Trane Technologies plc

At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like 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 Terrain Technologies' second quarter 2025 earnings conference call. This call is being webcast on our website at TerrainTechnologies.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 STC FILINGS FOR DESCRIPTION OF SOME OF THE FACTORS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANTICIPATED RESULTS. THIS PRESENTATION ALSO INCLUDES NON-GAP MEASURES WHICH ARE EXPLAINED IN THE FINANCIAL TABLES ATTACHED TO OUR NEWS RELEASE. JOINING ME ON TODAY'S CALL ARE DAVE RIGNARI, CHAIR AND CEO, AND CHRIS KUHN, EXECUTIVE VICE PRESIDENT AND CFO. WITH THAT, I'LL TURN THE CALL OVER TO 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 leading financial results. The global demand for energy is increasing at an unprecedented rate, while many areas lack access to reliable power sources. But this is not just a supply equation. At Trane Technologies, we see tremendous opportunities on the demand side, In an average building, we estimate a staggering 30% of energy after the meter is wasted. Our solutions are addressing this head on, helping our customers save energy and reduce emissions with a strong return on investment. We are setting the pace for the industry and paving the way to a more sustainable world with our leading innovation, robust customer demand, and talented team were well positioned to deliver differentiated shareholder value over the long term. Please turn to slide number four. Q2 was another strong quarter, marked by record bookings and revenues, a 90 basis point expansion in adjusted operating margins, and 18% growth in adjusted EPS. Our enterprise and America's commercial HVAC organic bookings reached new all-time highs, with increases of 4% and over 20% respectively. In our Americas commercial HVAC business, we continue to lead the industry by solving our customers' most complex challenges with applied solutions and large, high-growth verticals. Notably, orders for applied solutions surge by over 60% in the quarter and are up over 120% on a two-year stack. Our commercial HVAC businesses have demonstrated remarkable durability and resilience, achieving compounded growth over multiple years. Our project pipelines are expanding, underscoring continued opportunities ahead. Our direct sales strategy enables us to capture a significant share of these opportunities and consistently outgrow our end markets. Our backlog remains strong at 7.1 billion, up 6% compared to year end 2024. While there was a sequential decline from the first quarter of approximately 125 million, this was due to expected backlog reductions in our shorter cycle businesses, mainly residential. Our commercial HVAC book-to-bill ratio exceeds 100% in all regions, further elevating our global commercial HVAC backlog. Our services business remains robust, representing one-third of our enterprise revenues. We delivered low teens growth in the quarter and have maintained a low teens compound annual growth rate since the inception of Trane Technologies in 2020. We are effectively managing and mitigating all enacted tariffs and inflationary impacts through our world-class business operating system. This system includes advanced mechanisms for pricing, supply chain management, and scenario planning. which we leverage to offset tariffs, drive market outgrowth, and minimize the impact on our customers. As we review the key drivers for the quarter, our results were in line with expectations, with two notable exceptions. First, America's commercial HVAC. This business continues to perform exceptionally well, exceeding our expectations and aligning with our track record of consistent market outperformance. Second, Residential HVAC revenues fell short of our expectations due to a near-term industry shortage of our 454B refrigerant cylinders. However, the strength in our America's commercial HVAC business more than compensated for this, positively impacting our adjusted EPS for the quarter. Overall, we are confident in raising our full-year revenue and EPS guidance, which Chris will cover in more detail shortly. Please turn to slide number five. In our Americas segment, as we discussed, commercial HVAC continues to deliver standout performance. In the first quarter of 2025, this business achieved all-time high quarterly bookings. In the second quarter, we surpassed this record by nearly 300 million, with growth of over 20%. Revenue growth continues to be exceptional. increasing by mid-teens on top of a mid-20s growth comp in the prior year. Our market outgrowth has been consistent, compounding year after year. For perspective, in the second quarter, three-year stacked commercial HVAC revenues are up approximately 60%, with equipment up approximately 80% led by applied. Our growth in applied solutions is broad-based, aided by market outgrowth in sectors with large CapEx investments, such as data centers and high-tech industrial. These sectors require the most complex applied solutions and our ability to win more than our fair share of business here adds to our leading growth profile. CapEx spend in these sectors is expected to remain high over the next several years, providing further growth opportunities. In addition, applied solutions carry strong service revenue tails, generating 8 to 10 times the equipment sale, meaning the majority of the revenue from our applied growth is still ahead of us. Turning to residential, revenues were down mid-single digits due to the near-term cylinder-related headwinds I discussed earlier. However, combining our strong first quarter revenues, up high teens, with our second quarter, our year-to-date residential revenues are up 3%. Additionally, we saw very strong growth in the second quarter of 2024, up low teens, which was a multiple of the industry growth rate. Given the varying business models of mix of two-step versus three-step distribution across the industry, it's important to look at residential over the long term to get a clear picture of growth trends. In America's transport refrigeration, bookings were up low single digits while revenues were down low single digits. significantly outperforming in markets, which were down over 30%. In EMEA, commercial HVAC bookings were down low single digits, against a tough 20% prior year growth comp. However, two-year stack bookings were strong, up high teens. Revenues were up low single digits, impacted by timing of customer shipments from Q2 into the second half. EMEA transport organic bookings were down low single digits, while revenues were up low single digits, significantly outperforming in markets, which were down low single digits. In Asia Pacific, the quarter met our expectations. As we approach the anniversary of our tightened credit policies in China, we expect results to improve. The region is on track to meet full year 2025 expectations for flat revenues. with stronger performance in the rest of Asia. Now, I'd like to turn the call over to Chris. Chris?