Ingersoll Rand Inc.

Good day and thank you for standing by. Welcome to the Ingersoll Rand Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Christopher Myron, Vice President of Investor Relations. Please go ahead.

Good morning, everyone, and thank you for the patience with the technical difficulties this morning. Welcome to the Ingersoll Rand 2021 Second Quarter Earnings Call. I'm Chris Myron, Vice President of Investor Relations. And joining me is Vicente Reynaud, President and Chief Executive Officer, and Vic Kinney, Chief Financial Officer. We issued our earnings release and presentation yesterday that we will reference during the call. Both are available on the Investor Relations section of our website, www.irco.com. In addition, a replay of this conference call will be available later today. Before we start, I want to remind everyone that certain statements on this call are forward-looking in nature and are subject to the risks and uncertainties discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call. Please review the forward-looking statements on slide two for more details. In addition, in today's remarks, we will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the investor relations section of our website. On today's call, we will provide a company strategy update, review our company and segment financial highlights, and offer updated 2021 guidance. For today's Q&A session, we ask each caller keep to one question and one follow-up to allow time for other participants. At this time, I'll turn the call over to Vicente.

Thank you, Chris, and good morning to everyone. And as you can see on slide three, anchoring to our purpose, we're realizing the achievement of our desired targets. You will hear three key themes today. First, we're effectively allocating capital to advance our portfolio transformation to generate significant value for our shareholders. Second, you will hear about how we are outperforming and raising guidance, which illustrates our organic investments in new product development and demand generation are also working. And third, we will touch on our ESG journey. I have never been more excited about the state of English Iran. The combination of a highly engaged workforce who think and act like owners and the use of IRX is what makes us highly unique. I want to thank our employees all around the world for the dedication and determination. We continue to support our employees with an unwavering focus on health, safety, and mental well-being. Moving to slide four, our five strategic imperatives are how we stay grounded on priorities and areas of focus. You will see on the right-hand side during Q2, we have achieved substantial traction in all five imperatives. Within our Operate Sustainably Strategic Imperative, we achieved another major milestone that I'll touch on the next slide. Moving to slide five, a couple of weeks ago, we published our 2020 Sustainability Report. The report reflects our 2020 ESG data, celebrates our progress, and details our further goals with a high focus on measurable targets and accountability. We'll spend more time on this next Friday during our scheduled ESG and sustainability report investor update. What I want to emphasize right now is the team's strong bias for action over the last year, as you can see on this page. We have focused and delivered on diversity within our board and extended leadership team, which is now 50% and 43% respectively. We have launched aggressive 2030 and 2050 goals and improved our new product development process to address these goals. We expanded stockholder rights through corporate governance changes. And one of the things I am most proud of on behalf of our employees is granting $150 million in equity to our employees. which we believe is the largest employee equity grant ever provided by an industrial company. We see broad-based employee ownership as a game changer. We know underrepresented populations increase their earnings and wealth if they're employed in organizations that offer equity grants. And that's a powerful aspect of our thinking and acting like an owner that even ties into how directly impact global ESG efforts. And I look forward to sharing more with you next week. Moving to slide six, the signing of definitive agreements to acquire CPEX and Maximo Solutions, both of which will become part of the precision and science technology segment, are representative of the key characteristics we're targeting to drive our inorganic growth strategy. CPEX is by our estimation, the number two global progressive cavity pump manufacturer. and it is a highly recognized brand as a premium player in the market that adds a new positive displacement pump technology to our portfolio. Maximo Solutions is a leader player in the agri-tech software and controls market, whose technology we intend to pull through to other markets and leverage across the Ingersoll brand portfolio. Both of these companies have shown strong high single-digit to double-digit organic growth since at least 2017. and are focused on sustainable end markets that tend to grow well above GDP rates. In addition, both have strong aftermarket profiles enhanced by digital revenue streams, including software as a service. We anticipate both acquisitions to yield single-digit post-synergy adjusted EBITDA purchase multiples by year three of ownership. With these two acquisitions, we're expecting to add approximately $3.8 billion to PST addressable markets, which is an impressive 40% expansion. The profiles and characteristics of these high quality, high return on capital, and highly strategic acquisitions are indicative of how we're structuring our M&A funnel, which leads us to slide seven. We continue to execute our M&A funnel using IRX as its backbone. Our funnel is comprised of six stages and is probability weighted according to likelihood of closing when we calculate our funnel size. For instance, CPEX has been in our funnel for some time. And it was not until the owner became actively engaged and we were enacting the negotiation that it was moved from 0% weighted revenue contribution to 50% and then 100% assigned. And now it is out of our funnel calculation. Last quarter, we described how our M&A funnel has grown materially since the Ingus O'Brien garnet damage transaction was completed. At its current state, the funnel size remains approximately five times the size it was versus Q2 of 2020, with average revenue larger and velocity accelerating minimally. And to be clear, this describes the funnel even after removing the 32 targets we passed on in the second quarter, as well as our signed deals of CPEX and Maximus, and it also excludes SPX flow. As you can see, we have significant momentum in the funnel But our flywheel is in full motion. Regarding SPX Flow, we saw that they issued a press release this Monday stating that they will pursue strategic alternatives. Our $85 per share offer was preemptive and fully accounted for SPX Flow's investor day plan, which is ahead of consensus estimates. In terms of SPX Flow's strategic alternative process, if we participate, we intend to remain disciplined in our approach. as we do with all of our M&A transactions. And there can be no assurances that we will confirm our preemptive offer as part of any such process. It is very important also to note that once we received a second rejection from SPX Flow more than a month ago, we pivoted to executing on other funnel opportunities. We have always demonstrated a very decisive and highly disciplined approach with everything we do. And we believe it is much more important now in this current environment. I stated even with SPX flow excluded, our funnel remains as robust as it did last quarter, which exemplifies the volume and quality of our future potential opportunities. And we have sufficient cash in hand to execute on these opportunities with $4.7 billion in liquidity. However, as noted, we intend to remain very disciplined in this environment. It is also important to know that we continue to review our capital allocation priorities with our board and plan to communicate more formally on this topic later in the year. I'll now turn the call to Vic to provide an update on our Q2 financial performance.