Q3 2024 Ingersoll Rand Inc Earnings Call
Okay.
Speaker Change: Good day and welcome to the Ingersoll Rand Q3, 'twenty 'twenty four earnings call.
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Speaker Change: Finally, I would like to advise <unk>. This call is being recorded thank you.
Speaker Change: I'd now like to walk on Matthew fought Vice President of Investor Relations to begin the conference My view either to you.
Good morning, and welcome to the Ingersoll Rand 'twenty 'twenty four third quarter earnings call I'm, Matthew for Vice President of Investor Relations and joining me. This morning are based on different 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.
Speaker Change: On the Investor Relations section of our website. 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 in our previous SEC filings.
Speaker Change: 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 measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website.
Speaker Change: On today's call, we will review our company and segment financial highlights and provide an update to our 2024 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 the subject.
Speaker Change: Thanks, Matthew and good morning to all.
Speaker Change: Starting on slide three our teams delivered another strong quarter of results by leveraging our competitive differentiator Iraq.
Speaker Change: And for that I want to thank and acknowledge our employees for continuing to think and act like owners are strong execution was highlighted by record orders and revenue.
Speaker Change: Over 200 basis points of adjusted EBITDA margin expansion, 9%, adjusted EPS growth and 20% and free cash flow margins.
Speaker Change: And despite the difficult macro environment, we expect to deliver on a long term investor day targets of double digit adjusted EPS growth and strong free cash flow generation in 2024.
Speaker Change: Turning to slide four our economic growth engine describes how we deliver adorable compounding results.
Speaker Change: On the right hand side of the page ultimately the intended outcomes, our double digit earnings growth and strong free cash flow margins.
Speaker Change: We remain committed to our strategy of delivering over the cycle or long term investor day targets as outlined on this page.
Speaker Change: Our unique culture of ownership combined with ire eggs is our competitive differentiator, which will help drive that long term value creation.
With that in mind, let me provide a brief update on our growth initiatives.
Speaker Change: On the next slide we'll start with our inorganic growth initiatives I am pleased to highlight four transactions that closed this past month.
Which together are expected to achieve mid teens ROIC by year three.
Speaker Change: Let me walk through these deals first at school.
Speaker Change: Which is a leader in the design and manufacturing of fluid power systems for mobile transport equipment.
Speaker Change: This is a great example of strategic market expansion, which further strengthens our position in the dry and liquid blower and vacuum markets with energy efficient innovative solutions.
Speaker Change: Next is music.
Speaker Change: Which expands Ingersoll Rand's technology capabilities expertise and after market potential in high growth sustainable end markets, including biogas and carbon capture.
Speaker Change: Continuing on page six on the left hand side of the page, we have Ut pumps, which adds new high pressure pump technology to our portfolio in end markets, including water wastewater food beverage and life Sciences.
Speaker Change: And finally makes these banned valley pump.
Speaker Change: Which is a leading manufacturer of positive displacement pumps with patented double desk pump technology for use in the municipal industrial chemical and food industries.
Speaker Change: On the right hand side of the page I would like to highlight that year to date, we have already closed on a total of 15 transactions in 2024.
Speaker Change: And we have far exceeded our annualized inorganic revenue target.
Speaker Change: Which bodes well as we look towards 2025.
Speaker Change: In addition, the funnel continues to grow and remains very active with 10 additional transactions currently under LOI.
Speaker Change: Including deals that will fit into our recently created life Sciences business.
Speaker Change: The funnel, including the deals under LOI are primarily bolt on in size.
Speaker Change: Turning to slide seven I wanted to take a minute and highlight how we are driving organic growth across our digitally connected assets.
Speaker Change: As we often get asked two questions first what do we do with the data we receive.
Speaker Change: Good assets and two how do we leverage that data to drive additional revenue.
Speaker Change: Simply stated our teams are focused on creating a meaningful positive impact for our customers around energy efficiency and uptime.
Speaker Change: The example on this slide demonstrates the agility with which we operate.
Speaker Change: We're recently gathered 45 employees across seven countries.
Speaker Change: Accretive just two days.
Speaker Change: The goal was to do a deep dive into real time connected asset data to unlock new revenue opportunities.
Speaker Change: The outcome was that we identified over 40 different revenue generating insights that collectively could translate to over $25 million in incremental revenue.
Speaker Change: A figure that speaks volumes about the potential of data driven innovation for our products.
As you can see in the middle of the page we have examples of those insights and these range from the optimization of energy consumption and maximizing machine uptime.
Speaker Change: When we empower our people at every level of the organization to think and act like owners.
Speaker Change: They make us better by defining new customer experiences improving our ways of working and bringing innovative thinking to advance our mission of making life better.
Speaker Change: I will now turn the presentation over to Vic to provide an update on our Q3 financial performance.
Vic: Thanks for Sanjay.
Vic: Starting on slide eight utilizing our competitive differentiator of IRS, we're able to deliver strong results within the quarter. Despite the continued challenging macroeconomic environment.
Total company orders grew 10% or up 1% organically, finishing largely in line with expectations.
Vic: Book to Bill was zero point 97, which is in line with our previous guidance of above one times in the first half and below one times in the second half.
Vic: Total revenue was up 7% as reported or down 2% organically.
Worth, noting that we did see some customers pushing out orders due in large part to site readiness and local approvals.
Vic: However, we have not seen order cancellations, nor do we feel that cancellations are a significant risk.
Vic: The company delivered third quarter, adjusted EBITDA of $533 million.
Vic: A 15% year over year improvement in adjusted EBITDA margins of 28, 6%, a 210 basis point year over year improvement driven predominantly through gross margin expansion.
Vic: Adjusted earnings per share was <unk> 84 cents for the quarter, which is up 9% compared to the prior year.
Vic: Free cash flow for the quarter was $374 million delivering a solid 20% free cash flow margin in the quarter.
Vic: And total liquidity was $4 billion with $1 $4 billion of cash on hand at quarter end, which demonstrates the strength of our balance sheet.
Vic: Our continued strength in free cash flow generation will enable us to remain focused on our capital allocation strategy.
Speaker Change: So Sanjay mentioned earlier, we still have 10 additional transactions currently under LOI and we continue to have momentum in building our M&A funnel.
Speaker Change: Turning to slide nine for the total company on an FX adjusted basis Q3 hours were up 10% and revenue increased 7%.
Speaker Change: Total company adjusted EBITDA increased 15% from the prior year.
Speaker Change: <unk> segment margin increased 190 basis points, reaching a new high of nearly 31%, while the PST segment margin decreased 30 basis points year over year, but remains above 30%.
Speaker Change: Overall, you saw ran expanded adjusted EBITDA margins by 210 basis points.
Speaker Change: And corporate costs came in at $35 million for the quarter due in large part to a year to date true up of management incentive costs.
Speaker Change: Finally, adjusted EPS for the quarter was up 9% year over year to 84 cents per share, including an adjusted tax rate for the quarter of 22, 8%.
Speaker Change: On the next slide free cash flow for the quarter was $374 million, including Capex, which totaled $30 million.
