Ingersoll Rand Inc.

Hello and welcome to the Ingersoll Rand first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. I would now like to turn the conference over to Matthew Fort, Vice President, Investor Relations. You may begin.

Thank you and welcome to the Ingersoll Rand 2026 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 afternoon, 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 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 review our company and segment financial highlights and provide an update to our full year 2026 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. Good morning, everyone, and thank you for joining us today. Beginning on slide three, The first quarter represented a solid start to 2026, especially given the continued complexity of the global operating landscape in the markets where we play. Adjusted EPS grew high single digits, with revenue and adjusted EBITDA finishing in line with expectations. This performance reflects the durability of our portfolio and the consistency of our execution. Conditions remain mixed, but we're seeing continued improvement across several end markets and in short cycle activity. Our disciplined approach to M&A continues to be a key driver of our success. Our acquisition pipeline remains robust, focused on differentiated technologies and services that strengthen our portfolio and enhances our organic growth profile. Finally, IRX remains a key differentiator, allowing us to remain agile and stay focused on what we can control, including operational execution, discipline pricing, and capital allocation. On slide four, our intergranic growth strategy remains a core element of our overall strategy, and the pipeline remains robust. This is supported by our value creation flywheel, which is a core engine of our performance. generating durable free cash flow, which further enables consistent high return capital deployment. We're pleased to announce the signing of Fox SRL, which is expected to close at the end of this month. As a leading manufacturer of hydropneumatic accumulators and pulsation dampeners, Fox enhances our pump technology by utilizing dampeners to absorb pressure pulses. This protects downstream pipes and equipment, helping customers reduce downtime and maintenance costs, and thereby increasing the return on investment offered by our solutions. Today, we have over 200 companies in our funnel, with 10 transactions currently at the LOI stage. More than 90% of these opportunities remain internally sourced, which reflects the strength of our operating model and deep industry relationships. We continue to expect 400 to 500 basis points of annualized inorganic revenue to be acquired in 2026, and we have a few additional deals expected to close in the coming months. Our approach to M&A remains unchanged, which is disciplined valuation, strategic fit, and a focus on Bolton acquisitions that strengthen our core technologies or expand into attractive adjacencies. Now, I will hand it over to Vic who will share an update on our financial performance for the first quarter.

Thanks, Vicente. Starting on slide five, orders finished up 5% year over year, resulting in a book to bill of 1.07, which is consistent with normal seasonality. Worth noting, we did see a delay in orders of approximately $40 million, which was driven by a few long cycle projects. This delay was primarily driven by the conflict in the Middle East. We believe that the impact is transitory, and we expect these orders to be recovered in the balance of 2026. As a matter of fact, we have already recovered approximately a third of these orders in the month of April. Excluding that delay, organic orders would have finished approximately flat year over year. Total revenue grew 8% year over year, finishing in line with expectations. For the first quarter, adjusted EBITDA also finished in line with expectations at $469 million, with an adjusted EBITDA margin of 25.4%. The year-over-year margin pressure was primarily driven by the flow-through on organic volume declines, the dilutive impact from tariffs, and continued strategic investments for commercial growth. Corporate costs were $38 million. Our Q1 adjusted tax rate was 19.8%. and adjusted earnings per share was 77 cents for the quarter, up 7% year over year. On the next slide, free cash flow for the first quarter was $163 million, finishing largely in line with expectations and normal working capital seasonality. With nearly $4 billion in total liquidity, our balance sheet remains a strategic asset, enabling continued investment in high return opportunities. Our leverage remains well below two times, providing us with flexibility to continue to deploy capital effectively throughout 2026 and beyond. Our capital allocation strategy remains unchanged, which prioritizes M&A while also maintaining our commitment to share repurchases and quarterly dividends. Now I'll hand the call over to Vicente, who will review our segment results as well as full year guidance.

