Trane Technologies PLC at Morgan Stanley Laguna Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher Snyder - JPMorgan - Analyst : Maybe starting off at a high level, if we look at commercial HVAC growth, it's bifurcated from global construction over the last couple of years. and no company has bifurcated more than Trane. Can you just talk about what's driving this?

Question: Christopher Snyder - JPMorgan - Analyst : Yes. Do you think customers have a better appreciation of energy efficiency than they did five years ago? And if it's true, is it just because the paybacks are better or because there's a bigger focus on ESG targets and emissions.

Question: Christopher Snyder - JPMorgan - Analyst : I mean that 30% inefficiency is obviously a massive, massive number. What -- is that just because buildings have old systems? They have new systems that are maybe lower efficiency. They don't have the controls, like what's the biggest piece of that 30%?

Question: Christopher Snyder - JPMorgan - Analyst : The company's direct sales force, I know is very important to you, as you talked about earlier. I think sometimes it does get underappreciated in the market. I guess it's always been a positive for the company allows you to pivot to where the growth is. Would you argue that the value add from that direct sales force has picked up in a world where energy efficiency and paybacks have kind of come to the forefront?

Question: Christopher Snyder - JPMorgan - Analyst : And then on that relentless reinvestment, I guess what do you see in the pipeline today? Obviously, thermal management has been a big deal for you guys, digitized service. And then ultimately, how does it come back through the P&L, whether it's pricing or gross margin as you guys are

Question: Christopher Snyder - JPMorgan - Analyst : Maybe turning to the --

Question: Christopher Snyder - JPMorgan - Analyst : Yes. I look forward to learning more. The -- turning to the market, maybe commercial applied kind of company's strongest market, pretty incredible run. I think America is 90% on a three-year stack, seems pretty good. Can you talk about the runway for growth?

Question: Christopher Snyder - JPMorgan - Analyst : Yes. Can you talk about the runway for growth, both just in the market opportunities, but then also your guys' ability to continue to take share in our growth.

Question: Christopher Snyder - JPMorgan - Analyst : I mean, yes, 14 verticals. I think all or almost all of them were positive in Q2, if I --

Question: Christopher Snyder - JPMorgan - Analyst : Government. I mean when you look across these end markets, is there anywhere where you're seeing positive or negative rate of change?

Question: Christopher Snyder - JPMorgan - Analyst : Yes. I mean Obviously, the backlog is well above normalized levels, but it does include some longer-duration projects with data center. But when you look at the backlog and the orders that are coming in from customers, in general, do customers still want equipment sooner rather than later?

Question: Christopher Snyder - JPMorgan - Analyst : I know company serves 14 markets, not just data center, but that has become a very, very important one. And it does seem like when we look at the orders and the bifurcation does seem like you guys are winning more than your fair share. in data center. What is the driver of that success? Is it the technology, they appreciate it? Is it the direct sales force?

Question: Christopher Snyder - JPMorgan - Analyst : How is the selling process to a data center? Is that like a Trane is working with the engineer of hyperscale or X? How does that go?

Question: Christopher Snyder - JPMorgan - Analyst : Can you talk about the service opportunity in data center? And is it any different than the kind of the typical service model elsewhere?

Question: Christopher Snyder - JPMorgan - Analyst : I guess maybe on service more broadly. I guess x 2020 basically been a double-digit growth CAGR, still a very fragmented market. What is the runway for growth there on service broadly?

Question: Christopher Snyder - JPMorgan - Analyst : Obviously, we're seeing tremendous growth in the installed base of Trane assets in the world. how -- on an applied project, when do they really start generating service revenue for you guys? Is there a period of lag before that starts to kick in?

Question: Christopher Snyder - JPMorgan - Analyst : Yes. I think the biggest pushback that we quite honestly got on Trane is -- can things get much better than they are right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 6:05PM, TT.N - Trane Technologies PLC at Morgan Stanley Laguna Conference

Question: Christopher Snyder - JPMorgan - Analyst : And obviously, we kind of see demand still stays very good. Obviously, tough comps, particularly on orders into the back half of the year. Like what gives you confidence that things can continue to get better.

Question: Christopher Snyder - JPMorgan - Analyst : Maybe on commercial unitary, I think that market has hung in better than many expected 12 months ago. I guess why has that stayed resilient? And does commercial unitary get a lift from the strength that we're seeing on the applied side.

Question: Christopher Snyder - JPMorgan - Analyst : I appreciate that. Maybe moving over to resi, built some momentum in Q2, maybe better --

Question: Christopher Snyder - JPMorgan - Analyst : Q2 -- but there was some support from a visibility around the policy weather was pretty positive in Q2. Do you feel like that resi market is turning? And maybe also layered into there, what's the expectations with the refrigerator?

Question: Christopher Snyder - JPMorgan - Analyst : Yes, you had them off. All right. Pretty good. Maybe moving over to Thermo King. I know a business near and dear to your heart, down market this year, ACT forecast already. You guys are obviously investing. What do you see there over the next 12 months?

Question: Christopher Snyder - JPMorgan - Analyst : Last one, International, America has been incredibly strong. What do you guys see in the international market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 6:05PM, TT.N - Trane Technologies PLC at Morgan Stanley Laguna Conference

Question: Christopher Snyder - JPMorgan - Analyst : Well, we're up on the 30 minutes. Thank you, guys, both for coming.