Trane Technologies (TT) 1 Nov 232023 Q3 Earnings call transcript

Company Profile

Participants

Zac Nagle	executive
David Regnery	executive
Christopher Kuehn	executive
Scott Davis	analyst
Julian Mitchell	analyst
Andrew Kaplowitz	analyst
Gautam Khanna	analyst
Christopher Snyder	analyst
Joseph Ritchie	analyst
C. Stephen Tusa	analyst
Jeffrey Sprague	analyst
Nigel Coe	analyst
Deane Dray	analyst
Andrew Obin	analyst

Call transcript

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Operator

Good morning, and welcome to the Trane Technologies Q3 2023 Earnings Conference Call. My name is Cheryl, and I will be your operator for the call. The call will begin in a few moments with the speaker remarks and the Q&A session. [Operator Instructions] I will now turn the call over to Zac Nagle, Vice President of Investor Relations.

Zac Nagle

Thanks, operator. you Earnings us Conference thank Third Trane and XXXX Quarter Call. morning, for for joining Technologies' Good This call is tranetechnologies.com where being webcast on find accompanying our the presentation. you'll website at

our factors description securities results. made attached see cause in harbor explained that to call recording this includes and our considered We facts the for not the law. provisions today's to are forward-looking some are differ Statements call may anticipated financial a to actual from safe of non-GAAP statements that release. SEC This also and to on results tables are Please X. news in Slide the our of website. Please historical filings our also archiving federal measures, are are materially which presentation of go pursuant made

me to are today's Kuehn, the Vice Regnery, President CEO; I'll and Dave? CFO. Dave. call call Executive Chair turn and With that, Chris and over on Joining Dave

David Regnery

and with today's Thanks, boldly possible Zac us world. like for purpose: a few challenge on a to to what's sustainable on our I'd call. comments everyone, for joining begin

purpose see aimed We for corporations built trends Our see not our but decarbonization at We setting action. for energy heart at record, environment on commitments digital which our policies investors. decarbonizing hottest we and the only Coming the summer like transformation. off efficiency, growing customers, and sustainability powerful continuing to expand. to our see our is is taking aligned strategy, the suppliers mega goals of

we're change, of the help and partner exactly we to what bend are the on choice. have And doing. their climate technology that's curve We

end meet This markets our innovating needs to relentlessly outgrow shareholders, for enables our The differentiated customers' result emissions. end dramatically are We to is long-term today's the creation scaling and planet. our our deliver results. value and our for customers, consistently employees financial us for reduce and tomorrow technology to

#X. to Slide Moving

us and of extremely adjusted of well flow. up quarter, well P&L, We growth and in the in XX% for a throughout the XXXX. team XXXX setting powerful X% positioning us leverage third growth strong and organic free cash for global performed EPS resulting Our strong delivered

and We customer enterprise our with of continue of Bookings in in an organic the the our globally, at bookings nearly mid-teens products to segments. very were high with exceptionally all-time growth $X demand businesses services, all in for commercial strong billion see bookings low to quarter. HVAC strong

Enterprise business $X.X organic is increasingly on million. HVAC the Our Year-to-date, commercial commercial was XX% mid-teens standup quarter HVAC. up in approximately up a Americas X-year a backlog bookings stack. the approximately the commercial again composition ended backlog HVAC quarter in with and towards up shifting at with $XXX once billion,

the XXX%. X past HVAC years, backlog approximately up Over tripled, has our nearly commercial

backlog been normalized, a of large Thermo King As these offset HVAC growth in commercial businesses completely the percentage have long-cycle systems. has residential and by in burn backlog, including applied

on and performance. key power strong to continue ownership how We direct leveraging optimize sales policy, expertise to brings which of and customers' in HVAC drive incentives force, commercial our of We're solutions healthy businesses. cost pipeline leverage verticals projects growth across of to paybacks, the specific customize and total and a programs our demand

win and enables to evolve. go-to-market verticals unique us quickly highest and innovation leading direct Our growth markets strategy pivot the as in

designed is portfolio, quartile and resilient diverse a and business performance. to top deliver have consistent our We operating system

XX% reinvestment, strategy organic flow greater a softened, with and or and strong and continue deliver balanced adjusted earnings revenue strong equal of growing business deliver our high to pace have on residential than XXX% growth. We're year free allocation strategic EPS our delivered single-digit business repurchases. bolt-on execute net the XX%-plus share on is higher M&A to has and cash and business markets of our transport track As capital or EPS consecutive growth has growth and third for year, normalized to high results to dividend, our overall adjusted levels of

Our us in was ability guidance in in be XXXX portfolio. services go very our innovative We well, and up to booking our gives range of the exceptional XXs up deliver bookings with slide up low continues teens. commercial low strong confidence prior robust the services growth and In our segments, board. to in #X. Americas, commercial confidence Organic strong by up X%, Demand backlog raising HVAC led as discussed and across approximately strength bookings strength strong and execution, the performance exceptional products revenues Slide were the broad-based global for XXXX on our our well. Please businesses. the our percent revenue to equipment as across but and were HVAC XX% highlighting

in Revenues the remained tough complex revenues line on timing Xx continues between QX historical XXXX XX% low the the X-year and with a Our driver largest bit quarter. Americas HVAC. comments, than revenues. backlog bookings of of down commercial prior the deliveries component digit. Consistent normalize most both the residential against year of as business by in to performance beyond. nature largest and our with revenues and a prior HVAC a systems business strong transport expected were guidance applied driven growth Applied commercial stack, On were and expectations our for up with systems with service and up systems but customer XX%, innovative refrigeration business lumpy, our our and being single than XX% was our norms in is QX more are QX the is comp. of in lower our approximately

up prior Bookings up was with market. track Our strong, robust approximately than expectations. teens. higher HVAC. Commercial versus historical revenues strong HVAC tough commercial were on Backlog EMEA down were comps. XX% in both and were low with remains growth a right our both mid-single-digit on business norms TK businesses, revenues EMEA year predominantly

in of bookings the and China with Our strong Asia growth Pacific Asia. business performed well rest

nearly lower comp were prior against growth. XX% revenues slightly Asia a of year tough

continues be we the good The for to remain positive. future with play for opportunities verticals growth. strong region outlook Our in

XX% we commercial continues Asia historical backlog be and HVAC. segment above norms approximately to robust predominantly XXXX, approach as

Now to over to I'd turn call like Chris. the Chris?

