. Kuehn: In the Americas, we lead with price in the Americas, that's generally been the model within the company and within that commercial HVAC. It would have been would have been stronger.

Christopher J. Kuehn: As we think about price mix and maybe inflation a bit, we're very confident in terms of delivering the 20 or 30 basis points, maybe better in terms of price cost, price versus inflation for the full year. That's one of the best parts, if I think about our business operating system, has been our ability to remain nimble with pricing, making sure that we've got the right inputs. And as we think about commodities and how they kind of play out over the next year to two years, remaining nimble in terms of pricing is something that we've done in our business operating system. Your comment on residential. We're not Dave. Do you want to cover that?

Christopher J. Kuehn: As we think about.

Speaker Change: Nice mix and maybe inflation a bit we're very confident in terms of delivering the 20 or 30 basis points may be better in terms of price cost price versus inflation on the full year.

Dave: That's one of the best parts of I think about our business operating system has been our ability to remain nimble with pricing.

Dave: So that we've got the right inputs and as we think about commodities and how they kind of play out over the next year to two years remaining nimble in terms of pricing is something that.

Christopher J. Kuehn: Operator.

Speaker Change: Your comment on residential we're not Dave you want to cover that yeah.

David S. Regnery: Yeah, we don't have a lot of 454 B, at least in the Americas, built into our guide. Okay, we're ready from a product standpoint, we'll be launching those products as we go through the year, but we're not anticipating a lot of volume in 2024. And we'll see how the year progresses for 2025.

Dave: Don't have a lot of $4 54, b at least in the Americas built into our guide okay.

David S. Regnery: To see ready from a product standpoint, we will be launching those products as we as we go through the year, but we're not anticipating a lot of it.

David S. Regnery: Volume.

David S. Regnery: In 2024, and we'll see how the year progresses for 2025.

David S. Regnery: On one of the things too on 454B is I saw a couple of preliminary comments come out about, you know, being a new refrigerant. I just want to make sure everyone's clear. We've been using 454B in Europe for over two years now, so this is not a new refrigerant for Trane Technologies. We were very comfortable with the refrigerant, and we've had it in our portfolio for some time. A lot of it is baked in America and us.

David S. Regnery: One of the things to Unfortunately for me is I saw a couple of pre comments come out about being a new refrigerant I just want to make sure everyone's clear we've been using $4 54 b.

David S. Regnery: In Europe for over two years now. So this is not a new refrigerant for Trane technologies, where we are.

David S. Regnery: But with the refrigerant than we've had in our portfolio for some time.

David S. Regnery: A lot of it baked in America.

Julian C.H. Mitchell: Great, thank you. Okay, thanks Julian. Thanks Julian. Your next question comes from Gautam Khanna with TD Cowan.

David S. Regnery: Yes.

David S. Regnery: Okay.

Gautam J. Khanna: Great. Thank you.

Gautam J. Khanna: Okay. Thanks, Julie Thanks Julien.

Julian C.H. Mitchell: Your next question comes from Gautam Khanna with TD Cowen. Please go ahead.

Operator: Please go ahead. Hey, thanks, guys, and great results. Thank you. Good morning.

Gautam J. Khanna: Hey, Thanks, guys great results.

Gautam J. Khanna: Thank you good morning.

Gautam J. Khanna: I wanted to ask if you could opine again on what you think happens with resolute average resin pricing next year given the transition.

Gautam J. Khanna: Your next question comes from Gautam Khanna with TD Cowan. Please go ahead. Hey, thanks, guys, and good luck.

Gautam J. Khanna: Thank you.

Gautam J. Khanna: Kind of.

Gautam J. Khanna: 10%.

Gautam J. Khanna: How would you characterize.

Gautam J. Khanna: Yes, we have.

Gautam J. Khanna: That's a good question, Gautam. I hope all is well with you.

Gautam J. Khanna: It's a good question got them hope all is well with you look we don't anticipate a lot of 454 b product in 2024 as I, just said that will obviously ramp up in 2025, we're not projecting 2025, yet from a pricing standpoint, we're going to we will announce pricing when we released the products.

David S. Regnery: Look, we don't anticipate a lot of 454B product in 2024. But, as I just said, that will obviously ramp up in 2025. We're not projecting 2025 yet. From a pricing standpoint, we're going to, we'll announce pricing when we release the products. But I think what you've heard from others is probably in the ballpark as to what to expect from a pricing standpoint. We're going to see how the year plays out.

David S. Regnery: But I think what you've heard from others is probably in the ballpark as to what to expect from a pricing standpoint.

David S. Regnery: We're going to we're going to say the year plays out Okay. We don't see a big pre buy happening and at the end of the year for <unk>, maybe you'll get maybe a minor one with some high runners. So it's really going to be nobody wants to get stuck with inventory and.

David S. Regnery: Okay, we don't see a big pre-buy happening at the end of the year for 410. Maybe you'll get maybe a minor one with some high runners. So it's really going to be nobody wants to get stuck with inventory. And it's just we have to watch out to see how the balance plays out. And we'll give you an update as we move.

David S. Regnery: It's just we have to watch and see how that balance plays out and we'll give you an update as we move through the year.

Speaker Change: I appreciate it thank you guys.

