Q4 2020 Ingersoll Rand Inc Earnings Call
Okay.
Ladies and gentlemen, thank you for standing by and welcome to the Ingersoll Rand for Q2 thousand 20 earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question during the session you'll need the press star one on your telephone if you require any further assistance. Please press star zero.
I would now like to hand, the conference over to your speaker today, the kidney Chief Financial Officer. Thank you. Please go ahead Sir.
Thank you and welcome to the Ingersoll Rand 2024th quarter and total year earnings call on the Kenny Chief Financial Officer on joining me is the center and all the Chief Executive Officer.
We issued our earnings release and presentation yesterday that we will reference during the call.
Both are available on the Investor Relations section of our website www Dot <unk> dot com and.
In addition, a replay of this conference call will be available later today.
Before we start I want to remind everyone that certain statements on this call are forward looking in nature and are subject to the risks and uncertainties discussed on our previous SEC filings, which you should read in conjunction with the information provided on this call.
Please review of the forward looking statements on slide two for more details.
In addition in todays remarks, we will refer to certain non-GAAP financial measures you can find a reconciliation of these measures for 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.
On today's call, we will provide the company strategy and integration update review of our company and segment financial highlights and all for 2021 guidance for.
For today's Q&A session, we ask each caller to keep to one question and one follow up from allow enough time for other participants.
At this time I'll turn the call over to the center.
Thanks for taking good morning to everyone.
We start I want to take the moment to reflect and think about it the one year ago to day.
The five days away from day one of them.
Integrated company of Gardner, Denver, and the Ingersoll Rand industrial segment.
What a year, we select the to take on a transformational transaction.
Our new the combined company committed to our purpose to lean on us to help you make my credit and.
On external bodies that include the having the confidence of take on the most difficult problems.
With humility and integrity.
And we don't think we know we will be tested so quickly.
Looking back on 2020 of the global pandemic was challenging for everyone.
We will have to adapt and learn new skills to ensure our essential worker safety.
Wanted to provide mission critical products and services to serve the frontline COVID-19, but then the.
And we turn to our innovation and creativity to discover new ways to connect with each other with our customers and with our partners.
I am proud of every one of our global employees for.
For the resilience dedication and determination to think and act like owners.
Protect and nurture our one year old organization.
Our employees are strong we of that quickly of more fun, it's part of our culture and the.
That's not something you can replicate it as a competitive advantage I would prove it worked for all of this year.
For the backbone of our economic engine is our Ingersoll Rand execution of excellent.
What are you sort of employees, who trust and the IRS.
Every single day.
And thanks for them with the lever of strong results and stand ready to grow in 'twenty 'twenty, one and the young.
Starting on slide three do they were going to concentrate on remarks around three teams for.
First how we accelerated our transformation during 2020.
Second how we are all working of our true potential of the company.
We successfully pivoted to focus on growth.
Our portfolio of penetration and third.
Our focus on growth is supported through strong business segment performance during Q4 with momentum continuing in Q1.
Moving to slide for you have seen this before it's a framework of building a strong foundation for <unk>.
Growth and optimizing the portfolio.
All guided by our five strategic imperatives down on the left hand side.
As a reminder of what we have been executing against the LIBOR on our commitments.
Turning to slide five what framework shows we achieved substantial traction across all of our strategic imperatives and piece of it quickly two of them around growth and portfolio optimization.
From completing the Ingersoll Rand industrial transaction and integrating complementary cultures to awarded one of the largest <unk> ever given to employees in an industrial company.
Establishing diversity equity and inclusion of votes.
For 2020 accomplishments, especially in the area of the human capital management.
The differentiator.
We see broad based employee ownership as a game changer.
The fixed performance to a new level.
We're thinking of Nike like on the older.
One of our core values it changes the mindset for the pieces of the company I worked for.
This is Mike come from.
It's a matter of ships.
Authorities on highly engaged and active participants in our journey to create long term volume.
All of these human capital management priorities.
The part of why we ought to corporates as part of me that's the strategic pillar.
More on debt.
Yeah.
We enhance the portfolio through bolt on acquisitions and also the sale of the majority interest.
High pressure solutions segment.
Looking ahead to 2021 on beyond will focus on several areas for us.
Head of plan on our integration as we enter year two.
We are increasing our integration cost synergy target by $50 million $300 million.
On growth, we are bringing together complementary products across the businesses for strategic niche markets such of work.
And we're accelerating new product launches into sustainable industrial markets such as hydrogen.
All of these while we continue to focus on our strong balance sheet.
Support our inorganic growth strategy through accretive M&A transactions.
Turning to slide six as we successfully fueled the growth in our portfolio. The mutation we're on looking for maximum potential of the company.
Capital allocation is a huge part of my personal focus and I'll come back to you with more thoughts on day, one ready for.
We're actively discussing with the board.
The last week, we signed an agreement to sell the majority interest in our high pressure solutions segment.
At the time of close we will receive approximately $300 million, while retaining the 45% common equity ownership in the business moving forward.
We view of the $300 million alone is at good value.
Ultimately 2004 times 2020, adjusted EBITDA and also represents a solid multiple of 2021 expected adjusted EBITDA.
Okay.
The remaining terms of the deal are confidential and we're not going to comment further, but we view our remaining equity as pure upsides in the medium to long term.
For Ingersoll Rand the transaction is a meaningful step forward in our transformation immature.
The materially reduces our direct exposure to the cyclical upstream oil and gas market demands on 2% of revenue and result in a much more predictable business performance on all of these while removing the minimal current earnings from the company on the.
The M&A front at the beginning of this month, we completed the purchase of took the of vacuum and blowers systems. The <unk>.
Transaction of its highly complementary to our vacuum on blower technologies and will operate under the iconic on premium brands of envy in the aromatics and kidney vacuum pumps as we look at the growth we accelerated investments in the Iot E Commerce and Digitization last week, you may have seen our announcement with Google cloud for the five year collaboration.
The advanced connectivity across our portfolio.
Real time data on machine learning for us.
Smarter and more in novelty pellets, we are.
Strength in our capabilities to help our customers be successful for the long.
Along with recent viewpoints on wings.
And markets, we have recently shared with you.
Hydrogen life Sciences on all of your compressor products are.
Our work with Google represents one way, we are positioning ourselves for accelerated growth in 'twenty, one to one zone.
On looking our true potential means being the focus on sustainable technologies in high growth end markets.
And it also means being focused on our commitment to environmental social and governance principles as we see now on slide seven.
Yesterday, we joined the growing number of companies who are embracing the leadership responsibilities to help confront the global threat of climate change the.
The differentiator is that we're placing some ambitious milestones for our ESG efforts, we're committing to be net zero of greenhouse gas emission by 2050, but getting to 60% of the goal in less than 10 years.
