The operator welcomes participants to the Ingersoll Rand First Quarter 2024 Earnings Conference Call and introduces the speakers. The Vice President of Investor Relations, Matthew Fort, provides some important reminders and references the company's earnings release and presentation. He also mentions that certain statements are forward-looking and non-GAAP financial measures will be used. The CEO, Vicente Reynal, greets everyone and begins the call.

The speaker begins by thanking and acknowledging employees for their hard work and dedication in delivering another record quarter. They mention the constantly changing macroeconomic environment but assure that their team remains nimble and prepared to pivot if necessary. The company has raised their 2024 full-year guidance based on their solid Q1 performance. They highlight the success of their economic growth engine and their commitment to their long-term Investor Day target. The speaker then provides an update on recent inorganic growth initiatives, including two recently closed transactions that expand their technology into highly attractive end-markets. They also mention the expected acquisition of ILC Dover, which will exceed their analyzed inorganic revenue target.

The company is continuing its strategy of acquiring smaller companies and expects to announce more deals later in the year. They provide information on their recent acquisition of ILC Dover, including the breakdown of their business by end market and expected long-term growth. The majority of their business falls under the life sciences end market, with a focus on biopharma. The core competencies of ILC Dover in this market are in powder and liquid handling, with potential for future growth in pumps and compressors. They also have a strong presence in supplying technologies for manufacturing monoclonal antibodies and other therapeutics for cancer and rare diseases. Additionally, ILC Dover is involved in the growing markets for diabetes, obesity, and cell and gene therapy.

ILC Dover's single-use equipment offers various benefits such as lower cross-contamination risk and reduced cleaning efforts, while their Medical Components business allows them to tap into high-growth segments like cardiovascular and neurology. In addition, their Aerospace & Defense end market provides solid growth and profitability, as well as a point of entry into the lucrative global space market. With their core competencies in space suits and inflatable habitats, there is potential for future growth and pull-through on their core technologies.

ILC Dover's technology is needed in various products, and they are a market leader in compression technology for portable oxygen concentrators. They target the consumable portion of bioprocessing and with the acquisition of ILC Dover, they can offer a more complete product portfolio to their customers. The flexible isolators made by ILC Dover are essential in the manufacturing process of therapies, and their Medical Components, CDMO business allows them to enter a high-growth segment of MedTech and biomanufacturing.

The acquisition of ILC Dover has provided Ingersoll Rand with the opportunity for pull-through on existing technology and access to new customers in the Aerospace & Defense market. This will also help to grow their life sciences business through M&A and optionality. In the first quarter, organic orders were down 7% due to timing of large projects, but the company is focused on book-to-bill and saw an increase in orders and backlog in March. This is in line with their organic growth targets.

In the first quarter of 2024, the company faced tough comparisons due to the timing of large and long-cycle project orders. However, organic orders remained positive on a two-year basis. The company also saw an increase in MQL activity throughout the quarter. Despite ongoing macroeconomic uncertainty, the company delivered solid results through a balance of commercial and operational execution. Organic orders and revenues declined year-over-year, but were largely in line with expectations. The decline was mainly due to the timing of orders and a slight FX headwind. On a two-year basis, organic orders and revenues grew, and the backlog and book-to-bill ratio were also positive.

In summary, Ingersoll Rand had a strong first quarter with a healthy backlog and solid performance in key financial metrics. They saw a 15% increase in adjusted EBITDA and a 20% increase in adjusted earnings per share compared to the previous year. The company also has a strong liquidity position and plans to use a new $1 billion share repurchase authorization over the next three years.

The company's capital allocation strategy remains unchanged, with M&A being the top priority. Free cash flow for the quarter was $99 million, with a decline of $49 million compared to the previous year. Total company liquidity is at $3.5 billion, and leverage improved year-over-year. The Industrial Technologies and Service segments saw 4% revenue growth and a 370 basis point increase in adjusted EBITDA margins. Book-to-bill was 1.02x, with organic orders down 7%.

