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TT Trane Technologies

Participants
Zac Nagle VP, IR
Mike Lamach Chairman and CEO
Dave Regnery President and COO
Chris Kuehn SVP and CFO
Julian Mitchell Barclays
Jeff Sprague Vertical Research
Josh Pokrzywinski Morgan Stanley
Steve Tusa JPMorgan
Scott Davis Melius Research
Joe Ritchie Goldman Sachs
Andy Kaplowitz Citigroup
Andrew Obin Bank of America Merrill Lynch
John Walsh Credit Suisse
Call transcript
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Operator

Good morning. And welcome to the Trane Technologies Q3 2020 Earnings Conference Call. My name is Mariama, 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. At this time, all participants are in a listen-only mode. there a presentation, session. speakers' the will question-and-answer be After [Operator Instructions]. turn I to the Zac now Nagle, Relations. over Investor call will of Vice President

Zac Nagle

for find is being morning. for on our XXXX Good thank tranetechnologies.com, webcast presentation. conference Trane where at us you'll earnings call operator. quarter accompanying Technologies' This Thanks, call. website third the And joining you

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

are Chairman go over to Senior Mike? and call CFO. Mike. please Vice that, today's Kuehn, on turn the With I'll Mike President Chris Dave me and Regnery, Slide and and Lamach, to Joining and COO President call CEO; X,

Mike Lamach

for on joining thanks, call. today's Thanks, And Zac. everyone, us

relevant At particularly world, I'd the in for our in details world, most our we the we Technologies. Northern of in particularly of to provide and Before into the business move momentarily Hemisphere. third like quarter Trane and an parts is lives, in acceleration step perspective be the both cases of we've unprecedented COVID-XX daily this why appear present, around change seeing seen the results, on to broader and back level of

we're our let space masks critical is the Overall, very and and of non-residential guard eliminate that time is the of at best can't down. phase defensive billion this of hygiene, building feet we the and pandemic, will XXX turns X.X more communal there in virus. our Over spread feet actions the trillion all weather of in and the wearing to eventually world. contain spent colder represents the of space. non-residential course a square estimate Proper in this order distancing square As and critical is and activities residential indoors, remain

an to some for health right in economies, which healthy of paramount bring with overall the of health of doubt environment of to the no sense space action quality assess to XX% developed or Importantly tenants indoor environments. environments a people there's response and new reinforces an that spend looking safety day contemplating an are every average concern. of Building need physical support. and indoors, occupant indoor all their holistic industry owners, renew air indoor and taking now, for wide standards. certainly improve the and indoor of responsibility And and spaces better Systemic actions requires is and overall the

to collaborate electricity Over a the we past Center and to external Efficiency decade and policies required XX% drive innovation, systems education formed the more for market challenges the after standards that efficient ago, enhance convene modeled experts spaces center Sustainability a and healthy to we or Energy formed deliver and and thought quarter, of leadership, HVAC for internal over already at all we're the communication building's and facing. meet and future present total and demand.

impact for electrical energy strategies represents building for a costs increase quality and air of a in demand can XX%. indoor efficiency, many that know negative significant energy by owners. This XX% to further enhancements challenge have we While

overall the more to broad-based the customers controls, overall conservation help ways our energy we raise critical HVAC as normal. carbon to So efficient through take Trane additional of new of can their implementation system's we measures better air demand. Technologies, a of we energy which is part and quality to increasing emissions want we creating on mitigate economic spaces, the of indoor be through consequences is behalf, that the find that critical impact offsetting At unintended to systems

quo thrive, our when create the stork challenge where by and putting Trane action ambitious a normal our to foundational world. company, the by change a protected to generations. the where lead and a in taking industry is communities the new quality We environment future will for status Technologies ground setting stake that and will and We're commitments is example,

to X the because our equivalent our and committed of or year size to we reducing that's the ethnic emissions. billion by also X X% leadership parity scale, global to Our company tons with To idea on customers' all companies We're XXXX, us, achieve bend join carbon can creating and Gigaton annual reflective XXXX. our curve give gender warming. of and Challenge and goal other world's by of is alone, diversity metric for by the racial gigaton that opportunity the communities. committed just about an to emissions you That's

for Setting year in our other last has change bold that plans transformation another for Trane for Our of planning, shareholders normal analysis culminated against new world one the needs team, and action, all commitment exhibited a team the better around that the blueprint May, creating plan in new and and is decade. has of how our approximately and executing example talented passion we're customers Technologies our after marked

opportunities Our for blue our new and normal, to up. them, emissions turned healthy need are people accessible create to and goal who where skies turned is a down food, medicines simple, moved all water

we and for returns business of transformed for things those as challenges Our these complex shareholders. differentiated positioning right our purpose, climate With fit pressing innovator, making and intersection the focused tackle unique drive sits happen. can at and a

lives. COVID to call XX attest. to Moving today this everyone X, daily pandemic to of our every can Slide global challenges The as to continues ongoing present aspect listening virtually

much recovery the us. is As duration and of made very with of regarding progress the downturn, speed ago still contemplating all were the months shape much and we've and the questions depth the

and the might trajectory of timing, the While landscape mass capabilities effectively promising the there are in that open to remain needs financial change markets challenges, the revenue meet our expansion, end evolving strong of shareholders third pandemic margin EPS delivering for and ongoing focused and vaccines our Despite growth, these exceptional results navigating customers growth, quarter. process several go robust in growth, strong our distribution cash questions. radically positive remain strong agile, availability, to broadly, We teams bookings deliver and outperformed flow. free our

XXXX and to income we along outlook only again of gives performance we outperform for prior our and down do and expect outlook XXXX well. leverage, down current our in of outlook and to strong that confidence XX%, revenues XX% significantly for expect quarter raising But for with revenues our X% Continued some operating fourth also outlook improvement once as roughly well. us EBITDA see as to a the raise

for course X% Assuming be speed comps despite to tough the business down weakness revenues American current the markets. and global of economic and quarter transport continued in just we HVAC fourth recovery, the North expect global

improved have in for than expectations we better based quarter in to gross on execution. levels outlook XXXX four for margin deleverage strong Additionally, continued