Speaker Change: No problem Gotham.

Operator: Your next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

David S. Regnery: Your next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Joseph Alfred Ritchie: Hey guys, good morning, and yeah, stellar results. Thanks, Josh. Just maybe just taking it back to the data center discussion for a second. Is there a way to maybe parse out or range or on a relative basis kind of give us any sense for your dollar content on a data center and what the opportunity is?

Joseph Alfred Ritchie: Hey, guys good morning, and.

Joseph Alfred Ritchie: Stellar result.

Joseph Alfred Ritchie: Yes.

Joseph Alfred Ritchie: Just.

Joseph Alfred Ritchie: Maybe just taking it back to that data center discussing for a second.

Joseph Alfred Ritchie: Is there a way to maybe parse out or range or on a relative basis kind of give us any sense for your dollar content on a data center and what the opportunity is.

Joseph Alfred Ritchie: Yeah, you start talking about averages, which are always dangerous, Joe. I mean, I've read reports where people have estimated the 3 to 5 percent range. In some cases, I'd say they're in the ballpark, and then you get into some hyperscale that may have a different configuration, but it's not that far off. Look, we're very strong in this vertical. We have been for a while, and it's going to have a lot of growth in the future, which is exciting. But understand that it's one vertical of many verticals that we play in, and in the first quarter, we had broad-based strength, so it wasn't just focused on.

Joseph Alfred Ritchie: Yes.

Joseph Alfred Ritchie: Talking about averages, which are always dangerous Joe.

Joseph Alfred Ritchie: Read reports, where people have estimated the 3% to 5% range.

Joseph Alfred Ritchie: In some cases I'd say they are in the ballpark and then you get into some hyperscale that may have a different configuration, so, but it's not that far off.

Joseph Alfred Ritchie: Look we're very strong in this vertical we have been for a while.

Joseph Alfred Ritchie: And it's going to have a lot of growth in the future and which is exciting but understand its one vertical of many verticals that we play in.

Joseph Alfred Ritchie: And in the first quarter, we had broad based strength.

Joseph Alfred Ritchie: So it wasn't just focused on data centers.

David S. Regnery: Got it. That's, that's helpful, Dave.

Joe: Got it that's helpful. Dave and maybe that follow on question to the other other things that are strong right you had an electrical peer throw out a one two trillion dollars megaproject number today.

Joseph Alfred Ritchie: And maybe that follow-on question for the other, other things that are strong, right? You had an electrical pier throw out a $1.2 trillion megaproject number today. Seems like there's just a lot of investment on the horizon. At the same time, you do have some other funding, like ESSER funding, as an example, that might be coming down. So, just, maybe, high level, just talk to us about what you see in terms of like your quoting activity or what you see coming through the pipe over the next couple of years. Yeah, I'll start with megaprojects. I mean, I think that

Joseph Alfred Ritchie: It seems like there's just a lot of investment on the com at the same time like you do have some some other funding like asset funding as an example that might be coming down so.

Joseph Alfred Ritchie: Just maybe high level, just talk to us about what you see in terms of like your quoting activity or what you see coming through the pipe over the next couple of years.

Joseph Alfred Ritchie: Yeah, I'll start with Mega projects, I mean, I think that you know mega projects are happening in verticals that we've always been very strong and so it's always difficult to say, what's additive versus whats ongoing strength in a particular vertical that said our team is tracking over 300 Mega projects.

David S. Regnery: Yeah, I'll start with megaprojects. I mean, I think that, you know, megaprojects are happening in verticals that we've always been very strong in. So it's always difficult to say what's additive versus what's ongoing strength in a particular vertical.

David S. Regnery: That said, our team is tracking over 300 megaprojects, and we've had some orders that have been received. However, the majority are still in the pipeline, as these are typically longer-duration projects to close. A lot of these projects that are deemed as mega projects are global in nature, which gives us a competitive advantage with our direct sales force because we're able to triage decision makers and provide technical support in different parts of the world. So, well, well in tune to what's happening with megaprojects.

David S. Regnery: We've had some orders that have been received however, the majority are still in the pipeline.

David S. Regnery: These are typically longer duration projects to close.

David S. Regnery: Lot of these projects that are deemed as mega projects are global in nature, which gives us really a competitive advantage with our direct sales force because we're able to triage decision makers and provide technical support in different parts of the world, So well well in tune to what's happening with Mega projects as far as <unk> goes.

David S. Regnery: As far as ESSER funding goes, look, ESSER funding, the way it's designed right now, you can take an order up until September of this year, and it has to be fulfilled within the first quarter of 2026. And we've done very well with ESSER funding, but we don't believe that the whole education vertical, you know, stops after ESSER funding. There's also IRA funding that's available, and there's, of course, the municipal bond process that's always been very robust in the past. So look, the education vertical has always been strong for Trane Technologies, and it is expected to be strong in the future as well.

David S. Regnery: Look essar funding the way it's designed right now you can take an order up until September of this year and it has to be fulfilled within the first quarter of 2026.

David S. Regnery: We've done very well with us or funding, but we don't believe that the whole education vertical.

David S. Regnery: Stops after arrest or funding. There is also <unk> funding that's available and there's of course the municipal bond process. That's always been very robust in the past. So look the education vertical has always been strong for trane technologies is expected to be strong in the future as well.