Christopher Kuehn

Dave. were strong and turn Please respectively. basis single execution highlights revenue scoreboard Organic XXX XXX high enterprise were adjusted delivered bottom. equipment operating up margins up adjusted and revenues for and EBITDA organic an The top to #X. points, in Slide respectively, services, low the EPS XX%. basis was to X%, Thanks, up and strong quarter both At and level, up we teens, digits points growth

makes recurring margins revenues growth resilient more of us enterprise our and over Technologies represents higher at differentiate continues We business about because revenues. services continue in with time our to higher exceptional to our services industry. highlight It our X/X Trane

revenue Over our we're growth of the single past digits, business and delivered XXXX. CAGR services XXXX, even X a up high stronger growth driving years, including in

top and in Our high-performance driving margin relentless to with strong growth. Please deliver line flywheel growth, expansion investment innovation Slide continues turn #X. EPS to results

As delivered in more segment X in delivered points transport. The business, very led about margin In incrementals offsetting in organic move commercial in improving with volume strong realization delivered the than expansion, the X low productivity and given integration X year our of points quarter positive the down stabilize, the and HVAC the volume an in Strong volume of points EMEA also growth the revenues single enterprise, we growth, quarter, reported than by productivity X quarter. that continues and The volume approximately which price and costs. and X of segment, expansion in declines expansion leverage throughout XX quarter. segment up year. Asia the we segment combined strong organic price about leverage, impacted M&A margin to price digits points organic accompanied quarter. margin delivered points chain offset inflation of enabling slightly leverage delivered revenues. on strong and Americas The The of we as more about to supply

able basis and make incremental further linkage XXXX outgrowth, we're For we've We're average the XXXX. of taking This pleased the basis while business these an faster XXXX. and go points in a investments XX-plus to we innovation enterprise, opportunities extremely of see doubles rate the points investments nearly across reinvestment key run approximately our timing of enterprise. We a leverage. for XX or market additional total incremental basis accelerate tight annually points XX-plus in and strong XXXX projects in been in between to in driving to earmarked

to like turn over the I'd call to Now Dave. Dave? back

David Regnery

we remains we're high some backlog in key exceptional Please there for move levels our and solutions gaining the themes. sustainability-focused demand Strong quarter Chris. unchanged into to turn our as fourth segments outlook prior is markets for our Thanks, Slide additional into positive absolute of end the #X. strong are and enterprise, And growth demand, quarter. high. from healthy continued XXXX. Across with the Overall, largely execution, our visibility

for While that some play order given to and we at see a high baseline kick of leading absolute level. the our a law stacking robust, we is in and climate remain the growth our regulatory businesses, supportive strength decline, numbers to changes effect are policy very bookings innovator. at expect to new our large as Across unique expected to of point

name where with high business, differentiated long price as in We're see to the both a the tremendous we're programs. In initial municipal centers, to addition Europe, the to is Applied in commercial customers competitive is up strong life customers force it's representing a activity these of over And purchase all Americas our opportunities, the In levels, developing our we've our of business our higher-margin solutions tailwinds and and multiple growth our majority advantages data few in state service at backlog. HVAC, applied is able strong the and innovative education which the just sales complex at direct shine. help business with makes and and most It's tech, a U.S. and extremely system. and level outlined. cycle winning of verticals. driving the we leverage national

business move project relationships with project customers this multiyear helps a forge Additionally, from period. over long-term they to as to

portfolio verticals, comprehensive enables most the to no the us driving all in across to sustainable residential outlook. win growth. of There's and have long-term business We leading industry, compete our change products which

normalize We expect residential the the in to in through as strength and is quarter more complete process in fourth expected, for Also, the in commercial residential to decline be continue XXXX. largely XXXX. than normalization to offsetting HVAC

stack. largely business more in refrigeration with on our third a XX% the was X-year transport and line quarter up Our than expectations in

a the bounceback outperform projecting market the continued growth a XXXX year. afterwards. is in to XXXX ACT for and in expect dip We and

forecast line the also businesses. other with versus in third of EMEA our when was process quarter assumptions we and our earnings update in months, recent we hold market has year-end validating the and However, are both volatile in segment, for the our forecast We'll internal ACT's been expectations call. In our sources.

and XXs second XX%. in call, high our to revenue both the EMEA low expected and has respectively, X-year more moderate in second HVAC highlighted and comps XXs, is more quarters, is up we The for fourth be tough in stack As quarter than growth the very half. third QX up

refrigeration transport while second be our unchanged. Likewise, purely continue Asia unchanged. tough Pacific for segment, related outlook half strong. be is comps prior the year outlook the full to is to expected in our year Revenue flattish, Our to is bookings

