IR - Earnings call transcript Q1 2022

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Operator

Hello, everyone, and welcome to the Ingersoll Rand First Quarter 2022 Earnings Call. My name is Victoria, and I will be coordinating your call today. [Operator Instructions]. I'll now pass over to your host, Chris Miorin to begin. Please go ahead.

Chris Miorin

to Rand welcome Earnings First and Call. you, the XXXX Ingersoll Quarter Thank Vice Relations. of Chris President I'm Miorin, Investor And joining me and CEO; this morning are Vik Chief Vicente Kini, Financial Officer. and Reynal, Chairman and earnings and the our reference issued We call. presentation yesterday, these we release during will available Relations section on website, of Investor the are our www.irco.com. Both

this call be a later available addition, In conference today. replay of will

our are provided Before Slide previous with uncertainties are forward-looking call details. statements on we start, this you and which I filings, the statements more call. risks want nature SEC to review subject and should remind discussed conjunction on the the forward-looking for in everyone on that certain in Please to in X read this information

today's addition, remarks, we in non-GAAP In to refer certain will financial measures.

today's of measure most provide Instructions]. to At reconciliation and available which with to I'll our to can [Operator provide on guidance. call, highlights in presentation of the call accordance in of Investor find calculated XXXX turn we presented an in financial earnings update, On Relations a these comparable our review this company segment GAAP slide are the our will Vicente. and a website. the measures update and both and our release, You over strategy time, section

Vicente Reynal

performance think because act challenges teams base and accelerating in highly attributed and quarter their outperform quarter customers unwavering delivered We in process morning with first the our of geopolitical in ongoing and Slide they commitment and Thanks, to who sustainability strong to is making help inflation on our employee Chris, with better our consumption Rand's IRX chain, good reduce evident owners is to the QX products, water to Ingersoll another of X, engaged Starting everyone. the life like our are. purpose in uncertainty. energy our The leveraging usage. supply which even

at working we markets. made outside Rand, manufacturing the internally Last XXX impacted scoring humanitarian organizations. commitment $X the backlog engagement million XX% question our what top dynamic around of the are organization. an dynamic scores basis products all-time Demand only quarter, high where this of are and of now but showing We control. of our quartile the also rank and rank and the part resiliency the needs most in And our by we support manufacturing with at we attuned Ingersoll can we us latest focused services top benchmark. points upper leading you over happy a on for executing in how Our strong all for work above on on the environment highlight those Ukranian to remain are we indicators critical in to our remain aid. hyper-focused with the Not our

reduce how an our before core Ingersoll it values We've existence. them X. making compressors, those their over or our to sustainability environment, at which that this trend. believe trend decade to the today's usage. we reduce and in underinvested to flow so. solutions usage has and water deliver water blowers pumps, and solutions. devices we have today the emissions in market, decision-making area even creation will for Slide is and by drive efficient growing makes center sustainable. highlight energy take an life spoke intentionally We at We'd recent our the strongly embedded significant about processes strategy, company Investor cost in about Day as uncertainty about Rand uncertain been like more how despite spoken better materially the customers underpins that customers energy reduce invest very on customers the air to customer think this in more like to and past Moving is employ time providing operating And sustainably operating sustainably mission-critical of we by that our sustainability our in their and opportunities is to November And to mega sustainably

Slide X. Turning to

Rand's treatment dryers increasingly from to is in rise their Scope sites that treatment consume to an air are of air will efficiency continue X to our an the up to Air energy compressors reduce opportunity optimization Our XX%, and significant cost incredible essential reduce compressors Scope costs, that emissions. air the enables industry-leading this up energy the solutions with Ingersoll up increase. or products to XX% realizing X customers customers to And electricity. XX%. compressors manufacturing provide and and recent

potential As gas forecasted a greenhouse emissions XX% goal customers of megatons use X established achieve products, helping the our of COX. our impact emissions, to combined than Scope of in from reduction our our out we equates more which million of XX have we have a

compressor customers that impact more their Our are becoming can about optimization the educated have mission. on

the both industries, have and gas sustainability optimization a We examples paper priority this latest X compressor of identified clearly reduction consumer global top for slide greenhouse shown who reports. emission leaders as their electronics in in in

revenue water gallons And products. purification reducing X we're water the management, generated usage, to and in commitment. packaged use our and helping products. goods on from our very faced focused water XX% XX% and through total you have And significant can our quality. and In by water unit, products consumption, and Approximately reducing with a well see save at per positioned improve to a global of committed we're paper to consumer to our company customers a the of and annually usage world over improving respectively, shortage are base billion we're bottom water with of management is addition also energy page, committed the water to XX% leader one a customers of solve need

upon almost but Turning our customer making that energy opportunities to believe Slide X. take based into Not of to only efficiency our improve account. is efficiency, energy buying we all decisions customers largest

current at we and we the efficiency anticipate and trends upgrade in and these million the just in $XXX audits, led which of from continue year, over typical audits, realize is efficiency. how compressors, this directly efficiency now payback base of on of installed customer of we upon across to U.S., customer ownership And current that on the prices. total increase forefront compressor X/X example We X,XXX of Last energy accelerate, for than uplift XX% X compressor these average requirements. their in could system remain this and Additionally, and intend system governments regulating efficiency standards to and we system. years conducted factors, by are to energy energy great portion based a realize After will cost conservation install made attributable an is educate other several with our sales of audits. of to compressor meaningful less XXXX. our connect recommendations the will improvements base energy a XX% a on And that global evaluations estimate the energy these midpoint base, with of we at a upgrading

the savings meaningful see engaged base can highly entire real are we're in customer our you and and about educating here opportunity. So this

