Ingersoll Rand Inc.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Ingersoll Rand Third Quarter 2019 Earnings Conference Call. My name is Denise, and I'll be your conference operator today. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 on your telephone keypad. We ask that you limit yourself to one question and one follow-up and rejoin the queue for any additional questions. I would now like to hand the conference over to Zach Nagel, Vice President of Investor Relations. Please begin.

Thanks, Operator. Good morning, and thank you for joining us for Ingersoll Rand's third quarter 2019 earnings conference call. This call is being webcast on our website at 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. Please 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. I'd like to start out today's call with a brief overview of our global business strategy that's enabling us to consistently deliver strong financial results for our shareholders. Fundamentally, our strategy is that the nexus of environmental sustainability and impact which has strong secular tailwinds for our business. The world is continuing to urbanize while becoming warmer and more resource constrained as time passes. At our core, we are focused on and 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. Unless you think the world is getting cooler, less populated, and less resource constrained as time passes, these strong secular tailwinds will continue to provide opportunity for shareholders and purpose for our vision. As we continue separation and integration planning activities related to the combination of our industrial segment with Gardner Denver and transformation activities related to our move towards creating the premier pure play climate business in 2020, Our aggressive pursuit of excellence in driving solutions to mitigate the impact of these secular trends only intensifies. Our climate businesses squarely focus 100% of our portfolio at the nexus of sustainability and global environmental impact, where our products and services can reduce the impact of these megatrends and further advance the platform for the company to grow above average global economic conditions. Moving to slide four, We continue to deliver strong financial results by effectively managing through an evolving global landscape. In the third quarter, we delivered 6% organic revenue growth and 14% adjusted EPS growth, compounding on tough comps of 10% organic revenue growth and 22% adjusted EPS growth in the third quarter of 2018. We remain bullish on our strategy. The opportunities that lie ahead in our end markets broadly and particularly and our team's resilience and their ability to execute using our business operating system to deliver against the top-tier organic revenue growth and adjusted EPS guidance targets we provided for fiscal 2019. We continued to deliver strong and differentiated performance in Q3 in our climate segment globally. Climate segment organic revenues were up 8% against a tough comp in 2018. Our global HVAC business performance was particularly strong with approximately 10% organic bookings growth and approximately 10% organic revenue growth. Our performance was also broad-based, with North American commercial HVAC, European commercial HVAC, and residential HVAC all significantly contributing to the growth. Our backlog, pipeline, and order rates continued to be solid and support healthy growth in the fourth quarter. This is reflected in a revised full-year climate segment organic growth guidance of 7% to 7.5% revenue growth, which is a full point above the top of the prior guidance range. Delivering strong climate performance has enabled us to effectively offset persistent softness and global short cycle industrial spending, which drove organic revenue declines in our short cycle industrial businesses, mainly in compression technologies and tools. In 2019, long cycle larger compressor orders have shown more resiliency and small to midsize short cycle compressors, and we're building a solid backlog for these products year over year. However, the majority of these units won't ship or deliver meaningful revenues until 2020 and 2021. Despite revenue declines in our high gross margin compression technologies business, the steps we've taken to restructure and fundamentally improve our operations and service mix over the past several years enabled us to manage the leverage of the business within our gross margin target rate demonstrating what we believe is a more resilient business, better able to weather economic downturns. In transport, we delivered low single-digit revenue growth in the quarter against a tough comp in 2018. We also expect revenues to moderate some in the second half versus the first half, again comparing to tough comps in the second half of 2018. Fervid softening of the European economy combined with ongoing Brexit uncertainty has softened our European trailer outlook for the back half of the year for the region, but we expect this to be largely offset by strong North American revenues for 2019. Our outlook for mid single digit organic revenue growth in 2019 for our overall transport business remains unchanged. We continue to effectively manage tariff and inflationary headwinds and deliver a positive price versus material cost spread. Volume and productivity are also strong, enabling us to drive solid margin expansion. As always, delivering strong free cash flow and directing capital deployment towards high ROI projects remains core priorities. Lastly, we're excited about the pending reverse Morris Trust transaction with Gardner Denver, creating a premier industrial company while simultaneously creating a leading pure play climate technologies company focused on HVAC and transport refrigeration. We believe both businesses have the potential to unlock value for shareholders. Please go to slide five. This slide provides a visual depiction of organic bookings and revenue growth in the third quarter. As I discussed in the prior slide, we delivered strong, broad-based bookings and revenue growth in virtually all businesses and regions in our climate segment in the third quarter, and the business was up approximately 10% in organic bookings excluding transport and up 8% overall in organic revenues. Asia continues to see the impacts of trade tensions and broader economic uncertainty, but remains a stable market. Commercial HVAC Asia organic bookings were up mid-single digits in the third quarter. Climate Asia organic revenues were down mid-single digits against a tough low-teens revenue comp in China in the third quarter of 2018. As I outlined in the prior slide, our compression technologies and industrial products businesses continued to be impacted by slowing industrial short-cycle spending. Our small electric vehicle business has continued to deliver strong growth driven largely by our consumer vehicle strategy. All in, industrial organic bookings and revenues were essentially flat in the quarter. Please turn to slide six. We've encapsulated a number of takeaways for our major end markets on this slide for your reference. I've covered much of this content already, so I'll just add a few brief comments before passing the call along to Sue. First, focused execution of our business strategy is enabling us to continue to deliver very strong global HVAC performance, particularly in North America, Europe, and in our residential business. Our end markets are largely healthy, and we believe we are outperforming the underlying growth rates in these markets. The transport markets have softened a bit versus our view when we exited the second quarter, primarily driven by a softening of the European market, which continues to be impacted by weakening economic fundamentals and uncertainty surrounding Brexit. Overall, we believe focused execution of our strategy is enabling us to outperform global transport market conditions. We are on track to deliver mid-single-digit growth in transport for 2019. Lastly, I've talked at length about slowing industrial short-cycle spending, impacting our quicker book and ship small and mid-sized air compressors and industrial products businesses. We expect this softness to continue through the fourth quarter, consistent with our updated 2019 guidance. And we expect to offset the softness with the strength we're seeing in global HVAC. And now I'd like to turn the call over to Sue to provide more details on the quarter. Sue?