The paragraph is an introduction to the Ingersoll Rand 2024 Fourth Quarter Earnings Call, conducted by Matthew Fort, Vice President of Investor Relations. Attending the call are Vicente Reynal, Chairman and CEO, and Vik Kini, Chief Financial Officer. They have released the earnings report and presentation, and these documents are available on their website. The call will cover company and segment financial highlights and provide the full-year 2025 guidance. Matthew reminds listeners of the forward-looking statements and non-GAAP measures discussed in the call, and instructions are given for the Q&A session. Finally, the call is turned over to Vicente Reynal for further remarks.

The paragraph discusses the company's financial resilience and growth strategies, emphasizing its economic growth engine that led to strong performance in 2024 and anticipating continued growth in 2025 through organic and inorganic investments. The company highlights its strong operational execution supported by its competitive differentiation, IRX, and thanks its employees for their ownership mentality. It showcases its durable financial profile and track record of meeting or exceeding investor targets. Additionally, the company is recognized for its sustainability efforts, earning high rankings in the Dow Jones Indices and the CDP's A List for environmental leadership.

Since the merger with Ingersoll Rand in 2020, the company has become a premier growth entity by reducing cyclicality, divesting certain businesses, and reinvesting $5.4 billion in high-growth sustainable markets. This transformation has nearly doubled its total addressable market through both acquisitions and organic growth. The firm is well-positioned to increase market share in the $67 billion fragmented market through its innovative products and strategic approach. The M&A strategy remains disciplined, aiming to enhance shareholder value. By 2024, the company has expanded its addressable market by $12 billion and acquired $625 million in annual revenue from 18 acquisitions, with additional deals in progress.

The paragraph outlines the company's progress and strategy in mergers and acquisitions (M&A) since its Q3 earnings call. They have closed six company acquisitions and added four new companies to the Letter of Intent (LOI) stage, while abandoning one transaction. The M&A funnel is strong, with over 200 companies in consideration, aiming for 400-500 basis points of annualized inorganic revenue growth by 2025. They are off to a strong start to meet their 2025 target and highlight three strategic bolt-on acquisitions in high-growth sustainability markets. The company maintains a disciplined acquisition approach, aiming for a mid-teens return on invested capital by year three. Vik Kini then presents financial performance updates, noting strong Q4 and 2024 results driven by IRX, with significant growth in underpenetrated markets and a 6% year-over-year increase in adjusted EBITDA to $532 million.

The company reported strong financial performance, with adjusted earnings per share of $0.84 for the quarter and $3.29 for the year, reflecting an 11% increase in EPS for the year. Free cash flow for the quarter was $491 million, with a 26% margin, and total liquidity stood at $4.1 billion. Q4 orders rose by 8%, and revenue increased by 4%. The book-to-bill ratio was 0.95 for the quarter and 0.98 for the year. Adjusted EBITDA grew by 6% in Q4 and 13% for the year, with record margin levels. Corporate costs decreased significantly, mainly due to reduced management incentive costs. The adjusted tax rate was 23.4% for Q4 and 22.2% for the full year. CapEx for the quarter was $35 million.

The paragraph discusses the company's current financial status and recent activities. The total liquidity is $4.1 billion, with $1.5 billion in cash and $2.6 million available from a revolving credit facility. The company aims for significant revenue growth by 2025, with seven additional transactions under letter of intent and a strong acquisition pipeline. The leverage for the quarter was 1.6 turns, reflecting recent acquisitions, notably ILC Dover. The cash outflows included $200 million for mergers and acquisitions, and $71 million returned to shareholders through share repurchases and dividends. In the segment results, the ITS orders increased by 3% year-over-year, with China impacting revenue which declined slightly. However, adjusted EBITDA margin for the ITS segment improved by 30 basis points year-over-year. Compressor orders were up slightly, industrial vacuum and blower orders increased by mid-teens, while power tools and lifting orders decreased by mid-single digits.

The paragraph highlights Ingersoll Rand's latest innovation, the PureAir oil-free compressor, which offers significant energy efficiency improvements and is ideal for FDA-approved applications. It also reports a 29% increase in PST orders and a 24% rise in revenue year-over-year, primarily driven by M&A, despite a slight decline in organic orders. PST's adjusted EBITDA rose 14% year-over-year with a margin of 27.6%, though Q4 saw a decline due to lower volumes in the Aerospace & Defense and China markets. ILC Dover experienced double-digit revenue growth in its Life Science division and secured a $150 million multi-year agreement for its space suits business, integrated into 2025 guidance. Additionally, PST launched a new Diaphragm Metering Pump that improves energy efficiency and reduces ownership costs.

