All right, I think we are ready to go. So for those of you that don't know me, my name is Joe Ritchie. I co-head our U.S. Industrials and Materials Business Unit. Before we kick it off, really excited to have the conference. This is the first time we're doing it in December, so we're really excited with the turnout and hope that everybody has a great conference. Before we kick it off with Trane Technologies, we're required to make certain disclosures and public appearances about Goldman Sachs' relationships with companies that we discuss. The disclosures relate to investment banking relationships, compensation received, or 1% or more % ownership. We're prepared to read aloud disclosures for any issuer or upon request. However, these disclosures are available in our most recent reports available to you as clients on our firm's portals.
With that out of the way, really excited to have Trane Technologies here. We have Donny Simmons sitting next to me, our Group President of the Americas, as well as Chris Kuehn, EVP and Chief Financial Officer. Guys, thanks so much for joining us today. Really great to have you here kicking us off.
Yeah, we're happy to be here, Joe. And you're right, December in New York is kind of a fun time, and getting ready for the holidays. And happy to be one of the first companies to kick off the conference with you.
Yeah, great. Donny, why don't we start with you? You've been at Trane now since 2001. It's been a hell of a ride. Look, Trane has really transformed itself over that time frame into a really scaled North America applied HVAC business. Just talk us through the journey over the last few years. How have you been able to scale this business? And where do you see this business going over the next five years?
Absolutely. Thanks, Joe. So you're right, I've been with the company since 2001. I actually worked in both the commercial business as well as the Thermo King business, so I know those quite well, and actually, the commercial business has changed significantly over the last decade, and it really comes down to innovation, and it also comes down to our model around a direct sales force and building relationships with customers directly, and so if you go back, actually, before Ingersoll Rand purchased Trane, or right when Ingersoll Rand purchased Trane, we had actually reduced the amount of innovation we were doing in the company pretty significantly, so back in the 2008 time frame, and Dave Regnery at the time, who was the president of the commercial HVAC business, realized we need to start investing and innovating.
And so even through those tough times, we started investing significantly in new product developments and started investing on the front end of our business and services. And we've built out that capability over a long period of time. And so over that period of time, we've launched many, many new products. We've become much more consultative with our customers to make sure we understand what they require and what kind of needs they have so that we can solve those problems for them. And if you look at the future, what's happening now is it's becoming more and more digital. And specifically, as it relates to if you think about demand side management of energy, so 30% of energy is wasted after the meter.
And that's where the future is for us, is making sure that we can capitalize on that through connected offerings that we have today and that we're developing using artificial intelligence. So that's just going to continue to evolve here over the next probably five, 10 years.
That's great to hear. And look, before we got on stage, you talked a little bit about this week being a board meeting with the focus really being around innovation and technology. What are some of the things that you guys are excited about that you'll be at least previewing at the board meeting this week?
Yeah, we probably can't go into too many details, but what we shared with Joe is Dave Regnery, our CEO, would love to be here at the conference, but today is the first day of a three-day board meeting, and it does kick off with a technology and innovation committee review. We do it two times a year, and think of it as a deep dive across the portfolio. It could be three or four projects, could be three or four ideas, could be three or four investments that ultimately we're making decisions on and we want the board support on, so we can generally get to a lot of detail. Data centers could be an area you're spending some time with. Digital, in terms of investments that Donny just shared, what's our roadmap look like over that time, and I joked a little bit with Joe.
It's a board committee that has around four or five of our 12 directors on it. All directors are invited, but the four or five need to be there. And without fail, every director shows up to that meeting. It's just another layer to get insight on the company and where we're making those investments.
Yeah. So Chris, you mentioned data centers. Look, the growth rate in your applied business has been pretty incredible, particularly from an order standpoint the last several quarters. How do you think about what this means from a conversion cycle for that business? When do you actually expect to see that? You're already seeing very good growth across your Americas business, double-digit growth the last several quarters. How much visibility does this give you to your growth going forward?
