Ingersoll Rand Inc.

Good morning. Welcome to the Ingersoll Rand 2019 Q1 Earnings Conference Call. My name is Tiffany, and I will be the operator for the call. The call will begin in a few moments with the speaker remarks and then a Q&A session. All calls are on mute. If you would like to ask a question during the Q&A session, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. We ask that you please limit yourself to one question and one follow-up. Thank you. Zach Nagel, Vice President of Investor Relations. You may begin your conference.

Thanks, Operator. Good morning, and thank you for joining us for Ingersoll Rand's first quarter 2019 earnings conference call. This call is being webcast on our website in IngersollRand.com, where you'll find the accompanying presentation. We are also recording and archiving this call on our website. Please go to slide two. Statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. We see our SEC filings for a description of some of the factors that may cause our actual results to differ materially from anticipated results. This presentation also includes non-GAAP measures, which are explained in the financial tables attached to our news release. Joining me on today's call are Mike Lamac, Chairman and CEO, and Sue Carter, Senior Vice President and CFO. With that, please go to slide three, and I'll turn the call over to Mike. Mike?

Thanks, Zach, and thanks, everyone, for joining us on the call today. Our global business strategy is at the nexus of environmental sustainability and impact. The world is continuing to urbanize while becoming warmer and more resource-constrained as time passes. We excel at reducing the energy intensity in buildings, reducing greenhouse gas emissions, reducing waste of food and other perishable goods, and we excel in our ability to generate productivity for our customers, all enabled by technology. Our business portfolio creates a platform for the company to consistently grow above average global economic conditions, aided by the strong secular tailwinds that I've outlined. This morning, we announced a transaction to separate our industrial businesses by way of a spinoff to Ingersoll Rand shareholders, and then combining it with Gardner Denver, to create a leading global industrial company, and to maintain our climate control assets to create a premier pure-play climate business. Our pure-play climate business squarely focuses 100% of our portfolio at the nexus of sustainability and impact, where our products and services can have the most significant impact on the global challenges I outlined earlier. The press release and presentation outlining the transaction in detail is on the Ingersoll Rand website under the Investor Relations section. We also held a joint call with Gardner Denver Management this morning at 8 a.m., and a replay of the webcast will be available on our website. So I'm not going to spend any time discussing the transaction further on this earnings call. We will, however, be taking Q&A related to both our Q1 earnings and this morning's announcement during our Q&A session following our prepared remarks. Moving to slide four, we're off to a strong start in 2019. Focused and consistent execution of our business strategy enabled us to deliver top-tier revenue growth, margin expansion, and EPS growth in the first quarter. We saw strong leverage from both top to bottom on the P&L with 8% organic revenue growth levering up to 27% EPS growth in the quarter. We delivered another quarter of robust revenue growth led by our climate segment despite tough growth comps from the prior year quarter. Climate's 10% organic revenue growth in the quarter was as high as any quarter in the past two years and was compounded on 8% growth in the prior year. Industrials organic revenue growth was up 3%, representing good growth against a tough 9% growth comp in the prior year. Headline bookings growth for the enterprise and for climate of negative low single digits is driven by a significant year-over-year decline in bookings isolated to our transport business, which I'll lay out in more detail in a minute. In order to more fully understand the health of the portfolio, we believe it's constructive to look at the underlying bookings growth trends in each of our key business units. For example, our commercial HVAC North America, commercial HVAC Europe, residential HVAC, and compression technologies North America business reach up in the mid to high single-digit range in the quarter. China had flattish bookings in the quarter, but still healthy when you consider the growth comp in the prior year quarter was in the mid-20s growth range. As we expected, transport bookings were significantly lower in quarter one after the extraordinary bookings growth we saw in every quarter of 2018. As an example, in 2018, we booked one and a half years of North America trailer backlog and two years of auxiliary power unit backlog, resulting in record transport backlog at the beginning of 2019. With the record backlog and continued underlying market demand, Our revenue outlook for transport looks healthy into 2020, with the key constraint being trailer manufacturer's capacity. As you've seen, the ACT data is consistent with this view, showing very high levels of demand through the forecast horizon, which goes out to 2020. As I mentioned earlier, margin expansion was strong in the quarter, with adjusted enterprise margins expanding 90 basis points. We're very successfully mitigating tariff and inflation impacts through price, with a price versus material inflation spread of 70 basis points. Operating leverage was healthy at 26%, and slightly ahead of our guidance for 2019 of 25%. Overall, our end markets are healthy and performing largely as expected. As we discussed last quarter, we continue to monitor geopolitical uncertainties related to Brexit in Europe and tariffs and trade in China. In quarter one, we also continued to execute our balanced capital deployment strategy. After investing in the business, we deployed approximately $380 million between dividends and share repurchases. Lastly, while it's still early in the year and with the cooling season on deck, we haven't seen anything through the first quarter that diminishes our confidence in our full-year guidance. We're bullish on the effectiveness of our strategy, bullish on our end markets, and and bullish on our ability to execute in 2019. As a result, we're raising our annual guidance to the top end of our prior adjusted VPS range of $6.15 to $6.35 to approximately $6.35. Please go to slide five. As we discussed in the previous slide, we delivered robust revenue growth led by our climate segment with organic growth across all business units. We also delivered strong bookings growth in virtually all of our key businesses with commercial HVAC North America, commercial HVAC Europe, residential HVAC, and compression technologies all up mid to high single digits. These results reflect continued strong execution of our strategy, capitalizing on healthy end markets. Please turn to slide six. We've outlined a number of takeaways for each major business on the next two slides, and you can read through those for some additional color. The most important thing I'd like for you to take away from these slides, however, is that our outlook by key business is largely unchanged from when we gave guidance in January, and we haven't seen anything that would cause us to change our outlook for the year at this time. Turning to slide seven, again, we've added some comments to provide additional color on the slides, and you can read through those. The key takeaway remains that we didn't see anything significant in quarter one that would change our outlook for the year at this juncture. And now I'll turn it over to Sue to provide more details on the quarter. Sue?