Ingersoll Rand Q1 2025 Earnings Call Transcript

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May 2, 2025
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Operator

Hello, and welcome to the Ingersoll Rand Q1 twenty twenty five Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to turn the conference over to Matthew Fort, Vice President of Investor Relations. You may begin.

Matthew Fort
Matthew Fort
VP of IR & Corporate FP&A at Ingersoll Rand

Thank you, and welcome to the Ingersoll Rand twenty twenty five First Quarter Earnings Call. I'm Matthew Fort, Vice President of Investor Relations. And joining me this morning are Vicente Reynal, Chairman and CEO and Dick Kinney, Chief Financial Officer. We issued our earnings release and presentation yesterday afternoon and we will reference these during the call. Both are available on the Investor Relations section of our website.

Matthew Fort
Matthew Fort
VP of IR & Corporate FP&A at Ingersoll Rand

In addition, a replay of the conference call will be available later today. Before we start, I want to remind everyone that certain statements on this call are forward looking in nature and are subject to the risks and uncertainties as discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call. Please review the forward looking statements on Slide two for more details. In addition, in today's remarks, we will refer to certain non GAAP financial measures. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website.

Matthew Fort
Matthew Fort
VP of IR & Corporate FP&A at Ingersoll Rand

On today's call, we will review our company and segment financial highlights and provide an update to our full year 2025 guidance. For today's Q and A session, we ask that each caller keep to one question and one follow-up to allow time for other participants. At this time, I will turn the call over to Vicente.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thanks, Matthew, and good morning to all. Starting on Slide three, we're off to a strong start in Q1 as we delivered 10% total orders growth with a book to bill of 1.1 times. Additionally, organic orders increased by 3.3%, and we deliver a record Q1 free cash flow of $223,000,000 We remain encouraged as April orders continue to show stability, finishing in line with expectations. We continue to focus on controlling what we can control, staying agile, and leveraging IRX to offset all non tariff impacts. On slide four, I want to spend a minute highlighting why in this current environment, our in region for region footprint provides us with a competitive advantage.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We have built a footprint that allows to serve our customers with a wide range of technologies via an in region for region model. This, in combination with our proprietary demand generation tool, has us very well positioned to take market share in this environment by serving our customers locally with technologies and solutions that offer the highest ROI. Turning to slide five, our durable financial profile combined with our strong cash flow generation provides us with multiple levers to drive value creation. Our capital allocation strategy remains unchanged with M and A continuing to be our top priority. As a reminder, our M and A strategy is centered around making smaller bolt on acquisitions that complement existing technologies.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And with a highly fragmented addressable market of approximately $57,000,000,000 we believe there are still plenty of opportunities for bolt on acquisitions across all of our businesses. Our nine deals currently under LOI and the more than 200 companies currently in the acquisition funnel are largely centered around these smaller bolt on acquisitions, which are mainly in region for region and are also primarily internally sourced. As part of our balanced capital allocation strategy, our board has authorized an additional $1,000,000,000 of share repurchases, bringing our total value authorization to $2,000,000,000 This provided us with optionality for outsized opportunistic share repurchases over the short and medium term. We remain confident in our long term value creation and we'll leverage our strong cash flow generation to continue our focus on bolt on acquisitions as well as share buybacks. At this point in time, we're expecting to execute up to $750,000,000 of share repurchases by the end of twenty twenty five.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Even with these accelerated share repurchase activity, we continue to be committed to our expected 400 to 500 basis points of annualized inorganic revenue to be acquired in 2025. Moving to the next page, we're highlighting two additional transactions that were closed during the month of April. Bolt on in nature, these acquisitions expand our capabilities in core technologies focusing high growth sustainable end markets. With both acquisitions at nine times or less pre synergy adjusted EBITDA versus multiples, we continue to demonstrate our disciplined approach to M and A and expect to meet a mid teens ROIC for both deals by the end of the third year of ownership. We're off to a strong start towards achieving our 2025 annualized inorganic revenue target with six transactions already closed this year at a weighted average purchase multiple of approximately nine times.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

I will now turn the presentation over to Vic to provide an update on our Q1 financial performance.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Thanks, Vicente. Starting on slide seven, organic orders got off to a strong start, up 3.3% year over year with a book to bill of 1.1. We were pleased with the organic order performance across both segments and specifically within ITS, which saw organic order growth within all three regions. Aftermarket revenue finished at 38% of total revenue, which was up 110 basis points year over year. The 6% growth in aftermarket revenue underscores the focused efforts and progress we continue to make on aftermarket and recurring revenue.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

The first quarter finished largely in line with expectations for revenue, adjusted EBITDA and adjusted EPS. It's important to note that approximately $15,000,000 in revenue initially anticipated to be recognized in the first quarter has been deferred to the second quarter due in large part to customer requests. Additionally, we continue to make requisite investments for growth in the business, which did impact our year over year margin profile. The company delivered first quarter adjusted EBITDA of $460,000,000 with an adjusted EBITDA margin of 26.8%. Adjusted earnings per share was $0.72 for the quarter and free cash flow for the quarter was a Q1 record of $223,000,000 Total liquidity was $4,200,000,000 with a net leverage of 1.6 times demonstrating the tremendous strength of our balance sheet which we believe enables value creation optionality in volatile environments like the one we are currently facing.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Turning to slide eight. For the company, total Q1 orders were up 10% and revenue increased by 3%. Book to bill for the quarter was a robust 1.1 times showing great momentum. And total company adjusted EBITDA was flat compared to the prior year. Corporate costs came in at $36,000,000 for the quarter.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