Speaker Change: Total company liquidity now stands at $4 billion based on approximately $1 $4 billion of cash and $2 $6 billion of availability on our revolving credit facility.
Speaker Change: Leverage for the quarter was one seven turns which was a 0.8 turn increase year over year, and a 0.3 turn improvement sequentially versus Q2.
Speaker Change: The year over year increase was driven primarily due to the purchase of ILC Dover earlier this year.
Speaker Change: Specifically within the quarter cash outflows included $15 million deployed to M&A as well as $71 million returned to shareholders or $63 million in share repurchases and $8 million for our dividend payment.
Speaker Change: Our capital allocation strategy remains unchanged with M&A being our top priority and we continue to expect M&A to be our primary use of cash as we look ahead.
Speaker Change: I will now turn the call back to the center to discuss our segment results.
Thanks, Rick moving to slide 11, our industrial technologies and service segment delivered solid year over year revenue growth of approximately 3% on top of approximately 19% growth in Q3 of last year.
Speaker Change: Adjusted EBITDA margins finished at a record high of 37%.
Speaker Change: With incrementals of over 100%.
Speaker Change: Adjusted EBITDA margins finished up 190 basis points from the prior year, which was driven primarily by gross margin expansion.
Speaker Change: Book to Bill was <unk> 97 times with organic orders up low single digits, finishing largely in line with expectations.
Speaker Change: Moving to the promos my highlights compressor orders were up mid single digits.
Speaker Change: And we continue to see positive orders globally, excluding China.
Speaker Change: Compressor revenue was up low single digits in the quarter.
Speaker Change: While industrial vacuum up lower orders were up high single digits and revenue was up low single digits.
Speaker Change: For innovation in action, we're highlighting our new patented oil free technology that.
Speaker Change: That is focused on high growth sustainable end markets like food beverage and clean energy.
This patented technology offers a 30% reduction in total cost of ownership.
Speaker Change: Driving a great return on investment for the customer and helping our customers achieve their scope, one and scope two emissions reduction targets.
Speaker Change: Turning to slide 12, the PST segment achieved 3% organic order growth and deliver adjusted EBITDA of approximately $180 million with a margin of 30%.
We continue to see many encouraging signs within the PSD segment with sequential order growth of 13% and sequential revenue growth of 16%.
Speaker Change: Book to Bill was <unk> 96, or <unk> 99 on an organic basis.
Speaker Change: In addition, short cycle orders in PST segment remained positive with book and ship orders up high single digits year over year, demonstrating the continued ongoing momentum of organic orders driven mainly by our demand generation efforts.
Speaker Change: We're pleased to see organic order growth is stabilizing and we remain positive about the underlying health of the PSD business.
Speaker Change: Finally, I wanted to highlight the performance of <unk> within the quarter sequentially.
Sequentially total IFC Dover revenue improved low double digits.
Speaker Change: With the Biopharma business up low twenty's and the medical device component business up low double digits.
Speaker Change: Year over year revenue for the Biopharma business is up double digits.
Speaker Change: We're very pleased with the business performance and we are optimistic about the potential to drive above market growth.
Speaker Change: Our PSD innovation in Nijmegen example shows how our mission critical products can help a community in the.
Planet Water Foundation provides safe drinking water access in the wake of emergencies and natural disasters.
Speaker Change: Using our dosage from pumps the planet water system can provide clean drinking water for up to 6000 people without the need of electricity.
Speaker Change: The system was recently deployed in Nashville.
Speaker Change: North Carolina after Hurricane Helane.
Speaker Change: I also would like to take a moment to talk about the recent hurricanes, which impacted our dose <unk> site in the Tampa area.
Speaker Change: Where several of our team members experienced flooding the damage many of their homes.
Speaker Change: And despite this they worked late nights and weekends to support our customers.
Speaker Change: So to our dosage from team special Thank you for your dedication hard work and resiliency.
Speaker Change: Your actions show, what we can achieve with our ownership mindset and culture.
Speaker Change: On the next slide let me provide an update on the current market trends as we always get a lot of questions about our leading indicators.
Marketing qualified leads or an <unk> or a key leading indicator of our short to medium cycle business.
As illustrated in the chart on the left hand side of the page our <unk> continued to grow.
Speaker Change: For the quarter organic materials are up 12% year over year.
Speaker Change: And are up 7% sequentially.
For the longer cycle component of our portfolio. One key indicator. We look at is the formal activity for engineered to order compressors systems and.
Speaker Change: And we remain encouraged as the funnel activity for Q3 is up 22% year over year.
Speaker Change: Consistent with what we disclosed last quarter the decision making process remains elongated.
Speaker Change: The feedback we hear continues to be centered around customer site readiness and too many projects happening at the same time, which is impacting EPC engineering capacity.
Speaker Change: As we move to slide 14, we have updated our full year 2024 guidance for revenue adjusted EBITDA and adjusted EPS.
Total company revenue is now expected to grow overall between 5% to 7%.
Speaker Change: Which is down 100 basis points versus our prior guidance.
Speaker Change: We're adjusting our organic revenue guidance down 200 basis points.
Speaker Change: Driven predominantly by the timing of orders converting into shipments.
Speaker Change: While we are very encouraged by the improvement in Q3 organic order momentum and continued strength in market activity. We continue to see customer delivery delays driven largely by customer site readiness and other factors, including the upcoming election.
We expect these orders to be delivered in 2025.
Speaker Change: As we look at our <unk> data loan cycle project funnel.
Speaker Change: Q3 organic order growth this situation remains encouraging as we move into 2025.
Speaker Change: FX is now expected to be approximately flat for the full year, which is approximately 100 basis points as compared to our previous guidance.
Speaker Change: M&A is projected to contribute around $455 million, which reflects all completed and close transactions as of October 31 24.
Speaker Change: Corporate costs remains at approximately $170 million.
Total adjusted EBITDA for the company is expected to be in the range of $2.01 billion and $2.04 billion.
Speaker Change: Which is approximately 13% year over year at the midpoint.
Speaker Change: Adjusted EPS is projected to be within the range of $3 28.
And $3 34.
Speaker Change: Which is up approximately 12% year over year at the midpoint.
Speaker Change: On the bottom right hand side of the page. We have included a 'twenty 'twenty four full year guidance bridge showing the changes in our latest guidance as compared to our previous guidance provided in August.
Speaker Change: No changes have been made to our guidance on interest expenses tax rate capex spend as a percentage of revenue and free cash flow to adjusted net income conversion all.
All remain in line with our previous guidance.
Speaker Change: Finally, as we turn into slide 15, before we open the call for questions. Let me wrap up by saying that I am very pleased with how our teams continued to execute despite the current market conditions.
Speaker Change: As we look to close out 2024, our teams continued to execute well in terms of targeted share gains and driving momentum in geographies, where we have historically been underpenetrated.
And despite lower organic growth expected in 2024.
Speaker Change: On track to deliver a nearly 10% organic growth CAGR for the total company over the past four years, which is two times our stated goal.
Speaker Change: Well continue to differentiating as Iran is our economic growth engine.
