Next, the next company that we have here at the conference is Trane Technologies. Really excited to have both Dave Regnery, Chairman and CEO, and Chris Kuehn, their CFO. Guys, thanks so much for being here today.
Glad to be here. Thanks for having us. Thanks.
We were just talking about my 16-year-old driving, and we'll take that offline. Dave, why don't we chat a little bit more about Trane? I'm gonna start with a, with a softball question for you because, you know, investors often give you guys credit as being like, one of the highest quality multis within the space. Like, what do you think really kind of sets you apart from the other HVAC OEMs, and what areas would you really point to?
Yeah, thanks. It's a great question. Thanks, everyone, for joining us today. We're certainly glad to be here at the conference. Your team, Joe, does a nice job putting this together.
Thank you.
certainly appreciate everyone's interest in Trane Technologies. Look, it's a, it's a system of things that makes Trane Technologies a great company. You know, I could point to our relentless investments in the company, right? We're not episodic. We invest in our business heavily year after year. It's our business operating system that allows us to take best ideas and share them on a, on a global basis. It's our direct sales force. It's how we onboard our employees. It's how we train our service organization. It's about the breadth of our portfolio. All of that makes us a great company as Trane Technologies. If I had to pick one thing that I believe differentiates us as Trane Technologies, I would go to our culture. We have that uplifting culture. Our purpose is to challenge what's possible and innovate for a sustainable world.
I would tell you that all 40,000 of our employees realize that they work for a company that has a greater purpose, that is making this world a better place for the next generations that will live here, and it's evident in our culture. I always tell people that our competitors can copy what we say. Sometimes they do. They could certainly copy our products over time. They could even maybe copy our processes. What they will not be able to do is copy our culture. That, to me, is really what stands Trane Technologies above the pack.
Good answer, Dave. So.
I didn't even have any notes or anything.
Yeah. Nice. Yeah. Last year, when we were sitting here, you were, I think you were coming back from a sustainability forum in Europe.
Yeah.
You're all bulled up. New year, different challenges. Just curious, has your outlook over the next 12 months changed much?
It really has. I think I was coming back from SMI over in the U.K., I was with a group of CEOs, and we were talking about the actions that we need to take as leaders of companies to make sure that this global warming that we're all facing could start to reverse. It was just so refreshing for me. It was probably the first, one of the first meetings I had been to with that group. Just to hear other CEOs share the same passion that I have around what we need to do to decarbonize was very refreshing. To answer your question, yeah, the mega trends around sustainability and decarbonization, they haven't changed, okay. In fact, they've intensified. Unfortunately, the world keeps getting warmer, and we need to take action, and we need to take action now, right.
We have technologies that we could scale today that would dramatically reduce the carbon footprint of the built environment. We need to scale this technology. I always get asked, "You have this great technology. Why can't you scale it faster?" I always say that the biggest hurdle is knowledge about what's available today, right? We can combine heating and cooling into an electrified system that dramatically reduces the carbon footprint for the built environment. It works in all climates. We need to take action. We need to scale this. We need to go faster. 15% of all global warming is from heating and cooling of buildings. The majority of that is from heating because it's using fossil fuel.
We have solutions that can eliminate or significantly reduce the amount of fossil fuel that is used for heating. We need to adopt those challenges. I guess I'm still very passionate. I think there's lots of opportunities out there. You think about it, there's 400 billion sq ft of commercial real estate globally. 400 billion. It's hard to get your mind around that. We need to take action on all of this to help decarbonize it, to really make this world a better place for the next generation.
The long term still sounds great. I, and I, the, and you are very passionate about it, so it's great to see. The last six weeks, you know, did basically raise another wrinkle with all of the middle market financing that's occurring and credit tightening. We had a company here earlier today, not seeing it in their business today, but certainly, you know, concerned about it going forward. How are you thinking about it across your portfolio?
Yeah. We haven't seen it in our portfolio either.
Right.
Okay? In our business, we really haven't seen it. You see that with our first quarter results, which started out very strong. We're very happy with the results that we were able to put on the board in the first quarter. It gives us a lot of confidence in our full year guide. You know, we'll pay attention. I would tell you that the paybacks that we're seeing on a lot of our projects, especially on the applied space, are very, very accretive in a very short period of time. If it does cost more to finance it, okay, does the payback go from 2.3 years to 2.4 years?
Right.
That's still a very nice payback, and we'll see how it plays out. We haven't seen any kind of letup in demand.
