Ingersoll Rand Inc Q4 2024 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. Can we just talk a little bit about some assumptions embedded in the guidance from a demand perspective. Essentially, how are you thinking about what the underlying demand cadence looks like through the year more qualitatively? Are you expecting any improvement in end markets more stability? Thoughts on how you think the orders play out this year, and what kind of growth assumptions we're assuming as we move forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 1:00PM, IR.N - Q4 2024 Ingersoll Rand Inc Earnings Call

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : Okay. And just a final point there. Is there an assumption for end market improvement embedded in the guidance? Or is it relative stability from where we sit here today?

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : Okay. And then on the PST side, can you maybe just talk a little bit about the margins in the quarter, a little worse than we were expecting. And how to think about that ramp as we work through this next year?

Question: Mike Halloran - Robert W. Baird & Co. Incorporated - Analyst : Thanks. Appreciate it guys.

Question: Julian Mitchell - Barclays - Analyst : Hi, good morning. Maybe just wanted to start with the orders. It seemed that maybe they fell a touch light in Q4 versus what you had thought. Was that all related to China or anything else happening there? And when we're thinking about the first quarter, I think organic sales year-on-year are down low single digits or so, assuming a book-to-bill slightly above one for normal seasonality. Are we thinking sort of flattish orders just

Question: Julian Mitchell - Barclays - Analyst : That's helpful, thank you. And then my second question, I just wanted to circle back on PST, how you're sort of thinking about the EBITDA margin cadence through 2025 and sort of general satisfaction with the ILC Dover performance.

Question: Julian Mitchell - Barclays - Analyst : Thanks very much.

Question: Jeff Sprague - Vertical Research Partners - Analyst : Hey, thank you. Good morning, everyone. Wanted to touch base on the aerospace and defense business. I think obviously, you bought ILC Dover for the Life Science business, and that makes sense, right, and spacesuits kind of came along for the ride. But at the time, you did indicate you liked the business and may build and grow there. It seems like it's become more of a distraction than anything. So really, my question is, would you actually commit additional capital to these air and defense-related businesses? Is there stuff in your pipeline or your funnel that plays into this space?

Question: Jeff Sprague - Vertical Research Partners - Analyst : Okay. Great. And then just on the on the 400 bps to 500 bps of M&A impact. I just wanted to be kind of clear on that. So that's sort of excluding any wraparound effect from what you did in 2024, and would just be the annualized impact of what might get accomplished in 2025?

Question: Jeff Sprague - Vertical Research Partners - Analyst : Got it. Thank you.

Question: Robert Wertheimer - Melius Research LLC - Analyst : I'm not on mute. Can you hear me now?

Question: Robert Wertheimer - Melius Research LLC - Analyst : I wasn't on anyway. So sorry about that. So I think your comments on China were clarifying and that doesn't seem like you experienced kind of a macro slowdown in the quarter, but rather order comps. But could you talk about China in a more general sense? It's been tough to call for a while now.

Question: Andrew Kaplowitz - Citi - Analyst : Good morning, everyone. It's interesting that you didn't speak about MQL this quarter, maybe you want to get away from that, but can you give us an update on how your MQLs are looking? Last quarter, you mentioned they were still up 12% year-over-year, 7% sequentially. But that lead times at MQLs were getting extended. Have they extended further? MQL still up? Or maybe stepping back, how do you feel about your short-cycle businesses outside of China?

Question: Andrew Kaplowitz - Citi - Analyst : Very helpful. And then just back to the PST margins for one second, I think we understand that margin improvement to be slowed by weaker organic. But a lot of times when a company does a lot of M&A, it's hard to integrate the acquisitions, margin improvement slows. You're already at 30%, which is high. So I think, Vik, you mentioned some targeted restructuring. But maybe any lessons learned in terms of the greater acquisition strategy as this was a larger deal for you? Do you approach acquisitions differently at all? Maybe integrate differently, because you like very good at integrating, as you know.

Question: Andrew Kaplowitz - Citi - Analyst : Appreciate the color. Thank you.

Question: Stephen Volkmann - Jefferies - Analyst : Great. Good morning, everybody. Thanks for taking the question. Sorry if I missed this. I know you talked about incremental 45%, 50%. Should we think about those pretty similarly, Vik, in both of the segments? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 1:00PM, IR.N - Q4 2024 Ingersoll Rand Inc Earnings Call

Question: Stephen Volkmann - Jefferies - Analyst : Okay. All right. Thanks. And then, Andy, I think, almost touched on the question that I was going to ask, but it feels to me like you have sort of two competing targets here relative to margins, especially on PST, but also continuing to drive that 400 basis points to 500 basis points of M&A. As you know well, these M&A margins often come in a little bit lower at acquisition. And so just feels like those two goals are kind of at odds with each other. And I'm curious, Vicente, how you sort of balance that as you think about hitting those PST margin targets in the mid-30s.

Question: Stephen Volkmann - Jefferies - Analyst : Got it. Okay. So those 7 LOIs, I should just assume are 50% EBITDA margin?

