Ingersoll Rand Inc at Morgan Stanley Laguna Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Chris Snyder - Morgan Stanley - Analyst : So maybe starting off high level, in my view, the best compounder in the US industrials. A lot of companies do M&A. I don't know if I cover any companies that grow margins through the M&A. That's what always stands out. So what's the secret sauce?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. It sounds like the foundation at the company helps do that, but is there also an element of when you're looking at what to acquire, are there certain things that you're saying, okay, hey, we know they're going to come in, integrate well, we can get margins up? What do you look for there?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah, no, absolutely. While there's a lot to love about compounding, you drive growth without needing the cycle to get perpetual driver of positive revisions on earnings. The concern that I have around compounding at times is when the companies have gotten so much bigger, I think you guys are probably 50% bigger than you were in 2019, so adding that mid-single digit, now you need 50% more. Does that make it harder, or is there a change in the way you have to do things?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah, no. Absolutely. I guess maybe taking that total addressable market and bringing it to ILC Dover, was the TAM expansion there a big part of that deal and the decision to push harder into life sciences?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah, the deal, I think, more than doubled the life science business. So I guess two questions on that. How is it going? And then when we look at the M&A pipeline, is it fair to assume that there's more coming into life sciences as you continue to try to scale that? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 2:35PM, IR.N - Ingersoll Rand Inc at Morgan Stanley Laguna Conference

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. The deal really stood out from a cross-selling opportunity. Maybe can you talk a little bit about that? And are you seeing that come through? Or does that maybe take a little bit longer?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. And maybe last one on M&A. I think the deal was very positive from a total addressable market expansion, cross-selling opportunities. the concern that we heard from investors is that the history of industrial companies pushing into life science really hasn't been maybe always that successful. Maybe you don't have the same domain expertise you have in industrial, generally subscale. I guess what gave you the confidence that this was the right move?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. Maybe before I turn to the market outlook, I just want to see if anyone in the audience had any questions they want to ask? All right. So to the market, when I look at the performance of the company with respect to the end markets, growth has bifurcated above those end markets, most specifically in Europe and China and in Asia, I guess where do you attribute that to? Is that just you guys are winning share? Is it that energy efficiency and the value add there is higher than it used to be? What's driving that market outgrowth?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. Do you think -- is the bigger difference from the customer standpoint that just, hey, the ROI or the paybacks are better than they were five years ago, whether that's just because electricity prices are higher? Maybe the digitization has helped with that? Or do you think it's more that customers are maybe more focused on building resiliency? That was obviously a big theme in Europe given some of the energy stocks over the last couple of years.

Question: Chris Snyder - Morgan Stanley - Analyst : And is that return better than it was five years ago that you provide to the customer? Is there any numbers or anything you could talk about on that?

Question: Chris Snyder - Morgan Stanley - Analyst : So I mean 15-month payback is a phenomenal investment for anybody. I guess what's the pushback for people maybe not upgrading their systems?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. Maybe over to those MQLs. Mike's doing a great job, I think, up 13% in Q2, it really stood out to us. When do you think those MQLs could start driving a more material impact on organic growth for the company?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah, I mean, I guess maybe on that short cycle side, you know, whether it's driving -- and I know short cycles actually stayed pretty solid for you guys, but are you seeing positive rate of change and what's driving that? Do you think the end markets are getting better? Is it, okay, maybe there was some channelled inventory digestion that needed to be worked through?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. On maybe the longer cycle funnel, first half, I think up in the 20s year on year. But I think we're saying that that conversion is slower. It sounds like there's a lot of reasons for that. We can maybe pick our favorite. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 12, 2024 / 2:35PM, IR.N - Ingersoll Rand Inc at Morgan Stanley Laguna Conference But I guess, what do you think are the biggest? And why do you think that is converting slower than you would expect?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. On those mega projects, the US gets a lot of focus obviously. It's something we focus on a lot. But you mentioned mega projects elsewhere. Can you kind of talk about more globally what you're seeing there? Because I feel like that often is, hey, not as focused on, at least from us in the US.

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. Absolutely. Maybe to Vik on margins. It has been a great story for the company on expanding margins. Right now, not much volume growth out there. But in a slower environment, the business does mix more to aftermarket, which is margin accretive. What should investors expect for margins going forward?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah. You mentioned the company gets very consistent 1% to 2% price, pretty much every year. Obviously, with inflation, it was higher. But when I hear that customer paybacks or ROI is materially better, does that change the way you think about pricing and maybe not sharing those economics a little bit?

Question: Chris Snyder - Morgan Stanley - Analyst : Yeah, yeah. Maybe, Vik, you gave some regional commentary earlier. Maybe finishing up on China, there hasn't been much out there to be optimistic about. You guys, in Q2, talked about, I believe, orders and revenue up sequentially versus Q1, a little bit of backlog build. Do you feel like things are getting better there, or maybe there's too much to extrapolate out on there? I don't know if there's seasonality in that.

Question: Chris Snyder - Morgan Stanley - Analyst : I appreciate that. We're up on the 30 minutes, but I love the conversation. Thank you guys for being here.