So very happy with our results and very happy with the order book that we have going into 2024. It gives us a lot of visibility into 2024.
Chris Snyder: I appreciate that. And then maybe just following up on data center, and I know we’re in the very, very early innings on AI, but is there any way that you could frame Trane’s positioning in that market, the opportunity that you see going forward, just because it is very new, but it also does seem very significant. Thank you.
Dave Regnery: Yes, I mean, it’s not new to us. We’ve been in data centers for a long time. We’re very strong in that vertical. There’s a lot of public information out there that’s trying to size the data center market, and it’s somewhat difficult. You have a lot of variations in those reports just because by nature, the data center market is very confidential to data center providers. Okay? They don’t want a lot of that information out. But if you look at the reports and just kind of triangulate it, you get a global market anywhere between, I mean it’s a big range, but $6.5 billion [ph] to up to $10 billion. So, I mean, it’s a big range out there. And if you look at growth rates, if you take the most conservative growth rate, you’re going to see high teens, maybe mid teens growth on a compound annual growth rate for the next five years.
So this is a very strong vertical today. We do very well in it with our very technical sales team calling on data center customers and working with them. It’s very strong today and anticipate it being strong well into the future.
Chris Snyder: Appreciate that. Thank you.
Dave Regnery: All right, thanks, Chris. Have a great day.
Operator: Our next question comes from Gautam Khanna from TD Cowen. Please go ahead. Your line is open.
Dave Regnery: Hey, Gautam. Gautam. Operator, I think we might want to come back to Gautam.
Operator: Certainly. I’ll move on to Joe Ritchie from Goldman Sachs. Your line is open.
Joe Ritchie: Hey, guys. Good morning and nice end to the year. Dave, look, the service business we’ve talked about now for several years, it’s been great for you guys, and yet continues to accelerate in 2023. The double-digit growth number is pretty impressive. Could you maybe just point out what’s allowing you to continue to accelerate that business here? Is it something around your digital offering connected? How much you’re connecting? How much feet you’re putting on the street? What is it that’s kind of driving this acceleration and growth in that service business? And how do you see that playing out in the coming years?
Dave Regnery: Yes, Joe, thanks for the question. I think I’d say yes, yes and yes. Okay. It’s a system of things that makes our service business great. It starts with a great operating system around our service business. We track probably 30 different KPIs. And if you went to one of our offices, you’d see very detailed tracking on our service, which really leads to our success. So it’s a great business. Okay? I won’t disclose too much about our playbook, but we have a very detailed playbook, and you see it in our results. And I would tell you that our service business is really built around our applied systems. And as our applied systems continue to populate at an increasing rate, you could see the tail that we’re getting in our service business.
Think about applied system. I said this in our opening remarks. Think about it as for every dollar of equipment; think about eight times to 10 times over the life our service business. And you could now start to see that flywheel that’s being created in our service business. So great business today. As Chris said, it’s about a third of the enterprise growing nicely, and we’re investing heavily in it, because we know there’s a lot of opportunities in the future as well.
Joe Ritchie: That’s great to hear. And I guess, look, there’s a lot of good news in this print. I know that there’s some investor concern around the healthiness of the office market in 2024 and ultimately whether that’s going to be a drag on growth for a lot of companies. Can you maybe just address that market specifically and how that’s impacting your business or expected to in 2024?
Dave Regnery: Yes, I mean, I’ll speak of the Americas, and I think I said earlier, we track about 14 different verticals. Office is one of the weaker ones in 2023, and right now we’re forecasting that weakness to continue in 2024. We do believe that at one point office will come back and with our direct sales force, we’ll pivot to that opportunity and capture that opportunity. But right now, it’s going to be soft at least through 2024. We’ll see – we’ll report back as the year progresses as to how that vertical is behaving. There’s a lot in the news about it, so it’s got some recovery to do, but it’ll be soft in 2024. But that’s all baked into our guide, Joe, so, that’s we’ve taken that into account. And I would tell you that the strength that we’re seeing in some other verticals are going to be more than compensate what we’re seeing in the office vertical.
Joe Ritchie: Understood. Thank you.
Dave Regnery: Sure.