I'll start, then Donny can jump in. I mean, we ended the third quarter with over $7 billion of backlog. 90% of that is commercial HVAC backlog, and of that, the majority of that is applied equipment backlog, servicing all in the Americas, let's say, 14 verticals that we track data centers being one of them, Joe. Of that $7 billion plus of backlog, over $4 billion was already for 2025 and beyond. Now, that backlog, the majority of it churns within 12 months. But I think, Donny, you can add on a data center side, we get some pretty good visibility to those customers in terms of when they want the equipment, but still the majority of that backlog will churn in the next 12 months. But Donny, I think you're getting some good visibility on that.
Yeah, absolutely.
We get visibility. It doesn't mean we necessarily get an order, call it two years in advance, but we understand what our data center customers are doing and what their demand plans are for the next two, three years so that we can plan capacity appropriately. And then typically, you'll get an order up to a year out is kind of the way they plan. And there's no cycle to it. It's kind of just up to their own capital planning process. Everyone's a little bit different in terms of how those orders come in. But we have really good visibility from a pipeline management standpoint. And really, just outside of data centers, we have a very rigorous customer requirements management process within all of our sales offices.
You're talking about 160-plus sales offices across the country where they're doing weekly planning, understanding the pipeline for their customers, putting opportunities in the system. We have visibility to those opportunities all the way up through the enterprise, and we're able to kind of predict and look at what the demand profile looks like going forward based on that.
That's great. And look, I mentioned earlier that you've seen double-digit organic growth in your Americas segment. How sustainable is that type of growth rate based on what you see today? I know that you don't have.
Yeah.
I'm not trying to put you on the spot here, Chris, but it's fine with me.
Yeah. I mean, what, year to date, Americas commercial HVAC orders are up mid-teens. I think what we keep informing investors is take a look at at least three variables, right, three metrics. Take a look at order growth, take a look at absolute order rates, the dollars, and then compare that to the backlog. In the third quarter, Americas commercial HVAC was up low single digits. Enterprise bookings were up 5%. I think maybe some feedback was it feels like a low number or low percentage. It turns out it was our second highest bookings quarter ever at the enterprise. The previous high was, I believe, the first quarter of the year. The difference is around $100 million in terms of bookings. The fact is the bookings levels remain at a very high absolute level. Data centers is a great example.
Those orders can come in a bit lumpy over a period of time. They're not necessarily, to Donny's point, we're getting visibility over the next maybe two to three years, but those orders can come in in chunks. And so that can have an impact on order rates in any one given quarter. But year to date, up mid-teens in Americas commercial HVAC. Like I said, of the 14 verticals we track, all but one are up. And I think that's the power of the direct sales force that Donny alluded to earlier, that investment for 15-plus years, not just in innovation, but on our direct sales force and commercial HVAC Americas, we're pivoting to where the opportunities are. So where verticals are strong, that's great. We've got the resources, but let's not underinvest in other verticals because they will come back.
I think we love that broad-based approach to how we're getting orders.
I want to close the loop here on data centers. So we just spent some time at Supercomputing 24. There are a lot of companies that were showing us their liquid cooling offerings and also their rooftop chiller offerings. There was some confusion in the group as it relates to how their offerings differed from what the HVAC OEMs were offering into a data center. So Donny, maybe just kind of talk about when you're selling into a hyperscaler or colocator, why are they choosing you? How are your offerings complementary to maybe some of the technologies that we saw at Supercomputing 24?
Absolutely, so let me first go back and just think about the data center market over the last decade. You could go back 10 years. You could go back even longer, and there were times when we would put just traditional large rooftop units on data centers, just blow cold air to try to remove heat. Very, very inefficient, and for data centers, they measure power utilization, and that's an extremely important measurement, and so if you think about a traditional data center, power utilization is 1.4, which means that the amount of energy they use beyond computing is 0.4. So 1.4. They're trying to drive that down as close to 1 as possible, and so when you get into liquid immersion cooling and direct-to-chip liquid cooling, that reduces that power utilization significantly.
