IR - Earnings call transcript Q2 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, ladies and gentlemen, and welcome to the Ingersoll Rand Second Quarter 2022 Earnings Call.

Our host for today's call is Matthew Fort, Vice President of Investor Relations. [Operator Instructions] I would now like to turn the call over to your host, Mr.

Fort.

You may begin sir.

Matthew Fort

to Rand welcome earnings second and call. you the XXXX Ingersoll quarter Thank Vice Relations. of Matthew President I'm Fort, 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'll in financial In certain to non-GAAP refer measures.

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

time this question over session, For keep other one each to ask and Vicente. to time, At for allow one caller we to participants. I'll turn follow-up call to that today's Q&A the

Vicente Reynal

good Matthew, and morning Thanks to everyone.

power to years profile. strong our role return the his Moving to Head to leading and slide finance profitable X, and of several I leader growth a start as by as a the new successful helping Relations would Matthew to lifting like business margin welcoming and to Investor business after tools

say our needs. Officer. delivering of appointments our through you to Ingersoll to employees purpose and we happy to talent for demonstrate spirit I develop like new very worldwide our the also customer Chief Kathryn and welcome am to entrepreneurial on our bench also I Freytag would ownership addition, Rand. exemplifying continue an thank at that mindset deep as Both Information In

teams IRX environment. how on in leveraging we're own challenging to Our macro continue outperform our to most process impress me the

continue second can uncertainties and on act like year-to-date Our XXXX commitments and here how And while strong chain we supply we risk balance in leveraging very and the sit macroeconomic our the today. concern, exemplifies see performance quarter when own and owners. beyond. stay to our and remains focused as we strong Demand employees be what to deliver a control geopolitical sheet operational mindset we on and our think

innovation organic also this see you growth for agile around remain generation. how investments in and environment and will to continue today very demand accelerate We we

imperatives five staying portfolio X strategic are end our true align highlight slide center, to Starting allocation portfolio. our also is new markets committed sustainably page. And our to this briefly where to very three will high-growth There would by on global we're through operate at to We well-aligned very the quality highlighting acquisitions with our stated acquisitions. growth are capital remain M&A our focused and supported strategy on that continue like points I today of four enhance megatrends. strategy that the bolt-on to we sustainable is inorganic on

a is growing sustainably. of simple First, we have that and two-pronged sustainably operating approach

report targets. continue all sustainability XXXX Second, our aspects how of across highlighting and hit journey progress to released June XXXX in our track we we remain our sustainability our on to

was to a to peer of done update remind sustainability release will a BB to puts our September our we carefully our other AA ratings our comprehensive AA rating the that continued us the have see from recent upper I XX save to moved we we rating to from now on date a efforts momentum of positive group. before A, we worth another so report And in and from quartile provide which everyone in upgrade be less want this watching resulted noting X.X where our It rating have also the on is than our Third, expect webcast the years. sustainability efforts XXXX in MSCI from upgrade Annual in sustainability. current will agencies. for will Sustainability Last, around

contain slide highlight officially an where treatment a we of chemical-free Ingersoll that this compact a system water. are liquid our a very Ion and X, differentiated innovation this to to enhanced technology and pump kind high produce Solutions. water disinfection plasma is box of organic combined technology Rand launch This to small is compressor testament innovation, This exciting our Moving concentration oxygen. which patented cold solution we the to from for technology. to Later oxygenation want commitment through and sustainability a its first with year, nanobubbles today in own called allows growth of will

develop for end cost later of You can in We're to of the year and a farming Excellence benefits water efficacy Solutions IRX, of to like delivering food Ion higher and Solutions the disinfection or technology. disinfection concentration this this will IP and utilization XX increased of the while into technology indoor slide reach some launch including than technology and the on total markets as high-growth footprint. officially of moved commercialize less this other has well which more medical, is the the months. launching see Ingersoll and team sustainable behind What and the speed moved driving and pharma. our Execution the acquisition the even applications product Through incredible ownership Rand from continue the produces we me excites the all lower in the team as to product Ion oxygen expand

segment development self-funded like R&D in opportunities our the drive organic we future PST growth was continue investments to and within the to this. addition, In increase

most our inorganic top Turning to capital to pleased perspective. priority slide allocation remain very we're X, also highlight the from which investments a recent

in QX very which acquisitions, we signing aligned funnel are of was three healthy it criteria. end remains strategic XXXX. the week, and times the QX of with M&A as Earlier larger the of well funnel this Our remains bolt-on and than our of financial five over announced XXXX,

CAGR the over past more addition, on three grown In aggregate XX% companies these years. three an have than of

the through walk signed quickly me deals. Let

customer First, Holtec, of of example bolt-on market adjacencies provider a connected nitrogen produce generation high-purity at a nitrogen which compressor can that close that huge are the gas. nitrogen site. business. great In nitrogen tanks our and there generate to This be acquisition is very ITS also of including leading trucks. to case, addressable within which on-site benefits is requires refilling extends storage the a large this a frequent a And the typically for via site on this elimination systems

the can be quality controlled better of costs. In reduction much in with a on site addition and gas the drastic purity

our And the manufacturer recent better an of as serve ITS pumps great is Seepex Prokav our cavity dryer brings parts parts. further acquisition finally has Second needs. progressive Pacific penetrate Hanye, to expanding a growing manufacturer serves a partner of Hanye the served offerings and patented and to complementary sale that Holtec broader XX% which our of compressor and is and revenues Hydro aftermarket in differentiated spare technology Hydro of Prokav addition through generates OEM retrofit India-based of Hanye in Both than the India. our customer are market business. solutions the to its long-term Asia technology and China examples to business. a as compressor of ecosystem more

illustrated the multiples our and aggregate EBITDA adjusted these to sourcing We of by execution deals prudent very M&A in single-digit be three pre-synergy for continue deals. as purchase

eight we In acquisitions by have as year expect the have LOI. bolt-on the we that shown in to more half fact addition several under additional second announce to of the deals

of target an Vik coming As the QX update our a on provide to points from performance. confident basis annualized from over to will result, our being we're stated financial of to I now XXX turn able XXX M&A. to reaffirm growth presentation

Vik Kini

Thanks Vicente.