Thank you, Vic. On slide seven, IPS orders finished up 5% for the first quarter. Book to bill for the quarter was 1.08 times. Organic orders for the quarter were down 3%. Excluding the impact of delayed orders, which Vic mentioned, organic orders finished approximately flat. Important to note that on a two-year stack, organic orders are up 1%. On a total segment basis, revenue grew 7% year over year. Adjusted EBITDA margin finished at 26.7%. which was down year-over-year, largely driven by the flow-through on organic volume declines, the dilutive impact of tariffs, and continued commercial investments for growth. On a reported basis, every IPS product line grew orders except the power tools and lifting. On an organic basis, let me provide some additional color on orders by product line. Compressors were down year over year, driven by the previously noted timing on the large projects. The blower and vacuum business continues to perform well and was up year over year. Power tools and lifting was down year over year, driven by the lifting business. And we remain encouraged by the core tool business growing organically, mid-single digits, driven by launches in new product technologies, as well as growth in the short cycle momentum that we're seeing. From a regional perspective, here are a few highlights on organic orders. We saw stabilized compressor activity in the US, and we continue to see encouraging order trends across many of our compressor categories. Additionally, China continues to outperform the underlying market, delivering another quarter of positive organic order growth. In our innovation in action section, were excited to share a large win in carbon capture, where Ingersoll Rand was selected to provide a combined vacuum and blower application for an innovative carbon capture technology, which utilizes a proprietary gas separation process. This technology is applicable across a wide range of applications, including transportation like rail, power generation for data centers, as well as industrial engines. Although this innovation is still in its early stages, we're encouraged by the positive outcome demonstrated through the integration of our connected technologies. Turning to slide eight, Q1 orders in PST were up 6% year-over-year with a book-to-bill of 1.04 times. Organic orders saw a modest increase of 1%. Our life science business maintained robust growth with a double-digit increase in orders. while the remainder of PST business was impacted by the timing of some large projects. In precision technology business, the short cycle book and ship business continue to see organic order growth. First quarter organic revenue finished up 4%, with both precision technologies and life science technologies businesses delivering positive organic revenue growth in the quarter. PST delivered adjusted EBITDA of $122 million, which was up 15% year-over-year. Adjusted EBITDA margins improved 120 basis points year-over-year, reflecting continued strong operational execution. For our PST innovation in action, we're highlighting a great win for our life science business, which integrates core IPS product technologies into ILC Dover's end-to-end bulk powder system solution. ILC Dover developed a comprehensive, fully integrated bulk powder system which includes hardware, containment, and mixing in collaboration with our own vacuum technology for a leading pharmaceutical manufacturer. This end-to-end design, assembly, and installation utilize both ILC Dover powder solution as well as our Ingersoll-run Elmwood Richly vacuum pumps or powder conveyance. As we move to slide nine, we are reaffirming our full-year guidance for 2026. Total company revenue is expected to grow between 2.5 and 4.5%, driven by organic growth of 1% at the midpoint, growth from M&A of approximately 2%, which includes the carryover impact from all transactions completed, as well as the recently announced signed transaction of funds. And finally, we expect FX to be a tailwind of approximately half a percent. Total adjusted EBITDA for the company is expected to be in the range of $2.13 billion and $2.19 billion. Corporate costs are planned at $170 million and are expected to be incurred evenly per quarter throughout the remainder of the year. Adjusted EPS is projected to fall within the range of $3.45 and $3.57, which is approximately 5% growth at the midpoint. We anticipate our adjusted tax rate to be roughly 23%. Net interest expense to be about $230 million, and share count to be approximately 394 million. Free cash flow to adjusted net income conversion is expected to be approximately 95%. The facing of revenue, adjusted EBITDA, and adjusted EPS is expected to be consistent with what we have seen in prior years as outlined on the table. We continue to monitor the changes in tariffs carefully, including the recent changes in Section 232 tariffs. We remain nimble and continue to pivot adjusting our mitigation actions to best minimize the effect of tariffs as well as inflation. And as a result, we do not currently expect any net tariffs and inflation impact for our full year guidance. Additionally, as I mentioned earlier in the call, most deferred orders from the Middle East are tied to long cycle projects. We anticipate order recovery throughout the year and with strong execution from the team affect no impact on full year revenue or adjusted EBITDA at this time. Finally, on slide 10, as we conclude this segment of the call, I believe our performance in 2025, our solid start in 2026 with a book to build above one, and the improvement in the short cycle business set-ups help well for continued success throughout the remainder of 2026. we remain agile to effectively navigate the complex global environment. Through disciplined execution, ample liquidity, and a strong balance sheet, we continue to differentiate Ingus or REN as an investment. Our approach to capital allocation remains unchanged, leveraging our strong free cash flow to drive durable earnings growth and create long-term shareholder value. IRX remains the backbone of the organization, enabling operational execution. Finally, and most important, I would like to thank our employees for the ongoing dedication and commitment to embracing our ownership mindset. Thank you for your help in delivering another strong quarter. And with that, I will hand the call back to the operator and open it for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, simply press star 1 again. In the interest of time, please limit yourself to one question and rejoin the queue if needed. Thank you. Your first question comes from Mike Halloran with Baird. Your line is open. Hi.

Good morning, everyone. Morning, Mike. Maybe we could just start on what you're seeing on short cycle versus long cycle side of the business. On the short cycle side, are you seeing sequential acceleration? Are you seeing signs of improvement in demand normalizing. And then on the long cycle side, maybe just talk about what you're seeing outside of the Middle East, where you talked about the project delays, and if you're seeing delays more systemically, or what the customers are saying, or if there's any signs that that side of the business might be improving.

Yeah, sure, Michael. So, Michael, on the short cycle, looking specifically at the U.S., we're seeing signs of... Stabilization and improvement, which is definitely consistent with the ISM moving back to above 50 now for the past few quarters. I'll say that, you know, compressor activity in the U.S. stabilized during the quarter as well. And we're seeing encouraging order trend across several compressor categories. In addition, the short cycle businesses continue to improve. We mentioned on the prepared remarks, you know, Corp. tool business is growing organically at mid-single digit rate. That's a good indicator for us to see on that short cycle. And then within the PST side, in the precision technology, we saw book and turn or short cycle business grow organically, which also lines up really well with what we're seeing and actually continue improvement as we went through the quarter and here into April. In terms of the long cycle, we categorize the longer cycle funnel activity as remaining stable as well. And as we think about continued rising energy prices in Europe, we see these as a potential longer-term tailwind given the nature of our products and the value that we create for our customers in terms of delivering energy efficiency products and services. As we indicated before, what we're seeing right now is kind of customers and APCs taking a little bit of time more to decision making and finalizing POs, which is consistent to what we have said before in terms of the elongation of the funnel and the overall decision making. However, you know, projects are not canceled or anything of that nature. So we feel this is just a bit of a timing side in terms of the elongation of the decision that has not decreased significantly. And as we have mentioned previously, the specific to the Middle East, we have seen some of these longer cycle projects being delayed, but we expect that to come back over the course of 2026. And as Vic mentioned on the prepared remarks, already a third of those projects have come in and booked here in the month of April.

Thanks for that. And then maybe the follow-up is just put that in the context of how you're thinking about the guidance for this year. You know, how much of that is embedded sequentially? Are you embedding some level of improvement as we work through the year? And as we think about how the orders are going to cadence out, I know you guys don't give specific guidance here, but how should that work out through the year when you consider comps, the timings of the projects, some sequential improvement as we're thinking about the short cycle side of things?