The paragraph outlines the company's financial guidance for 2025. It projects a total revenue growth of 3% to 5%, with organic growth contributing 1% to 3%. M&A activities, including acquisitions of SSI Aeration and Excelsior Blower Systems, are estimated at $300 million. Corporate costs are expected to be $165 million, evenly distributed quarterly. Adjusted EBITDA is projected between $2.13 billion and $2.19 billion, and adjusted EPS is anticipated to range from $3.38 to $3.50, up by approximately 5% at the midpoint. The adjusted tax rate is expected to be 23%, while net interest expense is $220 million, and CapEx will be around 2% of revenue. Revenue growth is expected to remain consistent throughout the year, with Q1 being the weakest quarter, showing a similar revenue decline as the previous year. The paragraph also notes the impacts of FX, interest, tax, corporate costs, and share count on this guidance.

The paragraph discusses the financial outlook for Ingersoll Rand, projecting low-single digit total revenue growth in the first quarter and consistent revenue and adjusted EBITDA phasing by 2025, following historical patterns from 2021. Adjusted EPS is expected to reflect the adjusted EBITDA phasing with a 46% to 54% split between the first and second half of the year. The strong operational performance planned for 2025 is highlighted, crediting the company's nimbleness in a dynamic global market and a commitment to financial targets. The passage also mentions gratitude to employees for a record year and acknowledges a strong balance sheet, positioning the company well for future success. Vicente Reynal is then set to address questions, starting with Mike Halloran's query on demand assumptions for the year.

The paragraph discusses the company's financial expectations, indicating that total revenue and EBITDA projections align with historical patterns. Organic growth is anticipated to remain flat in the first half of the year, with about a 4% increase in the second half, primarily driven by pricing adjustments. Regionally, growth varies, with America expected at the higher end of low-single digits, mainland Europe at the lower end, China remaining flat, and the Middle East, India, and the rest of Asia in the mid-single digit range. Growth initiatives like unpenetrated region expansion, new product development, and recurring revenue are highlighted as key strategies. There is no assumption of end-market improvement; rather, stability is expected from the current state.

In the paragraph, Vik Kini addresses concerns about lower-than-expected margins in the quarter, primarily due to reduced volumes in the ILC Dover Aerospace and Defense business and organic volume declines in China. Despite these setbacks, Kini expresses optimism about the long-term margin prospects, aiming to achieve mid-30s targets over time. This optimism is based on several factors, including continued price cost positivity, a strong productivity funnel, targeted restructuring, and expected margin expansion following ILC Dover's integration. Kini anticipates a return to a 30% EBITDA margin profile by 2025 as integration and synergy efforts take effect.

In the paragraph, Julian Mitchell from Barclays asks about the order performance of Ingersoll in the fourth quarter, noting that it seemed slightly lower than expected. Vicente Reynal explains that the order softness was primarily due to delays in China, leading to essentially flat organic order growth. He notes that the book-to-bill ratio in China was approximately 1 in Q4, indicating some stability, and that orders outside China showed low-single-digit growth. Reynal mentions that large orders in China are delayed but not lost, with good momentum for longer cycle projects going into 2025, suggesting a positive outlook.

Julian Mitchell asks about the outlook for the PST segment's EBITDA margin through 2025 and the performance of ILC Dover. Vicente Reynal responds by expressing satisfaction with ILC Dover, highlighting its strong performance, particularly in the Life Sciences sector, which is experiencing double-digit revenue growth. This growth aligns with expectations but surpasses market averages. They have seen positive cross-selling and revenue synergy opportunities, especially with large medical device customers. Recent developments have facilitated holistic discussions involving the broader Ingersoll Rand brand. The company has restructured ILC Dover into three distinct P&Ls with new leadership, enhancing visibility and focus. The implementation of IRX is progressing well.

The paragraph is a discussion about the company's financial performance and strategy. The company is focusing on improving its Commercial Excellence Execution as a tool to maintain good momentum and business performance. Vik Kini mentions that their margin expansion target of approximately 100 basis points annually has been slightly exceeded, with a 29.6% EBITDA margin at the end of the year for PST, despite a lower figure in Q4. Looking to 2025, the company expects an improvement as it integrates ILC Dover, aiming for margins closer to 30%. The conversation then shifts to a question from Jeff Sprague about the company's Aerospace & Defense business, specifically regarding ILC Dover's space suit segment. Vicente Reynal responds, indicating interest in whether the company is willing to invest more in this area as it could be seen as more of a distraction.

