Q3 2023 Ingersoll Rand Inc Earnings Call
Good morning, My name is Krista and I'll be your call operator today at this time I would like to welcome everyone to the Ingersoll Rand third quarter why did he twenty-three earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you would like to ask a question. Please press star followed by the number one on your telephone keypad and if you would like to withdraw your question. Please press star one. Thank you I will now turn the conference over to Matthew Ford Vice President of Investor Relations. Please go ahead.
Thank you and welcome to the Ingersoll Rand 2023 third quarter earnings call I'm, Matthew for Vice President of Investor Relations.
Joining me. This morning are besides here at all chairman and CEO and Vic Kenny Chief Financial Officer.
We issued our earnings release and presentation yesterday, and we will reference during the call. Both are available on the Investor Relations section of our website. In addition, a replay of this conference call will be available later today before.
Before we start I want to remind everyone that certain statements on this call are forward looking in nature and are subject to the risks and uncertainties discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call.
Please review the forward looking statements on slide two for more details. In addition in todays remarks, we will refer to certain non-GAAP financial measures you can find a reconciliation of these measures to the most comparable measures calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website.
On today's call we will refer.
We will review company and segment financial highlights and provide an update to our 2023 guidance for today's Q&A session. We ask that each caller keep to one question and one follow up to allow time for other participants at this time I will turn the call over to Sanjay.
Thanks, Matthew and good morning to all.
I can start as we always do by thanking and acknowledging all of our employees for their hard work in helping us to deliver another record quarter in Q3.
By the constantly changing macroeconomic environment, our employees continue to deliver on our commitments.
Certainly exemplify our purpose well thinking and acting like owners.
I will also like to welcome our new employees from our recent acquisitions Oxy Wise Fraser Woods routes and Kayla.
Beginning on slide three fueled by our competitive differentiator I our eggs in the third quarter, we again delivered double digit growth in revenue adjusted EBITDA, adjusted EPS and free cash flow.
We remain nimble and focused on controlling what we can control and continue to direct our demand generation activities towards high growth sustainable end markets to accelerate market share gains.
Finally based on our continued robust performance year to date, we are once again, raising our 2023 full year guidance.
As we move to slide four our economic growth engine is the key to delivering compounded annual results.
During our last Investor day in November 2021, we presented this model and highlighted our organic inorganic and quality of earnings growth enablers.
We remain committed to our strategy and a long term investor day targets as outlined on this page.
In fact, we have so far exceeded our growth and margin commitments, including on organic orders and revenue CAGR of 12% and margin expansion of 170 basis points per year over the last three years.
On the next slide I will provide you with deeper insights into how we are accelerating organic growth in previously acquired businesses.
So turning to the page to slide five here, we have some examples of how we have driven outsized organic growth and margin expansion from our recently acquired M&A.
This is a testament to how we compelling growth on recently acquired businesses and have examples from both our Ips and P&C segments.
On the left hand side of the page. We're highlighting are narrowly acquisition from June of 2017.
We acquired this business for a purchase multiple of 11 times by.
By building, our end market focus to high growth sustainable end markets offering a complete ecosystem solution and leveraging our commercial footprint, we have achieved over 540% growth since the time of acquisition.
In addition, our post tax ROE I see is 155%, resulting in a 0.5 times post synergy.
That EBITDA purchase multiple.
Just an impressive result on how and what we can do with technologies once we incorporate them into our <unk> process.
The right hand side of the page is our air dimension business, which was acquired in November of 2021 also.
11 times purchase multiple.
<unk> serves high growth sustainable end markets like environmental services.
And the team has delivered 27% revenue growth over the last few years by leveraging I Rx rapidly integrating our demand generation process and launching new innovative technologies.
And given the outsized growth. This business has delivered over the past few years, we're very well on track to exceed our three year post tax ROIC target demonstrated by already delivering a post synergy adjusted EBITDA purchase multiple of eight times.
Next on slide six M&A continues to be at the forefront of our capital allocation strategy to compound value similar to the examples we displayed on the previous slide.
We're pleased to highlight two recent close transactions with.
With these two acquisitions, we have closed on approximately $190 million of annualized inorganic revenue, which puts us very close to the bottom end of the $200 million to $300 million of annualized inorganic revenue targets, we set forth at the beginning of the year and.
And we have no doubt in our ability to deliver our target this year.
Let me walk you through these two recent acquisitions first OXXO wise, which is based in Arizona.
As a leading provider of on site oxygen and nitrogen generation systems.
This acquisition expands our technology ecosystem with a complementary product to the compressor and increases Ingersoll Rand's broader air treatment capabilities in point of views oxygen duration.
Next day, sprinkler Woods, which is a leading provider of aftermarket services for blowers and pumps in the vacuum truck market.
This acquisition expands Ingersoll Rand technical expertise and our service capabilities in Western Canada.