2013.
In addition, we have also committed to targets for water and waste reduction.
As a purpose of states lean on the us to help you make life better.
We want to be an active participant on this important cost for the long term shifts in the ability of our planet.
The key advantage for us is using I R X to the labor of the performance needed to achieve our environmental goals.
We will provide an ongoing cadence of transparency on disclosure.
Of our second annual sustainability report been published at the end of range.
I will now turn it over the call to take to provide an update on financials.
Thanks for the center.
Moving to slide eight Q.
Q4 saw strong balance of commercial and operational execution fueled by the use of IRS with ongoing signs of improvement across industrial end markets.
We continue to be pleased with the performance of the company in Q4.
Total company orders and revenue increased 12% and 13%, respectively as compared to Q3 levels with strong double digit orders momentum across each of the segments.
In addition, the company continues to drive outperformance on productivity and synergy initiatives using <unk> of the catalysts.
The company delivered fourth quarter, adjusted EBITDA of $344 million and adjusted EBITDA margin of 22, 8%.
This was 150 basis point improvement from Q3.
And on a year over year basis. Despite mid single digit revenue declines margins increased 300 basis points and when adjusted to exclude the high pressure solutions segment total company margins improved 350 basis points.
Given the strong close in Q4, we had our best performance of the year in terms of managing Decrementals with adjusted EBITDA, increasing by $30 million on a year over year basis, Despite the $78 million day.
Increase in revenue.
As we've stated before quality of earnings has been a key focus on you can see the continued momentum we had throughout 2020 on this metric.
Cash flow on the balance sheet was another highlight for the quarter as free cash flow increased to $397 million, yielding total liquidity of $2 $7 billion at year end.
Moving to slide nine for the total company orders increased 2% and revenue declined 7% both on an FX adjusted basis.
This is a meaningful improvement from the comparable <unk>, 8% and 11% declines we saw on the third quarter Ics precision and science technologies and specialty vehicle technologies segments, all saw positive organic orders growth in the quarter.
Starting first with the Ics.
The total segment saw a 2% FX adjusted orders growth with both the Americas and EMEA regions, showing mid single digit orders improvement for core compressor blower and vacuum equipment.
Precision and science saw a 6% adjusted orders growth in the quarter the highest level of reached during the entire year.
Continued strength of the product lines like medical and dose of trials, both of which saw double digit growth were the major drivers given the niche end market exposure in areas like lab and life Sciences and water.
Specialty vehicles saw continued strong orders performance up 21% ex FX.
Specialty vehicle showed positive orders growth each quarter in 2020 in Q4 saw a nice balance with the court with continued strong momentum in consumer vehicles, as well as double digit growth in golf as well as aftermarket.
Overall, we posted a strong book to Bill of 1.01 for the quarter.
This was much better than the prior year level of 0.92.
Given the typical seasonality, we see in the fourth quarter with strong shipments in book to build the low one we are encouraged by the Q for 2020 book to build the above one as it sets up a healthy backlog moving into 2021.
The company delivered $344 million of adjusted EBITDA, an increase of 10% versus prior year.
The <unk> precision and science, especially the vehicle segments, all saw year over year improvements in adjusted EBITDA and had strong triple digit margin expansion.
The Acs segment continued to show profitability, despite depressed revenue levels and performed largely in line with expectations.
And finally corporate cost came in at $32 million for the quarter consistent with prior expectations and relatively flat to prior year.
Turning to slide 10 quickly touching on the total year FX adjusted orders and revenue were down, 9% and 13% respectively. Due primarily to the impacts of COVID-19 in both the <unk> and precision and science segments as well as the known downturn in the upstream energy markets, which impacted the HPA segment.
Despite these headwinds the business delivered adjusted EBITDA of $1 8 billion and.
And adjusted EBITDA margin of 20%, which is up 60 basis points versus the prior year or 180 basis points excluding HTS.
Speaks to the team's ability to execute during different business cycles as full for your Decrementals were limited to only 15%.
And the.
The vehicles, all delivered triple digit adjusted EBITDA margin expansion.
This is only possible through the power of <unk> as an execution engine to drive change in every area of the business.
Going to slide 11 free cash flow for the quarter was $397 million driven of the strong operational performance across the business and ongoing working capital improvements inventory management was of particular highlights for the reduction of nearly $60 million.
Starting to see benefits of many of the operational efficiency projects. The team has been deployed as well as the benefit of the improving commercial environment Capex during the quarter totaled $15 million and free cash flow included $17 million of outflows related to the transaction.
From a leverage perspective, we finished at two times.
Which of the 0.5 times improvement as compared to prior quarter due to both the strong generate cash generation in the quarter as well as the improvement in LTM EBITDA due to the strong Q4 finish.
We have now reduced leverage the same levels, we had prior to the RMT and have line of sight for leverage coming down closer to one eight times once the hps sales concludes.
On the rights on the page you can see the breakdown of total company liquidity, which now stands at $2 $7 billion based on approximately $1 $8 million of cash and nearly $1 billion of availability on our revolving credit facility.
In total liquidity has now increased nearly $1 2 billion from the end.
For the to continue our strategy of M&A, coupled with targeted internal investments to drive sustainable organic growth.
Moving to slide 12, we continue to see strong momentum on our cost synergy delivery efforts.
Due to the funnel we have built the stands in excess of $350 million and strong execution, we are increasing our overall target by $50 million to $300 million.
To date, we've already executed approximately of $175 million of annualized synergies, which is approximately 60% of the overall target and of $25 million increase from prior quarter.
In total we delivered approximately 40% of our new $300 million target in 2020, which equaled approximately $115 million of savings.
In addition, we expect to deliver an incremental $100 million of savings in 2021, which would bring the cumulative total to approximately 70% at the end of this year.
We expect the cumulative 85% to 90% of the $300 million in savings by the end of 2022 with the balance coming in 2023.
The $15 million increase on the target is largely driven for from from procurement and direct material oriented initiatives as the team continues to make good strides both on leveraging the larger spend day for the company as well as executing on the ICU the funnel.
I can be is of particular success story over.
Over the past six months, we've conducted over 20 virtual events with our commercial product management and manufacturing teams to both build the funnel and start executing on tangible savings on.
On the rights of the page, we reported each quarter in terms of our progress on managing decremental margins across the business in Q4 was no different.
I will now turn it back over to the center to discuss the segments.
Thanks, Nick moving to slide 13, and starting with industrial technologies on services.
Organic orders are up 1% on revenue down 8% net.
Adding to our book to Bill of <unk> 98 times.
Despite the revenue decline of the team delivered strong adjusted EBITDA of 12%.
And on adjusted EBITDA margin of 26, 1% of 400 basis points year over year.
Margins were also up 210 basis points sequentially versus Q3.