Yeah, Micah, as we think about delivering the full-year organic revenue guide, our expectations for organic growth and the cadence through the year has not changed from the original guidance. As you have seen at the midpoint of our guide, we're expecting about 1% full-year organic growth. And when we provided our original guidance, we indicated slightly negative organic growth in Q1. And then low single-digit growth for Q2 to Q4. Q1 kind of came in as we expected, and even Actually, if you were to exclude the Middle East pushouts, it kind of came even better than what we expected. So, you know, as we think about our second half guide, that implies low single-digit organic growth, which is supported by a very, you know, good solid backlog growth from 2025, where a four-year book-to-bill was above 1. Q1 here in 2026, again, book-to-bill above 1, 1.07. As we mentioned here before, the ongoing momentum in the short cycle activity, which we have seen in both segments, you know, provides a good setup as we go into the second half. You know, ongoing commercial investments for growth, including a very focus on the penetrated markets. And then, as we all know, you know, the prior year comes, we'll continue to moderate, particularly in IPS, as we kind of move into the second half.

Thank you. Appreciate it.

Thank you. Your next question comes from Julian Mitchell with Barclays. Your line is open.

Hi, good morning. I know you've given the color on sort of first half, second half splits on revenue and earnings and so forth in the debt, but just wondered if you could perhaps home in a little bit on what you're anticipating for the second quarter. You know, just backing the numbers out, it looks like kind of organic sales company-wide, maybe flattish year-on-year in Q2, and then the EBITDA margin is down, I don't know, 50 to 100 bps year-on-year in the quarter. I just wondered if those are roughly... accurate and any kind of segment color for what you're seeing in the current quarter?

Yeah, Julian, I'll, uh, I'll take that one here. So, um, I think first of all, Your read is three directionally correct. Um, you know, I, I think Vicente kind of outlined kind of the full year and kind of the expectations, but maybe to give a touch more color, uh, specifically, um, you know, in terms of the phasing, both first half, second half, as well as second quarter. First and foremost, just to reiterate, our expectations and assumptions for phasing for EBITDA delivery in the year haven't changed. You know, first half of the year being in that kind of 45.5 to 46% range, the balance in the second half. As far as Q2, you know, one, we do expect sequential improvement on margins from Q1 to Q2. But in Q2 margins, we do still expect to be slightly down year over year. You know, kind of in that, you know, 50 to 100 basis point kind of range. It's primarily driven by ITS. We do still expect to see continued margin expansion year-over-year on the PST side. And then, you know, just to fill in the color there, on the organic revenue side of the equation, you know, as Asante just mentioned, Q1 was expected to be slightly down, and that's exactly what we saw. From an overall perspective, Q2 is expected to be, you know, flattish to slightly up. And then, you know, the low single-digit growth on the organic side is what we're expecting the second half based on the kind of the drivers that Vicente just walked through.

That's very helpful. Thank you. And then just my follow-up would be around the ITS business. As you said, sort of margins, I think, are down there for five quarters in a row year on year. Down again second quarter. Maybe help us understand kind of the confidence on those being up in the second half and anything you could flesh out in terms of price cost impacts, anything changing competitively with what's happening on tariffs and inflation in ITS, please.

Sure, I'll start on that one there, Julian. You know, obviously, you know, fair comment from your side. I'll note that obviously, you know, the last five quarters, the majority of those have been impacted by the, you know, the kind of the tariff dynamics and kind of the underlying impact that's had on some of the demand environment, which is really the driver of what you're seeing on the margin front. You know, I think from a, you know, total year perspective, our expectation on a full year basis is that ITS will be approximately flat year over year. As we indicated, Q1 was going to be the most challenging quarter, you know, particularly given we hadn't really started comping, you know, or lapping the Liberation Day tariffs from prior year, which really started in second quarter. As far as the second half and to your question, we do expect that's where margin expansion kind of comes back, you know, supported by, I would say, you know, the slightly better organic volume outlook that we have kind of expected in the back half of the year. continued improvement in price cost, you know, driven by, I'd say, full implementation of, you know, all the tariff-related pricing actions that have been taken, as well as kind of some of the targeted in-year actions that we always kind of have executed on. And then many of the productivity initiatives, including, you know, we were, I think you saw us take some pretty meaningful restructuring charges in the back half of last year, which we would expect to continue to bolster margins, particularly as we move into the back half of this year. So, you know, I think that's what kind of gets us to that kind of flattish margin expansion on a year-over-year basis. But, yes, it is, you know, a little bit more back-end weighted as a result of those drivers.

And the only thing I will add is that the exit rate on margin expansion will be consistent with our long-term targets.

Great. Thank you.

Your next question comes from Jeff Sprague with Vertical Research Partners. Your line is open.

Hey, thank you. Good morning. Just a couple things. First, just the language on tariff here that you don't expect any impact. Does that mean you haven't sorted it all yet and you're still kind of working through it? Maybe you could just kind of talk us through, you know, the IEPA change versus the 232 change. I guess you're saying you think you land kind of net neutral, but again, just looking for a little more clarity there.

Yeah, Jeff, happy to provide a little bit more. Obviously, you know, a number of moving pieces. To keep it simple here, no, we have obviously, you know, worked through all those individual moving components, and I think the simple takeaway is kind of what you indicated here, that, you know, at this time, those moving factors, whether it be the tariff-related changes, some of the underlying kind of just inflationary movements in the market, as well as a lot of the proactive measures that our internal teams have been working on from a mitigation perspective, those are kind of netting out relatively neutral on a full year basis. So our rate at this point in time, based on what has been announced, is relatively neutral. And obviously, like everyone else, we're anxious to kind of see how things continue to play themselves out for the balance of the year.