Speaker Change: Even in a difficult macro environment, we're able to add differentiated technologies to the portfolio with a distinct focus in high growth sustainable end markets.
Speaker Change: Year to date, we have added 15 companies through M&A with 10 more bolt on targets under LOI and.
Speaker Change: And we don't see this momentum slowing down.
The real power continues to be in the value, we're able to unlock as part of this model.
Speaker Change: We're on track to deliver again triple digit adjusted EBITA margin expansion through strong initiatives focused on improving gross margins.
Speaker Change: Which translated into strong double digit earnings growth and solid free cash flow generation.
Speaker Change: We believe that we have created a durable model that will continue to deliver exceptional financial results differentiate and Ingersoll Rand as a premier growth competitor.
Speaker Change: With that I'll turn the call back to the operator to open the call for Q&A.
Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone and wait for an H B announced we ask that you limit your questions to one and one follow up so we're able to take as many questions as possible.
Speaker Change: Last question comes from the line of Mark Colorant from Baird. Your line is open.
Mark Colorant: Hey, good morning, everyone.
Morning, Mike.
Speaker Change: So let's start on slide 13.
Mark Colorant: I certainly heard the prepared remark commentary around project push outs, but maybe you could put that slide in context to what youre seeing on an underlying basis right now.
Because the <unk> as an example, that's been improving as you've worked through the year here, but the organic growth guidance has moved down again, partially project push outs that maybe kind of correlate all of those moving pieces because I'm guessing that the <unk> is probably a little bit of a shorter term lead time.
Mark Colorant: Leading indicators excuse me and so kind of just maybe put all that in context and then related.
Mark Colorant: What needs to happen to have that slide sync with the order trends in the underlying demand and the underlying trend in your portfolio.
Yes, Mike.
Speaker Change: I mean first of all I'd say that we're definitely encouraged by what we see in terms of that market activity.
Also categorize the MQM market activity.
Speaker Change: As you recall, we always said that's our demand generation engine that were instigating the math. So basically this is how we continue to penetrate new customer accounts, we always said that 50% of those <unk> go into customers that have not purchased anything from Ingersoll Rand over the past.
Speaker Change: Got it.
Speaker Change: Two years. So so so it's about how do we continue to take share now clearly in the past historically, we said that in MTL will translate into an order over a period of six to eight weeks, but what we're saying now is that that is definitely getting allocated.
Speaker Change: Not making a commentary as to how elongated that is but it is definitely much longer than than what historically has been in a lot of that has to do has to do with kind of what you see in the market I mean, clearly customer readiness.
Speaker Change: Here lately could be some of the election instability or kind of predicting as to what might happen in kind of some of the holdup that not only ours, but maybe others or the sourcing. So I think the encouragement for US is that these are real customers really interested in real products. I mean, this is not just a <unk>.
Speaker Change: Customer asking that question. Ryan. This is now a qualified lead of an activity that the customer is very interested in putting on a purchase order that is going through our funnel.
Speaker Change: Good news too as well is that we don't see cancellations, we don't see customers, leaving.
Speaker Change: Our funnel and it's just a matter of continuing to nurturing those customers until we get the closure.
We have continued to see good close rates and so that's why we continue to be very encouraged about the activity that we're seeing that we're generating and as to the the long cycle project.
Speaker Change: Kind of fairly similar in scope.
Speaker Change: Keep in mind over the past few years Theres been a lot of mega projects that have been announced.
Speaker Change: And I think you have seen maybe in the market and not a lot of those have translate yet into into the orders and that has to do because these mega projects when they get design they need to get the sign up process through typically large engineering companies engineering contracting companies, we call it <unk>.
Speaker Change: And Theres just a lot of projects that are going through what is encouraging is that we're seeing good movement on those.
Speaker Change: I spent the past two weeks.
Speaker Change: A lot of travel around the world I spent actually an entire weekend in in middle East in Dubai in Saudi just to even talk to customers about specific projects and just to get that perspective firsthand from those customers and it's very encouraging what we're seeing what we're saying here is it just taking longer.
Speaker Change: But again that bodes well as we continue to look forward and in the meantime, we'll just continue to execute and control what we can control and deliver the performance that we can deliver.
Speaker Change: So if I take your comments and in the.
Speaker Change: Optimism the.
Speaker Change: The fact that these leading indicators are tracking in the right way.
Speaker Change: Does that mean that when you think about next year. It starts tracking towards a more normal growth algorithm for the company and if it doesn't.
Speaker Change: What do you think prevents you from getting there at this point market timing of these projects and any other variables.
Speaker Change: Yes, I think I think Mike I think the way we view it as that.
Speaker Change: We don't view that the market is going to see a V shaped recovery, we can see gradual recovery as to as we go through into joined 25 and as we always do we want to kind of see continuation here in the fourth quarter, how everything kind of lays out in preparation for our 2025 and we gave guidance on our next <unk>.
Speaker Change: Call.
Speaker Change: The other point to that bodes well for US is that you know here EBIT in Q3, our backlog actually grew.
Speaker Change: Year over year and sequentially. So again, it kind of continues to bode well as we think about 2020 five.
We'll be able to provide better color and guidance as we go into our next earnings cycle.
Speaker Change: Thanks incentive.
Speaker Change: Thank you Mike.
Speaker Change: And as Julian Mitchell from Barclays. Your line is open.
Speaker Change: Hi, good morning.
Julian Mitchell: Good morning, maybe good morning, maybe just a first question a sense around.
Julian Mitchell: Sort of a.
Julian Mitchell: Current demand trends, just flesh that out a little bit more I think the last quarter. It was very clear that China was the peak.
Julian Mitchell: Hi, dwindle or surprise factor backing.
Julian Mitchell: Early summer months.
ICL compressor orders ex China are good but.
Speaker Change: Since the last call have you seen kind of a broadening out of those project push outs.
Speaker Change: Is that maybe weakness in more geographies, perhaps than just the China factor.
Speaker Change: And.
Speaker Change: I understand that orders are good backlogs are good it's the conversion of those two things into sales that's sluggish at present, but when we take a step back and look at the overall kind of process industries exposure as it.
Is it fair to say that those.
Speaker Change: Generally would lag kind of earliest cycle markets and that speaks to your point on a very gradual recovery pace nextgen.
Speaker Change: Yes.
Speaker Change: Thank you Dan.
Speaker Change: China back to the commentary about the travel I actually two weeks ago I spent a week in China with a team and as I always do spend a lot of good good amount of time with customers.
Speaker Change: I can also give you maybe a little bit of color on that too as well I'll say, China clearly the market has been challenged this year and has remained largely unchanged as we move through Q3 and into early parts of Q4.
Speaker Change: I think the the good thing I guess, a good tone as I spend time with customers and give you maybe a data point of this kind of customer that it is a very large account is a company that has over 400 facilities just in China alone and close to 1000 facilities across the world.
Speaker Change: And the tone from these customer was fairly positive towards what we think is a rank can do for them I run our service oriented initiatives I mean, the customer was very enthusiastic on leveraging all the M&A in terms of technology that we have done across.