Our M&A funnel remains very strong and as of today. It continues to be over five times larger than it was at the time of the R&D.
The characteristics of the targets in our funnel continues to be bolt on in nature with the exception of a couple that are approximately $1 billion purchase price.
On slide seven as highlighted in the middle of a beige we continued to be recognized for our corporate responsibility and we're proud that <unk> B L. Media recently named US as one of the top 100 best corporate citizens in 2023.
We were recently ranked on the top 3% among the Russell 1000.
Being a corporate citizen is part of our high performance employee ownership culture.
Our company purpose of making lives better as deeply ingrained into everything we do including partnerships with community focused organizations such as the American Heart Association fees ANZ, dropping the bucket unless quality bilingual Bristol.
In addition to striving to be a responsible corporate citizen.
We're thrilled to be named best companies to work for and Industrials and business service sector.
Receiving high marks in employee sense of belonging.
We believe our employee ownership model drives increased employee engagement and as a long term shareholders. It creates economic opportunity for our employees and their families.
I will turn now the presentation over to Vic to provide an update on our Q3 financial performance.
Thanks for the center.
On slide eight fueled by eye Rx, we again delivered record results in Q3 through a balance of commercial and operational execution.
Total company organic revenue increased 6% year over year with incremental margins of 38%.
Book to Bill was 0.94 times, which was inline with expectations.
As a reminder, we typically see book to Bill above one in the first half of the year due to the longer cycle of large project orders received and a book to bill below one in the second half as those large longer cycle projects convert into revenue.
We remain encouraged by the strength of our backlog, which is up approximately 6% year over year.
The strength of our backlog provides good visibility and momentum as we move into the fourth quarter of 2023 and begin to look towards 2024.
The company delivered third quarter, adjusted EBITDA of $462 million or 23% year over year improvement in adjusted EBITDA margin of 26, 5%, a 170 basis point year over year improvement.
It is important to note that these results are closely approaching our long term targets set forth during our 2021 Investor day.
For the quarter adjusted diluted earnings per share was <unk> 77.
24% versus the prior year.
Free cash flow generation for the quarter was $369 million up 46% versus the prior year.
Free cash flow margins for the quarter finished at 21%.
Total liquidity at quarter end was $3 $2 billion, which was flat compared to the prior quarter.
And our net leverage continues to remain near all time lows at 0.9 turns were 0.1 turns better than both the prior year and prior quarter.
Turning to slide nine for the total company Q3 orders declined 2% and revenue increased 13% both on an FX adjusted basis.
Total company adjusted EBITDA increased 23% from the prior year.
The Ats segment margin increased 260 basis points, while the PST segment margin improved 120 basis points.
Notably both segments remained price cost dollar and margin positive, which speaks to the nimble actions of our teams despite persistent inflationary headwinds.
Corporate costs came in at approximately $44 million for the quarter driven by continued investments to support growth in areas like demand generation and Iot as well as the impact of incentive compensation adjustments.
Adjusted diluted earnings per share for the quarter was up 24% to 77 per share.
This 15 year over year increase includes a <unk> <unk> headwind from interest expense.
And finally, the adjusted tax rate for the quarter was 22%.
Moving onto the next slide free cash flow for the quarter was $369 million, including Capex, which totaled $29 million.
Total company liquidity was $3 $2 billion based on approximately $1 2 billion of cash and $2 billion of availability on our revolving credit facility.
Cash outflows for the quarter included $308 million deployed to M&A, largely driven by the acquisition of routes.
We returned $8 billion to shareholders in dividends and no share repurchases were made during the third quarter. Although we remain committed to our annual share repurchase plan of approximately $250 million for the full year.
M&A remains our top priority for capital allocation and we continue to expect M&A to be our primary usage of cash for the foreseeable future.
We continue to have an active and healthy funnel of inorganic growth opportunities.
This funnel consists primarily of bolt on M&A relatively similar in size scope and nature to the assets we've acquired over the past two to three years.
Turning to slide 11, as we have always planned we continue to transform our debt portfolio.
After being upgraded to an investment grade credit rating across all three rating agencies, we refinanced $1 5 billion of secured term loans through the issuance of unsecured investment grade bonds in the quarter.
Our capital structure continues to evolve and are designed to facilitate our capital allocation strategy and we remain committed to having a fully unsecured investment grade capital structure in the near future.
As a result of this debt portfolio transformation, we have improved our fixed to floating ratio to 74% fixed and 26% floating and our weighted average maturity on that has moved from four years to six years.
Finally on an annualized basis, our interest expense has been reduced by approximately $20 million. This this should deliver an annualized improvement of approximately four of earnings per share, which will be realized across both 2023 and 2024.
I will now turn the call back to the center to discuss our segment results. Thanks Rick.
On slide 12, our industrial technologies and service segment delivered strong year over year organic revenue growth of nine 5%.
Adjusted EBITDA increased 31% year over year with adjusted EBITDA margin of 28, 8%.
