Q2 2024 Trane Technologies PLC Earnings Call

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Operator: Good morning, welcome to the Trane Technologies Q2 2024 earnings conference call. My name is Adam, and I'll be your operator for the call. The call will begin in a few moments with speaker remarks and a Q&A session. At this time, all participants are in a listen-only mode.

Operator: Good morning.

Adam: Good morning, welcome to the Trane Technologies Q2, 2024 earnings Conference call. My name is Adam and I'll be your operator for the call.

Operator: Welcome to the Train Technologies Q2 2024 earnings conference call.

Operator: My name is Adam, and I'll be your operator for the call. The call will begin in a few moments with the speaker remarks and Q&A session. At this time, all participants are in a listen-only mode. To ask a question, press star one on your telephone keypad.

Speaker Change: The call will begin in a few moments with the speaker remarks, and Q&A session. At this time all participants are in a listen only mode to ask a question press star one on your telephone keypad in the interest of time. Please ask only one question and one follow up question.

Operator: In the interest of time, please ask only one question and one follow-up question.

Zach Nagle: I would now like to turn the call over to Zach Nagle, Vice President of Investor Relations. Thanks Operator. Good morning, and thank you for joining us for Train Technologies' second quarter 2024 earnings conference call. This call is being webcast on our website at TrainTechnologies.com, where you'll find the accompanying presentation. We're also recording in our Kevin's call on our website.

Operator: To ask a question, press star one on your telephone keypad. In the interest of time, please ask only one question and one follow-up question. I would now like to turn the call over to Zach Nagle, Vice President of Investor Relations. Thanks, Operator. Good morning, and thank you for joining us for Trane Technology's second quarter 2024 Earnings Conference. This call is being webcast on our website at TraneTechnologies.com, where you'll find the accompanying presentation.

Speaker Change: I would now like to turn the call over to Zac Nagle, Vice President of Investor Relations.

Zachary A. Nagle: Thanks, operator.

Operator: 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: Good morning, and thank you for joining us for <unk> technologies second quarter 2024 earnings Conference call.

Speaker Change: This call is being webcast on our website at Trane technologies Dot com, where you'll find the accompanying presentation.

Speaker Change: We are also recording and archiving this call on our website.

Zach Nagle: Please go to slide two. Statements made 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. Please see our FCC 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.

Speaker Change: Please go to slide two.

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. This presentation also includes non-GAAP, which is explained in the financial tables attached to our newsroom. Joining me on today's call are David Regnery, Chair and CEO, and Chris Kuhn, Executive Vice President and CFO. With that, I'll turn the call over to Dave.

Zachary A. Nagle: Statements made in today's call that are not historical facts are considered forward looking statements.

Zachary A. Nagle: Made pursuant to the Safe Harbor provisions of Federal Securities Law. Please.

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.

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

Zach Nagle: Join me on today's call are David Nary, Chair and CEO, and Chris Cune, Executive Vice President and CFO.

Zachary A. Nagle: Joining me on today's call are David Narey Chair, and CEO, and Chris <unk> Executive Vice President and CFO.

David Nary: With that, I'll turn the call over to Dave. Dave. Thanks, Zach, and everyone for joining today's call.

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

David S. Regnery: Thanks, Zach, and everyone, for joining today's call. As we begin, I'd like to spend a few minutes on our purpose-driven strategy, which enables our differentiated financial results. Our purpose is centered on creating a more sustainable world, and our strategy is aligned with powerful megatrends like energy efficiency, decarbonization, and digital transformation. We're all seeing the dire effects of climate change, and governments, NGOs, and companies around the world are increasingly taking action.

David S. Regnery: Thanks, everyone for joining today's call.

David Nary: As we begin, I'd like to spend a few minutes on our purpose-driven strategy. Which enables our differentiate financial results over time. Our purpose is centered on creating a more sustainable world, and our strategy is aligned to powerful mega trends like energy efficiency, decarbonization, and digital transformation. We're all seeing the dire effects of climate change, and governments, NGOs, and companies around the world are increasingly taking action. We're hearing a lot about the needs, investment, renewables, and green the grid. What we're not talking enough about is demand side management. That's where train technologies comes in. Most buildings operate up to 30% inefficiently through our leading edge technical solutions and sophisticated controls and AI.

David Narey: As we begin I'd like to spend a few minutes on our purpose driven strategy, which enables our differentiated financial results over time.

Zachary A. Nagle: Our purpose is centered on creating a more sustainable world.

Zachary A. Nagle: And our strategy is aligned to powerful megatrends like energy efficiency de carbonization and digital transformation.

Zachary A. Nagle: We're all seeing the dire effects of climate change and governments Ngos and companies around the world are increasingly taking action.

David S. Regnery: We're hearing a lot about the need to invest in renewables and green the grid, but what we're not talking enough about is the demand side. That's for Trane Technologies. Most buildings operate up to 30% in a. Through our leading-edge technical solutions and sophisticated controls in AI, we can help our customers significantly reduce energy demand and emissions. Relentless innovation, proven business operators, and an uplifting culture enable us to consistently deliver a leading growth profile, 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.

Zachary A. Nagle: We're hearing a lot about the need to invest in renewables and green the grid.

Speaker Change: What we're not talking enough about as demand side management.

Scott Reed Davis: That's where trane technologies come soon.

Speaker Change: Most buildings operate up to 30% inefficiently.

Scott Reed Davis: Through our leading edge technical solutions and sophisticated controls and AI, we can help our customers significantly reduce energy demand and emissions.

David Nary: We can help our customers significantly reduce energy demand and emissions. Our relentless innovation, proven business operating system, and uplifting culture enable us to consistently deliver a leading growth profile, strong margins, and powerful free cash flow. The end result is strong value creation across the board for our customers, our shareholders, our employees, and for the planet.

Speaker Change: Our relentless innovation proven business operating system and uplifting culture enabled us to consistently deliver a leading growth profile strong margins and powerful free cash flow.

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

David Nary: Please turn to slide number four. In the second quarter, we extended our track record of strong execution; our global team delivered robust performance across the board. Not only bolstering our outlook for 2024, but strengthening our visibility to another year of leading performance in 2025. Folkings continue to be exceptional with healthy momentum into the back half of 2024 as our pipeline of projects continues. to grow. Q2 bookings of 5.3 billion rose to an all-time high, up 5% from our prior high in the first quarter, and up 19% versus the prior year. Organic revenues were up 13% with strong execution through the P&L, delivering 23% by just the EPS growth.

Speaker Change: Please turn to slide number four.

David S. Regnery: In the second quarter, we extended our track record of strong execution. Our global team delivered robust performance across the board, not only bolstering our outlook for 2024 but strengthening our visibility to another year of leading performance in 2025. Bookings continue to be exceptional with healthy momentum into the back half of 2024 as our pipeline of projects continues. Q2 bookings of $5.3 billion rose to an all-time high, up 5% from our prior high in the first quarter and up 19% versus the prior year.

Speaker Change: In the second quarter, we extended our track record of strong execution.

Speaker Change: Our global team delivered robust performance across the board not only bolstering our outlook for 2024, what's strengthening our visibility to another year of leading performance in 2025.

Speaker Change: Bookings continue to be exceptional with healthy momentum into the back half of 2024 as our pipeline of projects continues to grow.

Speaker Change: Q2 bookings of $5 3 billion rose to an all time high up 5% from our prior high in the first quarter and up 19% versus the prior year.

David S. Regnery: Organic revenues were up 13%, with strong execution through the P&L, delivering 23% adjusted EPS growth. Notably, we continue to reinvest heavily in our business and accelerate key strategic initiatives, further strengthening our competitive positioning for continued market outgrowth. Booking strength continues to be led by our commercial HVAC business, where we're seeing broad-based growth, top growth verticals, such as data centers, market projections call for an exceptionally strong multi-year CAPEX cycle, and high levels of project complexity play to our unique strengths.

Speaker Change: Organic revenues were up 13% with strong execution through the P&L delivering 23% adjusted EPS growth.

David Nary: Notably, we continue to reinvest heavily in our business and accelerate at key strategic investments, further strengthening our competitive positioning, or continue to market our growth. Booking strengths continue to be led by our commercial HBAC businesses, where we're seeing broad-based growth. In top growth verticals, such as data centers, market projections call for an exceptionally strong multi-year Catholic cycle, and high levels of project complexity play to our unique strengths. The power of our elite direct sales force, deep customer relationships, and leading innovation will enable us to capitalize on the tremendous opportunities ahead. As the leading applied solution provider, we are driving significant market outgrowth in the most attractive high-growth verticals in commercial HBAC.

Speaker Change: Notably we continue to reinvest heavily in our business and accelerated key strategic investments further strengthening our competitive positioning for continued market outgrowth.

Speaker Change: Booking strength continued to be led by our commercial HVAC businesses, where we're seeing broad based growth.

Speaker Change: And top growth verticals, such as data centers market projections call for an exceptionally strong multiyear capex cycle and high levels of project complexity play to our unique strengths.

David S. Regnery: The power of our elite direct sales force, deep customer relationships, and leading innovation will enable us to capitalize on this tremendous opportunity. As the leading applied solution provider, we are driving significant market outgrowth in the most attractive, high-growth verticals in commercial HVAC. As an example, Q2 revenues of our America's Applied Solution are up approximately 90% on the three-year stack. We estimate that our applied systems carry an 8 to 10 times multiple of higher margin service revenue over the life of the equipment.

Speaker Change: The power of our elite direct salesforce deep customer relationships and leading innovation will enable us to capitalize on the tremendous opportunities ahead.

Speaker Change: As the leading applied solution provider, we are driving significant market outgrowth in the most attractive high growth verticals in commercial HVAC.

David Nary: As an example, Q2 revenues of our America's Applied Solution are up approximately 90% on the three-year stack. We estimate that our applied systems carry an 8 to 10 times multiple of higher margin service revenue over the life of the equipment, so we're also excited about the service opportunities that lie ahead. Our robust bookings momentum and exceptional backlog of 7.5 billion provide strong visibility into the remainder of 2024 and increasing visibility into 2025. Our backlog includes 2.8 billion for 2025 and beyond, which is the level of backlog we would historically see entering a new year, and we're only halfway through 2024.

Speaker Change: As an example, Q2 revenues of our Americas applied solutions are up approximately 90% on a three year stack.

Speaker Change: We estimate that our applied systems carrying eight to 10 times multiple of higher margin service revenue over the life of the equipment. So were also excited about the service opportunities that lie ahead.

David S. Regnery: So we're also excited about the service opportunities that lie ahead. A robust bookings momentum and exceptional backlog of $7.5 billion provides strong visibility into the remainder of 2024 and increasing visibility into 2025. Our backlog includes $2.8 billion for 2025 and beyond, which is the level of backlog we would historically see entering a new year. And we're only halfway through 2024.

Speaker Change: Our robust bookings momentum and exceptional backlog of $7 5 billion provides strong visibility into the remainder of 2024 and increasing visibility into 2025.

Speaker Change: Our backlog includes $2 8 billion for 2025, and beyond which is the level of backlog, we would historically see entering a new year.

Speaker Change: And we're only halfway through 2024.

David Nary: All in, we're confident in raising our full-year revenue and EPS guidance, which would deliver our fourth consecutive year of 20% or greater adjusted EPS growth.

David S. Regnery: All in, we're confident in raising our full year revenue and EPS guidance, which would deliver our fourth consecutive year of 20% or greater adjusted EPS growth. Chris will cover guidance in more detail in a, Please go to slide number 5. In our America segment, our commercial HVAC business delivered industry-leading performance; bookings were up more than 20% in the quarter. Revenue is up mid-20s and broad-based across vertical markets, with equipment up more than 30% and services up highteen.

Speaker Change: All in we're confident in raising our full year revenue and EPS guidance, which would deliver our fourth consecutive year of 20% or greater adjusted EPS growth.

David Nary: Chris will cover guidance in more detail in a few minutes. Please go to slide number five. In our America's segment, our commercial HBAC business delivered industry-leading performance. Bookings were up more than 20% in the quarter. Revenue was up mid-twenties and broad base across vertical markets, with equipment up more than 30% and services up high teens. In residential, the team delivered very strong results, with bookings up more than 30% and revenues up low teens. Turning to transport, the business performed as expected. Revenue's were down high teens against a tough comp of more than 30% growth in the prior year.

Speaker Change: Chris will cover guidance in more detail in a few minutes.

Chris: Please go to slide number five.

Chris: In our Americas segment, our commercial HVAC business delivered industry leading performance.

Chris: Bookings were up more than 20% in the quarter.

Chris: Revenue was up mid twenties, and broad base across vertical markets with equipment up more than 30% and services up high teens.

David S. Regnery: In residential, the team delivered very strong results, with bookings up more than 30% and revenues up low teens. Turning to transport, the business performed as expected, revenues were down high teens against a tough comp of more than 30% growth in the prior year. The two-year stacked growth was more than 10% and well ahead of the market, which was down mid-term; bookings were solid at low. In EMEA, commercial HVAC strength continues with bookings up 20%.

Chris: In residential the team delivered very strong results with bookings up more than 30% and revenues up low teens.

Chris: Turning to transport the business performed as expected.

Chris: Revenues were down high teens against a tough comp of more than 30% growth in the prior year.

David Nary: The two-year stacked growth was more than 10% and well ahead of the market, which was down mid-teens. Bookings were solid, up low single digits. In AMIA, commercial HBAC strength continues with bookings up 20%. Revenue's were also strong, up high single digits in the quarter and up over 25% on a two-year stack. Our transport business performs in line with our expectations, with bookings and revenue both down modestly.

Chris: A two year stacked growth was more than 10% and well ahead of the market, which was down mid teens.

Chris: Bookings were solid up low single digits.

Chris: In EMEA commercial Hvac's strength continues with bookings up 20%.

David S. Regnery: Revenues were also strong, up high single digits in the quarter and up over 25% on a two-year stack. Our transport business performed in line with our expectations, with bookings and revenue both down. Turning to Asia, results were in line with our expectations for the second quarter. Asia-Pacific bookings were flat, while Chinese bookings were up mid-single digits, and revenues were down low single digits on a tough prior year comp of 40%. We're pleased with our performance through the first half and expect Asia-Pacific to have another solid year overall. Now, I'd like to turn the call over to Chris. Thanks, Dave. Please turn to slide number six.

Chris: Revenues were also strong up high single digits in the quarter and up over 25% on a two year stack.

Chris: Our transport business performed in line with our expectations with bookings and revenue both down modestly.

David Nary: Turning to Asia, results were in line with our expectations for the second quarter. Asia-Pacific bookings were flat, while China bookings were up mid-single digits. Revenues were down low single digits on a tough prior year comp of 40% growth. We're pleased with our performance through the first half and expect Asia-Pacific to have another solid year overall.

Chris: Turning to Asia results were in line with our expectations for the second quarter.

Chris: Pacific bookings were flat, while China bookings were up mid single digits.

Chris: Revenues were down low single digits on a tough prior year comp of 40% growth.

Chris: We're pleased with our performance through the first half and expect Asia Pacific to have another solid year overall now I'd like to turn the call over to Chris Chris.

Chris Cune: Now, I'd like to turn the call over to Chris. Chris?

Chris Cune: Thanks, Dave.

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

Chris Cune: Please turn to slide number six. This slide provides a snapshot of our performance in the second quarter and highlights continued strong execution top to bottom. Organic revenues were up 13%; adjusted EBITDA and operating margins were both up 140 basis points; and adjusted EPS was up 23%. At an enterprise level, we delivered strong organic revenue growth in both equipment and services of low teens and midteens, respectively. Our high performance flywheel continues to pay dividends, with relentless investments in innovation driving strong top line growth, margin expansion, and EPS growth.