And finally, adjusted EPS for the quarter finished at $72 per share including a Q1 adjusted tax rate of 22.6%. On the next slide, free cash flow for the quarter was $223,000,000 including CapEx which totaled $34,000,000 Total liquidity now stands at $4,200,000,000 based on approximately $1,600,000,000 of cash and $2,600,000,000 of availability on our revolving credit facility. As Vicente mentioned earlier, we're off to a strong start towards realizing our 2025 commitment of 400 to 500 basis points of annualized inorganic revenue acquired in 2025. Leverage for the quarter was 1.6 turns, which was a 0.9 turn increase year over year and flat sequentially versus Q4 twenty twenty four. As a reminder, the year over year increase in leverage was driven primarily due to the purchase of ILC Dover in June of the prior year.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Specifically within the quarter, cash outflows included $163,000,000 deployed to M

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

and A as well as

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

$18,000,000 returned to shareholders through $10,000,000 in share repurchases and $8,000,000 for our dividend payment. I'll now turn the call back to Vicente to discuss our segment results.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thanks, Rick. On slide ten, first quarter orders for IPS finished up 6% year over year with a book to bill of 1.1 times. Organic orders grew 3.5%. It's important to note that we saw organic orders growth across all regions, including Asia Pacific, and we remain encouraged by the market activity we're seeing in China. Revenue finished down 2%.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We continue to be encouraged by the growth in recurring revenue, which was up double digits year over year. Adjusted EBITDA margins declined year over year driven by the flow through of organic volume, the expected dilutive impact from recently acquired companies and continued commercial investments for growth in the business. Moving to the product line highlights, compressor organic orders were up mid single digits, industrial vacuum and blowers organic orders were up low single digits, and power tools and lifting organic orders were up low single digits. I added here in our innovation to action section is an example of our innovate to value process or I to v. The North American compressor team harmonized core components across multiple offerings of our oil lubricated product, driving a 23% reduction in total cost.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

This is one example of how we continue to see gross margin improvement opportunities even with technologies that have been in our portfolio for a while. Turning to Slide 11, Q1 orders in PST were up 28% year over year and up mid single digit sequentially from Q4 twenty twenty four to Q1 twenty twenty five. Organic orders finished up 3% It is important to note that we saw organic orders growth in both the Precision Technologies and Life Science businesses. Revenue finished up 23% year over year driven by M and A and finished down 3% organically. PST delivered adjusted EBITDA of $106,000,000 which was up approximately 16% year over year with a margin of 29.1%.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Adjusted EBITDA margins improved 150 basis points sequentially and finished in line with expectations. For PST innovation in action, we're highlighting a great I2B solution for CPEX progressive cavity pumps. This new solution optimizes the maintenance process for the replacement of key consumable components, reducing critical downtime for our customers and improving margins by 10%. And as a reminder, CPEX was a company we acquired with mid teens EBITDA margin and in less than three years, we improved that to PSP fleet average. And as you can see from this example, we continue to find ways to increase value in both to the customer and to the financial profile of the business.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

As we move to slide 12, I wanted to provide an update to the potential tariff impact on our business and how we're mitigating it. Starting on the left side of the slide, based on announced tariff rates as they stand today, our in year exposure for tariff is approximately $150,000,000 You can see the tariff rates outlined on the slide. And it is worth noting that the approximate $150,000,000 estimate also includes the secondary impact of tariffs, which refers to price increases we're anticipating largely from our domestic US suppliers who are procuring components from outside The US. On the right hand side of the page, we're showing the mitigation actions that we have currently deployed and which are well underway. Starting first with pricing actions, we have taken a multistep approach with list price actions across our impacted businesses put in place as of April 1, followed by targeted surcharges effective the week of May 1.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Based on these pricing actions, we expect to offset the impact of tariffs one for one. In addition to pricing actions, we have launched a tariff war room to operationalize our tiered supply chain mitigation plan. And these include operational and or routing changes at Ingersoll Rand manufacturing locations, supply chain relocation of existing supplier production to alternative manufacturing locations and leveraging the global supply base to source from new suppliers. It is worth noting that many of these actions will take some time to fully implement, so we're not expecting a material impact from these actions in the year, but we'll continue to utilize IRX to drive these actions to completion in an accelerated manner. On Slide 13, regarding our current guidance, we decided to take a prudent view by maintaining total revenue consistent with prior guide despite the tailwinds we're seeing from a strong start in organic orders through April, incremental pricing actions to mitigate the impact of tariffs, FX tailwinds and incremental revenue from recently completed acquisitions.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

In order to maintain total revenue, we're including a contingency in organic volume as outlined on the table. We're taking that contingency in volume at normal flow through, which creates a change in adjusted EBITDA and adjusted EPS also shown in the table. For the rest of the components of our full year guide, we anticipate our adjusted tax rate to be roughly 23%, net interest expense to be about $220,000,000 and CapEx to be around 2% of revenue. Finally, our guidance does not include the impact of any anticipated share repurchases we spoke about or incremental M and A, which we expect to complete over the balance of the year. At the bottom of the slide, we have also added commentary regarding the current market indicators we track, which continue to show good signs.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

MQLs were up double digits in Q1 twenty twenty five and remained strong in April. Large long cycle funnel activity continues to be robust with projects continuing to progress through the decision making process. And April orders have continued to show stability and in line with expectations. While we are operating in a dynamic environment, business conditions remain solid, and we're encouraged by the organic order growth we saw in Q1 and the continued momentum we have seen in April. We're focused on controlling what we can control, and our teams continue to execute very well.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We remain committed to leveraging our robust balance sheet to strategically deploy capital and drive value for our shareholders. And finally, slide 14, as we wrap up this portion of the call, I would like to highlight that we remain nimble and are prepared to pivot in what continues to be a dynamic global market environment. We will continue to leverage our robust global in region for region manufacturing capabilities and pivot towards opportunistic end markets, remaining aggressive and focused on taking share regardless of the macro conditions. We have multiple levers to deliver shareholder value, which differentiates Ingersoll Rand as an investment. To our employees, I want to thank again for your part in delivering another strong quarter.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Remain focused on controlling what we can control and staying agile through the use of IRX. With that, I will turn the call back to the operator and open it for Q and A.