Slide Moving to X.

now role CDP. we're leveraging have progress finished company companies time leader all had to the upgraded the In Vik a our Global and within as on in update addition not to by and a our we've achieving committed And our being months, our delivered performance. S&P it. quartile targeted started. to of achieve fact, our we're Global to our we as of sector, helping us would with agencies, provide call quartile Those an operating becoming But and goal ESG We're our of progress getting been their journey. on top very QX MSCI, committed top goal IRX sustainability rank efforts exceeding continuous just sustainability in financial Sustainalytics to Sustainalytics, journey, to sustainably. take progress. top rating sustainability recognized half We I ESG significant of in including seriously, improvement XX% goals. customers our over And the turn by now materially towards other X the in past and the S&P we're

Vikram Kini

Thanks, Vicente.

QX, to orders organic and company deliver with X, on commitment to balance million the a orders increased synergy uncertainty $XXX Moving XXXX. these year-over-year, track across and we and supply fueled segments. IRX Shanghai. which to increased of in to in performance of double-digit to execution on $XX and both continue and inflationary million XX% strong chain Total in a Despite our realized revenue XX% environment, growth remain expected commercial revenue growth strong the saw by persistent we ITS to geopolitical challenges, double-digit by pressures, with Slide encouraged be respectively, overcome lockdowns operational company be in challenging continue

notably were X.Xx adjusted quarter coming positive billion approximately backlog basis XXXX year of challenges. adjusted end for company of improvement an Our delivered was increase and point X.Xx, record, $XX despite orders and cash year. a was in and to to setting from XXXX. quarter in margins headwinds a from company Total leverage compensation capital first The the improvement was from prior an for the off million record XX% for incentive quarter This X.Xx from $XXX revenue net and XXX and margin quarter. million, quarter performance. slight $XXX increase at prior strong year-over-year despite our flow first remained company of year. of working prior prior the a in up million the Free inventory million Incremental support XX% costs most was in the cash $X.X strength growing quarter EBITDA continued $XXX elevated and approximately aforementioned us were a of the takes a EBITDA liquidity up improvement XX.X%, for a

X. Slide to Turning

headwinds. segment remain organic coming XXX ending we XX strong March For grew M&A. and encouraged points, declined mainly for basis XX We the on is of important points which impact PST EBITDA positive dollars Overall, our inflation, exclude the quarter. inflationary the posted When XX% declined total in which both from Total in to adjusted first FX did XX, the QX points remain with increased of actions by our team of both X.XXx in completed the of despite from nimble company basis backlog, an improved cost the company, the XX% It's price M&A XXXX. driver by of the while the book-to-bill from up note driven a XX%, impact adjusted quarter, terms by QX to revenue year. decrease XXX ITS of margin segment speaks margin increased margin orders mix. ongoing and product the largest strength of to the PST of approximately that prior our basis. months XX% basis segments

due incentive to continuing while Things. generation, compensation like invest Finally, $XX in the primarily at to corporate growth costs quarter, cost demand costs million for savings industrial down critical general in areas came lower Internet year-over-year and and of

XXs was low tax of for the terms to for back per of share, the normalize Adjusted to of to year. in costs being up corporate for XX% XX%. in rate quarter per was the XXs the quarter quarter and remainder anticipate millions the well. full expect the year We as low We dollars $X.XX EPS the the

now on increase to quarter XX% in demonstrating through IR Turning our approximately business. $X of in year. and X.Xx, And of was $XX the which improvement synergy of the the million for XX. in costs ops on $X.X outflows prior Free our the at share $X towards year, in decreased to was capital. the quarter, an $X.X billion billion increases stands payment. strategic million compared quarter the was despite is billion working $XXX Liquidity of included Leverage $X and by flow million continued flow for the liquidity $XX $XXX investment cash quarter the remaining to million an and which merger. total Free based totaled revolving further standup aforementioned million last facility. related Slide cash for availability credit company dividend our CapEx positive cash million continuing million, X.Xx basis, approximately net included on repurchases a $XX approximately M&A, which versus

discuss M&A, with transactions letters synergistic strong a bolt-on is and with exclusive of our generate But our to We strategic M&A returns clearly, characteristics. significant to model. funnel and segments. growth remains deploy of will active currently now we X remain turn to to compounding under acquisitions Our call I the prudent which highly Vicente strong back intent. have and firepower driver disciplined on to robust

