The paragraph announces the start of the Ingersoll Rand Q1 2025 earnings call. The operator introduces Matthew Fort, the Vice President of Investor Relations, who welcomes participants and introduces other key speakers, including Vicente Reynal, Chairman and CEO, and Vik Kini, CFO. Matthew mentions that their earnings release and presentation, which will be referenced during the call, are available on their website. He reminds listeners that the call contains forward-looking statements subject to risks and uncertainties outlined in their SEC filings, and that today's remarks will include non-GAAP financial measures with reconciliations available online. The call will cover financial highlights and updates to their 2025 guidance, and during the Q&A, participants are asked to limit their questions to one question and one follow-up to allow for more participation. Matthew then hands the call over to Vicente Reynal.

In the paragraph, the company highlights its strong performance in Q1, achieving 10% total order growth and a book-to-bill ratio of 1.1, with organic orders up by 3.3% and record free cash flow of $223 million. The company's "in-region, for-region" approach and proprietary demand generation tool are seen as competitive advantages in serving customers locally with high-ROI technologies. The company maintains a stable financial profile and strong cash flow, prioritizing M&A as part of its capital allocation strategy, focusing on smaller, regionally-oriented bolt-on acquisitions to complement existing technologies. They have nine deals under letter of intent and a large acquisition funnel, with an additional $1 billion authorized for share repurchases, totaling $2 billion.

The paragraph outlines the company's strategic plans and recent activities related to share repurchases and acquisitions. It highlights a commitment to up to $750 million in share repurchases by the end of 2025, while maintaining a goal of 400 to 500 basis points of annualized inorganic revenue. The company recently closed two bolt-on acquisitions at a favorable purchase multiple, aimed at enhancing capabilities in high-growth markets. With a disciplined M&A approach, they expect a mid-teens return on investment for these deals. Additionally, organic orders increased by 3.3% year-over-year, with growth across all regions and segments, and aftermarket revenue grew by 6%, emphasizing the focus on building aftermarket and recurring revenue streams. The presentation is then handed over to Vik Kini for further financial updates.

In the first quarter, the company met expectations for revenue, adjusted EBITDA, and adjusted EPS, despite deferring $15 million in anticipated revenue to the second quarter due to customer requests. The company reported an adjusted EBITDA of $460 million with a margin of 26.8% and an adjusted EPS of $0.72. A Q1 record was set with a free cash flow of $223 million. Total liquidity was robust at $4.2 billion, with a net leverage of 1.6 times. Orders increased by 10%, and revenue grew by 3%, with a book-to-bill ratio of 1.10. Corporate costs were $36 million, and the adjusted tax rate was 22.6%. Capital expenditures amounted to $34 million, contributing to the strong liquidity position. The company is on track to achieve its 2025 goal of significant inorganic revenue growth. Leverage remained stable compared to Q4 2024.

The paragraph discusses the financial results and business activities of a company. It highlights a year-over-year increase in leverage primarily due to the acquisition of ILC Dover. Within the quarter, there were cash outflows including $163 million for mergers and acquisitions, and $18 million returned to shareholders through share repurchases and dividends. The company's segment results showed a 6% year-over-year increase in first-quarter orders for ITS, with organic orders growing by 3.5%, and broad growth across all regions. Despite a 2% decline in revenue and a decrease in adjusted EBITDA margin, recurring revenue grew significantly. The company experienced varying levels of organic order growth across its product lines: mid-single digits for compressors, and low single digits for industrial vacuum, blower, power tools, and lifting. Additionally, a cost reduction initiative in its North American compressor team led to a 23% reduction in total costs through its Innovate 2 Value process. Furthermore, Q1 orders in PST increased 28% year-over-year and improved sequentially from Q4 '24 to Q1 '25.

The paragraph discusses the company's financial performance and strategic actions. Organic orders grew by 3%, particularly in the Precision Technologies and Life Science sectors, while revenue increased by 23% year-over-year due to mergers and acquisitions but fell 3% organically. PST achieved an adjusted EBITDA of $106 million with a margin of 29.1%, reflecting improvements and meeting expectations. The introduction of a new solution for cavity pumps is highlighted, demonstrating innovation and enhanced customer value. Regarding tariffs, the company anticipates an exposure of around $150 million, considering tariffs and resulting domestic price increases. To mitigate this, pricing strategies are being implemented, including list price adjustments and targeted surcharges.