Let me provide more detail on all the performance starting with compressors, we saw orders for mid single digit.
Further breakdown into all the three and lubricated poets shows that orders for both were up mid single digits.
All of preorder rates slightly outperformed those of all the lubricate it and speak to the airports of leveraging of the Companys expanded free portfolio and taking advantage of the channels.
We've got of the original split for orders on compressors in the America, North America performed compared to a little bit better at low single digits, While Latin America was down high single digits.
Mainland Europe was up high single digits, while India Middle East and Africa saw a nice inflection at for high teens as compared to being down double digits in the past two quarters.
Asia Pacific continued to perform well with orders up mid single digits, driven by mid single digit growth in China and Europe.
In terms of vacuums and blowers orders were up mid teens with strong double digit growth in the industrial banking on blower portfolio.
As well of mid single digit growth in the longer cycle of Nash Garo vacuum business.
Moving next to power tools from victims.
Auto business was down low teens the motors.
Tools part of the business was down the high single digits and motors compared to down high teens in Q3.
We expect the people back to positive orders growth in the first half of the year driven mainly by our enhanced E commerce capabilities.
On the right side, you'll see three market drivers come on to our go forward segments, which is for.
It's been the ability digitization and shifting demographics.
For each segment I will comment on the how theyre stepping forward to address.
The drivers.
Well I think Eric.
The Google cloud of announcement I referenced earlier is a prime example of how the business is expanding from Prince with data of the GP section that will help increase the customers the ability to improve energy efficiency the support them on achieving their own greenhouse gas emission reduction.
Let me move now to slide 14, and the provision on science technologies segments.
The organic orders were up 5% driven by the medical and also from businesses, which were both up double digits as well as healthy growth in the water and general industrial markets for clothes like Milton Roy.
The momentum on of our hygiene of solutions continues to build and we saw some good orders and funnel of activity in this rapidly changing market.
Revenue was down 8% organically with the major driver being the two large projects for a large aerospace and defense company.
The shift in Q4 of 2019, we think the legacy of PFS business.
Despite the revenue declines at the plc team delivered strong adjusted EBITDA up 7%.
Adjusted EBITDA margin was 38% of 290 basis points year over year.
As a reminder of this segment was already generated a very respectable 27 seven of adjusted EBITDA margin back in Q1 of 2020.
But we're very pleased with how the team continues to transform this business is now in Q4 with comparable revenue as what we did in Q1.
The segment of generating 310 basis points more on margin.
Looking at the market drivers.
Usually on science being as meeting the demand for more sustainable energy sources and launching into markets like hydrogen.
From a digital perspective, many of our new pump technologies can remotely controlled metering on dosing to ensure the safe and reliable dispensing of chemicals for markets around puts limitation and animal health.
On the segments medical business is answering the demand for precise liquid handling technologies to help advance personalized medicine research.
Moving to slide 15 on the specialty vehicle technologies segments. Overall Q4 was another strong quarter for the especially for the vehicles.
Orders were up 21% organically income.
Continue to get stronger throughout the quarter.
As the consumer offering continues to gain momentum and market share.
We also saw an inflection on on growth.
The continued into Q1 with the.
Believe our lithium iron battery launch is clearly a market leader and we're taking share in the market.
Organic revenue was up 8% with improvements across not only vehicles, but also aftermarket parts and services.
We feel we're in the early stages here and see potential as we expand the installed base that can be served ongoing with parts and accessories.
Adjusted EBITDA of $46 million increased 40% year over year.
Leading to an adjusted EBITDA margin of 18, 7%.
And these represent of 420 basis point improvement versus prior year.
Again, proving the risks can be applicable to any business to generate solid improvements.
We continued to see runway into the future.
As the team continues the more rapidly on accelerating the initiatives like new product launches and end user lifecycle management.
In terms of SVP of market drivers. The segment is recognizing on responding to the sustainability and efficiency of demand for zero emission vehicles to replace gas engine vehicles.
For example in Q4, we sold more than 80% unit growth for.
For lithium cards versus the prior year.
Could you give a sense of its critical also zone.
There's a speck of connected cars to provide real time data on the vehicle.
Is there kind of range for maintenance information location based data or infotainment services.
From a demographic shift perspective, we're seeing of higher demand for families to owned with creation.
Zero emission consumer vehicles used for short distance of dragging at low speeds.
Most of the 2016 and the high pressure solutions segment. The business performed largely in line with expectations in the midst of continued low demand in the oil and gas market.
All the non revenue were down 51% and 42% respectively.
Which wasn't improvement over the decline seen both in Q2 on Q3.
Nearly 90 per cent of the revenue base continues to come from aftermarket parts and services.
The business delivered positive adjusted EBITDA of $2 $5 million.
And the Incrementals of 40% just for.
By the meaningful revenue declines.
Beginning with the first quarter of 2021 and due to the recently announced sale.
On the HPA business will be classified as discontinued operations in the future periods and we were retroactively adjusted the comparable prior periods.
Within the income statement the historical H B as business results will be presented on the single financial statement line below operating income.
And up on the deal closure, we will accounts for our 45% interest.
On the equity method of accounting.
This means we will record our proportionate share of the hps business income or loss for the period from a single financial statement line below operating income.
Moving to slide 17, we will review guidance for 2021.
Given the pending sale the <unk>.
<unk> well loved the included in our revenue or adjusted EBITDA guidance for the year.
Starting with revenue growth, we expect total Ingersoll Rand revenue to be up high single digits to low double digits for them.
As reported basis.
This is comprised of mid single digit organic growth across each of the three segments.
FX is expected to be of low single digit tailwind for the business on a total year basis, given the weakening of the U S. Dollar against many of your foreign currency like Euro and British pound.
Our ethics assumptions are based on December 2020 exit rates.
And finally, we expect the M&A impact to be approximately $60 million driven primarily by the tip of the acquisition in the Ics segment.
From a pacing perspective, we anticipate the first half of the year to be up low double digits driven by the prior year impact of COVID-19, particularly in China in Q1, 2020, and the rest of the world starting in Q2 of 2000 22020.
In addition of the FX tailwind will be most evident during the first half of 2021.
Overall growth in the second half of the year is expected to mobilize the big comparatively but still be up high single digits.
As is typical we expect Q1 to be comparatively lighter and the remaining 2021 quarters.
Based on these revenue assumptions for introducing 2021 of adjusted EBITDA guidance of 123 billion from one 6 billion.
The range includes an expectation for approximately $100 million of incremental transaction related cost synergies with slight offsets due to two factors.
The first 35, approximately $35 million to $40 million of temporary cost taking out in 2020, returning to the P&L.
And second from expected material and logistics inflation, given the current dynamics across the global supply chain.
We continue to monitor overall inflation and will take appropriate incremental price actions.
Wanted.