Christopher J. Kuehn: This slide provides a snapshot of our performance in the second quarter and highlights continued strong execution top to bottom. Organic revenues were up 13%, Adjusted EBITDA and Operating Margins were both up 140 basis points, and just EPS was up 23%. At an enterprise level, we delivered strong organic revenue growth in both equipment and service, of low teens and mid-teens, respectively. Our high-performance flywheel continues to pay dividends, with relentless investments in innovation driving strong top-line growth, margin expansion, and EPS. Please turn to slide number 7.

Chris: This slide provides a snapshot of our performance in the second quarter and highlights continued strong execution top to bottom.

Chris: Organic revenues were up 13% adjusted EBITDA and operating margins were both up 140 basis points and adjusted EPS was up 23%.

Chris: At an enterprise level, we delivered strong organic revenue growth in both equipment and services up low teens and mid teens, respectively.

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

Chris Cune: Please turn to slide number seven. At the enterprise level, we delivered robust volume growth with strong incrementals, positive price realization, and productivity that more than offset inflation and continued high levels of business reinvestment. In our America segment, we delivered about 14 points of volume and about 2 points of price. Our America's commercial HVAC business again outperform the markets and delivered very strong volume growth of more than 20 points. Adjusted operating margin expansion of 130 basis points was driven by volume growth, productivity, and price realization, more than offsetting inflation and high levels of business reinvestment. In our Amia segment, we delivered about four points of volume and one point of price, with strong volume, and our commercial HVAC business adjusted operating margin expansion of 130 basis points was driven by volume growth, productivity, and price realization, more than offsetting inflation and high levels of business reinvestment.

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 and continued high levels of business reinvestment. For example, in our Americas segment, we delivered about 14 points of volume and about two points of price. Our America's commercial HVAC business again outperformed the markets and delivered very strong volume growth of more than 20%. Adjusted operating margin expansion of 130 basis points was driven by volume growth, productivity, and price realization, more than offsetting inflation and high levels of business reinvestment.

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

Chris: In our Americas segment, we delivered about 14 points of volume and about two points of price our Americas commercial HVAC business again outperformed the markets and delivered very strong volume growth of more than 20 points.

Chris: Adjusted operating margin expansion of 130 basis points was driven by volume growth productivity and price realization more than offsetting inflation and high levels of business reinvestment.

Christopher J. Kuehn: In our AMIA segment, we delivered about four points of volume and one point of price. Adjusted operating margin expansion of 130 basis points was driven by volume growth, productivity, and price realization, more than offsetting inflation and high levels of business reinvestment. In our Asia-Pacific segment, the team delivered 310 basis points of adjusted operating margin expansion despite a mid-single-digit volume decrease, strong productivity, and positive price realization, more than offsetting inflation and high levels of business reinvestment. Now, I'd like to turn the call back over to Dave. Dave

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

Chris: Adjusted operating margin expansion of 130 basis points was driven by volume growth productivity and price realization more than offsetting inflation and high levels of business reinvestment.

Chris Cune: In our Asia Pacific segment, the team delivered 310 basis points of adjusted operating margin expansion despite a mid single-digit buying decline. Strong productivity and positive price realization more than offset inflation and high levels of business reinvestment.

Chris: In our Asia Pacific segment, the team delivered 310 basis points of adjusted operating margin expansion. Despite a mid single digit volume decline.

Chris: Strong productivity and positive price realization more than offset inflation and high levels of business reinvestment.

David Nary: Now I'd like to turn the call back over to Dave. Dave. Thanks, Chris. Please turn to slide number eight. Our end market segment and business unit outlook is largely unchanged, with some notable exceptions in the America segment. First, our America's commercial HVAC business delivered another very strong quarter of market growth. While we've highlighted particular strength and key verticals, growth was again broad based. Revenue growth on a three year stack was extremely strong of approximately 45 to 50% in both Q1 and Q2. With our continued positive outlook and exceptional backlog position, we expect three year stack revenue growth to remain at this high range in the second half.

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

David S. Regnery: Thanks, Chris. Please turn to slide number eight. Our end market segment and business unit outlook is largely unchanged, with some notable exceptions in the Americas. First, our America's commercial HVAC business delivered another very strong quarter of market outgrowth. While we've highlighted particular strengths and key verticals, growth was again broad-based. Revenue growth on a three-year stack was extremely strong, up approximately 45 to 50 percent in both Q1 and Q2.

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 with some notable exceptions in the Americas segment first.

David S. Regnery: First our Americas commercial HVAC business delivered another very strong quarter of market outgrowth.

David S. Regnery: While we've highlighted particular strength in key verticals growth was again broad based.

David S. Regnery: Revenue growth on a three year stack was extremely strong up approximately 45% to 50% in both Q1 and Q2.

David S. Regnery: With our continued positive outlook and exceptional backlog position, we expect three-year stack revenue growth to remain at this high range in the second half of the year. Second, our America's residential business delivered stronger than expected growth in the second quarter, in part driven by three factors, the EPA clarification on the refrigerant, the normalization of channel inventories, and a strong start to the cooling season. We now expect full-year revenue growth to be up mid-single. Third, in our America's transport business, ACT has lowered their outlook for the 2024 transport markets to down mid-teens.

David S. Regnery: With our continued positive outlook and exceptional backlog position, we expect three year stack revenue growth to remain at this high range in the second half of the year.

David Nary: of the year. Second, our America's residential business delivered stronger-than-expected growth in the second quarter, in part driven by three factors. The EPA clarification on the refrigerant transition, the normalization of channel inventories, and a strong start to the cooling season. We now expect full-year revenue growth to be up mid-single digits.

David S. Regnery: Second our Americas residential business delivered stronger than expected growth in the second quarter in part driven by three factors. The EPA clarification on the refrigerant transition the normalization of channel inventories and a strong start to the cooling season.

David S. Regnery: We now expect full year revenue growth to be up mid single digits.

David Nary: Third, in our America's transport business, ACT has lowered their outlook for the 2024 transport markets to down mid-teens. Their expectation is for a much softer second half, which they project to be down more than 25%. We expect to outperform the transport markets in 2024. Looking to 2025, ACT projects approximately 15% growth as freight rates improve.

Speaker Change: Third in our Americas Transport business Act has lowered their outlook for the 2020 for transport markets to down mid teens.

David S. Regnery: Their expectation is for a much softer second half, which they project to be down more than 25%. However, we expect it to outperform the transport markets in 2024. Looking to 2025, ACT projects approximately 15% growth as freight rates improve. Overall, the changes to our outlook in the Americas segment represent a significant net positive to our enterprise outlook for 2024 and gives us confidence in raising our full year guidance. All other businesses performed largely as expected in the first half, and the outlooks 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. Okay?

Act: Their expectation is for a much softer second half, which they project to be down more than 25%.

Act: We expect to outperform the transport markets in 2024.

Act: Looking to 2025 act projects, approximately 15% growth as freight rates improve.

David Nary: Overall, the changes to our outlook in the America's segment represent the significant net positive to our enterprise outlook for 2024 and gives us confidence in raising our full-year guidance. All other businesses performed largely as expected in the first half, and the outlooks for the year are unchanged. We provided additional details on the slide for your reference.

Chris: Overall, the changes to our outlook in the Americas segment represents a significant net positive to our enterprise outlook for 2024 and gives us confidence in raising our full year guidance.

Chris: All other businesses performed largely as expected in the first half and the outlooks for the year are unchanged. We provided additional details on the slide for your reference.

Chris Cune: Now, I'd like to turn the call back over to Chris. Chris?

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

Chris Cune: Thanks, Dave.

Christopher J. Kuehn: Thanks, Dave. Please turn to slide number nine. Our initial 2024 guidance reflected targets that we believed would deliver top quartile performance on organic revenue and adjusted EPS growth for the full year. Halfway through, we're exceeding those objectives. Given our strong performance, positive outlook, and exceptional backlog, we're raising our organic revenue guidance to approximately 10 percent, 1.5 percentage points above the midpoint of our prior range of 8% to 9%. We're also raising our full year adjusted earnings per share guidance by 35 cents at the midpoint to approximately $10.80, up from a range of $10.40 to $10.50.

Christopher M. Snyder: Thanks, Dave Please turn to slide number nine.

Chris Cune: Please turn to slide number nine. Our initial 2024 guidance reflected targets that we believed would deliver top core trial performance on organic revenue and adjusted EPS growth for the full year. Halfway through, we're exceeding those objectives. Given our strong performance, positive outlook, and exceptional backlog, we're raising our organic revenue guidance to approximately 10%, 1.5 percentage points above the midpoint of our prior range of 8% to 9%. We're also raising our full-year adjusted earnings per share guidance by 35 cents at the midpoint to approximately $10.80, up from a range of $10.40 to $10.50 prior. With this updated guidance, we're poised to deliver our fourth consecutive year of 20% or greater adjusted earnings per share growth.

Christopher M. Snyder: Our initial 2024 guidance reflected targets that we believed we delivered top quartile performance on organic revenue and adjusted EPS growth for the full year.

Christopher M. Snyder: Halfway through we're exceeding those objectives.

Christopher M. Snyder: Given our strong performance positive outlook and exceptional backlog, we're raising our organic revenue guidance to approximately 10% one five percentage points above the midpoint of our prior range of 8% to 9%.

Chris: We're also raising our full year adjusted earnings per share guidance by 35 at the midpoint to approximately $10 80.

Chris: Up from a range of $10 40 to.

Chris: To $10 50 prior.

Christopher J. Kuehn: With this updated guidance, we're poised to deliver our fourth consecutive year of 20% or greater adjusted earnings per share growth. 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, for a negative impact of about five points to reported leverage versus organic. We also expect about one point of negative FX impact in 2024, effectively offsetting the point of growth from M&A.

Chris: With this updated guidance, we're poised to deliver our fourth consecutive year of 20% or greater adjusted earnings per share growth.

Chris Cune: 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. We also expect about one point of negative effects impact in 2024, effectively offsetting the point of growth from M&A. Net, organic, and reported revenue growth guidance for 2024 are the same at approximately 10%. There's no change to our organic leverage target of 25% plus for the year, consistent with our stated long-term target, and we continue to expect free cash flow conversion to adjusted earnings of 100% or greater.

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 for.

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

Chris: We also expect about one point of negative FX impact in 2024, effectively offsetting the point of growth from M&A.

Christopher J. Kuehn: Net organic and reported revenue growth guidance for 2024 are the same at approximately 10%. There's no change to our organic leverage target of 25% plus for the year, consistent with our stated long-term target, and we continue to expect free cash flow conversion to adjusted net earnings of 100% or greater. For the third quarter, we expect revenue growth of approximately 8.5% and adjusted EPS of approximately $3.15 to $3.20. Please see page 17 for additional information that may be helpful for modeling purposes. Please go to slide number 10.

Chris: Net organic and reported revenue growth guidance for 2020 for the same at approximately 10%.

Chris: There is no change to our organic leverage target of 25% plus for the year consistent with our stated long term target and we continue to expect free cash flow conversion to adjusted net earnings of 100% or greater.

Chris Cune: For the third quarter, we expect revenue growth of approximately 8.5% and adjusted EPS of approximately $3.15 to $3.20. Please see page 17 for additional information that may be helpful for modeling per services.

Chris: For the third quarter, we expect revenue growth of approximately eight 5% and adjusted EPS of approximately $3 15.

Chris: To $3 20.

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

Chris Cune: 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. Our balanced approach includes strategic M&A that further improves long-term shareholder returns and share purchases as the stock trades below its calculated intrinsic value.

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

Chris: First we continue to strengthen our core business through relentless business reinvestment.

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

Chris: 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. Through July, we've deployed $1.1 billion in cash, with $379 million to dividends, approximately $100 million to M&A, and $650 million to share repurchase. We have $1.8 billion remaining under the current share repurchase authorization, providing us with strong optionality as our shares remain attractive, trading below our calculated intrinsic value.

Chris: 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.

Chris Cune: Please turn to slide 11, and I'll provide an update on our 2024 capital deployment. You did eight through July. We've deployed $1.1 billion in cash, with 379 million to dividends, approximately 100 million to M&A, and 650 million to share repurchases. We have $1.8 billion remaining under the current share repurchase authorization, providing us with strong optionality as our shares remain attractive, trading below our calculated intrinsic value. We continue to have an active M&A pipeline with potential value of creative opportunities to further improve long-term shareholder returns. For 2024, we expected to deploy approximately $2.5 billion in cash.

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

Chris: Year to date through July we've deployed $1 1 billion in cash with $379 million of dividends, approximately $100 million to M&A and $650 million to share repurchases.

Chris: We have $1 $8 billion remaining under the current share repurchase authorization, providing us with strong optionality as our shares remain attractive trading below our calculated intrinsic value.

David S. Regnery: We continue to have an active M&A pipeline with potential value-accretive opportunities to further improve long-term shareholder value. 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. Now I'd like to turn the call back over to Dave. Thanks, Chris. Please go to slide 13.

Chris: We continue to have an active M&A pipeline with potential value accretive opportunities to further improve long term shareholder returns.

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

David Nary: Our strong free cash flow, liquidity, and balance sheet give us excellent capital allocation optionality moving forward.

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

David Nary: Now, I'd like to turn the call back over to Dave. Thanks, Chris. Please go to slide number 13.

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

David S. Regnery: Thanks, Chris Please go to slide number 13.

David Nary: We discussed the transport markets in our Outlook discussion on slide number eight, so I won't cover them again here. However, we've continued to provide the slide for your reference. Please turn to slide number 14. We operate our transport business for the long term, and while we're moving through a down cycle in 2024, this is a great business with a bright future. Act projects a trailer market rebound in 2025, up midteens, and forecasts continued growth through their 2029 forecast horizon. 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 a world-class dealer network.

David S. Regnery: We discussed the transport markets in our Outlook discussion on slide number eight, so I won't cover them again here. However, we've continued to provide this slide for your reference. Please turn to slide number 9. We operate our transport business for the long term, and while we're moving through a down cycle in 2024, this is a great business with a bright future. ACT projects a trailer market rebound in 2025, up mid-teens, and forecasts continued growth through their 2029 forecast horizon.

David S. Regnery: We discussed the transport markets and our outlook discussion on slide number eight so I won't cover them again here. However, we have continued to provide this slide for your reference.

Chris: Please turn to slide number 14.

Chris: We operate our transport business for the long term and while we're moving through a down cycle. In 2024. This is a great business with a bright future.

Chris: Act projects that trailer market rebound in 2025 up mid teens and forecast continued growth through 2029 forecast horizon.

David S. Regnery: We have a diversified transport business, with opportunities to grow across the portfolio. With leading innovation, strong execution through our business operations, and a world-class dealer network, we're well-positioned to outperform in any market. Please go to slide number 6.

Chris: We have a diversified transport business globally with opportunities to grow across the portfolio.

Chris: With leading innovation strong execution through our business operating system and a world class dealer network, we are well positioned to outperform in any market environment.

David Nary: We're well positioned to outperform in any market environment.

David Nary: Please go to slide number 15. In summary, we are well positioned to drive differentiated growth over time. Our leading innovation, proven business operating system, and unmatched culture enable us to consistently deliver top core tile financial performance over the long term, while continuing to reinvest in our business. And we believe our best days are ahead. We have the team, the strategy, and the track record to deliver leading performance and differentiated shareholder returns in 2024 and beyond.

Speaker Change: Please go to slide number 15.

David S. Regnery: In summary, we are well positioned to drive differentiated growth and leading innovation. Proven business options, and Unmatched Culture have enabled us to consistently deliver top quartile financial performance over the long term while continuing to reinvest in our business. And we believe our best days are ahead. We have the team, the strategy, and the track record to deliver leading performance and differentiated shareholder returns in 2024 and beyond. And now, we'd be happy to take your questions. Operator?

Chris: In summary, we are well positioned to drive differentiated growth overtime.