The paragraph discusses the company's strategic approach towards the Aerospace & Defense sector, emphasizing its optionality to explore and potentially expand into this space economy. This involvement has resulted in cross-revenue synergies, such as selling Haskel helium blanketing for rocket shipments. However, there are no current M&A plans for Aerospace & Defense. Additionally, the anticipated M&A impact of 400 to 500 basis points is expected to be incremental and does not include any carryover from 2024 efforts, projecting a focus on 2025 achievements. The conversation shifts to China, where the company perceives stability, with order rates remaining consistent between the first and second halves of the year, despite previous challenges in predicting the market.

The paragraph discusses the business growth in China, highlighting certain sectors like the blower and vacuum businesses experiencing high-single-digit organic growth due to investments in localized technology and targeted end markets. However, challenges are expected in 2024 due to high comparisons with the previous year's growth driven by electric vehicle, battery, and solar production, which are not expected to repeat. The speaker mentions observing progress and stability during visits to China. Additionally, there is a strategic shift towards investing outside China, particularly in Vietnam and Australia, where positive momentum and growth are observed. The operator then turns the conversation to a question from Andy Kaplowitz from Citigroup, who inquires about the company's MQL (Marketing Qualified Leads) performance, noting they were up 12% year-over-year previously, but it's not addressed in this response.

In the paragraph, Vicente Reynal discusses the strong performance of MQL (marketing qualified leads) and long-cycle businesses, both of which saw low double-digit growth for the full year of 2024. Despite the elongation of decision-making processes, customer conversation activity has increased, suggesting potential decisions in 2025. He highlights the talented team in Poland working on demand generation. Andy Kaplowitz shifts the topic to the impact of mergers and acquisitions (M&A) on PST margins, noting the challenges in integrating acquisitions and mentions Vik's point about targeted restructuring efforts in response. Kaplowitz inquires whether the company's approach to acquisitions has changed given the size of their recent deal.

In the paragraph, Vik Kini discusses the integration of acquired assets, mentioning past experiences like integrating Seepex in the PST business and ILC Dover. He highlights that Seepex was successfully brought to the PST's average level of profitability, and ILC Dover has made progress in restructuring and streamlining operations with new leadership and distinct P&Ls. Furthermore, the integration followed Ingersoll Rand's core processes without much deviation, including smaller acquisitions in 2024. Andy Kaplowitz then acknowledges the information, and Stephen Volkmann from Jefferies asks about profit incrementals across segments, to which Vik Kini responds affirmatively, noting consistency across segments.

The paragraph discusses the balance between two goals: achieving high margins in the PST (Pumps & Systems Technologies) segment and pursuing M&A (mergers and acquisitions) which often have lower initial margins. Vicente Reynal acknowledges that not all acquisitions are margin accretive but emphasizes the potential for improvement, citing the example of a high-pressure pump business (ADI) whose margins increased significantly post-acquisition. He highlights that the company's M&A strategy focuses on acquiring businesses with strong market positions and growth potential. The goal is to enhance the margins of acquired companies to meet or exceed the PST segment's average. The current M&A portfolio includes potential acquisitions with margins above the average for PST.

In this section of the conversation, Stephen Volkmann and Chris Snyder ask about the impact of external factors on business margins and projects in China. Vicente Reynal clarifies that not all projects have a 50% EBITDA margin and that the delays in projects in China are not related to the U.S. election outcomes or tariff expectations, but rather due to end-user technical specifications. Despite the election, business conversations in China remain positive, with no significant changes expected due to the election, though January typically slows down due to the Chinese New Year. Additionally, Chris Snyder notes that while a drop in revenue and margins is expected in Q1, last year's margins didn't decrease as much, making this year's Q1 margin comparison challenging.

In the paragraph, Vik Kini discusses the company's margin expectations for Q1, noting that there will likely be a typical sequential decline from Q4 to Q1, similar to the previous year, and no significant margin expansion should be expected. However, he anticipates margin improvements in the latter half of the year, particularly in Q4, driven by factors like pricing, productivity, restructuring actions, and M&A synergies. Additionally, progressive trends in recurring revenue, which carry a margin premium, are contributing positively to the margin profile, especially on the ITS side. Chris Snyder and the operator facilitate the conversation, with Nicole DeBlase from Deutsche Bank being next in line to ask a question.