Operator: Your next question comes from Steve Tusa with J.P. Morgan.

Speaker Change: Super Thank you.

Speaker Change: Thanks, Joe.

Operator: Your next question comes from Steve Tusa with Jpmorgan. Please go ahead.

Charles Stephen Tusa: Unknown Speaker Some very nice orders. Congratulations. Thank you. Thank you. Can you just talk about what you're seeing on applied versus light commercial, just orders and revenues?

Charles Stephen Tusa: Hi, good morning.

Charles Stephen Tusa: Once they went away.

Charles Stephen Tusa: Some very nice orders.

Charles Stephen Tusa: Congrats thank you. Thank you.

Charles Stephen Tusa: Can you just talk about what Youre seeing.

Charles Stephen Tusa: On applied versus.

David S. Regnery: Yeah, I mean, obviously, you know, in the Americas, which I think is where your questions focused, we were very strong in equipment overall. I mean, our order rate for equipment was up over 40%, and we saw strength really in both applied and unitary, and you know, in the past, I've said units applied have been a lot stronger this time, they were pretty close, so there's a lot of strength out there and that makes sense because if you look at our we had broad-based growth across almost all verticals, and a lot of those verticals are served with different applications So it was very strong.

Charles Stephen Tusa: Versus light commercial just orders and revenues.

David S. Regnery: Yes, I mean, obviously in.

David S. Regnery: In the Americas, which I think is where your question is focused.

David S. Regnery: We were very strong in equipment overall, I mean, our order rate for equipment was up over 40%.

David S. Regnery: And we saw strength really in both applied and unitary.

David S. Regnery: And in the past I've said units applied has been a lot stronger. This time they were pretty close so theres a lot of strength out there and that makes sense. Because if you look at we had broad based growth across really almost all verticals.

David S. Regnery: And a lot of those verticals are served with different applications. So it.

David S. Regnery: It was very strong.

Charles Stephen Tusa: And I guess, are there particular verticals on like commercial that, you know, you think you're gaining share in because you know your main peer had orders down pretty dramatically there.

Speaker Change: And I guess what are you are there particular verticals. Unlike commercial that you think you're <unk>.

Charles Stephen Tusa: Gaining share in because your main peer had orders down pretty dramatically there.

David S. Regnery: Yeah, I don't, I can't speak to a competitor because you get comps from one year to another. I would just tell you that, you know, it's broad-based. You're going to have some verticals that are more on the applied side, but some verticals are more on the, on the unitary side. So, think about education; it's probably a 50-50 split. Conventional office typically tends to be more on the unitary side, not always, but it tends to be.

Speaker Change: Yeah, I don't I can't speak to a competitor because you get comps from one year to another.

David S. Regnery: I would just tell you that.

David S. Regnery: Is it broad based youre going to have some verticals that are more on the applied side with some verticals are more on the on the unitary side. So think about education, it's probably a 50 50 split conventional office typically tends to be more on the unitary side not always but tends to be a.

David S. Regnery: Retail will be on the rooftop side, but look, we're very happy with the performance we had in Q1 and, you know, I don't remember a quarter when I was talking about 40% order growth and it was as broad-based as we saw in Q1.

David S. Regnery: Retail will be on the on the rooftop side, but.

David S. Regnery: We're very happy with the performance we had in Q1 and.

David S. Regnery: I don't remember a quarter when I was talking about 40% order growth and it was broad based as we saw in Q1.

Charles Stephen Tusa: Right. And then just one last one. On Resy, can you just break down the, in that business for the quarter, just the price mix and volume?

Speaker Change: Alright, and then just one last one on resi can you just break down the.

Charles Stephen Tusa: In that business for the quarter just the price.

Charles Stephen Tusa: Mix and volume.

Unknown Attendee: Unknown Attendee Yeah, revenues were up low single digits. Think of them as very low numbers contributing price and volume in terms of residential. It just we start getting a lot of small numbers there on up low single digits. It did better than we expected, as Dave talked about earlier. You know, think of prices really de minimis; maybe volume was up around one for resi. But, you know, let's see, we're just starting the cooling season here. Let's get through another quarter, and we'll see how the year plays out for residential. Okay, great. Thanks for the call.

Charles Stephen Tusa: For the quarter.

Charles Stephen Tusa: Revenues were up low single digits think of them as very low numbers contributing price volume.

Unknown Attendee: In terms of residential it just we start getting the law of small numbers, there and up low single digits.

Unknown Attendee: Did better than we expected as Dave talked to earlier.

Unknown Attendee: Think of prices really de Minimis, maybe volume was up around one for resi.

Unknown Attendee: Lets see were just starting the cooling season here, let's get through another quarter and we'll see how the year plays out for residential.

Speaker Change: Great. Thanks for the color.

Speaker Change: Thanks, Dave.

Operator: Your next question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Unknown Attendee: Your next question comes from Deane Dray with RBC capital markets. Please go ahead.

Deane Michael Dray: Thank you. Good morning, everyone. Hey Deane, how are you? Good morning.

Deane Michael Dray: Thank you and good morning, everyone.