Vicente Reynal

to Vik. you, turning Thank Slide XX. And

of were an was saw XX%. those XX%, orders we points revenue year strong Our rose including X.XXx. up XX% incremental shows XX%, team products while X% with over and approximately oil-lubricated up with breakdown margin The with Organic low growing book-to-bill quarter, in volume in further also orders up orders volume. organic XX% strong East of and Latin approximately America up on of America demonstrating both in Starting year-over-year adjusted in while prior Europe, were XXs. Industrial of Americas Middle growth delivered up North the with Mainland oil-free XX%. compressors, up segment orders the were XX%. of EBITDA Services now an X% in no the orders of Adjusted margin XX the strong with material XX.X%, price for In Technologies Both while A low products during with note and and performance basis mid-XXs. sequentially deceleration from India a up increased solidly delivered EBITDA approximately acceleration sequential approximately price XX%, growth. and year-over-year solid

Vacuum across by of on a up In were in growth the mid-XXs and business Asia blowers, the to orders well XXs power saw and high Pacific teens with global In continued rest orders and driven up mid-XX tools lifting Pacific. high momentum. continued for business, China up and were total positive basis. the Asia low growth perform orders teens

Middle discussed aware all marketing an qualified this the the Day, insight economy, and across most Mainland indicators we forward-looking East, weeks, in and the of generation our leveraging through show or MQLs, but we're year-over-year months we gained each across Asia the uncertainty has Investor global with are as data-driven level. of including the related to double-digit major And the to the India lockdown, indicators of As year's leads customer growth even been to recent geographies, approach Pacific. America, week, capabilities and Shanghai review us due near our business provide Europe, the by clearly developing data. China last MQLs but demand during across we additional several demand geographies impacted MQLs these most very

approach in I delivering mentioned As our solutions. innovative very focused to earlier, we're sustainable

XXXX, phenomenal our we to further As LeROI XXX%, I are customers want and LeROI mid-teens in by biogas gas the Since very gas over year. the post expect a synergy the is such, as strong Rand. then, weeks able business, time to compression which more transition of a I multiple growth ago, have the approximately target been double get spend And farms synergistic than from and LeROI monetize mid-XXXX. of Xx. to the strategic LeROI very accelerate. years XX as see to continues has and we to and emitted few as which over impressive. realized were minute in unleashed can highly achieve the to making family-owned revenue on as page, cattle these ownership be such We million organic exceeded total been to in in visit Ohio. and And we landfills repositioning growth on ROIC of you return And around has to a sources highlighting the focused to source. capital fantastic this business expected X team growth rapidly been over on Orders transformation Ingersoll acquired Sidney, it penetrate a a value acquisition have our months. seen of an team from greatly is energy is XX% creating capture portfolio in company A just market, whose from has past of the example a to is bringing efforts and $XXX the chance

the around but only feel enter more the ownership lives we important, has very mentality a of of we impacted manufacturing as We the show our employees how have way. the in of positively the passion the performance many lot not we can granted engagement of here, a energy, You employees and positive equity floor. and heard feedback you

X% Moving Precision volume XX. Science to grew and Slide and XX% segment Revenue approximately in Technologies the with XX% growth. organic price

was basis ex points, of on Additionally, by the growth Adjusted EBITDA the excluding Overall, again, XX% XXX year-over-year organic M&A. adjusted And was were year-over-year of XX%. of segment which impact in with EBITDA XX% XXX up points $XX was X%, down adjusted organic XXXX. year-over-year, driven top PST margin XX.X% down delivered of the which team an basis of margins margin of acquisitions, M&A. EBITDA strong primarily of is impact million, incremental with up the QX XX.X%, orders

continue technology ventilators And in and in-vitro end both Adjacent applications ahead. market, on left diagnostic the science oxygen Rand. they within patient serve technology, the significant an of very the pump very home our as solutions of example of into this In progress to our 'XX Ingersoll which strong pumps, excited with market today growth with focus acceleration margin now to end the we strong of of and A funnel integration about OEMs expansion of quarters Seepex Thomas acquired just $XXX addition, and addressable Thomas be well, a also future market. further is to life leveraged with fuel sustainable excited very for from our an a had we I role XXs which And team a million. business, September brand in The excess in closed Seepex, low unique we new geographies hydrogen Seepex a once transaction through care in have A targeting continues listen in stands market innovative our in level ownership market. I concentrators. with about focus grow at to potential crucial at inherited highly the through to of translatable couple is the and on very primarily U.S. part the is engagement the approach XX% facility ago. also and performance. like accelerating $X.X a playing chance runway compression billion the the mid-teens again, of brand.

in-vitro recently in designed cycle. from products, revenue who their into our product several new which sizable life will pharma Thomas large the recurring the have orders pump strong generate secured customers space customers' over We

to original to is total to organic XXX growth guidance. up the we're in organic X% from this as increase point to We're a to ITS also X% XX. to We're revenue XX%. guidance. raising Slide adjusted basis the XXXX revenue the billion. now both to growth start versus to guidance. raising strong $X.XXX prior range to Moving of on expected PST billion from headwind leads a After XX% the year, company X% basis XX% driven And points EBITDA expectations $X.XXX a contribute FX by a segments compared XXX the increasing approximately and

to We flow net be conversion adjusted income to and equal XXX%. X% greater CapEx our continue revenue. expect cash We anticipate or to XXs the in free than to rate adjusted approximately tax to be be low of to

want color and we in Lastly, Europe lockdowns Mainland on to some provide Shanghai.