Now to back like Chris. over call the turn I'd Chris? to

Christopher Kuehn

puts continued to to quarter flow-through billion our flow XX%-plus third flow full than pleased for our fourth approximately continue QX. to Thanks, Strong Slide year-to-date. excellent #X. bookings cash turn leverage adjusted to guidance execution, versus prior adjusted fourth we $X, of EPS and quarter. We're up greater up robust strong with a from an the our reflecting us outperformance in from as Please be range deliver a and expect year billion. position of for up performance our to a Dave. X%, revenue raising expected and XXXX. of between $X mainly guidance on largely $X.XX, our reflecting backlog year, to is into the and growth net performance equal quarter. for powerful approximately cash of our revenue We're or full approximately $X.X record to approximately And and X%, free move We're guidance earnings free near-record X% we unchanged QX of a EPS outlook or strong raising the guidance of $X.XX Organic

growth highlighted group in close XXXX. us consistently and a believe target EPS pay cash we've target places adjusted that As adjusted position deliver our investment strong before, to attention to free top in flow we against quartile conversion. our guidance financial peer including and performance, We

and Slide M&A. to half X as to presentation change no As assist points M&A versus earnings in call, Slide increased contribution fourth guidance quarter is additional is approximately approximately Please to savings acquisition for X X #XX. XXXX. deliver half guidance $XX last due of which year of expect X-year acquisitions. to of second included points the million in an There on from we track go we expect X of by third We M&A passes XX have be the related our first and quarter transformation in from said to models. Please mark the had points $XXX the business approximately remain timing in the of the see in our full to M&A the will of million our details run your including in base. realized We XXXX, with rate to

to cost to portfolio. investments continue further these savings projects We fuel innovation other invest across high and in the and ROI

and part year business operating productivity to Our integral our it's other to continuous each improvement offset mindset inflation. system, designed gross is drive of an

XXXX. Please supply other productivity leverage is productivity as deploying years, and macro organic in it's challenges to abate with #XX. focused to returns the cash While chain strategy remain to extremely in for been challenges, go XX%-plus opportunities of balanced meaningful We levels improving our supply to recent to capital chain is excess and contributing given Slide on difficult target our realize the shareholders. allocation committed consistently highest

to reinvestment. continue business we strengthen through relentless First, our business core

evolve. BBB+, balance we're to now that as reflective upgrades flow credit strong optionality Second, BaaX, us are our markets provides continued which generation. cash received ratings, of with sheet a maintaining XXXX, to balance strong our and we sheet our committed In

Third, consistently of over excess deploy time. we expect XXX% to cash

XXXX. calculated improves $XXX turn to million for million value. Please stock and repurchases Our M&A as our to million balanced deployed and below long-term $XXX deployment share we've trades capital approach returns provide the of includes October, on M&A that Slide the Year-to-date, to update intrinsic strategic as our billion cash I'll #XX, in shareholder further dividends, of end with repurchases. $X.X an $XXX and to share

share the calculated our intrinsic have over current under $X.X powder attractive, significant authorization, with repurchase value. dry remain We billion and shares remaining our below trading

and active, acquisitions to Our and technology or October of M&A investments. million pipeline $XXX committed as year-to-date remains we leading of deployed approximately the end equity have bolt-on

Our latest digital management services, enterprise augment October. capabilities early in commercial acquisition, our Nuvolo, was in and will HVAC. Nuvolo energy announced

quarter. deploy in fourth All XXXX. expect to to the transaction Nuvolo cash we're close billion $X.X We in the in, approximately on in track

Our optionality flow, and strong moving excellent sheet to capital allocation balance free forward. continue cash liquidity give us

call the Now to I'd like over Dave. turn Dave? to back

David Regnery

both we #XX. Please expect refrigeration Chris. Thanks, Transport Slide in and turn America EMEA to each and to remain market for market outperform unchanged, forecasts North XXXX.

these quarter through to Thermo go Our on The points key #XX. information. Please reference performance and the on specifically Slide markets third additional is and on track slide King the meet to transparency expectations. to data shows provide

we ACT's reference. Please As for of through have interim, focused analysis thorough #XX. the discussed, on a for are forecast been projections recent volatile, included to In we've Slide and ACT's XXXX most the your for markets. conducting XXXX XXXX go

XXXX provide to expect on We quarter fourth guidance earnings our call.

at confidence we'll discuss healthy that XXXX. in may play growth visibility, it to give given be see dynamics key increasing we constructive However, believe us

executing focus vertical up of which teams of our in revenues, our roughly commercial markets HVAC record sales growing backlog. the are bookings and total healthy to markets, and agility well XX% businesses, is quickly to Our pivot driving make

amplifying to stacking these still ahead majority backlog applied stronger higher-margin continue and provides that is a the more Our of regulatory tailwinds trends a policy mega is and standout these and resilient. Secular and makes growth, us. business our support programs with service long of tail

GDP-plus the on with process of to to growth. expect long-term path XXXX residential and We largely business enter our our through target normalization

of inflationary opportunities, remaining ahead is innovation, continue and system challenges with business pricing yields of vastly our We chain continue improved abate. pressures. The supply to to primed pockets has to and lead which stay healthy operating

as excited and in lean-based which move snapback XXXX, to into projects in the Our a automation, is productivity XXXX. culture such We've ACT productivity-enhancing unlock thereafter. we a in and we're about is been XXXX trailer production can investing we American we also further dip value. unlock in heavily expect forecasting North growth factory as

process assessing total approximately in further our transport America the revenues. their XX% our we're of refrigeration business forecast, of While is North

the business markets outperform the to and, within margin necessary, end if manage execute tightly, deleverage rates. expect well, gross We manage

service top we're single-digit in of XXXX don't rate about business we lot, annual high growth putting our of while growth Lastly, up quietly on X-year a a growth. talk compound double-digit

are continue is growth, to and In positioned strong, we and drive we opportunity. Please Slide build out summary, service big value services Our larger significant business resilient even and offerings, to future for time. and which our to poised go energy represents #XX. capabilities and a well over digital current

World's Fortune's Time been the We are by to Workplaces Companies Women for and have Best Magazine. of Best one of proud one named

