Good morning, and welcome to the Trane Technologies Q3 2023 earnings conference call. My name is Cheryl, 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. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Please limit yourself to one question and one follow-up. I will now turn the call over to Zac Nagle, Vice President of Investor Relations. Thanks, operator. Good morning, and thank you for joining us for Trane Technologies' third quarter 2023 earnings conference call. This call is being webcast on our website at tranetechnologies.com, where you'll find the accompanying presentation. We are also recording and archiving this call on our website. Please go to slide 2. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Please see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from anticipated results. This presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release. Joining me on today's call are Dave Regnery, Chair and CEO, and Chris Kuehn, Executive Vice President and CFO. With that, I'll turn the call over to Dave. Dave? Thanks, Zac, and everyone, for joining us on today's call. I'd like to begin with a few comments on our purpose: to boldly challenge what's possible for a sustainable world. Our purpose is at the heart of our strategy, which is aligned to powerful megatrends like energy efficiency, decarbonization, and digital transformation. Coming off the hottest summer on record, we see policies aimed at decarbonizing the built environment continuing to expand. We see growing sustainability commitments for our customers, our suppliers, and for our investors. We see corporations not only setting goals but taking action. We are their partner of choice, and we have the technology to help bend the curve on climate change, and that's exactly what we're doing. We are scaling today's technology and relentlessly innovating for tomorrow to meet our customers' needs to dramatically reduce emissions. This enables us to consistently outgrow our end markets and deliver differentiated financial results. The end result is long-term value creation for our customers, our shareholders, our employees, and for the planet. Moving to slide number 4. Our global team performed extremely well in the third quarter, setting us up for a strong 2023 and positioning us well for 2024. We delivered strong organic growth of 9% and leveraged throughout the P&L, resulting in adjusted EPS growth of 23% and powerful free cash flow. We continue to see very strong customer demand for our products and services, with the enterprise bookings at an all-time high of nearly $5 billion in the quarter. Bookings were exceptionally strong in our commercial HVAC businesses globally, with organic bookings growth of low- to mid-teens in all segments. Our Americas commercial HVAC business was once again a standout, with organic bookings up mid-teens in the quarter and up approximately 65% on a three-year stack. Enterprise backlog ended the quarter at $6.9 billion, with the composition shifting increasingly towards commercial HVAC. Year to date, backlog in commercial HVAC is up approximately $800 million. Over the past three years, our commercial HVAC backlog has nearly tripled, up approximately 170%. As residential and Thermo King have normalized, the backlog burn in these businesses has been completely offset by growth in commercial HVAC backlog, including a large percentage of long-cycle Applied Systems. We continue to drive strong demand and a healthy pipeline of projects in key growth verticals across our commercial HVAC businesses. We're leveraging the power of our direct sales force, which brings specific expertise on how to customize solutions and leverage policy, programs, and incentives to optimize customers' paybacks, total cost of ownership, and performance. Our leading innovation and unique, direct go-to-market strategy enables us to quickly pivot and win in the highest growth verticals as markets evolve. We have a resilient and diverse portfolio, and our business operating system is designed to deliver consistent top-quartile performance. As our residential business has normalized and transport markets have softened, our overall business has delivered strong results and is on track to deliver high single-digit organic revenue growth and 20%+ adjusted EPS growth for the year, our third consecutive year of 20% or higher adjusted EPS growth.... We're on pace to deliver free cash flow equal to or greater than 100% of net earnings, and continue to execute our balanced capital allocation strategy with high levels of business reinvestment, a strong and growing dividend, strategic bolt-on M&A, and share repurchases. Our strong execution, robust bookings and revenue growth, and exceptional backlog gives us confidence in raising our 2023 guidance and confidence in our ability to deliver strong performance in 2024 as well. Please go to slide number 5. Demand for our innovative products and services continues to be broad-based across our segments, highlighting the strength of our global portfolio. Organic bookings were up 8%, led by our commercial HVAC businesses. In the Americas, commercial HVAC was very strong across the board. We discussed booking strength on the prior slide, but revenues were exceptional as well, up in the low 20s% range, with equipment up approximately 30% and services up low teens%. Our residential business continues to normalize as expected, with revenues up low single-digit%. Consistent with our prior comments, the nature of our transport refrigeration business is lumpy, and our performance in Q3 was in line with our expectations on both bookings and revenues. Revenues were a bit lower than our guidance of down 10%, driven by the timing of customer deliveries between Q2 and Q3, but remained strong against a tough 60% prior year growth comp. On a two-year stack, revenues were up more than 40% in the quarter. Americas backlog is approximately 3 times historical norms, with the largest component being commercial HVAC applied systems for 2024 and beyond. Applied Systems are the most complex and innovative systems, and the largest driver of our service business in commercial HVAC. Our EMEA business was right on track with our expectations. Bookings were strong in both businesses, both up low teens. Commercial HVAC revenues were robust, with mid-single-digit growth on tough prior year comps. TK EMEA revenues were up versus a down market. Backlog remained strong, approximately 60% higher than historical norms and predominantly commercial HVAC. Our Asia Pacific business performed well, with strong bookings growth in China and the rest of Asia. Asia revenues were slightly lower against a tough prior year comp of nearly 30% growth. Our outlook for the region continues to be positive. The verticals we play in remain strong, with good opportunities for future growth. Asia segment backlog continues to be robust as we approach 2024, approximately 70% above historical norms and predominantly commercial HVAC. Now, I'd like to turn the call over to Chris. Chris? Thanks, Dave. Please turn to slide number 6. The scoreboard for the quarter highlights strong execution, top to bottom. Organic revenues were up 9%, adjusted operating and EBITDA margins were up 130 basis points and 100 basis points, respectively, and adjusted EPS was up 23%. At an enterprise level, we delivered strong organic revenue growth in both equipment and services, up high single digits and