During the have April, we material not in into slowdown quarter seen any and orders.

we leading and been stable quite qualified and our monitor we fairly fact, as for leads or in a they order indicator XXXX. have are throughout In Europe marketing as MQLs really close said, activity, MQLs

revenue we're item As But monitor to we're QX as encouraged. still not first that Shanghai. taking expected compared trending for best half making know, significant and think the to lockdowns EBITDA, we a is said We half to both is growth QX remain lockdown be and lockdowns the see And ease the in Having the is changes situation this, continued second in we to to it as phasing we due to in adjusted quarter way fluid the the closely. positively. as continue to starting our prudent the view are see modest. sequential to we second quarterly original about of provide don't a this you guidance, Shanghai, although

Slide XX. Turning to

quarter, up quarter. despite in Rand into We known want second be backlog As Ingersoll position. to and first strong is dynamic very that market delivered momentum the performance our a I reiterate is and today's in poised the XXXX provides record we wrap conditions. call, a challenges to strong year

our the mission agile decisions action-oriented engagement to the accomplishment the I To facet say deliver you engagement and We life want for thoughtful, and across making the drive our employees, commitments. every and This are. our to to continued of business thank will better remain environment that our your for to continue of you on IRX shareholders. like to our make customers, owners continues leverage

balance capital with our strong Our track with highest the market we and comprehensive outperformance. capital and to strategy, of resilient continue investments capital sheet record allocation is remain return deploy on have our as ability disciplined to the and we very

the I'll the to Q&A. So with open operator turn that, back and for call

Operator

And our question Halloran from Instructions]. first [Operator Baird. from comes Michael

Michael Halloran

gives Just you. some what on and thoughts backlog kind visibility that of

So visibility obviously, backlog going that we ITS. in cadenced kind How And to the expected does orders that as really a levels? be give what What's forward on on out? here? particularly you of with is strong, sit basis

Vicente Reynal

that think portion gives gives of may kind -- is been being the perspective, much it potentially us, cycle clearly to you that of we of being more way have backlog view years. what about kind kind visibility us greater XX% a XXXX. to so loan obviously, has than ITS, we maybe I it to prior which mean, Mike, good XX% as longer want in know, of the XX% of cycle. on And into a

I having visibility for XXXX. think what we're go couple the we we even it's in than have greater past into obviously, -- of as here, the seen visibility next great and quarters So

Michael Halloran

about that actually from that have in you because you it's seeing the backlog conservatism less backlog uncertainty demand converts guidance? what point the the the something is you're else part laid and conservatism just to about that perspective at as more a out then So Or time? this in actually of in there when visibility

Vicente Reynal

But happening I That's think in the it -- after and see you it, that a ramp any the momentum orders clearly, continues. of be it's in a geopolitical that might made, the kind we as of mean, environment lockdowns we prudency, Mike. shorter-term It's China bit I out continued that and navigate may there cloud remarks visibility. the

based this on we're leads and And I think continue pretty point strong to be at in just time, marketing what more qualified seeing. Our prudency resilient. it's

Operator

Barclays. question comes Julian next from from Mitchell Our

Julian Mitchell

the a I wanted outlook. Maybe to on margin question with just start

QX the saying, should wanted of you When for margin it year. talk you're but That quarter, that. So impacts, year? that the for sort second saying the incremental light, margin a you year-on-year than price and to in about lower seems bit quarter and we're had we then that the maybe little thinking mid-XXs is incrementals sort just assume maybe QX? about expect first what you're confirm what what And in was to of you cost in XX%

Vikram Kini

Julian, Yes. about thinking quite way the think I it you're accurate. is

maybe So I'll cost. with price the start

So price outcomes we more price positive inflation say the positive the from be the fairly a into perspective. cost margin the was incrementally of geopolitical frankly noting We Obviously, here, not more first to margin perspective, as cover quarter. we've to price of some continued situation perspective, more in and dollar a to clearly, well would seeing inflationary situation, pricing would I'd on in pressures of half the as QX. year. a the accretive perspective that but dynamic some given though, cost recalibrate Worth lot necessarily margin did and QX expect comparable. accretive, be driving the from of a that's a the into of favorable Russian-Ukraine we we're back obviously, and from expect

subdued So as the well of the specifically. incrementals subdued the slightly QX. thought drive will to about in in But due more QX that's it. think and that more incrementals as your well a of -- that's nature a in in kind as little terms correct Shanghai to lockdowns, bit QX being way That

Julian Mitchell

orders And around follow-up then would be the quick expectations. just my

the quarter expected comp. than had given first in you better orders So I your

into Sounds QX. are like good orders staying

Just I next correct. about wanted sure then within How think in are you are the PST out to thinking that's few those orders And the mid-single looking make up specifically, the first digit months? quarter.