And then maybe unrelated, just a little more color on life sciences, if you could, just how the year is unfolding, what you see in the pipeline. It looks like some of the life sciences reshoring announcements of, you know, a year or two ago, we're seeing some ground break on some bigger projects. Just wondering what the funnel looks like there and is the visibility actually improving?

Yeah, yes, definitely improving. And clearly we're pleased with what we saw here in the first quarter, double digit organic quarter growth momentum on the life science side. And a lot of these reshoring and investments that we're seeing, particularly in biopharma, and very specific around API production in the U.S., it's really a great trend for us in terms of the product that we have. So good disability. As a matter of fact, this week we had a great session with one of the largest biopharma companies here in the U.S. where we kind of collaborate as we look into specific technologies that we can actually put and help them to really accelerate some of the productivity and production that they have to do here in the U.S. So looking good, and we feel positive about it.

Great. Thanks. I'll leave it there.

Thank you.

The next question comes from Joe O'Day with Wells Fargo. Please go ahead.

Hi. Good morning. Just wanted to circle back on the EBITDA margin kind of trajectory with ITS because I expect that will be the biggest area of focus coming out of this quarter. And if we're talking about something like call it 27 and a half to 28 in Q2 and moving to something that approximates 30 in the back half, just if you could unpack any quantification around that, I know you gave some of the items, but um any more detail around like the pricing that you put in place for tariffs but the timing of when that starts to flow through the p l or the impact from the restructuring any other cost mitigation just to help with a little bit of the quantification around that bridge from q2 into the back half yeah sure i i joe we're obviously we're not going to necessarily provide you know the the exact specifics on the individual components but let me let me give a little bit more color on on some of the moving parts

So, you know, one, I think, obviously, kind of your read on, you know, the directional movement of margins is in line with expectations. As we've indicated, we do expect to see kind of sequential margin improvements here as we move through the year, frankly, both a statement about ITS as well as PST, for that matter. On the ITS front, you know, just to kind of delve into the components, a couple moving factors. One, obviously, as I indicated here, we do expect to see organic volumes decrease. improve in the second half as comparatively to the first half levels. Clearly, those do come with what I would call normal flow through, which clearly will be a benefit that you haven't really seen kind of in the numbers over the last few quarters, just given some of the volume dynamics. Second piece would be price. So specific to price, you know, all of the, I will call it tariff related pricing actions are in the numbers. They were all largely taken to the back, you know, through 2025. And I would say you're seeing those in the numbers as we speak. You know, what you haven't necessarily seen is some of the, I'd say in year 2026 actions, which is I think a catalyst of some of the margin expansion you would expect to see in the back half of the year. The other factors I would probably point to here would be on the productivity side of the equation. So you mentioned one on the restructuring. The restructuring has been taken. As you can expect, that restructuring is global in nature, so it does take some time for some of those actions to be fully executed, which we expect to kind of largely conclude here through the first half of this year and those benefits to start being more visible into the back half of the year. And the other piece would be, I would say, you know, the direct material side. You know, as a reminder, you know, direct material is approximately 70% of our cost of goods sold. And there is a lot of activity going on, whether it be on the I2V front or the classical, I would just call it direct material procurement side of the equation. And, you know, as you've seen in years past, those benefits tend to be much more visible when you have kind of your seasonally strongest quarter, which is always in the back half of the year and particularly fourth quarter. So, again, that's another driver of kind of some of the back half margin expansion that you're not necessarily seeing manifest right now in the first quarter.

All helpful details. And then just on the demand front, when you talk about some of the order delays, some of that coming back in in the quarter, but trying to understand a little bit of the ripple effect from the conflict. And so if you could just talk about what you're seeing in Europe, overall demand, and then over the course of March and April, if you have seen any impact associated with the conflict or if that order impact is largely contained to the Middle East region?

Yeah, okay, Joe. It is mainly contained right now to the Middle East. And the Middle East, it was really, as we said, you know, a handful of this kind of long cycle, large projects that as the conflict started and people had to just stay at home and not being able to leave. I mean, we have a uh, a lot of our team members, they're all safe and sound, but, uh, they had to, they could not leave, uh, the house, uh, to go and talk to customers, same thing at the customer side. So that is really what created some of the delay and the impact. And so therefore, as you can see here already in the, uh, in the month of April, as we said, already a third of those orders, uh, kind of already, uh, booked into, into us and we don't see any cancellation whatsoever. So, um, yeah, so I think it's just at this point in time, mainly due to, uh, fairly contained on that. As we think about continual perhaps impact in Europe, the main impact that we see is clearly the increase in energy prices, which we view it as a potential long-term tailwind for us, given the nature of our products, as we said before, and how we can create customer energy efficiency for our products and services. There was actually teams were telling me about a win that they had where They're saving upwards of $15,000 per month on a specific location at a customer, creating a payback of compressor to be anywhere into the one year. Not everyone is going to be like that, but I think that is really part of what we're very focused on. How can we help our customers lower those energy costs with the technologies that we have?

I appreciate it. Thanks.

Your next question comes from Amit Mehrotra with UBS. Your line is open.

Thanks. Good morning. I just... Sorry to revisit this, but I just want to sort of revisit the triangulation between organic growth in the quarter orders, both kind of flat to down, and then this 1% full-year organic growth, and then the comps actually get a little bit harder as we progress through the year on organic growth. Amit Singer- i'm just trying to triangulate those three things and if there's kind of this embedded expectation of of demand that we're not seeing yet as we progress through the year or maybe that's not maybe you can clarify that for me, thank you.

