Trane Technologies plc

To ask a question during that time, simply press star followed by the number one on your telephone keypad. We ask that you please limit your questions to one and one follow-up. I will now turn the call over to Zach Nagel, Vice President of Investor Relations. Please go ahead.

Thanks, Operator. Good morning, and thank you for joining us for Train Technologies' fourth 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 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 actual results to differ materially from anticipated results. This presentation also includes non-GAAP measures which are explained in the financial tables attached to our news release. Joining me on today's call are Dave McNary, 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. Please turn to slide number three. I'd like to begin with a few minutes on our purpose-driven strategy, which enables our differentiated financial results over time. At Trane Technologies, we continuously innovate for a sustainable world, and our innovation is driving significant customer demand. We are the partner of choice to ensure optimal performance while reducing energy use and emissions. Our customers know that our solutions are green for green, good for the planet, and good for the bottom line. Our relentless investment in innovation powers our flywheel of market outperformance and strong free cash flow. With this momentum, our proven business operating system, and our uplifting culture, we are well positioned to deliver a leading growth profile and differentiated shareholder value into the future. Please turn to slide number four. We expect to deliver top quartile financial performance over the long term, consistently and reliably for our shareholders. This is core to our culture and central to how we set our targets and execute our strategy across our global portfolio. 2024 was a standout year for the company. I'm proud of how our global teams exceeded our targets, top to bottom. We closely track top quartile performance against our core peer group and believe our performance will rank in the top quartile on organic revenue growth up 12%, as well as adjusted EPS growth up 24%. We also delivered free cash flow of 2.8 billion, or 109% free cash flow conversion, enabling us to make key strategic M&A investments while raising our dividend and returning significant cash to shareholders through share repurchases. Please turn to slide number five. Relentless investment in innovation, growth, people, culture, and our business operating system have yielded clear benefits over time. demonstrated by our strong track record. Since 2020, we've delivered a revenue compound annual growth rate of 12 percent, expanded our adjusted EBITDA margins by 400 basis points, and delivered free cash flow conversion of 108 percent, while deploying approximately 12 billion of capital. We believe that consistent business reinvestment is key to our long-term success. For over a decade, we've added a high level of incremental investments each year in high ROI projects. This has resulted in a world-class direct Salesforce channel and service organization. It has also enabled us to develop cutting-edge solutions for the most pressing customer challenges, driving strong demand. We have all the essential ingredients to execute our strategy, and continue driving differentiated returns for our shareholders over the long term. Please turn to slide number six. We delivered robust financial results in the fourth quarter, extending our strong track record of execution and industry-leading revenue and EPS growth. Our global team achieved 10% organic revenue growth, 110 basis points of adjusted EBITDA margin expansion, and 20% adjusted EPS growth. Organic bookings for full year 2024 were strong, up 11%, with a book-to-bill ratio of 102%, on top of 12% organic revenue growth. This contributed to a highly elevated backlog of $6.75 billion entering 2025. We saw strong performance across our segments, led by our commercial HVAC businesses. Fourth quarter Americas and EMEA organic commercial HVAC bookings were both strong. each up more than 30% on a three-year stack. Fourth quarter organic revenues were exceptional, with America's commercial HVAC up mid-50s percent on a three-year stack and EMEA commercial HVAC up more than 60% over the same period. Our teams are excelling in complex bespoke applied projects, which are key to the multi-year capex cycle, especially in high-growth verticals. For instance, Three-year stack organic revenue growth in applied systems for our Americas and EMEA commercial HVAC businesses is up over 120% and 90% respectively. Applied systems offer a durable service tail of 8 to 10 times the initial equipment cost over their lifespan. Meeting our strong growth in applied solutions presents tremendous service opportunities with higher margins that are largely still ahead of us. Looking beyond the continued strength in commercial HVAC, we see several tailwinds in 2025. We believe residential markets have largely normalized and are returning to our long-term framework of GDP plus growth. The Americas transport refrigeration markets are expected to bottom in the first half of 2025, paving the way for a second half recovery and strong growth in 2026 and 2027. In addition, The challenges associated with our actions in the second half of 2024 to tighten credit policies in China are improving ahead of our initial expectations. Given our consistent performance over time, we are confident in our ability to deliver strong results in 2025. We are initiating a strong guide for the year, which Chris will cover in more detail in a few minutes. Please turn to slide number seven. Demand for innovative solutions was broad based across our segments in the fourth quarter. In our America segment, commercial HVAC bookings were up high single digits. Revenues were up mid-teens in both equipment and services. Residential revenues were up low teens, consistent with the second and third quarters. Transport refrigeration bookings were down high 20s after being up high 20s in the third quarter. reflecting the inherent lumpiness associated with the timing of large customer orders in this business. Revenues were down low teens, outperforming end markets, which were down more than 20% in the quarter. In EMEA, commercial HVAC bookings were up mid-single digits in the quarter versus a tough prior year comp. Two-year stack bookings were up 20%. Revenue was also strong, up low teens. Our transport business performed in line with our expectations, with revenues down low single digits. In Asia Pacific, our team demonstrated resilience, achieving strong sequential improvement. Bookings in the region were up 8% and revenues were up 1%. Strength in the rest of Asia more than compensated for the softness in China, where bookings were down low single digits and revenues declined by low teens. Now, I'd like to turn the call over to Chris. Chris?