And so, liquid immersion cooling, actually, you can get down to, say, 1.04, 1.05, something like that. So it's significantly lower energy consumption. Even with those solutions, every one of those solutions requires cold water. And the majority of those solutions require a chiller. And so let's take liquid immersion cooling. With liquid immersion cooling, you still require a trim chiller. And so because you still have to remove heat, ultimately, you still have to, so just think of that as the condensing side. And so that condensing side, outside the building, you're going to have a chiller involved in that process. On the inside of the building, you've got fan walls. You've got different types of air handlers. So all of that equipment is also available. Now, the different technologies that are out there, every data center customer that we have evaluates different technologies.
And ultimately, it's all about how do we reduce that power utilization effectiveness, efficiency, essentially. So ultimately, that's the end game is how do you get that to where every bit of energy you're spending is on computing.
And then the follow-on, just in the conversations that you have with your customers, why are they choosing Trane over Carrier or JCI? What's your differentiation?
Look, the big differentiator here is our ability to sit down with customers, understand what their problems are, and work through solutions, and I'll give you an example, so we have a large data center customer that had a problem, very interesting problem. They had typically a chiller that would be used in a data center is like 10.5 kilowatts. We had an offering for them that was 16.5 kilowatts, so just think about that in terms of the size. This customer came to us and said, "Hey, we have more power available, so we need a larger chiller." It was like, "Okay, well, we can do that," so they need an 18.5 kilowatt chiller to make sure that they could use all the power they had available because otherwise, they're wasted opportunity. I mean, energy is like availability of energy is critical.
What's important about that is that in that particular scenario, we were able to develop this chiller for them, and it could be shipped on a flatbed. The competitive offerings that were out there that they were evaluating, they had to be split onto two different flatbeds, shipped. We saved them $100,000 a chiller in terms of shipment and the on-site assembly. So those are the kind of things, so we constantly solve problems. We had another data center customer that had a problem. They were trying to operate in a very high ambient, and we developed an air-cooled offering for them that had a leading-class efficiency with a low GWP refrigerant. So we approach these every time as custom solutions that we can then offer to other customers along the way.
That's the power of Trane, our ability from an application standpoint to help customers solve problems. We do design days with customers. When a customer has a problem, we have a large data center customer. We'll go to their site, or we'll have them come to one of our sites. We'll sit down with them for a day and talk through all the problems. We'll have our application engineers on site. We'll start coming up with different solutions. We'll rapidly develop that product and bring the customers back and do a witness test so they can understand whether or not it's meeting the requirements they have. These data center customers are highly sophisticated. They require relationships like they have with Trane in order to be successful themselves as well.
Yeah, that's a great example. I appreciate you sharing that. Look, in the market, there's so much discussion about data centers. There has been now for about the last 18 months. But there's a lot more that's happening, particularly here in the U.S., this whole U.S. manufacturing renaissance. I know that Dave doesn't love the term mega projects, but they're out there. And so you've got a bunch of EV battery plants. You've got some semi-fab plants, right? Maybe talk about what your content looks like on those types of facilities and whether you're starting to see some benefit in your order rates from what's happening here in the U.S.
Sure. So if I go back a little bit to our CRM, our customer requirements process and the pipeline that we manage, we see over 370 megap rojects kind of defined in that pipeline that we're in tune to in terms of when they're going to be actually purchasing equipment and the development cycles that they're in, whether or not we're going to win them, whether or not we're going to lose them, whether or not the design criteria is there. So we're managing through that, and we're working with consulting engineers to make sure we get the designs in place. The types of solutions vary significantly. So I'll give you an example. We have a large semiconductor customer that we developed a new chiller for, and we actually made an investment to put a new line in place. And this is one of a kind.
