Q2 2025 Ingersoll Rand Inc Earnings Call

Hello and welcome to the Ingersoll Rand Q2 2025 earnings call. All lines have been placed on mute to prevent any background noise.

After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, please press *1 on your telephone keypad.

I would now like to turn the conference over to Matthew Ford, Vice President of Investor Relations. You may begin.

Thank you, and welcome to the Ingersoll Rand Q2 2025 earnings call. I'm Matthew Fort, Vice President of Investor Relations. Joining me this morning are Vicente Reynal, Chairman and CEO, and Vikram Kini, Chief Financial Officer.

We issued our earnings release and presentation yesterday afternoon, and we will reference these 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 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.

Both of which are available on the Investor Relations section of our website.

On today's call, we will review our company and segment financial highlights and provide an update to our full-year 2025 guidance.

For today's Q&A session, we ask that each caller, keep to 1 question and 1 follow-up to allow for time for other participants. At this time, I will turn the call over to Vicente.

Thanks, Matthew, and good morning to all. Beginning on slide 3 with our strong start in the first half of the year, we're raising our full-year guidance on revenue, adjusted EBITDA, and adjusted EPS.

With first half organic order growth of low, single digits a book, The Bill of 1.06 times and a total backlog increasing by 16%. Since the end of 2024. We remain confident in our full year outlook.

We continue to focus on controlling what we can control saying agile and leveraging irx in what remains a very Dynamic environment.

On slide 4, we continue to lead in sustainability and achieve strong financial performance while supporting the planet, our community, and employees.

Our 2024 sustainability report, outlines our commitment to Innovation that benefits customers improves efficiency drives, the opportunities and delivers consistent shareholder value.

For the third consecutive year. We were ranked number 1 in North America and globally in our industry on the Dow Jones Best in Class indices.

and we placed in the top 1% of the corporate sustainability assessment.

Additionally, English Oren earned a spot on cdp's A-list for the second year in a row recognizing our Global environmental leadership and transparency.

We strongly believe that a combination of our ownership mindset and creating a great place to work, is a true Catalyst for long-term performance.

And that long-term performance to date. Has driven approximately 600 million dollars of value creation for our team, through our employee Equity grants, since the Garner Denver IPO,

Moving to the next page, our value creation flywheel will remain the central driver of our success.

We continue to Leverage.

This cash flow through our capital allocation strategy prioritizes M&A and focuses on high-return investments.

Since our last earnings call, we have announced two additional transactions, adding approximately $90 million in annualized inorganic revenue.

We have now closed on 11 trans this year totaling over million dollars in annualized. Revenue at a 9.5 times. Pre- Synergy. Evita multiple

these results are a great start towards achieving our annual Target of adding 400 to 500 basis points in inorganic Revenue acquired,

And on top of that, we have another 8 deals under current LOI.

Over the past 5 years, we have completed 70 transactions.

With approximately 90% of those deals being sold, sourced, largely coming from family-owned companies.

Through each transaction, we continue to improve upon the process. We have built this incredible M&A flywheel.

But we also stay humble and learn more with every transaction. I also like to point out that since the closing of ilc, over just over a year ago.

We have continued to compound value for shareholders by deploying approximately 650 million to acquisitions.

This capital was deployed across 20 acquisitions, adding over $100 million in annualized revenue at a 9.5 times pre-synergy adjusted EBITDA purchase multiple.

These acquisitions have been spread out across all of our growth platforms, adding attractive technologies in attractive markets, and continuing to turn our value creation flows.

All while delivering our balance sheet by 0.3 times, creating room for future M&A.

Moving into our recent acquisitions. Please fluids, it's the first step towards building our new life science platform. We're excited about this acquisition as it brings 2 things. First Advanced personality pump technology, which addresses the previous Gap in our comprehensive, Bond portfolio,

And second, it helps broaden our geographical reach of our life science platform, which is currently under-penetrated in Asia.

It is important to note that we have another Bolton deal under LOI.