Our XXXX. to prior gross the for XX% low range deleverage outlook margin was for

programs third take the of expect investments and the stronger new opportunities high as to fourth quarter. to and conditions business aggressive We levels emerge thrive quarter, growth continue develop. further in maintain and to throughout and improve to and accelerate We actions reinvestment business innovation our

to and strong XXXX. to in flow order as to more reduction in on slate deliver core and We our solutions. accelerate business track delivered in position. both year as liquidity the investments the storage strong and accelerate remain strong our cash IAQ chain a balance and of a initiatives high XXXX projects well opportunities first very half We We other have line course bottom in ROI these stranded costs in cost new We've set and XXXX financial deliver savings. to a and cold free we are sheet savings fixed

capital strategy balanced pause economic capital course all global of play in will to third elements third will optionality. quarter current into preservation strong this elements through a time. on positioned the of quarter allocation You of performance capital favor probably and bring recovery the balanced back speed a allocation strategy the of at well Exiting and based our

excel strategy elevated work world, core trends financial shareholders. sustainability us powers these sustainable We the the every a world the at need And ensure a of to Our redefining energy unchanged. are becoming for differentiated addressing in. for possible remains now passion tier increasing and these safety and our challenging of standard returns live and environments what we is deliver higher what megatrends normal. top the performance efficiency and day. Secular and with This health for are megatrends pressing forward considers more to

Dave? I performance over discuss to in to our quarter. call turn Dave Now the to bookings revenue and like the

Dave Regnery

Please Mike. X. go Thanks, Slide to

in and levels bookings of impacts but Despite agile remain contraction our slowly drove these focused our global the end of the forward, the teams economy pandemic X% in XXXX the markets. key In headwinds, delivered remains and quarter majority from situation positive Americas, progressing quarter. revenue is tenuous. the the global further and growth Third

remaining occupancy ongoing impacts safety in building challenged segment QX X% remain related revenue remained pandemic to revenues. quarter, up outperform both revenue rates bookings XXXX with low-single has related building by other prior continue flat to and Our digits bookings and downturn bookings Services through but low in equipment, resilient year. the and HVAC our down in and concerns. Americas, specific in third primarily closures America to the health with and growth X% delivered In commercial business

Strong quarter. have teams advantage us bookings such more new and the to air take services. conditions markets Backlog the quarter. HVAC of and been Our XX% and revenues in to business changing effective and than quality in capturing landscape construction high-teens replacement opportunities enabled both entering outgrow as to remains our up QX. indoor at Residential in market up at third are in adapting strong the residential growth areas levels are assessments record and in performance efficient

were in the refrigeration down more down transport the were positive than markets low-single digits. quarter. Our over which up business bookings Revenues the XX% were XX%, quarter outperformed in overall

in EMEA teams be In market Turning mid-single bookings down with quarter, execute were down transport but the the digits. market equipment, commercial Revenues EMEA conditions continue underlying overall. broader while but refrigeration. still outgrew HVAC outperformed single Revenues again than positive Services to low-single transport both impacts delivered down and the the were of challenged EMEA up revenues XX%. specific digits, earlier. up well. growth outperforming to positive downturn noted X% growth transport by were in more markets, were HVAC digits, down pandemic to continues overall bookings quarter were EMEA, Commercial digits. bookings are high high-single X% which constrained

X%. number to the made Having show a and growth where most Asia-Pacific than more with progress to the down down mixed, China countries results rest the on of declines was continue China X% steady in signs offset overall Asia, path the bookings improvement. in and by begin tide recovery. pandemic against the relatively have the be pandemic, on yet to continues revenues of turn of of

call I'd like our to more to to quarter results the Now, over discuss detail. turn Chris of in the

Chris Kuehn

Dave, across expectations to execution quarter, containment, the for the we margin prior Price market delivered remain on controls margins execution Thanks, Adjusted was our segment. given playbook Dave. strong quarter, are Please overview of each slide, so of evolving on with size heading tight recession margins through board my to margin to leverage turn good XX benefited comments gross reflecting the in EBITDA strong the in declines revenues see. Productivity points positive exceeded focused X. margins. which right adapt the provided execution basis than expected to a strong costs Slide strong, expansion Top-line rates. cost in revenue focus We our very into up operating the cost a and better I'll quarter. conditions.

significant While in declines EMEA. in headwind mix and remained the a given revenues transfer steep Americas both

and to of reinvestment turn safety maintained X. Slide innovation also employee We high and business measures, levels Please technology.

from expansion. price revenues, Turning revenues regional my cost again region, from a containment once and good and we XXXX. offset the margins quarter raising of versus scenario to provided I'll leverage margins Similarly, outset strong Dave the overview our been and fourth improve initial the pandemic, we've X, once heading the outlook it segments, on transport than containment mix more delivered regions our again margin raise earlier. to turn of cost and productivity, the In and Asia-Pacific XXXX. at into EMEA solid Slide residential for consistently to able are comments view productivity driving headwinds to focus strong Americas of Please as the revenues

prior deleverage. outlook XXXX better This XX% current the favorably our come compares down now be recovery, XX%. margin and down Assuming speed course to for global of economic we approximately revenues expect gross to to than X% XXXX in with revenues to

margin We approximately deleverage. expect than with better gross QX be X%, down revenues to

to of order continue to operate stronger offense company even strength from play continue emerge and We post-pandemic. a in aggressive intend an through to downturn to the position

of of that X% revenues we modeling. and some terms items help range In lower We on wanted our likely CapEx a QX, that operate outlook business provide for model may to with additional to of are for we light end of investing X% XXXX. your the

remain or at the We than expect equal be to for fourth to of XXXX. in flow is million $XX adjusted and strong Quarterly quarter. to expense interest cash free XXX% expected net greater consistent earnings

to XXXX. remains Our for range XX% is the rate in million our count approximately XXXX. shares XX% tax share lastly, for expected to And be XXX

Dave? outlook. the like to over back turn market I'd to Now to our Dave call provide