Operator

Thank you. You. Your first question comes from Mike Halloran with Baird. Your line is open.

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

Hey, good morning everyone.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Good morning Mike.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Good morning Mike.

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

So

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

the last comments on the guide, I just want to make sure we're on the same page here. Essentially, you bridge previous guide to current guide? It seems like you are taking the organic volume assumptions down, but it's more precautionary as opposed to anything you're seeing today, from an order trend backlog, etcetera. And so maybe you could just break that out and how you're thinking about the volume, price, confirm the precautionary, FX, and just kinda walk through those moving pieces.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Hey, Mike. Yeah. Yeah. You're absolutely right. It is what we call it precautionary, or prudent.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And because when you what we decided to do is to keep the total revenue guide consistent with the prior guide even though when you look at the components, we could have increased that guide in the sense that tariff pricing goes up 2% in incremental growth. When you look at a combination of FX and M and A, and I'll say FX as of the March, the combination of FX at the March and M and A should have given us another two points of growth. And we decided that in order to keep the total revenue guide consistent based on this environment, we felt it was prudent to not raise that revenue. We decided to then take the offset in organic volume, which then basically plugs in at a down 4%, which we believe is both prudent and also derisking the year and and holding the total revenue guide flat.

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

Helpful. And then a twofold question. Can you just talk to any nuance you're seeing on the short cycle businesses versus the long cycle businesses, more on the ITS side there. And then on the PST side, you know, you've had positive orders for, what, four quarters or so in a row now. At what point does that turn to positive organic growth on the revenue line?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Mike, in terms of the short and long cycle, I would say we saw a very good balance on both. As you remember, we have spoken a lot about NQLs being up double digits for also a couple of quarters, but the elongation of decision making was taken longer and also on the long cycle. We also highlighted in the previous quarters too as well that and the same thing now is that we're not seeing any of those order or potential orders kind of leads in the funnel getting canceled. It was just taking a little bit longer. So we're seeing still good momentum on kind of flushing those through the system and getting good orders.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And that we're seeing it on both. I'd say, as we said, and you can also on the slides, NQLs in the first quarter and also through April continue to be very positive double digit. And also long cycle continues to be fairly robust, not only in terms of the total size, but in terms of projects that we're adding on.

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

And then the TSC question?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Hey, Mike. This is Vic. So, yeah, I think first of to your point, I think similarly, we're encouraged by the momentum we've been seeing on the PST side. I think a couple of comments I think we made in the upfront comments here that we did see organic growth on both components of PST, so both the Precision Technology side as well as the Life Sciences. And so that Life Sciences is really referring to the piece of that that's organic is the legacy, what we call, the medical business.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

So, obviously, that has had probably the most challenging comps for a period of time. I don't think we'd say we've seen necessarily an inflection point fully yet, but we are encouraged that we're seeing a little bit of a return to organic growth. So I think we're encouraged here about kind of what we're seeing going forward, and that, you know, that will lead to, you know, better growth momentum as we move to go into the back half of the year, which should also help the margin profile as well.

Michael Halloran
Associate Director of Research at Robert W. Baird & Co

Really appreciate it, guys. Thanks for all the help.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Thank you.

Operator

The next question comes from Julian Mitchell with Barclays. Your line is open.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Good morning. Good morning. Just wanted to start with the organic growth outlook. So as you said, it seems like trends year to date in orders have been as you thought. There's some sales sort of moving around as normal.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

But when we're looking at this sort of seasonality of revenue this year, maybe help us understand how the quarterly organic sales are expected to progress? Anything abnormal seasonality wise? And what sort of exit rate for the year from the year does your guidance embed on organic sales?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yeah. Julian, let maybe kind of take that in two pieces, including also kind of just talking about maybe half one, two probably is the right way to frame that up. So first and foremost, I do think that from a seasonality perspective, you think about either percentage of revenue or percentage of earnings first half or second half, very comparable to what you've seen historically. Nothing really out of sorts from that perspective. I think when you think about the, you know, the the the moving components, and I'll I'll probably answer your question here in terms of, you know, the organic.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

First and foremost, we do expect, obviously, organic growth trends to improve moving into the back half of the year as compared to the first half of the year. So I would think about the first half of the year at from an organic perspective in total being down approximately 3% to 4%, with price contributing approximately 2% of growth, including, I would say, beginning of some of the tariff related pricing actions here in the April and May timeframe. And then as you move to the second half of the year, we're expected to be up approximately 3% to 4% total organic, with organic volume expected to be down low single digits and the balance coming from the full run rate of pricing including the tariff related pricing actions. So that can kind of help frame it up including the pricing and volume components. And it is worth noting here that the comps in the back half of the year do moderate a bit which does help with that comparison point.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

That's helpful. Thank you, Vic. And then just my follow-up would be looking at the EBITDA margins, those were down slightly year on year in the first quarter. I think the guide for the year, they're sort of flattish overall. So maybe help us understand kind of any effects on the margin rate from tariffs as we go through the balance of the year?