low teens, respectively. We continue to highlight our exceptional services growth because our services business continues to differentiate us in our industry. It makes Trane Technologies more resilient, with higher recurring revenues at higher margins over time, and represents about one-third of our enterprise revenues. Over the past 6 years, including 2020, our services business delivered a revenue growth CAGR of up high single digits, and we're driving even stronger growth in 2023. Our high-performance flywheel continues to deliver results, with relentless investment in innovation, driving strong top-line growth, margin expansion, and EPS growth. Please turn to slide number 7. As an enterprise, we delivered about 5 points of volume and about 4 points of price in the quarter. Strong volume growth, positive price realization, and productivity combined to more than offset inflation in the quarter. The supply chain continues to stabilize, enabling improving productivity as we move throughout the year. In the Americas segment, we delivered about 7 points of volume and 4 points of price, with accompanied strong leverage and margin expansion led by our commercial HVAC business, more than offsetting volume declines in transport. The EMEA segment delivered very strong organic incrementals and margin expansion, with organic revenues up low single digits in the quarter. The segment also delivered approximately 12 points of M&A growth in the quarter, which impacted reported leverage given year one integration costs. The Asia segment delivered strong margin expansion and organic leverage in the quarter on slightly down revenues. For the enterprise, we earmarked an additional 30+ basis points for incremental business reinvestment in 2023 to accelerate the timing of key projects across the enterprise. This nearly doubles our average run rate of approximately 40 basis points annually, for a total of 70+ basis points in 2023. We're extremely pleased we've been able to make these incremental investments in 2023 while driving strong leverage. We see a tight linkage between investments in innovation and market outgrowth, and we're taking opportunities to go further and faster in 2023. Now, I'd like to turn the call back over to Dave. Dave? ... Thanks, Chris. Please turn to slide number 8. Overall, our positive outlook for our segments and our end markets is largely unchanged from the prior quarter. As we move into the fourth quarter with continued high levels of absolute demand, exceptional backlog, and strong execution, we're gaining additional visibility into healthy growth in 2024. Across the enterprise, there are some key themes. Strong demand for our sustainability-focused solutions remains high. While we expect the law of large numbers to kick in at some point and for order growth to decline, absolute bookings are expected to remain robust, given our new baseline is at a very high level. Across our businesses, we see the stacking effect of supportive policy and regulatory changes that play to our unique strengths as a leading climate innovator. In addition to all the tailwinds at a national level in both the U.S. and Europe, we see activity at the state and municipal levels, and our direct sales force is able to help customers leverage these programs. In Americas Commercial HVAC, our business is extremely strong, as we've outlined. We're winning with customers and developing innovative solutions in data centers, education, and high-tech, just to name a few strong verticals. We're driving tremendous growth in our Applied business, which makes up the majority of our backlog. Applied business is the most differentiated and complex, and it's where our competitive advantages shine. It's long-cycle with higher-margin service opportunities, representing a multiple of initial purchase price over the life of the system. Additionally, this business helps to forge long-term relationships with customers as they move from project to project over a multi-year period. We have the most comprehensive portfolio of products in the industry, which enables us to compete and win across all verticals, driving leading, long-term, sustainable growth. There's no change to our residential business outlook. We expect residential to continue to normalize through the fourth quarter and for the normalization process to be largely complete in 2023. Also, as expected, strength in commercial HVAC is more than offsetting the decline in residential in 2023. Our transport refrigeration business was largely in line with our expectations in the third quarter and up more than 40% on a two-year stack. We expect to outperform the market for the year. ACT is projecting a dip in 2024 and a bounce back in 2025 and continued growth afterwards. However, ACT's forecast has been volatile in recent months, and we are in the process of validating assumptions versus our internal forecast and other sources. We'll update the market when we hold our year-end earnings call. In our EMEA segment, the third quarter was also in line with our expectations for both businesses. As we highlighted in our second quarter call, EMEA HVAC has very tough comps in both the third and fourth quarters, up high 20s and low 40s, respectively, and revenue growth is expected to be more moderate in the second half. The two-year stack for Q3 is up more than 30%. Our transport refrigeration outlook is unchanged. Likewise, our Asia Pacific segment, our outlook for the full year is unchanged. Revenue in the second half is expected to be flattish, purely related to tough prior year comps, while bookings continue to be strong. Now, I'd like to turn the call back over to Chris. Chris? Thanks, Dave. Please turn to slide number 9. Strong execution, record bookings, and near record backlog puts us in an excellent position as we move into the fourth quarter. We're raising our full-year revenue and EPS guidance for 2023. Organic revenue growth is expected to be between 8% and 9%, up from our prior guidance of up approximately 8%, reflecting strong Q3 performance and a largely unchanged outlook for a robust Q4. We're raising our adjusted EPS guidance to approximately $9, up from a range of $8.80-$8.90, mainly reflecting a flow-through of our third quarter outperformance versus our guidance and continued strong leverage of 30%+ for the fourth quarter. We're pleased with our free cash flow performance of approximately $1.3 billion year to date. On the full year, we continue to expect to deliver powerful free cash flow of equal to or greater than adjusted net earnings, or approximately $2 billion. As we've highlighted before, we pay close attention to our investment peer group and consistently target top quartile financial performance, including adjusted EPS growth and adjusted free cash flow conversion. We believe our guidance places us in a strong position to deliver against that target in 2023. As we said in our last earnings call, we expected increased M&A contribution in the second half versus the first half due to the timing of acquisitions. We had approximately 3 points of M&A in the third quarter and expect to have approximately 2 points of M&A in the fourth quarter, as one acquisition passes the one-year mark and is included in our base. There is no change to our full year guidance of approximately 2 points from M&A. Please see slide 19 of the presentation for additional details related to guidance to assist with your models. Please