Ingersoll Rand Inc.

Hello all and a warm welcome to the Ingersoll Rand 2021 fourth quarter and full year earnings call. My name is Lydia and I'll be your operator today. If you'd like to ask a question at the end of the presentation, you may do so by pressing star followed by one on your telephone keypad. It's my pleasure to now hand you over to our host, Chris Myron, Vice President of Investor Relations at Ingersoll Rand. Please go ahead when you're ready.

Thank you, and welcome to the Ingersoll Rand 2021 Fourth Quarter and Full Year Earnings Call. I'm Chris Myron, Vice President of Investor Relations, and joining me this morning are Vicente Reynal, Chairman and CEO, and Vic Kinney, Chief Financial Officer. We issued our earnings release and presentation yesterday, and we will reference these 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 strategy update, review our company and segment financial highlights, and announce 2022 guidance. For today's Q&A session, We ask that 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. Starting on slide three, 2021 was a pivotal year for Ingersoll Run with many accomplishments and new records. We solidified our compounding growth story as we reshaped our portfolio to focus on mission-critical flow creation technologies and high-growth, sustainable end markets, while establishing a new capital allocation strategy designed to enable us to consistently compound earnings over time. We continued a strong operational execution where the commercial effectiveness of our team, driven by our IRX process, yielded a backlog at the end of the fourth quarter that was our largest ever and positions us very well for continuous strong results in 2022. as demand for our products and services continues to grow. Moving to slide four, I want to take a moment to recognize some of the accomplishments across each of our five strategic imperatives in 2021. In deployed talent, our employees think and act like owners because they are. Shares granted to employees today have appreciated from $250 million to over $500 million in value. motivating our engaged employee base to make decisions each day that can benefit our value creation and ultimately their personal wealth. Furthermore, we implemented a plan to also grant shares to employees who join us as new employees or via acquisitions. Yet another factor enabling Ingersoll Rand to be considered an employer and acquirer of choice. Our employee engagement score, up 17% over the last three years, also shows the power of ownership. Our current engagement score now ranks in the top quartile of manufacturing organizations. In expand margins, we have improved the company's adjusted EBITDA margin 370 basis points since 2019, including an improvement of 160 basis points in 2021 alone. We have realized $250 million in synergies out of the $300 million commitment from the IR merger, with an additional $50 million expected in 2022. It operates sustainably. We continue to make progress and have received recognition from ESG rating agencies, including S&P Global and MSCI, once again demonstrating how we leverage the power of IRX to drive performance across a multitude of initiatives. In accelerated growth, our unique growth enablers outlined during our 2021 investor day strongly contributed to growth in the past year. Our demand generation engine now generates three times more marketing qualified leads compared to 2018. IIoT enabled assets were up 250% year over year and new product innovation increased 95% in 2021. In annual capital effectively, we secured approximately $2 billion in gross proceeds from the divestitures of clock car and high-pressure solutions, and redeployed over $1 billion to acquisitions in 2021, which represents over 6% of sales when annualized. We also repurchased $731 million in shares as part of the KKR's finally equity sale, established a new $750 million share repurchase program, and initiated a quarterly dividend of $0.02 per share during the fourth quarter. We're incredibly proud of our 2021 accomplishments and could not have done it without the dedication of our team. Turning to slide five, we're committed to executing the strategy we outlined at our 2021 investor day and are confident it will produce the expected results. This slide outlines how we are already delivering on that strategy and associated commitments. Our portfolio is now positioned to capitalize on global megatrends, such as digitization, sustainability, and quality of life. We expect to leverage our organic growth enablers to deliver mid-single-digit organic growth through 2025. And as you can see, we outperformed on this commitment in 2021 delivering 12% year-over-year organic growth. When coupled with mid-single-digit annual growth from M&A and technology investments, we expect to deliver total growth of low double digits through 2025. And in 2021, we delivered 4% in-year growth from M&A and 6% annualized. Our strong pricing, aftermarket, and ITV initiatives enable us to generate operating leverage and incremental productivity. with an expected 100 basis points of margin improvement per year over the period. And in 2021, we overdeliver on this target, capturing 160 basis points of margin expansion despite several challenges like supply chain constraints and inflationary pressures. With IRX as our competitive differentiator and over 275 impact daily management or IDN meetings across our company each week, our high-performance culture encourages strong execution. This continues to support our goal of being a premier high-quality company that consistently compounds earnings by double digits each year with free cash flow margins in the high teens. And we feel that we're well on our way as in 2021, we grew EPS by 63% and achieved adjusted free cash flow margin of 16%. Turning to slide six, We have achieved strong margin improvement across our portfolio since 2019. Looking at the company, margins improved 370 basis points from 2019 despite COVID impact and persistent supply chain and inflationary pressures. In the IPS segment, we improved an impressive 470 basis points since 2019 as we continue to accelerate synergy capture and execute on value creation opportunities from the IR merger. Incremental operating leverage and productivity should enable ITS to achieve margins in the high 20s over time. In the PST segment, margins have expanded 170 basis points since 2019 and 290 basis points excluding M&A. Continued strong flow through in the base PST business coupled with diligent synergy execution as we onboard acquisitions should yield adjusted EBITDA margins in the mid-30s over time. It is important to note that as we highlight on the last bullet point, due to the nature of our products, we're mission critical with premium brands and high quality and reliability, and we have the ability to remain price cost positive. We have accomplished this in each quarter since the merger, even during these inflationary times, and expect to do the same in 2022. Moving to slide seven, we're thrilled to announce the recent validation of Ingersoll Rand's progress as an industry leader in ESG. Based on demonstrated progress, we received another upgrade from MSCI, which is our second upgrade in the past 18 months and now have an A rating. And I'm really excited to announce that S&P Global, in its annual sustainability assessment that was just released a few weeks ago, scored Incasol RAN in the top 15% and included us in its sustainability yearbook for 2022. In addition, S&P Global recognized us with the Industry Mover Award, which is given to the most improved company in each sector of the year. These recognitions exemplify our unwavering commitment to ESG. In March of 2021, we committed to becoming a top quartile ESG industrial company in three years. And we believe we have achieved or are at the cost of achieving that goal in one year. And S&P Global agrees, as it elected us to its sustainability yearbook, which recognizes the top 15% ESG performing companies in each industry sector. Despite this progress, we're just getting started. on our ESG journey, and we're very focused on accelerating progress towards our ESG goals. I'm incredibly proud of our team for being recognized by the rating agencies already this early in our journey. I will now turn the presentation over to Vic to provide an update on our Q4 financial performance.