If you were to start to see some of that letup, you guys have... You know, Chris, I'll bring you into this conversation as well. You've undergone an operational transformation-
Mm-hmm
several cost synergies, $300 million in cost synergies. If you were to see a slowdown, how do you think about pulling back the toggle on cost for something that might be a near-term phenomena versus, you know, what levers would you have available for you to pull, to sustain margins going forward? How do you think about that dynamic?
Yeah, Joe, we're on track to the, you know, delivering the $300 million of transformation savings by the end of this year. We use it for a couple of areas. One is to make sure we're investing back in the business. Two, to drive innovation and drive that market outgrowth on the top line. We're well on track with that program, I would tell you one of the major opportunities we have going forward is around productivity, right? We've had higher costs to serve customers over the last two years with an inefficient supply chain. It's very expensive to be on the spot markets to buy chips and electronics, we described the supply chain getting better gradually throughout the year.
You can see in parts of our business, even in the first quarter, especially Europe, a very challenged first quarter of a year ago. As that productivity got better, as the supply chain got better, we saw that come through the margins in the first quarter. That's a massive opportunity for us. You think about expediting freight, wasn't very cheap to put components on an airplane to make sure it makes your factory in time, and you can keep your factory moving forward. That's a massive opportunity for us, A, to get back to the basics, right? We love our lean thinking. We've had to spend more time leaning out the supply chain. Now we can shift back into the operations, and that's where we're describing more volume growth this year than we saw last year.
I think there's a nice opportunity there. Yeah. One of the things, if I could add, Joe, is we do a lot of work as part of our operating system around scenario planning. Every year, we do very detailed, "If X happens, what do we do?" We do this at a strategic business unit level within a geography, within a particular country. We look at broad macro as well as micro events, and we understand what we would do if we saw something happen. We also are very clear on what we would not do if something happened. I know that may sound a little awkward, but it's just as important to understand what investments you would never cut because they're about the long term.
Knee-jerk reactions based on what happens in six weeks or what happens in six months are always it's very poorly executed. If you have a plan, though, you can execute to the plan. We have very detailed plans. If there is a slowdown, and trust me, I'm not talking ourselves into a slowdown here. If there is a slowdown, we'd be ready for it, and we're ready for it as to what we would stop doing, more importantly, what we will not stop doing, so we can make sure we continue to invest for the future.
Okay, great. Thanks for the clarification. You said you haven't seen a slowdown yet. I mean, your recent trends, your 1 Q...
You make it sound like there might be one.
No, I know. I'm not trying to actually. Like your 1Q backlog was up $400 million, you know, 6% sequentially. That's a great sign. You talked about $6 billion being a floor in your backlog for the year. Maybe just kinda talk through what you're seeing in your maybe your front log or your pipeline that gives you confidence in those numbers?
Yeah. We ended the first quarter with a backlog of $7.3 billion, okay, which is, you know, two and a half times what we would consider to be normal. We said that we would have a floor of $6 billion going into 2024. What that's code for is we're gonna have a very strong backlog going into 2024. We think it'll be north of that level. By the way, in any particular year, we typically enter that year with about 20% of forward revenue in backlog. If you do the math on the $6 billion, it would say we'd be at $30 billion. We're not gonna be at $30 billion, don't write that in your report.
It just gives you a sense as to how strong our backlog's going to be going into 2024. You know, the mega trends around decarbonization, they're not stopping. The mega trends or the mega projects that'll be developing over the next 12- 18 months, they're massive. The stimulus money that's flowing on a global basis is a stacking effect that's occurring. It's continuing to create a lot of strong demand for our products and services.
Great. You know, one of the key themes that we saw come out of earnings this quarter was really just around supply chain easing, price costs, tailwinds. You know, maybe you can talk a little bit about the pricing that you're seeing come through your P&L today versus some of the pricing that might be even higher in your backlog. I don't wanna put words in your mouth, but what's the pricing like in the backlog today versus what you're seeing in your P&L?
Yeah. Joe, I'd say we like the margins in the backlog. Our product management teams have done an outstanding job the last two years staying ahead of inflation. We feel like we've led the industry in price in 2021 and 2022. We started the 1st quarter with about 6.5 points of price at the enterprise level. We're looking at the full year revenue growth around 78%, our latest guide. We see more volume growth, though, on a full year basis than we do price growth. Price probably still on that 200-300 basis point range.
