Operator: Our next question comes from Steve Tusa from JPMorgan. Please go ahead. Your line is open.
Steve Tusa: Hey, good morning and congrats on a very strong 2023.
Dave Regnery: Thanks, Steve. Appreciate it.
Steve Tusa: What are you guys embedding for price this year in general for the Americas? I mean, you said it was 3% in the quarter, I think. But what are you embedding for your 2024 guide?
Chris Kuehn: Yes, Steve, it’s Chris. Think about 2024 at the enterprise level around a point of price. It could be a little better than that. But as we’ve seen throughout 2023, the price contribution has started to level off as we move through the quarters. We had over 6 points of price in Q1, and we ended the fourth quarter with less than 3 points of price. So there’ll be some carryover into 2024, but we’re dialing in at the enterprise level probably around a point, it could be a little bit better than that.
Steve Tusa: Okay. And your inflation is kind of stable, I would assume?
Chris Kuehn: Yes. Tier 1 is fairly stable. I appreciate the notes you put out every weekend with updates on commodities, it’s a close read. At Tier 2 that happens to be inflationary, right. As we’re looking at wage inflation, refrigerants are a couple of examples in that space and we continue to work with our vendors on the demand we’re putting through with our order growth. So Tier 2 is a bit inflationary. Freight could be a little bit inflationary going into 2024 with a very positive, at least for us in 2023, on the cost side. But overall, I would say we’re on track to get 20 to 30 basis points, price over cost in the year like we would normally target. But we remain flexible right where we see things turn and we need to make another price adjustment. We’ve got the business operating system to do that.
Steve Tusa: So I would have, sorry, just on a follow-up on the price, I would assume that the majority of that price is still coming in commercial. So when you talk about that flat revenue number for resi, is that basically like, what’s the volume kind of price split that you’re assuming in resi? I guess is the question.
Chris Kuehn: All in for resi, its – we’re dialing in a flat year. Our guide would take into account a plus or minus low-single digits on full year revenues for resi. I’d expect price to be at that one or less kind of level for residential. Really is going to depend on what we think for the volume in the year, but not a lot of price necessarily coming through at this point.
Steve Tusa: And then for 2025, are you guys going to push through the A2L price like everybody else, the 10% – 10% to 15%?
Chris Kuehn: Yes. We don’t have a lot baked into 2024 on the conversion to 454B. If we think that does have an impact, it’s certainly second half of the year, maybe fourth quarter impact. We haven’t dialed in the pricing exactly on that. We’ll do that as we get ready to launch our products. But it’s in the ballpark of what others have said around pricing. But we’ll see how the year evolves, we’ll see how the demand plays with the 410A product versus the 454B transition, and we’ll update as we kind of go through the year.
Dave Regnery: But to be specific, Steve, this is Dave. Yes, for sure we’ll see that in 2025.
Steve Tusa: Yes.
Operator: Our next question comes from Andy Kaplowitz from Citigroup. Please go ahead. Your line is open.
Andy Kaplowitz: Hey, good morning, everyone.
Dave Regnery: Hey, Andy, how are you?
Chris Kuehn: Good morning.
Andy Kaplowitz: Good. How are you? Dave, can you give us some more color on the traction of your thermal management systems in EMEA and the progress you’re making in bringing thermal management systems to the U.S.? Is it possible to quantify the business at this point or at least give us color on how to think about how much of your growth is coming from thermal management systems and where you are in terms of bringing it out here in the U.S.?
Dave Regnery: Yes. I mean, it’s a great question. We continue to do very well in Europe, obviously, as you see in our results. Obviously some of that has to do with thermal management system, which is really electrification of heating. Some of it has to do with some key verticals that are very strong, like data centers and electronics. Look, we’re migrating that technology to different parts of the world. It’s not just in the U.S. we’re also bringing it to Asia. We think there’s a tremendous opportunity to electrify heating and to significantly reduce the carbon footprint for buildings and help them de-carbonize around the globe. We have already introduced several products in different regions. That trend will continue in 2024.
And by the way, I don’t want you to think that we’ve stopped innovating in Europe because that continues, it well. I think we’re on our, last time I was there was like our fourth or fifth generation of what’s happening there. So this is an evolving market. We believe its tremendous opportunity, excuse me, for the future, but we have solutions that have set great paybacks for our customers that, and a lot of people, I was getting asked the other day about some of the incentives around this. I’m like, yes, the incentives are great tailwinds, but these projects stand on their own. I mean there’s great paybacks, if you’re able to increase the efficiency by three, four times these are fantastic opportunities for Trane Technologies and they’re fantastic opportunities for our customers to really help them de-carbonize and actually save money as well in the process.