Dave Regnery

nine. to Thanks, Slide Chris. Please turn number

this opportunity early quality significantly third of execution. is of seeing markets huge still to The ultimately outperformed through momentum opportunity high strong evaluated be and of installed broader that in stages. focus, based interest billions strong and As indoor has could we've the air comprehensive But quarter assessments is agility in commercial North build. the continues and space HVAC the conversion for square footage addressed. levels highlighted, and through America on We're universe

we and Tough were XX% extremely be between QX, HVAC which essentially tough years up resilient faces. remains declines to we of flat the comps end North For American in XXXX to commercial to and markets the commercial our business in X% growth North XXXX. expect nearly by backlog expect business healthy XXXX, QX in HVAC primarily is XX% all the revenues roughly in our XXXX comps and equivalent two driven business America XX%, versus the of be despite year. one significant non-residential aside, down

quarter. saw us position quarter, is how point. residential, book bookings still which shake a entering Residential to November backlog revenue December puts or it's record unclear fourth and this and turn at out a in Turning strong we in and a will third the business,

So too stage. early this to call at QX

trends and calling in the quarter. transport growth market North for QX America XX% aligned Act likely be some positive to to from to continued for QX. we're sequentially order and that Turning freight overall transport transport, act North so the has business with market we're America our headwinds to rates improve seeing we're rates are QX, down expecting roughly the and in rates

soft recovery where EMEA, to Turning relatively dependent. country continues to be and

restaurants only QX. in amplified venue Some bracing in and to border and and call fourth in markets occur calls other closures. Europe, for Transport lockdowns countries for HVAC are early commercial which venue market be will in of It's and expect of round be transport the parts another to too challenging, broadly markets and outlook the XX% especially should challenging the both a decline be border quarter, closures as recovery Europe. they by we'd will

growth to which Turning QX. we to solid have recovery in expect Asia, by be to China, in the continue encouraged we

focus to However, more offset which Slide the in office the transaction, At stranded industrial Please time our quarter rest than to we from the million in expect the to streamlining in cost XX. revenue third we to we declines announced mobilized on RMT turn the remove the China. transformation see of Asia, business quickly growth XXXX. similar number $XXX by organization of results to

in million million XXXX XXXX. earlier, we achieve in are and discussed on to $XXX Mike track As $XXX

approximately million the we other As we expect of million costs. onetime to $XXX discussed, expenses and fixed stranded eliminate $XXX and

approximately spent year-to-date $XX in QX. million have million with We $XX

balanced Chris call to back Now I'd discuss strategy. to our capital allocation the turn Chris? like to over

Chris Kuehn

go Please number XX. Slide Thanks, Dave. to

elements favor quarter capital earlier, to of optionality. third outlook. current into a and the through the balanced strategy balanced capital free in our we on strong third of allocation allocation of Exiting our in and capital position elements paused We're As our flow preservation quarter strategy cash all bring on play. based back Mike mentioned generation strong our

growth, vital with committed to cash balance optionality our business economic we projects, consistently as on that continue excellence a to for is core our operational margin continued We our healthy balanced markets evolve. maintaining conditions, highest allocation deploying are and strategy the and which leadership sheet innovation strong Despite with of technology, Our and us shareholders. focused high remain with opportunities to ROI business capital investments, to excess levels expansion. returns strengthen continued product the provides

longstanding have We dividend above strong a commitment to and reliable, growing the earnings that at rate or of increases overtime. growth

shareholder excess to share expect to as returns. see And continue All to We overtime. M&A continue in consistently cash the in, value long-term of further pursue that intrinsic improves our stock the trades deploy repurchases we XXX% strategic calculated below value. we

turn Dave of to investor to topics like key to at to over Mike the call key close I'd of the Now points. cover interest back and and summary

Dave Regnery

go their growing occupants. pressing layered, balances for market their stage, for generating XX. Thanks, buildings confidence buildings. Chris. reopening the customers challenges system air services remote interest this tremendous in expertise, daily. and aimed we're most activity intensity. which to monitoring indoor safety At is unmatched us the fully the are quality our and our at to immediately services improve modest of Please and build for direct Slide our and number pipeline building contributors offer a service approach, addressing more to air turning sized Indoor to quality channel, is enhancements the seeing projects, of with for holistic, customized key We solid Fundamentally, energy

at during air safety on Please think With environment. have of and standards for Trane adoption business alike we the a the is an and highlighted in as establishment the represents to health Spaces for and innovation the air quarter. quality launched tailwind the the eye consumers everywhere. indoor focused and on term, secular believe codes the built Slide we Mike Technologies, As come influencing long-term strategy outset, breathe go Center our of businesses they to Efficient long-term of number about XX. and driving longer The and within our Healthy center differently

we markets know on is in the topic Another around investors transport minds XXXX and revolves of XXXX.

our on markets. market down the and to as outperform are for expected EMEA, XXXX. to be XXXX, We're XX% show down The to roughly markets the be well. in clearly outperforming about the EMEA expected applies North XX% For American is numbers for same pace where

approximately markets the we for XX% XXXX, to consistent IHS the Turning markets and be and to with up EMEA. from positive ACT transport North which in outlooks are America and in on calls market XX%

back to for Mike? Mike to remarks. I'd turn call the over Now, closing like

Mike Lamach

Please We've and investor event hold intend of go you to event up it firmed what will December, Slide XX. we the an XX, that should we all hope great we join that be morning December of a mentioned can and to looking be. at We're event. in us,

with new margin While that unprecedented with associated the This or three up to going of working constructed mind across to Please for year and conduct of Trane XX. date. has continues investors that go on breakfast, it current business we've will environment. continued We're not control, on eats our past the culture will it of and concrete some expansion for end story be is these couldn't perform. things the are the Peter in XXth expansion additional morning many Drucker sure believe follow organizations working evolve focus and self-help the we're on Investor our that which this said traditional to event growth culture with the in will supports to virtual activities be dependent more take but certainly who was be provide our Trane on markets these we idea. order been believe the of save the to given I the innovation when We've Technology happens about year. the we and details be targets line the days Technologies term, with The me. strategy that talk hours more to a what bottom couple top the to we challenges medium with present rather and topic of please continued we transformational top-line and for pandemic Day visibility in to near of than markets, confidence to and event, Slide deeper for agree the of margin touched a dive changes story. We'll that a current been on on a