Our teams have been leveraging the business operating system we'd devised in the company to make sure we're taking all the inputs on cost, the input on the total cost of ownership to a customer, and making sure that we're pricing effectively. We've guided to 20-30 basis points of a price-cost spread. We have a lot of confidence we're gonna deliver on that in the full year. We look at that across each of our three regions as well. They should be price-cost positive on a dollar basis, margin basis. We saw that in the first quarter. We're expecting that for the second quarter and the full year. On supply chain. Supply chain is improving. It continues to improve.
It's, it's not back to where it needs to be, so there'll be several quarters of this improvement continuing in the future. It was funny, I had, my head of manufacturing come to my office the other day 'cause I was on the, I was on our earnings call, and I said, "Yes, supply chain is getting good." He came to my office, he said, "Dave, you know that we still are working a lot to secure these things." I got it, I got it, I got it. It is getting better, and everyone should know that. We also still have elevated safety stock levels of inventory on a global basis. We think that's a prudent investment. We'll burn that when we think the time is right, but this is not the right time.
You know, through the course of the year, we'll reevaluate that as supply chain continues to improve.
Is there any particular end market or business where you're keeping more safety stock than others?
It's pretty universal. Certainly, anything that has to travel, we'll keep more of. You know, we're in region, four region from a manufacturing standpoint. Some of our components still do come from overseas in a particular region, so we'll double up on those. Certainly on the electronic component side, we'll make sure we're well, we're well safety stock leveled in those, in those areas. It really depends. I mean, Asia was a great example of where early on we doubled down on our safety stock levels there and kind of saw what was gonna happen with these lockdowns. You saw us never miss a beat in Asia. We really didn't. I mean, we had lockdowns, and the second quarter last year was a little bit softer than others.
For the most part, I mean, we were able to execute and take care of our customers. We're gonna keep the safety stock in place. It's a bit elevated, but again, we believe it's a very prudent investment, and we'll burn it off over time.
Since we're talking inventory, can we talk about some of your, just some of the destocking comments? You know, I think your independent distribution was down mid-teens in resi, independent distribution. Your, you know, your direct model was down, I think, closer to, like, high single digits. Maybe talk to us a little bit about the inventory levels that you're seeing across the channel.
Yeah. I mean, first of all, our residential business, the way we're looking at that right now is the sell-through, right, which is really the health of that business was flat year-over-year. We don't see that business falling off a cliff, I'll answer that question now. As far as the inventory level goes in our independent wholesale distributors, just to remind everyone, think about us as 50/50. 50% of that, of our residential business goes through independent wholesale distributors, 50%, we're the independent wholesale distributor. At the end of the fourth quarter, I thought we were in good inventory position, and I said that on our call. We did, you know, it was a little bit lighter than we thought, there was a little bit more destocking that happened in the first quarter.
As I look at where we are today, I don't see anything alarming, but I do see that there could be some continued destocking through the second quarter. Again, it's very early in the residential season. First quarter, I wouldn't judge our residential business on the first quarter, and that's, it's a seasonal business. We'll see how the season picks up, the cooling season that is, and we'll be well equipped to handle it. This is a business that's a very solid business. We have a great leadership team there that's very experienced, and we have some great brands and channels, and we'll, we believe we have this guided correctly for the year.
Great. Yeah. The commentary that I made with the numbers I threw out were more unit, right?
It was unit volume. Unit volume.
Yeah.
Revenue in the residential business was down.
Mid-singles
... you know, mid-singles, but unit volume was down. Let's see how the cooling season plays out.
Yeah. Can we transition maybe to the refrigerant change?
Sure.
I'm curious just where does your portfolio stand in terms of, you know, making sure that you're ready for the transition that occurs, you know, next year? Are you continuing to make. Is that part of the investments that we're talking about that you'll continue to make to get there?
Yeah. I mean, first of all, we've been dealing with refrigerant changes probably since I was running our commercial business back in 2012, not to date myself too much here. We're very well equipped to handle any refrigerant change. In fact, we've led the industry with next generation refrigerants. Joe, you remember this. I was talking about moving to low GWP refrigerants, and I was getting questions, not from Joe, but from others saying: Why is that important? Why do customers care? Now you can see it being regulated. To answer your question specifically on the... There is a phase out in 2025 of 410, okay? The majority of the industry will be migrating to a refrigerant called 454, and we're ready, okay?
Yes, there is some cost, especially in our, in our manufacturing locations. The 454 refrigerant is what they call an A2L, so it's slightly flammable, even though that may be a little bit of an oxymoron. With that, you need certain different precautions about from in your manufacturing locations, as well as on the product side. You'll have to have different sensors so that if there is any kind of a leak, it'll be detected, and the unit will protect itself.