It's a heat recovery chiller. This is almost a 5,000-ton heat recovery chiller. And so you might say, "What does that really mean?" What it means is it's able to provide cooling and heating to the process for the semiconductor plant. And so this was the largest of its kind chiller that we developed for the customer. And so they're able to use the heat recovery from that chiller to think of it as the warming required in the process for chemicals in the process. And so that's like a very unique scenario. What's cool about that is that we developed that solution for that customer for semiconductors. Now we have data center customers saying, "Hey, what could we do with that heat recovery unit?" So heat recovery essentially means you're taking the heat out, and then how can that be reused?
And so that's just a further level of evolution that we can see. And it's not happening today, but it'll happen more and more in the future in terms of making sure the overall efficiency and looking at decarbonization in aggregate. So these are big solutions. EV batteries, you typically get into really large orders associated with fans and fan arrays that are required in the operations. And so we develop custom solutions for EV battery customers. And then what happens is you'll get an order for 1,000. And so that just becomes the same unit over and over and over. And there's nothing better as a manufacturer to produce the same thing over and over again. That's the easiest thing possible to do. So every one of those verticals is a little bit different.
But ultimately, it still comes down to our highly technical direct sales force that's working with customers and solutions. And the other thing that's differentiated about that is that for all of these customers, you could have the owner that's located in one area of the world, the engineer that they're working with that's located somewhere else, and then the mechanical contractors and the general contractors who are on site. And our global direct sales force can touch every point of that. We're not relying on a third party to relay information to us. We're involved in every one of those. That's a key differentiator for us in the marketplace.
Yeah. So mega projects, Joe, we've got some of the backlog. We've probably been booking mega projects for the last year, year and a half. The pipeline still looks very robust to Donny's point. You are seeing some things getting canceled, right? Maybe EV batteries are very much in the news. Some of those projects have gotten canceled. Some projects have got it added. And I think over the spectrum, we're actually seeing a net addition here in terms of just the size of EV of mega projects. But yeah, we're always trying to see that fall into the backlog. Great. I'll open it up to the audience for questions in a minute. But maybe, Chris, just following up on that, so the 370 projects that Donny mentioned, so if you went back 12 months, that number was higher, lower?
I think it would have been lower. I think it's a net addition over that period of time, but again, these are projects that are going to run over the next five, seven years, or maybe even longer, right? So we're always looking at duration of timing, and to Donny's earlier point, the earlier visibility we get from customers and what they need, it may not be an order today. It may be we're going to give you that order in six months, 12 months' time. We now can then work with our supply chain and give them the visibility they need so we can be ready, so it is a capacity for our own facilities. It's capacity for the supply chain, and that's actually giving us a lot of visibility beyond what's in the backlog today.
Great. Maybe Donny, one follow-up there. So I know no project is created equal, right? Is there any kind of rule of thumb that you'd point us to on when the project's about to complete, when you'd actually see the order? Is it kind of like 12-18 months before production? What's the right way to kind of think about it?
I really wish it was that simple for our own planning.
I wish it was.
It really depends on the total supply chain for the customer. So data centers, as an example, electrical gear is typically the longest lead time item. So they'll have to place that well before they do the HVAC equipment, and so we have a little bit of visibility, but they understand what our kind of current requirements are. Semiconductor, very different. EV battery, completely different as well. So it really is just different depending on the customer, primarily the customer, the job site, whether they're going to be doing construction offsite and bringing materials in versus constructing onsite. I mean, there's a lot of different factors there that go into play.
So Joe, think of it as applied systems generally lend themselves to the mega projects. And then you've got commissioning date and then a warranty date that could be a year, two years, maybe some extended warranties. And then the service tail on these projects, the 8-10 times of revenue over the life of the equipment, that's where the service offerings for us, which is a third of the company revenues, makes it a very attractive space, not just day one for equipment, but then that service offering.