The paragraph discusses the company's strategy to counteract the impact of tariffs through pricing actions and a tiered supply chain mitigation plan, which includes relocating supplier production and sourcing from new suppliers. The effects of these strategies will take time to manifest. Despite strong organic orders and positive factors like favorable foreign exchange rates and increased revenue from acquisitions, the company has decided to maintain its revenue guidance, incorporating a contingency in organic volume. Financial estimates include an adjusted tax rate of about 23%, net interest expenses of $220 million, and capital expenditures at 2% of revenue. The guidance excludes potential share repurchases and future acquisitions planned for the year. Market indicators remain positive, with marketing qualified leads (MQLs) increasing in Q1 2025 and remaining strong in April.

The paragraph discusses the robust activity in large loan cycles and stable April orders, indicating solid business conditions. The company is focused on controlling what they can, executing well, and leveraging a strong balance sheet to drive shareholder value. They emphasize agility in a dynamic market, utilizing global manufacturing capabilities, and targeting opportunistic markets. The speaker highlights the importance of staying flexible and thanks employees for their contributions to a strong quarter. During the Q&A session, Mike Halloran from Baird asks about the guidance update, suggesting that any changes are precautionary rather than a reaction to current order trends.

In the paragraph, Vicente Reynal discusses the company's decision to maintain a consistent total revenue guidance despite potential increases from tariff pricing and a combination of FX and M&A, choosing instead to offset with a 4% decline in organic volume to prudently manage risk. Mike Halloran inquires about the performance of short-cycle versus long-cycle businesses and the outlook for positive organic growth in the PST side. Reynal responds by highlighting a balance in short-term cycles and notes that despite decision-making delays, there have been no cancellations in the long-cycle pipeline.

The paragraph discusses the positive momentum and growth observed in certain business areas, particularly the Precision Technology (PST) and Life Sciences segments. Mike Halloran inquires about PST, to which Vikram Kini responds, noting organic growth in both PST components. The Life Sciences segment, part of the medical business, has faced challenging comparisons but is showing some organic growth, which they find encouraging for future growth momentum and margin improvement, especially in the latter half of the year. This dialogue is followed by an interaction with Julian Mitchell from Barclays, who seeks clarification on the organic growth outlook, acknowledging that trends in orders have met expectations despite fluctuations in sales.

The paragraph discusses the expected seasonality and progression of organic sales throughout the year. Vik Kini explains that the seasonality of revenue and earnings will be similar to historical patterns. However, organic growth is anticipated to improve in the second half of the year compared to the first half. In the first half, organic sales are expected to decline by 3% to 4%, with a 2% growth contribution from pricing, including the early stages of tariff-related pricing actions. In the second half, organic sales are expected to increase by 3% to 4%, with a decline in organic volume and the rest of the growth coming from pricing actions. Additionally, the comparatives are expected to be easier in the second half, aiding growth. Finally, there is a brief mention of EBITDA margins being slightly down year-on-year in the first quarter.

In the paragraph, Julian Mitchell and Vik Kini discuss the company's financial outlook and the impact of tariffs on margins for the year. Vik Kini explains that while the overall financial guidance for the year is relatively flat, the company is taking pricing actions to offset the tariff costs, which amount to approximately $150 million for both price and cost. These actions result in a zero flow-through, making it dilutive to the overall margin. Despite this, Kini expresses confidence in the company's productivity and pricing actions, which align with historical behavior. Julian concludes by confirming the flat expectations for quarters Q2 to Q4. Following this, Jeff Sprague, joining the conversation a bit late, questions the tariff impact characterized as 2% of sales by Vicente, but suggests that the company does not seem to be recovering the entire amount through pricing.

In the paragraph, Vicente Reynal discusses the company's pricing strategy, highlighting a mix of price increases and surcharges implemented on April 1 and May 1 to maintain flexibility for the second half of the year. He emphasizes that when price increases are made, they typically remain in place without subsequent discounts. Reynal also mentions ongoing efforts in cost mitigation, including supply chain adjustments and relocalization, which are not factored into current guidance. Jeff Sprague then inquires about the demand in the China market and any potential backlash against US companies. Reynal responds by noting his visits with the China team earlier in the year but does not provide further details on the demand or backlash in China.

