Trane Technologies plc Morgan Stanley's 14th Annual Laguna Conference

Well, first of all, thanks, everyone, for coming today. Thanks for your interest in Trane Technologies. It is a great time to buy. Double down anytime. I do not know what the news was today, but it is a great time to buy. Look, I always tell everyone that Trane Technologies is a great company for several different reasons, right? It is not one, it is many. One of those reasons is the fact that our service business is so strong. Toby, as you said, it is a third of the company. It has had a double-digit growth rate since 2020. That includes COVID year. Just think about the durability and the resiliency of this business. I would also tell you that it does not happen by accident, right? We invest heavily in our service business, whether it is how we train our technicians.

We have about 7,500 technicians, all Trane Technologies employees, so all trained by Trane Technologies. It is how we recruit our technicians. It is the apprenticeship programs that we have, that we are constantly looking to attract and build new talent in that space. It is pretty obvious our service business is built around our applied business. Our backlog, which is at record levels of $12.1 billion, is over 90% applied. As your installed base grows, the tether to your service business is going to continue to expand. We do not forecast what the growth rate is going to be in the future, but look, we have demonstrated for a long period of time that this is a very, very sustainable and competitive advantage that we have as Trane Technologies. So expect more in the future.

We have said that applied systems and our conventional verticals or our core verticals typically carry about 8-10 times the original price over the life of that asset. That number is probably a bit different in data centers for a variety of reasons. Look, how the chiller is actually being used is different in a data center than what you would see in a core vertical. The renewal process or how you retrofit that will probably be different. We do not believe it is going to be 8-10. We think it is going to be a little bit lower, but at the end of the day, if you look at all of the chillers that we are installing in data centers, which is a lot, this is going to be great upside for the future.

We love being connected to assets. In the past, we have been connected to assets and buildings for a long time now, for decades. Today we have over 70,000 buildings connected. We probably have 2-3 million assets Over three, yeah.

connected. BrainBox has done is, in the past, we would always think of things like think of it as machine learning. We were connected, but it was always about how do you make sure the asset or the building is performing the way it was designed? With BrainBox, we now can take unstructured data and add that to the equation. Now all of a sudden you have buildings that are performing not only the way they were designed, but also how they're being used. That's a difference. We're able to get 15%-20% savings by putting algorithms or agentic algorithms in place in buildings. If you think about it, and most people don't know this, but buildings waste about 30% of the energy that they pay for. 30%. That's a very conservative number.

What we can do is we have the technology today with BrainBox and our portfolio of products to not only eliminate that 30%, but actually drive it negative. Think about the savings that we're able to drive for our customers in the buildings. If you think the cost of energy is going to be less in the future, I don't think that's the case. I think it's going to continue to improve, and I think our paybacks to customers is going to continue to increase. Our strategy is, think of it as we think buildings are going to get smarter, more resilient in the future. What that means, smarter, they're going to start using more sophisticated controls, using structured and unstructured data to ensure that they operate at the most efficient level. Resilient, they're going to start using different sources of power at different times.

For example, you may use electricity, you may use fossil fuel, or you may use storage. Our controls will know what to do at what time to optimize the return for our customer. We had our chief digital officer, we were running a pilot in Minneapolis. In February, he came in and he was like, "Dave, let me show you the pilot." He was all excited. I said, "This is great." I'm looking at the screen and I'm like, "What the heck are we running the heat pump for?" Which is electric, and it's minus 5 degrees Fahrenheit in Minnesota. It was 5:00 A.M. Minnesota time when I was looking at this. He quickly pointed to the bottom of the screen and he said, "Well, the cost of a kilowatt is $0.02." That's why we're doing that.

Think of it as almost free. Think about that at scale, and that's what we're talking about, what we're doing right now. It's really, really exciting. I know everyone wants to talk about data centers. We're very strong in data centers. We're going to continue to be very strong in data centers in the future. Smart, resilient buildings is as big or a bigger opportunity in the future.

Look, I think the pipeline of activity that we're seeing right now in our business is probably the most I've seen in my career in this industry, and I've been in it a long time. We're going to continue to accelerate our growth rates, and I can tell you our pipeline are very, very strong. In the second quarter, we had order growth in the commercial HVAC Americas business of 50%, and we track 14 different verticals in a lot of detail. I would tell you, the majority of those verticals had growth of over 20%. Look, we see a lot of demand not only today, but well into the future. The breadth of our portfolio, our service business, the way we go to market with the direct sales force, those are all things that make Trane Technologies a great company.