You're going to force me to follow up to that question. So you're expanding your installed base at this point, right? Is there a way to think about how much that installed base has expanded over the last 12 months or is expected to expand? Because you're right. I mean, that is a very differentiating factor relative to a lot of the other companies that we look at that typically have a one-time sale and then have to wait for a replacement sale to see the ongoing benefit. You guys will see it over the next 20 to 30 years.
We will, right? Think of it as those first couple of years after commissioning that we're doing more maintenance on systems, right? So maybe those revenue dollars are a little bit lower versus when you get to years three, four, five, six, seven, that'll start to increase. I think the complexity of these systems, you want the OEM being connected to that. That's why Donny has been relentless in investments around service technicians and the tools that they use to make sure we've got the capacity to serve. Think of just the last three years, commercial HVAC Americas' cumulative revenue growth the first three quarters of this year was 50%. Three-year stack, 50% growth, and we're guiding to the fourth quarter, 10% growth in commercial HVAC, but it will also be a three-year stack of 50% growth.
And a lot of that are applied systems that make up that growth in that business. So giving us a lot of confidence that the high single-digit CAGR we've seen in the service platform globally over the last six to seven years, it should have a very nice strength of growth going out into the future as that installed base continues to grow.
Great. I'm going to turn it to the audience. Anybody have any questions in the audience? I'll just keep going. So we haven't talked about A2L or what's happening on the resi side of the business. Maybe help us kind of understand what's happening at the end of this year. What are you hearing from your dealers and distributors? How much stocking is happening ahead of this transition? Just any color around that and how you expect this to play out in 2025.
Sure. You want to start?
Sure, I'll start.
So if you think about this year from a residential standpoint, a few things happened. One is at the end of last year, we got clarity from the EPA on the refrigerant transition requirements. And so there was fear at the end of last year that there was going to be a hard cutover. And so what happened is there was a destocking that took place, significant destocking that took place. So this year, you have two things going on. One is there's a restocking. So you think about with that clarity, distributors and dealers building inventory back up. And then on top of that, you have a transition on 12/31 of this year where you can no longer manufacture 410A equipment. It's got to be transitioned to A2Ls, which A2Ls is either 454B or 32.
So you've got those two different refrigerants in the marketplace that are being converted to. You can still sell that equipment throughout next year. So they have one year through the end of 2025 to sell that equipment. So there's no risk to have that inventory in place and sell it. Now, the transition has already taken place, and we mentioned that before that we were doing the majority of our transition in the fourth quarter. And we expect that if you think about next year on the residential side, roughly 75%-80% of the product that is sold will be A2L, meaning the inventory will deplete essentially in the first quarter. And then on the commercial side, it's probably more like 95% of the business that's sold next year will be A2L, so that transition's happening very smoothly.
We think of it as there's a moderate to low level of kind of what people think of a pull-in. We don't really think of it as a pull-in just because of the way the transition happens, the fact that you can, this is a last manufacturer date, not a last sell date. And so that transition gets a little bit more leeway from that standpoint. The dealers, it's really non-issue.
Yeah. And maybe, Donny, just help us understand because there's almost like a game theory situation, right? If you hold more inventory than your competitor does, then there's a chance that you'll end up having better sales next year. How do you make sure you get that part of the equation right?
Look, you have to take a bet ultimately. And every OEM ultimately has to do planning. And the planning is more than just like you're making an assumption on what the market size is going to be. You're making an assumption on what the transition's going to look like. And then ultimately, six months beforehand, you're locked in. Whatever you did is what's going to happen because you can't buy more refrigerant. If you wanted to make more R-410A refrigerant right now, you wouldn't be able to because you didn't plan it. You didn't purchase it in advance. So nobody's making it for you. Therefore, you're not going to, like, you're out. So that's the difficulty in those types of transitions for the residential.
That's a good point. So this past year, so historically, the residential HVAC market has been fairly well disciplined, right? Really good pricing power. I've said historically, you guys kind of operate like localized duopolies in the way that the business kind of sells. You've had one competitor this year lose share. Is there any concern around the discipline going away during this transition, or do you guys feel very comfortable with the dynamics in the market?