Deane Michael Dray: Hey, Dan how are you doing real well thank you.

Deane Michael Dray: They're doing real well. Thank you. So those were pretty positive comments coming out of China. So you kind of give us a sense of where the demand is and the outlook, because we have heard some mixed signals about, you know, at best, stabilization.

Deane Michael Dray: So those were pretty positive comments coming out of China. So you kind of give us a sense of where the demand is the outlook because we have heard some mixed signals about.

Deane Michael Dray: At best stabilizing, but it sounds like Youre seeing some pretty strong growth.

David S. Regnery: David Regnery, Unknown Attendee, Mark Koznarek, Trane Tech

David S. Regnery: Yeah.

David S. Regnery: Yeah, the team there continues to execute at a very high level, a very seasoned team, been in place for a lot of tenure with the company. A lot of strength in pharmaceutical, healthcare, high-tech, data centers, which is really where our portfolio plays well with our applied systems. So, very happy with what we saw. Now, China is a small percentage of the enterprise, in the 5% range, but there is a lot of strength there, which is encouraging. That's real really helpful.

David S. Regnery: The team there continues to execute at a very high level, a very seasoned team been in place for that.

David S. Regnery: A lot of tenure with the company a lot of strength in pharmaceutical health care High Tech data centers.

David S. Regnery: Which is where really where our portfolio plays well with our applied systems. So.

David S. Regnery: Very happy with what we saw in China is a small percentage of the enterprise and the 5% range, but a lot of strength, there which is encouraging.

David S. Regnery: That's real helpful. And then could you give us a sense of where you stand on your services mix.

David S. Regnery: And then, can you give us a sense of where you stand on your services mix, refresh us on the targets, and how do you think that plays out for this year? That was a great question. I was telling Chris, I think we're going to have, in the Americas. We always said our service business was 50% service and 50% equipment. But with our equipment growth, we have to go back and look at the calculation. Look, we had a very strong services business in Q1. At a global level, it was up in the low teens. In the Americas, it was up over 15%.

David S. Regnery: Refresh us on the target.

David S. Regnery: And.

David S. Regnery: How do you think that plays out for this year.

David S. Regnery: It's a great question I always tell it Chris I think we're going to add in the Americas. We always said our service business was 50% service, a 50% equipment, but with our equipment growth. We got to go back and look at the calculation look we had a very strong services business in the Q1 on a global level was up in the in the low teens.

David S. Regnery: In the Americas, It was up over 15% and there's a compounding effect thats going on there and this is the sixth year, where we've had service growth of low single digits.

David S. Regnery: And there's a compounding effect that's going on there. And this is the sixth year where we've had service growth of low single digits. So, it's a, we've invested heavily in this. I think it's one of the areas that sometimes gets underappreciated in trained technologies. But I tell you, it's a third of our business. It's very resilient, and it is an enabler.

David S. Regnery: We've invested heavily in this I think it's one of the areas that sometimes gets underappreciated and trane technologies, but I'd tell you. It's a third of our business is very resilient and it is an enabler and that team continues to execute at a very high level and expected in the future as well.

Christopher J. Kuehn: And that team continues to execute at a very high level, and growth is expected in the future as well. Yeah, Dean, the six years, you know, up high single digit growth in services. Last year it was up double digits, and Dave keeps pressuring us to kind of move up double digits. But I'll tell you, it's, you know, the resiliency, as he called it out. And we like the margins there. And a nice start to the year in the business. Thank you.

Christopher J. Kuehn: Indeed, the six years.

Christopher J. Kuehn: High single digits growth in services last year was up double digits, and Dave keeps pressuring us to kind of move to the double digits, but.

Christopher J. Kuehn: I'll tell you it's.

Christopher J. Kuehn: The resiliency as you called out and we like the margins there and nice start to the year in the business.

Speaker Change: Thank you thanks.

Speaker Change: Thanks, Dan.

Operator: Your next question comes from Nigel Coe with Wolf Research. Please go ahead.

Christopher J. Kuehn: Your next question comes from Nigel Coe with Wolfe Research. Please go ahead.

Nigel Edward Coe: Good morning. And I don't often say this, but great quarter, fantastic results. I guess, I'm sorry, I've been going back and forth on different calls here, but maybe just step back.

Nigel Edward Coe: Thanks, Thanks very much for the question good morning.

Nigel Edward Coe: So I don't know if I say, this but great quarter fantastic results.

Nigel Edward Coe: I guess.

Nigel Edward Coe: Im sorry, im going back and forth.

Nigel Edward Coe: The different closer, but so maybe just step back I mean, what surprised you to the upside this quarter I mean, obviously organic came in.

Nigel Edward Coe: I mean, what surprised you to the upside this quarter? I mean, obviously, Organic came in a lot better, really strong commercial HVAC trends. But specifically, what really surprised you during this quarter? Was it just backlog conversion?

Nigel Edward Coe: A lot better really strong commercial HBC trends, but specifically what really surprised you. During this quarter was it just backlog conversion.

David S. Regnery: Anything, any color that would help?

Nigel Edward Coe: Anything any color there would be helpful.

David S. Regnery: Yeah, I think there were really two things that were to the upside. One was our commercial HVAC business in the Americas. It really performed better than expected.