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

Chris: And we believe our best days are ahead.

Chris: We have the team the strategy and the track record to deliver leading performance and differentiated shareholder returns in 2024 and beyond and now we'd be happy to take your questions operator.

Operator: And now we'd be happy to take your questions, operator. If it's time, I'd like to remind everyone to ask a question, press star, then the number one telephone keypad. Please limited to one question and one follow up. question.

Operator: At this time, I'd like to remind everyone to ask a question, press star, then the number one on your telephone keypad. Please limit it to one question and one follow-up. And our first question comes from the line of Julian Mitchell with Barclays. Your line is open. Hi, good morning.

Speaker Change: At this time I would like to remind everyone to ask a question Press Star then the number one telephone keypad. Please limit to one question and one follow up question.

Julian Mitchell: And a first question comes from the line of Julian Mitchell with Barclays; your line is open. Hi, good morning. Maybe just wanted to start with the organic sales growth guidance. Understand some of the year-on-year dynamics; it can depend, you know, looking at one, two, three, s stacks and so forth. So maybe it's easier to look sequentially. And I think the guidance implies sort of flat sales in Q3 sequentially. You know, normally they're up the last three years, sort of mid single digits, and then fourth quarter, I think is implied down double digits sequentially, and recently it's been down high single.

Speaker Change: And our first question comes from the line of Julian Mitchell with Barclays. Your line is open.

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

Julian C.H. Mitchell: Maybe I just wanted to start with the organic sales growth guidance and understand sort of some of the year-on-year dynamics. It can depend, you know, if we're looking at one, two, three-year stacks and so forth. So maybe it's easier to look sequentially.

Speaker Change: Maybe.

Julian C.H. Mitchell: Just wanted to start with the organic sales growth guidance.

Julian C.H. Mitchell: I understand sort of some of the the year on year dynamics.

Speaker Change: And if we're looking at.

Speaker Change: 123 year stacks and so forth so maybe it's easier to look sequentially.

Julian C.H. Mitchell: And I think the guidance implies sort of flat sales in Q3 sequentially. You know, normally they're up the last few years, sort of mid-single digits, and then the fourth quarter, I think, is implied to be down double digits sequentially, and recently it's been down high single digits. So just wondered, sort of from a sequential standpoint.

Speaker Change: And I think the guidance implies sort of flat sales in Q3 sequentially.

Speaker Change: Normally they are up in the last few years sort of mid single digits and then the fourth quarter I think is implied down double digits sequentially and recently has been down high single. So just wanted to sort of from a sequential standpoint.

Chris Cune: So just wanted sort of from a sequential standpoint, anything in particular you're seeing or it's more of just a sort of conservative kind of construct based off the multi-year stacks.

Christopher J. Kuehn: Anything in particular you're seeing, or is it more of just a sort of conservative kind of construct based off the multi-year stack? Hey, good morning, Julian. This is Chris.

Speaker Change: Anything in particular.

Speaker Change: <unk> is small with just a sort of conservative kind of construct based off the multiyear stacks.

Chris Cune: Hey, good morning, Julian. This is Chris. I'll start. Yeah, look, we're happy with the guidance we just put forth and raised full-year organic revenue growth target to 10%, one and a half points from our prior guide. Think about the second half of the year, as I'll start with Commercial HVAC Americas; they're going to have a great year on a full-year basis. As I've talked about in prior calls, the comps versus 2023 are just tougher as you go into the second half of the year. As a reminder, you know, a year ago, that business grew midteens in Q1, high teens, Q2 and a second half of 2023, it grew in the low 20s to mid 20s, Q3 and Q4 respectively.

Speaker Change: Hey, good morning, Julien This is Chris I'll start.

Christopher J. Kuehn: I'll start. Yeah, look, we're happy with the guidance we just put forth and raised our full year organic revenue growth target to 10%, one and a half points from our prior guidance. Think about the second half of the year, as I'll start with commercial HVAC Americas, they're gonna have a great year on a full year basis. But, as I've talked about in prior calls, the comps versus 2023 are just tougher as you go into the second half of the year.

Christopher M. Snyder: Yes look where we're happy with the guidance, we just put forth and raised full year organic revenue growth target to 10% up one five points from our prior guide thinking.

Speaker Change: Think about the second half of the year.

Speaker Change: So I'll start with commercial HVAC Americas, they're going to have a great year on a full year basis.

Chris: As I've talked about in prior calls the comps versus 2023 or just tougher as you go into the second half of the year as a reminder, a year ago that business grew mid teens in Q1 high teens Q2 in the second half of 2023 grew in the low <unk> to mid <unk> Q3, and Q4, respectively.

Christopher J. Kuehn: As a reminder, you know, a year ago, that business grew mid-teens in Q1, high teens in Q2, and in the second half of 2023, it grew in the low 20s to mid-20s, Q3 and Q4, respectively. So it's going to have a great year.

Chris: So it's going to have a great year I think of that second half range, it's probably in the 10% to 12% range in growth and what's interesting and we did the math on this when you think about the first half of 2024 in that business. The three year revenue stack is at 45% to 50% growth and it's actually the same when you look at the second half of the.

Chris Cune: So it's going to have a great year. Think of that second half range. It's probably in the 10 to 12 percent range in growth. And what's interesting, and we did the math on this, when you think about the first half of 2024 in that business, the three-year revenue stack is a 45 to 50 percent growth. And it's actually the same when you look at the second half of the year in 2024 as well. It's a 45 to 50 percent revenue growth over the last three years. So it looks really consistent when you think about it over the last several years of a lot of dynamic markets speak and dealing with supply chain.

Christopher J. Kuehn: Think of that second half range; it's probably in the 10 to 12% range of growth. And what's interesting, and we did the math on this, when you think about the first half of 2024 for that business, the three-year revenue stack is 45 to 50% growth. And it's actually the same when you look at the second half of the year in 2024 as well.

Chris: Year in 2024, as well, it's a 45% to 50% revenue growth over the last three years. So it looks really consistent when you think about it over the last several years of a lot of.

Christopher J. Kuehn: It's a 45 to 50% revenue growth over the last three years. So it looks really consistent when you think about it over the last several years of a lot of, you know, dynamic market speak and dealing with the supply chain, but they're going to have a great year. Think of transport in the second half of the year, as Dave called out in his comments. I mean, those markets are expected to be down further than we even thought three months ago. ACT has called those markets down in the mid-20s in the second half of the year.

Speaker Change: NAMIC markets speak in dealing with supply chain, but theyre going to have a great year.

Chris Cune: But they're going to have a great year. Think of transport second half of the year as Dave called out in his comments. I mean, those markets are expected to be down further than what we even thought three months ago. ACT is called those markets down in the mid 20s in the second half of the year. So we expect that business to be down, but we expect to outperform on the full year. And then residential, I'll leave it within the Americas, you know, mid-single-digit growth plan for the second half of the year. And could it be better?

Speaker Change: Think of transport in second half of the year as Dave called out in his comments I mean, those markets are expected to be down further than what we even thought three months ago ACD is called those markets down in the mid <unk> in the second half of the year. So we expect that business to be down, but we expect to outperform on a full year.

Christopher J. Kuehn: So we expect that business to be down, but we expect it to outperform for the full year. And then residential, I'll leave it within the Americas, you know, a mid-single digit growth plan for the second half of the year. And could it be better? Yeah, maybe it could be better.

Speaker Change: And then residential I'll leave it within the Americas mid single digit growth planned for the second half of the year.

Speaker Change: Could it be better yet maybe it could be better and there's a bit of a step down from.

Chris Cune: Yeah, maybe it could be better. It is a bit of a step down from the second quarter, but we're cautiously optimistic about that space. We're very much in the middle of the cooling season right now. We want to really see where it plays out. But maybe I'll end there the confident in the full year guys.

Christopher J. Kuehn: It is a bit of a step down from the second quarter, but we're cautiously optimistic about that space. We're very much in the middle of the cooling season right now. We want to really see where it plays out, but maybe I'll end there that I'm confident in the full year guide and, you know, could things get a little bit better in the second half? Maybe, but we'll update you as we get to the call next quarter. Thanks very much, Chris.

Speaker Change: From the second quarter, but we're cautiously optimistic about that space, we're very much in the middle of the cooling season right now we want to really see where it plays out but.

Chris: Maybe I'll end there.

Chris: And the full year guide and you know could things get a little bit better second half, maybe but we'll update you as we get into the call next quarter.

Chris Cune: And you know, good things get a little bit better second half maybe, but we'll update you as we get to the call next quarter.

Scott Davis: Thanks very much, Chris. And just my second question on the operating margin outlook. So you've got the higher investments that are sort of pushing the full year leverage into that mid 20s plus framework after a 30s number in the first half. Anything else we should be aware of for the second half in terms of that margin element, maybe flesh out anything around mix, perhaps, I suppose, of resin and transport are a bit softer. There's a mix Max, negative, anything else to highlight in terms of, say, price, cost, tail, winds, and also within commercial HVAC mix, anything moving around on applied versus the light side in the back half.

Julian C.H. Mitchell: And just my second question on the operating margin outlook. So, you've got the higher investments that are sort of pushing the full-year op leverage into that mid-20s plus framework after a 30s number in the first half. Anything else we should be aware of for the second half in terms of that margin element? Maybe flesh out anything around mix, perhaps?

Chris: Thanks, very much Chris and just my second question.

Speaker Change: The operating.

Speaker Change: Margin outlook, so you've got the higher investments that are sort of pushing the full year op leverage into that mid <unk> plus framework off trip thirties number in the first half.

Speaker Change: Anything else, we should be aware of for the second half in terms of that margin element, maybe flesh out anything around mix perhaps.

Christopher J. Kuehn: I suppose it's Rezzy and Transporter a bit, softer there's a mix of negatives, anything else to highlight in terms of price cost tail winds and also within commercial HVAC mix anything moving around on applied versus the light side in the back half. Yeah, good question. I think it's really less about the mix of the businesses. When you think about performance last year and EBITDA margins across EMEA, Asia, and the Americas, a very different mix of businesses.

Ramsey: I, suppose if ramsey and transport over a bit.

Speaker Change: <unk>.

Speaker Change: There is a mix.

Speaker Change: Negative.

Speaker Change: Anything else to highlight in terms of say price cost tailwind and also within commercial HVAC mix anything moving around on applied versus the light side in the back half.

Chris Cune: Yeah, good question. I think it's really less about mix of the businesses. When you think about performance last year in EBITDA margins across Amia, Asia, and the Americas, very different mix of businesses, EBITDA margins were fairly consistent across all three of the businesses actually Asia leading. But if I think about the second half, this is really where Davis continue to challenge all of our business units with advancing investments, right? We see it as, and I've seen it for a very long time, with accelerating investments, and as we see high returns on them; that's where I would call out maybe second half of the year.

Speaker Change: Yeah. Good question I think it's really less about mix of the businesses.

Speaker Change: When you think about performance last year, and EBITDA margins across EMEA Asia, and the Americas very different mix of businesses.

Christopher J. Kuehn: EBITDA margins were, you know, fairly consistent across all three of the businesses, actually Asia-leading. But if I think about the second half, this is really where Davis continues to challenge all of our business units with advanced investments, right? We see it, and I've seen it for a very long time, as accelerating investments. And as we see high returns on them, that's where I would call it, maybe the second half of the year; there's a bit of a compounding effect of the investments that we began to ramp up in the first quarter of this year; those wind up being, you know, a little bit more costly in the second half, but all of them have really strong returns.

David S. Regnery: EBITDAR margins were fairly consistent across all three of the businesses actually Asia, leading but if I think about the second half or this is really where Dave is continue to challenge all of our business units with advancing investments right. We see it as I've seen it for a very long time with accelerating investments and as we see high.

David S. Regnery: Turns on them, that's where I would call out maybe second half of the year, there's a bit of compounding effect of the investments that we began began to ramp in the first quarter of this year.

Chris Cune: There's a bit of compounding effect of the investments that we began to ramp in the first quarter of this year. Those wind up being a little bit more costly in the second half, but all of them have really strong returns. So we like the full-year guidance and confidence in 25% or better organic leverage. Let's see where the year plays out.

David S. Regnery: <unk> wind up being a little bit more costly in the second half, but all of them have really strong returns. So we like the full year guidance and confidence in 25% or better organic leverage, let's see where the year plays out but the focus here is making sure we continuously and relentlessly invest in the business to keep <unk>.

Christopher J. Kuehn: So we like the full-year guidance and confidence in 25% or better organic leverage; let's see where the year plays out. But the focus here is making sure we continuously and relentlessly invest in the business to keep driving this market outgrowth for the next several years. And Dave's keeping the pressure on. I'm sitting here smiling at Chris as he's saying that, Julian, so thanks for the questions.

Chris Cune: But the focus here is making sure we continuously and relentlessly invest in the business to keep driving this market outgrow for the next several years, and Dave's keeping the pressure on. I'm sitting here smiling at Chris as he's saying that, Jillian. So thanks for the questions, but we love investing in our business, and we've been able to demonstrate the results of the investments we've been able to make, and we'll expect more of that in the future. That's great. Thank you. Thanks, Jillian.

David S. Regnery: Diving this market outgrowth in the next several years and Dave keeping the pressure on him.

David S. Regnery: Im sitting here smiling at Chris as he is saying that Julien. So thanks for the questions, but we love investing in our business and we've been able to demonstrate the results of the investments we've been able to make and expect more of that in the future.

David S. Regnery: But we love investing in our business. And we've been able to demonstrate the results of the investments we've been able to make and expect more of that in the future. That's great. Thank you. Thanks Julian. Thank you. Our next question comes from the line of Scott Davis with Melius Research. Your line is open. Hey, good morning, guys, Dave and Chris. Hey Scott, how are you doing?

Speaker Change: That's great. Thank you.

Christopher M. Snyder: Thanks Julien.

Scott Davis: Thank you. Our next question comes from the line of Scott Davis with Melius Research. Your line is open. Hey, good morning, guys. Dave and Chris is active. How are you doing? I'm good. Thank you. And today's results have been good, so it's been a good day.

Scott Reed Davis: I'm good, thank you, and today's results have been good, so it's been a good day. I wanted to just dig into a little bit of the backlog, comments about two times normal, and try to just tease out what's changed here. Obviously, demand is solid. But are these backlogs two times normal largely because lead times have gone up substantially because these projects have gotten bigger and more complex and folks want... front of the line, I'm thinking data, reps. Yeah, it's a great question, Scott. I would say that we should maybe challenge ourselves as to what's normal.

Speaker Change: Our next question comes from the line of Scott Davis with Melius Research. Your line is open.

Scott Reed Davis: Hey, Good morning, guys, David Christmas Act.

David S. Regnery: Hey, Scott how are you doing.

Scott: I'm good thank you and today's results.

Speaker Change: <unk> been good so it's been a good day so.

Scott Davis: I wanted to just dig in a little bit of backlog. It's kind of your comments about two times normal and trying to just tease out what's changed here. Obviously, demand is solid, but are these backlogs two times normal largely because lead times have gone up substantially because these projects have gotten bigger and more complex, and folks want to get in front of the line? I'm thinking data centers and semi-fas and things like that, but perhaps I'm overstating that a bit. Yeah, it's a great question, Scott. I would say that we should maybe challenge ourselves as to what's normal, okay?

David S. Regnery: <unk>.

Speaker Change: I wanted to just digging a little bit of backlog.

Speaker Change: And kind of your comments about two times normal I'm trying to just tease out what's changed here, obviously demand is solid but our.

Speaker Change: Backlogs two times normal largely because lead times have gone up substantially because these projects have gotten bigger and more complex and folks want to get in front of the line I'm thinking datacenters or semi fabs and things like that but perhaps.

David S. Regnery: Im overstating that a bit.