Speaker Change: Not only in China for China, but also in the U S and bring technology back to China to be able to help them.
Speaker Change: And particularly with the same growth themes and thematic so we say energy efficiency and how do we continue to improve the operational EBIT of their facilities.
Speaker Change: The customer was very committed incredibly well about our ownership mindset on how they feel that our employees when they go to their factories kind of take care incredible care of them and of course, there was I'll say positive in terms of what theyre seeing around investments not only in China for China, but they're now starting to.
Speaker Change: Outside of China, particularly in countries like even Africa.
Speaker Change: So I think we see customers are willing to invest and willing to continue to do accelerate how they continue to see their efficiencies in terms of your question is do we see anything broadly across any other regions that inflected negatively I'll say, let's say no for the most part I mean I think that the.
Speaker Change: Items here as we said is driven largely by by the shipment timing.
Speaker Change: And this is just the willingness of the customers to take the product now versus you know, we're saying Hey, we're seeing we have seen delays and customary getting though some of those push outs and we're just going to say and assume that this is going to actually now move into 2025, some of them and that's really the driver of our of our guidance.
Speaker Change: Organic guidance takedown in terms of your question about.
The Ats business driven process industries, and how do we traditionally see youre absolutely right in saying that we expect to see that gradual movement I think whether you ideas of the very diversed.
Speaker Change: Diverse in nature, and we have said always that we can pivot our products and technologies to the pockets of growth that we may see.
Speaker Change: And clearly you have seen <unk> that have been in contraction territory for over 24 months. We believe that we have outperformed adding I mean example, last year, we grew organically at double digit versus the <unk>.
Speaker Change: This year will be more flattish, but again, we think is better than contraction territory that the BMS our shine.
Speaker Change: Yes, I mean, having said that we believe that growth will continue to call more gradually as we expect these PMI has to improve and we don't expect that V shaped recovery or kind of snapple growth from one quarter to another but more gradually.
Speaker Change: Okay. That's helpful. Thank you and just my follow up on the margin front.
Speaker Change: So maybe just put a finer point on the sort of EBITDA margin rates in Q4, I think it maybe it's down a little bit sequentially, but.
Speaker Change: But maybe I have that wrong, but that would be.
Speaker Change: I know historically, you normally up sequentially in Q4, and as we think about 2025 exceptional incrementals this year.
Speaker Change: Are you sort of give back or normalization of incrementals.
Speaker Change: As you think about next year because of investment spend or anything like that.
Speaker Change: Yeah. Julian this is Eric let me, let me take that one so I think first and foremost.
Speaker Change: Yes.
Speaker Change: Frankly exceptional margin performance by the teams in Q3 really proud of what the teams were able to deliver.
Speaker Change: It's worth noting that largely driven by gross margin expansion and you really are starting to see the fruits of the labor and things like recurring revenue and things of that nature that we've been talking about for quite a while I think as you move to Q4.
Speaker Change: I think sequentially.
Speaker Change: Still going to see essentially two segments that are in the 30% EBITDA margin range is probably the easiest way to say it.
Speaker Change: I think corporate cost will probably normalize a little bit in that $40 million to $45 million range and so that's kind of the way to think about that margin algorithm for Q4, now I think as you've always seen us.
Speaker Change: Do and say, we're going to continue to make the requisite investments for ongoing growth and if there's room to probably outperform on the margin front, specifically in Etfs I think you've seen us do that for several quarters.
Speaker Change: I don't think Youll, hopefully see anything necessarily different in Q4, but we think around 30% is probably the right levels. As you think about Q4, specifically to your question about 2025, and obviously not not given necessarily guidance at this point, but is there anything that we would say is quote unquote, giving back margins or anything of that nature.
Speaker Change: I don't think that Thats, the way to think about it.
Speaker Change: We think that next year will be a bit of a normal margin expansion kind of in line with what we've historically laid out but we feel really good about where we are and most importantly, we continue to make the right investments in areas like innovation demand generation and commercial resources.
Speaker Change: Yeah.
Great. Thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Jeff Sprague from vertical Research partners. Your line is open.
Jeff Sprague: Thank you good morning, everyone.
Jeff Sprague: David just kind of back to the project delays and uncertainty.
Speaker Change: Yes, what you said about the APC is interesting but.
Jeff Sprague: No.
Jeff Sprague: And a lot of companies are pointing to election uncertainty.
Speaker Change: What is your view on that is that a reality or an excuse.
Speaker Change: Do you see.
Speaker Change: The outcome impacting your business substantially one way or the other or just having an outcome and getting this over with.
Speaker Change: Just lift some uncertainty.
Speaker Change: To move on with whatever and Brookdale.
Speaker Change: Yeah.
Speaker Change: Yes.
Speaker Change: It's interesting I mean, the reason why we don't call that out too often because it is we do a lot of voice of customer and <unk>.
Speaker Change: We are pretty close and intimate to them as they go through their buying cycle.
Speaker Change: And it doesn't come up couple of the table.
Top of the chart in terms of as the reason why the elongation now naturally as we have been kind of getting closer to the election here has it been more.
Speaker Change: Verbally said more often I'll say, yes.
Speaker Change: It is definitely not the top of the list, but it is definitely mentioned more often.
Speaker Change: So I think theres, a little bit of that I mean, how big of a reality it is or how much pent up demand is going to be after the election kind of snaps or counties over with and we see a better outcome I think steel they love to be determined based on clearly what happens after the election time.
Speaker Change: But but again, we will we will remain a focus on controlling what we can control and and that's that.
Speaker Change: That's our play basically year, Jeff so.
Speaker Change: Answer your question, yes, how we fared a little bit of more often I would say, maybe yes, but it is definitely not the number one reason for the integration.
Speaker Change: Due to project delays, though skew to the U S. It sounds like it's actually just quite global.
Speaker Change: It is quite global Jeff, Yes, very global so that's why the election is definitely not the only reason to be honest.
Speaker Change: Saudi Arabia and spend time with customers. It is project related delay because of site readiness and UPC I mean, it's basically those two.
Speaker Change: Yes.
Speaker Change: Just just pivoting real quick.
Speaker Change: Just mix obviously.
Seemingly would be positive given equipment software and Nick just mentioned service can you just maybe give us a little bit of an update on how services performing sort of what the growth rate is higher.
We now expect to close out 2024 on the service side.
Speaker Change: Yes, just very encouraging on the service side.
Speaker Change: Surveys.
Speaker Change: Positive.
Speaker Change: Good good momentum that we saw clearly organically in the quarter.
Speaker Change: And I think everything that we said at the Investor day is working really well.
Speaker Change: But recurring revenue on the focus of the teams are given it.
Speaker Change: And not just in the U S.
Speaker Change: One of the biggest engines that we have.
Speaker Change: But how we see the momentum in Europe, and even also in China, and India, India.
Speaker Change: India was the other country that I spent a large amount of time with.
Speaker Change: With the team and again that service oriented it's a great solution that not only our teams are launching but also customers.
They they really want so.
Speaker Change: Yep, it's good good momentum that we're seeing.
Speaker Change: Alright, thank you.