go to slide number 10. We remain on track to deliver $300 million of run rate savings from business transformation by 2023, including $60 million, which will be realized in 2023. We continue to invest in these cost savings and high ROI projects to further fuel innovation and other investments across the portfolio. Our continuous improvement mindset is an integral part of our business operating system, and it's designed to drive gross productivity each year to offset other inflation. While it's been extremely difficult to realize meaningful levels of productivity in recent years, given the supply chain and other macro challenges, productivity is improving as supply chain challenges abate and is contributing to our 30%+ organic leverage target in 2023. Please go to slide number 11. We remain committed to our balanced capital allocation strategy, focused on consistently deploying excess cash to opportunities with the highest returns for shareholders. First, we continue to strengthen our core business through relentless business reinvestment. Second, we're committed to maintaining a strong balance sheet that provides us with continued optionality as our markets evolve. In 2023, we received upgrades to our credit ratings, which are now Baa1 BBB+, reflective of our strong balance sheet and cash flow generation. Third, we expect to consistently deploy 100% of excess cash over time. Our balanced approach includes strategic M&A that further improves long-term shareholder returns and share repurchases as the stock trades below our calculated intrinsic value. Please turn to slide number 12, and I'll provide an update on our capital deployment for 2023. Year to date, as of the end of October, we've deployed $1.6 billion in cash, with $513 million to dividends, $535 million to M&A, and $550 million to share repurchases. We have significant dry powder, with over $2.6 billion remaining under the current share repurchase authorization, and our shares remain attractive, trading below our calculated intrinsic value. Our M&A pipeline remains active, and we have deployed or committed approximately $900 million year to date as of the end of October to bolt on leading technology acquisitions and equity investments. Our latest acquisition, Nuvolo, was announced in early October. Nuvolo will augment our energy services, enterprise management, and digital capabilities in commercial HVAC. We expect the Nuvolo transaction to close in the fourth quarter. All in, we're on track to deploy approximately $2.5 billion in cash in 2023. Our strong free cash flow, liquidity, and balance sheet continue to give us excellent capital allocation optionality moving forward. Now I'd like to turn the call back over to Dave. Dave? Thanks, Chris. Please turn to slide number 14. Transport refrigeration market forecasts for both North America and EMEA remain unchanged, and we expect to outperform each market in 2023. Our performance through the third quarter is on track to meet these expectations. The slide shows key data points on the markets and on Thermo King specifically to provide additional transparency and reference information. Please go to slide number 15. As discussed, ACT's projections for 2024 have been volatile, and we are focused on conducting a thorough analysis of the markets. In the interim, we've included ACT's most recent forecast for 2023 through 2028 for your reference. Please go to slide number 16. We expect to provide 2024 guidance on our fourth quarter earnings call. However, given increasing visibility, we believe it may be constructive to discuss key dynamics at play that give us confidence we'll see healthy growth in 2024. Our commercial HVAC businesses, which make up roughly 65% of our total revenues, are executing well in healthy markets, and the agility of our sales teams to quickly pivot focus to growing vertical markets is driving record bookings and backlog. Our applied backlog is a standout and provides a long, higher margin service tail that makes our business stronger and more resilient. Secular megatrends continue to support growth, and policy and regulatory stacking is amplifying these tailwinds, with the majority of these programs still ahead of us. We expect to enter 2024 with our residential business largely through the normalization process and on path to our long-term target of GDP plus growth. We continue to lead with innovation, which yields healthy pricing opportunities, and our business operating system is primed to stay ahead of inflationary pressures. The supply chain is vastly improved, and pockets of remaining challenges continue to abate. Our culture is lean-based, and we're excited about the productivity we can unlock as we move into 2024. We've also been heavily investing in productivity-enhancing projects such as factory automation, which we expect to unlock further value. ACT is forecasting a dip in North American trailer production in 2024, a snapback in 2025, and growth thereafter. While we're in the process of further assessing their forecast, our North America transport refrigeration business is approximately 10% of our total revenues. We expect to execute well, manage the business tightly, outperform the end markets, and, if necessary, manage deleverage within gross margin rates. Lastly, while we don't talk about our service business a lot, we're quietly putting up double-digit growth in 2023 on top of a 6-year compound annual growth rate of high single-digit growth. Our service business is strong, resilient, and poised for growth, and we continue to build out our energy services and digital capabilities and offerings, which represents a big current and even larger future opportunity. Please go to slide number 17. In summary, we are well-positioned to drive significant value over time. We are proud to have been named one of Fortune's Best Workplaces for Women and one of the World's Best Companies by Time Magazine. Our culture and people fuel our innovation and help us to fulfill our purpose every day. This steadfast focus on purpose, our leading innovation, our proven business operating system enables us to execute our strategy and stay nimble across our resilient portfolio. This, in turn, enables us to consistently deliver a leading revenue and earnings growth profile and powerful free cash flow. With our strong performance, elevated backlog, and continued high levels of customer demand, we are confident in once again raising our full-year revenue and EPS guidance and reaffirming our free cash flow conversion target. We have the team, the strategy, and the track record to deliver strong performance in 2023 and differentiated shareholder returns over the long term. And now we'd be happy to take your questions. Operator? Thank you. To ask a question, please press star one. Please limit yourself to one question and one follow-up. Your first question is from Scott Davis of Melius Research. Please go ahead. Your line is open. Hey, good morning, Dave, Chris, and Zac. Good morning, Scott. I'm kind of getting sick of congratulating you on good quarters, but this is one of the better ones. Please keep it up. You're making Lehigh proud, Dave. All good. Guys, when you think about the backlog that you have and the demand environment in commercial, is this the type of environment where you can really be selective on projects and kind of cherry-pick the stuff that has really the margin, price margin structure that you want? Or are