very and the had the Trane that formation our XX,XXX through to of has we through the we this Reverse survey, people weather work industrial work pride, As associates this, results Trane blueprinted emblematic this Morris overwhelming. and to verbatim went through proud of difficult the from Technologies our recently and year's of on the XX% XX,XXX newly Trust, of were provided. we've feedback our as and of gotten of created pandemic new the I'm Technologies. plate impact point, optimism a plenty culture that is nearly only globally and the all stronger. energy We've engagement with say comments received The over separation in

received. the feedback shared entire our of the optimism achieved quartile an our change With for one index industry core at of our engagement do and world. team the in Trane all about can that proud improve Our our our companies future world, we company pride year-over-year. change can and industry top company Technologies inspiration what of and the in and again people, I'm energy

health We've Trane to Technologies. outset and to the to profitable competitive we The customers capabilities, air been with to and brands Trane make to improve at difference a in heavily innovation and our advance time leadership build helping another presser approach positioning downturn, quality passes. and global future growth positions energy with and safety are the of high excel financial indoor strives investing and and to megatrends and demand call, market world. franchise sustainability advantage efficiency strong And for megatrends enable holistic our and is as said to for I navigate growing these intend and during of years leverage that the our As Technologies for focus to sustainability consistent our our increased a heavily intersect on services. of this stronger spaces the fundamentally, invest opportunity the products only we to in solutions

our to and to challenges message of is and to certainly we're the slow today not unambiguous. still investors Our but never will tomorrow, going we We're up down. stand stepping

only blueprinting into in marketplace ultimate the improve and leaner company parameter. We're Our for fundamentally transforming the of in pure that focused elimination the growth, and execution relentless play or transformation investments stranded company the on of a the profile investments of margin and fit and results innovation purpose costs, the will initiatives not through over the long-term.

remain deployment flow, committed excess and Dave, a to and Operator? and your we of years. the record be take happy we free to Lastly, questions. dynamic strong track balanced returns I tier strong of cash top with have And capital, deliver that, delivering Chris, will deploying shareholder cash over to

Operator

comes first Julian Barclays. [Operator instructions] you. Your with from question Mitchell Thank

Your line is open.

Julian Mitchell

is markets project line? indicators call of your the of corner do morning. choppy your starts to good just hit alternatively, backlog environment or you quarter market mid things worst think and no too past I Or the just the starts in you're down it market of year-end? you or trend that, like backlog, Maybe because that impact first think about out next - moving that there's into each So, end that to of commercial indicators, will weak, trend kind you suppose think the real just around point taking a COVID, out, you're early year? I you HVAC just the question think and negative own as the would comes Hi, stable the already end Because as when Americas. those though

Mike Lamach

Dodge But our in XX% is demand of really a probably little XX% It's And read. data place how - predicated too probably the doing lot that that line with put is around a that creating understand Julian. bit we're to and retrofits of Yeah, business quality. remember early indoor on by to affected air you there. more trend that data

been this backlog. think I based exit do do that on through an of And relatively correct, terms backlog. everything you're past think year of the year, So, that's end flat we've flat achievement in our we to the I with somewhat

course So, I strength into 'XX think and current decent with health to going growth. year markets we've many enough around in in a enough the got 'XX, have speed

Julian Mitchell

Thanks. normal what you think a around And year? or next then or up is quick extent thoughts your low that market. sets any bar the this think maybe total residential question And a you And the market in U.S. resi? for the perspectives on updates year? follow Any the that replacement to on just doing high on which cycle

Chris Kuehn

Well, demand was really here, it's strange - pushed around around. because shoved

everyone good the people generally think quality a into is the as felt different and I a recession and pandemic playbook at playbook bit home. so about went in jobs investing indoor air

through mix you toward saw drive went that only even not replacing so And down systems, us versus but up that. for

I So, think that indefinitely. don't that continues

was in do as and the that into really unique season in moving in we're what build peak season season, think first really an the I cooling quarter it The thing begins traditional year extended we peak well one. quarter to normalize we that probably from the the quarter four, see, beginning certainly is would the in 'XX. in fourth for of would normally quarter next

'XX. in So, I into And 'XX XXXX think to a think the is to way setup will look at we we're we seeing normalized for more an anomaly. look a is best of I would at the 'XX. confidence that But move around speed feel employment of that certainly consumer into be Everything overall growth it's current how of about the the early get that all bit be little into we predicated further people course and again, 'XX - as a into and 'XX. the see economy and and on bit

fourth could and that for into a revenue the in outstanding turn expansion everything to you book forecast really to is business. business turned about And nice were that job turn course didn't quarter. margin we being that an looking Teams demand get Of quarter. in meet done and able we build the

I So, execution normalizes. again, the to but there, it want compliment I think

Julian Mitchell

Very helpful. Thank you.

Operator

Your next with question Vertical Jeff comes Research. Sprague from

is line open. Your

Jeff Sprague

Thank you. Hello everyone.

Chris Kuehn

are doing? you How Jeff. Hi,

Jeff Sprague

great. Doing Thanks.

the of in we're services, some you're Is the for view or growth that's Just with The kind quarter. up you access a on question. think situation run-rate site commercial from seeing that pretty steady in in digit low-single QX? the I that in a your back it said catch

Dave Regnery

is equipment, closures. and a that They've occupied, add really start still are Mike Chris on. we're that Dave, service the I'll a - very outperformed in can all this And our despite of occupied office with lot lot pandemic. and buildings at there's Jeff, of happy businesses buildings But the with not are there's yeah, the globally.

students are that, schools various actually back. have degrees when of We coming

growing equipment So, despite all still business. of our is outperforming it's business and that, our service

Chris Kuehn

[ph], setup a recession. I'd I is headwind, tailwind. to say a great still a service service antidote business based the for think on net IAQ a And the it's say I business. net that availability positive a would was certainly But

