All right. Good morning, everybody. Thanks for joining us again here. Next up, fireside chat for the conference will be Trane. We have Chairman and CEO Dave Regnery and Chris Kuehn, EVP and CFO. Guys, thanks for joining us. Pleasure to see you as always, and welcome back in person. Just a reminder for folks in the room and on the web. Like California, so, but it's always nice. Your team does a great job, so congratulations to you, and thanks for hosting us. At Trane Technologies, our purpose is to challenge what's possible and to innovate for a sustainable world. It's fundamental to our strategy, and it allows us to drive differentiated returns for our shareholders over time. The mega trends around decarbonization and sustainability continue to increase. Unfortunately, the rate of global warming continues to accelerate. As a world, we need to act, and we need to act now if we're gonna bend the curve on global warming. At Trane Technologies, we are scaling technologies that exist today that can dramatically reduce the carbon footprint for the built environment. We're also relentlessly innovating for future technologies to continue to improve on that. We had a very strong second quarter. Our order rates were up 7%, and that's on top of a very difficult comparison to prior year, where our order rates were up 30%. On a two-year stack in the second quarter, our order rates were up 37%. Our revenue was strong, up 11%. Our book- to- bill was 111%. Like the broader industry, we continue to have challenges with supply chain. We see the supply chain challenges are improving slower than we would like, but they're improving. We're much better than we were three months ago. We're much better than we were six months ago and nine months ago. That gradual improvement will continue in the future. With a backlog of $6.5 billion at the end of the second quarter, which is close to double what would be normal, we are well positioned to drive value in 2022 and beyond. With that, Josh, glad to take your questions. Excellent. Thanks for that overview. Maybe to sort of zoom in first before we talk about some of the longer term stuff. I mean, the last, you know, six months have been pretty choppy out there in the macro, and certainly Russia-Ukraine has done nothing to soften that. I think on one hand, like most industrial companies seem to, you know, be seeing a good amount of underlying demand strength, but you have had a lot of this macro chop. Is that showing up in the business at all? Even if it's kinda below materiality, like are you seeing, you know, kind of a change in maybe some of the real economy versus some of the longer term mega trends? Yeah. I mean, specifically in Europe, I think you could argue that the markets are flat there. Our business is up. Our order rates in the second quarter and our commercial HVAC business were up mid-teens. I think everyone in Europe is understanding how dependent they are on fossil fuel coming from a country that may not be very friendly. We've developed solutions where you don't need fossil fuel for heating in the built environment. I mean, our thermal management systems allow us to eliminate fossil fuel for buildings, regardless of the climate that you live in. These are very sophisticated systems. It's more than just a heat pump. It's a very sophisticated system that is highly controlled. This is a tailwind for us as to what's happening in the built environment, specifically in Europe. You know, we have technologies that exist, thermal management is one of them, that can dramatically reduce the carbon footprint. It's about the education and the economics. Well, the education is really increasing as to what's possible, specifically in Europe. We see it as a tailwind for us, Josh. If I had to think about, you know, kinda Trane as a whole, there's sort of these, you know, TAM on TAM on TAM kind of discussions where you have stuff like what's going on in Europe where there's a big electrification opportunity or energy efficiency of kinda broader building modernization. I mean, have you guys given, you know, some thought about what this does to your addressable market? 'Cause a lot of things seem like they changed overnight, and I think those are generally positive things for your business. But, you know, any sense for what that's worth? Yeah. I mean, it's difficult to size, especially with a lot of the policy that's been instituted lately. I mean, there's tailwind after tailwind after tailwind that's adding to the economics of our business. We see those continuing in the future. You know, the decarbonization of the built environment it's happening, but we need to make it happen at a faster rate. We have solutions today that can make that happen. 15% of all global or all greenhouse gas emissions comes from heating and cooling of buildings and homes, and we could dramatically reduce that carbon footprint. That's a tailwind that's happening. How you size it, I mean, it's difficult. We've said that in Europe, we thought it was a billion-dollar opportunity. We may be underestimating what that opportunity is. We do know that as you implement these thermal management systems, the need to leverage your service business is no longer just when it's very hot outside. It's also when it's very cold outside, so you can leverage the assets that exist in your service business. I think sort of a similar story in the U.S. with some of this infrastructure and school modernization and indoor air quality that, you know, now that no one's wearing masks and sort of like all sitting in the same room, maybe we don't think about indoor air quality quite as much anymore. Like, your customers probably still are very much. Like, has that played out or is starting to