260 basis points from the prior year with an incremental margin of 42%.
I would like to take a minute to note that these high Twenty's adjusted EBITA margin are in line with our 2025 long term targets said during our Investor day in 2021.
So we're almost two years ahead of schedule in terms of achieving these results.
Book to Bill remains on track and finished in line with expectations at <unk> 94 times.
Consistent with previous guidance, we anticipated book to Bill of approximately one time for the year.
As a reminder, we typically see a book to bill of about one in the first half as larger longer cycle orders are placed and below one in the second half as those larger longer cycle orders are shipped.
Organic orders came in line with our expectations down eight 7% as we are Comping high teens organic orders growth from Q3 last year.
Therefore, it is good to highlight that on a two year stack for the third quarter <unk> organic orders have grown 8%.
Moving to the program highlights core product lines continued to show strong momentum on a two year stack, excluding FX and also excluding the recent acquisitions of SPX air treatment and roads blowers.
On a two year stack compressor orders were up low double digits and revenue was up mid thirty's.
Industrial vacuum on lower orders were up mid teens and revenue was up low thirties.
The power tools and lifting was up low double digits on both orders and revenue.
Additional detailed information on product lines and regional splits we have moved the chart, which was previously included on this page to slide 17 in the appendix.
Moving to the innovation in action portion of these why we're highlighting our new oil free compressor recently launched in North America.
This program is a great example of Ingersoll Rand leveraging <unk> to deliver new products with best in class efficiency. These.
These Iot ready compressor is 14% more efficient than the previous model and it is 5% more efficient than the competition.
Maybe the of $94 million, which is a 2% year over year despite declines in revenue.
I just didn't meet the margin was 30.3% off the hundred and 20 basis points year over year.
The continue here a year improvement in our adjusted EBITDA margins is driven primarily by price cost improvements and synergy delivery on acquired businesses.
For <unk> innovation inaction, we're highlighting R y Z.
Brian partnership with the largest natural gas transmitter in Europe G. R. D F.
During the second quarter of 2023, we executed a 10 year contract with G. R. D F to provide mission critical authorization equipment for renewable natural gas or Orangey.
We're very excited about this partnership and believe that there are plenty of future growth opportunities as the European Union has committed to replacing 20 per cent of lost Russian gas supply with Orange G.
Over the next six to seven years.
Moving to just like 14.
Given the year today solid performance and continued momentum for from backlog, where once again, raising our 2023 guidance.
For the full year total company revenues expect it to grow between 14% and 60%, which is at 200 basis point improvement versus our previous guidance.
We anticipate organic growth of 9% to 11% were prized on volume remain splayed approximately 60 40.
F X is now expected to show a slight headwind.
Accidentally 1% on a full year basis.
Ah revenue from M&A has increased by $60 million to approximately $360 million for the full year.
These inquiries reflect the impact from all completed and clothes M&A transactions as of November 1st 2023.
Corporate caused our plan at $170 million for the year.
Total adjusted EBITDA for the company is expected to be in the range of $1.73 billion and $1.77 billion, which is of 2% versus Brian guidance and at 9% versus our initial guidance at the mid point.
Ah different all the time.
Well I just in a P. S is projected to be within the range of $2.81 and $2.89, which is of 21% year over year at the midpoint.
We're also reaffirming a book to bill of approximately one for the full year, which puts us in a solid position as we look to enter 2024.
Based on our current full year outlook backlog will finish at near record level of Heights, and we will end the year with approximately 40% higher backlog compared to the balance at the end of 2021.
As Vic had mentioned earlier on the call interest expense is now projected at $155 million with a portion of the interest expense savings from the debt restructuring being realized in 2003.
No changes have been made to our guidance on the adjusted tax rate or Capex Ben <unk>.
Percentage of revenue.
They remain in line with both initial and prior guidance.
On the bottom right hand side of the page. We included some additional commentary specifically around Q for we.
We do expect organic orders to be positive sequentially and year over year.
In addition, we anticipate or organic revenue to be positive in both fries and volume year over year.
Incremental margins are expected to be approximately 35% for both Q4 and a four year.
Turning to slide 15, as we wrap up today's call I want to reiterate I think it's around remains in a strong position and were proven how resilient we are even in difficult microenvironment.
We continued to the neighbor record results and are updated guidance is reflective of our year to date performance and ongoing backlog momentum dorm.
Who are employees I want to thank you for another quarter of record results <unk>.
These results show the impact each of you have as owners of English.
We will remain focus of our commitment to meeting our financial targets and executing our economic growth engine using I R X.
As we continue our track record market outperformance, our balance sheet is as strong as ever.
With our discipline and comprehensive capital allocation strategy, we remain resilient and have the capacity to deploy capital doing investments with the highest return.
We remained nimble and continue to monitor the dynamic market conditions on our prepare for the challenges that may chrome.
With that I will turn to call back to the operator to open the call up for Q&A.