Of some very is tough grow there to denied, in And that is it's different to service open, access that as buildings actually see would well. service as buildings deferred course, front. but continue to busy the business, we're a pandemic we'd maintenance expect if be there will on IAQ I deferred

Jeff Sprague

additional a IAQ, on square the I'm footage target. then be thanks for wondering framing maybe of the the And could

of there starting building I XYZ kind what you midsized dollar and it it's anything still here? kind opportunity would of think like project ahead to sounds increase know, there, that around the of your percentage? some And you're some get opportunity we framework So, service midsized means kind mentioned rough just glean early as like by book some Dave, can projects. to Is but you days

Dave Regnery

a continue And Jeff, mean, momentum see that strong tell I we demand back, indoor do customer in the it's when air I just quality to assessment, not and we an one. would number check box. take step a Yeah, you

approach a hundreds take look building. very holistic take to we complete. assessments when at we the these And hours So, of

system, it's a be to make we just item a really end approach, not one you some has customer. changing So, can within bad it out very systems for otherwise, decisions the

Our audits building is way the equipment fall practices, was past we the operating, ways, best ensure designed. it

to filtration on be start the then indoor looking side, whether air side. the quality, opportunities whether You on the fresher be improve that that at exchange

lay customers. out look that's for do at we prove what part our occupancy, temperature do humidity layered approach. to we a we customers also sensors We very for all our levels, would is What the of

they say will building the in then the And tax projects, give get side, we degree, one building assets we'll that that projects. And tell roadmap additional to the if air Mike greater a may capacity. for be, let's we're that the one get as fresh assets they then give day to customer the the on wanted your actually energy be with get as And we roadmap the to It the building is, to operating that to current them And call put the today. earlier When current quality we reduce your you we'll set future. So of do bring exchanges the what talking what need up. could a projects we about they we'll with cooling could roadmap we place. that can the could increase healthy alluded as air day can indoor modest energy on it where future. for on best there's

Chris Kuehn

period it's think what it designed needs the then that why play. need now. do ultimately wanting do, if building that right a would wasn't or do to to be And time something I of Because That's long-term your use over building, changed be system investments made. should for have they those all of need standards adapted. was Those the necessary that are limitations and some to never what be

the that for things solution and of some that bit because we're on moved point the if of phone on advice what's the little point you're here, just happening offer of I that, of problematic And as spaces. of not you're this making you actually seeing just sort opposite worse people a holistic medium. at the The this. of a a of getting is solutions airflow one situation One the there that's have gotten buildings. And filter enough is often just lot do duct really to dense ends and out approach a runs

back air fans change. impact maybe support in, filter changes so you do not actual putting we're going or math that point the hour around to not you're could we and media the And do capacity changes? and maximum How the per in getting some maximizing once How fact and at modeling that, occupants? may the as systems put that we then those have What effect bit measures it the And together, falls those. of to of that the all aerosol use for we So get try kill heavier, it's to back problems create to are can little a well conservation humidity environmental holistically as wouldn't end faster? we for that mitigate all contaminant? the energy an by things

Jeff Sprague

thanks Great, for luck. that color. Best of

Operator

with Your next question Stanley. Josh Morgan comes Pokrzywinski from

Your line open. is

Josh Pokrzywinski

morning good all. Hey,

Chris Kuehn

good morning. Josh, Hey

Josh Pokrzywinski

of opportunity of base square the the throw the the that you these out appreciate size I efficiency some stuff upgrades pretty there IAQ. certainly with Mike, on holistic especially coming is global - the install footage kind large. and are around through energy numbers and that

much and Any you've world, talked dimensionalize system? worse cost a the context just are think parts through I a of equipment us way maybe it the the that for in dollar what in dollar? or lifespan. just Is $X.XX, off of the and like to these in upgrades kind that these purchasing it $X of past, to of about $X.XX, sense things relative is how new give services applied pull

Mike Lamach

spent $X for XX-year that. potential XX a an see of retrofit of Yeah, and range in life to that, around in system, X service a the we'd cycle, it's times applied terms

true. So I to referring think you're that probably Josh. And there, that's what that's

the to to urgency work customers plan the day consistent probably end with the that. plan execute terms to think has to got with the able We've capacity I explained financial something do that do to on in to be of overall and front be plan. someone's

buildings, to the do be landlords inquiring to at also standard day and class. think system at the or look people a in Dave what are beyond, - things them So as to one can happen two day in too, mitigating would or But we some to put things said, I best the have a do, need that best for or There's should standard to have to perform occupants. building healthy and to some lease a particularly tenants to tendency buildings. understanding that made be a does what need you and a going trying from be lot, to at modifications, what degree this about

going into play to so And well. this as that's

term. So, some planning busy doing for think and asset be I customers we'll longer

think as could analogous they just will points. are maintenance matter to couple actual well. in be in of the that a will as that Because system the through design things can probably customers but accelerate but in know overriding built retrofits. of standards are installed a the that. energy impact of It to also design, built it's critical, the I it from XX% and probably things not This the some that standard, yet model drop of that you is Not either modeled have standard. really years drop just to as example, future, in

maintaining You this if and linkages. dampers But you great were. default can outdoor to where you back and filters work you're all do that and around stuff, not air exchanges

I there the you're So because think, well digitally do monitor remotely, at, maintenance the to the will for to be improved there's forward, in to look have stuff much just this going as as look going anomalies systems. to ability so and out

Josh Pokrzywinski

vaccine are be and or about it. to just support to inquiries customers the helpful. the any for And house. what sense needed look Any of It's over like that distribution transportation the Got might making opportunity pivoting side quickly transport that? there the capacity and could

Dave Regnery

is business, that marine, line And just that's vaccines take a back, trailer, Josh, sure distribution, last everyone's we of King complete and rail, are for Thermo whole that. a air, several chain refrigerated, are I'm Dave, whether this the for that step worked. There take mile, aware have being products truck, I'll services is coal containers.

