Ingersoll Rand Inc. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Recurring Revenue: Exceeded $450 million in 2025 with a backlog of approximately $1.1 billion in future recurring revenue from existing contracts.
• Inorganic Growth: Disciplined M&A continues to drive success. In 2025, $525 million invested in 16 transactions generating ~$275 million annualized inorganic revenue. Nine transactions under LOI in 2026, including acquisition of Synomics in January 2026.
• Financial Performance: Q4 orders up 8% year over year (1% organic), revenue up 10% year over year, organic revenue up 3%. Full-year orders up 9% year over year (1% organic), revenue up 6% year over year, organic revenue up 3%. Adjusted EBITDA $2.1 billion, margin 27.4%.

Segment Performance

• ITS: Fourth quarter orders up 8% year over year (1% organic), low single-digit organic order growth. Revenue grew 11% year over year, organic revenue growth 3%, adjusted EBITDA margin 28.9% (down due to tariffs and commercial investments). Regional organic order trends: Americas low single digits, EMEA mid single digits down, Asia Pacific low double digits (China low single digits, rest of Asia mid twenties).
• PST: Q4 orders up 6% year over year, organic orders up 1% (life sciences mid-teens organic order growth). Full-year organic order growth 2%, revenue up 8% year over year, organic revenue growth 4%, adjusted EBITDA $127 million, margin 30.4% (up 280 basis points year over year).

Guidance

• Total company revenue expected to grow 2.5%-4.5% in 2026, driven by 1% organic order growth, 1.5% growth from M&A, and 1% FX tailwind.
• Adjusted EBITDA expected in the range of $2,130,000,000 to $2,190,000,000.
• Adjusted EPS projected to be between $3.45 and $3.57 (5% growth midpoint).
• Corporate costs planned at $170,000,000, adjusted tax rate ~23%, net interest expense ~$230,000,000, share count ~394,000,000, FCF to adjusted net income conversion ~95%.

Risks

• Tariff Impacts: Year-over-year margin pressure driven by tariff impacts and intentional commercial investments for growth.
• Decision-Making Delays: Elongation of decision-making processes in long-cycle projects affecting order timing.
• Market Uncertainties: Uncertainties in end markets, including potential impacts on organic growth and margin performance.

Question and Answer

• Q: What sort of end market trajectory is embedded in the guidance?

A: No market recovery is embedded, the portfolio is resilient with 40% of revenue from aftermarket which is stable. Life sciences is progressing, general industrial is stable with more stability in 2025 as tariffs peak have passed.

• Q: Is it fair to assume the guidance is based on roughly that one point of organic revenue growth year on year fairly evenly through the year?

A: Q1 organic is expected to be flat to slightly down, and Q2-Q4 are expected to have low single-digit organic growth.

• Q: What is the first-year margin profile look like for the acquisitions in the pipeline?

A: Purchase multiples are prudent, acquisitions have a path to be in line with or better than segment average margin profile, with potential for double-digit returns by year three through cost synergies.

• Q: Can you talk about the improvement in China's organic order growth?

A: China has had three consecutive quarters of positive organic order growth, driven by new product launches, localization of acquired technologies, and innovation to penetrate the market.