David S. Regnery: Okay, we're a lot bigger business than we were four years ago, obviously. Lead times, I would say lead times are back to what I would call a normal rate. For data centers, for sure. We have data center customers that are providing us visibility into their needs well in advance than, say, maybe some of the other verticals. So that's a part of it. But look, we're seeing tremendous strength, really, in almost all verticals. As we looked in the Americas for our commercial HVAC business in the quarter, I think we spoke before, we tracked 14 different verticals. It was hard for us to find a vertical that was down.

Speaker Change: Yeah. It's a great question, Scott I would say that you shouldn't we shouldn't have any challenge ourselves as to whats normal. Okay. We're a lot bigger business than we were four years ago, obviously lead times, that's not I wouldn't say that's the I would say lead times are back to what I would call a normal rate.

David Nary: We're a lot bigger business than we were four years ago, obviously. Lead times, that's not, I wouldn't say that's; I would say lead times are back to what I would call a normal rate. For data centers, for sure, we have data center customers that are providing us visibility to their needs well in advance, then say maybe some of the other verticals. So that's a part of it, but look, we're seeing tremendous strength really in almost all verticals. As we looked in the Americas in our commercial HVAC business in the quarter, I think we spoke before.

Speaker Change: For data centers for sure we have data center customers that are providing us visibility to their needs well.

Speaker Change: Well in advance than say, maybe some of the other verticals. So that that's a part of it but look we're seeing tremendous strength really and.

Speaker Change: In almost all verticals, so as we looked into the Americas and our commercial HVAC business in the quarter.

Speaker Change: I think we spoke before we track 14 different verticals. It was hard for us to find a vertical that was down.

David Nary: We tracked 14 different verticals. It was hard for us to find a vertical that was down. So we just have broad-based strength. We certainly are seeing a lot of demand in the high growth verticals like data centers, but we're also seeing nice demand in other verticals as well.

Speaker Change: So we just have broad based strength, we certainly are seeing a lot of demand in the high growth verticals like data centers.

David S. Regnery: So we just have broad-based strength. We certainly are seeing a lot of demand in the high-growth verticals like data centers, but we're also seeing nice demand in other verticals as well, which is helpful, and then China. The bookings are up, can be a little bit lumpy, for sure, but is there an indication that China's bottomed? I guess my question is, a, on the macro side, but b, you guys are probably getting some outgrowth.

Speaker Change: But we're also seeing nice demand in <unk>.

Speaker Change: In other verticals as well.

David Nary: Okay, helpful. And then China, you know, the bookings are up, and I know it can be a little bit lumpy for sure, but is there an indication that China is bottomed? I guess my question is kind of is A, on the macro side, but B, you guys probably getting some outgrowth, I would imagine there, so if you have some color around that B. Yeah, I think it's a good question. Scott, let me look. Asia's less than 10% of the revenue for the enterprise. Okay, I think it was 50% China, 50% the rest of Asia. In the quarter, the region performed as we expected; revenues were flat.

Speaker Change: Okay helpful and then.

Speaker Change: China the bookings are up.

Speaker Change: And I know it can be a little bit lumpy for sure but.

Speaker Change: Is there an indication that China has bottomed.

Kevin: And Kevin I guess my question is kind of as a on the macro side would be you guys, probably getting some outgrowth I would imagine there. So if you add some color around that piece.

David S. Regnery: Yeah, I'd say it's a good question, Scott. Look, Asia's less than 10% of the revenue for the enterprise. Okay, think of it as 50% China, 50% the rest of Asia. In the quarter, the region performed as we expected. Revenues were flat.

Kevin: Yeah I'd say.

Speaker Change: It's a good question Scott I mean look Asia is less than 10% of the revenue from the enterprise. Okay. I think it was 50% China, 50% the rest of Asia in.

Speaker Change: In the quarter the region performed as we expected.

Christopher J. Kuehn: I would tell you that we did see some choppiness in China towards the back half of the quarter. So we have our eyes wide open on that. But I would also tell you that we have that baked into our guide for the year. So I wouldn't say that China is bottoming out.

Speaker Change: Revenues were flat I would tell you that we did see some choppiness in China towards the back half of the quarter. So we have our eyes wide open on that but I would also tell you that we have that baked into our guide for the year.

David Nary: I would tell you that we did see some choppiness in China towards the back half of the quarter. So we have our eyes wide open on that, but I would also tell you that we have that baked into our guide for the year. So I wouldn't say that China has bottom. We performed well there. Our team is executing at a very high level. We were a very seasoned team there. A lot of innovations in the in their pipeline there that they're rolling out into the marketplace, but just to be clear, getting orders in China are pretty dynamic right now.

Speaker Change: So.

Speaker Change: I wouldn't say that China has bottomed, we performed well there our team is executing at a very high level. We were very seasoned team there a lot of innovations in the in their pipeline there that they are rolling out into the marketplace, but just to be clear getting orders in China are pretty dynamic right now.

Christopher J. Kuehn: We performed well there. Our team was executing at a very high level. We were a very seasoned team there.

Christopher J. Kuehn: A lot of innovations in their pipeline there that they're rolling out into the marketplace. But just to be clear, getting orders in China is pretty dynamic right now. Congratulations. Thanks.

Speaker Change: Okay. Congrats David Thanks, I'll pass it on thanks.

Scott Davis: Okay, congrats, Dave. Thanks. I'll pass it on. Thanks. Appreciate it.

Scott Reed Davis: Thanks, I appreciate it, Scott. Our next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Good morning, everyone.

Scott Reed Davis: I appreciate it Scott.

Scott Davis: Scott.

Speaker Change: Yeah.

Andy Kaplowitz: Our next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open. Good morning, everyone. Nice quarter. Thanks, Andy. Appreciate it. Just a little bit more about bookings and backlog momentum going forward. We know you have more difficult order comparisons coming up, but could you maintain book-to-bill at or over one time? And then the renewed momentum in America's commercial HVAC. I know you just said it was relatively broad, based, including data centers, but how long do you think this elevated bookings environment could last? And at what point the strong loaders give you confidence that 25 should be another strong earnings growth year or even a double-digit growth year?

Speaker Change: Our next question comes from the line of Andy Kaplowitz with Citigroup. Your line is open.

Andrew Alec Kaplowitz: Nice quarter. Thanks, Andy. I appreciate it. David, just a little bit more about bookings and backlog momentum going forward. We know you've got more difficult order comparisons coming up, but could you maintain book to bill at or over one times and then the renewed momentum in America's commercial HVAC? I know you just said it was relatively broad-based, including data centers, but how long do you think this elevated bookings environment could last? And at what point does strong orders give you confidence that 25% should be another strong earnings growth a year, or even double-digit growth?

Andrew Alec Kaplowitz: Good morning, everyone nice quarter.

Andy: Thanks, Andy appreciate it.

Andrew Alec Kaplowitz: Dan just a little bit more about bookings and backlog momentum going forward. We know you have more difficult comparisons coming up but could you maintain book to bill at or over one times and then the renewed momentum in Americas commercial HVAC I know you just said it was relatively broad based including data centers, but how long do you think this elevated bookings environment could last kind of what.

Speaker Change: The strong orders give you confidence that 25 should be another strong earnings growth year, or even a double digit growth year.

David Nary: Yeah, I'm not going to forecast our incoming order rates for us a year. I will tell you that we're going to be have a backlog that'll be very strong going into 2025, much like you saw us at the beginning of 2024. We already have 2.8 billion booked for 2025, and I mean, that's a number that we haven't talked about that size of a number in the past, so we're very confident there. As far as the demand that we're seeing, look, we're seeing a lot of demand, and I emphasize it's broad base, right? It's not just in the high growth verticals because we're very strong there.

David S. Regnery: Yeah, I'm not gonna forecast our incoming order rates for the rest of the year, but I will tell you that we're going to have a backlog that'll be very strong going into 2025, much like you saw at the beginning of 2024. We already have $2.8 billion booked for 2025.

Speaker Change: Yeah, I'm not going to court case forecast, our incoming order rates for rest of the year I will tell you that we're going to be have a backlog that will be very strong going into 2025, much like you saw us at the beginning of 2024, we already have $2 8 billion booked for 2025.

David S. Regnery: And I mean, that's a number that we haven't talked about, that size of a number in the past. So we're very confident there. As far as the demand that we're seeing, look, we're seeing a lot of demand, and I emphasize it's broad-based, right? It's not just in the high-growth verticals because we're very strong there, but it's broad-based. And it really has to do with a lot of our innovation and our ability to. And with our direct sales force, we go to where the opportunities are. Our teams are, you know, highly technical, and we're winning in the marketplace. It's that simple.

Speaker Change: I mean, that's a number that we haven't talked about that size of a number in the past. So we're very confident there as far as the the demand that we're seeing look were seeing a lot of demand and I emphasize it's broad base right. It's not just in the high growth verticals, because we're very strong there, but it's broad.

David Nary: But it's broad-based and it really has to do with a lot of our innovation and our ability to execute. And with our direct sales force, we go to where the opportunities are. Our teams are highly technical and we're winning in the marketplace. It's that simple, and I couldn't be prouder what that team's been able to execute.

Speaker Change: Based and it really has to do with a lot of our innovation and our ability to execute and with our direct sales force. We go to where the opportunities are our teams are.

Speaker Change: Highly technical and we're winning in the marketplace, it's that simple and I couldnt be prouder of what the team's been able to execute and by the way we're talking a lot about the Americas, but I would tell you that our commercial HVAC business in Europe also performed extremely well their order rates were up 20%. So you could see that inverse.

David S. Regnery: And I couldn't be prouder of what that team has been able to accomplish. And by the way, we're talking a lot about the Americas, but I would tell you that our commercial HVAC business in Europe also performed extremely well. Their order rates were up 20%, so you could see that investing in the business, always having that long-term vision as to where you want to go. And the payback that you get for that, this is a flywheel, as Chris would say, and we're seeing the effects of that.

David Nary: And by the way, we're talking a lot about the Americas, but I would tell you that our commercial HVAC business in Europe also performed extremely well. Their order rates were up 20%. So you could see that investing in the business, always having that long-term vision as to where you want to go and the payback that you get for that. This is a flywheel, as Chris would say, and we're seeing the impact of that, and that flywheel is going to continue to spend for us. Thanks for that.

Speaker Change: <unk> in the business always having that long term vision as to where you want to go and the payback that you get for that this is a flywheel as Chris would say and we're seeing the impacts of that and that flywheel is going to continue to spend for us.

David S. Regnery: And that flywheel is going to continue to spin for us. Thanks for that. Yeah, I tried there to get you to forecast bookings. Oh, well.

Andrew Alec Kaplowitz: So let me then ask you, Chris, you kind of alluded to Rezi and the strength that you're seeing. It looks like revenues in the first half were already up mid single digits plus, you know, orders accelerate, obviously, in Q2 up 30%. I know you said you wanted to be conservative, but really, is mid single digit growth the minimum for the year? And, you know, what have you seen so far during the cooling season? Andy, good question. Yeah, I think mid-singles is probably the floor for the business. But could it be better?

Speaker Change: Thanks for that Yeah, I tried there to get to the forecast bookings Oh, well. So let me then ask you follow up Chris you've kind of alluded to RASM.

Chris Cune: Yeah, I tried there to get to the forecast bookings. Oh, well, so let me then ask you follow up. Chris, you kind of alluded to Rezzi and the strength that you're seeing. It looks like revenues in the first half already up, mid-single digits plus orders accelerate obviously in Q2 up 30%. I know you said you want to be conservative, but really mid-single digit growth a minimum for the year, and what have you seen so far going to cool in season? Yeah, and you can question. Yeah, I think mid-singles is probably the floor for the business.

Speaker Change: <unk> and the strength that youre seeing it looks like revenues in the first half we're already up mid single digits plus orders accelerated obviously in Q2 up 30% I know you said you wanted to be conservative, but really is mid single digit growth in minimum for the year and what did you what have you seen so far during the cooling season.

Speaker Change: Andy Good question, Yes, I think mid singles is probably the floor for the business could it be better yeah, we think it could be better but.

Chris Cune: Could it be better? Yeah, we think it could be better. But, as you know, bookings in that business, it's less important. It's really around seeing through the entire cooling season. As you know, there's a refrigerant transition that's happening later into this year and to next year. And we're ready for that. We can certainly answer any questions there as well. But we've got a lot of confidence in that team. It's been a challenging market, you know, leading into this cooling season for about a year, year and a half. But yeah, we feel like could that be better?

Christopher J. Kuehn: Yeah, we think it could be better. But, as you know, bookings in that business are less important. It's really around seeing through the entire cooling season.

Speaker Change: As you know bookings in that business, it's less important its really around.

Speaker Change: Theme through the entire cooling season.

Speaker Change: As you know Theres, a refrigerant transition that's happening later into this year into next year and we are ready for that we can certainly answer any questions there as well, but we've got a lot of confidence in that team. It's been a challenging market leading into this cooling season for about a year year and a half.

Christopher J. Kuehn: As you know, there's a refrigerant transition that's happening later this year and into next year, and we're ready for that. We can certainly answer any questions there as well. But we have a lot of confidence in that team.

Christopher J. Kuehn: It's been a challenging market, you know, leading into this cooling season for about a year and a half. But yeah, we feel like, could this be better? It could be better.

Speaker Change: But yes, we feel like could that be better it could be better, but let's see how the year kind of plays itself out.

Chris Cune: It could be better. But let's see how the year kind of plays itself out. Yeah.

David S. Regnery: But let's see how the year kind of plays itself out. Yeah, and as I said in our prepared remarks, look, three reasons why we did so much better in Resi in the second quarter. One is the clarification on the refrigerant transition.

David Nary: And as I said in our prepared remarks, look, three reasons why we did so much better in Rezzi in the second quarter. One is the clarification on the refrigerant transition. The second is certainly the inventory. Is that what we would call a normal level in the channel list through our independent wholesale distributors. And the third is not that I like to talk about the weather. But it's been a very, very warm start to the cooling season, which should have us all concerned for a different reason that we could talk about if you'd like. But it's been a very, very strong start.

Speaker Change: Said in our prepared remarks look three reasons why we did so much better in <unk> in the second quarter. One is a clarification on the refrigerant transition the second is.

David S. Regnery: The second is certainly the inventory is at what we would call a normal level in the channel list through our independent wholesale distributors. And the third is not that I like to talk about the weather, but it's been a very, very warm start to the cooling season, which should have us all concerned for a different reason that we could talk about if you'd like. But it's been a very, very strong start.

Speaker Change: Certainly the inventory is at what we would call a normal level and the channel list through our independent wholesale distributors and the third is not that I like to talk about the weather.

Speaker Change: But it's been a very very warm start to the cooling season, which should have us all concerned for a different reason that we could talk about if you'd like but.

David S. Regnery: So, as Chris said, we're cautiously optimistic in this business. The team performed very well in the second quarter, and it's a great start for that team. Appreciate it, guys. Okay, thank you, Andy. Our next question comes from the line of Gautam Khanna with TD Cowan. Your line is open.

Speaker Change: It's been a very very strong start so as Chris said, we're cautiously optimistic in this business. The team performed very well in the second quarter and it's a great start for that team.

David Nary: So, as Chris said, we're cautiously optimistic in this business. The team performed very well in the second quarter. And it's a great start for that team. Appreciate it, guys.

Speaker Change: Appreciate it guys.

Gautam Khanna: Okay, thank you. Our next question comes from the line of Gotham Conno with TD Cowan. Your line is open. Yes, thank you. I was wondering if you could talk about your expectations of any pre-buy given the ACR transition and just, yeah, what have you already introduced the product? Yeah, got some good questions. We've introduced in our commercial business. We've introduced about half of the products that would be affected and think about any product that uses a scroll compressor as a target for refrigerant change. Okay, so just in a broad brush. So in our commercial sites, about half of it, we've introduced we're actually selling both.