In terms of cash generation, we expect free cash flow conversion to adjusted net income to be greater or equal to 100%.
Capex is expected to be approximately $1, 550% of revenues and finally, we expect the adjusted tax rate to be between 23% and 24% as compared to the 24, 3% rate seen in 2020.
Moving to slide 18, as we wrap today's call I reflect on 2020 of the year of change volatile.
We took every measure to prioritize our employee safety, while enabling our essential workers to maintain their livelihoods.
And that is because our employees many of those.
We concentrated on delivering our mission critical flow of Conservatives.
Frontline of the COVID-19 pandemic by because of <unk>.
Customers moving on.
And we even proactively reached out to the area of health care providers to donate.
The use of sub degree preserves the store COVID-19 vaccines because communities also minimums.
So we think our role as the.
The sustainably minded.
The only on the industry leaders here, it's kind.
The CE by our clear commitment to reducing our impact on the environment.
I'm proud of every sales team member in our company for how it came together and the lever to protect the interest of all of our stakeholders. This year.
What are the friends of your mix on the true.
First of all of our one year anniversary, it's been and momentum right.
Creating a differentiated culture and improving the performance of our company.
I am confident we will continue to transform Ingersoll Rand and deliver increased value to all of our shareholders and with that I'll turn the call back of the operator and open for Q&A.
Great. Thank you.
To ask a question.
<unk> you will need to press star one on your telephone to withdraw your question press the pound or hash key please standby, while we compile the Q&A roster.
And your first question here comes from the line of Nicole the place from Deutsche Bank. Please go ahead. Your line is now open.
Yeah. Thanks, guys good morning.
Hey, Michael.
Maybe we could start by just talking about if you guys are seeing any impact to production of your supply chain.
Just to kind of add on how confident you feel about the ability to ramp up as we move into Q2, and presumably credit should be pretty significant.
Yeah, Nicole I will say that I mean, we're clearly not immune to what is happening out there in the supply chain whether.
Delivering or kind of the logistics side I think the good news here is I'd say the things one we have always said that we're in the region for the region. So we're really co located our factories to really support our customers in the regions and for the most part of lot of our supply chain is really co located within kind of.
Close proximity of of the factory so that has not been the material impact to us and I think the second point.
But it has been good for us is that with the merger with the combination of the companies we have of larger supply chain and and as we have gone through the procurement on the rationalization of suppliers. We're selecting some pretty strong partners that are here to support us from a global perspective, and that is kind of leading the two to know having debt.
Disruption of that perhaps others are seen so in terms of the ramping the capacity you know, we just don't foresee that to be on issue I mean for the most part most of our most of our factories. They operate on the one shift.
The operations I mean, we have to expand that should be just a matter of.
The expanding capacity from from incremental shifts.
Got it that's helpful. Thanks for the country and then when you think about that the proceeds from hps once the divestiture closes the partial divestiture.
Is the idea of that that's going to be used completely debt pay down debt. I know you mentioned, bringing down leverage on a pro forma basis and is that indicative of maybe the M&A pipeline just not being very for right now.
Yeah, No I think I think Nicole.
We mentioned I mean capital location is definitely one of my top priorities and we're having the constant conversation with the board will provide another here in due course, but.
But yes, we're very excited where we are.
You have seen that with the.
The playing a pretty large addressable market highly fragmented our M&A funnel is really robust very strong and it's just a matter of making sure that we're disciplined with current valuations, but it's something that.
So we're going to remain really exited.
Okay. Thanks, I'll pass it on.
Thank you Nicole.
Your next question comes from the line of Mike Halloran from Baird. Please go ahead. Your line is now open.
Hey, good morning, everyone.
Good morning.
So let's start on the on the cost outside so of uptick the target from $2 50 of 300 million funnel still of $3 50, but obviously you're talking about some upside of that so two things. One can you talk to the components of what you've seen that give you confidence to raise it from $2 50 to 300, and then also maybe talk about what some of the things that are out there that way.
The raise the synergy target funnel above that 350 level.
Yeah sure Mike This is the as.
As Vic I'll take that one.
I think like we said.
We had a we had a larger funnel and the term.
In the course of $350 million and think of the teams have been executing really well.
I think of large part of the volatile structural.
The actions that really behind us really most of those taken much more closer to the merger and really what you've seen the momentum building on here is really execution across really the more direct material.
Focused components of that funnel, so really well I'll call. It the procurement as well as now really getting deep into the <unk> side of the equation. So I think of lot of what Youre seeing is just it's just good execution like we always said we had a larger funnel.
I'd say that not every idea on the funnel is going to necessarily translated traits of the bottom line, but the team is executing really well and we saw really good momentum, including in the fourth quarter, our annualized synergy number actually increased in fourth quarter compared to where we were in Q3 and so it gave us the confidence to be able to increase the synergy target of two.
The $300 million.
In terms of the second part of your question, what would give us kind of increased confidence too.
The increase it further from there I think it's really continued execution. What's really ahead of US here is the items like procurement <unk> and footprint and we've always been very disciplined on saying that the footprint piece of this equation was always going to come more so towards the back end of the kind of three year plan nothing has changed on that spend that perspective, but I think now as we're moving.
That's the kind of our second year as the as a competitor of combined company.
Now the teams are really starting to kind of build out that footprint tunnel and starting to see kind of some of that momentum. So I think that's really time will tell in terms of being able to kind of increase the number from there, but we're optimistic about where we are we've done thus far.
Thanks for the Vic and then the second one here.
When you think about assumptions embedded in the revenue guidance for the year, maybe just talk a little bit about what the cadence of it looks like obviously first half second half dynamics you laid out in prepared remarks as well as in the slide deck, but are you seeing normal sequential or you're assuming a pretty conservative ramp through the year, maybe just give some context on what type of environment.
Is embedded in the assumptions as you look at the three units.
Yes.
Mike I think in general I think what you can expect as the quarterly phasing in terms of revenue should be quite comparable to what we've seen in 2020 in terms of the percent of sales per quarter and whats. Your typically see there is Q1 is typically the lightest quarter.
As customers kind of reload budgets and things of that nature as well as the Chinese new year holidays in the in the first quarter.
Second of third quarter in between in Q4, typically becomes the heaviest quarter.
For the same dynamics that we've seen historically as well as some of our I'd say larger project business just tend to ship more so in the fourth quarter or the second half of the year. So again I don't think anything is largely different in that respect when you think about the kind of overall equation.
2020 is probably a pretty good proxy to use in terms of the quarterly phasing of applying that to 2021.
So if I hear you right then you're basically assuming normal sequential from the current run rate and no real acceleration in the environment from the underlying perspective from here.