Which will continue to broaden our life science platform and we expect that transaction to close within the next few days.

Another acquisition to highlight is this thermal mechanical industrial compressors.

Which is a core Bolton for our compressor business. Both lead fluid and thermal mechanica were completed at a low double digit, precin adjusted ebit, top purchase multiple and we expect these transactions to meet the meetings, roic by the end of the third year,

I will now turn the presentation over to Vic to provide an update on our Q2 financial performance.

Thanks veinte.

Starting on slide 6, orders continued their strong start, up 8% year-over-year, with a book-to-bill of 1.03 times.

Sequentially from q1. To Q2, we saw 3% order growth as well as a mid single digit increase in backlog.

As a sente mentioned compared to the end of 2024, our backlog is up mid teens.

We are pleased with the first half organic order performance, which is up low single digits.

After market Revenue finished at 37% of total revenue which is up 100% points year-over-year,

and the second quarter finished largely in expect in line with expectations for Revenue, adjusted IBA and adjusted EPS, despite the dynamic macro environment, which demonstrates our ability to continue to execute well,

The company reported an adjusted EBITDA of $509 million for the second quarter, with an adjusted EBITDA margin of 27%.

The year-over-year decline in just EVA margin was driven primarily by the flow through on organic volume declines.

As expected, the dilutive impact from recently. Acquired businesses.

The dilutive impact of tariff, pricing matching tariff costs 1 for 1.

And continued targeted investments to drive organic growth.

Corporate costs came in at $35 million for the quarter.

Our Q2 adjusted tax rate was 23.6%.

Adjusted earnings per share were $0.80 for the quarter, which, on a 2-year stack, is up 18%.

In the second quarter, we recorded both a non-cash Goodwill and asset impairments.

These adjustments have no effect on our adjusted earnings or the underlying operational performance of the business.

We provided detailed information in the 10 e which was filed yesterday, but I'll take a moment to provide some commentary.

And ilc Dover.

Starting with the high-pressure Solutions business. We wrote down the minority stake. We retain when we sold off the business

This write-down was due to changes in the revised long-term outlook driven by the upstream oil and gas market.

And specific to ilc Dover.

First, we had a change in the long-term outlook for our Aerospace and Defense business due to reduced expectations for business with a certain customer, which resulted in an impairment.

Second, while our long-term forecast for the bio Pharma business remains robust. We did record an impairment.

This impairment was driven primarily by market-based inputs such as an increase in the discount rate and contraction of pure Market multiples.

And finally, to a lesser extent, we recorded an impairment related to the ILC, Dover trade name, due largely to the above-stated factors.

Given the ILC Dover impairments, I would like to comment on our disciplined approach to M&A.

We have a holistic approach that includes comprehensive diligence appropriate for the transaction, as well as negotiated representations and warranties.

In the ILC, Dover transaction, these representations and warranties were backed up by insurance. We have filed a claim under that policy.

I just want to reiterate our conviction in the long-term prospects of our life sciences business, which remains unchanged. We believe that ISC Del will play a key role in long-term value creation.

Finally, we remain disciplined in our approach to M&A. And as a reminder, year to date, we've acquired 11 companies at a pre-synergy multiple of 9.5 times.

On the next slide, free cash flow for the second quarter was $210 million, which was down year-over-year, primarily due to the timing of bonding payments.

Year to date, free cash flow remains robust, up 13% year over year.

To company liquidity is currently $3.9 billion, underscoring the strength of our balance sheet and providing continued flexibility to pursue value creation opportunities in what remains a dynamic market environment.

Leverage for the quarter was 1.7 turns, which was a 0.3 turn improvement compared to the prior year.

And specifically within the quarter cash, outflows included, 500 million deployed to share repurchases, as well as 47 million, to m&a, and 8 million dollars for our dividend payments.

The hundred million dollars in Sherry purchases made during the second quarter represented approximately 6.1 million shares at an average purchase price of $81.35.