I remember the last refrigerant change. yeah.
It was a lot.
Been covering you guys since then, so.
Well, refrigerant changes, it's an opportunity for all of us, right?
Sure.
These are significantly less harmful chemicals for the environment. You know, the GWP of four ten versus the global warming potential of the, of a new refrigerant is 60%, 70% less than the one it's replacing. We have many refrigerants in our portfolio, especially on the commercial side, where the global warming potential is, like, one, right? It's de minimis, right? That's what you want. You want a refrigerant that's very friendly to the environment and, by the way, increases the efficiency of your product. That's what we've been able to develop on our commercial business. We, we look at refrigerant changes as opportunities, and I'm sure this will be an opportunity for us as well.
Maybe on that front, Chris, bringing you back into this. We talked about the portfolio transformation and the cost transformation.
Mm-hmm
... that's occurred. When you think about your Americas margins over time, like where could those margins get to? I'm assuming that you're not gonna stop at current levels, and so any thoughts around that would be helpful.
Yeah. I mean, nice growth in the first quarter. We saw about 90 basis points of margin growth in the first quarter. I think it's important to understand, it was really a tale of two cities in the Americas segment in Q1. You know, we saw 8% revenue growth. We saw 26% organic leverage at the segment level. The first tale is really the strength that we saw in our commercial HVAC business. Revenues were up mid-teens in the quarter. Volume was stronger than price in the first quarter. You know, while I'll kind of help back into the math for everybody, but organic leverage in the commercial business in Q1 in Americas is over 30%. We're really seeing very strong results globally, but I'll start with Americas based on your question, with our commercial HVAC business.
The tale, the other part of that city was really our residential business, right? Revenues were down mid-single %. Dave described the volume was the leader of the decline, it de-leveraged around gross margins. We still were able to grow margins in this segment as well as achieve over 25% organic leverage. We look at all of our segments as driving to 25% or better organic leverage each year. We'll manage all levels of the P&L to get there, Joe. Think about price cost positive in the quarter in the Americas and all segments. We'll look at productivity to be a nice tailwind as we move throughout the year as well, even into 2024. We're never gonna stop investing too. That's the key.
We're gonna make sure we'll get good incrementals on the volume, and we're gonna make sure we keep reinvesting back into the product.
Sounds great. I'm gonna turn the questions over to the audience in one second. Before I do that, just one other question. A company that I just had here is an automation company that just was on stage before you guys. Consistently, whenever we talk about a manufacturing renaissance, folks think about the automation angle, but clearly you guys should be a beneficiary as well. As you think about semiconductor CapEx, EV battery plants, talk to us a little bit about that opportunity, whether that's starting to show up in your order rates or whether that's something that comes a little bit later in the equation for you guys.
Well, first of all, we've been very strong in those verticals for a number of years, so we always have a base that we're working on in the EV, which is the last couple of years, and certainly on the chip manufacturing semiconductor space, we've been strong on a global basis for years. Our applied systems are very attractive to those verticals, right? Think about complex systems that need to be engineered, and you're engineering multiple components, not only for a cooling capacity, but from an energy capacity standpoint and those trade-offs, we're really good at doing that, and we're very strong in those verticals. I believe that if you think about some of the regulation that's coming there, whether it be the CHIPS Act or maybe to a lesser extent, IRA, that's in front of us.
It really is. I mean, you think about a fab plant, I don't know. I'm not an expert on manufacturing fab plants here, but if you think about it as a four-year process from planning to first production, you know, they're probably in the first stage of that. Think about HVAC equipment showing up 12 months before operation starts. You can start to do the math as to when those tailwinds will start to hit our business. There's a lot of planning. We're involved in a lot of the planning today. There's still some details to be worked out on how the funding is going to work and how you apply for that. I'm sure we have some very smart people in the semiconductor space that are working through that.
This will be a tailwind for our business, and we are very well suited with our solutions to serve this space.
Great. With that, I'll turn it over to the audience. Any questions from the audience? Oh, here we go, right here in the middle.
Good morning, Dave.
Good morning.
Can you talk a little bit about the European heat pump market and Trane's positioning and what the opportunity set there could look like if that's a secular growth market over time?
Sure. Well, we're very well positioned in the commercial space for heat pump. In fact, we're leading with what we call our thermal management system. What we've been able to do is we basically have combined a boiler plant and a chiller plant and made them one system. When you think about it at a system level, you're able to do a lot of great things. These systems that we create are three to four times more efficient than what they're replacing, three to four times. Because we've developed different components that fit into this system with sophisticated controls, we're able to operate in all geographies, right? It used to be, you know, 10 years ago, we used to talk about cold ambience and heat pumps don't work.