As a reminder, if you would like to.
Ask a question. Please press star followed by the number one on your telephone keypad.
Limit yourself to one question England's all of that.
Your first question comes from the line of Mike Halleran from standard. Please go ahead.
Yeah. Good morning, everyone. Good morning, My morning, Mike.
So come closer to your first you know could you just put the order trajectory and trends in in context for us I certainly understand some of the life science stuff, but when you looked at more of the industrialized since you have.
Why the confidence in order <unk> to.
Are you seeing any signs of soft.
And and and how do you think about the underlying momentum businesses.
24.
You know like so maybe a couple of things here first as we mentioned earlier on the call I mean, two three when we can only do three is really on a year over year is really driven in large due to a tough comps from prior year as you. So it kind of acute 2223 alternate running through.
Ideas was up 16% M. P S 3% so.
He orders finish in line with the expectations that we have even to your <unk> to your or their question about when we were seen underlying demand you know, we we made a reference.
Even though the P. S decide when you look at the shore cycle business, which is really more driven by industrial side. I mean, we saw sequentially Ah about business to be sure Psycho industrial being up Q2, Q3, and also a a year or a year from an older perspective Ah organically.
I would also like that Ah you know even R. I T. S segment. When you look at mainline Europe Q3 order momentum was actually higher than thank you. So so we still feel that the underlying businesses are performing to our expectations. We also is you know really look at this from Ah and QL prospect.
The marketing qualify leads with C stability with these solely kind of continue momentum on that and as we head into the the the the fourth quarter.
You know the level of confidence on on what we said about odors Ah sequentially being up and also on a year a year is driven by a load of these kind of data points as well as you know alone cycle miscibility, though we have ah coming into until the fourth quarter.
Thanks for that and then and then on the M&A side of things you know certainly appreciate the call you give them.
Otherwise and funnel and everything like that but my question more is have you seen any change in tone with the.
People, you're interacting with from our interest rate perspective lack of visibility maybe with a demand picture is does that helps or hurts the thought process and the conversations and maybe just some thoughts on this sentiment around the people you're talking to you and.
And how you should think about uh-huh.
Yeah, no definitely like I I I will say that the sentiment has been on the positive side for Ah Ah Ah Ah Ah by yours, and like wires and and as you.
No a load of our M&A sole-source are driven by literally outreach that we do Ah too. Many cases, you know family on companies and and I think the the what What'd you continue to see in the in the market for the micro environment I think that is really enticing I'm encouraging others to really.
Think about how to transition those multi generation family companies to a great company like ours, where as you know we do a lot of work around employee ownership employee engagement and that's a big attraction factor for a lot of these companies to transition through us. So so I think we're seeing.
Continue very strong activity on the M&a's.
Great really appreciate it thank you Benjamin.
Your next question comes from the line of Julian Mitchell from Barclays. Please go ahead.
Thanks, Good morning [noise].
Maybe.
The source cool to guide it looks like it's some sort of mid single digits organic sales gross and mid thirties incremental knowledge and I just wanted to you know as as the queue. So probably represents a somewhat.
More normal price cost and somewhat more normal sort of demand environment in the last year or two so you know as we look ahead should we assume that that sort of mid thirties operating leverage is a good place holder for the period beyond Q fool.
And on the organic top line, maybe there's a little bitterness price next year than in queue fool, but that sort of low to mid single digit rate. It's a good starting point for sales gross.
Yeah, Julie and this is like I'll take that one I I I think he was spot on on on both the courts in terms of the operating leverage we've indicated whether it be Q4 or full year, and we've kind of been holding pretty steady to this that mid thirties call at roughly 35 per cent Incrementals range is where we expect to operate in and that's very consistent with I think where you've seen as.
Brickley my chest, maybe slightly on the higher side, but I.
Mid thirties Rangers right kind of where we would expect to play not just now but on the Gulf War It as well and then in terms of the pricing side of the equation, yes, obviously, you've seen much more elevated price realisation over the last few years, but you know quite frankly, you've seen a lot of that now starting to get Comped and now your phone into a much I'd say more normalized lower singer.
[noise] digit realm, and we would expect that kind of one to two per cent net price to be a good proxy as we move into 2024. So yes, I think you're you're spot on on both.
Thanks, very much and then just a quick follow up.
E. S. T. Specifically you know it can be tricky from the outside to understand the the moving parts on the revenue there when you called out the same thing the official site the industrial beats pretty good by Osama bin is still bad which everyone else has cause it's rated as well.
What's what sort of best view of that.
So I'm a piece from him and kind of how large is that medical peace now of P. S. T. As we exit this year I think when we look at next year's some people talked about the v-shaped Biopharma, it's not obvious to me why that would happen at all but just wanted to jewel perspectives George earlier, so maybe.