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

And should we expect sort of margins to just be up a bit in each of the remaining three quarters year on year?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Jud. I think the way I would explain it and to keep it relatively simple here is you're completely right. Total year, it implies relatively flattish. I think that's essentially what you will see in ITS, a little bit better on the PST front. In terms of the biggest driver, the single biggest driver is the tariff pricing.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

We are taking pricing actions that are one for one offsetting the tariff costs. So that size is approximately $150,000,000 both of price and cost. And obviously, with that being a zero flow through, that is, you know, let's call it dollar cost and margin, essentially. You know, it's not it's not it's dilutive to the to the overall. So that's essentially the biggest driver.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

I think when we look at the other factors of productivity, normal pricing actions, things of that nature, we actually feel relatively good, kind of very much in line with how you've seen us historically behave. And then in terms of the quarterly, yes, a little bit of moving parts, but generally speaking, right around that kind of flattish expectation Q2 to Q4.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Great. Thank you.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

You bet.

Operator

Your

Operator

next question comes from Jeff Sprague with Vertical Research Partners. Your line is open.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Hey. Thank you. Good morning, everyone. Hey. I'm a little bit late, but just coming back coming back to tariffs, if I could.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Vasanti, I I think you you know, when in in kind of explaining the hedges of sorts in the guide, right, you kinda characterized the tariff impact as 2% of sales. But it it doesn't sound like you're going for it all in price. Can you can you if you haven't already, can you just provide a little bit more color on how much you think of it as kind of price versus kind of cost or other sourcing actions to to offset this gross amount?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yeah, Jeff. I I I'll say it's a pretty good plan between price and surcharges. Everything that we did in April 1 was 100% on price. And so and then what we did on the as of May 1 included a good combination between price and surcharges. And we're doing that to give us plenty of flexibility as we kind of go into the second half and better understand too as well what happened here with the surcharges, kind of what stays or doesn't stay.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

I will also kind of emphasize and mention too as well, Jeff, that typically when we do a price increase, it stays. So we have been very disciplined and diligent that when we do a price increase, we don't then discount that price. I will also mention, kind of what I said on the call is that a lot of these, tariffs today does not include some of the meaningful cost mitigation. That is not included here, but we're also working on a lot of cost mitigation. And that means, whether supply chain relocalization or moving one product from one factory to the another to another, as you saw, I mean, we have a pretty vast global footprint and we have the ability and capability of moving product from one facility to another.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So that is not included in our guide. But clearly something that, as you know us very well, we're always actively working on cost mitigations.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Yeah. Great. No. That's what I was sort of getting at. So, yeah, the plan is all priced, but you're obviously doing a lot of other stuff.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

It's providing some cushion. And then could you also just speak to the China business, specifically China for China, kind of the tone of demand that you're seeing there, and sort of any evidence of backlash against US companies or anything of that nature?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Hey, Jeff. Was actually I'll say, you know, I was actually with the China team a couple of times already this year. And and I'll tell you that the team continues to be fairly optimistic about what could what could happen here in this year based on some of the push that the government seems to be doing now here in China for China and how everything that we do in China really stays in China. So we're kind of being viewed as a very local company in China for China. So things seem to be very stable.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Clearly, throughout the quarter, we saw better improvements. Still for the year, we're predicting that China is going to be materially is going to still be down. It's kind of what we imply in our guide. But we're encouraged by what we're seeing and how our teams continue to really accelerate, the process of localization and also share taking in new technologies and products such as blowers and vacuums. Also highlight too as well, Jeff, you heard us talk a lot about how outside of China, we have put a lot of attention on how do we accelerate our share take or market share, which is underpenetrated.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We call it the underpenetrated regions. It is pleased to say that, obviously, overall, within the ITS, we saw Asia Pacific up organically in orders. And that speaks to the fact that we continue to see good momentum outside of China with the organic investment initiatives that we have done outside of China. And that remains to be a great good encouragement to offset any potential you know, softness that China may seem to be continuing to see throughout the rest of the year. But again, China, I'll say, encouraged and and no no negative, retaliatory, I'll say, gestures that we're seeing from customers against, against us.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Thank you for that. I'll leave it there.

Operator

The

Operator

next question comes from Rob Wertheimer with Melius Research. Your line is open.

Rob Wertheimer
Director of Research at Melius Research LLC

Thank you. I'm curious how you think about acquisitions, your desire to close, how conversations change just given obviously there's more uncertainty that you reflect in your own guidance. Do you assume a safety factor and are willing to go forward? Or what is the outlook for kind of closing deals in the year? Thank you.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes, Rob, I'll say it continues to be very strong funnel that we have in the M and A. And you have seen that we have closed already quite a few transactions here in the year already. So we're off to a very good start. As you have seen us do, we're very focused on bolt on in nature acquisitions. We're very disciplined with price.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

You can see that the last two that we mentioned here roughly nine times pre synergy multiple with expectation that on the post synergy we can lower that to another three turns. So very good return on those investments that we're making there. I'll I'll also highlight that our funnel is consistent to what we have done always done before, which is sole source. We go to family owned companies. And moments like these, in this macro environment, provides a lot of uncertainty to those multi generation families and also provides a good opportunity for us to continue to emphasize how we're a good home for those acquisitions.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Clearly, in the financial diligence, we do a lot of work to understand is the macro kind of making changes or not. And and we're, you know, we're we're being prudent on how we're, you know, kind of that, writing the the the model to create that ROIC. Last two points I'll say, you know, we're we're a lot of these acquisitions are very in region for region, which obviously proves again a very good concept in this environment. And and the last point I'll say, Rob, is that a lot of these multi generation families, they're encouraged to come to us because of our ownership model. I mean, they're regardless of, the macro environment, they they view that, that we are a great home for transitioning their legacy, especially the way we treat employees and how we treat, the long term ownership of, of having those employees be part and owners of the company.