Speaker Change: Yes, I think there is really two things that were to the upside one was our commercial HVAC business in the Americas It really performed.

David S. Regnery: It performed better than expectations, just a lot of demand for our innovative products and the team executed extremely well the other upside within our residential business look we thought that was a business that was going to be down low single digits, maybe even mid single digits in the beginning of the year for Q1 with Destocking that was.

David S. Regnery: There was just a lot of demand for our innovative products, and the team executed extremely well. The other upside was in our residential business. Look, we thought that was a business that was going to be down low single digits, maybe even mid single digits in the beginning of the year for Q1, with destocking that was going to occur. I think that where we kind of got help there was the EPA coming out with their clarification on the sell-through for 410 and giving confidence to our independent wholesale distributors that they should be stocking up and getting ready for the season, which is what

David S. Regnery: To occur I think that where we kind of got help there was the EPA coming out with a clarification on the sell through for <unk> and gave confidence to our independent wholesale distributors.

David S. Regnery: They should be stocking up and getting ready for the season, which is what we saw so those would be the two big areas that kind of.

David S. Regnery: So those would be the two big areas that kind of where we saw the upside. The rest of the world really played out the way we thought. Europe strengthened our commercial HVAC business, continues a Thermal King business. Look, it's going to be a modest downturn in Thermal King sales this year. We'll do better than the markets, but that's exactly what we saw play out in the first quarter. Asia, you know, pretty much as we thought, maybe a little bit stronger in our commercial HVAC business, but it really played out as expected in the rest of the world.

David S. Regnery: Where we saw the upside the rest of the world really played out the way we thought.

David S. Regnery: Europe strengthen our commercial HVAC business continues a thermo king business look it's going to be.

David S. Regnery: A modest downturn in thermo king in the year, we will do better than the markets, but that's exactly what we saw play out in the first quarter Asia.

David S. Regnery: Pretty much as we thought maybe a little bit stronger in our commercial HVAC business, but it really played out as expected in the rest of the world.

Nigel Edward Coe: And then my follow-on is just the, you know, the standard here is, you know, just the resilience of the commercial HVC orders and backlog, especially in the backdrop of such, you know, weak, you know, Dodge Stars, ABI, et cetera. So, just wondering, you know, obviously, there's pockets of strength in data centers, et cetera, but, you know, is there increasing evidence of just more proactive replacement demands, you know, CO2 emission targets really driving demand in [inaudible] Yeah, I haven't, I can't get, I can't.

David S. Regnery: And then my follow on is just the.

Nigel Edward Coe: Stand out he is just the resilience of the <unk>.

Nigel Edward Coe: Commercial HBC orders in backlog.

Nigel Edward Coe: Even in the backdrop of weak Dodge starts Abi et cetera.

Nigel Edward Coe: So I'm just wondering that.

Nigel Edward Coe: Now obviously, there's pockets of strength in data center et cetera, but.

Nigel Edward Coe: Is that an increasing evidence of just more proactive replacement demand scioto emission targets really driving.

Nigel Edward Coe: Demand in.

David S. Regnery: Yeah, I haven't, I can't get, I can't answer that specifically, I haven't looked at it that way, but I would tell you that we continue to see a very strong pipeline. And so this would be what our sales force is actually working on, that they're putting in our CRM system, and that remains very robust. So there's a lot of activity out there. And I hear the disconnect when you look at it, or some of the other macro numbers. You just have to look at we don't look at just one, OK, you have to look at several, and some are aligned to one vertical versus another vertical. But look, we saw very strong demand. Broadbase, and pipelines are still strong. Great. Thanks, Dave. Okay, thanks.

Nigel Edward Coe: In Canada.

Speaker Change: I haven't.

David S. Regnery: I can't answer that specifically haven't looked that way, but I would tell you that.

David S. Regnery: We continue to see a V.

David S. Regnery: Very strong pipeline.

David S. Regnery: So this would be what our sales force is actually are working on that they're putting in our CRM systems and that remains very robust. So theres a lot of activity out there.

David S. Regnery: The disconnect too when you look at it or some of the other <unk>.

David S. Regnery: Macro numbers you just have to look at we don't look at just one okay. You have to look at several and some are aligned to one vertical versus another vertical but look we saw very strong demand.

David S. Regnery: Rod based and the pipelines are still strong.

David S. Regnery: Yeah.

Speaker Change: Great. Thanks, Dave.

Speaker Change: Okay. Thanks Nigel.

Operator: Your next question comes from Andrew Obin with Bank of America. Please go ahead.

David S. Regnery: Your next question comes from Andrew <unk> with Bank of America. Please go ahead.

Andrew Burris Obin: How are you? Good morning. Hi, how are you?

Andrew Burris Obin: Andrew.

Andrew Burris Obin: Can you hear me.

Andrew Burris Obin: Alright can how are you hey, good morning, Hi, how are you how are you good morning.

Andrew Burris Obin: Good morning. Just a question. As we think about, you know, cooling for semiconductor plants and data centers, right, it seems that the scale of the project is going up. And the question I have for that is, A, does this provide an opportunity to provide more sophisticated solutions to your customers and also to capture more value for training? And second, what are you doing with your aftermarket support organization to take advantage of that?