Be a couple of things I'll I'll take two as well. So when you think about the P. S. The P. S. Do you think about it I've, even when you exclude the life signs business PSD on 10 out of the 11th past quarter has been positive Ah on organic orders and actually organic revenue. So that tells you what kind of the the the the.
Good strength of the rest of the P. S. P segment, I mean, clearly the life signs, which is roughly about a quarter of the P. S. D has been [noise] on this kind of situation.
With Biopharma, but also you know oxygen concentration.
And the life signs business has been pretty negative.
Organic order growth momentum for probably the past six quarters. So it's been a it's been a little while while you know the non life signs of it has been positive. So yeah. So I mean, we're experiencing these these challenges that that others have indicated on a life sciences.
I mean I think that.
[noise] way, we think about it is that for all his biopharma, yes, we have some exposure, but he's not the biggest piece of our life science and Marquez exposure within the P. S D.
Biggest exposure for all his Israeli oxygen concentration and they'll say oh, so you're in concentration when you think about it.
Really great acceleration during the Covid days and is the one that we saw appeal with anything to negative Ah more pronounced earlier than even their biopharma. So it was almost like a leading indicator for us. So we kind of go here into their fourth quarter and maybe in the first half of next year, we see that more so on next year.
Maybe an uptick nobody that'd be shape, but Ah Ah continue doing better from an oxygen concentration side of the business. So so we can continue to things that their I P. S. D. Even you saw on that segments side, I mean P F D cake or growth.
Organically revenue and and and and orders momentum continues to be a segment that will see that mid single digits plus over to cycle and over time I mean, it's with great great great characteristics on continuing to improving back so.
I don't think it's gonna be a V shape Ah, but even if it's a V shape Ah.
Ah Ah Ah it it's not one that again, we don't have that big a sports during the Biopharma.
That's great. Thank you.
Your next question comes from the line of Justice sprang from vertical research partner. Please go ahead.
Hey, Thank you good morning, everyone on board.
Hey, This Sunday, maybe elaborate a little bit on kind of this visibility on long cycle orders that you mentioned.
Q for and kind of the spirit of my my question is.
Heard from a few companies this earnings season electrical companies HVAC companies that you know the kind.
The Mega project pipeline is building and becoming more visible.
There haven't been a lot of orders book, yet and they're just starting to kind of come in to kind of the booking cycle are you seeing any of that sort of dynamic where maybe if not maybe share a little bit more color on kind of the nature of alongside orders you are starting to see come into view.
Yeah, I think that's exactly what I was trying to refer to a there is a were seen definitely you know before you remember a few quarters or.
And last year, we spoke a lot about a lot of these kind of large project that that we're being in conversations and now we're seeing definitely that relieves some of those funds and so yeah. So that's that's what GB knows a bit of a higher level of confidence.
Terms of how the the long cycle a funnel continues to build in a company that gives us a good liberal over should be with you all say not only care for but also as we go into 2024.
And then I think it was maybe it was you were talking about deals, saying, there's a couple of billion dollars things in the pipeline sounds like you expect bolt ons, but most likely which would be I guess natural but but may be kind of a little bit of color on.
You know what's going on in the bigger deals and the likelihood of getting something done in that size range.
Yeah. So.
That's right I mean, we we sent him to call that we in the final continues to be really strong and you know Mosley bolt on in nature, but there's a couple that are you know above a billion dollar purchase price and and and I would say that those are very well in line with our M&A strategy I, we should not think about it as being a third leg of.
Of the company you know for competitive reasons, we don't want to kind of get into a lot of details, but we feel very comfortable with kinda, we even where we are from a balance sheet perspective on being lives on one time, when our net debt to adjusted EBITDA ratio.
It's actually put something in a very strong proficient to to to move forward with this transaction, but yeah. We're we're very excited with how the M&A funnel continues to to bill and what we see in terms of getting things executed here over the next couple of quarters.
Great. Thanks for the color printer.
Your next question comes from the line of Andy Capp Lament from Citigroup. Please go ahead.
Good morning good.
Morning.
Can you give us more color on what you've seen by geography, I think you've been very that doesn't really generating market share gains in your own demand in regions, such as China and Europe are you confident for instance that Chinese competitive growth will remain positive.
I think I need a competitive orders turned down but I don't think you have big exposure to Germany, but how long do you think he'd been a meal as well.
Sure. So you know first of all on the Chinese compressor I mean, clearly not surprisingly the overall China market has continued to be I'll say tropaean soft. However, you saw how how we deliver you know the team in in Asia Pacific and particularly in China Ah again demonstrated one more time another quarter.
Kind of growth organically in the compressor aside from an older.
Perspective, which you speaks.
So the continue self-help that the team is driving him and leading relative to the overall performance in the market will clearly.
Share more examples of that as well.
Heading to the investors a.
I'll say in Europe, no no no significant changes in the amount I mean and cruel activities remains solid we continue to focus our on our own demand generation for a high growth sustainable and markets are economic engineers, working and as I made on the remarks, I mean, we saw even order sequentially in mainland.
