Q4 2019 Earnings Call

Refilling number as well as access code can be found on slide two of the presentation before we get started. I would like to remind everyone that serve the statements on this call are forward-looking in nature and are subject to the risks And uncertainties discussing our previous SEC filings, which you should read in conjunction with the information provided on this call. For more details on these risks, please refer to Gardner Denver annual report on form 10-K filed with the Securities and Exchange Commission, which is available on our website our gardener. Additional disclosure regarding forward-looking statements and include on-site three of the presentations.

In addition in today's remarks will refer a certain non-gaap Financial measures. You can find a Reconciliation of these measures the most comparable measure calculated and presented in accordance with gaap in our slide presentation and in our earnings release which are both available on the investor relations section of our website.

Turning to slide four on today's call will review our fourth quarter and total your highlights as well as an update on the pending transaction with Ingersoll Rand and introduce twenty twenty guidance. We will conclude today's call with a session as a reminder. We would ask that each caller keep the one question and one follow-up to allow for enough time for other participants at this time. I will now turn it over to Vicente Rhode Island chief executive officer.

Thanks.

Good morning to everyone turning to slide five. Let me start with a brief overview of the fourth quarter over all the fourth quarter was a good example of the team's ability to use a garnet Denver education Excellence process or GDX to remain Nimble in the face of a soft economic environment. I suspected entering the quarter core industrial markets continue to suck signs of slowdown and the Aussie manner you Market continue to face similar head winds as we have seen in Prior quarters. However, the team utilize the GDX process to drop off a quick actions that resulted in solid commercial and operational execution with strong margin expansion in our non-op Stream Energy businesses and healthy free cash flow Jeff.

Let me provide a bit more color on the financial highlights in the fourth quarter from a total company perspective FX adjusted revenue and orders declines of 14% And 60% respectively Thursday. We're heavily impacted by the known softness in the Upstream energy business. We're both revenue and orders were down a person in the fifty percent due to the known oversupply in the market am limited activity in the later end of the year despite these headwinds the option team executed on several targeted customer wins due to new product introductions limiting a sequential Revenue declined to only 21% which was better than our expectations coming into the quarter.

the remainder of

Businesses including Industrials mid and downstream energy and medical solid Collective effects adjusted Revenue decline of 3% and orders decline of 4% off in the software macroeconomic environment as well as meaningful prior-year cons.

The company that leave it. I just did they diluted earnings per share of $0.37 and adjusted ebitda of $135 million with an overall margin of 22.3%

overall margins were impacted by the expected declines in Austrian revenues as well as increased corporate cost in the quarter driven by growth Investments and incentive compensation payout related to better them dissipated business performance.

We were also very pleased with the performance of the industrial medical and mid and downstream energy businesses, which collectively expanded adjusted ebitda. Margin by fifty basis points. Despite. The Top Line had one the margin Improvement was driven by initiatives such as ITV and proactive cause measures that the team has implemented including the restructuring actions that we took in Q3

from a balance sheet

Active free cash flow in the quarter was ninety million dollars free cash flow conversion to report a net income was 347% as a team continue to make strong Port progress on working capital including reducing inventory by thirty-seven million dollars within the quarter while total company operating working capital as percentage of Revenue finished slightly higher than a year at 24.6% This increase was due entirely to the Austrian energy business, which has a meaningful opportunity as we look ahead.

The remainder of the business is finished the year collectively at 19.5% 170 basis-point Improvement versus prior year and this marks the first time we have seen below 20%

the trunk cash performance led to net leverage of two times at the end of the year and Improvement of 1 times as compared to Prior year.

Moving to slide six as I reflect on the total year 2019 was a solid year that showed the resilience of the business model and the team's ability to drive results in the face of changing market conditions the bridge and the page starts with Industrials made and down stream energy and medical businesses, which collectively deliver 3% FX adjusted growth and adjusted ebitda margins of 24.2% which was 80 basis points up versus prior year.

this is

very strong performance in the face of challenging macroeconomic conditions with flow through to in excess of fifty percent due in large part to the continued execution of GDX that the name

Stream Energy did face a challenging year, but I am pleased with the steps that team has taken to proactively right size the cost structure and limit the detrimental margins in the second half of the year off and while FX on other Investments this proved to be headwinds on a year a year basis. They were largely in line with anticipated levels from the beginning of the year.