Eddie: Okay. Thank you Eddie.

Speaker Change: Our next question comes from the line of Gautam Khanna with TD Cowen Your line is open.

Gautam J. Khanna: Yes, thank you. I was wondering if you could talk about the expectations of any pre-buy given the ATL transition. And just, yeah, have you already introduced the products?

Gautam J. Khanna: Yes. Thank you I was wondering if you could talk about.

Gautam J. Khanna: Yes, the closings of any pre buy given the transition.

Speaker Change: Yes have you already introduced the product.

David S. Regnery: Yeah, Gautam, good question. We've introduced in our commercial business about half of the products that would be affected. And think about it; any product that uses a scroll compressor is a target for a refrigerant change. Okay, so just in a broad stroke. So in our commercial sites, about half of the units we've introduced, we're actually selling both. So we're selling 454B, the new refrigerant, as well as the still popular 410. In our resi business, not yet; we haven't introduced it; that'll be rolling out in the back half of the year.

Jonathan: Yeah, Jonathan good question.

Speaker Change: We've introduced in our commercial business, we've introduced about half of the products that would be affected and think about it any product that uses a scroll compressor as a target for a refrigerant change. Okay. So just a broad brush so on our commercial side, it's about half of it we've introduced we're actually selling both so we're selling 450.

Gautam Khanna: So we're selling 454B, the new refrigerant, as well as still 410 in our resie business, not yet. We have introduced it. That'll be rolling out in the back half of the year.

Jonathan: What would be the new refrigerant as well as still for 10, and our resi business not yet we havent introduced it that'll be rolling out in the back half of the year.

David S. Regnery: As far as pre-buys go, look, we're not anticipating in our residential business a large pre-buy towards the end of the year. We'll see how that rolls out. But right now, we're not forecasting that there's just too much timing that you have to work on to make sure that you sell through all your products in the year. And our focus really is on helping our independent wholesale distributors transition their inventory properly.

Gautam Khanna: As far as pre buys go, look, we're not anticipating in our residential business a large pre buy towards the end of the year. We'll see how that rolls out, but right now we're not forecasting that. There's just too much timing that you have to work on to make sure that you could sell through all your products in the year, and our focus really is on helping our independent also distributors transition their inventory properly. So, you know, we'll be working with them as the year progresses here to make sure that they're ready for the cooling season in 2025.

Jonathan: As far as pre buys go look we're not anticipating in our residential business a large pre buy towards the end of the year and we'll see how that rolls out but right now we're not forecasting that there's just too much timing that you have to work on to make sure that you could sell through all your products in the year and our focus really is on helping our.

Jonathan: Independent wholesale distributors transition their inventory properly. So we will be working with them as the year progresses here to make sure that they are ready for the cooling season in 2025.

David S. Regnery: So you know, we'll be working with them as the year progresses here to make sure that they're ready for the cooling season in 2025. And that's really where our focus is right now. So answer to your question: not a large pre-buy, at least we don't have one baked in.

Gautam Khanna: And that's really where our focus is right now. So, answer to your question, not a large pre-buy; at least we don't have one big thing. But I would tell you that the way we designed our operations, we're able to manufacture both products. So, we have mixed model lines, which it was a little bit more upfront cost, but we'll leave that investment; we'll pay.

Jonathan: And that's really where our focus is right now so the answer to your question not a large pre buy at least we don't have one Victor but I would tell you that the way we designed our operations were able to manufacture both products. So we have mixed model lines, which.

Jonathan: It was a little bit more upfront cost, but we believe that investment will pay because as you know and the rest of the area you'll be.

Gautam Khanna: Because, as you know, in the resie area, you'll be providing components of 410 for some time into the future to make sure that we could service our product over the useful life of that product. Thank you.

Jonathan: Providing components up $4 10 for some time into the future to make sure that we could service our product over the useful life of that product.

Speaker Change: Great. Thank you.

Damian Karas: Thanks, Gautam, appreciate it. Our next question comes from the line of Damian Karas with UBS. Your line is open. Hey, good morning, everyone. Congrats on the quarter. Good morning, Damian. How are you? Doing well, thank you.

Speaker Change: Thanks, Scott I appreciate it.

David S. Regnery: But I would tell you that the way we designed our operation, we were able to manufacture both products. So we have mixed model lines, which was a little bit more upfront cost, but we believe that investment will pay. Because, as you know, in the resi area, you'll be providing components of 410 for some time into the future to make sure that we can service our product over the useful life of that product. Great, thank you. Thanks, Gautam. I appreciate it. Our next question comes from the line of Damian Karas with UBS. Your line is open. Hey, good morning, everyone. Congratulations on the quarter. Morning Damian, how are you?

Speaker Change: Our next question comes from the line of Damian Karas with UBS. Your line is open.

Damian Karas: Hey, good morning, everyone and congrats on the quarter.

Damian Karas: Good morning, David how are you.

Damian Karas: Doing well, thank you. I was wondering if you could maybe help us unpack the 13% organic growth a little bit, just give us a sense for, you know, how much of this top line is being driven by volumes versus, you know, some price and mixed benefits and just maybe kind of walk us through how you're thinking about that for the full year now. Hey Damian, it's Chris.

David: Doing well thank you.

Chris Cune: I was wondering if you could maybe help us unpack the 13% organic growth a little bit. Just give us a sense for how much of this top line being driven by volumes versus some price and mixed benefits, and just maybe walk us through how you're thinking about that for the full year now.

Damian Karas: Well I was wondering if you could maybe help us unpack the 13% organic growth a little bit just give us a sense for.

Speaker Change: How much of this top line being driven by volumes versus.

Speaker Change: Some some price and mix benefits and just maybe kind of walk us through how youre thinking about that for the full year now.

Chris Cune: Hey, Damian, it's Chris. I'll start. Yeah, for the quarter, think of it as a little bit over two points of price. You'll see this in the 10 queue that gets filed later today, about 11 points of volume. So, as we anticipated coming to the year, we knew that price was going to be a contributor, but less of a contributor than what we saw in 2022 and 2023. That's been dovetailing. And the offset to that, and a nice offset to that, has been improved productivity. And so, as kind of came out at the end of last year, middle last year with supply chain challenges largely resolved, we're continuing to see improvements on the productivity side.

Christopher J. Kuehn: I'll start. Yeah, for the quarter, think of it as a little bit over two points of price. You'll see this in the 10-Q that gets filed later today. About 11 points of volume.

Speaker Change: Hey, Jamie it's Chris I'll start.

Jamie: Yeah for the quarter think of it as a little bit over two points of price Youll see this in the 10-Q that gets filed later today.

Speaker Change: About 11 points of volume so as we anticipated coming into the year, we knew that price was going to be a contributor but less of a contributor than what we saw in 2022 and 2023 that's been dovetailing.

Speaker Change: And the offset to that in a nice offset to that has been improved productivity and so as it came out at the end of last year middle of last year with the supply chain challenges largely resolved, we're continuing to see improvements on the productivity side. So if I step back we're getting the right combination of price dollars and margin.

Christopher J. Kuehn: So, as we anticipated, coming into the year, we knew that price was going to be a contributor, but less of a contributor than what we saw in 2022 and 2023. That's been dovetailing. And the offset to that, and a nice offset to that, has been improved productivity. And so, as kind of came out at the end of last year, the middle of last year, with supply chain challenges largely resolved, we're continuing to see improvements on the productivity side. So, if I step back, we're getting the right combination of price, dollars, and margin above inflation. It is inflationary out there, to be fair.

Chris Cune: So if I step back, we're getting the right combination of price, dollars, and margin above inflation. It is inflationary out there, to be fair. If I think about tier one costs with copper up, aluminum up to somewhat flat, steel down, refrigerants up, and ultimately wage inflation, you know, really being up. All of that is still going to be a bit inflationary on us for this year. But I like where we are, price versus inflation. The productivity is getting stronger, and making sure that we're funding the business with investments. It was another quarter of a high investment and continued high investment quarter with projects we think are very, very strong.

Speaker Change: Above inflation it is inflationary out there to be fair, if I think about tier one costs with.

Jonathan: Copper aluminum up somewhat.

Jonathan: Somewhat flat steel down refrigerants up.

Jonathan: Ultimately wage inflation really being up all of that is still going to be a bit inflationary honest for this year, but I like where we are price versus inflation, the productivity is getting stronger and make.

Jonathan: Making sure that we're funding the business with the investments it was another quarter of a high investment and continued high investment quarter with projects. We think they are very very strong.

Chris Cune: That volume growth, the 13 points of volume on the 13 points of revenue growth, think of that as 20 points of volume in commercial HVAC Americas. On price, you know, that where we were in the second quarter, we're confident that it gives us a lot of view into the full year. Price should be around two points as well. And, you know, that'll look a little bit lower in the second half of the year versus the first half, ultimately landing around two points on the full year. So, over there gives you a little bit added color.

Christopher J. Kuehn: If I think about tier one costs, with copper up, aluminum up to somewhat flat, steel down, we've had volume growth, 11 points of volume on 13 points of revenue growth. Think of that as 20 points of volume in commercial HVAC Americas. On price, where we were in the second quarter, we're confident that gives us a lot of insight into the full year. Price should be around two points as well, and you know that'll look a little bit lower in the second half of the year versus the first half, ultimately landing around two points on the full year. So hopefully, that gives you a little bit of color. A lot of volume, Damian. Yeah, not a bad thing.

Speaker Change: That volume growth of 13 point some of our I'm, sorry, 11 points of volume on the 13 points of revenue growth think of that as 20 points of volume and commercial HVAC Americas.

Jonathan: On price, where we were in the second quarter. We are confident that gives us a lot of view into the full year price should be around two points as well.

Speaker Change: And that will look a little bit lower in the second half of the year versus the first half ultimately landing around two points on the full year. So hopefully it gives you a little bit of color a lot of volume Damian.

Chris Cune: A lot of volume, Damien. Yeah, not a bad thing. That was helpful, thanks.

Damian: Yeah, not not a bad thing.

Damian: That was helpful. Thanks.

David Nary: And then I wanted to see if you might be able to share some color on how things are progressing with some of your kind of early stage, you know, emerging growth opportunities, if you will, invest in emerging cooling, your AI partnership. Would you envision these being potential capital deployment opportunities down the road?

Christopher J. Kuehn: That was helpful. Thank you. And then I wanted to see if you might be able to share some color on how things are progressing with some of your kind of early stage, you know, emerging growth opportunities, if you will, you know, investment immersion cooling, your AI partnership. Would you imagine these being potential capital deployment opportunities down the road? I'll answer the first question here.

Damian: And then I wanted to see if you might be able to share some color on how things are progressing with some of your kind of early stage emerging growth.

Speaker Change: Kennedy's if you will for investment in emerging cooling.

Speaker Change: Our AI partnership.

Speaker Change: Would you envision that being potential capital deployment opportunities down the road.

David Nary: I'll answer the first question here. Emerging cooling, as I've said in the past, that's sort of a, that's got some hurdles it still needs to work through, and we're working through some of that with our partner there. So, that's not what I would call mainstream. As far as the AI tools, like the Volvo acquisition we did, it's early days, but we really like what we see there. And this is going to really help us excel our connected asset solutions. And you know, in my opening remarks, I talked about demand side management, and we're not talking a lot about that, but a lot of people are talking right now about the generation side of power.

Speaker Change: Well I'll answer the first question here the emerging cooling as I have said in the past that's sort of a.

David S. Regnery: Emerging cooling, as I've said in the past, that's got some hurdles it still needs to work through. And we're working through some of that with our partner there. So that's not what I would call mainstream.

Speaker Change: That's got some hurdles that still needs to work through and we're working through some of that with our with our partner there. So that's not what I would call mainstream.

Damian: As far as the AI tools like the <unk> acquisition, we did it's early days, but we really like what we see there and this is going to really help us excel our connected asset solutions and in my opening remarks, I talked about demand side management, and we're not talking a lot about that but a lot of a lot of people.

David S. Regnery: As far as the AI tools, like the Novolo acquisition we did, it's early days, but we really like what we see there. And this is going to really help us excel in our connected asset solutions. In my opening remarks, I talked about demand-side management, and we're not talking a lot about that. But a lot of people are talking right now about the generation side of power. A lot of people are talking about all the demand that's coming. What people don't realize is that in a building, 30% of the energy that's consumed is wasted.

Damian: We're talking right now about the generation side of power a lot of people are talking about all of the demand that's coming where people don't realize is that.

David Nary: A lot of people are talking about all the demand that's coming. What people don't realize is that, you know, in a building, 30% of the energy that's consumed is wasted, right? So, if you're connected to the asset, if you're connected to the building, you're able to ensure that that asset or that building is going to perform the way it was designed. And this 30% number, I'd love to show you some of our stats, but this is a massive amount of energy that can be saved. So, we're really happy; we're really bullish on the Volvo. We're really bullish on what we're doing with our connected solutions.

Damian: And our building 30% of the energy that is consumed is wasted right. So if you're connected to the asset if you're connected to the building you're able to ensure that that asset or that building is going to perform the way it was designed.

David S. Regnery: So if you're connected to the asset, if you're connected to the building, you're able to ensure that that asset or that building is going to perform the way it was designed. And this 30% number, I'd love to show you some of our stats, but this is a massive amount of energy that can be saved. So we're really happy. We're really bullish on Nobolo.

Damian: And this 30% number I would love to show you some of our stats, but this is a massive amount of energy that can be saved. So we're really happy we're really bullish on Ebola, we're really bullish on what we're doing with our connected solutions and I think youre going to hear a lot more about demand side management.

David S. Regnery: We're really bullish on what we're doing with our connected solutions, and I think you're going to hear a lot more about demand-side management in the coming years because it's not just about generation. It's not just about forecasting all the demand that's going to be coming. And you hear a lot about data centers right now. It's like, how do we use what we're generating today in a more efficient way?

David Nary: And I think you're going to hear a lot more about demand side management in the coming years because it's not just about generation, it's not just about forecasting all the demand that's going to be coming, and you see a lot about data centers right now. It's like, how do we use what we're generating today in a more efficient way? And that's what we know at training technology; we can help our customers.

Speaker Change: In the coming years, because it's not just about generation is not just about forecasting all the demand that's going to be coming in you see a lot about data centers right now it's like how do we use what we're generating today and in a more efficient way and Thats, what we know at train technology, we can help our customers with.

Operator: Smith with. Great, thanks, guys.

Speaker Change: Great. Thanks, guys best of luck.

Operator: That's a lot.

Joe Ritchie: Next question comes from the line of Joe Ritchie with Goldman Sachs; your line is open. Good morning. So I'm going to touch on data centers again, just this quickly. I know this book, Broad Based Gray with the Cross, Commercial HFAC in America. I'm just curious, though, are you seeing any constraint on your bookings for data centers? You know, that's been at the hot topic of late. And then also just when can you just maybe talk a little bit about the margin profile of the business that you're booking in that vertical? I'll start; I'll let Chris talk about margins, but constraints from a capacity standpoint.

Speaker Change: Okay. Thanks, Thank you.

David S. Regnery: And that's what we know at Trane Technology; we can help our customers. Great. Thanks, guys. That's a lot. Thanks. Thank you. Next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open. Hey, Joe. Good morning.

Speaker Change: Our next question comes from the line of Joe Ritchie with Goldman Sachs. Your line is open.

Joseph Alfred Ritchie: Hey, guys good morning.

Joseph Alfred Ritchie: So I'm going to touch on data centers again just quickly. I know there's broad-based growth across commercial HVAC in the Americas. I'm just curious, though, are you seeing any constraints on your bookings for data centers? I know that that's been a hot topic of late.

Joseph Alfred Ritchie: Hello.