you still or is that not kind of how it works, and you're just out there bidding on, you know, a wide array of stuff, but just that, you know, bidding at a higher price? I'm just trying to get a sense of that interplay between project selectivity and really just, you know, the supply-demand imbalance that's out there right now. Yeah, Scott, it's a good question. You know, we have strong core business right now, and we spend a lot on innovation, and we price our innovation to ensure that we get proper returns. So I would say it's leading more with innovation, and we're constantly looking for how we can improve our portfolio, how we can improve the efficiency of our products, how our products can use next-generation low-GWP refrigerant. That's all inclusive in our business operating system when it comes to innovation, and that's what's really leading our markets right now. I would also tell you that, you know, having this, and I know I've told you this before, but this direct sales force and being able to educate them on new innovations real time and having them take those messages to the influencers on jobs is very, very important when you go to close, especially some of these large applied jobs. Yeah. That's helpful color. I have to ask this question, and you know, you have a competitor who had a ransomware issue in the quarter. Did that help you guys as it related to bidding on things and such, or was that a non-event? It was not. It was a non-event, so, hope everything's okay there, but it was a non-event. Okay. I'll pass it on. Thank you again. Okay. Thanks, Scott. Your next question is from Julian Mitchell of Barclays Capital. Please go ahead. Your line is open. Hi. Good morning. You know, I think, Dave, you emphasized a couple of times the strength in applied bookings and the difference versus you know light commercial because of the service element. So maybe just a follow-up on that point would be around sort of what's the rough split today of say the revenues in your commercial HVAC business between applied and light commercial? Just wondered, you know, when you're looking at the revenue outlook next 12 months, do you anticipate much of a difference in revenue trends of applied versus light commercial, maybe because of stimulus impacts or the scale of the respective backlogs? Any sort of perspective around that, please? Yeah. Julian, we don't look at just light. We look at Unitary in total, so it'd be light and large. And historically, it's been about 50/50 in our equipment business. But obviously, in the third quarter, we had very, very strong demand in our applied business. So think of data centers, high tech, education were very strong. We had solid performance in other verticals too, like healthcare, life science, government, industrial. And then there were some weaker verticals as well. Think of, you know, traditional office, warehousing and retail, and those weaker verticals where you tend to see more unitary than applied systems. That's very helpful. Thank you. And then just my follow-up, you know, it's more of a sort of silly short-term one, but, you know, only one quarter left in the year. Your sales guide, you know, I think your Q4 sort of construct on guidance is the same as it was back in July, and you just kind of flowed through the Q3 beat to your full year guide. But if I wanted to look at the Q4 for what that's worth, you know, the revenue guide implies a nearly, I think, sort of 8%-9% sequential sales decline from Q3, which seems a bit heavier than normal. Is that just kind of noise around backing out from the year, or is there anything, you know, specific maybe in transport or something like that, that's weighing on Q4? Hey, Julian, it's Chris. I'll start off. You know, the Q4 implied guide is kind of around mid-single digits, organic revenue growth. It is a little bit of a step down versus Q3, but if we put a few reasons behind it, one is, when I think about the toughest comp of the year, our commercial HVAC businesses, this is really the toughest comp across the board going into the fourth quarter on a year-over-year basis. Second would be, the contribution from price we would expect to be a bit lower in the fourth quarter than the third quarter. We commented price delivered around four points of growth in Q3. We probably dial that in to about two-ish points of growth in Q4. So, there's about two points right there sequentially. And then, you know, maybe just to round out another response here, really be around residential as it continues to normalize. We did a little better in the third quarter on revenues. Our constructive view around residential for the full year hasn't changed, with revenues down around mid-single digits. So, you know, we're very focused on making sure inventory in the channel is positioned well for the start of 2024. So we would expect that normalization to continue really into the fourth quarter. So hopefully that gives you a little bit of some view here on how we think about Q3 to Q4. But let's not forget, maybe the first point, the commercial HVAC on tough comps. You know, we had 40% growth in EMEA last year, 30% growth in Asia last year. Really toughest comp of the quarter. That makes sense. Thank you. You're welcome. Thanks, Julian. Your next question is from Andy Kaplowitz of Citigroup. Please go ahead. Your line is open. Good morning, everyone. Impressive quarter. Hey, thanks, Andy. Thank you. Dave, with the understanding that orders can be lumpy, it appears that you actually had a positive inflection in orders in Americas commercial HVAC in the quarter, despite concerns of higher U.S. rates. So did you see larger mega projects start to hit a little more frequently in the quarter? I know you mentioned, you know, strength in data centers. Did you see, like, some of your bigger verticals actually heat up a bit, you know, as the quarter went on? And would you say that that gives you more of a probability of ending backlog at the end of this year, closer to $7 billion than $6 billion, as I know you're guiding? Yeah, I mean, we, we're still tracking a lot of "mega projects," and we're defining a mega project again, as a project where the total size of it is over $1 billion. We're still tracking a lot of those in our pipeline. So yeah, we had a little bit of activity in the third quarter, but we just had some really nice growth. And as I said earlier, data centers, education continues to be very strong. And then we had like, what I would call solid, solid performance over a lot of different verticals: healthcare, life science, government, industrial. Those are all very solid performance in the quarter. So, I, I think a lot of the mega projects are yet to come, which is, which is still good news. I think I've told you on our second quarter call, you know, our ability to track these projects and to triage them on a global basis, because some of these big mega projects, you have decision-makers that are in different parts of the world. You know, you could have the owner in Korea, you could have the engineer in Seattle, Washington, and the project is in Texas. And we're able to triage that and work with the customer and show the value that we can provide. So we're super excited about a lot of the mega projects that are still in the pipeline. Thanks for that. And then, Chris, could you give more color into the organic leverage you've been delivering? Organic leverage in the mid-30% range