Our and stay day. our This, purpose, to to proven purpose revenue culture free our turn, levels our and and on leading a steadfast confident resilient reaffirming to profile EPS we our fulfill raising are and system us operating our and deliver execute cash elevated high business enables every in of strategy our our portfolio. consistently demand, continued free focus our enables full across flow This cash innovation, nimble innovation strong once our and customer and people us earnings performance, fuel help backlog leading target. in flow. With and revenue conversion powerful growth guidance year us again

We differentiated now performance strong over record in to and the have deliver the And shareholder and questions. be Operator? XXXX the team, to we'd strategy track happy returns long take the term. your

Operator

from Melius Scott Instructions] Your of Research. first [Operator is Davis question

Scott Davis

better quarters, I'm kind but the getting ones. of sick is on of this one congratulating of good you

David Regnery

up. it keep Please

Scott Davis

kind on the cherry price? just to how that's want? that margin, selective that works or stuff not are just the the really interplay this good. out sense as have of there Guys, of Or can bidding but trying is environment projects supply-demand stuff you now. of really project and type a just environment demand at a was price and You're on and where making bidding is when still proud, Dave. in between imbalance Lehigh get that really and it out structure pick you the higher right selectivity -- margin just the array there wider the I you're commercial, a about that All you be that of you kind of think you backlog

David Regnery

a it's question. Scott, good Yes,

lot core proper have price And innovation spend We innovation to strong we now. we our right get that ensure a and we business on returns.

looking would with this, the of some constantly them leading I products, that time before, efficiency new when those the more jobs refrigerant. being now. And all our would also jobs. say you force I've our for next-generation having this of how applied when operating we you portfolio, business having products messages important that's on take really very large very, low-GWP you know to to influencers comes able what's these and we're our close them tell That's direct I and this can to So go And is can told our leading improve can we it's I innovation, our right system improve educate how inclusive markets to how innovations in innovation. on use sales and and but real it especially

Scott Davis

color. that's I Yes, question. helpful this ask to have

related a had the and a nonevent? have on things quarter. help who as guys it was Did that in or a to that such competitor you You issue bidding ransomware

David Regnery

a It okay it a nonevent. it there, was nonevent hope not -- was I but everything so was is

Operator

of Your next Barclays Mitchell Capital. Julian from question is

Julian Mitchell

versus couple times because bookings you of Dave, of the in element. think, I light difference strength service and the commercial the a emphasized applied

revenue say, looking sort So commercial? wondered business HVAC applied stimulus of today that of, anticipate versus around the you're the light XX much light be rough revenues revenue applied a split between And maybe maybe of and in that, at commercial of Any respective scale you the around what's point on just follow-up next difference would your backlogs? of in impacts when the of outlook because sort please. a or just months, trends the commercial perspective of do

David Regnery

in large. very applied look light. units don't are we strong We just business. about would in total obviously, at quarter, it's equipment And at XX-XX our Yes. in look But third and demand been be the business. light Julian, so we in very, our had historically, it

So And traditional think in there than government, you We high systems. of very see care, were industrial. solid as more retail of other education, to we're data verticals like performance unitary and tend health warehousing office, life then tech, well. Think science, verticals applied where those strong. verticals, and centers, some weaker had weaker too,

Julian Mitchell

very in It's of And follow-up. more short-term only then That's the helpful. of my silly a year. but one, left just sort quarter X

of flowed nearly, look sequential I same to back the Or of guide, decline through sales a sales just around of what in of than revenue Is just that, is or think guide. guidance the QX sort for bit kind your worth, wanted that at the transport out you and I normal. was July, which beat QX, on year? I maybe something QX implies like from kind in QX X% Your guide as seems that's the noise if is from to think, backing the heavier sort it your full specific year weighing that's But X%, on QX? anything construct there

Christopher Kuehn

Chris. if digits implied I'll reasons versus revenue put QX. and The a is it of around But a few growth, we guide a organic mid-single off. about it's behind comp on the is little the it, start a of HVAC bit Julian, quarter kind QX our businesses, think basis. this the toughest fourth of when into comp toughest is the commercial year-over-year one going I is board the across really stepdown year,

We We contribution than be price. in lower the from X QX. commented fourth expect the around quarter would price be delivered of would in bit growth to a quarter. the points Second third

a maybe then there's We normalize. quarter around revenues. be the into another that did to X-ish points in continues really probably third of X on response there in You QX, here, sequentially. residential little as dialed right better growth out just it round about points so And about to

digits. the around around Our full constructive changed down for residential mid-single year view hasn't revenues with

of well for very focused on the sure is start positioned making XXXX. in the we're inventory channel So

continue to quarter. really into normalization the that expect fourth would we So

But commercial on gives here how QX. not last toughest of on in comps, QX the tough a last Asia EMEA view XX% the maybe year, XX% little point, that quarter. hope of really about we think forget to you some comp growth had in the bit growth HVAC first year, let's So we

Operator

of question next Citigroup. from is Your Andy Kaplowitz

Andrew Kaplowitz

appears quarter. you inflection a understanding higher the rates. orders it orders HVAC with had Impressive actually lumpy, that positive Americas in quarter Dave, the of that in can U.S. concerns be commercial in despite

did that, the billion as mentioned And So little see of of quarter? year closer hit a at went say gives probability frequently start billion strength in quarter bit of guiding? I you Did to larger on? I verticals you more projects $X mega know data a you this centers. the up ending in to your a you're heat some $X would that of more end bigger know you you actually as the see and like backlog

David Regnery

over total I a of size we're it billion. still revenue Yes. and the of -- of project We're lot mean, a total is those a a projects", still in lot pipeline. again, "mega where as tracking mega we're tracking $X defining project, our

solid what are industrial. would just said And So some nice continues a of data we had life call yes, quarter. little education verticals, had I but over then health Those activity really in solid science, very bit very And all of we third performance the quarter to strong. the be government, growth. a in centers, different earlier, as we had like I lot performance care,