In the paragraph, Nicole DeBlase asks about the company's exposure to tariffs, particularly with respect to costs related to Mexico and Canada, and any plans to counteract current tariff impacts. Vik Kini responds by explaining that their current guidance does not explicitly account for new tariffs or mitigation actions, but the company is positioned to handle potential impacts due to its regional manufacturing strategy. While the U.S. purchases from China represent a small percentage of their cost of goods sold, they have plans ready to mitigate tariff effects. These plans include leveraging a global supply chain to shift sourcing and implementing pricing actions to offset tariff costs.

In the paragraph, the discussion centers on the company's ability to manage tariff impacts following a previous successful experience post-merger in 2021. The company feels confident in its ability to navigate these challenges by monitoring closely and adjusting pricing strategies. There are minimal impacts on operations in Canada, Mexico, and China. The conversation shifts to the performance of the legacy Ingersoll Rand Medical business, which is described as stable with no significant changes expected in Q4 or 2025. The company does not anticipate a V-shaped recovery and expects the business to continue with a steady, moderate recovery.

In the paragraph, Nigel Coe from Wolfe Research asks about the projected margin path for PST (presumably a segment or business unit) and whether margins will start the year at a 27% to 28% range before improving. Vik Kini responds by suggesting that the early-year margins will be slightly better than the Q4 exit rate, likely in the upper 20s, with a gradual increase expected. The company aims to exceed their Investor Day target of increasing margins by 100 basis points over the year. Vik also indicates that the impact from ILC Dover will serve as a pivot point in midyear, leading to more significant changes in the latter half of the year. Nigel then asks about growth projections for ILC Dover, specifically dissecting potential growth between Aerospace & Defense (A&D) and Life Sciences for 2025.

In the article paragraph, Vicente Reynal discusses the momentum in the Life Science sector, noting that it aligns with their expectations of low double-digit to high-single digit growth. This is attributed to ILC Dover's exposure to promising markets such as biopharma, high-potency APIs, GLP-1, gene therapy, and personalized immuno treatments. Nigel Coe, a participant in the conversation, acknowledges Reynal's updates. Nathan Jones from Stifel then inquires about the status of previously mentioned projects that were delayed due to engineering capacity and site preparation issues. Reynal responds by saying there hasn't been a dramatic change in capacity, but he shares insights from meetings with customers, indicating that while some projects are not canceled, procurement processes are beginning to release, which might lead to future orders.

The conversations around capital investments are increasing, but there's no rapid acceleration or major changes in decision-making. Despite uncertainties surrounding U.S. policy, especially regarding tariffs, projects have not been canceled and some are progressing positively. Vicente Reynal explains that the uncertainty hasn't significantly impacted customer behavior outside the U.S., as indicated by the stable MQL activity tracking purchase intent. Although decisions are being made cautiously, the momentum remains robust. Nathan Jones inquires about potential catalysts for faster project advancement, but no specific answer is provided.

In the paragraph, Nathan Jones discusses how project dynamics and customer interactions can vary significantly. He mentions a specific case where a project was released due to U.S. energy policies and the end customer's comfort with the new administration. He also refers to a European EPC customer facing engineering capacity constraints, for which they are offering engineering support to progress the project. Following this, David Raso from Evercore ISI questions the expected acceleration in pricing in the latter half of the year. Vik Kini responds by explaining that the acceleration is due to anticipated midyear pricing actions across different businesses and potential multiple pricing adjustments throughout the year, reflecting these plans in the financial projections.

In the discussion, Andrew Buscaglia inquires about the company's mergers and acquisitions (M&A) strategy, particularly in light of current uncertainties. Vicente Reynal responds by indicating that their M&A pipeline focuses on smaller, bolt-on acquisitions rather than large deals like the ILC Dover acquisition. These are generally family-owned companies that present a good opportunity due to the geopolitical climate. The companies like SSI Aeration, Excelsior Blower, and Toshniwal are mentioned as examples of the type of acquisitions they're pursuing. Reynal also notes intentions to expand in the life sciences sector, considering further acquisitions, and possibly moving into related medical technology fields.

In the paragraph, Vicente Reynal discusses the progress of Ingersoll Rand, highlighting that the company has identified potential acquisitions, particularly in the life sciences and medical device sectors. These opportunities involve highly specialized components, such as silicone molding and extrusion, which can be integrated with their existing products. While some opportunities are at the letter of intent (LOI) stage, others are still under exploration. Reynal also expresses gratitude to the company's employees for their dedication and contributions to the company's strong performance. The call concludes with closing remarks and appreciation directed towards the employees and participants.

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