is obviously a good result for Trane. We know you're guiding at 30% for Q4 and 25%+ long term, but maybe you could talk about whether you have an extended period of productivity projects along with good price versus costs that could help your margin performance well into 2024. Given, I think it was more difficult to engage these projects during the pandemic. Yeah, Andy, it's a great question. And I would say we go into every year looking at incrementals in the 25% or better category, right? And we'll dial that in as we get a little closer to 2024. But, you know, we continue to see this dovetail of the contributions from growth price normalizing, with the gross productivity getting better as we've worked through the quarter this year, the quarters this year. The supply chain has continued to improve. With that, the volume growth has continued to grow each and every quarter. We delivered around 5 points of volume growth here in the third quarter. And with that, the inefficiencies, as you said, it was hard to get that productivity the last couple of years. The inefficiencies have gotten less, so there's a lot of room to go here. We're starting to see some of the benefits of that in 2023, but this will be a continued opportunity for us as we go into 2024, really, and, and beyond. We're really getting back to the DNA of the company, right? The ability for us to drive the lean culture and look at cost takeout, and ultimately lean through with automation in our factories. These are all investments we're making this year, and we're able to pivot the workforce to focus on that versus the supply chain challenges of the last few years. ... Yeah, Andy, I had the opportunity to visit several of our locations during the quarter, and it was just such a great feeling to feel the flow that's happening in the operations today versus where we were a year ago, where we were looking at, you know, the yard full of product that had to go back on the line to be reworked. So that's all helping with the productivity. So we're really starting to hit our stride here in our operations, which is a great job by the team because they've had some tough times there working through the supply chain. But I'm glad to say that they're operating extremely well right now. Appreciate all the color, guys. All right. Thanks, Andy. Your next question is from Gautam Khanna of TD Cowen. Please go ahead. Your line is open. Hey, good morning, and great quarter. Thanks, Gautam. Appreciate it. Just wanted to get your sense on, you mentioned the transport refrigeration, you opened the order books in October. Any early read on how demand looks and how far out you're booking into 2024 right now? Yeah, I mean, like I said, we did open the order book in October. As expected, Gautam, I mean, you know, the Thermo King business has performed very well for us over a number of years. And, you know, with our current guide, we're forecasting that we're going to outperform the markets again in 2023. So it's a great business. We have a lot of innovation that we're pumping through that business right now as we electrify our portfolio of products. Great team, and, it's, I'm pretty excited about where we are with Thermo King. I know that, you know, ACT is forecasting a bit of a dip in 2024. We're validating that. There's some things that don't align up with our internal forecast, but we'll validate that in the short term and update everyone as we report out our fourth quarter earnings. Okay. Can you comment on how far out you guys are actually booking into 2024 at this point, or? It's always within a 12-month period, so no, these orders don't get booked way out. But, in fact, in the prior years, we were only opening up the book for 6-month increments. So, just because we wanted to make sure we pricing right when we were in a higher inflation market. Yeah, I think for Americas, it may through middle of 2024, Gautam, and I think for Europe, it may be open for a bit longer than that. But to Dave's point, you know, the order book would really only be for 2024 at this point. Thanks. So just one quick follow-up on Resi. Any evidence of people deferring replacement and instead repairing units? Are you seeing any uptick in those products? Yeah, I was with the Resi team recently. We're not seeing that, no. So, I think the short answer is no, we haven't seen that yet. Thank you, guys. Appreciate it. Yeah, thank you. Your next question is from Chris Snyder of UBS. Please go ahead. Your line is open. Thank you. I wanted to ask on commercial HVAC orders this quarter, you know, so clearly bifurcated from the broader industry. And, you know, the company has always prided itself on driving innovation. So, I guess my question is, with the world moving to emissions targets and just higher electricity prices globally, are you seeing customers more so appreciate the innovation and efficiency that you are providing to them? And do you think that could result in a higher rate of share gains moving forward? Thank you. Hey, Chris, hope all is well with you. Great question. Look, we always lead with innovation. I think our customers always appreciate you know, higher efficient products, greener products using low GWP refrigerants, so we pride ourselves on that. Look, we do a lot of innovation around verticals, and I don't talk a lot about that for obvious reasons. But if you think of data centers, you know, we had a very strong quarter in data centers. A lot of that has to do with the innovation that we're providing, working with the customer. So these are unique solutions for them, and then they scale it through all the data centers that they're building. So we'll continue to do that in the future. We'll continue to sell our energy efficiency to our customers, and we'll continue to make sure that we have a connected solution so that our service business can continue to expand in the future. Thank you. I appreciate that. And then maybe following up, Dave, you mentioned in the prepared remarks that, you know, orders need to go down at some point, due to the law of large numbers. So I guess my question is: would we need a, like, a step change negative in the macro to see that? Because it feels like the lead time compression headwinds are kind of largely in the rearview at this point. Commercial's healthy, Resi seems to be turning, and you mentioned before, the mega projects really haven't ordered yet. It's mostly still in the pipeline. So, I mean, what do you need to see in a macro standpoint, you know, to have material order declines off these levels? Thank you. Yeah, Chris, it's Chris. I'll start. This is why we want to make sure it's important that investors look at, growth rates as well as backlog position and just absolute bookings levels, right? I think the trends around decarbonization, and as you mentioned this before, customers putting out emissions targets, we see these as long-term tailwinds. Growth around data centers appears to be a multiyear tailwind as we think about the need for, for data and for saving data and to process data. So, we see this as some longer-term tailwinds. When we think about the beginning of the year, we guided, ending backlog down to around $6 billion, and that would have implied bookings down around 5%-6%. But even on a down 5% or 6%, that would have been still very elevated levels in terms of absolute bookings. And we continue to see that strength here through the third quarter. So I would say the trends we don't necessarily see as abating. Could we find some quarters where, you know, the backlog will start to normalize or bookings growth will be negative? I guess we could, but I would just encourage people to look at absolute bookings levels, because when you look at two-year stacks, three-year stacks around bookings growth, they're significant. You think about commercial HVAC in the Americas, a three-year booking stack of over- Sixty-five percent. 