Andrew Burris Obin: Just a question as well.

Andrew Burris Obin: We think about.

Andrew Burris Obin: Cooling for.

Andrew Burris Obin: Semiconductor plants and data centers right. It seems that the scale of the projects.

Andrew Burris Obin: Going up and the question I have for that.

Andrew Burris Obin: Does this provide.

Andrew Burris Obin: An opportunity to provide more sophisticated solution to your customers and also to capture more value to train and second what are you doing to your aftermarket support organization.

Andrew Burris Obin: To take advantage of that.

Andrew Burris Obin: Yeah, we talked a little bit about data centers earlier. But look, this is a vertical that tends to move faster from a technology adoption standpoint than others. And we're working closely with partners and data center customers to understand what the trends are. And I would tell you, we're right in the middle of it.

Speaker Change: Yes, we talked a little bit about data centers earlier, but look this is a vertical that tends to move faster from a technology adoption than others.

Andrew Burris Obin: And we're working closely with partners and data center customers to understand what the trends are and I would tell you we're right in the middle of it.

David S. Regnery: In a data center, Andrew, look at the entire system. Okay, we like to look at things at the system level. And you're hearing a lot right now about the terminal side of the data center. So that would be like direct cooling to the chip or immersion cooling. We look at the entire system.

Andrew Burris Obin: And the data center and you look at the entire system. Okay. We like to look at things at a system level and Youre hearing a lot right now on the terminal side of data centers, so that would be like direct cooling to the chip or immersion cooling we look at the entire system. So the air handling side of it as well as the sophisticated chillers the higher.

David S. Regnery: So the air handling side of it, as well as the sophisticated chillers, the high efficiency chillers with next-gen refrigerants that are also required. I think where you're going to hear a little bit more is on the thermal management side of a data center. They produce a lot of heat. That heat is taken out of the data center. How can you repurpose it? And that's some of the technology that we're in discussions about, kind of at a thought leadership level as to how we can take an asset and our heat and turn it into an asset in the future.

David S. Regnery: <unk> Chillers with Nextgen refrigerants that are also required I think where youre going to hear a little bit more is on the thermal management side of a data center. They produce a lot of heat that he is.

David S. Regnery: It's taken out of the data center, how can you repurposing and Thats some of the technology that we're we're in discussions kind of our thought leadership level as to how we can take an asset and heat.

David S. Regnery: And turn it into an asset in the future.

Andrew Burris Obin: Yeah, my question was more basic. I was just thinking that these systems are bigger and more complex, they're more energy-hungry, so more opportunity for your sales, more need for your customers to partner up with you, and more opportunity for you to sort of provide these packaged energy-saving solutions.

Speaker Change: Yes. My question I think it was more basic I was just thinking that the system is a bigger and more complex, they're more energy hungry so more opportunity for.

Andrew Burris Obin: The more need for your customers to partner up with even more opportunity for you to sort of provide these package energy saving solution, that's where I was going.

David S. Regnery: That's where I was going.

Andrew Burris Obin: You're right on, Andrew. All opportunities. And it's a growing vertical.

Andrew Burris Obin: Youre right on Andrew all opportunities and it's.

Andrew Burris Obin: Gotcha. And then just follow up on M&A, you guys have been pretty active over the past couple of years, but, you know, looking at the market, the market is on to the fact that, once again, manufacturing, clean rooms by a farmer, all the areas you guys have been focusing on, but, you know, these are, I think, getting hot, pardon my pun. So what's the environment looking like for these bolt-ons? What's your ability to sort of pursue targets at reasonable valuations? What does the pipeline look like right now? What are you interested in? Thank you.

Andrew Burris Obin: Growing vertical.

Speaker Change: Got you and then just follow up on M&A, you guys have been pretty active over the past couple of years.

Andrew Burris Obin: But looking at the market the market is on to the fact that once again manufacturing clean rooms Biopharma. All the areas you guys have been focusing on but these are I think are.

Andrew Burris Obin: Getting hot pardon my upon so what are the what's the environment looking like for these bolt ons, what's your ability to sort of pursue targets at reasonable valuations what does the pipeline look right now what are you interested in thank you.

Christopher J. Kuehn: And I'll start. It's Chris.

Andrew Burris Obin: And I'll start it's Chris pipeline remains very active.

Christopher J. Kuehn: Yeah, the pipeline remains very active. You know, it's sometimes episodic when an M&A transaction closes. So, you know, quarter by quarter may be hard to call, but over the course of a year, I think the pipeline remains very active. We're very happy with the acquisitions we've done over, say, the last 18-24 months, right? You'd probably describe them as a bolt-on bit of strategy. Think of that around investments in the channel and investments in technology. And in some cases, it's both.

Christopher J. Kuehn: Sometimes episodic win when an M&A transaction closes so.

Christopher J. Kuehn: Quarter by quarter, maybe hard to call, but over the course of the year I think the pipeline remains very active.

Christopher J. Kuehn: We're very happy with the acquisitions, we've done over say the last 18 24 months right.

Christopher J. Kuehn: Properly described them as a bolt on that a strategy you think of that around investments in the channel and investments in technology and in some cases, it's both it's taking a great technology that has a limited channel and applying it to our deep channels in Europe <unk> in the Americas. So we've been very successful.