Speaker Change: Yes.
Speaker Change: Your next question comes from the line of Robert Watson Mono familiar research your line is open.
Speaker Change: Yes, hi, thanks for the question.
Speaker Change: Your margin performance continues to be extraordinary and I'm, a little bit curious just about.
Robert Watson: How much opportunity lies ahead, maybe do Ics versus behind if you still see as much potential there if you're shifting your workflows to be more growth oriented than margin oriented.
Robert Watson: The commentary because obviously you have done amazing things for the last couple of years.
Speaker Change: Yes, Rob I'll say.
Internally I'll start with the last question I mean internally, we like to say is the power of the yen is about.
Speaker Change: About growth and margin.
Speaker Change: So we always look at the quality of earnings and we look at making sure that yes, we're growing but we're growing profitably.
Speaker Change: So I'll say that we go for both.
Speaker Change: Yes, I mean year to date, we've seen exceptional incrementals and that speaks to as we said the gross margin activities that we have done this.
Speaker Change: Despite the market volatility we continue to make a lot of investments investments not only.
Speaker Change: Around.
Speaker Change: Recurring revenue streams and things like that also new product technology part of my trip out here in Asia.
Spent a full day with the team in China, specifically on innovation and I think they know what the solutions that the team has develop are very unique and very exciting.
Speaker Change: To see and things that we're leveraging now also from a global basis. You saw the example that we put out here in terms of the Dakota.
Speaker Change: That will definitely drive some incremental revenue as well. That's also part of our investment. So I'll say, we continue to be positive about about where we have margin expansion here in Ics.
Speaker Change: Rob maybe I'll just add maybe to your question about.
Speaker Change: Thinking about the two segments.
Speaker Change: Thanks, Brian I think we've been incredibly pleased with the momentum we've seen in 'twenty four we're poised for another triple digit margin expansion year and as you can the guidance implies and as you've seen largely led on the Ics side.
Speaker Change: I think as we flash forward its kind of back to kind of how we laid things out we expect that there still is opportunity in Ics are you're going to see the pace probably as much <unk> seen historically, maybe not as much I think there's still opportunity there, but I do think there is probably a little bit more outsized opportunity in PST and that very much fits with our stated at investor day targets of how to get.
Speaker Change: That to a closer to a mid Thirty's EBITDA margin so.
Still really pleased and I think that we see a lot a lot of great opportunity as we now think about the PSD business and particularly also with the ILC Dover business now being fully integrated.
Speaker Change: Yes.
Okay I'll step back thank you.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Andy Kaplowitz from Citigroup. Your line is open.
Andy Kaplowitz: Good morning, Aaron.
Speaker Change: Okay.
Andy Kaplowitz: The center can you talk about give us more color about the acquisition landscape as you start to think about 25, you've obviously been very active as you said for 24 years.
Andy Kaplowitz: <unk> I think Kurt went up a little bit sequentially. So do you see 25 is potentially as robust a year for incremental M&A M&A activities 24, and I know you said the analyze them or bolt on in nature is that generally the type of activity that you would expect in 'twenty five.
Speaker Change: Yes, Andy I will say the answer the simple answer to that is yes.
Speaker Change: I mean, we definitely see we're seeing a lot of good activity.
Speaker Change: Clearly you heard on the opening remarks, too as well with ILC Cobra acquisition that gave US a 10 billion ex.
Speaker Change: Expansion into an addressable market and that comes in where its looking into in terms of bolt on.
Speaker Change: Bolt on acquisitions, and we already have a few of those in our funnel.
Speaker Change: So, yes, I mean 225 I'll say.
Speaker Change: It looks to be still also very encouraging as we see the momentum that we have today, yes.
Speaker Change: Okay I'll for visit and then you mentioned in PSD and book and ship it still up high single digits year over year, you mentioned sequential orders up 13% I know organic revenue growth has been stubbornly negative for a while now in that segment until there's a better order environment suggests that you do have relatively good visibility to improve growth in 'twenty five.
Speaker Change: Maybe just on the ILC Dover in particular, a lot of positive commentary on it but just an update there.
Speaker Change: Yes. Andy. This is this is Vic maybe I'll, maybe I'll start and I'll, let Dan.
Speaker Change: I think with regards to just kind of the base PST business and what kind of comment on ILC Dover separately.
Speaker Change: We've been very encouraged by the positive orders momentum that you've seen now for a few quarters.
We are starting to see that translate a bit better. We do expect that for example in Q4 to be to be part of that growth algorithm, specifically as part of our Q4 guidance as you kind of get to the full year guide.
We'll pause on necessarily 2025 commentary, but I think the good news here is a combination of both the base business as well as a lot of the acquisitions, which are now really been fully integrated.
Speaker Change: I think positions us well as we move into 2025, and we're encouraged by kind of what I'll say the base PSD business and I'll, let you comment.
Speaker Change: And then on the on the IFC, Okay, I'll say that the integration continues to go very well.
Speaker Change: Some of them some of the numbers in terms of Biopharma and medical device component business.
Speaker Change: Really well.
Speaker Change: And I think the most important piece is that we continue to make investments for growth in the ILC over already as we see opportunities to accelerate growth in both the biopharma and medical device business and investments are not only just on demand generation in targeted commercial and innovation of product investment, but also.
Speaker Change: Investments and talent.
We have multiple new general amount of years we.
Speaker Change: I think we said before we structured the business now into.
Speaker Change: Into three distinct <unk> with new general managers in the P&L and we're reinforcing the functional support areas. So we're making a lot of the good for breakfast as investments to scale that up and scaled that business as we as we move forward.
Appreciate the color guys.
Speaker Change: Thank you.
Your next question comes from the line of Nigel Coe from Wolfe Research. Your line is open.
Speaker Change: Good morning, everyone.
Speaker Change: Hum.
Nigel Coe: Morning, I'm, just wondering if we could maybe just hone in on the.
Nigel Coe: On the on the PST sort of outlook for <unk>.
It looks like were.
Nigel Coe: Sort of pointing towards a return to growth in the fourth quarter, obviously comps getting easier just wanted to make sure. That's the case and then I just wanted to just try and nail this M&A contribution.
Nigel Coe: You definitely had a bit more revenue from I guess Iot Dover in third quarter.
Nigel Coe: And just wanted to know what you kind of pencil in the fourth quarter from <unk> and just maybe if you can just within that address the book to Bill <unk> 97 for reported <unk> 99 for cool does that suggest there's a bit of a book to bill below nine four for acquisitions, just maybe just unpack that for us. Thanks.
Speaker Change: Yes, Nigel I'll.
I'll try to answer all of those.
Speaker Change: So specifically in terms of PST on the growth algorithm into Q4 returned to a positive organic yes that is the expectation just to kind of state that one simply.
Speaker Change: In the context of the.
Speaker Change: The M&A contribution specifically in.
Speaker Change: And in Q4.
Speaker Change: Youll see it comparable maybe a touch lower than what you saw in Q3, but again I wouldn't take that as anything in the context us.
Speaker Change: Market trends I think that specifically with an ILC Dover.