65%. So, the fact is, if we went down 5 points in a given period, you still have to subtract that from 65 percentage points of growth. So maybe a bit of a long answer to your question, but, we're confident we've got a long-term tailwind here. Appreciate that. Thank you. Thanks, Chris. Your next question is from Joe Ritchie of Goldman Sachs. Please go ahead. Your line is open. Hey, guys. Good morning. Nice quarter. Thanks, Joe. Appreciate it. So yesterday, you know, Eaton resized the mega project funnel up 25%, you know, you know, now tracking almost close to, like, $900 billion. And they suggested that about 20% of the projects have kind of broken ground, and a lower percentage they've actually bid. I'm curious, like, I know that you guys have your own funnel, and you guys are also tracking projects over $1 billion, but does that all kind of jive with what you're seeing in your pipeline, you know, broadly, or any other color around that would be helpful? Yeah, I haven't read Eaton's report, so I can't comment specifically. I would just tell you that, you know, we have a lot of projects in the pipeline right now that we're tracking. I think it's always, you always have to be a little bit careful when you track one company versus another company is when orders are, you know, procured by different companies could vary. So, Eaton may be a bit before us, but, you know, I guess the good news is we still see a lot out there, and it sounds like Eaton does as well. And we're very, very confident with the many of the solutions that we have that we're talking with customers about, and we feel that on many of these projects, we're in a unique position. Yeah, maybe, maybe following up on that, Dave, have you had any concerns? I know you're not seeing really in your order book today, but are there any concerns out there on project financing or things pushing to the right, just given the rate environment that we're in? Joe, it's Chris. No, we're not. I think while certainly interest rates have gone in a negative direction on paybacks, I would tell you that the change in paybacks is minor when we think about the energy efficient systems that we're able to quote customers. You know, a payback may have gone from 2 to 2.5 years to 3-ish years now with interest rates. So, the fact is, there's still very strong paybacks when you're implementing some of these solutions. So, we're not seeing that right now. Got it. That makes sense. And I guess maybe one last one quickly for you, Chris. I know that we're kind of not ready to bless any 2024 numbers at this point, but as you kind of think through both pricing and mix for next year, just any thoughts, initial thoughts on how that should kind of play out across the Americas business? Yeah, we'll dial it in a little bit further, Joe, as we get a couple of months from now. But, you know, we do target from a price inflation measure, you know, let's say a spread of 20-30 basis points in a normal year. We'll dial that in as we get closer to next year. To Dave's earlier point, we're making sure we're pricing for innovation and also long-term customer relationships, so, I'm confident that we'll have a good set of numbers there. We're going to target positive on a dollar basis and a margin basis on price versus inflation. And, we've been able to demonstrate that for the last three years, so I have a lot of confidence our teams will be able to do that going forward. Great. Thank you. Thanks, Joe. Thank you. Your next question is from Steve Tusa of J.P. Morgan. Please go ahead. Your line is open. Hey, guys. Good morning. Hey, morning, Steve. How are you? Yeah, I'll let go the those orders, you know, pretty strong, for sure. What were there, there's been a lot of strength in light commercial. How strong was your light commercial business? You know- Yeah ... large and light. Our revenue was up in the Americas, was up over 20%. Equipment was up over 30%. Applied was stronger than Unitary. Applied was stronger than Unitary? Yes, yes, yes. Both were strong, but applied was stronger than Unitary. I mean, you could look at the verticals that really had the strength in it, Steve. You know, data centers, high tech, education, those tend to be more applied systems. And even the verticals that were solid, like healthcare, life science, again, those tend to be the more intricate projects where you need to really a design system, which is our applied system. So, we're pretty happy with the performance that we saw in the third quarter. And again, not to reiterate- Yeah ... but these applied. I know you know this, but this is where you get the long service tail. Yeah. This is going to continue to fuel our service business in the future. Yeah, can you just give us maybe a little... I know you kind of, you haven't done this before, but like you've mentioned these-... these four verticals in every slide presentation for like the last several years. Obviously, you guys are doing a great job there. Can you just give us, given it's so important now, I mean, commercial HVAC, 65% of your, of your revenue base. Can you just give us some sort of color on how much those four verticals represent now? I mean, is that like 50% of your portfolio? Like, just roughly how much those growthy verticals represent? They're strong, Steve, is what I would answer. You know, we track about 14 verticals in the Americas, and certainly, office and warehousing would be areas, retail, they'd be a little bit weaker today. I know the office vertical has a number of things kind of buried in it today. We've been lobbying to try to break that out, just given demand on warehouse and data centers. But I won't dial it in specifically, but we like our positioning here. And what I think is, again, most important with the direct sales force is their ability that if a vertical is slower, like office, the ability to pivot into another vertical is really a testament. That's, that's exactly where I was gonna go, Chris. I mean, these verticals, we track 14. You could even get 18 if you do a little subdividing there. But there's often times when one vertical is stronger than another vertical for, you know, extended period of time. I'll use warehousing as an example. You know, two years ago, three years ago, warehousing was extremely strong. We pivot our sales force to focus on warehousing, we develop programs for them, and they go capture share in those particular verticals. Right now, you know, the strength in data centers, I don't see that going away in the near term. High tech, we have all the mega projects that are really in front of us. And education, you know, education's been strong. Obviously, ESSER funding is helping that. I think ESSER funding is probably in the, you know, fifth or sixth inning, but, you know, we've been extremely strong in education for an extended period of time. One last one for you. Your peers have talked about this refrigerant change in resi, driving some pretty nice price mix, 10%-15% or