-- value ability the a that parts Washington the work still I've our of in to you and the to in Korea, projects, I we that think have big on think you decision-makers project which these And to yet news. you that a And Texas. provide. global mega them are you you able told good to the track are projects basis of the owner second lot quarter in with on some triage world. and could come, and the projects engineer we're because these So the have can in of have Seattle, mega triage call, different I is our customer could And have and is show

in excited So super are the a the we're about of that still mega pipeline. lot projects

Andrew Kaplowitz

give into more you term. delivering. into for could QX maybe and the to a XX% in XX%-plus Chris, the range mid-XX% We good talk that during then leverage margin leverage well guiding Trane. about difficult think result productivity been have long 'XX, Organic projects obviously given more organic you're whether you've to you could could for know you your And is along But price it the with costs good color projects extended was engage an of pandemic? help I these period versus performance

Christopher Kuehn

Yes, has or in better points every And it less. would question. of continued inefficiencies incrementals the has we in around with Andy, at it's get third year XX% last continued that, With volume category, dial growth each the a And couple that And I every say we into growth we'll and this looking in that, quarter. We right? go that as gotten to The great quarter. X you the as productivity was better get hard a the with said, price here we we getting gross the little dovetail this the But to years. inefficiencies, the as growth year of contributions closer continue the -- work to productivity to of see supply XXXX. grow from normalizing, through have to the quarters The volume chain improve. this year. quarter delivered

there's So for will in this see starting we that room go continued a XXXX, and really into here. benefits but a of the be to We're to as of us beyond. go lot XXXX of some opportunity

the all The lean these back on this drive pivot getting cost that really workforce are supply and chain investments the making through year. the years. to at ultimately right? the ability we're to for to us And and the company, challenges last takeout our culture the able look of with DNA factories, lean we're to few We're versus focus over automation in

David Regnery

back on It the full product the the we opportunity just quarter. go were at Yes, the to feel several happening a the that of locations had during feeling of yard had the a great versus ago, were Andy, flow in that's I where reworked. we was visit looking to be our year today to such operations where line to

with that's all helping So productivity. the

we're a But team times stride the here really great now. supply glad our right starting which operations, I'm to they're to working is our through some had chain. extremely they're the well job in So tough by they've hit say that operating because

Operator

question TD Gautam of Your is from Cowen. next Khanna

Gautam Khanna

quarter. Great

wanted transport you demand booking right Any in opened out refrigeration, on, you're read mentioned October. how Just sense the books get far early to now? how and the order your into looks on XXXX you

David Regnery

the like open Yes. I mean, we I book October. in order did said,

Thermo over current of the again number the mean, markets going King us forecasting guide, has a we're years. I we're for XXXX. outperform Gautam, And to expected, As business well with in very performed our that

great a business. it's So

validate a We lot forecasting business that earnings. things some out term a There's align have fourth electrify that that. about up through forecast, I'm bit are that pretty of of I where that with our the know report dip XXXX. in with and we we're quarter We're now innovation as in right Thermo products. Great we'll our that don't as our but of validating excited it's we we is internal update King. pumping everyone ACT team, short -- portfolio a and

Gautam Khanna

booking into how far you are out Okay. you point 'XX on at this Can or... actually comment guys

David Regnery

period. It's always within XX-month a

book fact, don't orders in for in years, these increments. But get prior out. would So the up we only booked open the X-month way

just we because sure were we make to So in we a higher right when pricing inflation wanted market. are

Christopher Kuehn

Yes.

be at would only Dave's [indiscernible] than book point, for open Europe, of it be And a bit I through think Americas, it middle order really for this the 'XX, may to that. Gautam. point. for think But XXXX I for longer

Gautam Khanna

seeing repairing evidence And quick uptick products? resi. instead just those follow-up X people deferring replacement units? you of in on Any any Are and

David Regnery

seeing with that, Yes. not recently. team resi I no. the We're was

is no, answer short we the yet. haven't think that I seen So

Operator

question Snyder next Chris is of from Your UBS.

Christopher Snyder

Orders broader the ask from bifurcated to quarter the on on And driving this commercial always wanted HVAC. company I prided has clearly itself industry. innovation.

guess customers you world to I So providing prices innovation the you of and moving gains you electricity a do question in share and is my higher that to rate are globally, emissions more result higher that appreciate efficiency them? forward? think just so are the moving targets could seeing And

David Regnery

lead question. always Look, Chris, hope with with you. is all Great we innovation. well

has appreciate we low-GWP innovation efficient lot ourselves so talk verticals, that. of always a do around I about had with products reasons. and you that products, customer. of if we higher innovation strong quarter customers a the providing with data our I that a that refrigerants, to greener we obvious working centers. A very of lot the in think pride don't lot think centers, Look, we're But on using data do for

them So they're and all they scale then through unique the data building. for that these solutions centers are it

we the a to to So connected to And we'll future. continue our to service our efficiency sure to that that in customers. solutions that make future. continue our so expand do can continue in continue business we'll have energy sell the We'll

Christopher Snyder

numbers. appreciate orders law at the that. large of the up, that maybe to I down to in need Dave, point go prepared remarks And following you then mentioned some due

Commercial rearview It's is the So like haven't question like at wouldn't pipeline. this compression to negative a And be the need time of point. Resi mega before, are feels it you mostly lead largely to yet. other is ordered still macro you Because step healthy. the turning. in the mentioned the projects in see in really the change seems that? kind headwinds

So I levels? a what mean, you do declines standpoint see on order macro to material off these need have to

Christopher Kuehn

a and think these saving putting multiyear be data tailwind is I'll mentioned well you start. customers the investors backlog at about This sure why think before, bookings Chris. data make growth emissions we just and as to Growth and absolute targets, centers rates and Chris. trends data. need just as it's out to Yes, tailwinds. I long-term we want that for levels, decarbonization, around process right? important data around look for as as see to as we It's position the appears

even down that through have levels X%. to in longer-term still here down this terms or X%, quarter. we absolute about that we X%, elevated year, strength the the But the think X% of we would of around been some bookings tailwinds. When and beginning would on third billion, and have a very backlog continue we ending bookings, see around implied guided So to down as see $X that

abating. encourage bookings So look or X-year guess stacks, just will Could be stacks negative? we levels people at don't start some significant. look at I when the see, absolute X-year trends, would where necessarily I could. But would say we the to I growth bookings quarters find to they're around as because bookings we you backlog will normalize growth,

X-year over... in stack booking of HVAC Americas, commercial a the about think You

David Regnery

XX%.