Europe come from for the compressor side Ah actually grow grew Ah sequentially Q2, Q3, so that gives us continue encouraging the encouragement that again the the self help initiatives are are working in in these kind of year in your year over year tough comps is one that that we're just not worry about.
When you see the underlying the mind continue based on the self help.
The magenta, maybe just following up on that you know as the environment has normalizing you know an interest rates are up here a little bit at least in the U S.
You know you focus on energy efficiency and sustainability through your products, how did customers. When you have conversations with customers how do they balance sort of maybe higher cost of financing versus you know your ability to provide them energy efficiency.
That's still Trumping, you know the higher cost.
Yeah, I'll say it it's all about that Roy under payback Ah and I've customers prioritize capex as they go into 2024 and beyond it's all going to be all about our life Ah no different to how we do it ourselves internally and and and these energy savings energy efficiency is definitely driving.
The conversation at the top even though the C suite Liberal now where or customers are looking for what could do what can they do it to drive there's a there's a great paper. So again this is how our sales guy sail they they fell based on the total cost of ownership on that right.
Appreciate it.
You know our next question comes from the line is rather whereas familiar research. Please go ahead.
Thank you just to kind of follow up on a couple of those comments because I think what you've done in China as an as an impressive maybe increasingly so.
The market in China.
And do you have any sense of the outperformance gasoline you been able to deliver is not widening because he continued growth in the market is kinda blown up if you.
Results. This quarter is great and have you seen the competitive response.
On my list until you come to new Yorker, relatively constructive or they need to show for it.
Reflect on your ex and how you're you're generating better orders in a softening market or does it really does not seem as often.
Yeah, Great I think the the two there are pretty well try it I mean, I I think I R. X is definitely what is helping those dry these outperformance that were seen against the backdrop in the market and even when you think about it I I S. A M. P. M. I's have been below 50, and we still have been able to deliver over the past few quarters really great strength and orders and revenue.
Mental them I think that is what what gives those that uniqueness in terms of leveraging I R X S. A differentiator and and clearly we're not immune to the market, but it's all about controlling what we can control and this is what our teams have done exceptionally well Ah guided on driven by how we leverage Iraq's Ah.
Ah the Ah execution engine two over two overdrive.
Enter that until the China's low down a question there rub I'll I'll say that China seems to be very soft Entropic you know I I was in China I been in China now twice over the past five months and just to see it myself firsthand.
And I think you know what the teams continue to do there is just incredible but as we all we said we're in China for China and that Israeli also helping from a strategy perspective, because we were being view in the China market as a as a local almost like a local player obviously with a great reputation of a multinational I'm a great quality and innovation that were lunch.
But it's it's a lot of self-help that we're getting execute it through the use of I R X.
Okay. Thank you.
You know our next question comes from the line of Nigel Combs. Some Wolf research. Please go ahead.
Good morning.
Well a couple of little ground on P. S. T. Maybe could you just remind US you know after after this so busy this correction, whereas bio a farmer.
Knows about segment now and then on the fourth quarter and P. S. T. I think with seeming up you know amongst five two I think low to mid single digit growth. The I think the the step up Q3 to to keep fluids is a bit heavy the normal. So just wondering you know what you're seeing needs him driving that the improvement.
Yeah, that's it.
First on the on the P. S. The overall life signs is about a quarter of the PSD segment Ah and Biopharma. It is maybe I'll say, maybe I don't know, maybe a third of a quarter and and a big life signs here for us more stories on the oxygen concentration a side of the equation.
I think it's important to note of that.
That when you look at P. S. T segment X life Science, we have been able to kind of put organic orders and revenue positive.
I'm on thin out over the last 11 quarters. So that kind of shows are they're good string thong and diversity of that segment that gives us confidence on bad overall over the long cycle or cycle, the mid single digits plus.
Okay.
And I think your second part of your question was the sequential movement from P. S. T Q3 to queue for.
Definitely yeah, Yeah, Yes, I I think we do expect to see what I'll say, a slight nominal uptick from Q3 to Q4 I would remind you that this business done it I would say I have a tremendous amount of seasonality comparatively speaking to each other other businesses, it's a relatively consistent quarter to quarter, but that being said I'd say a combination of a couple of things one.
Still continue to have you know relatively healthy backlog, you know and and that is reflected in terms of what we expect to ship in queue for as well as Ah Saturday indicated relatively healthy and good strong momentum on the the what I'll call. The industrial side of the business, where you continue to see good order intake in Q3, and we would expect.
To see that continuing to queue for so for those reasons, we would expect to see you know a slight nominal uptick from Q3 Q for I'd say relatively consistent to what you've seen historically.
Okay. That's great. Thanks, and then on the.
Ask the question as well, but so I just want the phone up on the on the couple of the the billion dollar typed transactions.
That's a typical probably so the negotiated deal. So these most of the investment banking driven.