Amit Singer- yeah sure i'm at all start on, so you know I think as the Sunday indicated here. Amit Singer- First and foremost, you know the short cycle side of our business, whether you look at either on the itf side or the pst side. is the piece that we're definitely seeing, I'd say, stabilization and even, you know, I'd say improvement on as we think back to, you know, the last few quarters. So that's obviously very encouraging. It's kind of the base of the business and obviously what will be a driver of, you know, the improvement that we see in the demand environment. As far as... As far as the order numbers you saw in Q1, I think as Vicente said here, clearly more impacted by the longer cycle projects. Those are projects that you typically book in the first half of the year, they go into backlog, and those might be six to 18 months in duration, right? So yes, obviously we want to continue to see those get to the finish line. But one, our expectation is a lot of it was just timing and transitory. We do expect those projects to kind of You know, not just stay in the funnel, but ultimately get to the finish line. And, you know, those will continue to feed the backlog, not just in the back half of this year, but even into 2027. So, again, yes, we do want to see that longer cycle, you know, those projects get to the finish line. But, you know, that for us is, you know, more of the longer term side of the equation. We're very encouraged by what we're seeing on the, let's say, shorter cycle in some of the book shift businesses, as well as, you know, some of the momentum we continue to see on the life sciences side as well.

Okay, thank you. And I just wanted to follow up on that point. And maybe Vincente, you know, the short cycle stuff seems encouraging underneath the surface, but ultimately it's not piercing its way through to the organic growth profile of the business. And I'd like to get maybe your perspective on this, because obviously you know the business better than anybody else. And my understanding, my feeling is, is that you guys took a lot of price over the last several years. I'd love for you to opine on whether there's a demand elasticity. I mean, because energy prices are high and surge during the quarter, which arguably would create a little bit of a cycle for your products. Maybe just opine on whether there's a demand elasticity issue vis-a-vis pricing and market share. Like, is there something else going on where some of this short cycle momentum that we're seeing across the broader industrial is not really piercing through your organic growth in the moment?

Yeah, I'll say, I mean, underneath, obviously, all the data that we have, I mean, we're kind of clearly seeing it. I mean, if I think about the PST side, when you think about the two-year stack, organic orders on PST, they're basically up a single digit, organic. And when you kind of unpack what we saw in the first quarter, precision technology, which is kind of the more short cycle in nature, we saw the short cycle in nature piece actually continue to do fairly well. offset by some long cycle kind of year-over-year comps. I mean, some of the long cycle, I think we tend to like to look at it better more on a first half and second half kind of comparison versus on a quarter-to-quarter basis. Within the ITS, when you think about the blower and the vacuum side of the business, those tend to be more short cycle. We have always indicated in the past historically that we have our vacuum business that is based in Europe as a good leading indicator for upswings in manufacturing demand based on short cycle. And we're seeing that. I mean, we see that clearly. So kind of when we unpack at a high level and you kind of start excluding some of these long cycles, we definitely see that short cycle continues to improve. And, you know, Keep in mind, I mean, the demand elasticity based on price, I mean, we have a lot of statistics and a lot of analysis. We see that as long as we continue to innovate and we sell based on cost of ownership and payback that remains strong, that's how our sales teams, they sell today. They sell based on that total cost of ownership on the IPS side, but also on the PST side too as well.

Got it. Okay, very helpful. Thank you very much. Thank you.

Your next question comes from Nathan Jones with Stifel. Your line is open.

Good morning, everyone. I'd like to just ask about, you've made a couple of comments on the call today about the potential for high oil prices, high energy prices in Europe to be a catalyst. We had a similar circumstance in 2022, and I believe there was a surge in demand for your products then. I'm hoping you can kind of compare where we are today in Europe to where we were maybe in 2022. I know there were some government programs that helped there, but maybe just any color you can give us on the similarities that you see and differences that you see between now and then and how rising energy prices or high energy prices impacted the business back then.

Yeah, Nathan, well said. As you can imagine, we're looking at a lot of those indicators to see how comparable it is. Gas prices are not to the same level as what it was back then, but definitely have spiked and increased, and even also gasoline and oil prices. I was just in Europe with the team not too long ago, and diesel prices are actually higher than petrol prices, which in the European market they have not seen in quite some time. So it's going to take a little bit of time. I mean, I think as you can imagine, I mean, we're still early into what I would say the conflict in the Middle East. And we're still early into that acceleration of the oil and gas prices. But clearly that is definitely going to help us. And we're leveraging our demand generation tools. We're leveraging going back into the funnels and reassessing that return on investment and communicating with customers. as to that energy efficiency that we can achieve based on our new technology. So, again, staying optimistic in terms of being able to provide better solutions to our customers that will allow them to lower that energy cost.

And I guess my follow-up question, you guys have frequently talked about the time from RFQ to booking as a sign of customer confidence. Can you talk about any changes you've seen there? Has it got any shorter or are we still waiting for that to come? Thanks.

Yeah, it has improved. It is definitely not to the early days when we said that a marketing qualified lead will take four to, I mean, we said historically before all this elongation, it could take anywhere between six to eight weeks, and clearly it got elongated. It has improved a little bit, but it's nowhere near back to the levels that it was before.

Thanks for taking the questions.

Thank you.

Your next question comes from Joseph Gablaze with Deutsche Bank. Your line is open.

