Ingersoll Rand Inc.

Hello everyone and welcome to the Ingersoll Rand first quarter 2022 earnings call. My name is Victoria and I will be calling into your call today. If you'd like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. If you wish to withdraw your question, please press star 2. If you have joined us online, please press the red flag icon. When preparing to ask your question, please ensure that your line is unmuted locally. I'll now pass over to your host, Chris Mayeron, to begin. Please go ahead.

Thank you and welcome to the Ingersoll Rand 2022 First Quarter 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 provide an update to 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.

Thanks, Chris, and good morning to everyone. Starting on slide three, Ingersoll-Rand's unwavering commitment to our purpose of making life better is evident in the sustainability of our products, which help our customers reduce their energy consumption and water usage. We deliver another strong quarter in the first quarter with our teams leveraging the IRX process to outperform even with ongoing challenges in supply chain, accelerating inflation, and geopolitical uncertainty. The performance in Q1 is attributed to our highly engaged employee base who think and act like owners because they are. Our latest engagement scores highlight this dynamic where we now rank in the upper part of the top quartile scoring over 500 basis points above the manufacturing benchmark. And for the most critical question of how happy are you working at Ingersoll Rand, we rank in the top 10% of all manufacturing organizations. Not only are we focused internally, but also on the needs of those outside our organization. Last quarter, we made a $1 million commitment to support Ukrainians impacted by the war with humanitarian aid. Demand for products and services remains strong, with our backlog at an all-time high and our leading indicators showing resiliency in our markets. We remain attuned to the dynamic environment around us and are hyper-focused on executing on what we can control. Moving to slide four, we've spoken before about how operating sustainably is embedded in our company and is intentionally at the center of our core values. as it underpins our very existence. Ingersoll Rand makes life better for customers by making them more sustainable. We'd like to take time today to highlight that even in an uncertain environment, customers have significant opportunities to reduce their emissions and materially reduce their energy costs and water usage. And this is how we think about our sustainability strategy, growing sustainably by providing mission-critical solutions to customers that reduce energy and water usage and operating sustainably in the processes we employ to deliver those solutions. We spoke at our recent investor day in November about the sustainability megatrend. And despite the uncertainty in today's market, we strongly believe that this trend will drive customer decision-making to invest on more efficient flow creation devices like air compressors, blowers, and pumps, which has been an under-invested area over the past decade or so. Turning to slide five, our customers are increasingly realizing that air compressors and air treatment optimization is an essential opportunity to reduce their scope one and scope two emissions. Air compressors consume up to 30% of a manufacturing site's electricity. And with the recent significant rise in energy costs, this will continue to increase. Inges O'Brien's products provide industry-leading efficiency that enables customers to reduce the energy cost from air compressors up to 50%, and air treatment solutions or dryers up to an incredible 90%. As we have forecasted out our potential impact of our Scope 3 emissions, we have established a goal of helping our customers achieve a combined 15% reduction in greenhouse gas emissions from the use of our products. which equates to more than 40 million megatons of CO2. Our customers are becoming more educated about the impact that compressor optimization can have on their emissions. We have shown two examples in this slide of global leaders in both the consumer electronics and paper industries who clearly identified compressor optimization as a top priority for greenhouse gas emission reduction in their latest sustainability reports. In addition to energy usage, our customers are also faced with water shortage and a need to improve water management and quality. And you can see at the bottom of the page where a global paper company and a world leader in consumer packaged goods have committed to reducing water usage by 25% and 20% per unit, respectively, a significant commitment and one we're very well positioned to solve with our products. Approximately 30% Our total revenue base is generated from products focused on improving water management, purification, and reducing water consumption. And we're committed to helping customers save over 1 billion gallons of water annually through the use of our products. Turning to slide six, not only are our largest customers making buying decisions based upon opportunities to improve energy efficiency, but we believe that almost all of our customers take energy efficiency into account. Additionally, governments are now regulating energy conservation standards for compressors, and we anticipate this trend will continue to accelerate, and we intend to remain at the forefront of these requirements. Last year, just in the U.S., we conducted over 4,000 customer compressor system audits, which is an increase of 60% from 2019. After the audits, we made upgrade recommendations based upon evaluations of energy efficiency and several other factors. And these led to $100 million in sales directly attributable to these audits. And this is a great example on how we connect and educate our customer base on total cost of ownership and energy efficiency. We estimate that two-thirds of our current global install base could realize meaningful improvements in efficiency by upgrading their compressor system. And with a midpoint of 15% energy efficiency uplift across that portion of the install base, A customer with a typical compressor system will realize on average a payback of less than two years at current energy prices. So you can see that savings here are real and meaningful, and we're highly engaged in educating our entire customer base about this opportunity. Moving to slide seven, in addition to helping our customers progress on their sustainability journey, we're leveraging IRX to achieve our goal of being recognized as a top quartile ESG company by operating sustainably. Those efforts have delivered significant progress. And within the past six months, we've been materially upgraded by all of our targeted ESG rating agencies, including MSCI, Sustainalytics, S&P Global, and CDP. And in fact, Sustainalytics and S&P Global now rank us in the top 15% of companies in our sector, exceeding our goal of becoming top quartile in half the time we had committed to it. But we're not finished with this journey. We're just getting started. We take our role as sustainability leaders very seriously, and we're committed to continuous improvements and progress towards achieving our other sustainability goals. I will now turn the call over to Vic to provide an update on our Q1 financial performance.