Ingersoll Rand Inc Q1 2025 Earnings Call Transcript

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

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : Hey, good morning, everyone. So the last comments on the guide. I just want to make sure we're all on the same page here. Essentially, could you bridge previous guide to current guide? It seems like you are taking the organic volume assumptions down, but it's more precautionary as opposed to anything you're seeing today from an order trend backlog, et cetera. And so maybe you could just break that out on how you're thinking about the volume, price, confirm the precautionary FX and just kind of walk through those moving pieces?

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : And then a twofold question. Can you just talk to any nuance you're seeing on the short-cycle businesses versus the long-cycle businesses, more on the ITS side there? And then on the PST side, you've had positive orders for, what four quarters or so in a row now. At what point does that turn to positive organic growth on the revenue wise? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, IR.N - Q1 2025 Ingersoll Rand Inc Earnings Call

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : And then the PST question?

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : Really appreciate it guys, thanks for all the help.

Question: Julian Mitchell - Barclays - Analyst : Yeah, good morning, just wanted to start with the organic growth outlook. So as you said, it seems like trends year-to-date in orders have been as you thought, there's some sales sort of moving around as normal. But when we're looking at the sort of seasonality of revenue this year, maybe help us understand how the quarterly organic sales are expected to progress. Anything abnormal seasonality wise and what sort of exit rate for the year from the year does your guidance embed on organic sales? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, IR.N - Q1 2025 Ingersoll Rand Inc Earnings Call

Question: Julian Mitchell - Barclays - Analyst : That's helpful, Vik. And then just my follow-up would be looking at the EBITDA margins, those were down slightly year-on-year in the first quarter. I think the guide for the year; they're sort of flattish overall. So maybe help us understand kind of any effects on the margin rate from tariffs as we go through the balance of the year? And should we expect sort of margins to just be up a bit in each of the remaining three quarters year-on-year?

Question: Jeff Sprague - Vertical Research Partners - Analyst : Hey, thank you. Good morning, everyone. I'm a little bit late. But just coming back to tariffs, if I could. Vicente, I think you, when you're kind of explaining the hedges of sorts in the guide, right? You kind of characterized the tariff impact is 2% of sales. But it doesn't sound like you're going for it all in price. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, IR.N - Q1 2025 Ingersoll Rand Inc Earnings Call Can you, if you haven't already, can you just provide a little bit more color on how much you think of it as kind of price versus kind of cost or other sourcing actions to offset this gross amount?

Question: Jeff Sprague - Vertical Research Partners - Analyst : Yeah, great. No, that's what I was sort of getting at. So yes, the plan is all priced, but you're obviously doing a lot of other stuff some cushion. Could you also just speak to the China business, specifically China for China kind of the tone of demand that you're seeing there and sort of any evidence of backlash against US companies or anything of that nature?

Question: Jeff Sprague - Vertical Research Partners - Analyst : Thank you for that. I'll leave it there.

Question: Robert Wertheimer - Melius Research LLC - Analyst : Thank you. I'm curious how you think about acquisitions, your desire to close, how conversations change just given obviously there's more uncertainty that you've reflected in your own guidance, do you assume a safety factor and are willing to go forward, or what is the outlook for kind of closing deals in the year? Thank you.

Question: Robert Wertheimer - Melius Research LLC - Analyst : Thank you.

Question: Andrew Kaplowitz - Citi - Analyst : Hey, good morning, everyone. Vicente or Vik, book-to-bill over onetime as you said, which was strong and still strong in April. And I know you said your MQLs remain strong. So maybe you could talk about your order expectations for the year. This year end up actually being normal for you where book-to-bill stays over 1 time in Q2 and you end up booking book-to-bill at or above one for 2025.

Question: Andrew Kaplowitz - Citi - Analyst : Helpful and then (inaudible) Vick, can you talk about the Q1 margin performance, in the segments? I know you got hit with operating the leverage in ITS given the $15 million moving to the right as you said, but if I look over the last Couple of quarters, margins at least versus, high expectations have been a bit choppier, and we know your acquisition activities continue to be robust. So is there anything to read into here that acquisition noise and margins a little higher these days, and is there anything you could do to mitigate that noise?

Question: Andrew Kaplowitz - Citi - Analyst : Appreciate the color of Vicente.

Question: Nigel Coe - Wolfe Research - Analyst : Thanks. Good morning. So, just wanted to maybe, sharpen up the 2Q, kind of thinking here. You said previously, I think [4,6 54] on EBITDA, but obviously a lot's changed since February. So are we still on that sort of 46% phasing for the first half, Vik?

Question: Nigel Coe - Wolfe Research - Analyst : So about 505 of EBITDA, $0.80 of EPS, in that kind of zone?

Question: Nigel Coe - Wolfe Research - Analyst : Okay. Fair enough, fair enough. That's helpful. And then a big picture question, I think, maybe for you, Vicente. I mean the services growth, the aftermarket growth of 6% is really encouraging and shows resilience of that franchise. But that sort of backs into equipment down close to 10%, 9% to 10%, I think, is the number. That feels recessionary. So I understand there was some push from 1Q to 2Q, but any sort of perspective you have on the cycle would be pretty helpful.

Question: Nigel Coe - Wolfe Research - Analyst : Okay, thanks a lot guys.

Question: Joe Ritchie - Goldman Sachs - Analyst : Hey guys, good morning. Just tackling this new guidance from a little bit of a different angle. So if I take a look at the kind of like midpoint of your EBITDA for the year, it's like $2.1 billion. It feels like we can get there just from your completed M&A. So I want to make sure that I've got that straight. And then like all else being equal, it really isn't much baked in for the rest of the business.