Joseph Alfred Ritchie: I'm going to touch on data centers again, just quickly I know thats broad.

Joseph Alfred Ritchie: Broad based growth across commercial HVAC in the Americas I'm just curious, though are you seeing any constraints on your bookings for data centers.

Speaker Change: That's been a hot topic of late and then also just.

Joseph Alfred Ritchie: And then also, can you just maybe tell us a little bit about the margin profile of the business that you're booking in that vertical? I'll start; I'll let Chris talk about margins. Constraints from a capacity standpoint, no.

Speaker Change: Can you just maybe talk a little bit about the margin profile of the business that you are booking in that vertical.

Speaker Change: I'll start I'll, let I'll, let Chris talk about margins, but.

Christopher M. Snyder: Constraints from a capacity standpoint.

David Nary: No, I mean we've made capacity expansions in over the last several years. So we feel as over in good shape there. You know, it's more about working with the customers. It's more about working with the system level within the data center. We're not just a component supplier within a data center. We look at the entire cooling system, whether you're cooling at the building level, the server, or the servers themselves. You know, this is something that we're really good at. And we're very strong in this vertical. And we've been very strong in this vertical for a long time.

David S. Regnery: I mean, we've made capacity expansions over the last several years. So we feel as though we're in good shape there. You know, it's more about working with the customers. It's more about working at the system level within the data center. We're not just a component supplier within a data center. We look at the entire cooling system, whether you're cooling at the building level, the server, or the servers themselves.

Speaker Change: No I mean, we've made capacity expansions.

Christopher M. Snyder: And over the last several years, so we feel as over in good shape there.

Speaker Change: It's more about working with the customers its more about working with the.

Speaker Change: The system level within the data center.

Speaker Change: We're not just a component supplier within a data center when we look at the entire cooling system, whether you are cooling at the building level the server or the servers themselves.

David S. Regnery: You know, this is something that we're really good at, and we're very strong in this vertical, and we've been very strong in this vertical for a long time. I'll steal a bit of Chris's thunder here, but the margins in this space are very attractive, and we really like our service tail that this provides. Chris, do you want to add anything?

Christopher M. Snyder: This is something that we're really good at and we're very strong in this vertical and we've been very strong in this vertical for a long time.

Chris Cune: I'll feel a bit of Chris's thunder here, but the margins in this space are very attractive. And we really like our service tail that this provides.

Christopher M. Snyder: I'll steal a bit of Christmas Thunder here, but the margins in this space are very attractive and we really like our service.

Christopher M. Snyder: But this provides Chris one that's where I was going to go Dave I think you know again. These are generally highly customized applied systems. When you were talking about data centers for the most part and so while we're pricing for innovation. We're also making sure. We've got customers for life. These are customers that are putting in multiple locations multiple data centers.

Chris Cune: Chris, one anything. Yeah, that's where I was going to go, Dave. I think, you know, Gendese are generally highly customized applied systems when you're talking about data centers for the most part. And so, while we're pricing for innovation, we're also making sure we've got customers for life. These are customers that are putting in, you know, multiple locations, multiple data centers. And we want to make sure we have not only a solution for today's order, but what that order can be a year, two years, five years from now, as, you know, all market projections would suggest that this is going to be a multi-year growth factor with the growth of data centers.

Christopher J. Kuehn: That's where I was gonna go, Dave. I think, you know, again, these are generally highly customized application systems when you're talking about data centers, for the most part. And so while we're pricing for innovation, we're also making sure we've got customers for life. These are customers that are putting in, you know, multiple locations, multiple data centers, and we want to make sure we have not only a solution for today's order but what that order could be a year, two years, five years from now, as, you know, all market projections would suggest that this is going to be a multi-year growth factor with the growth of data centers.

Christopher M. Snyder: And we want to make sure we have not only a solution for today's order, but what that order can be a year two years five years from now.

Speaker Change: As you know.

Speaker Change: All market projections would suggest that this is going to be a multi year growth factor.

David S. Regnery: With the growth of data centers and with that to Dave's ending point.

Christopher J. Kuehn: And with that, to Dave's ending point, the opportunity still in front of us is to think about services. And with typical applied systems generating eight to ten times the revenue and services from a dollar of equipment, that's still an opportunity well in front of us as we deploy products into this space. And you're starting to see that a bit in the revenues, but more of that in 25 and 26. That's a nice opportunity still in front of us. I got it.

Chris Cune: And with that, to Dave's ending point, the opportunity still in front of us is to think about services here. And with typical applied systems generating eight to ten times of the revenue and services from a dollar of equipment, that's still an opportunity well in front of us as we deploy products into the space. And you're starting to see that a bit in the revenues, but more of that in 25 and 26. That's a nice opportunity still in front of us. Got it.

David S. Regnery: The opportunity is still in front of US is to think about services here and with typical applied systems generating 8% to 10 times of the revenue in services from a dollar of equipment.

David S. Regnery: That's still an opportunity well in front of us as we deploy products into this space and you're starting to see that a bit in the revenues, but more of that in 'twenty five 'twenty six that's a nice opportunity still in front of us.

Joseph Alfred Ritchie: That's helpful, guys. And then just my quick follow-up. I read that the HVAC growth this quarter was much better than what some of your other public peers have reported so far, so it looks like you took some share. I was just wondering, was there any, like, disruption that you noticed with any of your public or non-public comps in the quarter? And I know, Dave, you referenced some of the reasons why you grew this quarter, but I'm just, the growth was surprisingly good. Yeah, I mean, the team executed very well.

Speaker Change: Got it that's helpful guys and then just my quick follow up.

Joe Ritchie: That's that's helpful, guys. And then just my quick follow up. I read the HVAC growth this quarter was much better than what some of your other public peers have reported so far. So it looks like you took some share.

Speaker Change: The HVAC growth this quarter.

Speaker Change: Was much better than what some of your other public peers have reported so far it looks like you took some share I was just wondering was there any like disruption that you'd notice with any of your public or non public comps in the quarter and I know I know David you referenced some of the reasons why.

David Nary: I was just wondering, was there any disruption that you'd notice with any of your public or non-public comps in the quarter? And I know Dave, you referenced some of the reasons why you grew this quarter, but I'm just I think the growth was surprisingly good. Yeah, I mean, the team executed very well.

Speaker Change: You grew this quarter, but I'm just.

Speaker Change #118: The growth was surprisingly good.

David S. Regnery: Look, I've been saying for a long time, Joe, you got to look at the share of residential over a longer period than just a quarter. So, you know, did you do better in a quarter? Tell me what you've done over the long term. So I can't comment on whether there was any one of our other competitors that didn't do well. I don't know that, but I am very pleased with our results. But look, we're cautiously optimistic here. Look at the share over the long term. Don't just look at it for a quarter.

David: Yeah, I mean, the team executed very well look I've been saying for a long time, Joe you got to look at.

David Nary: Look, I've been saying for a long time, Joe, you got to look at the share in residential over a longer period than just a quarter. So, you know, did you do better at a quarter? Tell me what you've done over the long term. So I can't comment on there was any one of our other competitors that didn't do well. I don't know that, but I am very pleased with our results.

David: The share in residential over a longer period than just a quarter.

Joseph Alfred Ritchie: So did you do better in the quarter tell me, what you've done over the long term so I.

Joseph Alfred Ritchie: Can't comment on if there was any any one of our other competitors that didn't do well I don't know that but I am very pleased with our results but.

David Nary: But look, we're cautiously optimistic here. Look at share over the long term. Don't just look at it on a quarter. There's different sell-in models, and you could get you get the wrong answer if you just look at a particular quarter.

Speaker Change: Look we're cautiously optimistic here.

Speaker Change: Look at share over the long term don't just look at it on a quarter as different selling models and you could get.

Speaker Change: You get the wrong answer if you just look at a particular quarter, but I am very happy with the results that we've been able to demonstrate.

David Nary: But what I am very happy with the results that we've been looking at is that you're going to be able to get the right answer, but you're not, and the demonstrate.

Operator: Okay, guys, thank you.

Speaker Change: Okay got it thank you.

Steve Tusa: Our next question comes from the line of Steve Tusa with JP Morgan. Your line is open. Hey, good morning. Hey, Steve, how are you? Are you guys getting bored yet of putting up these kind of results? On great execution and very strong results.

David S. Regnery: There are different sell-in models, and you could get the wrong answer if you just look at a particular quarter. But I am very happy with the results that we've been able to get. Okay, guys. Thank you. Our next question comes from the line of Steve Tusa with J.P. Morgan. Your line is open. Hey, good morning. Hey Steve, how are you?

Speaker Change #110: Our next question comes from the line of Steve Tusa with Jpmorgan. Your line is open.

Speaker Change: Okay.

Charles Stephen Tusa: Hey, good morning.

Charles Stephen Tusa: Hey, sorry, if how oriented.

Charles Stephen Tusa: Are you guys getting bored yet of putting up these kind of results? Steve, I never get bored of putting up great results, so... It's the flywheel that this is talking about, right?

Charles Stephen Tusa: Hey, you guys getting bored yet of putting up these kind of results.

Speaker Change: Steve I never get bored of putting up great results.

Speaker Change: No.

Speaker Change: The flywheel, that's just thoughts about right now.

David S. Regnery: Now, congrats on great execution and very strong results. Could we just get a breakdown of the difference between applied and unitary equipment in, you know, the quarter and then what you're expecting for the second half of those two? Yeah, Steve, I'll start. I'm happy with performance in both of those businesses, Applied and Unitary. I'd say both are up strong.

Speaker Change: Congrats on great execution.

Speaker Change #116: <unk> and very strong results could you just get a breakdown of the difference between.

Chris Cune: Can we just get a breakdown of the difference between applied and unitary equipment in the quarter and then what you're expecting for the second half in those two? Yes, Steve. I'll start happy with performance in both of those businesses with applied and unitary. I take both up strong. We talked about commercial HVAC revenues, up over 20% in the quarter, and both contributing to that equipment was up 30%. Maybe unitary a bit stronger than applied, but not by much.

Speaker Change #108: Applied and unitary equipment in the quarter and then what youre expecting for the second half in those two.

Speaker Change #108: Yes, Steve I'll start happy with performance in both of those.

Speaker Change #114: Those businesses with applied and unitary.

Christopher J. Kuehn: We talked about commercial HVAC revenues up over 20% in the quarter and both contributing to that. Equipment was up 30%, maybe Unitary a bit stronger than Applied, but not by much. Second half of the year, I'll start with commercial HVAC Americas. Think of that all in about up 10 to 12% in the second half.

Speaker Change: I'd say bolt up strong we talked about commercial HVAC revenues.

Speaker Change: Up over 20% in the quarter and both contributing to that equipment was up 30%, maybe unitary a bit stronger than than applied but not by much.

Chris Cune: Second half of the year, think of our, I'll start with Commercial HVAC Americas. Think of that all in about up 10 to 12% in the second half. I described earlier, you know, great performance last year in terms of tougher comms with the growth and revenue from call it mid teens in the first quarter of last year to mid 20s by the fourth quarter of last year. That team's going to have a great year this year, and we're even more excited about 90% of the backlog being commercial HVAC, the $2.8 billion a day spoke about that we already have for 2025 and beyond.

Speaker Change: Second half of the year think of our I'll start with commercial HVAC Americas think of that all in about up 10% to 12% in the second half.

Speaker Change: Scribed earlier.

Speaker Change: Great performance last year in terms of tougher comps with the growth in revenue.

Christopher J. Kuehn: I described earlier, you know, great performance last year in terms of tougher comps with the growth in revenue from call it mid-teens in the first quarter of last year to mid-20s by the fourth quarter of last year. That team's going to have a great year this year, and we're even more excited about, you know, 90% of the backlog is commercial HVAC. The $2.8 billion that Dave spoke about that we already have for 2025 and beyond, that's all equipment.

Speaker Change: From call it mid teens in the first quarter of last year to mid Twenty's by the fourth quarter of last year that team is going to have a great year. This year and we're even more excited about.

Speaker Change: 90% of the backlog is commercial HVAC.

Speaker Change: The $2 $8 billion of Dave spoke about that we already have for 2025 and beyond that's all the equipment. We don't have service in that backlog and that's all commercial hvac's. So it's going to be a really strong follow on to this year and it's given us a lot of confidence for growth going into next year.

Christopher J. Kuehn: We don't have service in that backlog, and that's all commercial HVAC. So it's going to be a really strong follow-on to this year, and it's giving us a lot of confidence for growth going into next year. Hopefully, that kind of answers the question.

Chris Cune: That's all equipment. We don't have service in that backlog, and that's all commercial HVAC. So it's going to be a really strong fall on to this year, and it's giving us a lot of confidence for growth going into next year. Over that kind of answers the question.

Speaker Change #102: Over that kind of answers the question.

Charles Stephen Tusa: And will these diverge in the second half? I mean, obviously, with the data center stuff, the applied business, and the backlog related businesses continuing to grow really strongly, but the more short cycle stuff maybe slows a bit given the tougher comps. Is that how we should think about it? Will they diverge a bit, Unitarian Applied?

Chris Cune: Any, you know, will these diverge in the second half? I mean, it seems like obviously with the data center stuff, the applied business and the backlog related businesses continuing to grow really strongly. But the more short cycle stuff maybe slows a bit given the tougher comps. Is that how we should think about what will they diverge a bit, unitarian applied? I don't know if they'll diverge a bit. I mean with Unitarian being up a bit more in the second quarter, I think they're going to be somewhat close to each other here in the second half.

Speaker Change #101: Any any.

Speaker Change #120: These diverge in the second half I mean, it seems like obviously with the data center stuff the applied business in the backlog related businesses.

Speaker Change #101: Continuing to grow really strongly.

Speaker Change: But the more short cycle stuff, maybe slows a bit given the tougher comps is that how we should think about what would they diverge a bit unitary and applied.

Christopher J. Kuehn: I don't know if they'll diverge a bit. I mean, with Unitary maybe being up a bit more in the second quarter, I think they're gonna be somewhat close to each other here in the second half. Services are gonna be strong for the second half as well. We're tracking, as we saw in the second quarter, America's business was up high teens. Enterprise was up mid-teens, so that's gonna be a nice contributor to the second half as well, but I wouldn't say that there's gonna be a big divergence in the second half. Yeah, I would agree, Chris.

Speaker Change #115: I don't know if they'll diverge a bit I mean with unitary maybe being up a bit more in the second quarter, I think theyre going to be somewhat close to each other here in the second half services is going to be strong for the second half as well, where we're tracking as we saw in the second quarter in the Americas business was up high teens enterprise was up mid teens, that's going to be a nice.

Chris Cune: Services is going to be strong for the second half as well. We're tracking as we saw in the second quarter. In the America's business, was up high teens; enterprise was up mid teens. That's going to be a nice contributor to the second half as well, but I wouldn't say that there's going to be a big divergence in the second half. I would agree with this. I think I think that that's that.

Speaker Change #115: Contributor to the second half as well, but I wouldn't say that there's going to be a big divergence in the second half.

Speaker Change #103: And then as I think I think that let's.

David S. Regnery: I think that, but Steve, I think that, again, when you talk about broad-based growth, right, different verticals are satisfied with different types of products, and if on this broad base we continue to demonstrate results, you could see that we're growing both applied and unitary. Not that we look at the business that way because we're really selling systems, but so our unitary, as Chris said, we were actually stronger and more unitary in the second quarter than we were applied despite the fact that we have very large backlogs.

David Nary: But Steve, I think that again, when you talk about broad base growth, right different verticals are satisfied with different types of products. And if in this broad base that we continue to demonstrate results and you can see that we're growing both applied and you're not that we look at the business that we're really selling systems. But so our unit area, as Chris said, we were actually stronger in unit area in the second quarter than we were applied, despite the fact that we have very large backlogs and applied.