I need to slide seven. I would like to spend a few moments discussing the progress. We're making on depending on t with the English or an industrial segments as you probably saw a few weeks ago. We received unconventional clearance from the European commission for the transaction. This was a major Milestone as it marked the final regulatory clearance needed for approval of the deal.

Time we have continued to make strong progress as we launched the financing for the deal in late January and completed that on February 7th with fully committed Term Loan be structure in addition Ingersoll Rand completed their shareholder vote on February 4th with all proposals being approved and garnered them for sure how they're both is now scheduled for February 21st. We do not anticipate any issues with the final legal requirements required to close a deal and I am very excited to announce that the merger should be completed on February 29th.

This marks an exciting time for the new company. I am very much looking forward to the bright future ahead for the New England Run.

Going to slide 8. I want to Spanish a moment reflecting on our four-point strategy of these will serve as the basis for how we operate and your company. I have said it many times that Talent is at the Centre of everything we do and having an outstanding team is called to our strategy as you may have seen. We announced the leadership team for the New England or brand back in December. I am very excited by the town from both English and burning Denver coming together as we have strong representation from both organizations that will help as we create a combined culture for the new company everything starts to people and I suppose is a great way to infuse best practices from both organizations in to our daily routine.

More integration planning efforts over the past few months. We are in the final stages of our detail organizational design across a new company and I'm looking forward to sharing these with the team's shortly after closing.

Another key facet of our strategy has been margin expansion as we look ahead and major component of the transaction is delivering our previously announced $250 million dollars of cost energy Target month. We continue to have strong confidence in delivering this Target and that confidence is driven by the integration planning efforts. We have done over the past nine months as well as the continued momentum. We see off the den Berg as shown by the 80 basis points of adjusted ebitda. Margin expansion. We delivered in our non option businesses in 2019.

The key Catalyst to that margin expansion and one that we are excited to expand in the new company is the innovate value process or I to v i to be continued yield very strong results across the Garner Denver businesses including recent recent wins in redesigning products within our European blower and vacuum platform.

Think ahead we will take this very same principles to the three billion plus Revenue segment at ingersoll-rand industrial where we expect to see similar momentum and opportunity in improving the prompt well at the same time delivering margin benefits for the businesses.

Moving to slide 9 I would provide more color on the operating performance of our segment.

We start with the industrial segment where I suspect that we saw growth slowed down from what we have seen in Prior quarters driven by the subnetting macroeconomic backdrop the industrial segment fourth-quarter scoring take was 308 million dollars down 3% versus prior year excluding affects revenues in the quarter worth $333 flat excluding effects.

From is your graphic perspective Revenue in the Americas declined 2% on an fx adjusted basis. We view this as an excellent performance. When you take into account that the US manufacturing a Thursday December was the lowest result in a decade according to is em index in addition to this were overcoming very strong comes from prior-year where FX adjusted growth was 12%

For Market perspective. We feel good about our relative position in the third party industry reports continue to show that we are outpacing the market in terms of units and dollars in both of the main compressor offerings of oil lubricated rotary screws and reciprocating Technologies.

In Europe performance was very comfortable to what we saw in the Americas with Revenue down 2% FX adjusted despite the continued tough macroeconomic environment the majority of the European regions, including Main and Western Europe and India, so relatively stable performance including low single-digit growth in oil lubricated compressors and continued momentum in each project blowers Middle East and Africa collectively saw double-digit Revenue decline due in large part to the non repeat of a large high pressure compressor system that shifting 2018.

Specific reported a double-digit revenue increase due to growth in Niche product like oil-free compressors and transport the equipment as well as strong institution took a few large custom projects.

The market continues to see General softness in most major regions, we continue to advance our strategy of differentiated Innovation complemented by the efforts of the man generation in order to drive outside boroughs in Niche verticals one such case study is highlighted at the bottom of this light where we have introduced an Innovative Robux screw compressor to the Marine industry off the application of error lubrication.

Are lubrication is a process of infusing air bubbles beneath a ship's Hull to reduce friction between the whole and the water this helps reduce resistance and the amount of energy needed to propel The Shack leading to 5 to 10% fuel savings and reduce CO2 emissions products like the robots compressor have led to outside growth in the Marine industry where wage so strong double-digit growth in 2019.