Question: Joe Ritchie - Goldman Sachs - Analyst : Okay, great, Vik. And then just Vicente, maybe bigger picture question and touch to play in hypotheticals here, just given the environment that we're in. But if the tariffs were to kind of resolve themselves, let's call it sometime in the next couple of months, given just the demand picture that you're seeing in your business today and that contingency that you have built in, would your expectation then be that like, okay, you're going to get a little bit better growth than as the year progresses and we can get back to potentially what the original guidance was for the year?

Question: Joe Ritchie - Goldman Sachs - Analyst : Makes a lot of sense. Thanks guys. Appreciate it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, IR.N - Q1 2025 Ingersoll Rand Inc Earnings Call

Question: Stephen Volkmann - Jefferies - Analyst : Great, good morning, guys. Just a couple of quick follow ups here. I think you talked about like $150 million or something of pricing is that pretty much even in the two segments?

Question: Stephen Volkmann - Jefferies - Analyst : Okay, and then I'm just trying to get my head around, you're obviously doing some other things, on the cost side, sourcing, etc. It would seem to me like those would take a little while to sort of filter in, but it also doesn't seem like you're really sort of saying the second quarter will be weaker and we'll sort of grow into it so I just thought that was interesting. Any way to square that circle?

Question: Stephen Volkmann - Jefferies - Analyst : Got it. Okay, thank you guys.

Question: Joseph O'Dea - Wells Fargo - Analyst : Hi, good morning. Can you unpack the 4% volume impact, I guess, embedded as contingency? And it would seem that that's an annualized number, so it's an even bigger hit that you're taking primarily to the back half of the year. But where do you think about that vulnerability really sitting between segments and then within segments by end markets or product groups? Just to understand what you're watching most closely for the volume vulnerability.

Question: Joseph O'Dea - Wells Fargo - Analyst : Got it. I guess just related to that, like, are you seeing different demand you've got products that price that, pretty wide range of points. Are you seeing anything in differing demand trends between those, whether something that would be more the reciprocating scroll compressor price points are up to centrifugal, like any hesitation out there on higher price points.

Question: Joseph O'Dea - Wells Fargo - Analyst : And then just on tariffs, $150 million, can you size how much of that is China and within that, how much is import and how much is export, really so that we have a sense of moving forward and if we see headlines on changes to these, we have a sense of how much of that applies to the $150 million.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you. I wanted to ask just on the contrast between the Q1, 1.10 book-to-bill, which, I know there's positive seasonality, but I think that was the best since 2022 and then just the 4 point volume guide down. Is there a view that these orders could have included some pull forward ahead of the tariffs? Or customer conversations changing at all in Q2 that's making you guys a little bit more cautious on the back half? And then just on that, like anything specifically on China, where it does feel like the demand for manufactured products may have changed a lot versus what was going on in Q1? Thank you.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you, I appreciate that. And then I'm just following up, have tariffs changed the competitive positioning for you in the US market, whether it's some of your bigger competitors or to the extent, are there, do you guys compete at all against maybe, lower cost foreign imports, whether it's China or elsewhere that could be impacted by the tariffs? Thank you.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you.

Question: Nicole Deblase - Deutsche Bank - Analyst : Yeah thanks. Good morning guys. Just one quick follow-up on the 1Q margins. Were margins impacted at all by price cost headwinds just because the inflation kind of came in really quickly? And I think you guys started to attack this with pricing in April rather than during 1Q?

Question: Nicole Deblase - Deutsche Bank - Analyst : Okay, thanks. And then we've gotten through a lot of my questions here, but I guess one thing we didn't talk about is what you're seeing in Europe. I suspect that it's probably stability, not really much change relative to what we've seen in the past few quarters, but could you talk a little bit about, order activity in that region?

Question: Nicole Deblase - Deutsche Bank - Analyst : Thank you, I'll pass it. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 02, 2025 / 12:00PM, IR.N - Q1 2025 Ingersoll Rand Inc Earnings Call

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc - Analyst : Good morning everyone. I wanted to ask a question, thinking about these price increases from your customers' perspective. I mean we're talking about 2% price for Ingersoll Rand. But if we start thinking about that being across three quarters and 40% to 45% of revenues in the US, so if you just spread that across kind of the US portfolio, you're talking more about a 6% price increase on that kind of stuff. And then probably some of the services don't need to see that price. So maybe you're pushing into the high single digits on products. Everybody else is raising price the same amount. Do these things start to impact customers' go, no-go decisions on projects because the return metrics for their investments have changed because of these price increases as they go into effect?

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc - Analyst : Thanks for that. I guess the second question for me is a bit of a longer-term one. We've seen things like fiscal stimulus announcements in Europe and Germany specifically, you'll probably get to more of that. Started to see stories about South America looking to invest in capacity to decouple from the US, a lot of those things talked about and probably don't impact you this year but maybe start impacting you next year. Maybe just talk about the opportunities that, that could provide for the business.

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc - Analyst : Thanks very much for taking my questions.

Question: Andrew Buscaglia - BNP Paribas Exane - Analyst : Hey, good morning, everyone. Maybe just one for me. Everyone kind of took the last few questions I had. So I wanted to get an update so on ILC Dover and how that how that is tracking during the tariffs. It's not a market I'm too familiar with, but I'm wondering what the exposures are there and if you're seeing any change in demand trends in that specific area. Thanks.

Question: Andrew Buscaglia - BNP Paribas Exane - Analyst : Okay, got it. That's it for me. Thank you.