Yeah, I guess we'll see where that plays out, Joe. I think to Donny's point, we put our plans in early last year to have mixed model lines, be prepared to, if need be, switch over to the new refrigerant product if there was demand for it. We made sure we had enough R-410A. We thought for 2024, it was really going to be a legacy product year. That's what it's turned out to be. We have a lot of visibility with our distributors in terms of what they want for the new inventory. So we're working with them on that. We've guided to high single-digit-ish pricing for the new refrigerant for next year. It feels like the industry is roughly in that space. Think of that next year, to Donny's point, 75% of next year, we think will be new refrigerant.
So, you take that high single digits, you multiply it by the 75%, and then you also have to multiply it by another 70% because not all products are subject to the new refrigerant. Like, furnaces wouldn't be subject to that pricing. So we'll see. But I think we've got some great dealers out there, great IWDs that we work with. And we play in that premium space. But we'll see how it plays out.
So, Chris, you touched a little bit on pricing there, but maybe just broadening this out to 2025, just initial framework for the year. I know that you guys have clearly the order rates have been really good. Looks like organic growth should be really good. You've been doing a nice job at the incremental margins. Just give us any kind of color that you can on a 25 framework.
Yeah, we're really happy with where 2024 played out. Our guidance about a month ago was 11% revenue growth. That's two points of price and nine points of volume. So back on pricing, I don't think we go back to the 30, 40 basis points of price that we saw pre-pandemic. Do I think we're at the five, six, seven points of price we saw during supply chain challenges? I hope not. But this year, around two points of price, we'll see where next year kind of plays out. But you're right, we're going to enter 2025 with very strong backlog, elevated backlog. We long ago stopped trying to guide where we thought ending backlog would be because it's been a challenge and it's remained elevated. And we expect it to remain elevated for a long period of time.
Again, like I said, we had over $4 billion of backlog for 2025 and beyond at the end of the third quarter, and that'll only grow in the fourth quarter. If you think about, so commercial HVAC, strong end market, strong solutions, strong backlog entering the year, service, a business that's delivered very well over the last many years. Again, that high single-digit revenue CAGR that we've seen over the last six to seven years, this year on track to low double digits. We'll provide more guidance as we get to the end of January, but we like the path that that service business is on. We continue to invest heavily. Donny just talked about residential. It looks like it's returning back to a GDP plus business. We're ready with that transition. We've been ready for some time and we'll execute through it.
If there is a moderate pre-buy in the market, it'll probably impact more Q1 than any other quarter of next year, but again, we see next year being around 75% of the new refrigerant being the size and scale of sales there. Transport refrigeration, it's been a challenging year for those markets, especially in the Americas. Down mid-teens. It looks like ACT is forecasting up maybe low single digits next year. It looks like that's more back half of the year. Timing. We agree with that. What's exciting, though, is ACT is forecasting 2026 and 2027 to be up mid-teens, and that would bring the market back to kind of a normal level, which we don't disagree with that outlook at this point as well, so 2025, it'll be less of a headwind like it was in 2024.
It should be more of at least a neutral to a tailwind going into 2025, and then on top of that, let's make sure we're guiding to top quartile revenue growth, top quartile EPS growth, and very strong cash conversion. We haven't talked about cash yet, but the last four years, we delivered 108% conversion of free cash flow and net income, which I would describe, and Dave would describe, and Donny, it's high-quality earnings. The cash is there, and business generates a lot of cash, and so we'd go into any year thinking about guiding to top quartile, but give us another month and a half or so. We'll tell you at the end of January what we're thinking for 2025, but it looks like it's going to be another strong year.