I think that I think that's a fair way to describe it like we mentioned in the prepared remarks, I think we continue to see the overall kind of industrial demand environment, improving sequentially kind of as you saw through Q4, but I think as you look at it in the context of 2021, because we see a fairly similar cadence to what we saw on prior year.
Thanks, Nick Thanks for center revenue.
Hey, Mike.
Your next question comes from the line of Julian Mitchell from Barclays. Please go ahead. Your line is now open.
Hi, good morning.
Maybe just.
Setting up with that adjusted EBIT guidance for the year, just wanted to confirm that that implies around the 30% incremental margin also.
And then understand is the 100 moving of extra cost synergies.
As a tailwind for the EBIT Dol, maybe give any color around the headwinds embedded in that guide from say the scale of temporary costs coming back any kind of input cost headwinds that sort of thing.
Yes, sure Julien I'll take that one so I think in terms of the.
The the the Incrementals that we're expecting on a total of your basis on an all in basis I'd say.
Growth as well as the.
All of the synergies as well as some of the the.
Other cost headwinds, it's probably closer to that of 35% incremental or slightly higher depending on some of the quarters, but its all of the closer to 35% of kind of the implied incremental on an all in basis.
Which we actually see is pretty healthy given kind of the puts and takes in it does of course include reinvestment back in the business as we're kind of focused on sustainable organic growth as we move forward.
In terms of the some of the moving pieces I think you hit it on the head here.
Just kind of the organic growth in the M&A and some of the FX tailwind that we called him all of that in guidance. A couple of a couple of pieces I'd probably I include one of the $100 million that you spoke to in terms of the incremental.
Synergy savings that the year two of our transaction related integration savings.
The second item debt on the headwinds.
I would really be the 35 day, roughly $40 million of temp costs really coming back into the equation into the equation really ramping as we move through the back half of the year and then we have baked in at the nominal amount of inflation, we're not necessarily quantifying the exact dollar amount, but as you would expect knows defense I mentioned.
Seeing some of the kind of normal of day supply chain and logistics oriented inflation that you would expect so the.
Those are probably the major pieces.
Terms of the.
I'd say the of the components that we're seeing.
And I think that hopefully kind of characterize of the.
Components.
Thanks, Vic and then maybe my second question just around the free cash flow was very very strong in 2020.
Just wanted to confirm sort of what's left in terms of cash cost.
To achieve synergies.
And maybe what the phasing of that is.
Embedded in your free cash flow in sort of 'twenty, one 'twenty two.
Yeah sure Janet I think we can keep it relatively high level I mean, we still we do definitely have I'd say a.
Fair amount of what I'll call. The continued integration of the company as well as synergy delivery of particularly on the footprint side.
Again, I think we've been saying roughly speaking on.
On average about 20 of $30 million per quarter is typically kind of been what <unk> seen in terms of the cash costs going out the door for execution I don't think that the.
The bad placeholder used for for 2021 as you look forward so again.
I think the equation still largely holds in terms of the expectations for the savings of Neil on the ultimate amount of cash costs going out of the door the.
The difference is we've really taken up the cat in the synergy number we don't really feel like we need to increase the amount of cash out the door that we're expecting to be able to liberate.
Again, I think we're pretty encouraged by how we've been managed to.
Execute to a higher number in terms of synergies, but continue to the team the kind of cash outflows pretty disciplined but remember we do have the footprint piece of that equation ahead of us, which once again does tend to be a little bit more on the on the cost side.
Great. Thank you.
Your next question comes from the line of Jeff Sprague from vertical research. Please go ahead. Your line is now open.
Thank you and good morning, everyone.
Hey, I was just wondering if we could come back to the kind of of the margin discussion a little bit and if you could elaborate a little bit on what you're expecting for price realization over the course of 2021.
And just the to be clear on your comments about cost.
Were those kind of inflationary pressures net of pricing actions, perhaps you could just provide a little more color on that.
So just let me let me give you kind of give you a little bit of color enterprise I mean price.
We definitely we generate the price in the fourth quarter.
We have set of very well that the.
On our approach of our such a mission critical.
Our approach is that debt.
I would have been highly strategic on the price equation that we will continue to do so.
As we go into into 2021, the big you want to comment on one of the headwinds here.
Yeah, So I think the weighted average.
The thing about the headwinds are we view those headwinds on kind of separate from the price of your questions at the center.
Mentioned.
Net net we do expect to be price cost positive.
Trend you've seen historically through the business.
And I think the other day mentioned here is to the degree of inflationary pressure the potentially become become higher and Thats really how things play out at the Madison, We've seen that just yet, but we want to continue to look at price of the lever to be able to pass at the root zone I think.
Right now, we see everything that's kind of a pet.
Cost of positive inflation of just quite yet.
And could you also give us some thoughts on what you actually expect H P. S. The due in 2021 of the.
I think you've kind of mentioned the multiple on 'twenty, one I didn't catch it when you set it for that implied an earnings number.
Thinking about what kind of placeholder should be coming through on equity income.
Yeah, we're not providing the guidance on SBS in the 'twenty to 'twenty, one or anything further in terms of kind of of the details of the.
Of the transaction.
I said on the on the remarks is that when you look at the 300 million balance of cash equals the roughly 24 times EBITDA of 2020 and also it implies a pretty good multiple basically based on expected 2021, but we're not guidance.
Guiding to any specific number for 2021.
And I'm, sorry can I just ask one more quick one.
<unk>.
Characterized is healthy but the keys.
Could you just give some context are they you know.
Where they stand maybe backlogs as the percent of kind of forward projected sales are they are the normal in that regard do they give.
I'll give you a kind of comfort and visibility on the top line forecast from all.
Stop the effects.
Yeah on the project when.
When you look at the three segments you can collect the rice.
I'll start with maybe the especially at the vehicles you've seen the bookings momentum I mean definitely they are coming in really strong into 2021 with very very robust kind of backlog.
Yes.
So some very good large.
Loans cycle orders as well in the in the fourth quarter, so that really and also with some of the orders that we receive in the third quarter that kind of gets shippable in 2021, so the backlog of Nike answers coming in also of better.
Then, but we have seen historically and the precision on science is really more of kind of more on the short cycle.
They don't have that long cycle with the exception of the hydrogen orders and those we saw.
Few of them that we called out on some press releases in the third quarter and we continue to see the funnel of momentum of that continued to grow. So all in all we feel pretty good position in terms of where we have the backlog coming into 'twenty 2021.
Thank you.
Thank you.
Your next question comes from the line of Josh <unk> from Morgan Stanley. Please go ahead. Your line is now open.
Hi, good morning, guys.
Yeah.
So I guess, we've come a long way from from talking about fluid end pricing. So just really congrats on the on the overall portfolio transition of the last few years.
Thank you Joseph.
Yeah.
So in kind of the.
Side of the CNS, maybe a bit stronger on orders than you would normally see at the stage of recovery I mean comps aren't really even truly easy yet.
