Trane Technologies plc

Good morning, and thank you for joining us for Trane Technologies' second quarter 2024 earnings conference call. This call is being webcast on our website at tranetechnologies.com, where you'll find the accompanying presentation. We're also recording and archiving this call on our website. Please go to slide two. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from anticipated results. This presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release. Joining me on today's call are David Neri, Chair and CEO, and Chris Kuhn, Executive Vice President and CFO. With that, I'll turn the call over to Dave. Dave?

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 over time. Our purpose is centered on creating a more sustainable world, and our strategy is aligned to powerful megatrends like energy efficiency, decarbonization, and digital transformation. 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 need to invest in 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 in AI, 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. 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. Bookings 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% adjusted EPS growth. Notably, we continue to reinvest heavily in our business and accelerated key strategic investments, further strengthening our competitive positioning for continued market outgrowth. Booking strength continued to be led by our commercial HVAC 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 capex 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 HVAC. As an example, Q2 revenues of our Americas 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. 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 few minutes. Please go to slide number five. In our Americas segment, our commercial HVAC business delivered industry-leading performance. Bookings were up more than 20% in the quarter. Revenue was up mid-20s 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. 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-teens. Bookings were solid, up low single digits. In EMEA, commercial HVAC strength continues, with bookings up 20%. 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 modestly. 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. Now, I'd like to turn the call over to Chris. Chris?

Thanks, Dave. 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 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 growth. 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 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. 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 EMEA segment, we delivered about four points of volume and one point of price with strong volume in 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. In our Asia Pacific segment, the team delivered 310 basis points of adjusted operating margin expansion, despite a mid-single-digit volume decline. Strong productivity and positive price realization, more than offset inflation and high levels of business reinvestment. Now, I'd like to turn the call back over to Dave. Dave?