Yeah, thanks. It's Nicole DeBlaze. I don't know where that came from. So good morning, guys. Thanks for the questions. I guess maybe first, organic growth for PST pretty strong, and I think it was better than your expectations for maybe Flattish originally for the first quarter. So if you could unpack that a little bit, and do you think that that 4% growth that we saw in 1Q is sustainable throughout the rest of the year, meaning that maybe PST outperforms ITS in 2026? Thank you.

Yeah, Nicole, so we definitely were pleased with what we saw and very pleased with what we saw, as we mentioned, on the life sciences side of the business and kind of the short cycle nature that we saw on the PP. And I think we said, too, as well, that we're pleased with what we're seeing here as we kind of move into the month of April, too, as well. So, hey, I think we're encouraged. Encouraged also, I made the statistic that, you know, when you think about PSP organic two-year stack, I mean, they're in the mid-single digit, which is kind of what we always said. that that segment should be operating at that mid-single digit plus.

Okay, got it. Understood. And then just thinking a little bit more about the progression of short cycle, I know this has been asked a lot of times, so I don't want to beat a dead horse, but did you guys actually see improvement in order activity on the short cycle businesses throughout the quarter and then into April? And Vicente, if you could just remind us roughly what percentage of your total sales are short cycle today. Thank you.

Yeah, Nicole, we definitely saw progression improvement, I would say, on the short cycle through the quarter and kind of as we continue, as I said here, moving into the month of April. But, you know, order cadence continues to go fairly well in terms of line, in line with expectations. And so I think we're pleased with that.

Yeah, Nicole, on the second part of your question about the kind of short cycle versus long cycle, Probably the easiest way to frame it up would be at the enterprise-wide level, roughly 40% of our revenue is aftermarket, which obviously has more of an activity-based kind of book and ship kind of dynamic to it. And then when you kind of peel that apart on the whole goods side or the balance or the original equipment side, It's approximately 75% to 80%. 75% is probably a good proxy. It's more short-recycled in nature, and that leaves about 25%, which is more of the, I would call, a long-recycle project-type business. And you do see a relatively equitable split between both segments. Both segments have that long-recycle dynamic, as we mentioned before.

Thank you, Vic and Vicente. I'll turn it over. Thank you, Nicole.

Your next question comes from Chris Snyder with Morgan Stanley. Your line is open.

thank you um you know i understand that um price cost is i guess basically a net neutral for you guys throughout the rest of the year when when we net out all the tariff changes and any sort of mitigation but i guess is the expectation that the company will push more price in 2026 than what you thought coming into the year um in response to inflation and just kind of part of that mitigation efforts I mean, if so, any way to think about how much more price in 26 versus the expectations in January? Thank you.

Yeah, Chris, let me unpack that and clarify a few things here. So I think the price cost being more neutral, particularly here in the first quarter, as we're continuing to lap some of the tariff dynamics, I think that's more of a fair statement. I think as you move into the back half of the year, we do expect the price cost dynamic to turn a bit more positive. And what I would point to that is, are we taking what I would call incremental tariff-related actions at this point? No, I don't think that's the case anymore. As we indicated, even as we came into the year, we expect pricing to kind of revert back to that kind of more normalized 1% to 2% that you've seen in historic times. That does include just some of the, I would say, normal course pricing actions you would expect. Again, not kind of peanut butter and vanilla across the entire enterprise, but targeted pricing where it makes sense. And so that's the piece that's still, you know, I'd say in play here, which does drive some of the more second half, particularly Q4, you know, price costs being positive. So again, not being necessarily more on the tariff at this point in time, just given things have kind of stabilized, it's much more what I would call normal course pricing. I thank you for that.

I appreciate it. And then You know, maybe if I could just follow up on the Middle East. You know, I understand there was an impact on orders in Q1, but for the full year, you guys are saying no impact on sales or orders, it seems like, for the full year. But I guess, did the Middle East have an impact on Q1 sales? And is there any impact that you expect to come through in Q2 on the Middle East? And again, just on the revenue side. Thank you.

Yeah, Chris, to keep it fairly simple, I think the teams did an exceptional job here in Q1. So on the shipments or revenue side, no, no meaningful impact one way or the other in Q1. At this point in time, obviously not expecting any material movement here in Q2, but obviously clearly an area that we're watching just like everyone else in terms of how the conflict continues to play itself out. Thank you. I appreciate that.

Your next question comes from Steven Volkmann with Jefferies. Your line is open.

Hi. Good morning, guys. Thanks for taking the question. Most of it's been answered, but I guess I'm curious. We're approaching the two-year anniversary of ILC Dover now. Is there anything qualitative you can say around how that asset specifically is performing relative to the segment, maybe in terms of veneral growth or margin? Just kind of bring us up to speed on how that's doing.

Yeah, we don't tend to go into kind of unpeeling each of the businesses and particularly across any of the two segments. But I mean, after a two-year anniversary, we're pleased with all the investments that we have done. I mean, we have a full lineup of new teams. a team really leveraging the tools that we have around IRX. And really, as you can see, obviously, that and investments that we have done in commercial investments to really accelerate and penetrate more. And you're seeing it now here in the numbers. I mean, obviously, IOC Dover is a good part of the PST segment today. And as we said, you know, and particularly the life sciences and life science technology, you know, at a double-digit kind of order run rate, we're pleased with that because we have now created a really good platform for the M&A. And as you remember, that was kind of what we were looking for with the IOC Dover 2 as well. And now we have embedded, you know, quite a few of these now bolt-on acquisitions into the lifetime business of IOC Dover. So continue to be pleased. I think the team is executing very well and we see a bright future ahead.

Okay, thank you. And then just follow on to that. Is there anything in the M&A funnel, maybe of the 10 LOIs or something that would be even close to that size of ILC Dover? Or is this all more like what we've seen year to date?