Speaker Change: As I said as I said, I think the Biopharma and medical device businesses very stable continuing to see the what you would expect to see the normal growth and the sequential momentum we would expect a lot of what youre seeing and quite frankly, even now to your book to Bill question. It really comes much more from the space side of the equation, where typically you see orders.
Speaker Change: They can be lumpy at times, because they quite frankly are tied to larger.
Speaker Change: I will call platform level kind of kind of contracts and then they tend to ship over a multi quarter multi year timeframe thats exactly what you saw in Q3. So you did see a book to Bill that was below the fleet average that was literally driven by the space business and the reality is in subsequent in future quarters Youll see the exact inverse once you book.
Speaker Change: Some of those normal course contracts nothing that we would speak to you that's outside the norm and actually very consistent with how that business operates so again, we actually look I would say, it's very consistent we're very pleased with the performance there.
Speaker Change: A bit of noise, but I think the way you have characterized it in the numbers you are calling are very they are fairly accurate.
Speaker Change: Okay, and then just to be clear are we still on track for 215 to 20 guide for IFC.
Nigel Coe: Nigel could you repeat the question are we still on track for full year contribution from I'll see it I think it was $2 15 to 20 is the range.
Yes, I think thats in the right ballpark.
Speaker Change: Okay, great. Thanks, Mike.
Speaker Change: Your next question comes from the line of Joe Ritchie from Goldman Sachs. Your line is open.
Joe Ritchie: Thanks, Good morning, everybody.
Speaker Change: Joe.
Joe Ritchie: Hey, <unk> can you just.
Joe Ritchie: Could you just elaborate on what site readiness actually means I know you referenced the middle East.
Joe Ritchie: Assuming this is this is brownfield projects.
Joe Ritchie: Very separate that need like EPC.
Joe Ritchie: Our discussion that we had earlier and then also and I know people are asking all these questions around.
Joe Ritchie: Orders and book to Bill I guess, if there's a concern that the.
Joe Ritchie: The book to Bill well kind of nose dive in the fourth quarter and two just any any kind of comments around what the expectation is for the book to bill fully recognizing that typically in the second half of your year is typically below one.
Yeah, Joe in terms of the.
Joe Ritchie: In terms of the site readiness.
Joe Ritchie: It's a pretty wide range in terms of as to the reason why.
Joe Ritchie: In some cases, but I mean, it could be permits permits.
Excuse me it can be permitting in terms of greenfields or even brownfield.
Joe Ritchie: Project expansion capacities.
Joe Ritchie: But it is basically permitting in the labor to be able to get some of the things on in some cases were a piece of the entire process. So in many cases the other pieces are in already and we have to come in.
Joe Ritchie: Certain times. So it has to do with just the logistics and just getting a lot of this.
Joe Ritchie: Activities kind of put in place.
Joe Ritchie: In terms of our of the of the book to Bill.
Joe Ritchie: Keep in mind that you.
Speaker Change: No. We said that we don't guide on that.
Speaker Change: Don't guide on orders, but we said that for the full year, we expect book to bill to be approximately one and a and when you can see you cannot basically we are in that range. So we expect that book to bill to be and we said the first half of the year is going to be usually above one the second half of the year is usually laser.
Speaker Change: And as we kind of came here in the third quarter that kind of exactly that's exactly what happened and as we will see in the fourth quarter that would be the same case. So we're continuing to expect that for the full year, we expect that book to bill to be.
Speaker Change: Quigley approximately one and that means basically organic orders should bode well in the fourth quarter.
Speaker Change: Great that's super helpful and I guess just.
Speaker Change: Hi, maybe just elaborate a little bit more on biopharma really nice to see that 20% typically we.
Speaker Change: Part of that is being very.
Speaker Change: Margin accretive to the business and then we're hearing from others that there is places like.
Speaker Change: Radio farmer, there nasdaq's that that could be really growth in the coming years.
Speaker Change: Maybe elaborate on.
Speaker Change: That piece of your business, and specifically, where you're seeing what are you seeing good momentum.
Yes, I think I think the exciting piece is that.
Speaker Change: We said before is that these biopharma is very well focused laser focused on the approach in terms of high potency Apis and all of these hypertense EAP is that is for the next generation of gene therapies.
Speaker Change: And whether you think about personalization of cancer treatment research or even simply stated as these <unk> ones and drove weights.
Speaker Change: Drug weight reduction.
Speaker Change: Medicines and there's now there's now even new developments I mean, I think so far a lot of these drugs have been kind of on the monoclonal antibodies and now theyre going into by Bimodal activity. So I think theres just a lot of good development and for a lot of that development you need these high potency.
Speaker Change: Compounds and.
Speaker Change: To generate these hypotension compounds you need to move the powder and that's basically where we come in.
Speaker Change: We come in with great.
Speaker Change: Customization of powder handling and powder containment.
Speaker Change: Assesses that are single using nature, and so I think our team continue to be very focused on accelerating growth very focus on.
Speaker Change: The early development on on drug so okay.
Speaker Change: You said it very well I mean, I think there's just a lot of good growth momentum on that Biopharma business.
Speaker Change: Very helpful. Thank you guys.
Speaker Change: Your next question comes from line of Chris Snyder from Morgan Stanley. Your line is open.
Thank you I want to follow up on the commentary around site readiness much of it.
Chris Snyder: Appears tied to labor capacity and constraints there.
Speaker Change: When you speak with customers is there an expectation that that gets any better.
Unemployment at least here in the U S continues to go higher and it seems like demand for these projects and the activity is pushing higher so it seems like that could remain a concern.
Speaker Change: Yeah, No Chris I mean, I think it varies country by country for sure.
But yes, I mean, I think thats exactly why.
Speaker Change: We are smart about thinking about how.
Speaker Change: We think about this gradual recovery and the momentum that because that's you said it very well I mean labor will continue to be a constraint is a constrained here in the U S and continue to be constrained in many other countries across the world.
Speaker Change: Many cases is that skilled labor is very needed for these very highly complicated.
Speaker Change: Yeah.
Speaker Change: I appreciate that and then maybe on.
Speaker Change: On China, specifically I know you said.
Speaker Change: Not really seeing any impact in the operating environment or from the stimulus through the early part of Q4, but I guess.
Do you think that the stimulus will have an impact.
Speaker Change: On the economy, there into 2025 any way to think about the timing between when that could filter through.
Speaker Change: And just for all of us in the U S. When you look at the policy measures.
Speaker Change: I guess is there anything that stands out as potentially being impactful to ingersoll.
Speaker Change: Yeah, Yeah, Yeah, Great question there Chris.
Speaker Change: I think that the most impactful one is that these latest stimulus is really around upgrading all of the equipment.
Speaker Change: And you get a higher priority many cases and again this is at the total national level and then you Gotta go region by region. So.
Speaker Change: But the high priority goes to those projects and those conversions that are going to deliver energy efficiency.
Speaker Change: This is exactly the story that we have been saying all along in terms of what we are capable of doing on energy efficiency improvement. So so I think that that is where we see that the stimulus can be impactful for Ingersoll Rand in terms of the timing. It takes time I mean central government announced as the stimulus and then he has to trickle down to the provinces into the regions and that.