something like that over the next couple of years, perhaps a bit more back-end loaded into 2025, given the change comes then. Can you just give us your latest and greatest lens on price and mix from that transition and what potentially you could see in 2024 and 2025 on that front for resi? Yeah. The short answer is we're dialing it in. But, I mean, if you think about the whole refrigerant change, right? You know, we've been leading with refrigerant change, really, the industry. I think we've been at it since about 2013 with next generation refrigerants. So we're more than ready for this transition away from 410A to, in our case, 454B. You know, our designs are complete, our manufacturing is ready to go. We're gonna start up production here in early Q2, so all systems goes there. There are some definitions, Steve, that we're still working with the EPA to make sure our interpretation is correct. And then really, our focus is gonna shift to the, to the channel to make sure we have a clean phase in, phase out of inventory. We will be manufacturing both 410A product and 454 product in 2024, and probably even into 2025, at least our interpretation right now, what we're seeing with the EPA. As far as price, we're still dialing that in. The 454 product is going to be more expensive. Obviously, it's a slightly flammable refrigerant, so you're gonna have to put different sensing equipment around the unit. So we'll get more data on that in the coming weeks here, and we'll update everyone on our fourth quarter call. Great. Thanks a lot. Okay. Thanks, Steve. Your next question is from Jeff Sprague of Vertical Research Partners. Please go ahead. Your line is open. Hey, thank you. Good morning, everyone. Hey, Jeff. How are you? I am doing great. Not as good as you guys, but doing well. Thank you. I wonder if we could just dig a little bit more into just customer behavior and backlogs. You know, as big as the backlogs are versus history, right? If I think about, you know, 90% of $6 billion, maybe it's $6 billion plus, right? But that would be, call it, you know, my math, roughly half of your 2024 commercial revenues are in backlog. I mean, that's a good, healthy number, but given the size and scope of some of these projects, maybe it goes back a little bit to one of the earlier questions. I'm not sure why backlog would really go down much from here. Like, do you actually see, you know, customers, you know, just kinda changing their order patterns, or there's kinda something else that, you know, would suggest that backlogs really do need to kinda go back down towards where they were historically? Jeff, I'll start. I mean, I think the lead times are still a bit extended in Applied Systems, getting better, certainly from where we were beginning of the year, same in Unitary, getting better. So I think as the lead times come in a bit, you may see where the backlog contracts a bit over time. It is elevated today. You're right, 90% of the backlog would relate to our global commercial HVAC business, and when you think about our commercial businesses, including Thermo King, it's over 95%. So it gives us a lot of visibility into what we think 2024 would be with some healthy growth. But let's see how, you know, the policy stacking effects that continue to positively affect us, and order rates. Mega projects, as Dave said, are ahead of us here in terms of bookings and, you know, applied. These are long cycle kinda projects. Let's see how this plays out. We think it could be elevated for longer, but it will start to normalize at some point. Yeah, I think the only thing I would add to that, Jeff, is, you know, I'll, I'll go back to data centers again. And kind of our strategy was, is to work with the data center engineers and develop solutions that- ... are optimal for them. Once we do that, they do tend to lock in for an extended period of time with you. So they'll provide orders, you know, beyond your lead times just to ensure that they have slots available, and we don't disappoint by missing a shipment. Can you gauge in any way, you know, what percent of this forward project pipeline is tied to various stimulus programs, you know, be they, you know, IRA, CHIPS, other things, and what's coming down through the state promulgations? Yeah, Jeff, I would say from an IRA perspective, that's really all in front of us. I, I don't think that's necessarily in the backlog today. But from an ESSER funding for several years now, we've had projects and making sure that over the summer months when schools are open, we're ready to service and upgrade equipment. So I think that's certainly been the backlog for a while. Data centers continues to elevate, and we see it as a long-term tail. But CHIPS and Science Act, we- Yeah. We, we don't have that dialed in, but that would be one where I guess you could specifically say, this is, this is driving this demand. But, in the data center, there's no, there's no... You know, that's more about just a pure demand for data centers right now. Right. Great. Thanks for the color, guys. Appreciate it. Thanks. Your next question is from Nigel Coe of Wolfe Research. Please go ahead. Your line is open. Thanks. Good morning, everyone. Thanks for the question. So going back to the commercial HVAC growth in 3Q, which was obviously spectacular, but especially in the Americas, you know, the pickup Q-over-Q was quite something. So you called out, obviously, the strength in the verticals. You know, was there any kind of supply chain sort of loosening or kind of flush there that maybe drove that? I understand the demand's very strong. And then within that, you know, education, I think there's some concerns out there, you know, with the stimulus funding kind of re-reaching a peak, perhaps, that, you know, maybe education falls off in 2024. So any visibility on education would be helpful. Yeah. I'll start with the latter. The education, we haven't seen it cool off yet. We still have a lot in our pipeline as well. There's still a lot of money to be spent out there. As I said, I think if we were playing baseball, I'd say we're in the sixth inning. There's still some funding to come there. We've been strong there for an extended period of time. The other question was? Yeah, just the, you know, obviously, supply chain constraints have been a factor. The supply chain- in the Applied business. Yeah. The supply chain, it's, you know, I wouldn't say it's normal, but it's pretty close to normal. We always have some noise that you're gonna see in the supply chain, but our teams have done just a great job there. So I wouldn't say our third quarter performance was because supply chain suddenly got better, because it's been better for some time. Okay. And then- I think- Just on the comment. Executing very well on the front end of our business. We're executing very well on the operation side of our business, and you, and you really see it in our results. Okay. Thanks. Thanks, Dave. Just quick, another crack at the pricing question. You know, you know, Chris, you mentioned 23 basis points spread versus inflation is what you target. It does feel like some of your competitors are taking a much more aggressive policy towards pricing. So I'm just curious on two aspects. Number one, you know, the potential to really be a bit more aggressive on price as you go into 2024. And then secondly, you know, this as this commercial HVAC backlog starts to convert, is there a sort of