Moving seven. to slide

be of our the fueled We a the company deliver encouraged to performance We cost track of to IRX by million from continue in remain merger. on agile ability current our in $XXX execution the operate synergies manner commitment commercial in We demonstrating to very balance and environment. on by strong a saw the in QX. operational

driven basis warranted have and funnel we stands we've EBITDA year-over-year driven quarter to activity. ongoing many Total capital as and actions and point ready in market XX% if improvement at which down XX that are from macroeconomic basis organic improvement the cash inventories backlog. low by ITS QX. and in XX orders sequentially global addition The primarily strong excess orders. of million a single-digit PST company despite XX% as year-over-year Total respectively we of and $XXX well discuss supply million take double-digit quarter execution approximately by was $XXX was incremental $XXX the of will need chain quarter a from flow In XX.X% the indicated end due revenue and order structure organic million liquidity billion delivered to company improvement and as $XXX shortly. year-over-year headwinds for times EBITDA Free adjusted margin growth million prior in adjusted from of the growth support XX% a increased $X.X by strategy conditions quarter we to second our of point

is improvement quarter. Our a X.Xx net slight X.Xx leverage of prior from

slide to eight. Turning

basis quarter, such in of FX-adjusted of revenue in For adjusted strength both our the of the price as impact impact ITS growth exclude quarter. impact the nimble ongoing the year PST as declined on It's XXX Vicente segments which We in in last for PST of the declined up dollars to while inflationary our the by When book-to-bill facilities. the increased of of as grew team speaks we increased posted segment headwinds. XX% acquisitions innovation prior year. despite QX remain of PST important note both investments actions XX% basis. margin driven basis remain well did that prior by points from of and and lockdowns terms X.XXx the China the Solutions completed orders increased strong by M&A positive encouraged an from for a cost XXXX, backlog over which by to XX% total the is company EBITDA the second points. XXX Total impact margin XX adjusted Ion of company two basis XX% margins year. segment points Overall, highlighted the

made lower the costs costs general primarily due cost for and down offsetting full we $X.XX the the Adjusted Finally, same. came to for incremental investments area the up year XX% EPS and share. million corporate in IT. and of we XX% at incentive anticipate for being the and quarter generation $XX per rate was to compensation quarter, prudency in quarter savings year-over-year The demand tax approximately was the

liquidity versus Moving flow million. $XXX which the leverage the And $XXX prior quarter free billion now for which CapEx for $X.X based was million of billion improvement cash million million decreased on of dividend the million repurchases despite $X.X million during turns, X.X approximately support $X.X our slide, and company increase million quarter, totaled our billion quarter share included to a Total facility. the in deploying revolving stands in credit cash the to $X on by at debt $XX an $XX quarter. to payment. and to backlog. repayment, on inventory next $XXX quarter to $XXX X.X availability the was turn Liquidity was

As allocation. capital mentioned, our remains Vicente M&A top for our priority

of and we expect and made slide show we robust year. number remains A second half and actions XX, to here efficient M& in structure. to cash an flexible funnel of the be Our more changes primary capital quarter. In to of would capital our strategic we effort detail have the the a within structure, took in we usage create active the a our On

debt we policies entirety commitment financial our of our towards loan term the achieving and to credit paydown prudently The $XXX First, euro consistent is down ratings. manage our debt gross of our with paid investment-grade million.

interest of of mix balance our also a better interest our and floating executed and fixed to swaps to rate swaps We debt. interest our rate cross-currency ratio caps combination rate currency

to now addition, the cash a the on conditions. segments. growth business, back of discuss strategy balance execute I along us generation strong to call Vicente strong turn In across will our sheet, our to economic enable with all

Vicente Reynal

Thanks, Vik.

XXs. to organic the ITS our which strong incremental in growth low an year-over-year. growth Industrial with into digits, look indicators grew in Adjusted Americas the team than individual shows the move Mainland our leading in including vacuums approximately XX growth categories, slide and Despite low XX% product is for Organic X% price with while It mid-XXs down Shanghai orders volume adjusted and delivered a that delivered also high grew a further segment. margin orders see single team of oil-lubricated low which orders and the orders single to growth across year-over-year, approximately and products. XX, grew digits saw China in demand FX, driven see the driven even EBITDA the performance breakdown due Asia stable in mid-teens. the that orders further on XX.X%, a important with low approximately our X.XX. blowers, tough North Mainland strong note also by mid-XXs In more two of FX is during down of the orders book-to-bill up In each higher headwinds. XX% lease the far in we we Europe, of orders to in to If up XX%, in and Europe. digits. of QX, Asia comp, EBITDA generation double-digit X% months the growth stack, XXXX. Services like stack demand across teens growth single products organic of negative products of two-year up China nearly rose up the basis we Turning below with headwind on oil-free prior Pacific revenue primarily an Technologies low and we The segment rates for XXXX, XX%. before points were segment figures about by from And year, a grew shows was QX XX%, margin about than saw impact delivered XX%, orders in lockdowns mainly accelerated of A continue Starting was a XX%, single meaning we Pacific. compressors, can of This to solid rest FX total includes thus global of was spoke digits. basis, with America you Latin the two-year America X% high

approximately to delivered for Tools of And & their The this Lifting & the XX%. Power orders team since the Moving QX up largest performance, quarter XXXX. Power Lifting. with Tools strong orders marks next business for

innovation sustainable slide, of compressor. the our Looking highlighting at oil-free next-generation the we're in action portion