I know you're not big in semiconductor maybe relative to some of your other big competitor out there, but can you maybe contextualize, what's going on in the market and why orders are bouncing back. So hard is it doesn't seem like it would be capacity for your customers, but some sort of the debottlenecking or near shoring or like.
Any way you would characterize what is it seems to be kind of earlier strength.
Yes, just so we're we're obviously excited with what the team has been able to accomplish there.
Have a kind of articulated in the past that in the vacuum on blower as you very well said is more than the industrial we don't really play in the semiconductor market and he is really due to the to the nature of the kind of the niche business that we have in terms of applications and the team on the on the Mac inside the continued to two.
The Wayne New OEM accounts and these OEM accounts are basically new pretty unique applications and the blower. Some good momentum on water and wastewater treatment facilities as well as on some.
Some other kind of niche end markets that are that we have been very actively engaged in opening and when you combine some of that of that with the activity that we're driving with demand generation and just kind of on highly fragmented end markets, its really whats, causing that the kind of good solid momentum too, but perhaps.
Showed the ability to take some some of them.
On market share.
Got it that's helpful. And then I guess just speaking to that fragmented end market. You guys are kind of a rarity in U S industrial debt you'd been able pretty consistently defined properties over the last several years that you know pretty pretty steep discounts on valuation too to yourselves.
Yeah, I know the properties in general tend to be on the smaller side, but.
Are there a lot of dot.
Hill's Albeniz run tax out there to be found like is this the flywheel you guys can keep going because obviously the balance sheet and cash flow are in good shape. It's more of a question of do you have a place to consistently put it.
I will say, yes, Josh.
It is.
It is something that.
We spend a lot of time, even in 2000 22020, improving our process. How focused we are with prostate then on our M&A process from stage zero in terms of ideas from cultivation.
Has dramatically improved also the level of investments that we have done with the team across the different segments to really support more penetration of M&A and on the leverage of even I Rx as a way through every week, we kind of reviews from some key critical performance indicators on things that we're adding to the phone on how.
The funnel velocity of working particularly on the M&A I think that's working really well and so to answer your question, Yes, I mean, I think we see some continued operating momentum on.
On the on the funnel of activity and what could translate into into into acquisitions for us and yes. We're very also very prudent on the price we continue to be highly disciplined on that.
Perfect. Thanks for the color.
Thank you.
Your next question comes from the line of Rob Wertheimer from Melius Research. Please go ahead. Your line is now open.
Thanks, Good morning, everybody.
My.
Question is a little bit of the just on the Google cloud announcements that you made I am curious if that brings us new revenue models in the next five years on mobile, but curious if it's.
If you put you ahead of competition, how you thought about the decision strategically and how it relates to interact with customers.
True yes.
To your question on absolutely I mean, this should help us become more creative on.
On new revenue streams.
Over the next five years.
And when you think about of the potential of what we have here is the in North America alone. When you look at all of our assets when you look at it.
Particularly on the segments of industrial technologies and precision on the science, we have over a million assets in the field.
No.
The ways on how we connect them and how we harvest of the data and how we leverage now of the supercomputing power from Google cloud to be able to create a better predictive analytics on better.
Data.
The revenue streams I think that's the powerful of what we see here over the next few years and we're very excited about.
So a pretty rigorous process, we were able to select the Google cloud as one of those partners that can help us really harvest a lot of these data and analytics over the next over the next few years to come.
Do you have any comment on how connected that asset base is today, what you are doing internally and what you what you gain with Google as the groundwork done for the analytic start or do you have a lot to invest on I'll start. Thanks. So some of the groundwork as it has.
Don on the on the compressors I think the excitement here too as well is now.
Let's say the you will to specific in the market and we alluded to some of the is on our last earnings call of how when you look at the water wastewater we have multiple.
The assets that could be connected to really optimize the entire process. This is where we see the powerful of.
Realizing with the Google analytics, but where are the early stages on that one.
Thank you.
Okay.
Your next question comes from the line of Joseph <unk> from Goldman Sachs. Please go ahead. Your line is now open.
Thanks, Good morning, everybody.
One of them.
Hey, so.
So obviously, great job navigating them really really tough environment. This year I guess as I'm thinking about the medium term for you guys from a margin perspective.
Exited the year really strong in both Ics and PSP I'm just wondering.
How do we think about the the medium term targets for both of those segments.
Given the upside of synergies like can Ics the like sustainably in the high Twenty's I'm just trying to kind of think about this like really kind of beyond 'twenty one into 'twenty 'twenty two 'twenty three.
Yes sure.
So as the the question specifically, yes, I mean, we haven't come out with the specific guidance in terms of over the medium term of where we see the margin profile to come but I mean look ideas I mean, the finishing the fourth quarter of 26%.
Margins and if you remember back from the Gardner Denver day, as we said that industrial segment, we wanted to be in the mid <unk>.
So, but we also said that mid Twenty's, there's not the cap and just kind of on milestone and we see more room for improvement.
From there on.
When you kind of opened the door inside of <unk> I mean, we have as you know we are running P&L and we have definitely P&L that are way above that kind of mid twenty's. So we know that we have a model.
On how to in the past on how to get to that kind of of high twenties.
And the position of the science.
So I made some commentary is very proud of with the team. When we started with that business in Q1 of this year. The business was the win respectable high twenties and we finished at about 30 on an exit rate. So do we see of potential on that continuing unlike the same analogy back you know the medical business. When we had that would burn of remember we were in.
Maybe the mid twenties, and we ended up in the thirties and again, we see we also said that that will just kind of of milestone, but more of room for us to improve on that.
So we'll come on here, maybe sometimes zone in terms of kind of of how we think about the medium.
The guidance for some of those segments, but.
But we definitely see continued room for improvement from here on the zone.
Got it no that's helpful on great to hear the same day I guess my one follow up question.
To ask you about the portfolio just given the announcement of an HTS. So I guess, maybe two questions. One just on it's on an H B S.
Keeping the 45 per cent ownership here.
What's the kind of thought process as it to play in some of the upside and potentially then monetize it in the future and then and then how are you thinking about the rest of the portfolio because of our other pieces.
Maybe you don't necessarily fit longer term, but I'd be curious to hear any thoughts around that as well.
Yeah, Joe I think I think we're very excited with the HPA is for multiple reasons one this.
It kind of of what we found a great partner with the.
The AIP and we're also very excited with the team on then becoming a pure play in the upstream oil and gas where the very premium products.
Premium business.
I think we view of very.
Really good because we were able to look on some cash but at the same time as you said participate in any of the potential upside that could come.
As you know theres the multiple cycles that can happen here.
And as we continue to see that we got the 45% participation.
In terms of what could come next and in terms of your other questions I mean.