Speaker Change: Takes time.
Speaker Change: Now when I was in China, just a week ago did we hear more often and the teams we're talking to a lot of it yes.
Speaker Change: Have we seen it yet come to fruition not yet, but you know.
Speaker Change: That's why we say it could bode well for 2025, and we will see how kind of the fourth quarter.
Speaker Change: On that perspective.
Speaker Change: Thank you I appreciate that thank you. Thank you Greg.
Speaker Change: Your next question comes from the line of Joe O'dea from Wells Fargo. Your line is open.
Joe O'dea: Hi, good morning.
Joe O'dea: Okay.
Joe O'dea: Good morning.
Joe O'dea: Could you talk about Ingersoll kind of engagement and the timeline of the large projects. When we think about our growing pipeline of what can be multi year projects.
Speaker Change: Think about your involvement relative to when shovels go in the ground.
Speaker Change: Sort of when when Youre engaged with the customer when you get an order when you ship it relative to say shovels in the ground in a multiyear timeframe.
Speaker Change: Yeah sure also Jones from the early beginnings, we get involved I mean, a lot of it.
Speaker Change: These large projects we have are the EPC side to have what they call SMA subject matter experts and their subject matter experts on typical specifically processing technology like rotating component and so we have really great relationship in contact with those educating what our products can do.
Speaker Change: When the project is decision.
Speaker Change: The typical lead time is call. It 12 to 18 months between the order to the time of shipment and and that could be.
So maybe.
Speaker Change: 12 months later after the shovel goes into the ground so call it it could be up to two years.
Speaker Change: By the time that.
Speaker Change: When when the initial kind of gets removed to the time the project gets to completion, but it varies I mean, it clearly varies on the size of the project and the scope of the project but.
Our lead time is could be anywhere between 12 to 18 months based on based on when the customer puts the order and when the customer is ready for the site.
Speaker Change: Got it that's helpful.
Speaker Change: And then just wanted to come back to PST in some of the trends when we look at the organic growth the stacks, whether its two year three year actually soften sequentially from Q2 to Q3.
Speaker Change: The guide suggests that this would improve sequentially from Q3 to Q4.
Speaker Change: It seems like within sort of the order framework as well and book to Bill outlook that.
Speaker Change: PSD orders would sort of lead the growth in the fourth quarter and so just looking for any color on lumpiness within the third quarter and how that's improving in the fourth quarter I'm not sure if weather events were a factor, but any details there would be helpful.
Yes, Joe This is Dave maybe I'll start and I'll, let <unk> add in as well.
Speaker Change: What I'd point, Jenny I'll start with the latter part any major weather related things or any of that nature no nothing of that note that I'd point to I think the piece that we are continue to be encouraged about in terms of the.
Speaker Change: In terms of PST is that we've now had two sequential quarters of positive year over year organic growth and obviously I think we've kind of now fully consumed are comped a lot of those will call. The legacy Ingersoll Rand medical or life Sciences headwinds that we've been talking about for a while have we seen.
Speaker Change: Necessarily any meaningful recovery there no not necessarily at this point in time, but I do think that that was what was cloudy and I would say a lot of the historical comps I think the good news as we said in the prepared comments was one I think the kind of more what I'll call industrial or book and ship continues to do nicely. It's been multiple quarters of that I'd say showing good trends and then.
Speaker Change: Remember the PST business. It does also have some of the longer cycle type projects that can create some of the noise that sometimes I'm speaking about I think we talked about it much more prevalent in the ETF space, but some of that in PST. So I think the good news here is when you put that altogether in a particularly a couple of sequential quarters now of positive organic orders growth.
Speaker Change: Now, we expect to see that to start translating a little bit and we do expect to see positive.
Speaker Change: Organic revenue growth specifically in Q4.
Great. Thank you.
Speaker Change: Your next question comes from the line of David Raso from Evercore ISI. Your line is open.
David Raso: Hi, Thank you for the time just a quick question the organic orders within Es I know page 18 provides sort of the all in ex currency, but just given the acquisitions can you help us between compressors vacuum power tools and other <unk>.
David Raso: 0.4, I'm, just trying to figure out how much would a bottoming China b as a boost to the organic orders.
David Raso: It's not that easy on page 18, just given those are all in ex currency can you give those same splits organically to get to the organic order of point for for.
David Raso: For the quarter.
Speaker Change: Yes, David.
Speaker Change: Vacuum another.
Speaker Change: Yes, I'll give you I think probably the way to think about this.
Speaker Change: At least at a high level a couple of components, probably the two I'd say detractors for lack of a better way to say that when you think about the stack and I'll do my region was clearly Asia Pacific and clearly that's more of a China comment.
Speaker Change: I mean, we called that out in the end there hasnt been I would say it is.
Speaker Change: In China the commentary.
Speaker Change: Essentially all organic right there isn't a lot of M&A impacting that on the China side that has obviously been the biggest negative comp negative organic.
Speaker Change: Meaningfully negative thats whats thats whats driving that number closer to flattish the power tools business against smaller piece of it was also I would say below kind of the overall fleet average so that slightly bringing the numbers down the more positive trends you are seeing are definitely in the Americas is definitely kind of the leader of the pack comparatively.
Speaker Change: We also talked about that probably having one of the.
Speaker Change: Easier comps comparatively speaking on Q3, just given some of the the timing of projects in terms of last year.
Speaker Change: Europe Middle East, India Africa has kind of been in the Middle I would say, India and the middle East.
Frankly places that the center and myself, we're in not too long ago had been.
Speaker Change: Solid organic growth drivers.
Speaker Change: Western Europe has been a little bit of I would say mixed in terms of some of the different regions. So.
Speaker Change: To give you.
Speaker Change: The spectrum there I would say the two biggest factors definitely have been China and to a lesser degree power tools Americas contribute comparatively stronger and Europe kind of in the middle is probably the best way to think about it and I wouldn't delineate dramatically between the product technologies. They tend to follow those regional trends fairly well.
Speaker Change: I guess asked directly if China's say at this point down about 15% of it maybe even slightly smaller.
Speaker Change: What would the organic orders ex China.
Speaker Change: The year over year, not yes ex China.
Speaker Change: Yes, Hey, David we haven't we haven't given that but what I will say here is what you would you be much more positive than that low single digit realm, that's probably a fair statement yes.
David Raso: Okay, so something like them up three.
Speaker Change: China down 15, something like data center of the map, Okay very helpful. Thank you.
David Raso: Yes.
Your next question comes from the line of Angie Pasquale from BNP Paribas. Your line is open.
Angie Pasquale: Hey, good morning, everyone.
Speaker Change: Hey, good morning, Andrew.
Speaker Change: Yes.
Thing that caught my eye was kind of Youre, saying youre comment on.
Speaker Change: Some incremental activity in water treatment.
Speaker Change: Yes can you comment more on it.
Speaker Change: Is there more behind that and I guess, what are you seeing in that market because it really seemed to accelerate quite a bit.