These thermal management systems will work in all climates, and they basically eliminate the need or significantly reduce the need for fossil fuel. We had a customer the other day, they were like, "Well, we believe they're up in the up north," they were like, up in the Sweden area. They were like, "Oh, we don't believe we're gonna be cold in the wintertime." We're like, "Leave your boiler in place. We'll put in our thermal management system. We'll hook your boiler, so if the ambient temperature reaches a certain level on the, on the outside, we'll kick the fossil fuel.
I know you'll rarely ever use fossil fuel," but customer, "Oh, you can do that?" "Yeah, absolutely, we could do that." That's why we think at a system level when we come up with these solutions for our customers. We've also done a lot of work too with, like in the data center space, right? Think about a data center. Think about the amount of heat that's being removed. We're repurposing that heat. We're creating district loops, so we're actually heating schools and other buildings around them. You'd be surprised because data centers tend to be located in densely populated areas. Anyway, these are really cool solutions we have.
If your question is on the residential side, we don't play there today, but that's certainly an area of, you know, that you're hearing a lot about in the news, but it's pretty crowded space. We really like where we are in the commercial space. We really like the fact that we can differentiate ourselves, and you see it in our results. Right? I mean, our equipment business in the first quarter was up 44.0%. Very strong demand for our solutions and we're helping out a lot of customers. We've done some M&A in the region as well recently, building out that portfolio. Think about an acquisition we did in October of last year called AL-KO, high-end air handling. That's a nice, complementary part of our chiller and applied system.
Then last week, we closed on an industrial process cooling acquisition called MTA. Another area to expand the operating map of where we've been focused more around comfort cooling, with these thermal management systems, Dave, as you described, it's given us a lot of insight to the upper end of heating, upper, or call lower end of cooling and industrial process heating and cooling. This is a nice acquisition on the cooling side there that expands our opportunities as well. When you think about regulation that's happening in Europe, it's a little bit different there. It's actually less confusing because they basically just say in many countries, not all, but it's being adopted. If you're building a new structure, a greenfield, you're not gonna put fossil fuel in it. You can't.
These are the solutions that are, you know, becoming the norm.
Another question right here.
Okay. A higher interest environment, how are our channel partners thinking about holding inventory? You're really referring to the only place that we, our channel partners would hold inventory is in our residential business, which again is 50%. We hold the inventory, 50% is our independent wholesale distributors. I'm sure they're thinking about that. Okay. I would tell you that, it's very early in the season. We'll see how it projects out. It could be some of the destocking, but I don't believe it really is right now. I mean, they're really looking at how they satisfy demand for the customer. This is, once we get into the heart of the cooling season, you're gonna start to see inventory churning really, really fast. We'll see how it plays out, but it's early days there.
I was with one of our largest channel partner, and to be honest with you, that didn't even come up in the conversation.
Any other questions from the audience? I'll go back to the heat pump question. I don't know if you've disclosed this in the past, but how big is your heat pump business in Europe today? To the point on residential, you know, do you have an ambition to be a residential heat pump provider in Europe?
Well, I won't answer the first question or the second question. No. On the in our equipment business, think of our European business, think of it as 50% service, 50% equipment. You know, the equipment business, you know, it's a growing percentage that's in this thermal management space, as you would expect. I won't get more specific than that. I would just say it's a very attractive space. We have differentiated solutions, and we're winning in the marketplace. On the residential conversation, look, we don't play in that space today. It's pretty crowded space. We like the opportunities that we see in commercial, Chris talked earlier about some bolt-ons that we added on.
We really like this, take a, you know, less than 1% of our, the enterprise revenue that has great technology. You bolt it on, you have a strong channel with our direct sales force. We scale these opportunities very, very fast. You know, the AL-KO acquisition, you know, on the, on the high end of air handling, think about clean room environments. A lot of success early. It's early days, but a lot of success. MTA, we just announced, it's industrial process cooling. As we've, as we've gotten into our thermal management systems, we realized that our operating map, okay, where your system can perform, has expanded. Now you're into process cooling and process heating. MTA is a great example of process cooling. Some really cool technologies on their design of their condenser that allows that to be very applicable for that space.
We'll take this with our direct sales force and scale it quickly.