Vicente Reynal

think I comps, actually yes, Clearly, we good. QX, be into go mean fairly tougher So QX, I more as continue to orders obviously.

an about the As see and from into that as last double-digit PST. sequentially But but order you orders think PST orders comping are QX, at actually momentum, they're XX% were that a good still very XXXX. increase XX% of of in way from QX look I month it we against XX% about we think saw I a And the sequential year, moving to dollar, on on I is, again, QX we a the momentum we perspective, perspective, from if April. momentum remember, it seeing here absolute

pretty of is to lead speaks seeing no on the again, outcome the here. as a and the will continues obviously better terms order to concerns ramp momentum, well So what team in which

Operator

question Research. comes Wertheimer Rob next from from Our Melius

Robert Wertheimer

My on energy question, Europe, opposing and potentialities there energy still comments same wanted drop. energy you circle clear the there's have pretty just Europe needs you the time, And seems and like crisis. to I recession because demand to growing desperately made could the at back and it a where efficiency, savings solutions

you it the just your reason? qualitatively more pipeline? spike, so line? on issue, Can the in coming energy you time you to for And that already your MQLs, to about can for see talk Is started impact plans upgrades? people Are

Vicente Reynal

efficiency you what -- from I it from can requests seeing relates do else perspective. Rob, think as in will they to an that teams think, how -- I increase what our energy tell they're customers an

the as compared in also audits do the Europe, didn't of terms to are XXXX. pre-pandemic come back in momentum seeing but factories. of that And in about levels you to terms growth. do audits it in how about XX%, in Europe, audits. of when I think a audits doing, kind we're lot And energy it's number talked in efficiency of in the nature about it, in of a -- data think U.S., think we audits good we point that the We up we similar

to what they customers achieve. So our definitely demand to generation We are can the attuned customers leveraged it. more on engine educate to continue

here of for we're tailwind bit continue And advantage that so a create taking and a to us.

Robert Wertheimer

varies delivered? and give lot, any upgrade Perfect. And on time comments the but upon then might stop investigated, I'll what be there. general decided can line a and on your factory it maybe you --

Vicente Reynal

yes. Sure,

and be get to you're meeting -- time reports couple that months. And be to making a this us gather in for a and audits, to and the face-to-face kind by could facility provide it I be the we customer cycle the want the the points. a that We provide order request time that we from months may trying purchase think report, go do the of and communicate, On X of to the the with data customer definitely time that good of they what roughly a agreeing there. to could up a lot and to we customer show

Robert Wertheimer

And the if upgrade, Perfect. purchase, is how that is months? time? Or they then another long lead do the few

Vicente Reynal

I mean, it goes into and we've now. Yes, the time. lead then backlog clearly, extended got

be backlog the yes, on of will go into the the So it regular -- of product. lead product depending time could the

So of could yes, or longer. couple another be months, it

Operator

comes from Jeff Vertical from Our question Research. Sprague next

Jeffrey Sprague

Just wondering you more give deal the and that you the you color maybe collectively the for maybe if a on kind us the here, LOI. exclusive hit what's the pipeline historical could size bolt-ons specifically, mentioned rate you get and X of once little into

Vicente Reynal

said Yes. we're rate exclusive in find I'm hit we Jeff, LOI, I is once maybe I anything. mean don't plus. XX% to say, high. pretty going

some but we done enough exclusive confident that final just the diligence with negotiating and a matter we're of we're of it's of have So them, going kind points.

acquisition. LeROI to we these deal X nature by the think bolt-ons of In made similar size, about in time that that terms

it of but can the you not to size, acquisitions clearly, these for deal in But become like see us can that period So it time. every be bolt-ons small want that over always We like good will LeROI. that significant shows be they're that.

Jeffrey Sprague

hit of a on lead look provides. insight also rate I on any advance, order. just update in of kind Or just MQL leads wonder kind tried to on your of then kind develop to... information there anything going conversion as you've whole Understood. follow-up to out the it if further there's that Great. what's And kind further and of

Vicente Reynal

mean to a Yes, a just to kind give qualified when be of to I it -- up. a have frame lead, what it you is marketing lead. consider hot we we to medium

artificial has kind like internally lot have. we'd a with demand been prequalified algorithm engine already we that that our of the it and kind through that So to do we generation, intelligence of of call

So higher typical rate. than is it close the

it's much higher that's the make. to -- kind strategic think explicitly you talk sales as our close if don't call we So about than of can we but we that ratio typical us, think

And very per that's it's with encouraging. several MQLs. encouraged keep marketing of rate of quite we're leads just qualified the thousand pushing So at why week,

Operator

question Goldman next Ritchie comes from Our Joe Sachs. from

Joseph Ritchie

So was really just that off, audits. interesting the around I thought discussion discussion. back starting going a maybe to

not it's because think points your audits, is this comparison growth. think, conversion something and through base $XXX an just X longer-term X,XXX basis that's because million. ITS X portfolio meaningful, I million to I across a on see know pretty installed like trying I I'm your So apples-to-apples your of opportunity to products like

is a multiplier like are to wondering, years, guys is forward? this just something thoughts helpful. on coming this be so something Any would the hoping growth of around And that over I'm going you bank kind