Since I processes.
No, they're they're they're primary source I mean, they're they're the ones that we have been cultivating for quite some time.
Okay, great well good luck with that thank you.
Your next question comes from the line of kill Richie Some Goldman Sachs. Please go ahead.
Hey, guys. Good morning, good morning, with a joke.
Hey, so just.
Tell her today. Thank you just as you kind of think he through you know the book the Bill in the order right as you head into 2024, if that was the expectation than that in the first half of 2024, we would expect a book the bill and Ikea has to be above one again orders to continue to expand just based on what you're seeing today in your in your <unk>.
Joe Yeah, I think obviously, we're we're we're not gonna get into guidance for 2024, yet, but I think the construct remains consistent with what you indicated I think and generally any degree of you know a typical.
Typical year book to Bill above one through the first half of the year, particularly as that longer cycle kind of orders funneled continues to to progress through and then book develop a low one what I'd say a combination of normal seasonality combined with the the longer cycle larger projects shipping through the back half that will typically led to that normal dynamic.
Gov book to Bill about one of the first half and below one in the second half right now no reason to think.
Different late for 2024.
Okay, Great and then maybe just the follow up to that or are you guys. Like hearing any you know concerns around projects pushing out a little bit to the right I'm, just giving them what the right environment looks like today and you know there's there's been a cause it's been I think a lot of concern to the market with with you know certain and markets at least like seeing projects pushed the right.
Like the renewable sector I'm, just curious what you're seeing specifically.
Ah, but Ah conversation thing happened with your customers.
But you always say nothing no significant or material change and and if anything when we when we see projects Bush do it right. It is really mainly due to sites not been ready, which which is being more driven by finding the labor to just get the sites are on track can be doing having heard much about.
The context of interest rates being the driver for for getting this project pushed through it right.
Okay, great. Thanks, guys. Thank you. Thank you.
You know our next question comes from the line of Jell O D. I have some wells Fargo. Please go ahead.
Hi, good morning, Thanks for taking my questions.
I wanted to start on resource allocation planning for for 24, and I think you you you've got a model that allows you to be pretty nimble as you suppose exploit growth where growth is and so what are you doing now what's kind of under way in terms of how you want a position as resources.
You know from a geographic perspective from an end market perspective, where you see growth is most attractive and now you're positioning for that.
That's really it.
[noise] drifting question I I again, and also maybe a few weeks ago, we were actually where we work together and with our team or demand generation team in Poland, where we had a long week fish I'm, particularly thinking I'm looking at what are we seeing today and what do we expect to see in 2024, how do we position.
The next level of demand generation activities to really position I was in good strength as we go into a 2024. So all of that work is undergoing a I can tell you that you know the one little detail I'll tell Ya I just kind of.
Double click on that is that it it varies region by region and even even the country and countries within the region like for example in mainland mainland Europe, well, we might be doing in friends is very different from what we might be doing in the UK and and a lot of that is driven by what we're seeing at the micro level. So that's.
The level of detail that that we undergo and we as a team kind of put together to really understand those best growth Victor's that we're seeing at the micro level.
So is not keeping up at the micro which if you do it in the microwave you're gonna get it if you brought it wrong [laughter]. So.
That's that's the exciting pieces that theme, we cannot got together and we feel that we're in pretty good momentum here to start 24.
Right.
[noise] I appreciate it and then I wanted to ask on the wrong side and the example, you gave on the oil free compressor and 14% more efficient than the previous model and just any more perspective on when when that previous model would have been launched to to get a sense of who would customers be sort of a natural kind of replace.
Men stage or or what about that R. O Y as compelling such that the payback would encourage them to replace the head of the natural aging of of the prior model system.
Yeah I.
I would say that right now or I, it's I think any it could vary by region, but we're seeing our eyes between you know 12 to 15 months Ah that's always a really great payback.
Ah again, driven by a combination of energy efficiency, but also driven by higher energy energy costs, though I think it's just one of those at the the we're we're driving really hard and customers when they see a payback of 12 to 15 months.
Or call that lives on two years and combine that with the sustainability and when many of them have to do with a scrub. One in school too is the is the other kind of a great factor that gives us a great tailwind.
Got it thank you.
Our next question comes.
Comes from the line of Christians Snyder from you B S. Please go ahead.
Oh, Thank you I wanted to ask on on the fourth quarter, you know the guy pretty wide range of outcomes in the organic growth cried anywhere from down one to up sticks by my mask can you just maybe talk about some of the the puts and takes her the variables that would drive the range of outcomes from that high.
So that low and thank you.
Yeah sure Chris I I, you know what I.
I would probably tell you here is you know we kind of viewed Australia, frankly, a bit of a tighter tighter spread than that but you know if I take it by the two components. So maybe I'll I'll talk kind of year over year based on the guide here.
Like we said, we do expect to see you know positive organic growth.
