Ingersoll Rand Inc.

Good morning and a warm welcome to the Ingersoll Rand first quarter 2023 earnings conference call. My name is Candice and I will be your coordinator for today's call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you would like to ask a question, please press start followed by one on your telephone keypad. I would now like to hand the conference over to our host, Matthew Fort, Vice President of Investor Relations Please go ahead.

Thank you, and welcome to the Ingersoll Rand 2023 first 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 reference 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 we start, I want to remind everyone that certain statements on this call are forward-looking in nature and 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 review our company and segment financial highlights and provide an update to our 2023 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 will turn the call over to Vicente.

Thanks, Matthew, and good morning to all. I would like to begin by thanking and acknowledging all of our employees for their hard work in helping us to deliver another record quarter in Q1. Our employees consistently exemplify our purpose while thinking and acting like owners to deliver on our commitments despite the constantly changing macroeconomic environment. Starting on slide three, in Q1, we delivered double-digit adjusted EBITDA and adjusted EPS growth with strong free cash flow generation which is up over 350% year over year. Fueling this performance is our competitive differentiator, IRX. We continue to align to mega trends and high growth sustainable day markets to deliver on our investor day commitments of achieving sustainable revenue growth. Based on the solid Q1 performance, we're raising our 2023 full year guidance. Turning to slide four, our economic growth engine continues to deliver compounding annual results. During our last investor day in Q4 2021, we presented this model and highlighted our organic, inorganic, and quality of earnings growth enablers. We remain committed to our strategy and our long-term investor day targets outlined on this page. On the next two slides, I will provide you with deeper insights into our organic and inorganic initiatives. On slide five, we start with our organic growth initiatives. So let's dive into how we approach the megatrends of sustainability, digitization, and quality of life. Demand Generation Excellence, or DGX, which is a tool within IRX, helps us to capture above-market growth. Here we have six examples of initiatives that we launched during the first quarter of 2023. Important to note that these six are only a few examples out of hundreds of these initiatives we execute every quarter. I will review a few of these examples shown on the page. Within the sustainability megatrend, we have a digital campaign example which is focused on carbon capture system builders and integrators. This campaign generated a global supply agreement with a key carbon capture player and has also driven a $200 million increase funnel with no new product development required. For digitization, we have a great example on how we utilize IIoT to grow our aftermarket business. Leveraging our IIoT-connected equipment, machine alerts are set up to trigger email notification to our customers, and Engelsel runs service contracts when service is needed. The result of this initiative was increased orders on new contracts for preventive maintenance. And this initiative is in its early stages, and we plan to expand this approach to other key triggers in the future. Finally, at the bottom of the page, we have a great example within the quality of life megatrend. We launched a social media campaign tailored towards small farms and agriculture that increased our marketing qualified leads by 96% for Dosatron dosing pumps. These are merely a few examples of the tailwinds associated with megatrends and how we deploy our organic growth enablers to deliver compounding annual results. On the inorganic initiative, we wanted to provide an integration update of one of our larger acquisitions since the merger, G-Cipex. In less than 15 months, the business has expanded, adjusted EBITDA margins by over 1,000 basis points. And this margin expansion has come from a balanced approach of gross margin expansion and SG&A synergies. When we acquired this business, adjusted EBITDA margins were in the mid-teens, and we expect to deliver low 30s in 2023 while accelerating organic growth. And this speaks to the power of our M&A approach on finding phenomenal companies and then integrating them into our economic growth engine. With new acquisitions, we're not only focused on cost improvements, but also maintaining focus on growth. For CPEX, we accelerated organic growth across three levers. First, from the CPEX acquisition came a great IIoT technology, which we now have expanded and scaled across the entire PSD segment. The second lever, is combining CPEX technology with Ingersoll Rand existing channel knowledge to access lithium-ion battery customers. And we were able to bring a mission-critical product to market in less than nine months while expanding our addressable market by over $250 million. Finally, we have also integrated CPEX pump and compressor technology to accelerate product differentiation within the marketplace. By combining an air compressor with CPEX progressive cavity pump, This patented technology enables our customers to better transfer materials with controlled air flow and improved energy efficiency. As we move to slide seven, M&A continues to be at the forefront of our capital allocation strategy. We're pleased to highlight one closed transaction and one signed M&A deal. These acquisitions add both market leading products and technologies while accelerating our addressable market with closed adjacencies. Let me walk you through these two deals. First, Trace Analytics, which is a leading provider of lab-based testing and sampling for compressed air technologies. This acquisition has strong recurring revenue in air purity and quality across attractive markets such as life sciences, food and beverage, and pharmaceutical. Next is Gaopeng Vacuum, which is a well-established, oil-free vacuum pump manufacturer that expands our product portfolio in a very attractive and growing sustainable end markets across Asia Pacific. Our M&A funnel remains very strong and as of today, it continues to be over five times larger than it was at the time of the RMT. We currently have five transactions at the LOI stage and more importantly, we have several other transactions in process which are close to the LOI stage. Based on acquisitions to date, the five transactions under LOI and our current M&A funnel we are reaffirming our commitment to additional 200 to 300 million in annualized inorganic revenue to be acquired in 2023. Moving to slide eight, while our results have been strong and we continue to see orders and backlog growth, we do acknowledge that the market is in a state of constant change and we need to remain agile and nimble in order to respond. Over the past few years, we have transformed our portfolio to be more resilient than ever. We have a large, recurring, and highly profitable aftermarket business that accounts for approximately 35% of our total revenue while growing at double digits. In addition, we have divested almost $2 billion of highly cyclical assets in club car and high-pressure solutions, and in turn reinvested that into acquisitions that are better aligned in high-growth, sustainable end markets. And we believe that this, along with a differentiated loan cycle and better geographically balanced portfolio, will ensure a more durable, stable performance in the next slowdown. We also have a proven track record of performance. For example, in 2020, during the global pandemic, we were able to expand adjusted EBITDA margins by 190 basis points year over year. As you recall, during the pandemic, we immediately deployed merger-related synergies to ensure we were out in front and controlling costs pretty quickly. Also in 2019, the Legacy Garner Denver Industrial Segment delivered 70 basis points of adjusted EBITDA margin expansion and grew adjusted EBITDA dollars 3% in spite of revenue declining 3% organically year over year. We're constantly monitoring for early indicators of an economic slowdown, and we remain nimble and ready to act in the event that markets start to soften. We have highlighted in the past during this call how we are able to pivot our demand generation activities towards markets that are still growing. And with an addressable market of over $45 billion, we believe that there is still plenty of room to take market share. In addition, we have multiple levers to manage adjusted EPS as seen at the bottom right-hand side of the slide. On slide nine, our commitment to become a market leader in ESG continues, and we're very excited to continue receiving positive feedback from the rating agencies on our efforts. In April, Ingersoll Rand received an ESG risk rating of low with a score of 12.8 from Morningstar Sustainalytics. This rating ranks us second in the machinery industry group and places Ingersoll Rand in the first percentile in the machinery industry and sixth percentile of all rated companies. This is a perfect example of how we utilize IRX for agile execution across all aspects of our business. In this case, we use our own IRX execution process to go from medium risk to low risk and are now in the top percentile in the industry and regionally. I will turn the presentation over to Vic to provide an update on our Q1 financial performance.