Christopher Kuehn

XX%.

we growth. points points have that still period, So of the is a fact from if you down X subtract in went XX% given to

So maybe a tailwind bit of we're where confident but a long here. answer to your question, got long-term we've a

Operator

Ritchie is Goldman Sachs. question next Your Joe of from

Joseph Ritchie

quarter. Nice

And XX%, curious, XX% actually that you have they of $X broadly? Eaton like broken and $XXX projects projects pipeline now the guys a I'm color helpful. be of of jive almost also and ground your they've the yesterday, I you're other you to that would are funnel kind have that tracking any percentage, funnel in So resized bid. suggested kind what around with guys all about billion. that lower like billion. know up own Or seeing close But project mega your tracking does over

David Regnery

you Yes. in lot would I so I I just we comment reports we're pipeline Eaton's that that of tell now a right haven't read can't projects the tracking. specifically. have

think -- a vary. versus companies you I to company company different orders by X it's always be have careful could is when track procured are bit little always you another when

in still see we very, lot of with and So news we well, very feel we're I projects, about us. But unique is like many that customers before confident that a many sounds and as Eaton does there. a the these talking we're good It guess with maybe out have bit a solutions of we're that Eaton position. the we

Joseph Ritchie

given but environment project just on had putting up there order on Dave. any the not I today, the book it know concerns there any to in are financing that, following out [indiscernible] rate really in? we're Maybe that concerns? the or Yes. things right, seeing you're

Christopher Kuehn

No, Chris. not. it's Joe, we're

gone paybacks, X.X minor gone quote while we're X, we years I when now to rates years about in the on able think may systems that in interest X-ish is A direction I energy-efficient to negative change you have from payback the think certainly have the that customers. tell paybacks would with interest rates.

there's So of implementing the when still you're these paybacks very is solutions. fact some strong

not seeing we're So now. right that

Joseph Ritchie

on of of year, sense. you, how kind any kind at I thoughts it. And not for point. ready XXXX quickly Got that know bless this any guess to makes I X we're X maybe numbers last Chris. you think out both Americas should just across thoughts through play of pricing and as business? mix But -- next that kind for the initial That

Christopher Kuehn

a little price that We'll Joe, closer Yes. Dave's XX spread a measure, and of making let's for we're to to months get as we pricing normal To a dial get in it XX from basis in target, customer further, we're points innovation year. do we of We'll dial a as relationships. from earlier point, bit year. say, next long-term a couple inflation now. we sure But in also

a basis So there. to versus of set forward. last on dollar to target the a on have able to so be teams I'm confident numbers going able have for inflation. of a going positive do confidence that basis a we'll we've that good years, been price demonstrate I will And We're X and our margin lot that

Operator

from of is JPMorgan. question Steve Tusa next Your

C. Stephen Tusa

light? were was light sure. strength pretty orders, in commercial -- a commercial. strong large your there's How lot and business, of strong those What echo, I'll for been light

David Regnery

up, was was XX%. over in was Americas, stronger over was unitary. Equipment Our up up XX%. the than Applied revenue

C. Stephen Tusa

Applied was stronger than unitary?

David Regnery

were but could you stronger at it, strength applied Both had look yes, mean, the strong that in yes. the was unitary. really Yes, verticals than I Steve.

like be intricate systems. a care, verticals high be which more our And that to design the system, where You the again, applied to tech, have more systems. Those really tend life you science, need is projects applied data education. centers, those were health even solid tend

the So the is performance tail. happy service this again, And you we're we but these third this, where to get I the quarter. iterate, long but implied, with saw pretty in know know not that you

is so future. And the in our to business to service fuel continue going this

C. Stephen Tusa

just now? base. sort you us X job you now, -- verticals just are represent of presentation I little us several is just a done how this of I give you your slide a know give Can on it's -- doing commercial mentioned like of Obviously, haven't you roughly verticals verticals but us HVAC there. before, growth Like for you so years. just XX% those these important -- last you've mean, like I much that Can give portfolio? kind color Can X those like given maybe you your every Yes. guys great in some mean, XX% represent? much of how the revenue

Christopher Kuehn

again, kind today. would We answer. try pivot little I vertical weaker is if retail, data of They're given positioning to we centers. won't dial that'd certainly, and the But the like out, ability is but warehouse buried a another just most been sales today. the what areas, in verticals Americas. XX office it direct office, We've here. of I be on the would important really... to that it with warehousing strong, vertical Steve, specifically about into think to and And a And slower demand vertical in know be that what has track force is in office like things our their I lobbying bit ability number break I a is, is

David Regnery

I going XX. verticals, was we to I where track exactly mean, Chris. go, That's these

strength there's sales to than I'll X vertical time, XX But funding was education, extended programs We see warehousing period get are we that. on share mega those helping do and vertical of in really has capture the of away front X for education you been ago, us. there. an have warehousing as develop don't example. centers, the projects all You could subdividing Obviously, another near is even extremely particular force if data little when years verticals. Right they term. We them, in the pivot that And stronger that for I ESSER ago, oftentimes an a focus warehousing. go strong. years going High in is strong. now, in tech, Two our use

education or extended in is funding sixth of fifth an extremely inning, time. period we've been strong probably think for the in I ESSER but