X first are different be as for And now. temperature right requirements depending to unclear which Phase It's have on vaccine they distribution. to the Some market. in will trials

sufficient air, ranges over to which three rewinds really is could The be four the certifications, the capacity see approved we C we opportunities would to trailer One C. it is a a as FAA cold business where in been ESA, an pharmaceutical, XX So, for from in and the equivalent the just deep X have as air all in like land which be like or C we've it's frozen, for whether minus which which spaces. XX is freeze, markets decades, have Europe.

months is see mile. there storage. a few ago, freeze is opportunities big have a we last we And We also deep And cold introduced in product product see a in opportunity some new this that we a that just a hospital about at our refrigerator could the that deep size in you'd really volume times the a is a And in typical solution find there hold. about deep hospital, XX freeze your your capability freezer of home.

And distribution big opportunity it's we solution comes. hopefully, when talking ready government start everyone? to Thermo solution, healthcare talking talking be XPL, going to, we're storage be distribution providers, to a companies, for when vaccines. Who that's we're time pharma going companies, King. that So, And we're the with to to soon distributing we're

Mike Lamach

the our take pharma businesses, that's there, got I mobile with I It's work exactly could team needed. we out got and capacity packed of cold around the chain eventually vaccine map as to things opportunity understanding and to supply solution and move chain the pharma the also or and be will capability And capability. all them affordable if every be be rental our eventually break vaccines through unit, the that every and in their the logistics the and model, company a for and market so the that when here add, can for at how the distribution current capacities you where what example, specifically manufacturing through rental the did people still a CVS U.S. looks to of But Walmart, here they requirements we've the can around points about every inoculated. exactly going through work really XXx proud way like distributed. in how pair with the

selling and able us opposed to product actually that, just sure allowed be We're need that put capacities to to as into product not it required, that make about at that the if that would happening. it a to doing that very observing we're look capacity at conscientious capacities in best be it's may that place. be people look of constraints, selling into being mess real would sort So,

Josh Pokrzywinski

Appreciate it. Thanks Mike. Dave. Thanks,

Operator

next The Tusa comes Steve with from question JPMorgan.

open. is line Your

Steve Tusa

long a the way We're dry Mike. remember if days, morning. Good you RXX from those ship changes

Mike Lamach

Sorry, I'm [ph] Steve. not

Steve Tusa

this perspective stuff about ASHRAE this? kind congrats unlock have - kind gain, into catalyst mean, I from don't thinking to I to of You come the on the of continued I quality a all cetera. as of et together it's just air what opportunity. On think and right to your up execution needs some nothing mean, kind off been share deals now, of busy ESG. standards. catalyzes And this? brings it it election new around trying and of I very of together is get obviously all messaging the to figure how green what Right kind the to fragmented, and of kind kind you fragmented customers, sidelines? think out do around is the mean, you've very sounds got but

Mike Lamach

first, as forward. building think occupants, owners all building science and to going at looking and this. behavioral I it And think tenants space and about comes we consumers behind what just the down

And kind it's demand of or not going coder to to somebody require convene so on standard. that into,

codes non-residential don't whether Although don't creates I or do will and a step looking think not there in to mitigate developed at and what operating buildings would where back it be economies, when particularly happen bulk level our us, initially, the or we're res business at of I immediate you exist look they're standards, to then will quickly is, think exist which that? up what But really to a is become think particularly have the than about, the you standard, stringent Canada. opportunity of business, much in will in if where global those for U.S. our only the happened. you more would perhaps implemented and

more is. about think center. a have get get sophisticated institutional open best critical you university, you know systems, that, building a and They these factory, it at least maybe at standard they be hospital, immediately to owners They're it. research the they to applied whatever going are - to If a

So I don't happen. actually anything think to has

focus would additive anything implementing more that be and faster them course, would that. codes that create could to driving happen, Of on

Steve Tusa

some that fund you your there's for business? will would at that, even of enough the mean, without I like margin the of big move kind think beyond that that something these to investments just So ancillary

Mike Lamach

has the even trillion get you where that non-res like feet think immediately to that's can't starting a square honestly, everybody X.X And for got in response away square our to an again base, solving you about of situations just, of right if business, it get feet space. billions point. this, of installed being Yes, great that's we've in XXs why an industry

first, get something it that do wants people about the to it. go it to going You're and to

function And we're when a qualify be to of so, opportunity going that making to talking in that we're you opportunities, front you've them you. disqualify how selective something. who sure somebody we're should and of much It's talking long as does before readily got about to opportunity

the we're and outcomes people sure us. that going prioritizing it's to we're quickly the making going time course, to to going our drive to which with action for for So spend that want on where health, going it to of drive be and act will taken, is revenues

Steve Tusa

again. Thanks the Congrats color. for Great.

Operator

from comes next Scott Your with Melius question Davis Research.

Scott Davis

Hello.

Mike Lamach

Hey, Scott.

Scott Davis

then there for to in I'm just Have the to But are kind curious now? how morning. collect going a any were units, see equity to companies down I are change financing loans visibility - or things a into people then how when credit the time, and it you side, Good you --once any question channel? back paying real have home I quarter. am they people whether of guys have you this and know, visibility popular, that about think resi were upon in do cards. far was what specialty finance seen

Mike Lamach

savings were X% people part things the I around aren't guess and Yes, XX%versus I savings or the and of but and out obviously rates vacations quarter doing. they sitting think first started doing quarter taking two I three U.S. And with quadruple, the in going we were X% rate.

people So at home at think solid actually more that this feel capacity. around least footing, point pretty values. is the And there increased, they're that home have I values think I also

I the that seeing that rate lines think we're around savings anything, home may We're the primary equity take open, financing. between specifically about higher not So, there. that's be rate hearing

Scott Davis

what and activity general out have as you but as I you I project China looking outlook? mean, local that Okay, visibility And a never far guys, are in strange, the there. for guys thanks. sense. kind figured just time. That on makes saying was answered, non-res know your of it's I and other then it's question things and

Dave Regnery

that in rates think there. business, to back lot the our comes we is take that that four in China, now We're growth that. Dave, a I years happy we're made sales the the this Scott, developed investments with right direct pretty force we when Yes. I'll seeing of ago,

we and to and of you trained we sales If days, literally actually engineers design. and talk remember become had force, went direct out the to a engineers - help basis go have those XXX-XXX to architects

lot in are what China areas a and is we're seeing data well. of obviously, So a we And that weakness activity electronics, backdrop, in centers, we as healthcare. have and those with as that have pharma strength

accomplishments. in and job would Some retail. heard just in But Chris has really excellent say overall, proud done and the team you office and of those and we're spots an our team, the be their China of beginning,

Scott Davis

thank guys. luck. you Good Okay,

Dave Regnery

you. Thank

Operator

next Your Goldman with Sachs. Joe comes from Ritchie question

Your open. line is

Joe Ritchie

morning everyone. Good Thanks.