Moving to adjusted ebitda industrial deliver $79 in the quarter of 2% excluding effects. Fourth quarter adjusted ebitda. Margin was 23.57% fifty basis points versus prior year and not a hundred and fifty basis points sequentially from Q3, the year of a year margin increase was largely attributable to ongoing productivity initiatives, like I to be as well as benefits from the Restriction action that we completed in Q3.

the margin profile

Thank you for Mark the highest level we have ever seen in our industrial segment and continue the momentum towards our mid-twenties ebitda. Margin Target that we have previously stated.

Moving next to the energy segments light then the energy segment fourth-quarter order intake was 272 million dollars down 35% excluding in effect wage driven largely by the expected declines in Upstream energy and to a lesser degree by high single-digit adjusted decline in the mid and downstream businesses as we continue to see an elegant in the project quote to order cycle.

Revenues in the quarter where two hundred six million dollars down 32% excluding affects both to bill in the fourth quarter was 83% which was relatively similar to what we saw in June nineteen addressing the components of energy. Let me start with Upstream orders and revenue both finish a $17 down 52% and 50% respectively excluding affects. Both of these levels were above our initial expectations entering the quarter as a team did a very nice job on executing commercially on newly introduced products and solutions that we have been speaking about over the past few quarters.

Do you need?

A little deeper on orders and revenue the results were in line with what we saw in Q3 as a composition was largely aftermarket Centric with minimal orders from original equipment Frank Baum's.

Even Market capacity utilization and customers stacking and empowering horsepower as well as spending less capex. It is not surprising for us to see relatively low levels of or equipment orders and shipments. We continue to be pleased with the momentum. We're seeing in consumables as customers continue to Value the differentiation that our products provide leading to Consumer being down only mid-teens on a year-over-year perspective in addition pricing levels continue to remain relatively flat or a quarter-over-quarter basis.

From a marketing perspective despite the 50% Revenue decline on a year a year basis. The option business was able to deliver 20% ebitda margins healthy concentration of Home margin aftermarket Revenue couple with a proactive restructuring efforts that the team took through throughout the year limited incremental margins in the second half of the year to 45% life as opposed to levels in excess of fifty percent when the business was ramping up.

Look ahead. One of the exciting initiatives that the option team has been working on is diversifying the End Market base of its products away from Upstream oriented application wage may have seen in the AK that we published back in December that we intend to call this business high-pressure Solutions as part of your company the name speaks to the highly differentiated products may have developed and the ability to apply some of our Legacy Frank and drilling technology to Industrial applications. Specifically, we're entering horizontal directional drilling applications in the field of mining Waste Water and Utilities work garnered never high pressure pump technology provides a more efficient and reliable solution than Legacy Technologies.

This is just one example where the team is entering new spaces that expand the total addressable market for the business.

On the meat and downstream side orders were collectively down 9% and revenue was down 13% Both excluding effects booked bill came in at seven 3 which was actually quite a bit higher than what we saw last year in in the fourth quarter as noted earlier. We continue to see a relatively healthy quotation funnel for larger projects because they are taking longer to convert those quotes to orders. The good news. Is that the discussions with the customers continue to be very active. So we're optimistic about seeing many of these orders convert and fill the form for 6:20.

the energy

And deliver adjusted ebitda of $53 in the fourth quarter, which was down 43% to prior-year excluding effects.

As a percentage of revenues fourth quarter adjusted ebitda was 26% down five hundred basis points from prior year due to the decline in Austin Energy with a slight offset from our home improvement in the mid and downstream business.

Moving next to the medical segment on 11:00 order intake was sixty four million dollars down 2% excluding affects. The orders declined was due to the same Dynamic reference in Cuba where the customer is now ordering in smaller quarterly installments as opposed to the historical pattern of larger frame orders.

Revenues in the quarter where 67 million flat excluding effects on top of very strong prior-year cons of 19% growth overall book-to-bill was .95, which is comparable to prior-year fourth quarter.

the business

Continue to see good momentum across both gas and liquid markets with ongoing progress on new innovation one such product is highlighted at the bottom of the of the slide are Compact and lightweight gas pumps are integral to the application of negative pressure wound therapy or buy a vacuum is drawn only one to help it heal faster the solution delivers increased efficiency by minimizing size sound vibration and energy consumption and is an exciting win for the team as it is a growing and Market in the medical space off third-party reports indicate that negative pressure wound therapy is expected to grow at an eight per-cent kegger over the next four years.

This is just another example on how our team continues to Pivot to faster-growing markets.

Medical adjusted ebitda performance for the quarter was $21 1% excluding affects margins worth 30.8% of 60 basis points per year the sixth consecutive quarter of positive margin expansion as the teams continue to drive operational efficiency.