C. Stephen Tusa

One last X for you.

you what next peers latest the some that that driving change front 'XX, XX% years, could mix, bit price in on over 'XX give resi loaded given and that change or us to price talked and greatest refrigerant this XX% like of something into and more and potentially see for mix perhaps back-end then. a transition couple have from in just pretty your about comes the nice lens resi? 'XX Your Can on you

David Regnery

about whole change, been The been change it the XXXX we've leading I the I But Yes. with in. right, refrigerant refrigerant think we're if industry, think next-generation you refrigerants. dialing short at is it about answer since we've mean, with really

than more for we're ready So XXXB. away this in case, to, from XXX our transition

to complete, manufacturing designs up in are Our ready here start going to go. early We're our production QX. is

shift sure still correct. with out we're channel. focus to of And goes sure all the phase inventory. clean in, phase are systems going EPA our that definitions, the we really then is I'm So Steve, our make working some a have to interpretation there. There to is

and even what XXX will product manufacturing seeing and right XXXX, now, We both XXX be we're product in probably interpretation XXXX least the with into our at EPA.

put different The price, you're sensing As far the Obviously, XXX going we're that product slightly still have be union. expensive. to equipment so going it's in. dialing refrigerant more as flammable to is to a around

weeks update on data on more get fourth here, we'll coming and we'll everyone the So in that quarter call. our

Operator

question Your Jeff Vertical of Partners. is Research next from Sprague

Jeffrey Sprague

dig a I bit little guys behavior into customer if as we well. good wonder you more doing could just as backlogs. but Not and just

towards roughly customers as historically? down size would mean, I that's would billion, bit But think big of go XX% you history, of maybe some suggest really patterns kind my of the given much their it's commercial about sure the or it, healthy if to of why do something back little but earlier they from would of that not just really there's backlogs to scope in one math, of a changing see down need order versus else a kind good questions. the back number. here. where go projects, actually that I'm backlogs half $X were backlog. I XXXX kind and maybe of are Do backlog right, are be, $X billion-plus, of revenues right, goes your As that these call

Christopher Kuehn

Same still of start. the we the extended were are I'll bit better. beginning from applied Jeff, in times mean, unitary, I better think lead year. where systems, getting getting I a certainly in

contracts bit think come bit, lead where elevated the as a I backlog see the today. you over in times a So is may It time.

you You're our businesses, would about right, think King, HVAC XX%. of backlog over business. And Thermo relate the to commercial our commercial when XX% it's including global

the gives visibility projects, how rates. that it here affect what effects we with be of stacking terms And said, policy of bookings. Mega of us of as some in applied, are continue think us let's So projects. growth. would into order see are XXXX to kind But us healthy lot and Dave a positively ahead long-cycle these

elevated be this out. Let's think longer, can point. start plays for how normalize at it see it We but to will some

David Regnery

Yes.

is for was the add to that period think you. I'll kind work thing of strategy tend lock our that, Jeff, the with are to they an do I that, to Once would and time engineers go to for only solutions extended data and do develop I back data with of center centers again, in we optimal them.

to ensure your disappoint a orders just they'll So and shipment. times don't they lead have that we missing slots provide beyond available

Jeffrey Sprague

gauge coming way the IRA, this programs, what forward tied is they of pipeline be through percent down And and in CHIPS, you other stimulus to state any what's promulgations? project various things can

Christopher Kuehn

service equipment. I think in we're sure the open, necessarily an over us. today. and from to we've backlog say of I really Jeff, ESSER had an that's for all the don't are IRA perspective, in But summer that that's projects months now, would front making and schools from funding ready years upgrade several when

one this long-term to I center, for data a elevate certainly been about it continues demand. I and just backlog for So say Act, we we a this But more that's there's is but be in have But data centers specifically that the centers as while. Data right tail. -- that's don't CHIPS dialed could no Science would guess driving think you in now. that see and pure demand where the

Operator

of Coe Wolfe Your Research. next question is from Nigel

Nigel Coe

the So going back obviously was quite the QX, in spectacular, but growth in which to the Q-over-Q something. especially HVAC pickup commercial Americas, was

there supply funding or perhaps strength Understand reaching falls out 'XX. education, demand kind flush out peak, there's within off strong. drove very in think concerns you kind verticals. there that? I So that a with is of of that, education stimulus loosening kind Was of in that any maybe some of obviously maybe there called the sort then chain the the And

be So helpful. any on visibility would education

David Regnery

Yes, I'll in lot latter. the have There's start a a yet. with there. well. to out haven't a lot pipeline We still spent cooloff still as money we The be education, our of seen

funding been of there. playing said, We've time. say I I sixth think an As some -- still the There's I'd if to a strong we in there we had baseball, inning. extended period for come were we're

was... question The other

Nigel Coe

Yes.

factor Just applied yes. the been a business, in obviously, supply chain constraints have

David Regnery

say chain, that going supply it's to great done there. in normal. pretty it's to have it's a some teams I our but job see The just wouldn't noise have the always chain, We close you're -- normal but supply

third our suddenly So because -- been supply I wouldn't chain it [indiscernible]. got was I better was it's quarter not say performance because say would

Nigel Coe

And Okay. then the comment... on

David Regnery

the very of end executing our results. operations the our well We're you front on see well on business. our very of side in We're executing business and really it

Nigel Coe

Okay.