In the product highlight, compressor orders were down due to project timing, but excluding these factors, orders were flat. Industrial vacuum and blower orders and revenue were up, with significant growth over a two-year period. The company also introduced a new vacuum pump technology with benefits for sustainable markets. In the PST segment, adjusted EBITDA was $91 million with a margin of 30.8%. Organic orders were down 5%, but the life sciences business saw an increase in order momentum. Short-cycle orders remain strong and the PST segment is on track to meet long-term growth commitments.

In paragraph 11, the focus is on the recurring revenue opportunity with ELCOM, a range of IIoT solutions that can help reduce emissions for utility companies. The company is raising its 2024 guidance due to solid performance in Q1, with expected revenue growth of 4-6%, positive organic growth of 2-4%, and adjusted EBITDA up 11% year-over-year. Adjusted EPS is projected to be up 2% versus prior guidance and 10% year-over-year. M&A and corporate costs are also mentioned as factors in the revised guidance.

In this paragraph, the speaker discusses the 2024 full-year guidance bridge and the changes in guidance compared to initial guidance in February. They mention that the primary driver of EPS growth is operational activity, while FX is the largest headwind. Other aspects such as interest expense, tax rate, CapEx, and free cash flow remain in line with initial guidance. The speaker also mentions the company's strong position, record results, and M&A pipeline. They thank employees for their hard work and emphasize the company's durability and long-term value for shareholders. The call is then opened for Q&A.

During a conference call, Mike Halloran asks Vicente Reynal and Vikram Kini about any changes in trends and order expectations for the company. Reynal responds that there has been an increase in funnel activity, particularly in China and EMEA, for large projects. He also mentions that the company's messaging has remained consistent and the outlook is encouraging. Kini adds that the book-to-bill ratio for the first quarter was above 1x, which is in line with their expectations. He also notes that the company typically sees higher orders in the first half of the year and lower orders in the second half due to seasonality and long-cycle projects.

The speaker believes that Q2 will be challenging, but will normalize in the back half of the year. Q1 played out as expected and the company expects a slight increase in margins for the full year. Q1 had the highest margin expansion and margins are expected to moderate in the latter half of the year. The company will continue to focus on operational and QFE improvements to drive outperformance.

The company's orders in the second quarter are down compared to the previous year, with China being the main source of decline. However, Europe and America are performing better. The company expects organic order growth to improve in the second quarter compared to the first quarter.

The company expects Q2 organic orders to increase compared to Q1 due to increased MQL activity and better visibility from customers. Q2 revenue is also expected to increase sequentially and show low single digit growth year-over-year with continued EBITDA margin expansion. M&A contribution and FX are expected to be similar to Q1. The revenue growth is expected to be split roughly two thirds price and one third volume. Margins may decrease sequentially, but EPS is expected to increase.

The speaker is discussing the expected increase in EPS for the second quarter and the abnormal seasonality of the first half of the year. They mention a strong performance in the first quarter, with a 27% EBITDA margin, and expect revenue and EBITDA to continue growing in the second quarter. However, they note that there may be some noise due to a normalization in tax rates. The speaker also mentions the expected improvement in revenue and EBITDA, and a question is asked about the margins and ITS in the first quarter. The response includes a mention of i2V and price cost, and the speaker notes that there was a strong performance in the quarter. They also mention a change in incrementals, possibly due to FX, and there is a question about any changes in expectations for the year.

Vicente Reynal and Vikram Kini discuss the strong performance of ITS and the factors that contributed to the solid gross margin expansion. These include initiatives like i2V and restructuring efforts, as well as good price realization and steady inflationary headwinds. The company also took targeted restructuring actions in the fourth quarter of last year and in the first quarter of this year.