Speaker Change #103: But Steve I think that again, when you talk about broad based growth right different verticals are satisfied with different types of products.

Speaker Change #126: And this broad base that we continue to demonstrate results and you could see that we're growing both applied and use it is not that we look at the business that way because it really selling systems, but so our unitary as Chris said, we were actually stronger and unitary in the second quarter than we were applied. Despite the fact that we have very large backlogs are required.

Chris Cune: One last question for you just on the services growth. I mean. who usually think of services being pretty solid growth but more stable, you know, these types of growth rates and services, obviously very strong, credit to you guys, what is like the key driver here? It seems like it's more than to stay, you know, a run rate of recurring, you know, repair, stuff like that. Is there anything that's, you know, standing out? Because it just seems, these types of growth rates, they're not lumpy, but they're just seemingly way higher than, you know, what you would consider to be a nice steady services business.

David S. Regnery: One last question for you, just on the services growth. I mean, usually think of services as being pretty solid growth, but more stable. You know, these types of growth rates in services are obviously very strong. Credit to you guys. What is the key driver here?

Speaker Change #113: One last.

Speaker Change #128: Question for you just on the services growth I mean.

Speaker Change #142: You, usually think of service as being pretty solid growth, but more stable.

Speaker Change #112: These types of growth rates and services.

Speaker Change #124: Obviously very strong credit to you guys.

Speaker Change #127: What is like the key driver here it seems like it's more than just a run rate of.

Charles Stephen Tusa: It seems like it's more than just a run rate of recurring, you know, break, repair, stuff like that. Is there anything that's, you know, standing out? Because these types of growth rates, they're not lumpy, but they're just seemingly way higher than, you know, what you would consider to be a nice steady services business. Yeah, it's a great question, Steve, and I appreciate you noticing our high growth rates there. You know, just to remind everyone, we've had a compound annual growth rate of high single digits for the last six years. In the second quarter, we were up mid-teens, right?

Speaker Change #112: Recurring.

Speaker Change #119: Brake repair and stuff like that.

Speaker Change #123: Is there anything that's standing out.

Speaker Change #123: Because it just seems these types of growth rates, they're not lumpy, but theyre just seemingly.

Speaker Change #119: Higher than what you would consider to be at.

Speaker Change #109: Nice steady services business.

Chris Cune: Yeah, it's a great question, Steve, and I appreciate you noticing our hard growth rates there. You know, just to remind everyone, we've had a compound annual growth rate over the last six years of high single digits. In the second quarter, we were up mid teens, right? And I keep, I'll just go back to our operating system, right? It's a system of things that makes our service business great. For sure, it helps when you keep growing your applied installed base because our service business is really built around our applied installed base. But I would also tell you that the mindset that we have of an asset is not performing when it's not heating or cooling properly and/or it's using too much energy is a different way to think about it.

David S. Regnery: And I'll just go back to our operating system, right? It's a system of things that makes our service business great. For sure, it helps when you keep growing your applied installed base because our service business is really built around our applied installed base. But I would also tell you that the mindset that we have of an asset is not performing when it's not heating or cooling properly, and or it's using too much energy is a different way to think about it. And there's a lot of growth potential when you start thinking, Great, okay, thank you. Yeah, thanks a lot. Keshti.

Speaker Change #136: It's a great question Stephen I appreciate you noticing our high growth rates there.

Speaker Change #106: Remind everyone. We've had a compound annual growth rate over the last six years of high single digits in the second quarter, we were up mid teens right.

Speaker Change #106: I'll just go back to our operating system right. It's a system of things that makes our service business great for sure. It helps when you keep growing Europe applied installed base because our service business is really built around our applied installed base.

Speaker Change #106: But I would also tell you that.

Speaker Change #106: The mindset that we have of an asset is not performing when it's not heating or cooling properly and or it's using too much energy is a different way to think about it and there is a lot of growth potential when you start thinking that way.

Chris Cune: And there's a lot of growth potential. We start thinking that way.

Christopher M. Snyder: Thanks, Chris.

Jeffrey Sprague: Yeah, thanks a lot. Our next question comes in line of Jeff Sprite with Vertical Research Partners. Your line is open. Hey, thanks. Good morning, everyone. Hey, I want to come back to data centers to maybe a little bit bigger picture or just kind of competitive and customer kind of behavior question. You know, obviously you and your peers are talking about very strong growth that seems like there's plenty to go around. You know, it also does look like you're probably outgrowing them, but it's hard to tell.

Speaker Change #104: Yes, Thanks a lot.

Speaker Change #111: Okay. Thanks.

Charles Stephen Tusa: Our next question comes from the line of Jeff Sprague with Vertical Research Partners. Your line is open. Hey, thanks. Good morning, everyone. Hey, Joe. Good morning.

Speaker Change #107: Our next question comes from the line of Jeff Sprague with vertical research partners. Your line is open.

Jeffrey Todd Sprague: Hey, Thanks, good morning, everyone.

Speaker Change #122: Yeah, Hey, Hello, everybody as well I wanted to come back to.

Jeffrey Todd Sprague: Hope everybody's well. I wanted to come back to data centers, too, maybe a little bit bigger picture, just kind of a competitive and customer behavior question. You know, obviously, you and your peers are talking about very strong growth. It seems like there's plenty to go around. But it also does look like you're probably outgrowing them, but it's hard to tell.

Jeffrey Todd Sprague: Data centers to maybe a little bit bigger picture, just kind of competitive and customer kind of behavior question.

Speaker Change #121: Obviously, you and your peers are talking about very strong growth that seems like there's plenty to go around it also it does look like youre, probably outgrowing them, but it's hard to tell but the nature of my question is.

David S. Regnery: But the nature of my question is, are your customers, in general, and maybe the hyperscalers in particular, standardizing on OEMs? You know, you end up dominating, you know, hyperscaler A and carrier as hyperscaler B, or, you know, are we looking at mixed fleets based on, you know, what people can deliver at a point in time? Just give us a sense of, you know, kind of in this almost kind of gold rush to stand up for these stuff.

David Nary: But the nature of my question is, are your customers in general and maybe the hyper scalers in particular standardizing on OEMs? You know, you end up dominating, you know, hyper scale or A and carrier as hyper scale or B, or, you know, are we looking at mixed fleets based on, you know, what people can deliver it. At a point in time, just give us a sense of, you know, kind of in this almost kind of gold rush to stand this stuff up, you know, just how the competitive landscape and customer behavior is unfolding. Yeah, I'd say hyper scales.

Speaker Change #144: Are your customers in general and maybe the hyper scaler in particular standard standardizing on Oems.

David S. Regnery: You know, just how the competitive landscape and customer behavior is unfolding. Yeah, I'd say Hyperscale. First of all, they like technology, and they like always pushing the envelope and trying to increase the efficiency of the system.

Speaker Change #105: You end up dominating.

Speaker Change #146: Hyperscale or a carrier as hyperscale or B R. R.

Speaker Change #133: Are we looking at mixed fleets based on what people can deliver it at a point in time.

Speaker Change #137: Give us a sense of kind of in this almost kind of gold rush to extend this stuff up.

Speaker Change #137: Just how the competitive landscape and customer behavior is unfolding.

David S. Regnery: So they're always working with us, and they may be working with our competitors as well to make sure that we can have a more efficient system tomorrow. And we have a lot of cool things that we're working on with them. And some of it includes things that are maybe a little bit outside of that, which is the heat recovery side of things, which I've talked about in the past.

Speaker Change #145: Yes, I'd say Hyperscale is first of all they like technology and they like always pushing the envelope.

David Nary: First of all, they like technology, and they like always pushing the envelope and trying to increase the efficiency of the system. So they're always working with us, and they maybe work with our competitors as well as to make sure that we could have a more efficient system tomorrow. And we have a real lot of cool things that we're working on there with them, and some of it include some things that are maybe a little bit outside of that, which is the heat recovery side of things, which I talked about in the past. Look, at the end of the day, these hyperscale customers, they like resiliency as well.

Speaker Change #130: Trying to increase the efficiency of the system. So theyre always working with US and then may be working with our competitors as well as to make sure that we can have a more efficient system tomorrow and we have a lot of cool things that we're working on there with them and some of it includes some things that are maybe a little bit outside of that which is the heat recovery side of things, which I talked about in the past.

Speaker Change #132: <unk> looked at the end of the day these hyperscale customers they they like resiliency as well so.

David S. Regnery: Look, at the end of the day, these Hyperscale customers, they like resiliency as well. So they'll typically pick a prime, and then they'll pick a secondary. And that's just prudent behavior on their behalf. And, and we've seen that before, but I would tell you they really, really, really like Innovative Technology.

David Nary: So they'll typically pick a prime and then they'll pick a secondary, and that's just prudent behavior on their behalf. And we've seen that before, but I would tell you they really, really, really like. and innovative technologies.

Speaker Change #132: They'll fill typically pick a prime and then they will pick a secondary and that's just prudent behavior on their behalf and.

Speaker Change #132: And we've seen that before but I would tell you they really really really like.

Speaker Change #132: Innovative technologies.

David Nary: And Davis, there's a way to think about, you know, just kind of your available serve market here, dollars from megawatt deployed or some other metric, you know, as you try to really kind of game plan for the capacity you need in the revenue trajectory you might be looking at. Anyway, you could kind of help us frame that. We have some internal models that I want to share with you, the results, but look, it's allowed us to be able to help forecast based on talking to our customers, understanding what their demands are. Okay. And then kind of pushing that back into what would it mean for us.

David S. Regnery: And Dave, is there a way to think about... You know, just kind of your available service market here, dollars per megawatt deployed or some other metric, you know, as you try to really kind of game plan for the capacity you need and the revenue trajectory you might be looking at. Anyway, you could kind of help us frame that. We have some internal models that I won't share with you the results.

Speaker Change #105: And Dave is there a way to think about.

David S. Regnery: Just kind of your available served market here dollars per megawatt deployed or some other metric as you try to really kind of game plan for the capacity you need in the revenue trajectory you might be looking at.

Speaker Change #138: Any way you could kind of help us frame that.

Speaker Change #141: We have some internal models.

Speaker Change #151: Share with you the results, but look it's allowed us to be able to help forecast based on talking to our customers understanding what their demands are okay, and then kind of pushing that back and so what would it mean for US I would tell you that think of units getting bigger think of units getting more complex.

David S. Regnery: But look, it's allowed us to be able to help forecast based on talking to our customers and understanding what their demands are. Okay, and then kind of pushing that back into what it would mean for us, I would tell you that think of units getting bigger, think of units getting more complex, and think of added features on units like heat recovery. That's certainly a trend that we're seeing, and that's certainly something that we're working with our customers to kind of push into the market. Okay, great. I'll leave it there, thanks.

David Nary: I would tell you that think of units getting bigger, think of units getting more complex and think of added features on units like heat recovery. That's certainly a trend that we're seeing, and that's certainly something that we're working with our customers, kind of pushing into the marketplace. Okay. Great. I'll leave it there. Thanks.

Speaker Change #105: And think of added features on units like heat recovery, that's certainly a trend that we're seeing and that's certainly something that.

Speaker Change #105: We're working with our customers kind of pushing into the marketplace.

Speaker Change #105: Okay, Great I'll leave it there thanks, alright, thanks, Jeff.

Operator: Thanks, sir.

Nigel Coe: Our next question comes from a line of Nigel Co with Wolf Research. Your line is open. Thanks. Good morning, everyone. Great. Obviously, he had good thanks. Look, everything's really good.

Speaker Change #152: Our next question comes from the line of Nigel Coe with Wolfe Research. Your line is open.

Jeffrey Todd Sprague: Thanks. Our next question comes from the line of Nigel Coe with Wolf Research. Your line is open. Thanks. Good morning, everyone.

Nigel Edward Coe: Thanks, Good morning, everyone.

Nigel Edward Coe: Great call out, obviously. Yeah, good, thanks. Look, everything's really good.

Speaker Change #105: Great.

Speaker Change #139: Obviously, you had good thanks look at things.

David S. Regnery: So I'm going to focus on a couple of areas that aren't so great right now. So... Dave, in a world of 15% trailer declines this year and after, how does TK Americas perform? And maybe just on top of that, add in how the other verticals are performing, your bus rail, et cetera, and spare parts. Yeah, it's a fair question.

David Nary: So I'm going to focus on a couple of areas that aren't so great right now. So, David, in the world of down 15% trailer declines this year and after, how does TK America's form? And maybe just on top of that, add in how the other verticals are performing: your bus, rail, et cetera, and spare parts. Yeah. I mean, it's a third question. Look, the America's transport business is going to be down in 2014. It's a more cyclical business than our commercial HVAC business. Act is projecting the back half of the year to be down 25%, to be fair.

Speaker Change #148: So I'm going to focus on a couple of areas on so great right now.

Speaker Change #139: No.

Speaker Change #105: Dave.

Speaker Change #105: Down 15%.

Speaker Change #105: Trailer declines this year in NAFTA.

Teekay Americas: Teekay Americas a form.

Teekay Americas: Maybe just on top of that sat in how the other <unk>.

Teekay Americas: Vehicles are performing busway et cetera, and spare parts.

David S. Regnery: Look, America's transport business is going to be down in 2014. It's a more cyclical business than our commercial HVAC business. ACT is projecting the back half of the year to be down 25%. To be fair, our internal models say it could be down even a little bit more than that. And that's what we have baked into our full-year guide. Look, I had the opportunity early in my career, Nigel, to run this business.

Speaker Change #131: It's a fair question look the Americas transport business is going to be down in 2014, it's a more cyclical business than our commercial HVAC business Act as projected in the back half of the year to be down 25% to be fair. Our internal models say it could be down even a little bit more than that and thats, what we have baked into our.

David Nary: Our internal models say it could be down even a little bit more than that. And that's what we have baked into our full-year guide.

Speaker Change #131: Our full year guide.

Chris Cune: Look, I had the opportunity early in my career, Nigel, to run this business. And I would tell you that I've seen these downturns in the past. And I would tell you that these markets will come back. And right now it's projected they'll come back in 2015. We'll stay tuned on that. But this is a very strong business. And when these markets come back, they're going to come back strong. And the key is to continue to invest in the business when you're in this down cycle. And when you do that, when the markets come back, you're able to delight your customers with a whole portfolio of innovation that really allows you to win through that cycle.

Speaker Change #131: Look I had the opportunity early in my career Nigel to run this business and I would tell you that I've seen these downturns in the past.

David S. Regnery: And I would tell you that I've seen these downturns in the past. And I would tell you that these markets will come back. And right now, it's projected they'll come back in 2015.

Speaker Change #131: And I would tell you that these markets will come back.

Nigel: Right now it's projected they'll come back in 2015 will stay tuned on that.

David S. Regnery: We'll stay tuned on that, but this is a very strong business. And when these markets come back, they're going to come back strong. And the key is to continue to invest in your business when you're in this down cycle. And when you do that, when the markets come back, you're able to delight your customers with a whole portfolio of innovation that really allows you to win through that cycle. And that's what our plan is right now. As Chris said, we've been investing heavily in the business, and we're not stopping that.

Nigel: This is a very strong business and when these markets come back theyre going to come back strong and the key is to continue to invest in the business. When you are in this down cycle and when you do that when the markets come back Youre able to delight your customers with pulp.

Nigel: Whole portfolio of innovation.

Christopher M. Snyder: That really allows you to win through that cycle and that's what our plan is right now as Chris said, we've been investing heavily in the business, we're not stopping that and Teekay is a big part of those investments that we're making and I'm excited about the innovation pipeline that is going to come out in the thermo King business and when the markets come back we're going to be ready as far as.

David Nary: And that's what our plan is right now. As Chris said, we've been investing heavily in the business. We're not stopping that. And TK is a big part of those investments that we're making. And I'm excited about the innovation pipeline that's going to come out in the Thermal King business. And when the markets come back, we're going to be ready.