And, as a reminder, we are still targeting up to an additional $250 million of Sherry purchases for the balance of the year.

I will now turn the call back to Vicente to discuss our segment results.

Thanks, Vic. On slide 8, second quarter orders for us finished up 7% year-over-year and up 5% sequentially from Q1 to Q2.

Book. The bill was 1.05 times.

The second delivery organic order growth in the low single digits. Making the second consecutive quarter of positive organic order growth.

Revenue finished up low single digits.

Adjusted, Evita margins, the client year-over-year driven by the flow through on organic volume, the expected diluted impact from recently acquired businesses.

To diluted impact of their pricing matching tariff costs 1 for 1 and continue commercial Investments, for growth in the business.

Moving to the product line. Highlights compressor, orders were up low single digits.

Industrial vacuum and blower orders were up high this quarter.

The power tools and lifting orders saw a minimal decline of low single digits.

On a regional view, we saw orders in the Americas up high, teens.

EMA up high, single digits, and Asia-Pacific up low, double digits.

It is important to note that we saw organic order growth in China.

Which reflects the resilience of our team, the utilization of IRX, and the effectiveness of our demand generation initiatives.

In our innovation, in action, the new Compare Ultra Altima oil-free compressor product is truly a breakthrough offering, delivering a 14% improvement in energy efficiency.

These new compressor has an optimized design with a fully integrated air and drive that eliminates the need for a gearbox, reducing friction and increasing reliability, and serviceability launched initially on the the compare brand. This product exemplifies English or runs multi-channel. Multi-brand strategy as this technology will be launched on their other brands and across the globe.

Turning to slide 9 Q to orders. In PSD were up 13% year-over-year with a book to Bill of 0.96 times.

At 1.0 2 times.

Organic orders were down 5% but came in in large with expectations in the prior year, we saw some larger loan cycle orders which were not expected to repeat in the current year.

Excluding these large projects organic orders were up low single digits.

Revenue finished up 17% year-over-year driven largely by m&a.

PST delivered adjusted EBITDA of $170 million, which was up 14% year-over-year, with a margin of 29.5%.

Just a little bit of margins. Finished in line with expectations, improving 40 basis points sequentially and are up 190 basis points over the past two quarters.

For our PST in action, we're highlighting the Evo Series electric diaphragm pump.

This breakthrough technology sets a new benchmark, delivering a 15% improvement in energy efficiency over previous technologies.

It is also designed with an ergonomic single-sided diaphragm for easier maintenance.

In addition, this product provides us with a perfect platform to launch the AeroProtect.

Which is a care type solution. Similar to our offering on compressors designed to maximize customer uptime and minimize costs while increasing recurring revenues.

As we move to slide 10.

We are raising our guidance on total revenue adjusted and adjusted eps.

As highlighted on the right hand side of the page were increasing, total revenue driven by m&a and FX which is partially offset by reduction in their related pricing.

It is important to note that the change in organic revenue is solely Based On A reduced. Tariff, pricing assumption, which has no impact to adjust the debt or adjust the DPS.

Given that the Tariff landscape will remain fluid due to the introduction of new trade agreements, we have included an appendix slide detailing, our underlying assumptions incorporated into our latest guidance.

We have raised our adjusted EBITDA midpoint to $2.13 billion.

Matching the top end of our previous guidance.

We have also increased our adjusted EPS to 3,040 cents at the midpoint which is up 6 cents or 2% from the midpoint of our previous guidance.

for the rest of the component of a full year guidance, we anticipate are adjusted tax rate to be roughly 23%

Net Insurance expense, to be about 220 million, in capex, to be around 2% of Revenue.

We have updated our shared account assumption of approximately 403 million shares, which reflects the impact of the $500 million in share repurchases made during the second quarter.

Our guidance excludes the effect of any additional share repurchases or m&a, which may happen later in the year.

At the bottom of the slide, we have added commentary regarding our own internal indicators. We track which continued to show positive signs.

Mqls, remain up double digits in the second quarter with Continuum momentum in July.