With customers' innovative oil-free than emissions. and by Scope we is Scope are efficient sustainability This gas reduce compressor the address XX% energy replace. a continuing of centrifugal perfect rotary costs, decreasing patented greenhouse example typically to more this efficiency goals productivity needs aerodynamic driving will design, X and X impeller our approximately is compressor it technology through improved how the the and

organically. and Technologies revenue slide Science in to Moving XX, the Precision X% segment grew

basis up Additionally, was the of X% with adjusted XX%. million, PST EBITDA $XX margins team year-over-year, year-over-year. up which EBITDA incremental was delivered Adjusted points margin XX.X%, down XXX

of in decline. As illustrated side driven on the the the margin EBITDA acquisitions XXX bottom table page, by basis year the of of drove prior decline which adjusted in points the impact the is left primarily

non-repeating XXXX, large to acceleration our of impact Investor Since that up the nearly as organic to In points orders, demand one-time was of is PST. of points, is have the of for on largest had basis line the in sequential stack X% the orders related discrete some XX%, were COVID stack the normalized growth, addition, business. the were note product asked expect X%. solutions challenging year-over-year, showing we in lockdowns, profile the in hydrogen how approximately the driver to orders orders mid-XXs XX up ion year and been two-year where November, business of Day approximately such prior organic and investments we And the up COVID grew XX margin drove the one China given demand, PST basis decline and for again EBITDA the due into QX future important Medical Thomas questions China primarily as achieve the due QX. key in organic XX%. the a Adjusting to for Organic also It facilities segment. two-year that impact comps were other

medium to the right-hand of committed to want margin in illustrate, we bottom side On that achievable continue term. we I is the the mid-XXs to believe why a delivering and page remain

across are or above margins, EBITDA few XX% of to another is the related XX% XX% of see vast As margin. already leaves XX% we opportunity and record you portfolio businesses we That below a XX% around us expansion and that in significant with majority out core that the portfolio early-stage can for entire at innovations. We acquired of margin is targeted newly portfolio three within have margin the And new the our with acquisitions with examples. EBITDA track expansion a business. believe have assets proven margin both let point me and to

plan to businesses in and margin is illustrates that EBITDA are The we how the Seepex bucket. than first less improve XX% example

which the acquired of we less margins. how XXXX, out we has some to have September time two to two high already recall, next businesses the margin in and XXs than the already you acquisition that As at examples to had in The improve EBITDA quarters. mid-teens EBITDA Seepex very can low continue point improved

XXXX First, acquired which segment, then in have business. This our EBITDA mid-XXs our Medical gone is two a XXXX, of margin. core legacy XXs business And margin PST Air to the from ensure which Dimensions, company nimble there to Gardner which call recently EBITDA to and of less was in another an remains expansion from low margin is quarters Thomas shown runway now a than where today. in QX have we we Denver the portfolio on its strong proper XXs ability we EBITDA see continue XXs and Overall, actions XXXX where execution. across will grow to to and low we prioritization the it entire use by margin high IRX

the headwinds from The raise by organic our increase now guidance from basis FX also entirely to raising Once X% IPS organic billion XX% to XX%, of leads $X.XXX year XXX is We're full XX. increase versus approximately negative FX. our prior The a expected segment. at total contribute billion. of guidance offset We're to which a year the X% to to growth guidance. of growth. is And this XX% raising growth revenue is the company to in full Moving to comes again our total XX% prior Slide XXXX our EBITDA a guidance a $X.XXX headwind adjusted range point guidance. guidance. we're of to for raising impact

X% provide income in be our CapEx cash than to be to conversion adjusted We XXX%. anticipate expect free continue greater to We quarterly think revenue. don't net the or to way be we approximately is and to between XXs adjusted revenue is And we year. rate the half similar tax EBITDA and what facing low that and distribution the although, back flow guidance equal about the to of prior to best saw QX in to QX

improve do from second half price expect of expect half we spread to the in the cost the improve to half, second we slightly backlog through continue to We and pricing to the first work as year. the

guidance this a reminder, on included Slide X transactions have not As new acquisitions in the closed. not as the are mentioned

Turning We I including up be better performance in to strong XXXX is we reiterate than results known in to strong poised delivered the first was conditions. call, is want position. market and half despite quarter Slide that second our dynamic that today's XX, wrap very Rand a year as a strong record challenges to Ingersoll XXXX expectations.

our drive with With we to disciplined leverage continues to the facet the a record our capacity we business very to and allocation And and decisions to to on continue better owners IRX with as turn capital To agile for I sheet the life employees, of our thoughtful the capital the investments back operator for our This of the resilient accomplishment and across to continued shareholders. your will performance. deploy comprehensive strategy, is making track you market will We for and that action remain high our again engagement deliver call are. customers, continue oriented open our you environment to to our thank of our return capital and make Q&A. engagement strong to commitments. that like on want mission remain I and every balance have

Operator

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

Michael Halloran

Hey, good everyone. morning,

Vicente Reynal

Good morning, Mike.