Clearly as we said in the past I mean, we look at all possible scenarios.
And so on the degree that we can create shareholder value by doing something creative with some of the businesses that might not be that appropriately aligned.
Don't hesitate to explore those options and the.
And I think we just want to be thoughtful.
On strategic and disciplined on how we do that.
Makes sense. Thank you guys.
Thank you Joe.
Your next question comes from the line of Steven Volkmann from Jefferies. Please go ahead of your line is now open.
Hi, Good morning, guys, maybe just back to Joes margin question quickly.
Any difference amongst the segments and how we should think about incrementals for 'twenty and 'twenty one.
Yes.
I'll take that one I think the way to think about it as you know.
The Ics will probably be at least from a year over year perspective, probably the healthiest overall, just because frankly a lot of the cost synergies as we've mentioned before are much more isolated.
Centralized I should say in the <unk> segment in terms of the precision and science and specialty vehicles businesses.
The the Incrementals, there will be a little bit more muted just frankly on the year over year basis.
Frankly, a little bit of balancing in terms of the mix in terms of the top line. If you remember on the precision of the science, we did see a pretty strong in swell of Covid related demand in 2020 on the medical side that actually came out of pretty good margin premium that is obviously not expected to recur in 2021 replace of a little bit more of a I'll call. It more general industrial and then on.
Are you seeing some of the investments back in and then the SPT business kind of comparable as well as the commercial and golf businesses tend to kind of normalize youre not going necessarily see.
The next be quite as what it was in 'twenty 2020, and we obviously continue to invest for new products and growth. So again, I think I'd say that is where youll see it a little bit more pronounced.
Okay, Great. That's helpful. And then if I could just ask about kind of recurring revenue and services and maybe both near and longer term. I mean are you guys able to get out and do the servicing the do we have some pent up demand there and then longer term are we getting those types of contracts I know that's been a target for you guys just maybe.
An update there.
Yes, Steve I think.
Definitely are able to go get out there and.
Do a lot of them.
The you know being creative literally by doing that the physically but in some cases, even remotely as we kind of connect more and more machines and as we continue to go forward absolutely I mean, we see a lot of good potential here based on our installed base and the technologies that we're launching with Iot and then now here further.
We're expanding into with the connectivity with Google cloud being able to be more pronounced on how we can create some sort of unique service agreements.
Okay I'll leave it there thank you.
Thank you Sir.
Your next question comes from the line of Nigel Coe from Wolfe Research. Please go ahead. Your line is now open.
Oh, Thanks, good morning.
The as well.
Not a whole lot of two to be bunch of it here, but.
I think when I go back from the synergies ons, obviously for human screening of big.
Sort of let's.
Cost savings.
With the sort of the supply chain issues, we've seen out there is that limits on in any way your ability to get procurement savings.
Near term it doesn't it doesn't feel like for this but just wanted to put in the and then the second part is G&A is a relatively small part of the synergy mix I'm just wondering now you've had.
I R in for a year now whether you see a bit more potential for G&A.
Yeah sure Nigel I'll take both of those I think I think on the procurement front like we said there is some inflation in the system, but does that prohibit us from being able to deliver on the procurement savings and I'll, even I'll just make that even broader on the direct material equation, whether it be classical procurement from leveraging the larger spend base as well as now the <unk> savings of one of I think the answers now you've seen the continued momentum.
Obviously, the conviction in raising the the synergy target of $300 million. So I think that we have a way of a pretty good line of sight and pretty good conviction and be able to deliver those procurement on direct material oriented numbers and then on the G&A side again, I'd say, there's always room for opportunity, but I think like we said the majority of the the more structural related savings and.
Cost takeout, you really saw that much more executed in 2020, So again I would say that part of kind of largely behind us, but we'll always look for rins for optimization.
Okay, Great and then just going back to Joe's question on the portfolio just curious kind of just given the performance of the SVT you know much better than we would have expected probably the effect of what you expected as well.
How's your view on SVP of the bulk of the path for 12 months on and how confident are you. The this kind of performance coming to the things beyond the reopening.
Yeah, I mean I think.
I'll put it in a couple of a couple of ways. There Nigel I mean, I think what you see on.
On the SVP is clearly great performance based on product launches on the team has done.
On the consumer side when.
When you look at also of commentary that we made even the Q4 also a very good momentum in Ingalls again based on new product launches of they have gone, particularly well.
Lithium battery.
Cars that they have the they have done so we feel that the team has taken some good market share.
They're not done yet I mean, what's causing maybe an accelerator or accentuate the decision, making for some consumers to really buy now versus maybe by mid or yeah. It could be.
But I think what's exciting is that the momentum has continued.
What is also exciting is that the the team is getting ready to make some pretty good product launches in 2021, not only the consumer but also did you deal with the market that could play very very well not only in the U S. But also in Europe. So I think the team is really hitting on all cylinders, we're supporting with great investments and more to come.
Great. Thanks, guys.
Thank you.
Your next question comes from the line of Nathan Jones from Stifel. Please go ahead. Your line is now open.
Good morning, everyone.
One of them.
On a couple of couple of questions on investments in growth can you talk about kind of what kind of level of reinvestment, you're making in growth at the moment and what the kind of potential to take that too yes.
And then the one and a half the 2% Capex seems a little low to me can you talk about opportunity to to.
To invest more here in order to drive better growth.
Yes.
In terms of investment on growth multiple ways, one on the corporate side I mean, we continue to make some pretty good the investments on on some of our the.
The kind of demand generation activities.
As well as what you have seen here with the with the Google Cloud and then within the businesses.
The only we're making some.
Very solid investments you know maybe some of that I can highlight on the precision on science.
The team is making their investments in the hydrogen and really seeing some acceleration in terms of the product launches that they expect to get the as well of commercialization by investing on feet on the street.
Throughout the world and anyone on the industrial technique.
Okay.
The investment on the umbrella of lunches now that we have the combined two two.
For the companies, particularly on the compressor side, there's going to be a very good cadence of the execution of what we were planning on delivering and working through 2020 of that is getting executed on launching out here.
For the year.
Theres no capex.
Sure I mean, that's the only.
We think 1.5% to 2% I mean were typically very light.
The very light Capex base oil, but as the team comes in with the with a great proposal that provided some very good return on invested capital we look at the ROIC even on the Capex basis, then we'll do it.
Okay, and then I wanted to ask one of that revenue synergies I know when we put these businesses together revenue synergies is one avenue for creating value, but it was also luckily the take longer to really start to kick in.
So now of year end can you talk about what opportunities you've seen.
Whats the access as you've seen and what's expected in the future.
Sure Nathan I'll touch on kind of a high level, obviously, we haven't necessarily quantified growth synergies externally, but.
Clearly, it's strategic and you've seen a lot of the momentum that we're actually driving whether it would be.