Large loan cycle funnel activity remains robust with approved projects continuing to progress through the decision making process.

Well, the macro environment remains dynamic, business conditions remain stable, and we're encouraged by the organic order growth and robust book-to-bill we saw in the first half of the year.

We continue to focus on controlling what we can control on our teams remain resilient and are executing very very well.

We remain committed to leveraging our robust balance sheet to strategically deploy capital and drive value for our shareholders.

Finally on slide 11. As we wrap up this portion of the call, I would like to highlight that we remain involved and are prepared to pay, but in what continues to be a dynamic, Global marketer environment.

We will continue to utilize our strong balance sheet to strategically allocate, Capital Insurance, sustained durable, value creation for our shareholders.

Our Capital allocation strategy remains unchanged.

And we will continue to be disciplined in our approach to m&a.

To employees: I want to thank you again for your part in delivering another strong quarter. Remain focused on controlling what you can control and stay agile through the use of IRX.

With that, I will turn the call back to the operator and open it for Q&A.

Thank you. If you would like to ask a question, please press *1 on your telephone keypad. If you would like to withdraw your question, simply press *1 again. We ask that you please limit yourself to 1 question and 1 follow-up. Thank you.

Your line is open.

Hey, good morning, everyone.

Morning, good morning, Mike.

Hey, so maybe we could just talk a little bit about how you see the demand Cadence order, Cadence, play out in the back half of the year. Um, I know you saw sequential Improvement, uh, 1 Q to 2. How did that track through the quarter and into the start of the third quarter? And what are you assuming guidance from a seasonality or Improvement perspective? Um, as we work through the back half of the year,

Yeah, Mike. So, um, I mean, as you know, we don't we don't typically guide, uh, orders externally. However, as we have, uh, historically said, this is a business that tends to be around, you know, book to Bill 1 on a full year basis. And, you know, we saw a pretty good start or the first half of the year with a book to build of 1.06. So that kind of sets uh, well for, for the second half, in terms of the backlog that we have provided, their

Uh, you know, in the second quarter, uh, in terms of Continuum momentum, we, we actually saw a fairly stable continuation through the throughout the quarter. Uh, no. No nothing to discern in terms of, uh, declines or but it was very consistent. Uh, as we have, uh, seen, you know, uh, historically in in a typical quarter and, and that also continued, uh, here in the month of July. So I would say that, uh, that that kind of bodes. Well, you know, the second quarter, what we also saw is continuous strength in the kind of the large, uh, loan cycle orders uh, which was, you know, primarily the driver or the organic order growth or

And say, you know, particularly here in the its side and uh you know, we expect these orders to have a good impact here as we go into 2026 Revenue. So kind of building up uh, on the on that backlog already.

But maybe the last point, uh, to highlight here in terms of Mike, in terms of, uh, the underlying demand. I mean, as we pointed out, you know, it’s two quarters of positive order growth, which is good. And PST, if it wasn’t for the loan cycle comp, uh, that was really related to hydrogen orders last year, not this year, we would be kind of positive as well, uh, within the quarter.

Thanks for that and and then maybe somewhat similar question on the margins. If if I look at what's implied in the margins back, half the year a little bit of a step up, maybe just walk through the puts and takes, um, you know why the step up in the back half of the year, is it? Seasonal. Are there other factors associated with it?

Yeah, Mike just like I'll take that 1. So um I think it would be fairly consistent with kind of how you seen uh prior years. So you know, just a couple things to point out um 1 definitive seasonality, I I think the Cadence of of Revenue and earnings is very consistent. Uh in in terms of our guide for 2025 is what you've seen historically. Um, and so you know the the the with the increased Revenue profile in the back half of the year, you, you typically see some of the flow through, uh, come from that. Just not just on the organic volume and the pricing side, but then some of the productivity initiatives like i2v and things like that that follow. Um, you know, volume

The other thing I would say is, uh, the continued integration, um, on the m&a side, whether it be the bolt-ons as well, as kind of as we've talked about for multiple quarters. Now the the ongoing progress on the on the ilc Dover side, um and it is worth noting that particularly in Q4 on a year-over-year basis. You know, our PST business probably has a, you know, their their easiest comp comparatively speaking, um, which obviously kind of helps factor into that. So again, I would point to the, the normal kind of drivers and factors. You would see that go along with seasonality,

Thanks guys appreciate it. Yep, thank you.