Well now.

Over the call to Emily to walk us through the guidance for 2020.

Thanks, Vicente and good morning to everyone on the call. I'd like to start by saying that it's been a pleasure to be part of the Gardner Denver team and I look forward to the bright future we have ahead for the new Ingersoll Rand team.

Let's move to slide 12 and review the guidance for 2020 will start with our Revenue growth expectations for the year. We expect total Gardner Denver Revenue to be down to single digits on both an as reported and FX adjusted basis. As FX is expected to be relatively flat year-over-year from a phasing perspective. We anticipate the first half of the year to be down high single digits driven notably by the tough comp in both Upstream energy as well as Industrials where we delivered mid single-digit growth in the first half of 2019.

the second half of the year

Is expected to be comparatively better with growth of low to mid-single digits.

As is typical for us. We are expecting q1 to be comparatively lighter than the remaining quarters of 2020 and this year will be a bit more exacerbated by the coronavirus off as such we expect q1 to deliver slightly less than 20% of full-year profitability while China is a relatively small percentage of our overall Revenue base. We are expecting some shipment deferrals from the first quarter into Q2 and the balance of the year. As of right now. It is important to note that our guidance does not include any total year impact and most importantly we are very pleased to report that all of our employees are currently safe and there will being remains are of most concern.

We'll continue to monitor the situation daily as our employees customers and suppliers are allowed to get back to work.

now

Moving to our segments Industrials Revenue growth for the year to be flat to down low single-digits given the Slowdown we have seen in the general Industrial in the second half of 2019. We don't expect that to change significantly as we enter twenty-twenty the teams will continue to focus on operational efficiencies such as I am in cost control where we are expecting to deliver positive margin expansion in 2020. Despite the moderating Top Line.

In medical we expect low single-digit growth for the total segment as well as for both gas and liquid products within the portfolio.

Moving to the energy segment. I'll start with mid and downstream energy. As you know, these businesses play in similar and markets to our industrial segment and the general macroeconomic softness. We're seeing there has a similar impact on these businesses. We continue to see a good final four projects as previously mentioned. We expect to see several of those orders convert within the year long resulting in flat too low single-digit growth for these businesses.

moving to Upstream

We don't expect much change in the market as we move into twenty-twenty given the Dynamics. We've been discussing around oversupply and cannibalization of equipment along with what customers have been waiting on Capital spend expectations. We expect Revenue to be down approximately 20% on a year-over-year basis. We expect the clients to be higher in the first half of the Year driven mainly by the tough comp and to moderate in the back half of the year. The teams will continue to manage the business as we did in the second half of 2019 with a focus on controlling cost protecting margins and right-sizing working capital particularly inventories.

That's it. We are currently taking a prudent view of twenty-twenty demand levels and Upstream energy. Although we do see some signs of optimism as we look into the future first customers have impaired approximately four million of horsepower in Q4 with expectations of another 1 million to come in q1. This helps normalize supply and demand and which is needed in this market second. We continue to see cannibalization in the field of both pumps and fluid ends. This is a trend that can't go on indefinitely wage. Eventually. This equipment will come back for service and repair or full replacement and we are prepared to handle that demand.

3rd

Bunch of new consumable offerings continues to see strong Traction in the market and we are strengthening our Partnerships with key accounts. And finally we are excited about the prospects for new revenue streams by selling Legacy for a can Drilling Technologies into industrial and markets that Vicente highlighted earlier.

Based on these Revenue assumptions. We are introducing 2020 adjusted ebitda guidance of $540 to $570. This range includes slight increases in corporate costs of approximately seven million dollars on a year-over-year basis driven by two main items first-growth investments in key areas, I demand generation and iot, which we continue to see as core strategies to deliver above market growth and second a slight increase in variable incentive compensation expense for 6:20, and we reset to Target levels this time each year.

including

These items we expect corporate costs to be approximately twelve million dollars per quarter.

Turning to slide 13. Our expectation for Capital expenditures is $45 and we expect to generate $280 to $3,000 in free cash flow, which is generally consistent with what we delivered in 2019. In addition. We expect free cash flow to report a net income to be in excess of 100,000.