Vicente Reynal

Joe. Yes,

X,XXX the U.S. can tell that that in the I made you only is So we reference

customers growth self-help the really good we many -- as but at bit for definitely kind I for what meaningful more think can been yes, it something So a It something this we're of a that blowers. little of global we're we've yes, compressors is to another leveraging they call only time, about not mean, getting doing we like is do. a more doing that for as think We globally, And for perspective. about this I initiative. I what also from it's but we're learn think mean,

like you these a doing as now in about pulp when in they're as and audits conservation Rontec paper look industry. the pulp think the So lot energy as to well paper water at industry, well a of and company

to strategic that it. think Lawrence how making, some very think quarters audits, do the on ago, we're and of only of of air that level it's not the We us. remote but we able of like kind acquisitions going it's is I of purity to efficiency yes, do to connectivity Factor couple air a the So on we're unique testing. maintain on something We're how be enhancer so another and with

on it's good far. the us think us. the we of said XXXX, improvement XX% it that yes, so So I has be from can It driver a number for remarks, audits pre-pandemic. -- in did And we been growth as for

an definitely of for us. area investment it's So continued

Joseph Ritchie

hear, that's no, guess to China. just maybe No, I great my on Yes. question, Vicente. follow-on

What the thinking now? the in you Just quantitatively guide? for curious, color you guys? how just And some seeing the provide are region What's on-the-ground about size for maybe are business like, you you been right can it impact? of the

Vicente Reynal

Yes.

X-X. we is for I before the And think country it roughly of in we're So sales, XX% said China that the for really us country.

argue the XX% product you gets So that roughly of that produced in could China. sold is China in

And a have so therefore, We the supply chain in is kind don't of Shanghai. closed factory by.

outside Xuzhou factories in Busan. and are and Our Wuxi

lockdowns of go impacted that Shanghai, is the a what factory. fully have have center. by as operators we kind different distribution the In have not So cities still can our these to we been are

maybe of go companies is allowing from have we some allowed companies aftermarket. most and for center distribution we recently back. of one been that kind some impacted it of we that do go -- government actually back, here, those to which been is has the the So have But mainly to

we start here ramping the supply situation now now to need up. So the is where chain

ramp within they're that has down, not so us, it's able to we where been as able but to. making have fast Shanghai as much So that the been suppliers that about kind have that we locked up sure those of region

support a suppliers it's I second as and work one better. here and to be, the better of able will with think in of faster prudent some the our It way. that opportunity even just taking to in upside those we're customers being we as ramp view be able and we're go hopefully, our So perspective able that to quarter a from

Operator

comes Coe next Wolfe from Our Research. from question Nigel

Vicente Reynal

Nigel. next the Victoria, Maybe to back move and come then we to

Operator

comes question Pokrzywinski Morgan Josh at from Our next Stanley.

Joshua Pokrzywinski

of historical of Just seen keep I'm sort wondering context on what the price discussion Vicente. is here, spikes before. second. a to We've the audit energy for sort energy

there's been current And with think happened time, but Ukraine. customers much. and going at of on I in guess going analysis, environment in like what I haven't payback a sort the what's move the like of magnitude difference? we But compelling kind may seen of different order structural before? this more has as back more points be feels

Vicente Reynal

maybe ESG companies that companies their X way and included basically that saw getting slides treatment how Josh, that variable X think, XXXX quotes for the large and are is are from from the the Scope different systems And reports about and XXXX to the I our one their agreeing we is and you maybe on air of very actually compressor talk pretty to. X targets new Scope activity. sustainability here

this to is underinvested in energy think fundamental now has that change I the and there's a the these consumes kind now Internet So is it's putting yes, think combination could realizing enhance be connectivity usage create remote little of out kind I spiked Things And really the variable in of that, variables connectivity the around of even fact how acceleration. second the and the water the the may that that area But and energy, ESG time upgrade really and of past companies that bit a of and that, industrial market targets that blowers of is stronger. of and the IoT of energy multiple to that. consumption compressors, really really product pumps accelerating are

that that are create the X are very we going to different momentum. a now variables really are those sustainable So ongoing better think

Joshua Pokrzywinski

question stuff, focus that shoring, to your X sort of it of past maybe either if or or cyclical you probably backdrop, X things, than today disruptions difference you what a is my own But And period, of some it. That's points performance down maybe I order and of break driving on you mean sort do next macro like volatile this specific had near business of micro, you lead is sort do macro the it's think in bit in or better What are generation. maybe the would felt the big the is now? sustainability time, regions. to? other to of more this that's of Got think part PMIs part with at answer in whether helpful. sort

Vicente Reynal

of Yes. on of I'd I is call of working been the sciences. and and sustainability. whether Day life that as if we as better those we markets, continue food, have several Josh, moved that how our terms quality can how is move we by markets, things end in better years, say, to past a we provides that out kind to in control we markets, end beverage, high-growth play the more own that the product our have end to life able it sustainable, called in Investor say be We we choosing to for what see that of

highly product to is what of is in customer us compelling much hitting The competitive this and to We way development speak be sales that internally say And we again, is, terms to able really and And way how get it for leads. bats demand of say, how control, see you I'll the even fragmented cost-effective reach gas differentiator highly terms into LeROI very acceleration this new products, we in second turn technology market. one mean, about more leads sometimes it oriented, third was new the can what I very that in in in-vitro we a much generation. than this mean, like a every the going a we've base the we can create is, us we end runs qualified home and will is think more moved in very, quarter, been allowing essential. past. new innovation. to a us efficient, technologies, in the create I getting allowing market ad pump that it and control more Or compressor, the to sustainable internally qualified sales piece moving into -- which And Thomas to guys we're basically diagnostics. our that more that is compressor we're

sustainable to have areas that ongoing those a X we much in have allowing think growth. more our control us I are are that So