play out as you would have hoped, you know, call it a year or two ago? Maybe been a little bit quieter since then. Yeah, I think you read less about it in the media, but I would tell you that our customer base still asks a lot about indoor air quality. It used to be concentrated really in the healthcare vertical, but I would tell you that's across all verticals now, where customers are asking, "What about the indoor environment where my employees have to come to work? How can I improve it?" You're not reading as much about it. I would tell you that it's still going to be a tailwind for our business for the foreseeable future. Everyone now is very educated as to what it means to have a clean, fresh environment to work in, a healthy environment to work in. Yeah, Josh, I think, on the indoor air quality, you think about last year, it was easier to separate those revenues, and that's why we called it out, contributing to 2% of revenue growth last year. Over time, it just became embedded as part of a system. It is contributing to the 40% global commercial HVAC bookings growth we saw in the second quarter and 45% growth in the Americas. Got it. That's helpful. Maybe the last piece of kind of the fiscal discussion that is more recent is on Inflation Reduction Act. Resi seemed to get a lot of support in that. I mean, seems like the government kind of wants to buy everybody a heat pump. How do you guys see it? Like, I sort of came up with kind of the simple math of, you know, everyone who's buying straight cooling in a lot of cases gets sort of at least the difference to a heat pump covered or mostly covered, which might get you a double-digit benefit when it's all kinda annualized. Like, is there a lot of nuance in there that would detract from that? Or, like, how do you guys see it? Yeah, we see it as a tailwind. Again, it's one of those we're working through the detail of the IRA, and it's quite a lengthy document. I think there's some pieces of it that are very clear on the tax side. I think the rebate is a, we'll see how that plays out because it's gonna be orchestrated by the states. But at the end of the day, it's gonna be a tailwind. Josh, you hit it. It's gonna promote more sustainable products for our homes and on the commercial space as well. It's going to be good for the environment, and we do see it as a tailwind long term for the business. Is that something that from a capacity or supply chain perspective, you guys are able to move the needle on? 'Cause on one hand, no one can really get as much of anything as they want out the door. If this is, you know, kind of that big shift in entire industry mix overnight, like, can the manufacturing base handle that, or is this stuff a little bit more fungible? We're not concerned about the capacity of our heat pumps, so I think we're okay there. We have added capacity in our res space about a year and a half ago because we had a weather event, and we reconstructed the facility there, and we've actually added about 30% capacity. That's not a concern of ours. On the commercial space, again, it's not. We're not concerned about capacity. Got it. Maybe just sort of the next regulatory tailwind. Seems like a good industry if I'm only talking about regulatory tailwinds last. I was explaining this earlier today. They were asking me about all the different, you know, policies that have come out over the last three or four years. I was explaining it's like, you know, if you're in a hallway and you put a fan in the hallway and you start to feel the breeze. Well, if you put two fans, you feel more. If you had three, four, five, you could see the stacking effect that's happening here with these policies. These are tailwinds that are becoming very strong for our business. If you think about, you know, what we have to do as a world to really bend the curve on global warming, these are all good events, okay? It's a tailwind to our business, a tailwind to the industry, but it's really good for the climate as well. How should we think about kind of the next catalyst on SEER change? Seems like the industry has kind of signed up for this 10%-15% type benefit. Seems like the last time we've gone through these things, the benefits were smaller, but every kind of iteration is a little different. I think maybe regulators get a little smarter over time as to how to thread the needle on that. What are you guys watching as we kind of approach that transition date that would give you maybe, you know, some more insight into what that gap could look like? Yeah. I think the SEER change that's happening in the residential business, first off, we don't see a big pre-buy just because of the way it's being rolled out, where you have heat pumps on a national level, you have AC manufacture date versus an install date. It's a little bit different than it's been rolled out in the past. If you think about the industry today, about 70% of the industry is at the minimum SEER. If you think about the SEER change, it will add between 10%-15% to the price of those products. Now understand this would probably be margin neutral because it costs more. A wrong answer would be take 70% of the residential business and multiply it by 0.10%. This is an affected product. In that 70%, you have, like, furnaces and peripherals, et cetera. Think about it as maybe 30%-40% of the business would actually be impacted by the SEER change from a price standpoint. Got it. Just with all the compounding price that's gone in between regulatory actions and, you know, capturing, recapturing inflation, is demand destruction something that you guys are watching or concerned about? I mean, clearly, the industry is very healthy now, but as someone who has purchased a couple HVAC systems