Finally, we expect the tax rate to be between $22 and 23% and share count to be approximately $209 million shares. It's worth noting. All of these estimates are for stand-alone Gardner Denver on closure of the transaction. We will take the requisite time to combine the financials for the two organizations and in due course provide both pro forma historical financials for the new company as well as guidance. I'll now turn it back to Vicente for some closing remarks. Thank you Emily as we look ahead twenty will continue to be challenging from a macroeconomic perspective. But I am confident that the teams have the right tool kit with GDX to both navigate the environment and continue to deliver both commercial and operational initiatives.

we also

At the Landmark moment for the company as we prepare to merge with an industrial segment and become the new Ingersoll Rand the long-term prospects of the combined company and the value package opportunity both remain very positive, and I'm very excited to lead the combined organization going forward with that. I'll turn the call over to the operator and open it for Q&A.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the keys to withdraw your question, please press * then two at this time. We will pause momentarily to assemble our roster.

And our first question comes from Mike Halloran of beard, please go ahead. Hey morning everyone. So can we just start with the guidance assumptions here should be some thoughts on what's embedded from an underlying perspective by segment. In other words. Is there fundamental Improvement embedded in in in in the Outlook through the year? Obviously e Emily highlighted the one Q impacts from the coronavirus but kind of stripping that out. How do you think about what underlying demand looks like sequentially as you work through the year any choice options for improvement and then anything else that could help us get comfort with how that one age to age ramp looks is Mike. I'll say that it is gradually improving a second half, uh primarily as, get he's here as you know, as we said on the remarks, you know, the first half expected to be down high-single.

digits while the second

Have positive law single to meet single, uh, you know, the majority of this is really do to you know, more difficult calms that we have here in the first half. So pretty normal sequential's percent. Exactly. Yes, that's right. Yes. And and then when you think a separate question then when you think about the the the underlying internal Improvement continue to do a lot of work, they're positive work, maybe help provide some thoughts on what the major priorities on the Legacy business are going into twenty-twenty. And and what kind of impact do you think that can have on the Eva. Life?

Like I think I'll say number one, you know as usual. We you know, if I talked about the industrial as a great example, even on flat too low single-digit growth was to expect the business through generate positive basis point margin expansion. So that's just one example of how we're having our teams put together a plan that puts a picture of no growth, but we still need to execute very thoughtfully the initiatives that we have been doing. So for example, you know control the areas that are within our control the example of that is ITV in a way to Value continues to be a great tool for us to to deliver that gross margin expansion, you know, we will continue to do a lot of the activities that we have been doing on pricing as I continue to be a great labor for us to strategically be more focused on price and then, you know more areas such as well.

Capital, I mean inventory continues to be a big Airforce for improvement to generate a no.

Talk a lot of cash that we have in the business.

Thank you for the time. Appreciate it. Thank you, Mike.

Our next question comes from Jeff Sprague vertical research Partners, please go ahead. Thank you. Good morning. Everyone morning first, you know Emily is off due course, but can you give us a little bit of color and what your timing uh is like in terms of, you know, pro forma financials or kind of your initial new code guide.

Yeah, Jeff. Thanks for the question. No one's more excited to get this out than I am. So it will take us a little bit of time to get through, you know, the data that we're going to get on day one coming up here in a few weeks or less and once we get through that initial work, we'll come back to you with some dates on Wednesday and the guidance will come out so that you guys can plan the the calendar.

Right and then the Sunday, I'm wondering just on the on the cost reductions which you affirmed today. If if you could give us a little bit of color on, you know, the visibility on that has evolved from the the beginning of the process to hear near the conclusion. And if there's anything qualitative you might say about your confidence level or potential upside to that number. Yeah, Jeff. I I I mean obviously 250 million synergies. It doesn't include any Revenue potential synergies that we may have but the confidence has been growing because of the work that we have been doing here over the past nine months and as we you know talk about on the last call. We we put an example on how you know, we have now, lies the the right material spanned from both companies through what we call a clean room environment and we're even at this point right now reassessing one more time that date of birth

And so that we're ready with this.

Are peas and rfqs for for day one. So let's say the phone will has continued to to to to grow internally clearly for us in order to hit the 250 million dollars of synergy. We have a funnel that is larger than that in order to be able to to execute that level of synergies, but the confidence level continues to grow not only from what we talked about last week in the operational side, but also the organizational structure

Great. Thank you. Thank you, too.