Christopher J. Kuehn: It's taking a great technology that has a limited channel and applying it to our deep channels in Europe and or in the Americas. So we've been very successful with that strategy. As for the pipeline today, you know, we're going to remain disciplined. We've got our hurdle rates.

Christopher J. Kuehn: So with that strategy as it looks at the pipeline today, we are going to remain disciplined.

Christopher J. Kuehn: We've got our hurdle rates and as we think about whats constructive to be EPS accretive in three years ROIC accretive in three years.

Christopher J. Kuehn: And as we think about what's constructive to be EPS accretive in three years, ROIC accretive in three years, but I'll tell you that we've got a great balance sheet to really deploy to not only acquisitions but also to share repurchases as we see the stock trading below its calculated intrinsic value. So if you go back, you know, even six, seven years ago with an acquisition and in Europe with thermal cold, and you really started out with our pipe chillers and thermal management systems and how that's grown over time now, I think to our six or seven generations of thermal management systems, it tells you that we can take that early stage technology and really grow it over a longer period of time.

Christopher J. Kuehn: But I'll tell you that we've got a great balance sheet to really deploy.

Christopher J. Kuehn: Two.

Christopher J. Kuehn: Not only acquisitions, but also deploy if the cash is available for M&A over to share repurchases as we see the stock trading below our calculated intrinsic value. So if you go back even six seven years ago with an acquisition in Europe with thermal coal then you really started out with our <unk> Chillers and thermal management systems and how that is.

Christopher J. Kuehn: <unk> grown over time, now I think to our sixth or seventh generation of thermal management systems intelligence that we can take that early stage technology and really grow it over a over a longer period of time.

Christopher J. Kuehn: We've got the people we've got a great, we have a great sales team. We have a great service team. That's where some of those investments are going as well this year to make sure we have all the infrastructure and support to keep growing those businesses. And I'll tell you, we've got a great team in each. When you think about the challenge of an acquisition, a lot of time, it's the, you know, the success is dependent on how well you integrate.

Christopher J. Kuehn: We've got the people we've got a great. We have a great sales team great service team, that's where some of those investments are going as well. This year is to make sure. We have all the infrastructure and support to keep growing those businesses and I'll tell you. We've got a great team in each of our regions that can integrate acquisitions.

Christopher J. Kuehn: When you think about the challenge of an acquisition a lot of time. It's the the success is dependent on how will you integrate and we don't think of it as Trane technologies is acquiring and let's take our best are trained to the business. It really is also what are we learning from the business, we just acquired and bring it into our organization and I'll tell you some of our recent acquisitions it's.

Christopher J. Kuehn: And we don't think of it as Trane Technologies is acquiring and bringing the best of Trane to the business. It really is also what we are learning from the business we just acquired and bringing it into our organization. And I'll tell you some of our recent acquisitions, it's spot on with taking the learnings of the businesses we've acquired, bringing them into the Trane family, and how do we replicate that across 40, 50 plants across the globe. So I'll tell you where we're bullish in this area. So I will just say that the pipeline remains strong.

Christopher J. Kuehn: Spot on with taking the learnings of the businesses, we've acquired bring them into the <unk> family and how do we replicate that across 40 50 plants across the globe. So I'll tell you where we're bullish in this area. So I would just say the pipeline remained strong.

Christopher J. Kuehn: Great answer. I really appreciate it. Thanks a lot.

Speaker Change: Great answer I really appreciate it thanks a lot.

Speaker Change: Thanks, Andrew.

Operator: Your final question comes from Noah Kaye with Oppenheimer. Please go ahead.

Christopher J. Kuehn: Your final question comes from Noah Kaye with Oppenheimer. Please go ahead.

Noah Duke Kaye: Thanks. Dave, this is going to be a broad question, but it goes to what you discussed around the increasing complexity in applied. When we think about the customer value proposition, and I understand there are many dimensions that are going to differ across verticals, how does the increasing complexity play into the customer value proposition? Maybe give us the two or three biggest dimensions that that really speaks to and where that creates a sustainable Yeah, great.

Noah Duke Kaye: Thanks, Dave this is going to be a broad question, but it goes to what you've discussed around the increasing complexity in applied when we think about the customer value proposition and I understand there are many dimensions, that's going to differ across verticals.

Noah Duke Kaye: How does the increasing complexity play into the customer value proposition, maybe give us the two or three biggest dimensions that that really speaks to and where that creates a sustainable competitive differentiation for the company.

David S. Regnery: Yeah, great question, Noah. I think it all starts with our direct sales force that's highly technical, right? They understand the applications and often help the customer think through what the best solution is for whatever their need may be. You know, I always tell people we don't sell products, we sell solutions, and that's the way our account managers behave with customers.

Dave: Yes, Great question No I think it all starts with our direct sales force that's highly technical right. They understand the applications and a lot of times, helping the customer think through.

David S. Regnery: What the best solution is for whatever their need may be.

David S. Regnery: I always tell people, we don't sell products, we sell solutions.

David S. Regnery: And that's the way our account managers behave with customers.