Rob Wertheimer
Director of Research at Melius Research LLC

Thank

Rob Wertheimer
Director of Research at Melius Research LLC

you.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thank you, Rob.

Operator

The next question comes from Andrew Kaplowitz with Citigroup. Your line is open.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Hey, good morning everyone.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Morning Andy.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Sanjay, book to bill over one time as you said, which was strong and still strong in April. And I know you said your MQLs remain strong. So maybe you could talk about your order expectations for the year. Does this year end up actually being normal for you where book to bill stays over one times in Q2 and you end up booking book to bill at or above one for 2025?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yes. Andy, this is Zach. Maybe I'll take that one. Obviously, we're not going to necessarily try to try to guide on orders. I think what we'll say is this, you know, encouraged by the momentum we saw in q one.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Worth noting that a good balance between both, we'll call it, short to medium cycle products as well as longer cycle activity. And I think it speaks to a lot of what we've been talking about even in prior quarters that MQL activity has remained healthy. And we've been seeing that, I'd say, funnel activity and was just waiting for some of those longer cycle projects to kinda get to the finish line, if you will, in terms of the POs. So we're encouraged that we saw a nice balance of that. You know, I think right now, you know, listen, our expectation is that, you know, we we're not we're we're not expecting to see, dramatic changes from what we've seen historically in terms of book to bills from a seasonal perspective and things of that nature.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

And that's kind of the best view we have at this point in time just given the macro environment.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

It's helpful, Vic. And then, Vic, can you talk about the Q1 margin performance in the segments? I know you got hit with operating deleverage in ITS given the $15,000,000 moving to the right as you said. But if I look over the last couple of quarters, margins at least versus high expectations have been a bit choppier and we know your acquisition activities continue to be robust. So is there anything to read into here that acquisition noise and margins a little higher these days?

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

And is there anything you could do to mitigate that noise?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes. Andy, let me start by on kind of maybe the ITS and just remind everyone that Q1 twenty twenty four, the ITS EBITDA margins were really strong. I mean, were 29.9% in the first quarter of last year, which was up three seventy basis points. So still when you look at it at two year stack, like Q1 twenty twenty four and Q1 twenty twenty five, we're still up two sixty basis points, which is we're very pleased with what the teams continue to do, including obviously bringing new M and As and also as you said that some of the deleveraging because of the organic decline. So we continue to be very pleased with how the teams continue to execute within the ITS.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And to your point, I mean, there's still plenty of runway for us to improve. I mean, you saw the great example that we gave in the slide of the ITS, how even on very kind of core technologies that have been with us for quite some time, we're still finding ways with the use of innovative value to really consolidate those product lines and still save. I think it was like 23% improvement in the bill of material cost of that specific product line. So I think we're encouraged. We continue to see tremendous runway.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We spoke a lot about how recurring revenue and things like that will also improve the margin profile of the ITS. On the PST segment, you saw sequentially great improvement, 150 basis points Q4 to Q1. We continue to be very pleased to what we see on kind of what it was kind of that legacy PST that we call Precision Technologies now that continues to see some very good improvements. And also the operational improvements that we saw on the ILC Dover business on a sequential basis Q4 to Q1. So I think everything seems to be moving along with expectations.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And clearly there's still plenty of runway for us to see improvement on both segments.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Appreciate the color, Vicente.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes. Thank you, Andy.

Operator

The next question comes from Nigel Coe with Wolfe Research. Your line is open.

Nigel Coe
Managing Director at Wolfe Research, LLC

Thanks. Good morning.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Good morning, Nigel.

Nigel Coe
Managing Director at Wolfe Research, LLC

Good morning, guys. So just wanted to maybe sharpen up the 2Q kind of thinking here.

Nigel Coe
Managing Director at Wolfe Research, LLC

You said previously, I think, 46,000,000, 50 4 million on EBITDA, but obviously, a lot's changed since February. So are we still on that sort of 46% phasing for the first half, Vic?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yes. I think you're still very much right in line with that expectation.

Nigel Coe
Managing Director at Wolfe Research, LLC

It's about 5.05 of EBITDA, $0.08 0 of EPS in that kind of zone?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

You're in the right ballpark, Nigel.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. Fair enough. Fair enough. That's helpful. And then, a big picture of a question, I think, maybe for you, Vicente.

Nigel Coe
Managing Director at Wolfe Research, LLC

I mean, the services growth, the aftermarket growth of 6% is really encouraging and shows resilience of that franchise. But that sort of backs into equipment down close to 10%, nine % to 10%, I think is the number. That feels recessionary. So I understand there was some push from 1Q to 2Q, but any sort of perspectives you have on the cycle would be very helpful.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

No. I'd say Nigel, I keep in mind that we're putting a big effort on the recurring revenue that we said that recurring revenue kind of up double digit. I think we still feel fairly good on the overall compressor portfolio. And as you saw, where the compressors, blowers and vacuum technologies and even including the power tool that we continue to see, we saw positive good order organic momentum. We do analyze a lot of the data that we kind of get from associations, particularly here in the one in The U.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

S, which continues to show that we're holding to taking share. And so we remain encouraged. We have an amazing installed base of kind of core equipment. I think it's very important for us to start connecting a lot of that, which is what we're very focused on. And in addition to that, we continue to seed more equipment across the world.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So nothing that it is concerning here to us.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. Thanks a lot. Cheers.

