Trane Technologies plc

Good morning, ladies and gentlemen. Thank you for standing by and welcome to the Train Technologies Q2 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. If you should require any further assistance, please press star then zero and an operator will come back on to assist you. I would now like to hand the conference over to your speaker today. Mr. Zach Nagel, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Operator. Good morning, and thank you for joining us for Training Technologies' second quarter 2020 earnings conference call. This call is being webcast on our website at traintechnologies.com, where you'll find the accompanying presentation. We are 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. 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. Joining me on today's call are Mike Lemock, Chairman and CEO, Chris Kuhn, Senior Vice President and CFO, and Dave Regneri, President and COO. With that, please go to slide three, and I'll turn the call over to Mike. Mike?

Thanks, Zach, and thanks, everyone, for joining us on today's call. I'd like to start today's call with some perspective on the unprecedented level of change we've seen around the world, both in business and in our personal lives, over a time period of just a matter of months and why and how this is particularly relevant for trained technologies. The COVID-19 pandemic has disrupted long-lived paradigms on what was considered normal. It has exposed obvious truths about the many ways the old normal wasn't good enough. Normal has meant rapidly rising emissions and temperatures, creating a global climate crisis, and pollution and poor health in many of our world's biggest cities where COVID-19 has had a disproportionately damaging impact in communities where the demographics are most socioeconomically challenged. Normal has meant hunger even though one-third of the global food supply is lost or wasted each year. And normal has meant inherent systemic racism, injustice, and inequality. At Trane Technologies, we want to be part of creating a better new normal. We will challenge the status quo to create a new normal where communities thrive, where quality is foundational, and where the environment is protected for future generations. We're putting a stake in the ground that trained technologies will lead by example by setting historic and ambitious commitments and taking action to change our company, our industry, and the world. Our Gigaton Challenge commits to reducing our customers' carbon emissions by one gigaton, or a billion metric tons, by the year 2030. To give you an idea of the size and scale, that's equivalent to about 2% of the world's annual emissions. And that's just our company alone. As other companies join in, we can bend the curve on global warming. We're also committed to creating opportunity for all, with a goal to achieve gender parity in leadership by 2030 and racial and ethnic diversity that is reflective of our communities. As chair of the National Association of Manufacturers, I introduced a Pledge for Action, which the Executive Committee unanimously adopted on behalf of its 12,000 members, focused on advancing opportunity for black people and other people of color through advocacy, education, training, and workforce development initiatives. We're having important dialogue within our own organization and in our communities on how we can accelerate our efforts to combat racism and better support communities in need. This includes programs to eliminate hunger, support education and economic mobility, and to increase affordable housing. Our transformation plan for trained technologies is another example of how we're creating a new, better normal for our team, customers, and shareholders, executing against the new blueprint that culminated in May after 10 months of analysis and planning. Setting these and other bold plans in motion, our talented team around the world has exhibited all the commitment and passion for change that has marked our last decade. Our goal is simple, to create a new normal where opportunity is accessible for all, where healthy food, water, and medicines are moved to people who need them, where emissions trend down and blue skies trend up. Our business sits right at the intersection of making those things happen. With our unique positioning as a focused climate innovator, transformed and fit for purpose, we can tackle these pressing and complex challenges and drive differentiated returns for shareholders. Moving to slide four, the global COVID-19 pandemic continues to present ongoing challenges to virtually every aspect of daily life. As much progress as we've made This crisis is still very much with us, and the questions we were all contemplating months ago regarding the depth and duration of the downturn and the speed and shape of the recovery are still very much a question. As we navigate through the pandemic, of paramount importance is staying true to our culture, purpose, and values, where maintaining world-class employee safety is part of our DNA. The decisive and aggressive investments we made in the first quarter were important and necessary steps in order to bring all of our facilities online, operating efficiently and safely. As a result, today we're up and running under new readiness protocols and well-positioned to meet customer demand. Despite very challenging global markets, our teams remain focused and agile with strong execution and solid financial performance. We outperformed our end markets broadly and effectively managed e-leverage within our gross margin target levels in all regions and in all business units. We continue to play aggressive offense in order to emerge stronger and to thrive as business conditions improve and new opportunities emerge. We maintained high levels of business reinvestment in innovation and growth programs through the second quarter, and we expect to aggressively invest in the second half. We're also accelerating our stranded cost and other fixed cost reduction initiatives to deliver more bottom line savings in both 2020 and beyond. We remain in an exceptional financial position with strong liquidity and balance sheet optionality, which are competitive differentiators for us. We have ample capacity to run the business, effectively deploy capital, and remain nimble as market conditions evolve. We'll discuss this in more detail later in the presentation, but our best line of sight at this stage will put revenues somewhere between down 10% and down 15% for 2020, better than illustrative scenarios we laid out in quarter one. Our strategy remains unchanged. Secular megatrends of energy efficiency and sustainability are becoming more pressing every day. We excel at addressing these megatrends and challenging what is possible for a sustainable world, redefining a higher standard for what the world considers normal. This passion powers us forward to deliver top-tier financial performance and differentiated returns for our shareholders. Please go to slide five. Bookings and revenues were heavily impacted by the pandemic in all regions in the second quarter. In the Americas, the impacts of the pandemic continue to be far-reaching and severe. Broadly speaking, the economy is slowly progressing forward, but the situation remains tenuous and provides limited visibility. In North America, our commercial HVAC business has been relatively resilient through the second quarter, with bookings and revenues each down mid-single digits. The backlog continues to be strong, and services are outperforming equipment. Our transport refrigeration business outperformed the overall market as it continues to move through a deep down cycle, which has been exacerbated by the pandemic. Bookings are showing signs of stabilization, although it's too early to say the market has stabilized. Revenues were down more than 40%, outperforming the market, which was down more than 50%. Our residential HVAC business had low single-digit bookings decline, with distributors sell through down mid-single digits. June saw record bookings and backlog, and July is off to a very strong start. Turning to EMEA, commercial HVAC bookings were down mid-teens, while revenues were down high single digits. Services outperformed equipment, with building access continuing to improve. EMEA transport was down approximately 20%, outperforming the broader transport markets which were down approximately 40%. Asia Pacific continues to be mixed. China is showing signs of improvement, having made the most progress against the pandemic. Growth in China was more than offset by declines in the rest of Asia, with developed countries generally recovering slowly, while many developing countries are lagging. Now I'd like to turn the call over to Chris to discuss the results for the quarter in more detail.