The acquisition of ILC Dover is expected to have a nominal impact on EPS for the remainder of the year, with potential for further growth in the future. The company plans to use this acquisition as a platform for future deals and tuck-ins, and is currently building a pipeline for potential acquisitions.

Vicente Reynal, CEO of Gardner Denver Holdings, discussed the recent acquisition of ILC Dover and its potential impact on the company's growth. He stated that the acquisition has provided a strong platform for the company's life science division and has already resulted in another acquisition, Control Fluidics. Reynal also mentioned that the company is actively pursuing other potential acquisitions in the life science sector. He also stated that there are still a couple of larger acquisitions above $1 billion in the works. During the Q&A, an analyst asked about the company's growth in the quarter, which was slightly lower than expected.

In the paragraph, Vicente Reynal and Joe Ritchie discuss the first quarter earnings call and the company's performance. They mention that the results were in line with their expectations, with a slight shift due to a couple of revenue orders being pushed into the second quarter. They also discuss the improvement in the life sciences business and the positive conversations they are having with customers. Overall, they are encouraged by the results and the growth trajectory of the company.

During a conference call, Andy Kaplowitz asks Vicente Reynal about the large project order environment for the upcoming year. Vicente explains that the decrease in organic orders in Q1 was due to timing, as there was a surge in renewable natural gas and electric vehicle investments in the first half of the previous year. However, he notes that there is still strong formal activity, particularly in new mega projects, in regions such as China. Despite a tough year-over-year comparison, the Chinese team remains energized.

Vicente Reynal, CEO of a company, discusses the performance of China in the second half of the year. He mentions that the team is still energized and encouraged, despite tough comparisons. The core business in China is solid and showing good momentum. Reynal will be visiting Southeast Asia next week to look at growth initiatives in Vietnam, Indonesia, and Singapore. In response to a question about larger orders in Europe, Reynal mentions that there is some reshoring happening, particularly in the chip manufacturing sector. This could potentially happen quickly or in 2025-2026.

The "CHIPS Act" in Europe has led to investments in the UK and other countries, particularly in the energy and nuclear sectors. There is also excitement in the Middle East and India, where investments are paying off. The ILC Dover space and defense business is seen as highly strategic and presents opportunities in the compression and pump technology used in space, with PSP's company Haskel already involved with SpaceX.

During the first quarter, the company saw an increase in MQL (marketing qualified leads) and intra-quarter momentum, which was more accelerated than usual. This was seen across all regions, with EMEA and Americas showing particularly strong growth. This trend continued in April, with 14% year-over-year growth and 9% sequential growth in MQLs.

The legacy of ILC Dover is rooted in aerospace and defense, but they have recently expanded into the life sciences industry. This was achieved through leveraging their expertise in material technology and layering to create innovative solutions for containment. They acquired a CDMO, Flexon, to further expand their capabilities in silicon molding and extrusion for biopharma production. This strategic approach has allowed them to diversify into high growth markets, with potential for even more growth in the future.

The speaker, Vicente Reynal, discusses the acquisition of ILC Dover and the potential revenue synergy opportunities that come with it. He explains that the pump technology from ILC Dover can be transferred to the biopharma market and that the company's strong commercial footprint and access to new customer bases will benefit the company. Additionally, ILC Dover's large clean room facilities will allow for subassembly creation, which will make it easier for customers to use the pump technology.

The speaker discusses the company's need for clean room facilities and how the acquisition of ILC Dover has provided access to these facilities and new customer bases. They mention the potential for revenue synergies and the average duration for turning MQLs into orders. The speaker thanks the team for their performance and emphasizes the company's focus on improving the lives of employees, customers, the planet, and shareholders.

The speaker is looking forward to closing the acquisition of ILC Dover in the current quarter and reports that the integration plan is going smoothly. They express excitement to officially welcome the new team to their company. The call is then concluded by the speaker thanking the participants and the operator announcing the end of the call.

This summary was generated with AI and may contain some inaccuracies.