Operator

The next question is from Joe Ritchie of Goldman Sachs. Your line is open.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Hey, Good morning.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Good morning, Joe.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Hey. Just tackling this new guidance from a little bit of a different angle. So if I take a look at the kind of, like, midpoint of your EBITDA for the year, it's, $22,100,000,000.0. It feels like we can get there just from your completed m and a. So I wanna make sure that I've got that straight.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

And then, like, all else being equal, there really isn't much baked in for the rest of the business.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yeah. Joe, let me let me let me take that one. Obviously, with regards to the m and a that we have completed that, we sized that in the earnings at approximately $330,000,000 which I think is at relatively normal flow throughs as you would expect for things that are completed kind of year one. As far as the other moving parts, remember, with the with the organic volume adjustments we talked about and the and the the pricing, a meaningful component which comes through it at zero margin, it's a little bit atypical to kinda prior years, but we think, as we said, kinda prudent given kinda what we're seeing. So, again, are you kind of far off the mark in the context of the moving parts?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

No. I don't I don't think so in that respect. But I I would say that I'd say the composition of the the growth elements, particularly the the zero flow through on tariff pricing is probably the unique aspect of of this year compared to years past.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Okay. Okay. Great, Nick. And then and then just to sense a maybe bigger picture picture question and, you know, tough to tough to play in hypotheticals here, just given the environment that we're in. But if if the tariffs were to kind of resolve themselves, you know, let's call it sometime in the next couple months, given just the demand picture that you're seeing in your business today and that contingency that you have built in, would your expectation then be that like, okay, we are going to get a little bit better growth then as the year progresses and we can get back to potentially what the original guidance was for the year?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes, potentially, Joe. Mean, I think there's a lot of things that can happen. So, yes, I mean, absolutely. Don't again, I think we're incredibly encouraged that even though in this environment, we're seeing what we're seeing in terms of kind of the organic order growth momentum through on a year to date basis. And as we said, we just decided to take a prudent view because if you start stacking up all the positives, it kind of became more of a situation that we said, hey, we want to be more prudent.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So if tariffs comes off, could there be accelerated growth? Yes. I mean, but TBD, when that moment happens and at that time, we will definitely evaluate what the situation is.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Makes a lot of sense. Thanks guys. Appreciate it.

Operator

The

Operator

next question comes from Steven Volkmann with Jefferies. Your line is open.

Stephen Volkmann
Managing Director at Jefferies & Company Inc

Great. Good morning guys. Just a couple of quick follow ups here. I think you talked, Vic, about like $150,000,000 or something of pricing. Is that pretty much even in the two segments?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Well, yes. Obviously, it's, I'd say, proportional between the two given the size. But what I would say is the, the level of tariffs and or the level of pricing actions have been very commensurate across the two is probably the best way to think about it.

Stephen Volkmann
Managing Director at Jefferies & Company Inc

Okay. And then I'm just trying to get my head around, you know, you're obviously doing some other things, on the cost side, sourcing, etcetera. It would seem to me like those would take a little while to sort of filter in, but but it also doesn't seem like you're really sort of saying the second quarter will be weaker and will sort of grow into it. So I just thought that was interesting. Any way to square that circle?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yeah. Steve, I'll take that one. So, you know,

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

I think a a couple ways to think about it. I think the way you've thought about the I'm gonna call it the cost actions, as Vicente mentioned earlier, a %. You know, we're taking a prudent view here. Teams, we've launched tariff war rooms and things of that nature, which is very collaborative across the enterprise. We're just, you know, expecting that to, you know, take some time to kind of get to completion and taking a prudent view on the in year impact.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

So we're offsetting the tariffs essentially one for one with the pricing actions. I think the reason you're seeing that essentially being net neutral from a dollar perspective quarter to quarter is we have taken those actions in kind of two tranches. We took immediate action here kind of coming into April 1, which I think has helped mitigate a lot of the noise that you would see here in Q2 as well as a second round of actions here effectively as we speak here on May 1. So I think the two tiered approach kind of on the pricing front compared with tariffs themselves are kind of folding in, think, is keeping us largely intact.

Stephen Volkmann
Managing Director at Jefferies & Company Inc

Got it. Okay. Thank you, guys.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thank you.

Operator

The next question comes from Joe O'Dea with Wells Fargo. Your line is open.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Hi, good morning.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Hey, Joe.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Hey, can you unpack the 4% volume impact, I guess embedded as contingency? And it would seem that that's an annualized number. So it's an even bigger hit that you're taking primarily to the back half of the year. But where do you think about that vulnerability really sitting between segments and then within segments by end markets or product groups, just to understand what you're watching most closely for the volume vulnerability?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Joe. This is Vic. I'll take that one. So I think a couple of things here. One, we've taken what we think to be a prudent view for the balance of the year.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Obviously, with only three quarters in the year, yes, there obviously is an impact in the second half. As far as how to think about it between the two segments, we view it actually very comparable. Right? Like Vicente has mentioned here, you know, you look at this in kind of two fronts. One, I'd say, prudently derisking, the guide, but then also keeping total revenue intact.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

And you'd see that we actually kept that across you know, it's it's commensurate across both segments. So, you know, as far as, you know, product lines or anything of that nature, no. I I don't think we view it necessarily any different, you know, know, what I'd say product line by product line or anything of that nature. We're taking a prudent view on the volume expectations to keep the revenue guide kind of intact from a total perspective. And yes, obviously, the second half impact, as I kind of outlined before, we are expecting organic volumes to be down low single digits in the back half of the year.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Got it. Guess just related to that, like, are you seeing different demand trends you've got products that price at pretty wide range of points. Are you seeing anything in differing demand trends between those, whether something that would be more at the reciprocating scroll compressor price points or up to centrifugal, like any hesitation out there on higher price points?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