Michael Halloran

couple a here. questions of So

you give could level year just about through indicators – at Vicente of conversations confidence. of those question, leading least. in a First that you really quoting more of the customer making little or that positive the what you Maybe dig feel that are you some indicators confidence that demand and leading are talked bit constructive remainder what into

Vicente Reynal

to new the some move actually of into past continue is pretty saw us what Yes as quarter, is And Mike you most markets grab which demand we to leads acceleration see generating. as in that good as unique have think kind know the leading we regions. team we important generation, lot and the marketing a stability for have we we qualified the saw a some qualified able in engine to good be I one say through spoken customers. on July, about of even very I'll of leads, indicators we the And end and areas marketing

us strong. confidence. look we that's So fairly continue gives And into kind – of July also to as be what into momentum strong pretty the order

Michael Halloran

Thanks of for capital that. deployment things. good the And then on color side

seeing in you transactions of there's and LOIs context the things size pursuing you're this to of the type what point? a to any at give more little if change the pipeline, the you're On and could

Vicente Reynal

mean Mike. mean Sure, we about solid that pipeline. see I excited the very funnel. I'll what very in I say

and in over that similar kind growing other to – mean can that highly expanding with eight we three the market. look we financial doing tuck-in all addressing the accelerating of transactions would mean which strategic past good bolt-on of one the great elevating returns, saw to growth. XX kind the good through kind of it growing that the that are of hits us the the also what great even for months, see to marks And highly I the and in company – companies, highly addressable say I be I as strategic we XX the nature, companies, we the portfolio have continue You LOI, technologies, have criteria. been

Michael Halloran

it. for Thanks Appreciate that, Vicente.

Vicente Reynal

Yes, thank Mike. you,

Operator

Julian from we a And question Mitchell. have

Your line is open.

Julian Mitchell

little try the to of outlook Maybe understand clearly. a and morning. second wanted more bit half the Thanks. EBITDA just sort Good

between when trying your to step-up share margin segment, is split ITS the then of ramp. could versus how Just sort you give margin third between sort understand weighting into the back about the EBITDA? on are quarter color fourth much us the of the And year a any we're by quarter, and full So we PST? third of maybe thinking thinking high XXs half

Vik Kini

Yes. I'll the Vicente Julian, your this is Vik. take of let the answer I'll question, first second. part

question in I think you Yes, your QX. the say, of first in EBITDA phasing. asked phasing terms And terms think the of would terms of -- to about mid- of in high in I you're very in what actually, probably we right. I'd say XX% consistent actually we've -- that what of phasing actually of terms the is and saying what of the quarters, last you the the is to in throughout QX terms been QX saw to terms very weighting the of EBITDA. phasing year, all year similar year in

probably, that's a So good proxy it's.

Vicente Reynal

we is half to that kind maybe a it as and half it's already well ITS. Flow-through of merger-related to already the primarily that have in movement XXs about and realization second kind through we think terms we continued was the I from first half the in margin with XXs And XXs. it, in range. XXs, in And to half the the flow-through, EBITDA or that call to low of kind which look half action, second the go back which expect flow-through we if think then at think the in of better be way an PST you the the kind PST, to we in second -- first terms actions, And deals known pieces, it's of same we thing the for that mean high that XXs. PST, to you the as segment. get like similar pricing half, into It's second that should of these Julian was a about kind think actions productivity XXs, the driven, some closer XX% so of that already lot EBITDA the realization volume related first incremental speak the terms given the as issues. half also as action. fairly in and And a repeat synergy to is better have the China leads taken is at And that's some think the realization, generating in about of, to second half, savings, of that the half, first it in for around in when M&A of to the look for again again, absorption sometimes so grow the you data when could of big we going in you the first the half, I approximately margin price closed, segments, XXXX. mix, Yes, closer lockdown the of for have about it

need to team is those all we actions get So again, and done. executing it feels like that the to doable fairly

Julian Mitchell

piece? the then helpful. with piece. just be IT&S that orders really follow-up in compressor order bit that and EMEA healthier. in But of the demand around ITS on progression, comfortable are that how do change the And kind are FX, Thank COVID up feel you. my a stripping you outlook it's then and that little demand how any seeing realize you numbers, of And does long out put would headwind that last? including That’s you sort PST, I

Vicente Reynal

from in an dynamic. Julian, change ITS no Yes, EMEA,

our here even As with we indicators. leading see

mean well Eurozone the can QX you I headwind out, that's like affected pretty why the it by QX, impact. QX to sequentiall, a well FX, when you even pointed X% was see As very X% I FX. to And mean

to of the should in we pretty terms a same, quarter. the quarter. quarter. mean And and of on third to kind that meaningful be outlay COVID, here to coming after basically, the second well the more you're So, one the FX see in then yes, in to in I the the comp the should kind we mean, relatively what fourth in about the goal clear perspective, That what -- confident in be I PST continues saw but of even with team execution, team continues quarters. that From going outperform

Julian Mitchell

very Thanks much.

Vicente Reynal

Julian. you, Thank

Operator

Our next Nigel from Coe. question comes

is line Your open.