over the last few years, it has gotten less fun over time. Could I ask the next question on that? Which brand? We represent a few brands. I do have one drink. All right. We haven't seen any demand destruction at this point, and you could see that with our order rates. I mean, second quarter, two-year stack up 37%. Our residential business had an exceptional second quarter. You know, revenue was up 30% in the second quarter. Incoming order rates were down slightly, but our book-to-bill was 101. We built backlog despite having revenue growth to 30%, so we're not seeing any disruption. Got it. We're sort of heading into a part of the season where, not just in resi HVAC, but really across the board, folks are probably thinking about how much inventory do they wanna carry into the off-season. I think free cash conversion has probably been well across anyone that is making products this year. There's just more working capital than usual. Are we sort of in the point in time when folks are gonna start to scrutinize that a little bit more and just think about how do I get more cash between now and year-end? Or is this something where, like, there's not much they can do 'cause serving their customers is required? We watch inventory, obviously, in the dealer part of the business, which is about half of our residential business, and we have not seen any extraordinary behavior occur. In fact, the inventory levels are where we would expect them to be right now. Got it. That's helpful. Maybe just switching over to commercial HVAC and kind of the broader market. I mean, for folks who have covered this industry long enough, I remember when, like, the census non-resi data or, like, ABI, like, really moved people's opinions around and moved the fundamentals around as well. Now it seems like we've gotten to this point where enough of the industry is either secular or has regulatory tailwinds where, like, new construction doesn't matter anymore. I mean, if you had to think about what sorta tipped the scales there, was it we hit some sort of threshold on regulatory support? We hit some sort of technology threshold where the paybacks got much shorter? Like, you sort of authored that. You were, you know, running the commercial business at, you know, parts of that before becoming CEO. Like, how do you think, you know, this evolved in the marketplace? Yeah. Well, I do think that new construction is still an important part of the business, okay? ABI is still a great macro, longer-term macro, number to look at. By the way, ABI has been positive above 50 now for I think it's 19 months in a row, and that's a six to nine-month tail, so assume that's gonna continue to be a strong business into the future. It's a great question. Obviously, the retrofit market is always gonna be larger than the new construction just because of the installed base. Yeah, there's been dramatic changes over the last seven to 10 years in the industry. There's been refrigerant changes. There's been efficiency changes. There's been ways to upgrade your product now with drives and controls that have all added to the economics to make the paybacks so much less than they were in the past. People also realize that we need to take action to start having more efficient buildings. I think all that together has added to the growth in the, you know, the built environment. We still pay a lot of attention to the new construction and what's happening there, and right now they both are very strong. On the retrofit side, I mean, is there a way to sort of quantify that improvement in paybacks over time? It's difficult just because you have so many paybacks that have occurred. I would tell you that you could get paybacks. If you were to switch out a system now and go from a conventional system that would have a separate boiler and a separate chiller and use a thermal management system which would combine that, depending on where you are in the world, you could have paybacks that are less than three years, and in some cases less than two years. That's a very compelling proposition. The useful life of this stuff is, like, 40 years, right? Yeah, 30 to 40 years. I mean, these are very sophisticated systems, but it's very compelling, especially when you could eliminate the need for the fossil fuel. When you think about what's happening in Europe, we talked about, but this is a global phenomenon where people understand that there's a more efficient way to do heating and cooling today than there was seven to 10 years ago. If I had to think about how do you price for that or how do you go to market for that, I mean, people talk a lot about price cost, and that ends up becoming, like, more of a substitute for a steel and copper discussion. But I'm thinking more about, like, pricing for value. I mean, on one hand, I think the applied equipment market is sort of on the lower end of the margin profile in the business. But on the other hand, like, the technology seems pretty high, and you have that rich aftermarket that comes down the road. That's right. How do you think about pricing given that, like, the value proposition is improving? We're always gonna price for value, right? So if we're adding innovation that's adding value, we're always gonna price for that. I think, you know, if you think about our commercial HVAC business, we'll use the Americas as an example. 50% of that business is services. 