Across both segments starting on the Ikea side, you know if you're if you're thinking of the guide would imply something in the range of you know roughly approximately 3% organic growth year over year, you know again, given the pricing momentum, we seen as well as an expectation of organic volume growth you can probably think of it as roughly speaking two thirds price one third volume and I think I.
Would fall back on kind of exactly what we said all year is that if there's kind of an upside opportunity in the context up the guide and as we think about Q4, it would really be that organic volume side of the equation, particularly on the P. P O and the I T S side, where I get backlog continues to remain it effectively record levels.
On the P. S D side I'll go back to kind of some of the commentary we made earlier here again again continue to expect to see organic positive organic growth.
Probably a little bit more of a pricing tailwind comparatively speaking to what you've seen and Ikea and I would just really frankly attribute that more so too you know what we said over the course of the last one to two years Ikea is probably gone out a little bit quicker than PSP on the pricing front and as such now PSD, probably has a little bit of a longer lasting tail on the pricing side of the equate.
<unk>, but again those would be kind of the the dynamics, we would expect but you know again, we would expect to see positive on both sides of the equation effectively fall into the mid point up the Guy who does you saw a snake in the prepared comments.
Thank you for that I really really really helpful. Maybe for my follow up just on you know prior commentary around this expecting sequential order improvement in the queue for you know it doesn't really seem like that not seasonal it seems like you know typically Q4 orders or for similar to Q3, if not lower so should we.
That is that just the wrong timing of some of these bigger projects coming through or is that a signal of demand as you know at least stabilizing if not improving thank you.
Yeah, I I would I would actually say, it's it's probably a function of both so for example, if you go back to last year, you know, we acknowledge and you heard was that they said in the prepared comments Q3 was kind of a peak from an orders perspective in the context of some of these you know longer cycle order, some biogas order or something as we saw last year that creative that tough cop.
Right and we did see you know we we even indicated last year that think about it more in the second half basis, where you saw Q4 orders kinda normalized comparatively speaking to Q3 now you're kind of facing the other side of that equation. So obviously very tough comps in Q3, which we acknowledged you saw that kind of play itself out analogy. Thank you through the queue for I think a combination.
Sure enough consistent stable kind of M. Ql's stable demand patterns from a longer cycle dynamics of I since I spoke to.
I think that sucks up for what we're expecting to see in terms of the the positive trajectory both from Q3 to queue for as well within a year over year basis is there. Some degree of seasonality that is particularly a little bit more on the Ikea side, Yes, I guess, obviously with some of the other noise you haven't actually seen that as prevalent particularly in the last few years.
But you know I wouldn't speak to any dramatic seasonality of no playing itself out this year, whether it be ikea or P. S. Two.
Thank you.
You know our next question comes from the line of Nathan Jones from Stifel. Please go ahead.
Thank you Mr. Bhatt. Unfortunately on for Nathan Mothers' question is on channel inventory.
Any impact the channel inventory correction, having on your business.
Yeah, I don't know I I will say again, given given the highly customize nature of our products, there's really no material risk on on the Destocking Ah Ah Ah that that serves that come and serves really well for the I T a segment.
E S. T. A segment on those businesses that kind of sale through a distribution, we monitor really closely the selling and the sale through her to fill out activities to ensure that we prevent our customers from getting into and overstock situation and we we have been doing this that way for probably I mean, we have a bit of points over the past.
Five years to really have a good view after what's going on in the distribution channel.
Okay that makes sense and then my all my follow up.
The public schools and lifting business continues to show really solid growth that business has really improved under under your ownership.
No what's driving the strength there and I believe that was supposed to be considered non core in the past Ah. So maybe you could you run an update on.
Thinking about the portfolio and and the potential for portfolio rationalization. Thanks.
So so you're you're absolutely right about the the pizza business has really thrown incredibly well enter pointed out you know when we acquired and gets around P. P. L came in with mid teens and you meet the margin and now it's pretty close to so that the idea is kind of blended average kinda getting getting getting to that point so great improve.
Well still growing the business you know the the real real nature of a lot of these performance has really been a new product introduction. So so the team has done a really great job or reinvigorate and a new product and I think the exciting busier as a as we look into 224, they're going to be long.
And the next generation set of tools as well as lifting mechanisms that that we think continued to see some good performance.
Cause they were taking my questions.
And we have no further questions and they came at this time I will turn the call back over to Vincent gave for closing remarks.
Great. Thanks, everyone for your level of interest and as we sit on the call I Wanna. Thank again, all of our 20000 employees of Crows and go for a run or owners of English, Iran and have a have a great a great.
Great performance here is we kind of close a year and as we go into 2024. So thanks again for dangerous and look forward to catching up with many of you think you think about like.
This concludes today's conference call. Thank you.
And you may now disconnect.
Uh-huh.
Yeah.
Mhm.
Yeah.
Mhm.
Huh.
Yeah.
Mhm.
Mhm.