Nigel Coe

Good everyone. morning, Thanks.

that the dumb Just $XXX a Is quarter on that zone that my Vik third mean right see of phasing, of to EBITDA. get me million in -- is point finer to I would put where you things? math

Vik Kini

think higher Yes, may Nigel maybe a on be the I that side. little

use of think I'm mid to right I going you'd say were you plus the to kind QX, be – XX% a in mid phasing zone. in If

So, maybe the far dramatically not little but high a you're side, off. on that

Nigel Coe

Okay.

$XXX like million. million, So $XXX

the on PFT very Okay. margins about the fair we've talked side, That's And helpful. Thanks. then a bit.

when headwinds. we I wondering, And are well? that a called that how impact? four orders. seeing COVID to I'm through there You points think, the start So to headwind and revenues as lap do is And we order margins? out floating to there's

Vicente Reynal

Yeah. one Nigel, kind same of in third COVID related from the quarter quarter one-time year. we'll last of here the head more so see

the we saw And so third should fairly in quarter here perspective. and what order revenue what quarter, the in see you to second from be an similar

Nigel Coe

I’ll it there, lot. leave Okay. guys. a Thanks

Vicente Reynal

Thank Great. you.

Operator

Our next question Ritchie. comes from Joe

Your line open. is

Joe Ritchie

Good Thanks. guys. morning,

Vicente Reynal

Joe. morning, Good

Joe Ritchie

A for couple quick ones me. of

out a ultimately metal in to how companies XXXX. fact the understand, how starting is pricing that impacts the to lot and base Just P&L of like, think – our trying I that this with like deflate

see deflation potentially much So, cost of you're versus margins thoughts I'd how do a love And happens, to perspective? you to be going you do just you think your hold do some back? some if from think input the on to to able to hear around, pricing give what

Vicente Reynal

all the And buy, done have not a increases. given they the not pricing been it impact. have they that, the we and that, last historically we month. another have buy, too think type being, as way think price and we're price they increases that Yeah, product Joe, the just it same our this about we out even customers, list eight the any – say of compressor later. I'll is don't year year, to probably well now, every five one I way mean, to And about buy years reason

premium they allow mean, that's innovative price. differentiated of create price to and I highly that but against, that to to kind solutions market to of continue price So it's technology that to we clearly us that compare want perspective. kind will difficult do, why command the

And work be and price that what mean, of you're of have visibility half kind happen, we base us into could and look and for see can we – for go is we that stays is better assume some kind And told basis. the get constant a inflation productivity. pretty we what teams an starting for kind second to here that so you execution on we of mean, yeah, think to expansion reduced. Yeah, which control, forward. the and dramatically we these commodities excited and on I we're that a of deflation ourselves, see of as here XXXX, What great margin ongoing and could as we I

Joe Ritchie

did a bit that guys the That's And walk you I hear, the on talked about Vicente. the PST great maybe we know, just little I – to walk. margins. XX, slide like year-over-year

and how through you the like basis? the just four and are XQ, you a XQ quarter. at If on like PST your down a buckets about take margins that, and year-over-year in me maybe I'm maybe those other, M&A in then buckets should third those modestly talk look assuming buckets, think China, change growth how –

Vik Kini

Joe, I'll take Yeah, one. that

one So, the the if buckets, we it kind biggest with think about the describe starting I three M&A. of is, first probably the of impact way

First lap being one, we the there year's M&A. and a last coming Seepex acquisitions, highlighted particularly one biggest and the drivers Obviously, QX the do we've of times. were to biggest that few in foremost, start from

expect we see clearly to we start lap falling that, with will off. some that, synergy the So, obviously as that higher of and expectation

here So to timing purchased expect China the any Obviously, only impact good impact that when -- to is terms reduce it. see June, impact any given of particularly expectations the of to operating don't concerns that a track our in at year on last a again, we really exiting here this -- repeat of year PST, have QX. The expect The here wouldn't through June QX. QX lockdowns, sorry one-month very nuanced exiting we that China dramatically one-month had start all. in really of impact of we and in facilities see in in would we're M&A back right we news was we

of the growth, still yes definitely In that will be equation. the terms of for investments part

like business example terms different QX. for business was Ion and you expect areas will be that of I be are of dramatically our -- to should these Solutions lot it think A it These those hydrogen execute in will that continue. excited frankly we in And even deck. one and continue things really the we're on in are through innovations great invest that about, year to highlighted last since year. this the

that's get indicated also just for will themselves think QX. And out. Vicente continue not major PST three as here, to I in spread in price/cost the buckets better QX but again, So play how then the

Joe Ritchie

guys. Super helpful. Thanks

Vicente Reynal

Joe. Thanks,

Operator

Instructions] next from comes Wertheimer. [Operator Our Rob question

open. Your line is

Rob Wertheimer

morning, Hey, everybody. thanks good and

Vicente Reynal

Good Rob. morning,

Rob Wertheimer

known going innovations, been I'm different it different. and and be a review lucky may I of a actually could of the or gone not effort? widespread any have very then it's don't really I is and innovation cold to to sort is change And -- want this something more be and that know changes innovation a or on on forth? that's is thing. is if wanted pacing the you program process just of opportunity how ongoing is. industry you. so slightly plasma share differentiated a evidence question And kind see your Thank it you breakthrough My to if on whether oil-free sounds if interesting it's metrics sure