50% of that business is equipment. If you think about the equipment, you'd say 50% of that is unitary, 50% is applied, right? You think about 25% of your business is driving this other 50% over here, which is your service business, which has very nice margins. The applied structural margins are a bit lower than the unitary, but the tail, as you said, Josh, these things can last, you know, 20 to 30 years in some cases, and the service required on those is a long tail. It's a great business. It's a business that feeds itself because you're constantly with our direct sales force and our direct technicians in facilities every day, we're always helping our customers look for opportunities as to how they can improve their operations. The global service business has grown high single-digit over the last five years, Josh, and that includes 2020 when it was flat in a pandemic year when you couldn't get technicians into a building, right? Just given concerns around passing on COVID and otherwise. Think about that high single-digits compound annual growth rate over the last five years. How do you staff that? It's so important to the business and, you know, clearly there's broad labor shortages, but, you know, these aren't fast food workers. Like, these guys are educated and, you know, not just turning a wrench either. Is that a limiting factor for growth? I mean, I think you've seen some of your competitors get caught up a little bit in some of their field exposure. You guys seem to have kind of managed through that. What about Trane's business or the way that you kind of staff that, you know, has allowed you to move around it better? Yeah. I mean, we wanna be a destination location for our employees. We want employees to come work for Trane. A lot of that has to do with the culture that we have at Trane Technologies. In our service business specifically, we're always looking for great technicians. I would tell you, we have done a lot of work on building apprenticeship programs and really helping our service technicians advance. The training that we provide them. These are all company employees. We don't outsource our service. We train them. We train them on the innovative products that we're putting in the marketplace, so they can be intelligent in front of their customers. I mean, it's a system of things that makes us a great company. Our service is part of it, but within our service, again, the standard work that occurs there in our operating systems allows us to be a great service company. Is there within that, I guess, like a requirement that you guys kind of draw the line somewhere in terms of what you're willing to do in the commercial HVAC environment? Like, are there? Yeah, do you not do new installs? Are there types of service that you just say that's too low end? Our service business has really built around our applied systems, and we'll still service unitary, especially if it's for a customer that has dual equipment on them, but we tend to lead with the applied systems. Got it. Switching over to the other side of pricing and going to steel and copper, you guys have done pretty well on price cost throughout, including when inflation was, you know, a little bit more demanding late last year. How should we think about sort of the pockets of deflation that could show up in the business over the next, you know, kind of few quarters, just based on where we're at for spot today? Yeah. I mean, 2022, much more inflationary than 2021, but we got out in front of that inflation, to your point, Josh, you know, really with the first quarter of 2021. We've had six quarters straight of price cost positive on a dollar basis. This year, we're certainly seeing the negative impacts on a margin basis. It's one of the most resilient part of our business operating system, and what I would maybe describe as one of our most improved parts of the business operating system. If you go back five years and you think about the last inflationary cycle around commodities, we were behind on price cost for about five quarters. For us to get out in front of it from the very beginning has been great. We're seeing those curves too, and ultimately, where things may be, we hope are trending here in some deflationary models. We continue to hedge our commodities. Think about copper and aluminum being 70%-75% hedged one quarter out, 60%, 50%, 40% hedged as you go the second, third, and fourth quarter out. We continue on that process. We smooth on the upside, and we're gonna smooth on the downside if there's deflation. Steel is about a 6-month lag from when we buy to when we ultimately see that come through the P&L. I would say that's probably more of an opportunity if commodities retreat, probably more of an opportunity in 2023 than 2022 right now, given that hedging strategy and where we're locked for the second half of the year. I would just add that there's still a lot of inflation out there. I know everyone will talk about the commodity side, but there's still a lot of inflation. I think all of us saw that yesterday with the latest news. Labor's gonna be under a lot of pressure next year. Is that something that's gonna require you to go out with more price even as you see, say, something like metals come in? We'll roll it up for 2023 here in the next couple of months. So far this year, we've had, across our businesses, on average, two price increases. We had 3+ price increases a year ago. I don't think the rate of price increases will be, hopefully the same as what we've seen the last 18 months. We're gonna factor that in, right? As we think about our service technicians and a fully burdened rate, we're gonna factor all of that in as we think about pricing for next year. That's really the power of our operating system with our product management teams. They know the inputs. They're able to look around the next corner, and they really are able to dial in when we need to take a price increase. Shifting gears just a bit, to something I know was kind of a big focus for your predecessor, and I think we talked about it on this very stage