Our next question comes from Julian Mitchell of Barclays, please go ahead. Hey, good morning everyone. This is Joanne for Julian. Good morning morning morning at so digging deeper into kind of the Upstream Midstream within energy. Can you talk a bit more about kind of his project timing push out to you guys you're seeing is this, you know a bit more transitory or do you think it has to do with maybe software and Market as a whole? Yeah. So the project push out it is mainly related to the to the mean and the downstream and particularly more on the downstream side of the business. It is it is really transitory. I think there's some quote process in location that is going on in this in this market, but nothing that gets worried or concerned at least at this stage.

Got it, and then, you know maybe with an industrial-looking.

You know, it seems like you guys are basically guiding for kind of a sequential softening into the first half. Is there any you know, I know part of it as a as a tough, but is there any kind of color you can provide on maybe wage and markets? Do you see as potentially firming up in which one do you see as kind of, you know, only being a a second-half category?

No, I think I think I think it's consistent. You know, I think we we continue to be pretty excited with the work the teams are doing around Niche markets. So so again, you know, there's also a lot of good self-help initiatives on the commercial side with our demand generation activities, but also new Niche markets that were finding jobs and penetrating. So I'll say, you know, we we view the general industrial markets kind of tough while the niche markets that the were highly selective on are going to continue to get better.

Perfect. Thank you. Thank you.

Our next question comes from Andrew of City, please. Go ahead.

Hi, this is Aton bookbinder on frandy. Good morning. Good morning. Hey, your up stream energy guide for 2020 of down 20% is coming off of there was a really muted original equipment sales in 2019 with 85% of Upstream energy coming from aftermarket Kia Parts. How much is the continued decline is coming from Upstream aftermarket and what sort of visibility do you have to the cannibalization of equipment issue going on in the fields reaching a potential infection? Yeah. So so I think one of the things that you you'll see here kind of year-over-year in the we we we saw in the first half of 2019 some o e so we're original equipment pumps. So we're still kind of in the first half of 2020 campaigns on 12 numbers based on that. So I you you were to think about it. We we kind of take it from more the the performance that we did in the fourth quarter that basically when you think about that sequentially in in the fourth quarter we saw

so roughly

You know call it ten million dollars of oil pumps what we're saying is that coming into the first half and most likely here in the first quarter. We're not going to see any of that. So it's going to be a highly book and turn off after market business. Where as you saw on the remarks. We continue to the well by penetrating new accounts and increasing the share of wallet in the accounts that that we know we can take some share wage and and then the rest of the year obviously very opaque. I mean, we we don't have a lot of disability forward and that's why we can put here at forecast that in our view contains be highly aftermarket Centric because we expect that there continue to be a lot of activity in the field and like you said, you know, there's a lot of fleets that are getting in a spare and part. So we think long-term the supply and demand or horsepower. It's going to get very well balanced so that you know that the prospects here continue to look Pub.

Cross. Thank you.

And as a follow-up the medical segment was flat organically Versa Tough Cop about 19% and looking back in three Q. There was also a tough cop about 19% I'm just thinking about the sustainable growth rate for the segment going forward, Is it more low single-digits similar to the guidance for 2020 or can it returned to high single-digits like in 2019? Yeah expectation is really more kind of made me too high single digits off. And and the reason for why we're saying low single-digits is because if you think about the total General industrial Market being down, I mean, there's going to be potentially some effects that cannot take the medical Market to be slightly down from mid single to load single. But again as as you pointed out if you look at the Historical numbers for this business, you know in eighteen they did, you know double low double-digit in in nineteen, you know High single digits. So we think long-term continues to be expectation that this business over the course will be mid single-digits and here in 20 20 similar to what we have a game.

Calling on the businesses we told the team.

You know, I expect slow growth environment and let's focus on our margin expansion. Thank you.

Our next question comes from Josh pokers lenski of Morgan Stanley, please. Go ahead. Hey, good morning, everyone. Yes, they just starting off obviously a week or near-term environment from a marketing perspective then then maybe what we would have anticipated, you know, six or twelve months ago, you know different points in the planning process for them or for the integration. Is there more of a mind of I guess for you know for lack of a better term kind of demand triage as you know as the the transaction Club is that as much as you want to get to the meat of some of the integration pieces, you want to get your arms around the demand curves as well or or is it really just, you know, kind of focusing on the you know, that's the real core integration activities.

yes, just

I'll tell you that even as we were I think on our last earnings call. We also talked about which is kind of run the budget time in for for for us. We said that we were planning have a very slow growth to no growth environment. And and that we were going to be very focused on the activities that we could do into our control and as we look into the ignition that if we see that the environment to be even worse than the slow to no growth that we could find ways and accelerating Synergy energy creation, but the same time I mean, we we have the same very focused on the market you can see that we continue to invest in demand generation and new technology platforms, like coyote we continue to those view those as great ways for us to talk to trade the market and take share but but will continue to be very focused in area in areas of our control while we continue to find ways to invest in in those very unique dead.