Yeah, I think on the LOIs, it's kind of more on the bolt-on in nature. You know, having said that, I mean, there's definitely a couple of transactions, and particularly one that is not of the size of ILC, but about, you know, a little bit more than a billion-dollar purchase price transaction. But that one is not on the LOI. It's in the funnel, and we're having great conversations, but it is not one of the 10 LOIs.

Super. Appreciate it. Thanks. Thank you.

Your next question comes from Andy Kapowitz with Citigroup. Your line is open.

Good morning, everyone. Morning. You mentioned, I think, 40% of the business now after market. I think we've talked a lot about recurring revenue. I think it exceeded $450 million last year, and you talked about a backlog of $1.1 billion in future revenue. Has that continued to grow, and what do you see in terms of mix for 26 and sort of moving forward?

Yeah, Andy, I think it continues to be an area of emphasis and focus. And yes, particularly it continues to do very well. We have launched new solutions and we're pleased with making the great progress towards achieving that billion-dollar recurring revenue target that we set by kind of run rate at the end of 2027. It's an area of focus. The team is putting a lot of attention, and as you can imagine, it has created incredible customer loyalty and stickiness when we have these solutions to the customer. So it's going to continue to be an area of investment for us.

That's helpful. And then just one more on the Middle East. You mentioned you got a third of the delayed 40 million of longer cycle orders back in April, but Could you give us more kind of what, you know, the nature of these orders are? And do you think you need the Middle East conflict to end to get all of the orders back? Or are your people telling you that it's just a matter of time, even if the conflict lasts, that you get these delays back?

Yeah, so these were really kind of plant expansion and production capacity extensions related kind of long cycle project orders. We don't need... at least at this point in time, we don't expect that it needs the conflict to end. And it was just a matter of, you know, kind of putting the final, you know, final details of these purchase orders. But obviously, as you can imagine, I mean, the teams and the customer were not able to even in some cases leave their homes to be able to have that kind of close communication and finalizing things. So I think it's just at this point in time, we think it's time in. you know, there's definitely going to be a rebuild in a lot of the petrochemical facilities that have been kind of damaged. So that, I mean, we clearly have products that participate in that regard. So I think it's going to be good for the long term, we also believe.

Appreciate the color.

Thank you.

Your next question comes from Nigel Coe with Wolf Research. Your line is open.

Thanks, good morning. It's been a long time since I asked this question, but what percentage of the current portfolio do you think is levered to energy, be it process markets, oil and gas, chems, etc.?

Yeah, good question. A lot of our technologies are very applicable to multiple industries, and they're in some cases kind of agnostic, and clearly we're We're pivoting and kind of trying to help in some of these cases, situations as we see expansion into production capacities like petrochemical facilities, how our, for example, our NASH liquid rain vacuum that is widely used in the pulp and paper, it's also and can be very well utilized in the distillation towers of petrochemical facilities to be able to decompose products even further. I think we're putting attention to obviously help our customer where help is needed. And that percentage of total revenue kind of could fluctuate based on the approach that we give to certain customer levels.

Okay, okay. So what you're saying is that it doesn't matter what it is today, there's opportunities to grow that number. Okay. And then just maybe a follow-on to Joe DeBlaze's question. The life sciences, do you think that the double-digit life sciences revenue growth can continue? And I guess what I'm asking here is, was there anything unusual on the destocking or restocking activity there? Would you think that life sciences can be sustained? And how does the life sciences margin compare to the average within PST?

Yeah, Nigel, this is Vic. I'll take that. So maybe I'll answer it kind of backwards here. I'd say on an overall basis, the life sciences margin profile is comparable to the overall segment. Clearly, it's the area where you've had more of the integration with the ILC Dover assets, with the legacy life sciences assets of Ingersoll Rand and things of that nature. But it's also probably the area where we see continued opportunity, particularly as some of those life sciences businesses continue to show good growth momentum. It's solid margin profile, particularly areas like biopharma. So again, I would say, you know, relatively in line with the overall segment, but clearly an area for opportunity. As far as the growth cadence, things like that, You know, listen, I think clearly we're encouraged by what we saw. You know, obviously a double-digit growth cadence over the entirety of LST is not necessarily something that we've called for over the, you know, the entire year or anything of that nature. But clearly we're encouraged by what we're seeing here. We expect to continue to see good momentum. And, you know, I think to Vicente's point earlier, the fact that you have a, you know, a two-year stack on orders that's in that mid-single-digit you know, realm, I think definitely is kind of where we have been targeting this segment to operate. And we continue to expect to see, you know, continued momentum here as we move forward. So I think we're really encouraged by what we're seeing here. And, you know, we definitely see continued margin expansion, particularly as we move sequentially through the course of the year. Okay.

Thanks, Nick.

Your next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Hey, guys. Good morning. Andrew Sorensen- Morning Joe. Andrew Sorensen- lot yeah so lots been covered maybe just kind of just parsing out the IPS margins this quarter, I know you you've attributed it to volumes tariffs and investments. Andrew Sorensen- Seems like tariffs probably had the outsized impact this quarter I don't know i'm estimating maybe some something in that 10 to $15 million zone. Andrew Sorensen- You maybe just give us some some quantification on the tariff impact this quarter and then ultimately. If we're getting back to neutral as the year progresses, I guess we should probably see that come back in the upcoming quarters.