The team is optimistic about the current situation in China due to government efforts and the company's strong local presence. Despite predicting a decline in China for the year, there have been improvements and efforts to localize and introduce new technologies. Outside of China, there is a focus on increasing market share in underpenetrated regions, with positive momentum in the Asia Pacific. This progress helps mitigate potential downturns in China. There are no signs of negative customer reactions in China. Jeff Sprague acknowledges the update, and Rob Wertheimer from Melius Research inquires about the company's acquisition strategies amidst the uncertainty reflected in their guidance.

In the paragraph, Vicente Reynal discusses the strong performance and strategic focus of their company's mergers and acquisitions (M&A). The company is successfully executing bolt-on acquisitions, maintaining discipline with pricing, and achieving favorable returns on investments. Reynal emphasizes their approach of targeting family-owned businesses in uncertain macroeconomic conditions, presenting themselves as a stable and favorable option for legacy transitions. They conduct thorough financial diligence to understand market changes and ensure a strong return on invested capital (ROIC). Many acquisitions are regionally focused, and their ownership model, which includes employee ownership, attracts multi-generation companies. Rob Wertheimer from Citigroup thanked Vicente for his insights.

In the conversation, Andrew Kaplowitz inquires about order expectations and book-to-bill ratios for the company, with a specific focus on Q2 and the outlook for 2025. Vik Kini responds by highlighting the strong momentum from Q1 and a healthy mix of short to medium cycle products along with longer cycle activities, reflecting stable market demand (MQL activity). He expresses no expectation for significant changes in book-to-bill ratios based on historical trends and the current macro environment. Andrew then asks about Q1 margin performance amidst operational challenges and acquisition activities. Vik and Vicente are noted for facing some operational deleverage in one segment, with overall margins being somewhat inconsistent recently, partly due to ongoing acquisitions.

In the paragraph, Vicente Reynal discusses the strong EBITDA margins for the ITS segment in Q1 2024, noting an improvement of 370 basis points compared to the previous year and 260 basis points over two years. He highlights the contributions of new mergers and acquisitions and organic declines leading to deleveraging. Reynal emphasizes continued innovation, as exemplified by a 23% reduction in the bill of material costs for a core product line. He expresses optimism about future improvements in recurring revenue and margin profiles. The PST segment also shows progress, with a 150 basis point increase from Q4 to Q1. Reynal is pleased with the operational enhancements and remains optimistic about future growth in both segments.

In the article paragraph, Nigel Coe asks Vik Kini about the expected EBITDA phasing for the first half of the year, confirming a previous estimate of 46% despite recent changes. Vik Kini confirms that the expectation remains consistent. Nigel Coe then clarifies potential financial figures, including an EBITDA of approximately $505 million and EPS of $0.80, which Vik again affirms as being in the right range. Coe then questions Vicente Reynal about the contrasting growth in services and aftermarket versus a decline in equipment sales, which seems recessionary. Vicente explains that the company is focusing on recurring revenue and is seeing good momentum in orders for compressors, blowers, and vacuum technologies. Despite a decline in equipment sales, the company remains optimistic about its core equipment base and connection efforts, and sees no significant concerns. The conversation then moves on to the next question from Joe Ritchie of Goldman Sachs.

In the conversation, Joe Ritchie discusses the company's EBITDA guidance for the year, noting that the midpoint is $2.1 billion, largely achievable through completed M&A activities estimated to contribute around $330 million to earnings. Vik Kini explains that while there are organic volume adjustments and zero-margin tariff pricing affecting growth, these unique factors make the current year different from previous ones. Joe Ritchie then asks Vicente Reynal about the potential impact on growth if tariffs resolve in the coming months, suggesting it could align growth with the original guidance.

In the paragraph, Vicente Reynal discusses the potential for accelerated growth if tariffs are lifted, but emphasizes a prudent approach given the current environment and organic order growth. Joe Ritchie acknowledges this perspective. Stephen Volkmann from Jefferies asks about pricing strategies, to which Vik Kini responds that pricing adjustments are proportional across two segments, with tariff levels and pricing actions being consistent. Volkmann also inquires about cost-saving measures like sourcing and their timeline. Kini suggests that while these measures take time, the company isn't projecting a weaker second quarter and is focused on managing costs effectively.