Speaker Change: Yes.
Speaker Change: No.
Speaker Change: Yes, we do play.
Speaker Change: Very well in the water treatment I mean, you saw the example of those upfront.
Speaker Change: The example that we gave here.
Speaker Change: But even even within the PSD.
Speaker Change: <unk>.
Speaker Change: Good technologies with <unk>, which is basically one of the market mirrors for.
Speaker Change: Progressive cavity pumps in waste.
Speaker Change: Treatment facilities, you have Milton Roy which is basically doing a lot of mixing and dosing as well for waste water facilities and.
Speaker Change: And even when you go into the peer into the Ids segment.
Speaker Change: We have technologies like blower technology.
Speaker Change: We're one of the market leaders for creating the aviation in the wastewater facility. So so yes, the wastewater facilities in wastewater treatment processing has been an end market that we have put a lot of attention even including acquisitions.
Speaker Change: Got a couple of years ago, we acquire a company called Everest in India that is.
Speaker Change: The market leader for wastewater lower irrigation anything about India, only 30% of our water is treated so great growth in that market. So, yes, water and wastewater and water treatment are areas of opportunity for us to grow.
Speaker Change: Okay.
Speaker Change #100: Yes interesting.
Speaker Change #101: Another comment on I was hoping to get some color on.
Speaker Change #102: Obviously I'm trying to gauge your 2025.
Speaker Change #103: But what are you.
Speaker Change #102: Your free cash flow has been.
A good story for a long time do you see incremental tailwind.
Speaker Change #102: Some of these projects, especially some that are kind of delayed here.
Speaker Change #102: Really move forward.
And maybe any other comment on other than fundamental sorry to EBITDA margin expansion I.
Speaker Change #104: I think the other puts and takes we should keep in mind as we.
Speaker Change #104: Tried to model out next year.
Speaker Change #104: And.
Speaker Change #104: And just to be clear was that that was that on a on the cash cash flow side of the equation without the nature of the question or.
Speaker Change #104: Our cash flow.
Speaker Change #104: You have incremental tailwind, especially with some.
Speaker Change #104: Some of the pent up pent up project.
Speaker Change #104: Yes.
Speaker Change #105: I think I think maybe a couple of things in no particular order sure I think I think just frankly the business growth.
Speaker Change #105: Whether it be the projects or just the base business absolutely.
Speaker Change #105: I think working capital continues to be.
Yeah.
Speaker Change #105: A huge focal point I think we continue to make great strides in some of the more transactional pieces accounts payable kind of people, but I think inventory continues to be an opportunity to unlock that.
Especially given the model that we have I think a big piece, that's probably it.
Speaker Change #105: If I don't talk about it as much but maybe a touch under appreciated is also the M&A side generally speaking and the vast majority of M&A that we bring in.
Speaker Change #105: It frankly has a much higher working capital profile, just because quite frankly, a lot of them are smaller privately held companies buy less focus on working capital comparatively speaking to.
Speaker Change #105: Two to kind of where we are and so as we bring them and integrate them in across the full spectrum of working capital. That's generally an opportunity and then listen we will continue to continue to optimize I'd say.
Speaker Change #105: Ill call more of a blocking and tackling cash interest opportunity as we look forward cash taxes things of that nature. So I think there continues to be a lot of levers now that being said continue be really pleased with where the teams are operating you know we've been in that 100% free cash flow.
Speaker Change #105: <unk> realm, and we will continue to target those levels with some of the opportunities that I mentioned.
Speaker Change #106: Okay, great. Thank you.
Thank you.
Speaker Change #107: Your next question comes from the line of Nicki Jones from Stifel. Your line is open.
Nicki Jones: Good morning, everyone.
Speaker Change #109: Good morning.
Nicki Jones: Just a couple questions back on the velocity of the <unk> through the funnel.
Speaker Change #110: As <unk> said historically six to eight weeks and that that is materially longer now is it still getting longer or has it stabilized I think is getting shorter.
And then if the major regions regions or customer site readiness and insufficient APK engineering capacity. These things will naturally move through.
Speaker Change #111: That process over time is it really just time that we have to wait for these for the decision making to accelerate again or are there other conditions that need to exist.
Speaker Change #112: Yes, I know thats not sure yet.
Speaker Change #112: You know I will say that the elongation no material change in getting much longer to be honest.
Speaker Change #112: But definitely clear these tinkly much more above that six to eight week conversion rates.
Speaker Change #112: In terms of the additional question. It is just time I don't think we don't see interest rates.
Speaker Change #112: To be clearly, we never we never saw that being the impact for any of these to be kind of the driver.
Speaker Change #112: We made a commentary about here how elections.
Really not that dramatic change could it could that maybe accelerate as we kind of finalize and get these other ways.
Speaker Change #112: Next week, potentially but not something that we're counting on but it's mainly just mainly time here in this case.
Speaker Change #113: You guys have a little bit more visibility then we're going to have from the outside into those kinds of things is there an expectation or do you have the intelligence into the markets that would suggest kind of when that <unk>.
Speaker Change #113: <unk> lead time might start to shrink in these things might start to move forward.
Okay.
Speaker Change #114: I mean, I think I would tell you it varies dramatically country by country, depending on situations.
Speaker Change #115: Spending on growth projects I would say.
Speaker Change #116: Do we have intelligence on a lot of the projects on a lot of data yes.
Speaker Change #116: Or are we going to verbalize that externally, but likely not but yes, we do what we do know very well.
Speaker Change #117: Fair enough.
Speaker Change #118: I made a comment that things boding well for <unk> organic orders could you just elaborate on that a little bit.
Yes, I think the comment was I think it was positioned in the kind of the math around the book to Bill and if you. If you kind of run the math out now with three quarters behind us and you kind of an all of the variables would it imply kind of something in the maybe low single digit organic growth round for orders, that's kind of what the math would imply and you'll still kind of be around that that one time book.
Speaker Change #119: Bill I think.
Speaker Change #119: At this point and kind of what you're seeing you know like I said <unk> seen <unk> two quarters of good sequential good year over year orders organic orders growth. The PSC you did see it return back to positive organic realm in Q3. So again, what we'll say is the leading indicator of the general market continues to remain relatively stable and relatively healthy.
Speaker Change #119: So we're encouraged kind of as we as we move here into the fourth quarter.
Speaker Change #120: Thanks, very much for taking my questions.
Speaker Change #121: Thank you Nathan.
Speaker Change #121: Okay.
Speaker Change #122: There are no further questions at this time, so I'd like to hand, the call back to the same caveat with now for closing remarks.
Speaker Change #123: Thank you I will say that I my last remark will be again, a big thank you to our teams for another great quarter.
Speaker Change #123: That our economic growth engine is working very well to deliver very good results. Even despite the macroeconomic environment is very exciting to see so again, thanks, everyone for the interest and look forward to speaking with you. Many times. So thank you.
Speaker Change #123: Okay.
Speaker Change #124: That does conclude our conference for today. Thank you for participating in <unk> that will disconnect.
Speaker Change #124: [music].
Speaker Change #124: Yeah.