David S. Regnery: We don't, you know, it's as the sophistication of these products continues to increase, obviously, our strength shines on really on a global basis. A lot of the decision makers on, especially some of these mega projects right now are from around the world. And because we have this direct sales force globally, we're able to really triage the decision makers and help them think through the technical side. And then, of course, the downstream effect is that as these products are more sophisticated, they require OEM service in the future.

David S. Regnery: <unk>.

David S. Regnery: As the sophistication of these products continue to increase obviously.

David S. Regnery: Our strength shines aren't really on a global basis, a lot of the decision makers on especially some of these mega projects right now are on a global basis.

David S. Regnery: And because we have this direct sales force globally, we're able to really triage the decision makers and help them think through the technical side and then of course the <unk>.

David S. Regnery: <unk> stream effect as.

David S. Regnery: These products are more sophisticated they require Oems service in the future.

David S. Regnery: So there's a long tail associated with these applied systems that we're selling. And we're investing heavily too. It's not like, you know, people sometimes think about, as I say, we're investing in capacity. They think of it as, you know, just the plant. Okay, that's part of our capacity investment. But we're also investing heavily in training for our direct salesforce, adding to our direct salesforce, adding to our service technicians, adding to our engineer skillset, adding to our critical to close process, and adding to our back offices to make sure we have the right customer support. So it's all inclusive. But it really, you know, the sophistication of these systems as they become more and more engineered really just plays into the strength we have as trained technologies.

David S. Regnery: There's a long tail associated with these.

David S. Regnery: With these applied systems that we're selling.

David S. Regnery: And we're investing heavily to it's not like.

David S. Regnery: People people, sometimes think about as I say, we're investing in capacity they think of it.

David S. Regnery: Just the plant Okay. That's part of our capacity investment, but we're also investing heavily in training of our direct sales force, adding to our direct sales force, adding to our service technician, adding to our engineers skillset, adding to our critical to close process, adding to our back offices to make sure.

David S. Regnery: Sure we have the right customer support so it's all inclusive, but it really the sophistication of these systems as they become more and more engineered really just plays into the strength, we have as trane technologies.

David S. Regnery: Thanks, Dave. And the follow-up is really around the attach rate of services to those projects, right? And I think you've answered that in part, but just quantitatively, how do we think about service attach rates applied at this point? And where do those grow to as you see the increasing complexity of the projects working? As I said in my opening remarks, we've

David S. Regnery: Thanks, David and the follow up is really around the attach rate of services to those projects right I think you've answered it in part, but just quantitatively how do we think about our services attach rates for applied at this point.

David S. Regnery: And where those grow too is you see the increasing complexity of the projects Youre working on.

David S. Regnery: As I said in my opening remarks, we think about an applied system, you can think about an 8 to 10 times multiplier of services over the life of that system, and you know, we want to be connected to the system. Okay, so this, you know, it's no longer just a break fix. This is all connected solutions.

David S. Regnery: I said in my opening remarks, we think about an applied system. You can think about an eight to 10 times multiplier of services over the life of that system.

David S. Regnery: And we want to be connected to the system. Okay. So there's no.

David S. Regnery: It's no longer just a break fix this is all connected solutions and by the way the customer wants us connected to the solution. They want to make sure that it's their asset has always performed the way it was designed.

David S. Regnery: And by the way, the customer wants us connected to the solution; they want to make sure that their asset is always performing the way it was designed. I was telling a group earlier this week that, you know, it's no longer, the system isn't operating properly, the system is using too much energy; we're able to detect that. And that's where, you know, the sophistication goes both ways; it's the application of the system, but then how you monitor and service that system is also increasing in complexity, and we're right at the leading edge.

David S. Regnery: Was telling a group earlier this week, it's no longer the system isn't operating properly. This system is using too much energy, we're able to detect that and thats, where the sophistication goes both ways. It's on the application of the system, but then how you monitor and service that system is also increasing.

David S. Regnery: In complexity and we're right in the leading edge there.

Noah Duke Kaye: I appreciate that. Thanks, Dave. OK, thanks, Noah.

Noah: I appreciate that thanks.

Speaker Change: Okay. Thanks Noah.

Zachary A. Nagle: There are no further questions at this time. I will now turn the call back to Zach Nagle for closing remarks.

Noah Duke Kaye: Okay.

Noah Duke Kaye: There are no further questions at this time I will now turn the call back to Zac Nagle for closing remarks.

Zachary A. Nagle: I'd like to thank everyone for joining today's call. We'll be around as always for any questions that you may have in the coming days and weeks. And we look forward to seeing many of you on the road, or actually at our headquarters in some cases in the near future. So thanks again, and have a great day. This concludes today's conference call.

Zachary A. Nagle: I'd like to thank everyone for joining today's call we will be around as always for any questions that you may have in the coming days and weeks.

Zachary A. Nagle: We look forward to seeing many of you on the road.

Zachary A. Nagle: Or actually at our headquarters.

Zachary A. Nagle: In some cases in the near future here. So thanks, again and have a great day.

Operator: This concludes today's conference call. You may now disconnect.

Zachary A. Nagle: This concludes today's conference call you may now disconnect.

Zachary A. Nagle: in the near future here. So thanks again and have a great day.

Zachary A. Nagle: In the near future here, so thanks, again and have a great day.