Vicente Reynal

is out markets particularly intriguing like and the is own hydroponic ability the you about in on of of talk be to its very is in we'll only market self-contained but creating in actually, Rob, the Yeah, which that and unique. I'll water, important in disinfection, there all its for kind oxygenation it not has say so technology and more able innovation differentiated plasma it accelerated only pretty the the And create go cold questions. ability things one hydroculture very, that. -- markets that unit, the and very of highly

it's strong. So think I be going to really

a IP strong it. around built very have We

that. speaks is of wanting a combination kind the that of some we've again one very been things we of a can several Ingersoll have And so very big Rand of do, technologies to such protection a is as compressors which solution. unique example. and technology just in pumps great again into around And create actually to here additive volumes that IP terms area And

bit global lot of the of a teams. around accelerated continue combination that ITS gave think how spoke, when of with summits dramatically perspective conference We do In innovation we I a the a innovation. the it product innovation terms that an cadence investor think the of at the highlight have about that of of two kind of how kind we and we companies was we to and work back from

flow very created so plan inside. again the of around oil-free very exciting recently inside couple and here regards breakthrough core such And a fairly it's protective IP. And one that unique is it the of centrifugal which the think and had have core of we for of the we oil-free piece, was technology that is business the that because centrifugal product particularly I IP compression. where protection the I just and property -- In to weeks one review you review strategic with ago again in a our teams. of IP patented it's characteristics it compression we think to this that a be as we've technology believe the air protect moves some and case application-driven intellectual every unique kind And how technology example And and that take in around products. can technology as aerodynamics

create So, again, we efficiency. feel that that energy allows us and differentiation to

the in plasma some was say that Solutions the leverage example. own one Acquired we its would process. all the developed from pretty in And a out-execute XX that processes to than is way a which IRX model this I great cold So, unique to IRX Ion drive a IP, utilized impressive. and as launch less of IP, the went concept product months we to product pretty

Rob Wertheimer

you. Thank Great.

Operator

Volkmann. Stephen from question a have We

Your line open. is

Stephen Volkmann

wanted the and sort seeing issues impact guys. to to ask trying margin that. kind kind about supply of if of these we're productivity just headwind seeing? what in terms of just And all to I'm chain the you're there's morning any I that out due figure good of Hey, of been

Vicente Reynal

the Yes, it don't I if right would because headwind say right margin you at the place. the have Steve components all at we time absolutely think a about

the the heroics part. piece creates a prebuild of it of on maybe yes So, and side for reconfiguring the to try wait that in put do factories to compressor terms the and then

So, issues. yes, seen chain. And we chain supply the We've we'll I one due and absolutely. hits constraints on is to say the see still productivity think thing that inefficiencies supply

don't think I that everything is So, perfect.

the that that back But the incredible and processes team even came saw we with in expectations to able outperform. basically ITS with utilization doing I that when China the the of are they're headwinds. yes, and very lockdown. I with think dramatically what outperformed some they some had IRX in of our the clearly perspective the teams the that is from just to definitely you mean

go your to the to into as point, the maybe stable. and very due we or more the efficiencies So, it's point beyond, chain XXXX of being should supply a productivity maybe good we better see ease

Stephen Volkmann

some maybe going at chain cost supply because should then like exactly whatever point also and of price demand margin is XXXX of turns some with where for that's I but positive. presumably. you feels this it will normalization see Right And obviously it was tailwinds be from sort

pretty like it so could in incrementals feels be robust maybe And XXXX.

Vicente Reynal

Absolutely.

Vik Kini

you And year. into I deploy second a through into year Yes, see there mean what XXXX. we've that the commodities We tailwind we're agree. to actually potential think as obviously price, year. we how start been this that positive do deflate Vicente earlier the next -- price half potentially, the expect definitely and of better get it encouraged pretty said given indicated add even to the of first this the to we then as I entire ,if I year actually been only cost has last would thing time half is from

continues I alleviates see the in here. it have think of elevated chain opportunity of result supply a probably is supply a cash mention obviously think And a you from clearly obviously, that and to in here as inventory. We at the financials thing be inventory that deploying perspective -- should the other our terms levels. you chain, it meaningful we saw I

So and this back good there of to is the the the backlog it is year. news do half for

normalization more little the us chain. bit and to execute a matter So continuing just seeing supply in of again it's a

Stephen Volkmann

Super. Thank you.

Vik Kini

Steve. Thanks Yes.

Operator

from question Nicole next DeBlase. Our comes

Your line open. is

Unidentified analyst

Good Thanks. guys. morning Yeah.

Vik Kini

Good morning Nicole.

Unidentified analyst

you you things saw mentioned bit markets. and Just maybe on the orders back improved? Can regions about you a you little some going July made acceleration where guys to in elaborate comment certain like Vicente

Vicente Reynal

Nicole. I get Hi figured sure the we'll yes. Yes that follow-up for

think -- to if was to categorize was we're I'll say -- see speak cycle it. starting some more -- release honest fairly were so I I think it be – to I saw projects. it we for to the we guess Nicole, long broad-based I that

large been kind these a the getting So that conversations that some pipeline of seeing lot they're of of there's projects in we're released. and have been

as in these on and expansion some some energy we're also are capacities onshore of So momentum of transition-related well. and cases into good that some -- and/or as seeing

So perspective to we're perspective. movement seeing all but some that from China in global Europe. good in very But U.S., honest the across it even also a fairly momentum on regions and exciting global be was

So think was I it broad-based a Nicole. fairly here,

Unidentified analyst

on little very bit free plans about is inventories? Like a reducing weighted Can you second Vik for the your on cash Thanks plus conversion? just you just the get to this see Vicente XQ to flow. talk follow-up maybe made comment in path and the the XXX% a half you based about