Mike Lamach

Good morning, Joe.

Joe Ritchie

that curious first now, wondering your 'XX, time my through lot we year. resiliency guys where just to of into contracted headwind service potentially rates a just next look head in expect if business you of business? there's How this, it's be thinking the how obviously, So, in North are question I'd about the any occupancy as buildings. is kind to lower think on you're as America. commercial like at XXXX, whether a particularly I'm - you and

Mike Lamach

be are some there's the or to are bell little back that's question. of relates of retail to space, a think Yeah. that going of space some as restaurants business, in it will to be mean example that obviously, going business. this curve, about an I it's probably out business coming to as and helps bit be people a out And

for and mean mitigate other are get data the going or they they the to centers some the sort the organize warehouse and They're buildings. time of it's investing in that are to a how much mitigate as You office. as I to way in of relate they But and that. can. opportunity people occupants matter absolutely maybe coming people the to have density return middle before that back, in use going a back, pack folks and to preopening to space come businesses

to relates I But Carolina people population don't our our to place, into And can that's science intentions. least next as to just local the said and grabs, a that, And we landlords communicating to bulk until will to what case they protocols as today, North coming the sitting put us but we're of we standard year. so and see in investment tell our as to last week in and comfortable to requiring back up we're people their take you're community. mitigation having early the the the think look we've people up work at in these place coming we're space, like about recently here, and and that and office that tenants in bell are part companies through feel the rates now. back enormous And unless some beyond get have or of do in And saying curve for even not expecting they come gone taking need back.

see us to able between then mitigating some being are and open. get again, not going to subspaces, that the the and There's be to the and activity some services I well providing for providing as so enough are think And there, services. who around for people do people opening, growth as tailwind for

Joe Ritchie

maybe just on That's helpful, Mike. And one my follow question.

resi Focusing growth And a clearly the been just on HVAC second. really bookings good. has U.S. for

any type you bookings there. cooler share you I or constraints you're over I months switch maybe are is, that have of delivering of as - any with and any we guess guess furnace growth think into question seemingly switch to as are - there the kind are supply do kind then on season, experiencing? season? there issues of furnace some You And through, my taking into guys the the

Dave Regnery

seeing is in not We're Dave. Yes, I'll take any that. constraints our supply. This

place. back go in all our and the factories you if put think, right end I we protocols reconfigured to the of March, of safety

front a is We suppliers working to with And were constraints that right in we of provide to they ensure us still also all that place. components, have have in now, our us. no able team that was

Mike Lamach

our a add demand. and this supply make hard And again, out team, people heroic And it that here in typical at manufacturing, just efforts recession a was we great different to able that space respond playbook. residential how work sure a I of happening home. getting thinking the volumes this behaviors to viewing was these just teams, predicted, coming were to about to is set really chain ability we Yes, the Because by respond of our in see lot around some this didn't by their would in organization that not absolutely people to done.

Joe Ritchie

to Good all. you hear. Thank

Operator

with Citigroup. Your next Kaplowitz question comes from Andy

is line Your open.

Andy Kaplowitz

Nice morning, Good quarter. guys.

Dave Regnery

Hi, Andy. Thank you.

Andy Kaplowitz

demand talked for to side, the Getting service commercial see that continue about the IAQ increased as strength you as residential. and the in in you well

While markets into about I here that normalized 'XX respective go expecting channels QX residential? the you in know, the relative low? across confidence inventory give you you talked in and into end in more is relatively XXXX? Does Are as still more generally

Mike Lamach

what half of Inventory we're levels about QX, they needed to coming out of about.

if saw weeks I of you have hand for the sell So been typical. were you that mouth, drove continued. we case demand bit [ph] and six more were really, again say, taking could as a at an it's and June, get, what months, probably August three they And people choices sere they in could incredible And higher us. of it, for sitting would been and were got kind important, it. available. that about industry, might [ph] that if you've it's sere opting to think wasn't certainly was It July, really

think hasn't you XXXX 'XX a December, what it could run build that's crewing changed Usually quite between, And in we I basis January. be the normal. again, call right right from in think have, why there's August, were in it I we season elongated really, demand. is So, lot an into this think normal much. that the action and September, And that not

Andy Kaplowitz

gave mix we as I'm we'll quarter Mike. your at we margin the Thermo that, given higher seasonally Is operating said, the wouldn't why us 'XX, December. and to about margin last can that's that's King and be be of than longer-term any leverage target 'XX, the in But then happen goals than there for in likely thought residential, actually margin improvement that higher know your look adjusted targets target But get Thanks you you sure gross for margin 'XX? XXXX? strong. climate obviously 'XX into, when see at And in some in continue we hopefully reason we or to

Mike Lamach

make entitlement margins overtime. margins tell have. as incremental - a probably all and gross gross of shorter And, at margin, that XX% Yes, like against sitting to of course, that that to that expectation. course an business is an margins innovate to set we always Andy, upfront. us the I I and people we we're to it's to want XX%, And in sure giving to good wouldn't, raise think of points, XX% continue the are really problem XX opportunity that invest

it's the outsized So, in run, material that's quarter. about But way to of happen. the think long a is it, in don't drive room investment not us great I a that's 'XX. would it it we good lot thing that headman ideas beyond. try versus out. around and leverage best breakage close to inflation we're way the to something leaving which can that going and in just happens and shape that have some price for pan up Occasionally, in We're gross had And quarter thinking to productivity margins, creating about you particular and 'XX into a quarter three, three excellent for