several years ago, the retrofit opportunity in China on commercial property markets there, you know, kind of taking a little bit of a hit or, you know, not as strong. How have you guys been able to sort of position around that? I mean, clearly not as focused on, like, new property, but, you know, any kind of slowdown I would imagine has knock-on effects. How's that kind of laid in for Trane? Well, I mean, we had a very strong second quarter. We've been strong in China for a number of years. I think it's there are a couple things that are playing in our favor. One is the verticals that we play in remain strong in China. You think about electronics, data centers, healthcare, we're very strong. About six or seven years ago, we invested in a direct sales force, and that continues to pay dividends, right? We're able to talk to architects, engineers, and be able to explain to them the value of the Trane system. That continues to pay benefits today. On the resi space, we don't really we don't play at all in China. Very, very little. That's not a market, and that's the market that's really been down quite significantly. Are there areas that you don't play in that have gotten more attractive? Now, I don't mean to say, like, do you wanna get into China resi? Like, the market has moved fast. You guys are pretty holistic already, but are there product gaps that could use filling in? We like our portfolio, and it makes us a great company with the broadest, you could argue, the broadest portfolio in the industry. If you take that with a great channel and a great service organization, you end up with a great company, and that's what we have at Trane Technologies. Another part of that breadth that's maybe not quite as HVAC, but Thermo King, where I think cyclicality of that business probably gets more attention than is really necessary. What's your, you know, what's your view on that today? You know, is there, you know, kind of a fresh regulatory tailwind with, you know, some of this push toward electrification in that market as well? It's a great business, Thermo King. I had the opportunity early in my career to run it, so I could speak from the heart. It's a fantastic business. The need to transport perishables continues to increase. The amount of food waste that we see in the world is a bad story. I mean, think about it, 10% of greenhouse gas comes from food waste. Why do we have food waste? Because the way it's being transported, the majority of it. There's a big opportunity there. As far as innovations in that space, electrification is happening, okay? It's starting small, but it's getting big. We're obviously working to electrify the entire portfolio. You'll need some infrastructure to help be a tailwind there, especially if you get into the long-haul space. These would be trucks that are traveling across the country. We have products today that we've already introduced into the marketplace that are serving some of those niches. Do you expect to still kind of throttle back the order book and open up that, you know, kind of piecemeal, you know, just based on the, like, inflation supply chain? We wanna make sure we get it right, the pricing. As we said in our second call, second earnings call, that we'll open up the order book in the third quarter for the, you know, the beginning of 2023. Think of it as that dialogue's happening with customers all the time. We're getting good insight on the slots that they ultimately want to place the order with. It's just that we haven't combined it with the price. What we said is for 2023, we'll start opening up that order book here selectively really in the third quarter. Got it. If, you know, just kind of to summarize some of what you said, Dave, like you have, you know, just kind of multifaceted long-term tailwind across multiple businesses, like what do you do with the cash then? Yeah, well, I mean. You want me to start? It's actually one of the most fun parts of the job, right? It's a good problem to have. We've committed to deploy all the excess cash over the long term. We had $1.1 billion of cash at the end of June, so we continue to deploy the cash. Guidance for the year is around $2.5 billion of deployment, $600 million of that to dividends, and the balance of $1.9 billion to M&A and share repurchase. We completed one acquisition earlier in the year in the Americas in the channel space, commercial HVAC, channel acquisition. We've had a few of those over the last few years. We just announced in Europe a small material acquisition in the air handling space. We'll continue to really throttle between M&A and share repurchase. Number one, we're investing in the business. That's what's been driving our market outgrowth and the result of the order bookings we're seeing today and over the last 18 months, two years, is really from the innovation we've been driving the investments over that time. Grow the dividend is second priority, and then after that, let's throttle between M&A and share repurchase. We have a lot of firepower in terms of our repurchase program, almost $4 billion under the program that we can buy back. It's a fun problem to have in terms of what we're gonna do with the cash. We have a lot of options. Excellent. We're gonna be disciplined with the M&A activity, right? We have a great portfolio of products. We really don't need to do anything. We have a great service business. We have a great controls business. We have a great channel to markets on a global basis. We're gonna be disciplined as to which technologies we invest in. Excellent. I see we're coming up on time, so I appreciate you guys making the time, joining us in person, back at it again. Yeah, thanks for coming. Thanks, Josh. Thanks, everyone. You're welcome.