Trane Technologies (TT) Morgan Stanley's 14th Annual Laguna Conference summary

Service business performance and strategy

• Service business represents about a third of revenues and has achieved double-digit growth since 2020, demonstrating durability and resilience.

• Investments in technician training, recruitment, and apprenticeship programs support service growth and sustainability.

• Backlog is at a record $12.1 billion, over 90% of which is applied, expanding the installed base and service tether.

• Digital investments, such as BrainBox, enable 15%-20% energy savings and smarter, more resilient buildings.

• Direct sales force and local expertise provide a competitive advantage, enabling tailored customer solutions and capturing incentives.

Data center and vertical market opportunities

• Data centers are a strong growth driver, though service revenue tail is slightly lower than core verticals.

• Reference designs for data centers consistently include chillers, with innovation focused on smarter, more efficient systems.

• Partnerships with Eaton and others enable holistic solutions for hyperscalers and chip vendors, leveraging system expertise.

• Innovations in thermal management and heat recovery are being deployed in data centers and other verticals.

• Over 95% of the sales force focuses on verticals beyond data centers, including higher education, office, K–12, and government.

Growth, margin, and capital allocation

• Commercial HVAC Americas saw 50% order growth in Q2, with most verticals growing over 20%.

• Service business margin premium supports a 25%+ incremental margin outlook, with ongoing investments in product and efficiency.

• Long-term focus on top quartile growth and free cash flow conversion, averaging over 100% for six years.

• Strategic acquisitions like Stellar and LiquidStack enhance modular and emerging cooling technology offerings.

• Capital allocation prioritizes business investment, innovation, dividend growth (12% raise this year), and opportunistic M&A or share repurchases.