'XX. have the 'XX, that into we associates of increase we into would pushed salary brought have that out delays in schedule. normally salary like back would normal And we in increases, given in increases salary, the All they happen, under of hourly terms

back investment increases. get seeing So, salary here is what you're a

had unlikely at companies many historically. the that back, doing. probably about travel, how do levels doing really are be And but in so some those will entertainment things I be is of much as 'XX, right entertainment come how a probably now, get to win how would an they lot we're or the we tailwind levels example. are as travel business need only much were And never that, and rethinking we think sort of to frankly, much Certainly

not leverage setting up in we're really 'XX. a tough the So, in situation which is at reverse, coming

think good about. of kind is I So, middle and say, to right XX in a number the

Andy Kaplowitz

helpful. Very Mike. Thanks,

Operator

Obin Andrew Your Bank comes next question with from of America Merrill Lynch.

line open. Your is

Andrew Obin

Hi, good morning.

Mike Lamach

Hey, Andy.

Andrew Obin

the they're How question. in your has from thinking to consolidation And do a industry? changed setup should Just you of HVAC COVID term think a rethinking as sort about the strategic longer what be standpoint? a

Chris Kuehn

and that. change XXXX should want that. buyer, an that. sellers changed it's EBITDA looking forward looking course, a we're companies, something thinking doesn't happen. has that we mean, at the around that acquire process pandemic. technologies really think a my between like nothing be dislocate are that about COVID in that to or It's but to we're if M&A we some doing that. from to of mean, on bolt-ons, obviously, going it's that think use Conversely is changes the could can around Yes, impact have things as and future need and going understand the helpful on that earnings I you've the we're really of long-term I Broader valuable things got that the come doesn't view structural toward thought to cash flows I question,

seller You not - that's bit little that remote due now, structurally of EBITDA again, and future course the to is is you way diligence those tougher, go because look back and and best divergence, do at then got got a to breakout due so But most cash diligence. expectations of flows. and

So, other than or that, it transformational doesn't really M&A the view change toward long-term M&A.

Andrew Obin

normal you And next about offices actually activity of follow Have into ability are their specific fund and question the even then the your specifically What verticals, or thinking like up conversations? to year? those had fund sort sort and with just key about of customers upgrades conversations a institutional.

Dave Regnery

then here's make them approach our And work one to improve we audits. say, But we day with it Yes, our really going healthy customer. we And to depends layered be building forward. Dave. have in right whole can the opportunity Andy, to options - obviously, this we your is really as give on that's customers this developed it what And now. your

And some to we to to the standpoint. we what's indoor get building quality exchange exchanges, wanted that additional was put an a from that And that was this you level air dramatically would a with improve the other is their this out example, give customer worked capacity designed, level, day Unfortunately, we I'll it let's cooling makes what way happen. XX make fresh sense had real that have air customer today. of that to is which

PL a we're customer XXXX, of example ready. Let's that in live summer base. deliver That's your so a with the put what for is before months We'll in building cooling finding capacity. system additional our the

Dave Regnery

Thank you.

Operator

from comes Credit question Walsh next Your with John Suisse.

open. Your line is

John Walsh

for me it. morning Appreciate you squeezing everyone. to thank in good Hi, here. And

Dave Regnery

John. morning, Good

John Walsh

don't put looking opportunity. for XX to dollar right on just guess public TAM, disclosures entire two it, education, on Liberty but that trying up We number really does Are the X at quick billion I actually you there. we a We with a for stab to quality in indoor some as to took at billion size you're north that scaling it you? want we came ones. sound to took of appreciate the number are the up I ballpark, today? that air a out right

Mike Lamach

tell of I'll the got square the non-residential talking first something space. you been right. X.X space billions, is feet to XXX and John. of about thing indoor trillion The answer Yes, worth in billion we've do

just the going to long-term way think of in layered that forward about going think So capacity a And I some different and these mitigating solutions tailwind my and this in don't a space out. - go it's offering somebody holistic does based you're of matter economic play forward. is improve to on very and it's probably initiatives, a to notion on how approach a undertake of

We the still growth here with customers. not know, experienced timing. In market more probably through rate is very long to be this that go the How a view, growth our don't to size my be the of for it's rate? embedded in big it's be need get So time. the question. going that would we we as would It

John Walsh

customer. And talking a Great. we question it's you're get, to actually the and

get of slows to love your announcement, investment get this But, actually vaccine think we'd any you eventually we down? perspective. once So that do a

Mike Lamach

around vaccine peace And around frankly, mean, future it virus, fact because great. for quality, I the indoor air the three of for the the surety I do And have changes. there's is people pandemics, don't can't, virus. any I this I think mind vaccine think, reality that want to

the I about people think it's going But that think think really helps I how change benefit. think to economy. preparation. has I it open And positive don't

both the Rico a those things, we've which from perspective, something but Just from people wellness our really, we with and a and think from hurricanes continuity business like have A continuity used we aftermath hitting of things, and the overall is are we so we that how about Puerto to lot Gulf of and for generally, prepared and those about health for health pandemic, a how business welfare planned dealing perspective. the had a for learned perspective, prepared pandemic.

to those health space. relate So customers the are to going to pandemics and after managing their change for going are playbooks playbooks all these for our of

Dave Regnery

A open, restaurant fact, economy transmission to that put crisis. we one factored have they these the in done all we've rates in that's are clearly next healthier able into all lower, because factors, stay mitigating because where

John Walsh

sense. Thank makes Appreciate a that of lot No. you. it.

Operator

Nagle, turn the remarks. Q&A over back closing I will call Zac call. today's of This for now to concludes the portion

Zac Nagle

and Investor transformation on available the as a I great mark and today we more day. Briefing, always that our Thank will and on XX morning. dive And calendars for call with Thank will Good coming to days you follow. Trane everyone joining the for XX have obviously do you Shane your over a please deeper be December weeks. and for for Technologies will details today. be questions again, and then,

Operator

this concludes you call. Ladies and Thank gentlemen, joining. for today's conference

now disconnect. You may