Great. Two quick follow-ups. Some investors are concerned around that we've seen commercial starts data come down in 2024. There's some concern around perhaps maybe your, light commercial business going into next year or really more broadly to, light commercial markets . The way that you guys have sounded on the business has been more positive, I think, than what folks are thinking into next year. Just maybe talk about some of the dislocation between what you're seeing in your, light commercial business and what folks are concerned about.
Yeah, maybe I'll start and then turn over to Donny. I mean, I'll start with the fact that we like providing solutions to customers. And so let's figure out what the right solution is for them. And maybe it could be a full applied solution. Maybe it's a full unitary solution. In many cases, it's a combined solution. Think of a hospital that wouldn't necessarily just be one type of product that it needs, but you're serving multiple buildings. Maybe on a campus, it needs multiple solutions. So we're going to start with providing what the best solution is for the customer, regardless of what the equipment is. If we only had one or two types of pieces of equipment, we'd probably you might be in a position to try to keep selling that. But we have a very broad base of products.
But as we're setting up for unitary for next year, Donny, any additional?
Yeah. I mean, I would just add, if you think about the mix of the business, first off, we've got 14 verticals. We're not overweighted in any one vertical. So that's going to play itself out. And if you think about construction starts and the level of our business, that's replacement business really doesn't have an impact from construction starts. And then I would add, just recently, ABI came out, and they're over 50 for the first time. And I don't know how many months. I don't remember the last time we were over 50. So that shows some growth in the future. So I'm actually not nearly as concerned relative to the long term of what that business looks like into next year.
Chris, incremental margins. I know you've historically guided to 25 plus. Any reason for that to change as we head into next year?
We love the long-term view of 25% plus because it allows us that ability to invest back in the business. And that's our number one capital deployment priority. I mentioned earlier a technology innovation committee meeting today. Actually, in a week to two weeks' time, we have innovation reviews inside the company, a two-day set of meetings. Donny's team spends an entire day going through their pipelines on innovation. And I would tell you that the common denominator of all of those meetings is how do we go faster? How do we put more dollars to work quicker so that we can be out in the market sooner with these innovations? So there's a secret sauce amongst various things in the company, which is a system of things why we are executing the way that we're executing as Trane Technologies.
I think it does start with the relentless investments and making sure we're preserving the ability to keep investing back in the business. So we're not going to be the company that's going to be one or two quarters of massive leverage. We're going to keep investing back in the business. And if we do better in a given year, that's why we put the plus on there for the sign. This year, we're targeting 30% or better leverage for this year. It's always just making sure we have that flywheel for investments.
Great. One last question. I'd be remiss to not ask about any potential election implications now that we're through the election. So any thoughts on what the next four years could look like and whether there's any positive or negative things to call out?
Yeah, I'll start, and Donny can add. I mean, we've had the ability to work with multiple administrations over many cycles. I would say with our products, we've not designed a business around regulation. If Dave were here, he would add on that designing your business around any one point of regulation is probably a bad business principle, a bad business strategy. The great thing is around our products, our products have great paybacks, and so when you think of incentives, incentives will help reduce that payback period. But maybe you're going from 3.5 years to 3.2 years, right? There's still a very strong green for green solution here. You're doing the right thing for the planet, and you're doing the right thing for your income statement and your cash flow statement with the products that we're offering and the higher efficiency products that we're offering today.
So we'll navigate it as we see things play out. But let's see what happens on the campaign trail, how it actually plays out into real life. But we love the fact that our products already have great paybacks today. Donny, anything else you want to?
Yeah, I would just add, you think about that relative to federal programs and incentives, but don't forget there's states. And every state has different programs. And that outcome is not going to change how the states are driving the changes that they're trying to drive. It actually might increase the type of activity that you get at the state level. Again, one of our strengths is having local offices and every one of those being experts on what the incentives are from utilities, from entities, whether it be state, federal, to help educate our customers and help make sure that they can take advantage of it. It's a big opportunity for us.
Donny, Chris, great to see you. Thank you so much for joining us and kicking off the conference.
Thank you.
Thanks, Joe.