China Sales Weakness
Q: Why did China sales decline this quarter?
A: China revenues declined due to tightened credit policies requiring down and progress payments before accepting orders or shipping products. This prudent decision impacted short-term sales but is expected to benefit long-term performance. Management confirmed no material write-downs or increased reserves have been necessary. - , - , - , - , - , -

2025 Outlook and Operating Leverage
Q: What is the expected operating leverage for 2025?
A: Management targets operating leverage of 25% or better for 2025, aiming for top quartile financial performance with strong top-line growth, margins, and cash conversion. They anticipate tailwinds from commercial HVAC strength and improving transport markets, while continuing to invest in the business. - , -

Residential HVAC Market and A2L Transition
Q: How is the residential HVAC market performing and impact of A2L transition?
A: The residential HVAC business is operating at full capacity with strong demand, aided by a hot summer and normalized channel inventory. Management expects the A2L refrigerant transition to have minimal prebuy impact, anticipating about 75-80% of 2025 residential sales to be with the new refrigerants, with pricing up in the high single-digit range to remain margin neutral. - , - , -

Data Centers' Importance
Q: How significant are data centers to growth?
A: Data centers have been a strong vertical for decades, projected to grow at mid-teens rates. Trane Technologies expects to continue its strength in this complex, high-growth area, contributing significantly to bookings and overall business performance. - , - , -

Services Business Growth
Q: What's driving growth in the services business?
A: The services business, comprising one-third of the company, continues to grow at high single digits over the past seven years. Growth is fueled by increased installed base, especially from applied products, and investments in capacity, digital connected solutions, and sales and service teams. Service margins are higher than average, contributing positively to overall profitability. -

Other Verticals and Mega Projects
Q: How are other verticals like office and mega projects performing?
A: The office vertical showed strong orders, with year-to-date increases, driven by Class A buildings and efforts to help customers attract tenants. Mega projects in sectors like semiconductors and EV batteries are dynamic, with some delays or cancellations but overall continued activity and success in winning projects. - , - , -

Policy Impacts on Business
Q: What is the impact of policies like ESSER, CHIPS, IRA?
A: While policy tailwinds like ESSER funding have contributed to backlog, especially in education, Trane Technologies emphasizes that their solutions offer attractive paybacks regardless of policy incentives, supporting long-term growth independent of government programs. -

Liquid Cooling Investment
Q: What's the update on the liquid cooling investment in Liquid Stack?
A: The company continues to work with Liquid Stack, with activity starting to pick up. However, no significant orders have been announced, and they are still working through certain hurdles. -