In the organic growth numbers that we've actually guided to things around.
On the water end market some of the leveraging of the oil free compressor technologies in the in the kind of expanded channel of the market that the combined company is broad I think that probably each of the other the.
The segments, particularly in IGN asset of precision science.
Have a good funnel of what I'll call the growth synergies that they've been executing to that you're really going to kind of see embedded what I would tell you within kind of the organic growth numbers and I think we're really encouraged you've seen some of the the.
On the healthy order numbers, we talked about kind of the healthy backlog that we have exiting the year and I think youre starting to see some of those revenue synergies starting to kick in so again, we're not going to necessarily guide some explicitly but I think you've seen a lot of the mentioned on what we're going to continue to do is give you. Those examples and kind of give you that color as we continue to kind of level of debt that the that.
That kind of revenue synergy based on the combined company.
Alright, Thanks for taking my question.
Think of any of them.
Your next question comes from the line of John Walsh from Credit Suisse. Please go ahead. Your line is now open.
Hi, good morning, everyone.
Good morning, Joe Joseph.
Hi, Jim.
The one here from me going back to the free cash flow guidance for this year, the greater than or equal to the 100%.
Is there another way you guys could kind of articulate what youre expecting in terms of free cash flow either through of free cash flow margin.
Or maybe a free cash flow as a percent of EBITDA and then how you kind of think about that going forward.
As well.
Yeah, John I mean, I think we're going to be you know obviously the guidance, we gave was greater than or equal to 100% of adjusted net income, which we think is probably the right way to look at it clearly taken a lot of the purchase accounting implications and things of that out of an age out of the other equation I think if you look for example of 2020, how we're able to deliver we were quite pleased obviously we saw some.
Some pretty good headwinds I'm, sorry of some good some sort of tailwind in the context of.
Probably a little bit lower than normal capex on some pretty good working capital management, but the good news here as we look into 2021, we see some from some strong equal opportunities whether it be.
The cash interest, which is coming down with all of our fixed interest rate swaps have rolled off in the second half of the year the tax rate expected to be lower and also some good net working capital opportunity. So again I think the.
The guidance itself I think it's pretty prudent we would expect to see.
On cash flow over the course of the entire year much like you saw in 2020.
Obviously some of the opportunities now, though we're really starting to click in and some of the things we've mentioned before in terms of really the tax rate and working capital.
Great all of them.
Leave it there thank you.
And so on.
Your next question comes from the line of Mark Smith <unk> from UBS. Please go ahead of your line is now open.
Yes, hi, good morning, everyone.
Just a quick one hi, good money on procurement execution.
Obviously, good to see the increments of 50 million here.
Can you remind us what's the what's the total spend base here for direct and indirect and hope off through the pain space. All of you know roughly into the.
Consolidating spend picking of new suppliers.
Just on get a sense of visibility here for how far the increments of 50 million goes in the in the total spend per se.
Yes, no sure. Good question I mean, so we do roughly.
A little bit above 2 billion, it's kind of of the Mark that we said that we were going to.
The in terms of RF skus in the negotiation and stuff like that and.
Or maybe three quarters of the way for that.
There. So we still have another portion of that we still need to go through the process.
As you can imagine.
A lot of detail that the game is going through so we'll still have some ways to go to cover all of that 2 billion plus.
Great. That's very helpful. And then second one if I may.
Just on compression of the kind of a follow up for the earlier discussion.
The discussion on order intake I mean, what sticks out to me is particularly ended up high single digits Europe order intake.
Both of these mix for you guys and girls boys, the some share gains with the some of the obviously the strong European peers, how should we think about about that in the quarter.
Yeah, I think I think the team has really executed pretty well in the.
In Europe in the combination of the power of the group of the of the <unk>.
Multiple brands I mean, as you know in Europe, we had a compare.
One of the leading brands in Europe, and now Ingersoll Rand and also champion. So so we have.
The multi brand approach and we're just leveraging the channel across all of the all the regions and we feel that the team.
It's really executing well on potentially taking some taking some share based on the numbers.
Great. Thanks, a lot of good luck.
Thank you.
Your next question comes from the line of Andy Kaplowitz from Citi. Please go ahead. Your line is now open.
Hey, good morning, guys.
Hey, Andy.
Could you give us some more color on how youre thinking about growth in the APAC region. In 'twenty. One is we know what the strategic area of the growth for you kind of look solid but many of the rest of the of Pac remains of the weeks since you have a bigger presence there with the merger could you update us on your progress on the region.
Yeah.
So obviously to the two sub sector of Missouri, I mean, China.
The team the team is really doing fantastically well I mean, we have we have great leadership, we just went through.
A lot of the accelerated commercialization based on the combination of the two the two brands on the technologies just here before the.
The Chinese new year, and and it's exciting to see what the momentum there continues to build and we always said southeast Asia is definitely an area of opportunity for us.
It wasn't it wasn't an area of opportunity for not only of Gardner Denver, but also of Ingersoll Rand and now with the combination of the two we can actually really go after.
Better channel and better end market channel, So we're being very selective the teammates.
Really appropriately.
Investing in that region. So it's just a lot of good potential opportunity that we see in the southeast Asia.
Got it and then in the guidance for mid single digit revenue growth for the segment makes sense for 'twenty, one, but just looking at specialty vehicle. You know you mentioned the order strength into the quarter.
You know of over 20%. So are you are you.
Second from sort of slow down there I know the comparisons are more difficult for the other segments, but it seems like very good momentum versus that guidance for 'twenty one of them that segment.
Yeah, it's definitely a very good momentum on me I think we're being a bit more more prudent in terms of maybe some of the amortization coming here in the second half.
And as we continue to see momentum from product lunches and kind of market activity, we will update but I think the team.
It's very focused on delivering to the commitment that they have now.
And I would just being kind of more prudent based on the number of normalization of that can be seen here in the second half and no monetization I mean, just the tough comps.
So I'm pretty hefty comps, but they need to overcome based on what they were able to execute in 2020.
But the but we see room for improvement.
Thanks for that day.
Thank you on the.
And there are no further questions I will turn on the call back over to the center for any closing comments.
But I want to say, thank you to everyone for the interest I know that in this calls many of our employees around the across the world join to listen to the excitement of what they have been able to accomplish into all of them.
It was a phenomenal year.
We're about to celebrate our one year anniversary.
Altogether here and what a phenomenal journey has been and this is just the beginning we're getting started and there's just sort of definitely much more to come. So thank you. Thanks, everyone.
And ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
[music].
Yeah.
[music].
Yes.
Okay.
[music].
Okay.
Good day.
Revenue.
[music].
Yes.
Yes.
Yes.
At this point of sale.
[music].
Okay.
[music].
Okay.
Yes.