Main expertise that we have that we think are differentiated.

We on kind of the nature of of this slow down maybe leaving up screen off to the side because it's just a different animal these days are there is there evidence in the business of you know, kind of a coil spring impact or effect with customers where they're they're sitting on Capitol waiting to deploy or just just just come across more as kind of like a soft leaning and then once we get through some of these jobs, you know exhaustion and shocks with it straight or coronavirus, you know, we kind of returned back to more normalized growth any it just any sense is you know, you talked to customers out there. Thanks. Yes. I I don't think that there's such as you describe it that coil spring that we we were not expecting that and I don't think that is what we see out there in the market. I think this the current situation in Corona virus is Jose creating some some, you know, potentially delays in shipments and the man however, we see also other customers in investing birth.

Companies are really looking at diversifying their supply chain again. So, you know, we're not planning for for you know acceleration of growth we continue to to view the market as being you know, kind of slow to low growth, you know, but we continue to see, you know, a pretty healthy funnel in the downstream side for small and medium projects. So I guess you know all all up Josh I would say no dramatic change and here in the first first quarter what we see is just a little bit more pronounced down downturn just based on the car and the virus but we expect that to be transitory and be able to recover here in the later part of the year.

Got it. That's helpful. And then just just thinking more Broad.

Okay. Thanks for the the color and

No, good luck on the approaching closed. Thank you gesture. Thanks.

Again, if you would like to ask a question, please press * then 1 and our next question will confirm the code to blaze of Deutsche Bank, please go ahead. Yeah. Thanks. Good morning, Hi there. So just a quick clarification when you guys talked about, you know slightly less than 20% contribution in the first quarter that was on adjusted ebitda. Correct second question if that's the case is just what level of Revenue is up based on.

Yeah, so on the on the on the first question. Yes, you are correct on the second question. It's on the base of roughly kind of low double-digit growth on a year-over-year basis. Okay. Got it. Thanks for Sunday. That's helpful. And then totally understand that your guidance isn't you know baking in the impact of coronavirus, but maybe can you talk a little bit about what you're seeing on the ground and China? I think faith is just kind of got back to work last week. So obviously, you know A, lot's influx, but it will be helpful to hear. You know, what you're what you're hearing from your customers as well as the potential supply chain impact. Sure Nicole. So Thursday, we we always we have lunch very rigorous process where we stay in touch with all of our employees in China and and and Landing hand as much as we can. You know, we should also continue to do a lot of kind of donations to local communities based on our ability of what we can do our kind of main Factory is the one that we have in North, Georgia.

It's it's open. I'll say maybe you know kind of eighty per-cent capacity as no.

All employees have been able to come back from from the holidays are medical facility. It kind of about the same. I'll say, you know running, you know, eighty ninety percent capacity Factor stationed at this point in time, you know, the medical, uh, you know, it's is making pumps that get used and consumed for respiratory systems as well. So that's not busy, you know, very kind of critically needed in the current environment from a supply chain perspective. We clearly see, you know, took some you know disruption in the supply chain. Uh, our our team is then working extensively on how to diversify and find obviously our suppliers that could ramp up to the needs that we need to, you know, think the good news here is that you know when the tariffs were established birth

Team was already resourcing Andre finding new Supply chains. So I think that's actually quite helpful that we have we have now second and third sources of Supply base. So all of I think the team is reacting very quickly very agile and trying to protect the customers that still need the product and and for us to be able to recover kind of quickly. Yeah, and it's all about, you know, as I mentioned in the prepared remarks where we are really pleased that that our teams are safe and healthy right now, you know, so we're we're paying close attention to that. Of course as long as well as the numbers.

This concludes our question-and-answer session. I would like to turn the conference back over to the company for any closing remarks.

Yes, I you know, we're just first I would like to thank our employees for the efforts and the great work that everyone contains to do especially as we kind of people to these great moment in our history of being able to combine two fantastic Premier Companies, and then create the new Ingersoll Rand moving forward. I look we look forward to speaking to many of you here shortly, and I will talk to you again soon. Thank you.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.