Operator

Andrew from from Our next question comes Citi. Kaplowitz

Andrew Kaplowitz

I just said. something just on you want up to follow

the If I improve had you've aftermarket of initiatives big IR's to the resiliency was the you post the one RMT think few talk of company. ago, of the portfolio now about versus company a the years at capability

improvement that proceeded the the And So years? with few has you has how how gone last initiative? over

Vikram Kini

and is this Vicente I let Maybe well. Vik. start, Andy, Yes. I'll on can as

right. absolutely You're

was that I cyclicality previously. say, think in concerted the, of I'd years, here inherent the a the lot we efforts, some call, what I'll followed if few you to very a eliminate journey for portfolio made

total be a markets. obviously be divestitures, and mentioned, just a what recurring number end whether of One stable the forward. And more think think areas with couple particularly about perspective, I'll from more from of it I seen call oil growth, away and he absolutely gas and or and to path I'd with the you're that business. And then Vicente we gave say which higher the more a being profitable a well. other piece, sustainable see is obviously, We one today pumps, revenue, the LeROI above as Thomas enterprise is moving So that obviously other you've examples, aftermarket is divested XX% as right. now the base upstream which of the a

be So lot into. you've it for it a whether areas, water the goes on applications a side, be seen of the life that science, lot of on our hydrogen, whether the it push whether oil-free technology be compression lab

huge So and push a would yes, absolutely effort. that's a I very been tell concerted you,

of versus virtue that was look at an RMT you different on. we of focus if market what composition time those even areas the the meaningfully I from today, the by think both portfolio the of perspective at end

Andrew Kaplowitz

improvement follow Vik, as I on could $XXX of from out started flow. in XXX% goal normal the million to we and thinking year mentioned in inventory. you Obviously, seasonally you with capital reach through How QX, slow here? cadence that if investment go sort you working you cash should And then, up about are

Vikram Kini

the Obviously, Andy. year. environment, you through seen the Yes. on, clearly, capital global build there, probably of elevated given here, first that's QX. still situation unrest supply obviously, the would That's thought Shanghai the to here now, a to would say, some clearly, inventory and the we and particularly slightly right have with backlog at continue supply of I of chain half kind levels chain a see of working expect in that

half normalization. And much being about say I'd of being more the QX So different. not second then probably the

is would in. the continues probably So come that different see ramp here half, this year. no that the to everything does I seasonal QX you noting seasonality typically cash expect return year. flow And normal, of think expect it's assuming by second towards back it of lightest to semblance worth our again, is end the We typically to the would some and

Just exacerbated the a the situation. half inventory due little more to bit first in

Operator

question Nathan Stifel. comes next Jones at from Our

Nathan Jones

and strong you mean I'm wanted start pass-through around obviously off you've lead questions backlog very backlog have this times sure you and times. I very you like to book-to-bill I strong Any But than the that's lead had color shorter, with the us ratios, getting more getting in business backlogs, point. orders. some at Are you give longer? impacting cetera. impacting would around how that's how can et

Vicente Reynal

I the the it Nathan, say varies would Yes, and businesses. actually lines within product also and by business

example, for time lead the small So have able reduce now we've the what compressors dramatically been to past. like to was the versus it in

better that time those the some have. think mix product lines so aggregate, about kind slightly think same in you of within the about lead can we And to I maybe with

as So is are, aggressively our a competitive they reduce and it yes. You team use bet, try advantage? to working to

Nathan Jones

you think gains? that, are lead market the and than your to significantly Do better that share better times or is that competitions leading

Vicente Reynal

a have country or will we in have And to for by in a said, region way know, Nathan, it we're vary utilize to that in I I cases, country opportunity our It as think could vary still I as country. mean, some think country. differentiator, will. I region we if to time for country. you like country lead competitive

Nathan Jones

just view charge Or you energy energy as you of And audits? do expense? selling on that kind for quick actually one those a audits. Do one the

Vicente Reynal

that won't some that, charging actually we Yes. industries, is it do What as it amount. of actually No, some minimal -- do for I we're In only Nathan. say again, varies well, we mainly it. because pay the customer it audits. the they in just commitment if these sometimes, the to I we just from doing free, for want don't to you see do mean attention

profit a I in the -- on these cases, some It's more conversation create audits. actually we to we're to do that charging. generate customer. just not but So what mean can on to

Operator

Volkmann Jefferies. Stephen Our of comes next from question

Stephen Volkmann

incremental guess probably fourth that's have back the sure is around But just I I make most be margin year. get you be wanted assume half. a to accelerating Vik, kind I of but second incremental of would relative to because to if be would the have the quarter the visibility And the cost. want just the of price margins of great. for and could, I just to year, in going question, I highest comfort into to that to that to pretty I the kind go the conviction XX% half any heady guess to And second