Just to be clear, if you did have ambitions, the only way to really scale the business, it would be probably to do acquisitions on residential side?
Yeah. You would not do it on an organic basis. It's a two-step or three-step distribution, so it's the channel is extremely important and product.
Yeah, makes sense.
Please, another question. Is your question again on residential?
Across.
Across board. Well, I would say we love being connected to our assets. We love being connected to the buildings. Once you have the data, there's lots of advantages that you can run for the customer to make sure that that building is always performing the way it was designed. We recently introduced that same concept in the residential space. As you're thinking about what's happening here in the United States with heat pumps and IRA, these systems are becoming more intelligent, right? When you get variable speed, you have microprocessors that are now on the piece of equipment. It's no longer electromechanical. When you get a microprocessor, you now have the ability to gather data. That's exactly what we're doing.
We developed a system now where if you install a unit on your home, there's a checklist that'll electronically be generated, and it will give the homeowner peace of mind that, and by the way, the dealer, that everything was installed properly and the unit is performing the way it was designed. A lot of times, when you do replacements in older homes, you have air ducts that may have been damaged because of a variety of reasons. You may not even know that. Our system will detect that because you won't get the right pressure drops. You'll be able to say, "Okay, I have another solution that I need to go fix." If you don't fix it, your system is gonna run very inefficiently. It's a great way to do it.
By the way, in this system, it's called Link, you actually can tie into that system remotely. The dealer now can call in and see what's going on with the system before they even roll a truck to do, you know, service or to do any kind of maintenance. It's a great. It's early days, but great success so far. Great question.
Just talking about the aftermarket opportunity, you guys have had, you know, high attachment rates, I think, for a long period of time. How connected is your dealer install base at this point? How far along have we come on that?
We love being connected to our asset base. We love being connected to buildings. You know, Joe used the term attachment rate. I stopped saying attachment rate because others started talking about it. I didn't know what they were attaching, right? I can tell you that our service business over the last five years, compound annual growth rate, including the pandemic year, high single digits. First quarter, double digits. Fourth quarter, double digits. Our service business is very healthy. We invest a lot in our service business. I want our technicians to be the smartest in front of their customers, and it's a great business. We love being connected to our assets where there's so much... It's great for the customer, and it's just business opportunity there as well.
How important-
Sorry, about a third of our enterprise revenues represent service.
Yeah. I was gonna say, how important of a moat is your service technicians?
A lot. I mean, the technicians themselves?
Yeah, just the scale you have.
I mean, our service business, as Chris said, it's about a third of the enterprise, and our service technicians are, you know, they're Best in breed, some of the best that we have in the industry. But we spend a lot developing our technicians. It doesn't happen by accident, okay? It has to do with, you know, rigorous training, rigorous tools, how they interrogate a machine. It's very much like your car. If you remember, you know, 20 years ago, you would take your car in to a corner garage and have it fixed. Today, you take your car in and someone plugs into it. It's very much the same concept, but someone's plugging in now remotely and telling you what's wrong before they even go there.
By the way, what they're really looking for is the unit using too much energy versus something's about to break. We do both, and that's when we start dispatching technicians.
I know we've focused a little bit on residential heat pumps in Europe, but as you're thinking about your capital deployment strategy, you know, what other types of, you know, areas do you think could require dollars from an M&A perspective, and how are you thinking about that toggle between M&A and buyback throughout the year?
Yeah. Our target for the year is, two and a half billion dollars, Joe, of deployment. $700 million of that's earmarked to dividends, so it leaves about $1.8 billion left to deploy. Of the $1.8 billion, we've already applied $800 million to share repurchase or to, closed M&A, like MTA, or we have another transaction that we expect to close sometime in the second quarter in the Americas space. Think of that as a life sciences investment within our commercial HVAC business.
Okay.
Okay, working through the math, there's about $1 billion left of capital deployment to hit our target for the year. We'll continue to toggle between M&A and share repurchase. We see a lot of value in our shares. We saw it in the first quarter. We see it today. And I would tell you, though, that to Dave's earlier point, if we can take an early-stage technology and match it up with our channel, we've had very strong returns in those types of acquisitions. The pipeline is active. We're gonna make sure that we're disciplined, though, as we go through an M&A environment. I'm gonna steal some of Dave's words because we wanna make sure we remain disciplined as we have been, but we still have a lot of firepower to deploy cash this year.
Great to hear. We'll end on that note. Dave and Chris, thanks so much for being here.
All right. Thanks. Yeah. Thanks, everyone. Thank you. Appreciate it.