Yeah, Joe, so I think, you know, without question, I think the two drivers you mentioned there, both the tariff-related dynamics as well as Just to float through on organic volume, which obviously this is a healthy gross margin business. So clearly those are the two biggest factors. We haven't necessarily quantified one versus another, but those are the two bigger drivers. To your point, yes, clearly as we move into Q2, remember the tariff-related noise really started in April of last year or kind of in the second quarter of last year. So I think on a year-over-year basis, this is where the comps on the margin side of the equation start to moderate significantly. you know, a bit more. And that's why the margin expansion expectation is more back-end weighted here, particularly now with all the pricing actions and mitigation actions and things like that have really gone into place. I think it's also worth noting here that, you know, even over the course of the last year and even the Q1, we've continued to invest on the cost side of the equation and on the SG&A side, really feet on the street, R&D, you know, the same areas we've talked about quite a bit. And so for us, that's an area that we wanted to be hyper-focused on continuing to invest because that's going to drive the ongoing organic growth moving forward. So I'd say those are the biggest drivers. But yes, your point is valid that as we move sequentially through Q2 and really into the back half of the year, that's where those tariff-related headwinds moderate.

Okay. Helpful, Vic. And then maybe Vicente, just on the M&A pipeline and the LOIs. I know, you know, back in the day, I think you guys had a goal, ultimately, to get the PST business up to, you know, like a 2 billion-ish type run rate business from a revenue perspective. As you think about your pipeline, and whether that's the LOI or maybe the broader company pipeline that you're looking at, like how much of that is centered on the PST business versus ITS going forward?

Yes, Joe. So I'll say that, you know, on the PST side, back to your commentary about making it larger and bigger, I mean, it's kind of double in size since we started talking about PST. And those 10 LOIs, I would say a good blend between both, ITS and PST. But again, we continue to see a lot of great prospects in the PST side that we're very excited about.

Okay, great. Thank you. Thank you.

Your next question comes from David Rasso with Evercore ISI. Your line is open.

Hi, thank you. For the second half of the year, ITS, the margins, can you give us a sense of where do you think that growth will come from organically between compressors, vacuum and blowers, and the lifting power tool segments? And just remind us on the relative margin between those three.

Yeah, sure, David. I'll kind of give you a quick overview. So, you know, obviously the power tools piece is relatively small. It's kind of the smallest piece of the equation. To keep it very simple, the margin profile between compressors, blowers, and vacuum actually quite comparable. You know, you don't see a dramatic mix impact between them or things of that nature. Clearly, some of those technologies maybe have more aftermarket than others, but in totality, fairly comparable. So, I think the simple answer to your question here is, and then clearly with with compressors being upwards of 65% of the revenue base. know clearly that's going to be you know uh you know the biggest driver just because it's the biggest piece but i do think that we expect to see uh you know i'd say positive contributions from from all the underlying technologies and you know as jacente said here um when you think about the shorter cycle kind of momentum you know we've seen in the blower vacuum side we've seen it in pieces of the compressor side so i think we're encouraged at least by i'd say some of the underlying market activity that we're seeing uh that should kind of lend itself to some of that expansion you see in the back half of the year

All right, so sort of mixed agnostic. We just need the volume, essentially, regardless of either subsector. Generally correct, yeah. In the tariff impact, and you say it gets better as the year goes on, can you just clarify in the first quarter, is that pricing you put in against tariffs and they're dropping revenues at zero margin, or are we actually getting an EBITDA hit and we need the price to catch up to that in the second half of the year?

It's more the former of what you've said. So the pricing actions related to tariffs have largely all been taken through the balance of 2025. You're seeing that come through now, offsetting tariffs. I would say it's dollar neutral, but obviously margin dilutive. And now, obviously, on a year-over-year basis, you move through Q2 to Q4, you're seeing the tariff piece of that start to normalize because you had the tariffs in prior year. And clearly, with the mitigation actually taken combined with some of the ongoing pricing actions we're taking, that's why we expect to see better momentum, particularly exiting the year and in Q4. All right. That's helpful. I appreciate it. Thank you.

Your next question comes from Andrew Buscaglia with BNP Paribas. Your line is open.

Hey, good morning, everyone. Hey, Andrew. Still think I got one last question even this far in the queue, but I think no one's brought up China yet, and I want to say that your comment there was, as I recall, orders still outperforming underlying markets. Is that a comment around improvement up of the stabilization you've been commenting on the last couple of quarters, or what are you seeing in that market?

Yeah, Andrew. China, for us, again, we have been able to outperform the market that we're playing in China with basically new technologies, taking technologies from other acquisitions and localizing that in China for China. And the team has done now consistently a pretty good job over the past, I'd say, three quarters of being positive on an organic order basis. And so, again, we're pleased with the execution. It's just another form of kind of highlighting the self-help commercial that we continue to push on a global basis.

What do you see for the China market this year? Like, what's your...

uh sense in terms of where where that market's going for you guys i think you know we still don't see the market the market itself uh outgrowing uh now what we see is us outgrowing and taking share in the in the market itself if the market is not we don't see china markets shrinking uh it is obviously highly competitive uh but we still see a lot of good opportunities based on the technologies that we have and how we're approaching the market I mean, and we got hundreds of examples. I was in China earlier this year at one of our medical device facilities, and in China for China for that medical device operation, its opportunity is very high. That's an example.

Yeah, okay. All right, thanks, Vicente.

Thank you.

Thank you, Andrew.

that is all the time we have for questions. I'll turn the call to Vincente for closing remarks.

Thank you, Sarah. Just finally, I just want to pass one more thank you to our employees for their ongoing dedication and commitment to having that ownership mindset and controlling what we can control and continue to deliver performance for our shareholders, which by the way, all of our employees are, and they have that rewarding skin in the game to continue to deliver long-term value performance for all of us. So thanks again for the interest, and we'll talk soon.

This concludes today's conference call. Thank you for joining. You may now disconnect.