I think, mean, Joe, nothing of significance that we can think about. I mean, as you kind of well point out, when you think about centrifugal and some of the kind of medium to large, those tend to be more CapEx oriented versus maybe the smaller compressors will be more related kind of, I say, OpEx. And but we we play more on that kind of, you know, become medium ish to large compressor side. I mean, we don't do we clearly we clearly are not in the game of, do it yourself sort of compressor style, piston compressors, which I assume that's maybe more related to consumer spend for your sellers, which that we don't play in that market. So our products are more on the highly engineered and they do provide that return on investment.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So everything we sell is based on the payback. And as long we have proven that as long as we show the customer that the payback is, you know, fifteen months or less, they will put a project up on the list because, obviously, it's a great payback. And the technologies that we're launching and how save energy, how we conserve water and everything else, it's a great way for customers to view that total cost of ownership that offers a payback.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

And then just on tariffs, $150,000,000 can you size how much of that is China? And within that, how much is import and how much is export, really so that we have a sense of moving forward? And if we see headlines on changes to these, we have a sense of how much of that applies to the 150

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yes. Sure, Joe. I'll take that one. So I'd say the majority of the costs are China oriented. And I would say relating to imports from China, I would say much more on what I'd say just, you know, third party spend.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

As we mentioned, we're largely in Region 4 region. So while there's a small impact there, that's that's by no means the major driver. It's also kind of worth noting here that in that number, we do include what we'll call, you know, the I I call I refer to it almost as the tier two impact, but that really refers to, increases that in The US we're expecting from domestic suppliers, because they are getting components internationally. So, you know, we have included that in our $150,000,000 estimate, and we do attribute that largely to that that kind of China component. So that's that is very much the majority of the, of the driver of the 150.

Joseph O'Dea
Joseph O'Dea
Managing Director at Wells Fargo

Thanks a lot.

Operator

The next question comes from Chris Snyder with Morgan Stanley. Your line is open.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you. I wanted to

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

ask just on the contrast between the q one one point o 1.1 o book to bill, which I know there's positive seasonality, I think

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

that was the best since 2022,

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

and then just the four point volume guide down. You know, is there a view that these orders could have, included some pull forward ahead of the tariffs? Or are you got are customer conversations changing at all in q two that's making you guys a little bit more cautious on the back half? And then just on that, like, anything specifically on China where it does feel like the demand for manufactured products may have changed a lot versus what was going on in q one? Thank you.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yeah, Chris. Thank you. I'll say on a on a on a pull forward, nothing that we could see. Because keep in mind, mean, I think a lot of our the majority of our products, a very large percentage of them, they are like, you gotta select the options, and it's kinda almost, I'll say, a little bit customized to the need. So so it is not possible for our customers to really create a lot of inventory of our of our particularly, compressors and things of that nature.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And and as we said before, historically, we do track point of sale on those distributors that mostly on a Precision Technology side, we track, you know, what are selling and then the sell out. So we basically track the amount of inventory and we do not want our distributors to carry excessive amounts of inventory. So based on the data that we have seen, we don't see any of that pull forward. I think in terms of your question around China, again, positive say positively enthusiastic about what we saw throughout the quarter and also kind of as we kind of come into April. The team remains very encouraged of all the activity that we're seeing.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And but we're not expecting like a fast recovery clearly in China. And we're putting a lot of emphasis on growth outside of China, particularly Asia Pacific, where we see good solid momentum today.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you. I appreciate that. And then I'm just following up. Have tariffs changed the competitive positioning for you in in The US market, you know, whether it's some of your bigger competitors? Or to the extent, are there you know, do you guys compete at all against maybe, you know, lower cost foreign imports, you know, whether it's China or elsewhere that could be impacted by the tariffs?

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

Thank you.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yeah. Chris, you know, the, we do have a competitive advantage because of our in region for region model. I mean, that is, clearly because when you look at, you know, all of our competitors, whether, you know, they they they bring product, from the from the outside, the I mean, the majority, most of them. So that offers definitely a competitive advantage and one that we're putting now, not only just in The US, but on a global basis, a lot of our customers, they're asking for local products and that is what we are able to offer to a lot of

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

them.

Chris Snyder
Chris Snyder
Executive Director at Morgan Stanley

You.

Operator

The next question comes from Nicole DeBlase with Deutsche Bank. Your line is open.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Yes, thanks. Good morning, guys.

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Good morning, Nicole.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Hi, Nicole.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Just one quick follow-up on

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

the 1Q margins. Were margins impacted at all by price cost headwinds just because the inflation kind of came in really quickly, and I think you guys started to attack this with pricing in April rather than during 1Q?

Vikram Kini
Vikram Kini
SVP & CFO at Ingersoll Rand

Yeah, Nicole. I think the simple answer is not dramatically. I would say the tariff impact has become more of a Q2 dynamic forward. I mean, we did have some of the kind of carryover pricing that kind of comes normally from prior year into this year. So I wouldn't say there was anything of a dramatic nature there.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Okay. Thanks, Vic. And then we've gotten through a lot of my questions here, but I guess one thing we didn't talk about is what you're seeing in Europe. I suspect that it's probably stability, not really much change relative to what we've seen in the past few quarters. But could you talk a little bit about order activity in that region?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes. We were actually Nicole, great question. Thank you for that. We're actually very pleased with what we saw in Europe. We saw kind of mid single digit organic in the ITS segment through I mean, in Europe.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So I guess that encouraged with what we actually saw.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Thank you. I'll pass it on.

Operator

The next question comes from Nathan Jones of Stifel. Your line is open.

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

Good morning, everyone.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Good morning, Nathan.