The paragraph discusses a company's approach to managing the impact of tariffs through a strategic pricing plan. They have established "tariff war rooms" to collaboratively address these challenges across the enterprise. They have implemented a two-tiered pricing strategy to offset the tariffs, taking immediate action on April 1 and another round on May 1. This approach has kept the financial impact largely neutral from quarter to quarter. The conversation shifts to addressing a 4% volume impact anticipated for the year, viewed as a contingency primarily affecting the latter half. The impact is expected to be evenly distributed between segments.

In the discussion, the speaker emphasizes a prudent approach to revenue guidance, maintaining consistent expectations across all product lines despite forecasting a slight decrease in organic volumes for the second half of the year. When asked about demand trends for different products, Vicente Reynal notes that there are no significant changes in demand between lower-priced and higher-priced compressors. He mentions that their company specializes in medium to large compressors, which are typically capital expenditure-focused, offering a return on investment. If a product demonstrates a payback period of 15 months or less, customers are likely to prioritize it due to its attractive return.

The paragraph discusses the impact of tariffs on costs, with a focus on China-related imports. Vik Kini explains that most of the $150 million in costs are due to imports from China, emphasizing that this includes expenses related to domestic suppliers in the U.S. sourcing components internationally. Joe O'Dea and Chris Snyder are involved in the discussion, with Snyder inquiring about the contrast between a strong Q1 book-to-bill ratio and a lowered volume outlook, questioning whether the orders were pulled forward ahead of tariffs or if there are changes in customer conversations affecting forecasts for the latter half of the year.

In the paragraph, Vicente Reynal discusses the demand for manufactured products in China, noting that their products are largely customized, preventing excess inventory buildup. They monitor distributor inventory to avoid oversupply. Although they're positive about activity in China, they're not expecting rapid recovery and are focusing on growth in Asia Pacific. Reynal also mentions a competitive advantage in the U.S. market due to their in-region for-region model, which is resilient against tariffs and foreign competition, including from China. Chris Snyder follows up with questions about tariffs impacting competitive positioning in the U.S. market.

The paragraph features a conversation during a financial earnings call. Chris Snyder thanks the operator before switching to Nicole DeBlase from Deutsche Bank, who asks about first-quarter margins, particularly if they were affected by price-cost headwinds due to rapid inflation and if adjustments were made in April rather than during the first quarter. Vik Kini responds that price-cost impacts weren't dramatic and were more relevant to Q2, with some carryover pricing effects from the previous year. Nicole DeBlase also inquires about business activity in Europe, to which Vicente Reynal responds positively, noting mid-single-digit organic growth in the ITS segment in Europe. Nicole then passes on further questions, and the call moves to Nathan Jones from Stifel.

Nathan Jones asks about the impact of price increases on customer decisions regarding projects, noting that Ingersoll Rand's price increase translates to a 6% rise in the U.S. portfolio, with high single-digit increases on products. Vicente Reynal responds by emphasizing that their products are essential for specific projects and applications, and competitors are also increasing prices. Customers still perform cost-benefit analyses to determine if investments are worthwhile. Although there's a possibility of customers delaying projects due to price hikes, there has been no observed impact on orders up to that point in the year. Reynal stresses the importance of prudence in their financial guidance.

In the paragraph, Vicente Reynal discusses the growing demand for locally produced products across various regions, highlighting how this trend benefits their business. He mentions that customers increasingly want products with local content, and this aligns with their strategy of offering region-specific products. Reynal also notes recent investments, such as a new facility in Brazil, and emphasizes the company's advantageous position due to their ability to localize offerings across different markets. Nathan Jones and Andrew Buscaglia from BNP Paribas also participate in the discussion, with questions focused on business opportunities and market localization trends.

In the paragraph, Andrew Buscaglia asks for an update on ILC Dover, focusing on its performance during the tariff imposition and any changes in demand trends. Vicente Reynal responds by expressing optimism about the momentum in ILC Dover's Life Science sector, noting strong bookings and operational improvements. Tariff impacts are described as minimal, with the ability to pass costs to customers. In his closing remarks, Reynal highlights the five-year anniversary of the Gardner Denver and Ingersoll Rand merger, emphasizing their resilience and growth, including acquisitions and a strong portfolio despite challenges like COVID-19 and supply chain issues.

The management team at Ingersoll Rand is confident in their ability to navigate challenges effectively, drawing on their past experience over the last five years. They attribute their agility and resilience in the market to the dedication of their 21,000 employee-owners working towards common goals. Overall, they are optimistic about the future. The call concludes with a thank you to all participants.

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