David S. Regnery: And TK is a big part of those investments that we're making. And I'm excited about the innovation pipeline that's going to come out in the Thermal King business. And when the markets come back, we'll be ready. As far as the other businesses go, they tend to follow a trailer. I mean, and they're not trailers, the big ones, but they tend to follow that same cycle.

Chris Cune: As far as the other businesses, they tend to follow trailer. I mean, and they're not trailers. The big one, but they tend to follow that same cycle. We start to get rate rates to improve if we start to get capacity coming out of the channel. We'll see the market start to rebound. And I know they will. Oh, they're sitting well, absolutely.

Nigel: The other businesses.

Speaker Change #134: They tend to follow a trailer and theyre not the trailers the big one but they tend to they tend to follow that same cycle, we start to get freight rates to improve if we start to get.

Nigel Edward Coe: If we start to get freight rates to improve, if we start to get capacity coming out of the channel, we'll see the market start to rebound. And I know it will. Oh, they certainly will. Absolutely. So would a downturn from mid to high teens be reasonable for TK America in the back half of the year? Nigel, this is Chris.

Speaker Change #134: Passenger coming out of the out of the out of the channel, we'll see the market start to rebound and I know they will so.

Speaker Change #134: Okay Sidney will absolutely so.

Chris Cune: So, would down mid to high teens be reasonable for TK America to be back half of the year? And I just, Chris, yeah, I mean, I think they could be down mid single to high single in the second half of the year. I mean, we expect it to be down probably in a range of low doubles, double digits on the year. If trailer martyrs are down mid-teens, we expect outperform, and again, that's the innovation and the investments we've done this business for many, many years. And the key here is to make sure that while it is a down year, and we're going to manage the decremental as so far we have, and we expect to do that for the balance of the year, it's making sure that we've got the investment pipeline that continues to run in the business.

Sidney: Down mid to high teens be reasonable for TK maxx in the back half of the year.

Christopher J. Kuehn: Yeah, I mean, I think they could be down mid-single to high-single digits in the second half of the year. We expect them to be down probably in a range of low doubles, and double digits for the year. If trailer markets are down in the mid-teens, we expect to outperform. And again, that's the innovation and the investments we've had in this business for many, many years. And the key here is to make sure that while it is a down year and we're going to manage the decrements as we have so far, and we expect to do that for the balance of the year, we make sure that we've got the investment pipeline that continues to run in the business.

Christopher M. Snyder: So this is Chris.

Speaker Change #169: I mean, I think there could be down mid single to high single in the second half of the year I mean, we expect it to be down probably in the range of low doubles double digits on the year. If trailer markets are down mid teens, we expect to outperform and again, that's the innovation and the investments we've had in this business for many many years and the key here is to make.

Christopher M. Snyder: Sure that while it is a down year and we're going to manage to the decrementals as so far we have and we expect to do that for the balance of the year, It's making sure that we've got the investment pipeline that continues to run in the business. Just in June we finished our long range plans for each of our business units.

Christopher J. Kuehn: You know, just in June, we finished our long-range plans for each of our business units, thinking about capacity, and not only in commercial HVAC, but all of our businesses. And this is one that, you know, we like these markets, to Dave's point. We want to make sure we're still investing so that when the markets do recover, we're ready. But could the market be down more than mid-teens? I mean, that's what we've called it right now. To be fair, I know ACT's had multiple revisions here over the last several months. I think it's four or five this year already.

Chris Cune: You know, just in June, we finished our long range plans for each of our business units, thinking about capacity and not only commercially to see, but all of our businesses. And this is one that, you know, we like these markets to Dave's point, want to make sure we're still investing so that when the markets do recover, we're ready.

Christopher M. Snyder: About capacity and not only in commercial HVAC, but all of our businesses and this is one that we like these markets to Dave's point, we want to make sure. We're still investing so that when the markets do recover we are ready.

Chris Cune: Could the market be down more than mid teens? I mean, that's what we've called it right now. To be fair, I know ECTs had multiple revisions here over the last several months. I think it's four or five this year already. Our internal models would suggest maybe it's down a little more than that. So we're making sure we bake that into our guide at this point. Second half of the year, we expect it to be down on downcombs from a year prior, but that we do expect to outperform the market.

Speaker Change #157: Could the market be down more than mid teens I mean, that's what we called it right now to be fair I know Acte's had multiple revisions here over the last several months I think it's four or five this year already.

Christopher J. Kuehn: Our internal models would suggest maybe it's down a little bit more than that. So, we're making sure we bake that into our guide at this point. Second half of the year, we expect it to be down on down comps from a year prior, but we do expect to outperform the market. Okay, Gus. I had a follow-up question, but that was a great answer, so I'll leave it there. Thanks. Thanks, Nigel.

Speaker Change #143: Our internal models would suggest maybe it's down a little more than that.

Speaker Change #158: We're making sure we baked that into our guide at this 0.2nd half of the year, we expect it to be down on down comps from a year prior but we do expect outperformed the market.

Speaker Change #134: Yeah.

Nigel Coe: Okay, Gus, I had a full question, but that was a great answer, so I'll leave it there.

Speaker Change #134: Okay. Thanks, Scott and I had a follow up question, but that was a great answer so I'll leave it there. Thanks Lucas.

Operator: Thanks, Lucas. Thanks, Nigel.

Nathan: Thanks Nathan.

Dean Drey: Our next question comes from the line of Dean Drey with RBC. Your line is open. Thank you. Good morning, everyone. Hey, Dean, how are you? I'm doing real well. Thank you.

Nigel Edward Coe: Our next question comes from the line of Deane Dray with RBC. Your line is open. Thank you. Good morning, everyone. Hey Deane, how are you?

Speaker Change #150: Our next question comes from the line of Deane Dray with RBC. Your line is open.

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

Deane Michael Dray: Hey, Dan how are you doing real well. Thank you I just wanted to circle back on unitary one of your competitors this quarter talked about making a push into the emergency replacement of unitary into that market.

Deane Michael Dray: I'm doing real well. Thank you. I just want to circle back on Unitary.

David Nary: I just want to circle back on Unitary. One of your competitors this quarter talked about making a push into the emergency replacement of Unitary into that market, where they said they really don't have any share. How might the competitive dynamics change here in the economic returns? Just any comments from you would be helpful. Thanks. That's a tough one for me to answer. I'm not sure what they're planning on doing. I would tell you that we're very strong in Unitary as far as the replacement market goes. Yeah, in the heat of the summer, if the unit stops working, it needs to be replaced.

David S. Regnery: One of your competitors this quarter talked about making a push of Unitary into that market, where they said they really didn't have any share. How might the competitive dynamics change here and in the economic returns? Just any comments? That's a tough one for me to answer. I'm not sure what they're planning on doing. I would tell you that, You know, we're very strong and unitary as far as the replacement market goes. Yeah, in the heat of the summer, if the unit stops working, it needs to be replaced.

Speaker Change #168: They said they really don't have any share.

Speaker Change #155: How might the competitive dynamics change here or any of the economic returns.

Speaker Change #154: Just any.

Speaker Change #154: Any commentary would be helpful. Thanks.

Speaker Change #162: That's a tough one for me to answer I'm not sure what they're planning on doing I would tell you that.

David S. Regnery: And having the available unit on hand is very, very important, and we carry a lot of inventory. And we also have, with our lean thinking and manufacturing, quick ship programs, which allows us to really win in this space. Is it fair to say that the emergency replacement, Mark, is basically half of the business? Yeah, I can't comment on that. I think it would be really depends on the time of year.

Speaker Change #166: We're we're very strong in unitary as far as the replacement market goes in the <unk>.

Speaker Change #161: The heat of the summer.

Speaker Change #154: If the unit stops working it needs to be replaced and having the available units on hand is very very important and we carry a lot of inventory stock and we also have.

David Nary: And having the available unit on hand is very, very important. And we carry a lot of inventory stock. And we also have with our lean thinking and manufacturing quick chip programs, which allows us to really win in this space. Is it fair to say that the emergency replacement market is basically half of the business today, or is that overstated? Yeah, I can't comment on that. I think it would depend on the time of year. You also have a planned replacement market as well. So there's a lot of things that are part of that statement that you just made.

Speaker Change #154: With our lean thinking and manufacturing quick ship programs, which allows us to really win in this space.

Speaker Change #172: Is it fair to say that the emergency replacement market is basically half of.

Speaker Change #172: The business today or is that overstated.

Speaker Change #140: I can't comment on that and I think it would be it would really it would depend on the time of year. Okay. You also have a planned replacement market as well. So there's a lot of things that that are part of that statement that you just made so.

David S. Regnery: Okay. You also have a planned replacement market as well. So there's a lot of things that are part of that statement that you just made. So it really depends.

David Nary: So it really depends. All right. No, I understand. That's helpful.

Speaker Change #140: It really depends.

Deane Michael Dray: All right, no, I understand that's helpful. And then, second question: any updates on all of the megaprojects? Any bidding coming through? Any updates? And some of them have been closed.

Speaker Change #159: Alright, I understand that's helpful. And then second question any updates on all of the Mega projects are you seeing any bidding coming through.

David Nary: And then second question, any updates on all of the mega projects? Are you seeing any bidding coming through? Any updates would be helpful. Thanks. Yeah, I mean we continue to track mega projects and, as I've said in the past, you know, mega projects tend to be in verticals that we were always strong in, so it's hard to say what's incremental in that space. But right now, our teams are tracking over 300 projects, and some of them being closed, but many of them are still in the pipeline. And, you know, one of the things about these mega projects is they tend to have lots of different decision makers, especially, you know, if any of the semiconductor space that, you know, I mean I'll give you an example: we had a project that the decision maker was in Asia, you know, the engineer was in Seattle, Washington, and the mechanical was in Austin, Texas. And one of the advantages that we have with our direct sales forces is we could really help the customer triage all the information that's required, and it allows us to really be focused on the customer needs, but also all the different individuals that are part of that process. So we really like our positioning with these mega projects, and a lot of these mega mega projects are very sophisticated engineered products, which actually plays to our strength as well.

Speaker Change #153: Any updates would be helpful. Thanks.

Speaker Change #177: Yeah, I mean, we continue to track Mega projects.

Speaker Change #173: As I've said in the past no mega projects tend to be in verticals that we were always strong and so it's hard to say, what's incremental in that space, but right.

Speaker Change #176: Right now our teams are tracking over 300 projects.

Speaker Change #153: Some of them have been closed.

Speaker Change #153: But many of them are still in the pipeline one of the things about these mega projects as they tend to have lots of different decision makers, especially if any of the semiconductor space I'll.

Speaker Change #153: I'll give you. An example, we had a project that the decision maker was in Asia.

Speaker Change #153: The engineer was in Seattle, Washington, and the mechanical was in Austin, Texas and one of the advantages that we have with our direct sales forces. We can really help the customer triage all the information that's required and it allows us to really be focused on the customer needs, but also all the different individuals that are part of that process. So.

Speaker Change #153: We really like our positioning with these mega projects and a lot of these mega projects are are very sophisticated engineered products, which actually plays to our strength as well.

David Nary: Great, thank you.

David S. Regnery: Great, thank you. Sure, Deane. I will now turn the call back over to Zach Nagle for closing remarks. I'd like to thank everyone for joining us on today's call. As always, we'll be around for any questions that you may have. So feel free to ring us up. And then in the coming months, we'll be on the conference circuit, obviously, and we'll hope to see some of you at the conferences as well. So thanks for joining us, and have a great day.

Speaker Change #160: Great. Thank you.

Noah Kaye: Sure. Our final question comes from the line of NOAAK, with Oppenheimer. Your line is open. Thanks. I'll just ask one question, and David goes back to your opening comments around demand side management as an underappreciated lever. Here, you're sitting on one of the largest flexible capacity assets on the grid, and you're expanding your ability to play distributed resource management and virtual power plants district heating.

Speaker Change #165: Sure thing.

Speaker Change #170: Our final question comes from the line of Noah Kaye with Oppenheimer. Your line is open.

Noah Duke Kaye: Yes, Thanks Al I'll, just ask one question and David goes back to your opening comments around demand side management as an underappreciated lever here you are sitting on one of the largest flexible capacity assets on the grid.

Noah Duke Kaye: And you're expanding your ability to play in distributed resource management to virtual power plants district heating I was hoping you could maybe connect the dots for us a bit more and just frame up how meaningful this is becoming in terms of some of the commercial HVAC bookings and revenue trends how much they expand your wallet share or anything you can do to help us quantify.

Noah Kaye: I was hoping you could maybe connect the dots for us a bit more and just frame up how meaningful this is becoming in terms of some of the commercial HVAC bookings and revenue trends, how much they expand your wallet share, anything you can do to help quantify for us, you know, some of these additional facets of the business. Now I appreciate the question. No, I think we're still in the early innings on this. I know we're in the early innings; it's more about an education process. We were working with a customer, a large customer in New York City, and we created a digital twin for their particular building. We were connected, and we were watching the energy consumption, and we saved that particular customer. It may not sound like a lot, but it was like $120,000.

Speaker Change #167: Five for US some of these additional facets of the business.

Speaker Change #171: Well I appreciate the question no I think we're still in the early innings on this I know we're in the early innings, it's more about an education process, we're working with a customer a large customer.

Speaker Change #171: In New York City, and we created a digital twin for their particular building and we were connected and we're watching the energy consumption and we save that particular customer.

Speaker Change #171: It may not sound like a lot, but it was like $120000 right and energy that they would have wasted if we werent connected to their solution. So and you think about the the universe. Okay. If you think about the commercial space at 401 billion square feet I mean, it's crazy the opportunity that exists. So look this is a massive opportunity.

David Nary: Right in energy that they would have wasted if we weren't connected to their solution. So, and you think about the universe, okay? You think about the commercial space at 400 billion square feet. I mean, it's crazy the opportunity that exists. So look, this is a massive opportunity. Demand side management, you're going to hear a lot more about it, and the neat thing about it is you don't have to wait for new technology to be developed. Right? This is technology that is readily available. And being connected you know from a structured data standpoint, which we've been for a while, but now we're adding in unstructured data with our AI tools, we're able to really dial in algorithms to really help our customers save energy, which is save in carbon, which is good for the good for the planet.

Speaker Change #163: <unk> demand side management, you're going to hear a lot more about it and the neat thing about it is you don't have to wait for new technology to be developed right. This is technology that is readily available and being connected from a structured data standpoint, which we've been for a while but now we are adding an unstructured data with <unk>.

Speaker Change #163: Our AI tools, we're able to really dial in algorithms to really help our customers save energy, which is saving carbon which is good for the good for the planet as well.

Noah Kaye: as well. Thank you. We'll look forward to hearing more.

Speaker Change #174: Okay. Thank you look forward here anymore.

Zach Nagle: Alright, thanks, Noah.

Neal: Alright, Thanks Neal.

Speaker Change #163: Yeah.

Operator: I would now turn the call back over to Zach Nagle for closing remarks. Thank you, everyone, for joining in today's call. As always, we'll be around for any questions that you may have. So feel free to bring us up. And then in the coming months, we'll be on the conference circuit, obviously, and we'll help to see some of you on the conference circuit. Thank you all for joining. And have a great day.

Speaker Change #160: I will now turn the call back over to Zac Nagle for closing remarks.

Zachary A. Nagle: Let me thank everyone for joining us on today's call as always we'll be around for any questions that you may have so feel free to ring us up and then in the coming months will be on the conference Circuit, obviously, and we will hope to see some of you on the conference circuit as.

Zachary A. Nagle: As well so thanks for joining and have a great day.

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Speaker Change #178: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.

Speaker Change #140:

Speaker Change #140:

Speaker Change #140: [music].

Speaker Change #140: Yeah.