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

I wanted to ask a question thinking about these price increases from your customers' perspective. I mean, we're talking about, you know, 2% price for Ingersoll Rand. But if we start thinking about that being across three quarters and 40 to 45% of revenues in The US, So if you just spread that across kind of The US portfolio, you're talking more about a 6% price increase on that kind of stuff. And then probably some of the services don't need to to see that price. So, yeah, maybe you're pushing into the high single digits on products.

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

Everybody else is is raising price the same amount. Did did these things start to impact customers', you know, go, no go decisions on projects? Because the the the return metrics for for their investments have changed because of of these price increases, as they go into effect?

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yeah. No. That's a great question. You know, I'll say, you know, a couple of things. You know, one, I mean, clearly, products are mission critical in nature.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

So they're they're needed. It's a must have, for the specific projects and the specific application. And and it's just not all that are increasing prices. I mean, clearly, we track the competitive dynamic and everyone is along the lines kind of doing it. So I will say that customers continue to pursue what I mean, clearly, they they will do the math in terms of the return on that investment, whether that will make sense as I kind of mentioned before.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We do a lot of a lot of presentation to our customers on how we are able to create that payback and then return on that investment. So I think, you know, what, so is this happening in the market? Could it create some customers to maybe put a pause? We haven't seen it at this point in time yet. That's why even more so being prudent as we kind of do what we did with our guide.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

But but, again, we nothing that we have seen on a year on a year to date basis, kind of q '1 and through April, from an order perspective. And And the last point I'll say is that this is why we emphasize our in region for region because we do see many customers, they're asking for products that are made locally. And, and that is the advantage that we have, not just on compressors, but you saw on the map, I mean, blowers, vacuums and other technologies that are very prevalent in the markets.

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

Thanks for that. I guess the second question for

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

me is a bit of

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

a longer term one. We've seen, you know, things like fiscal stimulus announcements in Europe and Germany specifically, probably get some more of that. We started to hear stories about South America looking to to invest in capacity to decouple from The US. A lot of those things talked about and probably don't impact you this year, but maybe start impacting neck impacting you next year. Maybe just talk about the opportunities that that could provide for the business.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Nathan, it's a great question. One that I mean so far this year, probably have been out to all the across all the regions, I've been in Latin America, Europe, Asia, Middle East, clearly throughout The US. And and I spent a lot of time talking to a lot of our customers. And and it is it is coming kind of loud and clear. Customers want localized product.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And that is the offering that we are able to provide pretty uniquely to many of them. So, yes, we see we see some good investments that are happening. And I think these localization, whether you think about India, even Brazil, that I just basically was inaugurating our new facility there not too long ago, a couple of few weeks ago. And customers, they want some local content in those products. And I think that provides us very well positioned in that environment.

Nathan Jones
Nathan Jones
Managing Director at Stifel Financial Corp

Thanks very much for taking my questions.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thank you, Nathan.

Operator

The next question comes from Andrew Buscaglia with BNP Paribas. Your line is open.

Andrew Buscaglia
Executive Director at BNP Paribas

Hey. Good morning, everyone.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Good morning, Andrew.

Andrew Buscaglia
Executive Director at BNP Paribas

Hey. Maybe just one for me. Everyone kind of took my last few questions I had. So I wanted to get an update. So on ILC Dover and how that is tracking during the tariffs.

Andrew Buscaglia
Executive Director at BNP Paribas

It's not a it's not a market I'm too familiar with, but I'm wondering what the exposures are there and if you're seeing any change in demand trends in that specific area. Thanks.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yeah. Yeah. Yeah. Sure, Andrew. I I you know, we continue to may remain really encouraged by the momentum we're seeing in in the life science front.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

I'll just kinda highlight that, you know, the life science, components of IOCs over, which is everything except the aerospace business, you know, had a book to bill of 1.11. Core single use powder handling portfolio bookings are up low double digits year over year in Q1. And operationally, very encouraged to what we saw kind of Q4 moving into Q1, as I mentioned on the call. So and clearly, we continue to make a lot of investments in the IOC. And over the long term, we continue to see that clear path for that long term margin target that we outlined when we announced the deal and the transaction.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Particularly to your question on tariffs, I'd say fairly minimal in nature. And where we have seen them, we can actually work with our customers to pass that whether it is price or surcharges.

Andrew Buscaglia
Executive Director at BNP Paribas

Okay, got it. That's it for me. Thank you.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Thank you.

Operator

This concludes the question and answer session. I'll turn the call to Vincente Renal for closing remarks.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

Yes. Thank you, Sarah. I'll just kind of want to highlight that, essentially last month, we crossed our five year anniversary of combining Garnet Denver and Ingersoll Rand. And as you have seen over the past five years, we have been through a lot, COVID, supply chain, freight, couple of wars and things of that nature. And we like to say that we're now much stronger than ever and completed divestitures, acquired 65 companies.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

We have a pretty unique portfolio. And needless to say, we know how to navigate this market. We have a management team that has done it before. We have done it over the past five years. And regardless of what comes out, we're pretty agile and nimble in this environment.

Vicente Reynal
Vicente Reynal
Chairman, CEO & President at Ingersoll Rand

And we know that we'll definitely come out even stronger in out of this situation that we have done even historically in the past. So remain very excited, remain very encouraged about what's future ahead of us at Ingersoll Rand. And one more time, I want to thank all 21,000 employees who are owners of the company. And that is one of the reasons why we continue to remain very agile and nimble despite any of the market situations is because all of them are pushing towards the same goals and same characteristics that we want to live we want to do, and we know that we will be successful. So with that, call it up for today, and thank you, everyone.

Operator

This concludes today's conference call. Thank you for joining. You may now disconnect.

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Earnings Conference Call
Ingersoll Rand Q1 2025
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