Question: Stephen Volkmann - Jefferies - Analyst : Thank you, guys.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you. You mentioned a couple bigger projects in China pushing to the right in Q4. Do you think that this was related to the US election outcome and just the expectation that incremental tariffs are coming? I mean just in that same vein, has customer conversations in China changed following the election?

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you, I appreciate that. And then maybe following up with one for Vik. It sounds like this year, we're going to get that typical revenue step-down into Q1. Usually, that is accompanied by a sequential step down in margins on the lower volumes. Last year, we didn't get that. So it feels like this Q1 margin comp is maybe particularly difficult. Should we expect margins to be down year-on-year in Q1? Any color on that would be appreciated. Thank you.

Question: Christopher Snyder - Morgan Stanley - Analyst : Thank you, I appreciate that.

Question: Nicole Deblase - Deutsche Bank - Analyst : Yeah, thanks. Good morning guys.

Question: Nicole Deblase - Deutsche Bank - Analyst : Maybe just continuing the tariff and election question, more from a cost perspective. I guess can you guys talk a little bit about the exposure that you have, whatever you're willing to provide, as a percent of COGS with respect to Mexico, Canada, things that haven't been an issue before? And then any plans to offset what we've already seen with respect to tariff actions?

Question: Nicole Deblase - Deutsche Bank - Analyst : Got it. That was super helpful. And then on PST, can we just talk about what you guys are seeing with respect to -- you talked a lot about like the ILC Dover Life Sciences business. What about the legacy Ingersoll Rand business, are you seeing that continued recovery play out on the biopharma and life sciences side? Thank you.

Question: Nicole Deblase - Deutsche Bank - Analyst : Thanks, Vicente. I'll pass it on.

Question: Nigel Coe - Wolfe Research - Analyst : Good morning, and thanks for the question. We've been dancing around the margin questions around PST. But I wonder if, can you maybe be a bit more specific in terms of that path for PST margins back above 30%? And I'm wondering based on your 1Q comments about that Q-to-Q, do we sort of start the year at a similar level in that 27%, 20% range and then ramp from there? Any kind of first half, second half comments would be helpful.

Question: Nigel Coe - Wolfe Research - Analyst : Okay. And then just maybe spending on Nicole's question about the kind of what you seeing out of the hood at ILC Dover, I think you called out double-digit growth, (inaudible) growth (inaudible) that's in the life sciences portion. What are you seeing in 2025? Maybe just dissect between A&D and Life Science for '25.

Question: Nigel Coe - Wolfe Research - Analyst : Great, thank you.

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Good morning, everyone.

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Maybe we could start with an update on some of the things you talked about last quarter. I think on some of these projects you were talking about, tight capacity on engineering, site preparations, those kinds of things holding back some of those projects moving forward. Maybe just start with an update on that.

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : I guess a follow-up question on that as it relates to US policy. There's obviously been a lot of noise around tariffs and what's happening and what's not happening. And uncertainty does tend to keep people's hands in their pockets when it comes to making capital investments. I think probably more outside of the US where that impact is unknown today. Is that kind of uncertainty around what US policy impact might be in places like Europe, China, Canada, Mexico, moving some of those projects a bit further to the right? With that uncertainty, people sitting around kind of waiting to see what happens with US policy?

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : What do you need to see as a catalyst to get these decisions made and get these projects moving forward at a better rate? And thanks for taking question.

Question: Nathan Jones - Stifel, Nicolaus & Company, Inc. - Analyst : Thanks for taking my questions. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 14, 2025 / 1:00PM, IR.N - Q4 2024 Ingersoll Rand Inc Earnings Call

Question: David Raso - Evercore ISI - Analyst : Hi, thank you very much. On the organic sales guide, you said 75% is going to be priced, right? So 1.5%. But then you alluded to the pricing in the second half of the year is going to be 2%. So I was just curious, the acceleration that you're expecting in pricing, where are you seeing that? And is that a midyear price increase or something about the backlog? And then you're layering on maybe prices to start this year. Just trying to get a sense of why we see pricing accelerating as the year goes on.

Question: David Raso - Evercore ISI - Analyst : Okay, that's interesting. Thank you so much. I appreciate it.

Question: Andrew Buscaglia - BNP Paribas Exane - Analyst : Hey, good morning guys. I just wanted to focus on M&A for a minute. You got this pipeline and kind of along the lines of the question Nathan was asking. Just -- do you see a year setup where some uncertainty might influence the types of deals that move forward? And then do you see more kind of single-double small deals rather than any sort of ILC Dover type acquisition moving across?

Question: Andrew Buscaglia - BNP Paribas Exane - Analyst : Okay. And as it pertains to ILC Dover, sticking with M&A, I know that's kind of like a new platform you intend to probably add on. Are there other deals in that kind of life sciences arena you see in that pipeline? And then do you plan to get into kind of adjacencies with medical consumable selling to med tech, maybe less so for life sciences application, but for other medical applications?

Question: Andrew Buscaglia - BNP Paribas Exane - Analyst : Okay, I got it. Thank you.