Vik Kini

say weighted. it. it's probably best to say It's second I'd Nicole, way the probably half

a you capital, look company year you continued that's think But the movements that as weighted. obviously comparatively -- probably it combination let's a going biggest terms in year which One, being the of the working the a of speaking. good working probably sure following piece. stronger Typically predicated the are on well in we also quarter two I as typical this are yes, say to see call lot is inventory example. profitability last things. a seasonally more I probably is If of of half second would rightsizing capital fourth

cash have of pleased But despite a that inventory about You cash the kind built we're half $XXX we perspective. that million meaningful million $XXX quite for a the half second see that amount headwind of still of from flow first say in generating free quarter. actually I'd the flow with through first

the is would to pleased I the and backlog the up team execute and with the execution But to good be headwind. the of news call capital free pretty cash. here again, what we path that despite working So have able

Unidentified analyst

Thanks Vik. I'll along. pass it

Vik Kini

Thank you, Nicole.

Operator

Vlad Bystricky. from next Our question comes

open. Your is line

Unidentified analyst

guys. my taking for morning Good question. Thanks

Vicente Reynal

Vlad. Good morning

Unidentified analyst

But just on you're bolt-ons. given some down, the announced lot how maybe color about larger you obviously you've increased deals noise just especially allocation how around your given a on capital talk and front, then can deals come of three maybe the additional backdrop? LOIs leverage about So good has the thinking the for the appetite in macro

Vicente Reynal

we that at Vlad say, characteristics I'll you are funnel our have -- Yeah. look in the when still nature. talking funnel fairly bolt-on

So might highly to today is of those I'll and see be focused we're nothing they because definitely around there very being accretive more not more in funnel can what acquisitions be but us. speak terms on that deals nature we one because the not out in billion bolt-on this plus in

Unidentified analyst

really to organic just back growth helpful And the That’s here. outlook then maybe Vicente. Okay. Thanks. going

outlook growth your up organic on stronger took IT&S you So growth.

environment you can you're focused on in mean, accelerate. the what's potential seeing and more since a organic investors I XQ? So macro, slowdown but growth are the talk worried just about really about changed

here? and half the just you talk about the can that you beyond back trajectory the of growth So about drivers sustainability think how

Vicente Reynal

to say is in we're and that or definitely more that nature it I'll less keep Sure. realization. maybe seeing acceleration simplistic price better

You XXX ITS whether QX price, saw I basis QX mean, price or in almost sequentially points improved how we to terms of PST.

taken actions are those and already backlog. So -- have again that in we already the is built that we

organic amplitude the increase the better Vik shipping higher get will said that second cost in continue in realization that that margin as that and you to gives that product as supply So able organic, price basically also price well realizing as volume be want. just then to and to the in And to accelerate shipments half. getting being some the chain customers what able again deliver released of from of to is terms volume, constraints the

us So to allows again produce factories a the it's to chain for coming better that supply price better product. a movement realization better here and

Unidentified analyst

Vicente. That’s Great. Thanks. helpful

Vicente Reynal

you, Thank Vlad. you. Thank

Operator

have Jones. We question Nathan a from

Your open. line is

Nathan Jones

everyone. morning, Good

Vicente Reynal

Hi, Nathan.

Nathan Jones

long-cycle projects off start to wanted I Vicente. about question a the with

to order You released of some talked the getting book. and helping about drive those

heard be backdrop. delaying any longer projects likely -- anything like planning Rand, on customers might have cycle they're information Have might ahead uncertainty about from those Can time stages or reconsidering maybe regardless the or stage projects interest forward about have you you macro might insight the think with those I anything that reconsidering by the get been projects in or macro some that are go Ingersoll talk larger to earlier rates, moving that? that? with of higher customers to like of products ordering you

Vicente Reynal

put see honest, be to an question, that Nathan in big just say customers would nothing a but interesting I and rethinking. we say it's pause that I'll dramatically

to acceleration energy kind this of will medium so us I get being we're of our let's and contrary, say the that and fact longer efficiency on allowed because it longer high of perspective. or for period seeing because be high improvements, technology to that here think see making prices I prices just the current energy now to energy customers the the of done time they of drive

in products seeing footprint have ownership cost good on So I and projects some view. of momentum customers. solutions for positioning customer to think are actually the and is our a our that my again that even more this through cause It carbon pipeline better getting equation benefit accelerated teams the that from total we how equates with that our a to

Nathan Jones

Thanks. Maybe for Vik.

the are the on next here. fixed impacts expense the it in value caps, structure in interest capital And what the maybe place On plans any couple give debt over of for notional actual you putting can years talk swaps about us you can how detail here the short-term?

us you structure? details give any the with your can capital on Just intentions

Vik Kini

Yes, sure.

to that kind note for rate we interest say, I'll in kind But maybe here. of our balancing floating to to and credit our indicated. that you rating, on it's sure want fixed we're ensuring path by as that of cognizant we structure balancing obviously execute ratio make important what the investment-grade summarize completeness number did on things here we're further an to strategy. we continued I'd So, exposure capital did second just And of of just here, a to, our quarter

amount what executed off in loan, we piece base capped did cross interest quarter. three we was I'd euro-denominated X% of euro €X full four the distinct rate of to say, so to final three term. of And term terms the million. Then US distinct And which $XXX $X the interest XX% pay the swaps we we dollar then, did or to on And things USD at billion One currency that three-year was, executed the in billion XX% to fixed, floating. swap dollar rate. is swap things