quick towards your Just target. at of Chris, taking competitors question. you pricing [ is much XX you points are aggressive versus some spread inflation pricing. policy a crack more what -- the another It basis like feel mentioned ] does

to starts on there going is XX curious as HVAC Number embedded price over you in And more So sort be X emerge backlog aggressive backlog on that 'XX. convert, bit months? to of one, next the commercial as into a secondly, go just really that's the then aspects. to pricing potential I'm this

Christopher Kuehn

Yes, question, with Nigel. start I'll your second

year, or X.X be making be in. sure right could escalators the the that ultimately As And to years, it inflators cost out to reference we're sure we we're we've built runs make think pricing it that an a cost backlog about where could external into got the we've X index put effectively. project

us we've So we've a to continue here right XXXX. for I ahead And long-term we're with of products, inflation. Yes. drive applied for and relationships X be the dial years get ahead it more confident to Look, it business, now this pricing effectively. here, as with the I course, to we view. of innovation make teams brings best sure us making will I with our in in going to described, we the environment environment on our And with healthy. going we're months before over as the I last pricing products, sure of sure think remain business an itself a to sure effectively. And stay that, make think It's making in about customer to way cost the But got to the which on innovative job continues with just that want we're pricing got outstanding have am think that, to backlog done that the the again, inflationary we that Dave embedded can will. we services want margins. healthy grow and X-plus

positioned So year. for well we're next

Just time to little a give us dial more that in.

Operator

is Deane Your from Dray Markets. Capital of question RBC next

Deane Dray

stronger. were bookings. Maybe It impressed -- lighter margins on the China, to you was good back had even that circle lighter had you though revenues, margins much

So you? how did out China for play

David Regnery

question. for with the performance our happy overall, very Asia Pacific I'm so in thanks

orders and were right? mid-teens, digits I order low were in comp mean, of the the pipeline remember, very orders, down performance Pacific well. is on team just that last had rates Asia well. very, I rest a the it's with for okay, The region. we had high bit. incoming XX% as flattish, the start region. we performing year, I'll had in in And very -- about growth strong was strong teens, revenue, rate. On single think a up with so is happy really And the But there issue. very Asia order China XX%, You so up

Deane Dray

New is like does Great. event backlog how the baseball funnel, feature? the using We is give thermal of in it still of experience Where analogy, adoption? the can to the we in follow-up are sense opting -- the this us -- business, for that both innings the And since as on stand? a management and you're you -- just are much -- that applied September customers customer early a York,

David Regnery

limit that of would there. been one thermal Yes, that be elements still of would continuous dialing Yes, the systems quite also selling exact for included so are think accelerate if drive but there. help that's everyone's that. And will to you could because be to efficiency period versus balance peak that thermal a systems shut have could is compressors you IRA off storage in And -- chillers. management great thermal time. our a power ways how your it significant applied. and some grid. to what do need a mean, on thermal I just or it running they're aware, that storage storage. ice we we're your great rebate way is do and And energy I be that But be We've adoption power, and really this ways burn great have for that the

about excited a be even the IRA had while, for We've catalyst we're So could have to technology. a it it grow faster. and

Operator

from is Andrew of question Bank next of Your Obin America.

Andrew Obin

guess all-time do. that the lot I aggressive gross rebased cost. cutting, spread is maintaining gross benefit. Look bigger on gross know and It's we a guys cost I of have cost spread. between have I work But is the margins how balance have but an is, of it guess. A And It much a I'm price other much stance at right? margins? timing, the just highs. you the think price clearly, right? on between I guys question cost, price And Because on you we look my at And companies you how hitting just margins, don't seems question model, between are the wondering peak done also

gross somewhat are could going you we with talk or the So in margins new we gross if just the should expect margins forward? about, normal normalize

Christopher Kuehn

start. I'll Andrew,

and to third I to think leverage able drive expansion. P&L about gross margin we quarter, execute were all the across really As of the parts

in inflation, tier it price earlier, the on X So I basis. the as of said and energy margin and inflation, are are dollar inflation business. around though, was positive versus execution wage especially that There areas, impacting a

around we a and So above invest X like well, we've year positive. The full targeting incrementals as in in business XX to investment the of volume basis volume still incremental We're basis those normal. incrementals. a the XX it quarter points And for right? the was on so point of continued points

opportunity But tell for you to for the parts opportunity really to bit of is P&L normalized back the incrementals. better going more or a drive us working. XX% to all that forward I price So really level, productivity us the of would really comes as are continue a

David Regnery

and we service. really mix And like our

Andrew Obin

high was driving services margins well? gross So as

Christopher Kuehn

contributor, a It's right?

David Regnery

service It with was a we contributor. really things the It but of we a like our was it, business. mix that does have system

Andrew Obin

on workplace question a I right? bought software just Great. a company. also follow-up Nuvolo, think And management JCI

Fortive this about business you excites for has what vertical a remind how us presence. you is about Can big just point? talk this a maybe as software at you and also

David Regnery

management Yes. current our at platform. and Nuvolo digital enterprise is and cloud-based workplace to leveraging company, ServiceNow this look capabilities. Look, we a way asset as connected it's a the augment

remind have everyone, we XX,XXX connected to buildings. over Just

have over well X We million assets. connected

it's great digital company, closed great a at us to to going help So of technology, we're and our clip. and we and think this is be get nice have leadership, a grow Technologies business great excited part it this the Trane really portfolio,

Andrew Obin

the business digital is big now? how And

David Regnery

that acquisition would the of this on than that. enterprise specific I won't X% say be I revenue. less is

Operator

allotted the I closing Nagle turn call completed remarks. have for to questions. We for now the will Zac time over

Zac Nagle

to everyone for Thanks, operator. call. like joining today's on I'd thank

coming As we and reach questions weeks be and may seeing hesitate so available to always, answer days that we'll soon. don't forward look in any Stay the to you have, please safe, out. to everyone

Operator

concludes you your for conference call. today's participation. This Thank

disconnect. now may You

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