embedded pricing in that backlog that's gonna emerge over the next 12 months? Yeah, I'll start with your second question, Nigel. As we think about the backlog that runs out a year, year and a half, we're making sure that we've got the right cost escalators built in. And it could be a reference to an external index, or it could be where we've put cost insulators into the project to ultimately make sure we're pricing effectively. So I think we've got that embedded in the backlog right now on a best view, and the teams have done an outstanding job with this over the last three-plus years in the inflationary environment to stay ahead on inflation. Yeah, look, I think pricing will remain a way for us to continue to drive with our innovative products, making sure we're pricing effectively. It's gonna be healthy. I just wanna get three more months ahead of us here before we dial it in for 2024. But, I am confident that as we think about the cost environment and the innovation of our products, we're gonna make sure we're pricing effectively. And again, making sure we've got long-term customer relationships here, as Dave described with the applied business, we wanna make sure that the services business continues to grow with that, which it can, and it will. And that, of course, brings with itself, you know, healthy margins. So we're well positioned for next year. Just give us a little more time to dial that in. Oh, great. Thanks, guys. Thanks, Nigel. Your next question is from Deane Dray of RBC Capital Markets. Please go ahead. Your line is open. Thank you. Good morning, everyone. Hey, Deane. How are you? Doing real well, thank you. Maybe you circle back on China. You had good bookings. Was impressed that even though you had lighter margins—lighter revenues, the margins were much stronger. So, how did China play out for you? I'm very happy with our performance in Asia Pacific overall, so thanks for the question. You know, you think about... I'll start with orders, right? I mean, orders were up in the low teens, up 12%, okay, for the region, and China had high single digits, and the rest of Asia had, you know, mid-teens. ... So very strong performance on order rate. On revenue, you know, we were flattish down a bit, but remember, last year we had 30% growth in Asia Pacific, so it's really just a comp issue. The team there is performing very well. I was very, very happy with the incoming order rates in that region. And the pipeline is strong as well. Great. And just as a follow-up to that, September customer experience event in New York, can you give us a sense of on the Applied business, both the backlog and the funnel, how much are customers opting for this thermal management feature? We still, since you like using the baseball analogy, is it are we in the early innings of adoption? Where does that stand? Yeah, it, thermal storage. Yeah. I mean, we have, you know, adoption that's continuous there. We've been selling, you know, thermal storage systems for quite some time. I do think that one of the elements of IRA that could accelerate that is that would be included there, and we're still dialing in what that exact rebate would be, and how it will be applied, but that could be significant and really drive that. Just so everyone's aware, you know, thermal management or thermal storage systems are great, great ways for energy efficiency, but they're also great ways to help balance the grid. You know, if you have a need in a peak period to shut off power or limit power, this is a great way to do it because you burn ice versus running your compressors on your chillers. So we're excited about the technology. We've had it for a while, and IRA could be a catalyst to even have it grow faster. Thank you. All right. Thanks, Deane. Your next question is from Andrew Obin of Bank of America. Please go ahead. Your line is open. Hey, guys. Good morning. Hi, Andrew. How are you? I'm good. I'm good. So question on gross margins, I guess. Looking at my model, I think gross margins are hitting all-time highs, and I know you guys don't look at other companies, but we do. And I'm just wondering how much price cost the spread between price cost is a benefit. And I guess the bigger question is have we rebased gross margins? Because clearly you guys have done a lot of work on cost cutting, right? It seems that you have an aggressive stance on maintaining the spread, but also how much of it is timing, right? It's just the peak between the balance between price and cost. If you could just talk about, you know, are we in the new normal with gross margins, or should we expect the gross margins normalize somewhat going forward? Thank you. Andrew, I'll start. As I think about the third quarter, we really were able to execute across all parts of the P&L to drive leverage and gross margin expansion. So the price execution versus inflation, as I said earlier, was positive on a margin and dollar basis. There are areas, though, of inflation, especially in tier two, around wage and energy inflation, that you know are impacting the business. So it was a positive. The incrementals on volume added five points of volume in the quarter, so we like those incrementals. And we've continued to invest in the business as well, right? We're still targeting for the full year around 70 basis points of incremental investment above a 40 basis point normal. So all parts of the P&L are really working. I would tell you, the productivity opportunity for us as price comes back to a bit more of a normal, normalized level, that is really the opportunity for us going forward to really continue to drive 25% or better incrementals. We really like our mix and service. So service is what's driving high gross margins as well? It's a contributor, right? A contributor. It was, It's a system of things that doesn't end, but we really like the mix we have with our service business. Great. And just a follow-up question on Nuvolo. Right, I think JCI also bought a workplace management software company. Fortive has a presence. Can you just talk about what excites you about this vertical? And maybe also remind us how big is software as a business for you at this point? Thank you. Yeah. Nuvolo is a cloud-based connected workplace and enterprise asset management company, and it's leveraging the ServiceNow platform. Look, we look at this as a way to augment our current digital capabilities. Just to remind everyone, we have over 36,000 connected buildings. We have well over 1 million connected assets. So we think this is a great company, great leadership, great technology, and we're excited to get this closed and have it be part of the Trane Technologies portfolio, and it's gonna really help us grow our digital business at a nice clip. How big is the digital business now? I won't be specific on that. I would say that this acquisition is less than 1% of the enterprise revenue. Okay. Thanks a lot. Okay. Thanks, Andrew. We have completed the allotted time for questions. I will now turn the call over to Zac Nagle for closing remarks. Thanks, operator. I'd like to thank everyone for joining on today's call. As always, we'll be available in the coming days and weeks to answer any questions that you may have, so please don't hesitate to reach out. Stay safe, and we look forward to seeing everyone soon. This concludes today's conference call. Thank you for your participation. 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