fixed example, to of QX, just meaningfully of our step where ratio mean in a this So second we floating for your the the again, here is context I in yes, exiting we've part your to changed where kind the I of of are we I -- were think QX. structure. consistent evolution exiting in a now think capital context question, of And

maturities indicated to which would As continue investment-grade to news at see here is to the The probably right we'll structure do time the of of we more structure are point expect which that fixed our good in continue a to nature debt here, rate point clearly go into all at capital and rating in time. change we credit out of path XXXX. at point to now our towers evolve a

you and and lot here us news And as So funnel here as coupled the as to I'd say, execute considerable QX. on free that Obviously, of change continue the of but with gives to with I amount structure. allocation say, we have strategy, a a that well to very And evaluate of to be flexibility continues flow to support liquidity Vicente. M&A-centric. -- well time as some exiting strong both the our cash cash the good It I'd think heard we the execute amount gives still flexibility continue from is have continue capital to that. which us we'll clearly,

Nathan Jones

the for just the rate expense? what's bottom maybe And quarterly line interest run

Vik Kini

back year speaking… Yes, roughly you'll probably average, the be, I'd XXs say, in high the closer the half to of on

Nathan Jones

Good.

Vik Kini

perspective. From legislative

Nathan Jones

Thanks very much.

Vik Kini

Thanks Nathan.

Operator

And Instructions] question a from we Joe O'Dea. have [Operator

Your open. line is

Joe O'Dea

Good Hi. morning.

Vicente Reynal

Good morning, Joe.

Joe O'Dea

you X% deals quarter kind X% of think wanted looking Are the at about the in setting I a to the that at and ask framework have that's when right you deals motion based on based what we annual given the better you contribution and growth on target LIO, then number of on of next for that think M&A looking what to up here? we're than of kind what's the this to under based year. on something now contribution

Vik Kini

of way and today XXX points Joe, to pieces. about ability commitment Yes, what an annualized to One is still best are execute the two think XXX think on basis inorganic is I the maybe this we our reaffirming basis to here growth.

me two So it let take pieces. in

in-year in guidance, still You about we the are of impact. committed can see million to $XXX

Now that's largely saw second coming the already in small year the the from one remember called that see you'll well in as you deals the reality bolt-on business we last announced Jorc. as the did half first a is primarily quarter of --

not earlier really guidance million. week have deals three The they this not been actually that $XXX what's they that's closed. were So driving because yet, the announced are in

basis LOIs of we annualized second the to as the indicated again, to We deals again in expect points Vicente the in the one close those the and on XXX of just would an to as the impact expect annualized year. we to XXX And on well them funnel basis. all get what half based what's announced,

way whether the annualized this all those year revenue to purchase of at able that see look the at here, to M&A expect actually basis say, of look what impact up all in-year to we of to whichever XXX -- is want So as of be revenue, the impact points which you to the us want we I'd we impact XXXX. to to into nicely setting if XXX go it, lead actually you us

actually actually it, this until to again, week, be I So and we we but won't want here earlier close deals. at look think, want Joe that the just in I the same to not deals the understand answer, guidance they're depending announced sure how to yet it technically three you they probably leads on make

Joe O'Dea

Asia the you insight Understood. you're region about of circling which market? double-digits on there? bit rest outperformance talk And driving Pac the Asia. of Some ITS to and the you mid-XXs Can orders little low what's have back degree into up that China in seeing the then the a growth in

Vicente Reynal

blowers that yes, mean, third-party or our where market teams China, I vacuums according compressor lot to have in but Joe, to outperform Pacific peers Asia there's the And triangulation. from in a a in I see what to can we really not I terms I that do technology and well the actually in And our we Yes, around we a mean, penetration teams, continue small. our share report perspective expanding also to of you team of say. really the and is think market today leverage continue the fairly according

I'll technologies great So the that compares we in of being the Joe momentum. as areas areas kind vacuums that to create our have technology able well pilot and to the of of ITS good we team really to old to quickly the of seeing move of growth opportunity those pretty say been applications in And have kind where they're in the a terms incredibly very that. team last agile big take Asia-Pacific, accelerate has piece, is our

say, the them the is I that understood well of still something these not have end is you growth externally, we is well portfolio. this execute has kind and pretty by think can China, strategic our It done to applicable I in phenomenal something trends that that would to executed and but aspect. markets we great the the So you particularly that And has is that here other just job, unique that in but make that regions, have of fact technologies to have. team Pacific our a Asia into been what team that to in kind

Joe O'Dea

Got it. much. Thanks very

Vicente Reynal

you. Thank

Operator

call at Mr. I the Reynal. to turn have time. questions this no back queue further we in over will And

Vicente Reynal

very and and challenging is that, proud the things few performance teams can I'm fit that, I'd very our terms business first macro important, long-lasting performance. stronger the of and this have see the say IRX our while And all that is for to Paul. like half mean highlight more a environment, in piece of very I of culture to over ownership, to I want essential continue say excited XXXX. I just want our Ingersoll build operationally leveraging transform our to team the we in to navigating quite And the momentum. to continued super both mean, and strong, work Rand know, Board. to agility continues I -- a second done financially resilient. to we be And importantly our announcements of you at with that, Thank add the and will the we're you, here Board proud about incredible the we're and quarter Michael end. of Mark them Stubblefield as to adding value, Stevenson continue company. we

to with many say soon. with speaking thank So Thank for look to your and forward I support that, of you just continued want here you you.

Operator

This you concludes attending. Thank conference for today's call.

Ingersoll Rand (IR) 4 Aug 222022 Q2 Earnings call transcript