Ingersoll Rand Inc.

Hello, everyone, and welcome to Ingersoll Rand Q3 2022 Earnings Conference Call. My name is Emily, and I'll be coordinating your call today. At the end of the presentation, you will have the opportunity to ask a question by pressing Start, followed by the number 1 on your telephone keypads. I will now turn the call over to our host, Matthew Fort with Ingersoll Rand. Please go ahead, Matthew.

Thank you, and welcome to the Ingersoll Rand 2022 Third Quarter Earnings Call. I'm Matthew Fort, Vice President of Investor Relations, and joining me this morning are Vicente Rinal, Chairman and CEO, and Vic Kinney, Chief Financial Officer. We issued our earnings release and presentation yesterday, and we will be referencing these during the call. Both are available on the investor relations section of our website. In addition, a replay of this conference call will be available later today. Before I 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 the sender.

Thanks, Matthew, and good morning to all. I would like to begin with a big thank you to our employees worldwide for their hard work in helping us deliver another record quarter in Q3. You consistently exemplify our purpose and think and act like owners to deliver on our customer needs. Every day, I am impressed with how you're leveraging our IRX process to outperform in a continuously challenging environment. Our performance this quarter and year to date reinforces the impact we have as owners of Ingersoll Randall. And now let's review how we accomplished these results on slide three. Our achievement is reflected in the numbers and also in our commitment to lead sustainably. We continue to positioning those around for long-term value creation through industry-leading innovation that offers intrinsically sustainable benefits to our customers. Through Q3, demand remains strong. And while microeconomic, geopolitical, and supply chain uncertainties continue to be a concern, we remain focused on what we can control while leveraging our strong balance sheet and operational mindset to execute on our commitments. Remaining agile in today's environment is critical, and you will see today how we continue to accelerate organic growth through demand generation and product execution. In addition, we remain committed to our capital allocation strategy, which is focused on inorganic growth through bolt-on acquisitions. Today, we're highlighting six new companies we have recently acquired or have under contract that will strengthen our position in core categories and broaden our exposure to high-growth, sustainable end markets. Turning to slide four, today we will discuss four critical elements of our compounded model to demonstrate how we stay focused on controlling what we can control. Moving to slide five, we have some exciting news to share. We recently earned a score of 81 on the S&P Global Corporate Sustainability Assessment. As of October 21st, this score puts us at number one in North America, number four in the world and in the 99th percentile within our industry, which is very impressive. And think about it. Less than three years ago, we were not even showing on the list, and today we are number one in our industry in North America. We continue to align our portfolio to sustainable high growth and markets supported by megatrends. In September, we hosted our second annual sustainability call where we introduce our enhanced strategic imperative, Lead Sustainably, which is based on a simple two-pronged approach of grow sustainably and operate sustainably. On this slide, I'll spend a minute highlighting two examples from our broad portfolio that help improve energy efficiency and reduce water consumption. We believe that within the US alone, there are over $1.3 billion in cost savings opportunities for compressed air systems. And that number is likely five times greater globally. The energy recovery unit shown here is an innovative device that captures up to 94% of the heat generated during air compression and uses it to warm water that can be used in oil processes or for space heating, with a payback period for our customers of less than one year on average. Our impact on water conservation occurs in multiple ways, but perhaps the most compelling is our products that eliminate the need for water usage in critical applications. The Runtec Turbo Blower technology is a perfect example. This blower technology is used by leading pulp and paper manufacturers, and it replaces an alternative technology that requires a fresh water supply. Our existing InstaBase around the world is currently saving 7.5 billion gallons of water a year. And we estimate that over 50 billion gallons of water per year could be potentially saved with the full adoption of our Runtek technology globally. To put that into perspective, that's more than three times the amount of bottled water consumed in the United States annually. Within our own facilities, Operating sustainably is an integral part of our business. We focus on reducing electricity and water consumption to drive zero greenhouse gas emissions. Our commitment to operating sustainably delivers value for our stakeholders and our planet, creates a sense of purpose and inspiration for our employees, and has a positive impact on the communities in which we operate. This commitment also makes Ingersoll Grant a supplier of choice for our customers. Together, we're building a better future and planet by leading sustainable actions within our business, with our suppliers, and in our communities. Turning to slide six, let us demonstrate two simple examples on how we continue to control what we can control to deliver organic growth. On the left, we have an example of demand generation execution in Europe, which clearly has been a challenging market. In Q1, at the start of the Russia-Ukraine war, we saw a downward trend of marketing-qualified leads, or MQLs. The demand generation team immediately jumped into action, leveraging IRX to invert that trend through channel campaigns focused on high-growth sustainable markets, vertical-specific and energy-efficient related webinars, and utilizing trend data to remain agile and revise all targeted campaigns. As a result of these actions, we saw a 60% increase in MQL, which is our primary leading indicator for orders. And as you can see from our results, orders in mainland Europe continue to remain healthy and grew in the low single-digit excluding effects for our compressor portfolio in IPS. On the right is an example of an outstanding product line execution in China. Prior to the merger, Garner Denver had a solid compressor portfolio for the China market. but did not have the right sales structure or operational footprint. Post-merger and leveraging IRX, the team refreshed the program, integrating the best practices from both IR and GED. Through the new product development process, they improved efficiency by 5% to 10% and also improved the cost structure of the compressor portfolio through utilization of ITV. With those improvements in efficiency and cost structure, we focused on fast-growing small to medium-sized customers and expanded the Garner Denver channel over 200% separate from the legacy IR channel. The end result is triple-digit growth in revenue and unit volume in a highly competitive market. Turning to slide seven, since our Q2 earnings call, we announced the signing of six Bolton acquisitions that enable us to increase value across ecosystems by expanding our core mission-critical flow creation technologies while accelerating our addressable market with close adjacencies. So let me quickly walk you through these deals. First, AirMax, which is a leading full-service provider of air compressors and compressed air system services based in France. This is an example of a strategic channel expansion for our ITS segment, which will leverage AirMax strong end-user relationship and technician network to convert competitive products and support aftermarket growth. Second is Pedro Hill, a leading Spanish manufacturer of blower and vacuum systems. This acquisition strengthens our position in core blower and vacuum categories in high-growth sustainable markets, including water and wastewater. Next is Everest, which is a leading Indian manufacturer of blower and vacuum systems. Everest significantly broadens our presence in the key high-growth market of India. These three acquisitions are strongly aligned with our strategy and increase our product portfolio in core technologies or enabling expansion into closed adjacencies. Continuing on page 8, moving from left to right of the page, these are great examples of closed adjacencies with immediate synergies. The FPX Flow air treatment business is a leading manufacturer of desiccants and refrigerator dryers, filtration systems, and purifiers for compressed air. These products are highly complementary to our portfolio since more than 75% of compressors need one of these air treatment solutions, and in addition, they generate strong recurrent aftermarket business. Next, Dosatron International, which is a UAS leader in water-powered flow solutions, and IIoT for hydroponics and agricultural markets, which improves our capabilities in several high-growth, sustainable end markets through depreciated digital controls and IIoT solutions. And finally, Westwood Technical, which is a highly experienced control instrumentation and IIoT specialist with technology that is complementary to our YZ system program. Westwood enhances our IIoT platform including innovative low-power wide area networking technology. We expect the team to integrate these acquisitions at the regional level by utilizing IRX and our proven model of integration excellence that you have seen in prior acquisitions. Our M&A funnel remains strong, and as of today, the funnel still remains over five times larger than it was in Q3 of 2020. I will now turn the presentation over to Vic to provide update on our Q3 financial performance.