Vikram Kini

expected say driver. completely drivers is correct. second half. first single the the are price Yes. obviously much that's The than I'd the Steve, be clearly major of margins biggest probably incremental to cost year better in the half Yes, the

margin going positive, other As are we one, Remember, they volume are price now the to we in seasonal synergies -- those a footprint we would the still tend on call that IXV-oriented is particularly cost much half, say the be they more degree, dollar maybe expect because be, the to much see. of quarters, have In more, second in volume all areas first up are in would said, the but half. so. show bit to I we expecting synergies note that very not million seeing more a the there. to But to I'd actually positive shifts areas. certain do would be we're $XX

do stronger. half here them acquisitions I'd of the seasonality have year, second once say, in we the associated remember, last the that is, seasonally synergies And that, year. again, third to so on them have the So the follow with would completed the, obviously, they the it's more bolt-on area we note

in -- a specifically. more We're taking and year. the taking of we're of to of lot more a in back we'd so see those half actions a margin business profile the the Seepex towards now, the -- the actually lot the And is expect of in that lot

first again, you in probably didn't PST particularly that them the those the So prior -- for right acquisitions, it's and now, obviously, have half. -- it's worth for noting year

be a is biggest the drivers. between But them. X those it X would cost acquisitions, there the probably of second you first comping So half, Price being to obviously the starts of bit on a normalize of a biggest the half, more. nuance start bit once fully

Stephen Volkmann

just in and pipeline. I you to acquisition good those helpful, find curious we that sometimes I have of line, my about if pretty be think leads mix? get those to I actually goal that some can bolt-ons you That's Understood. think follow-on sort targets. dilutive? know margin Are likely you curious how over the the But was X because actually margin the about should

Vikram Kini

vary they're nature Steve, Yes. say, in so a wouldn't bolt-on They perspective in margin here. And -- they as vary I profile. I'd also, well. from segment

across portfolio. XX%, will profile, the things completely have is good are with profile the realm, perspective a of line but plus deals we to targets previously. not in very frame, margin time that I typically Not if to how not speaking, on out segment an ROIC would I say, pretty have -- we that better, typically you I XX% a And within purchasing a So get path we're in mean, mix profile if they majority sorry, margin X tell good, X-year better. the these would I'm the meaningfully, for all we've of return from laid

pretty you if some there like quickly. would can that's dilution we rightsize we something feel we is even upfront, tell So slight

Operator

final Wolfe Our Nigel from question comes Coe from Research.

Nigel Coe

here. I'm time This

calls. the managing Sorry,

here. just payback So specifically I X-year definitely in in looks realms on number times a payback, just Europe, apologize looks of of there. prices for is that said But X-year the I I'm that the want to are good CapEx know how Vicente. you've wondering how Europe. high that, how embarrassing. a audits. but energy you given ROI, in energy touched back I go it to wondering a

Vicente Reynal

energy much kind region. by that Yes. as Great, be costs mean don't that Europe, region want Nigel. payback will definitely being is will specifically mathematical formulation to quantify clearly, X-year payback. to continue Yes, that We there. of energy in with the of core getting better higher, I rise, But cost than the to

Nigel Coe

that the Okay. are customers could get at not encourage some manufacturing incentives any And there incentives maybe But of then I'm just line -- aware replacements? any specific on the aware or of that I'm you're level. over curious, credits

Vicente Reynal

Nothing would nothing Nigel, meaningful, say be No, I honest. that to meaningful.

Nigel Coe

then more portfolio, I old compressors, know And prices. bit than mean. finally you The Ingersoll oily the i.e., Rand the legacy Denver larger, was Gardner on what portfolio just compressor higher definitely train, a

seen Just now is verticals? trends there? energy mix right centric those in what what the end wondering, so you of markets And

Vicente Reynal

Great. Yes.

about to actually is the very that in we said high-growth to what markets. line before one moving sustainable this So fits well end

that air into taking for we're centrifical technology of or that So large LNG. compressors like hydrogen for separation

also more into kind So of and chain. production I in is growth and what these of vehicle into of and the we're are and are semiconductor the markets away and last electric that from the lithium battery sustainable kind kind that seeing. pivoted the have a we supply the and these lot markets the new end expansions markets. those production. And Also the oil one call ion food that end of mean sustainable better you're more localization gas we beverage seeing of

taking well momentum. very position is a seeing them is end markets this growth control, on can are into the that great what So which and better example taking we products

Operator

session. remarks. back Q&A Reynal for our any concludes And This Vicente I'll to final it now pass over

Vicente Reynal

call the the your want everyone are say Rand. Thank shareholders, our of just all we Ingersoll you, here to on the to for thanks support. are to interest listening on thanks all also say to who Victoria. to And for and to again shareholders I want employees that

even not better guided continue making also shareholders. company purpose see, a very can we're execute only of environments, customers, you well but for our life our our to employees As planet, always and positioned by the in difficult we're and to

conclude I you talk some Thank here of with say you soon. and to So to you. thank and want that, again,

Operator

Thank joining for you, call. everybody, today's

disconnect now lines. may your You

Ingersoll Rand (IR) 5 May 222022 Q1 Earnings call transcript