Next question comes from Julian Mitchell with Barkley's, your line is open.

Hi, good morning. Um May good morning maybe just wanted to start with um the sort of

Phasing within the second half um, of the sales and airbit dart step up that. Um, Vic just um, highlights it. Um, I think historically.

Maybe just to start with, you know your EBIT. Does about 26% of the year fall in Q3? So based on your fully adjusted guidance, it's a sort of $550 million number for Q3. Is that roughly the right way to think about it in terms of that Q3 phasing?

Growth and book to build at desente kind of referenced earlier. Um, you know, through the first half of the Year supports that view, um, as far as kind of the large moving Parts, let me kind of break it down for you a little bit. Um, in the second half of the year. We do expect organic volume growth to be, you know, down in the low single digit range um which compares to being down in the kind of mid single digit range in the first half of the year and on pricing uh we expect pricing to be in the, let's call it 3 and a half to 4% uh total range with the relatively even split between base pricing and tariff related pricing. That's worth noting that that that base price of about 2% is very much in line. With what we have always indicated is a normal level of pricing, that we should be able to, uh, you know, generate in the business.

And then on the margins, I think it's exactly what you would expect. We do expect to see sequential. Mar mar margin improvement with, with Q4, kind of being the uh, the high water mark for the year.

That's very helpful. Thank you. Um, and when we're thinking about the organic sales sort of year on year, um, you know total company, let's say I think the first half was down about 3 and a half percent year-on-year. Um the full year guide is sort of minus 1 so you're up maybe you know low single digit in the second half year on year on organic sales that your guide midpoint um does all that growth come in the fourth quarter. Um or you know

Do we see sort of flattish organic sales in Q3, and is that the same for both segments?

Yeah, let me, let me start there. I, I, I do think Q4 will be a little bit of a healthier growth than, than Q3, um, you know, so Q3 you know, slightly positive Q4, you know, a little bit better than that. It's kind of the way the ramp will work between Q3 and Q4, uh, the way that you outlined, obviously the first half and the second half expectations is, is largely correct. And consistent with kind of what I what I said before. And then, you know, you're, you're a second part of your question in terms of the 2 segments. Um, what I would say is not dramatically different between, uh, the 2 segments. Um, you know, I, I think, uh, you know, you you've, you've seen fairly consistent performance. Um, you know, in, in terms of the volume side of the equation in the first half for its and PST. Um, you know, I I, I don't think you're going to see a dramatically defer, you know, diverging performance between the 2 segments in the back half of the year.

Great. Thank you.

Thank you.

The next question comes from Jeff. Sprag with vertical research, your line is open.

Hey, thanks. Good morning, everyone. Um, enjoy. Appreciate you hit it. Hey, good morning. Appreciate you hitting the ilc right up front, but we just talked about, uh, sort of dealing with m&a over time, right? These, you know, these bolt-ons are, you know, they look like they're all sort of a layup and we want to do as many as you can. I think

They make sense. Uh, I would think as a company gets bigger, right? You, uh, and the targets potentially get bigger. There's always going to be things that maybe have some interest, but you know, 20%, 25%, 30% of sales might be something you didn't really want and came along for the ride, similar with what happened with ILC. Um, so maybe just a little bit more color on, you know, what you did to protect yourself. You know, you've mentioned some indemnities or something along those lines. And how do you think about managing, kind of, you know, potentially larger, more complex M&A down the road?

Yeah, no good question. I, I, uh, you know, a couple of things.

But, uh, even even going to the ilc, uh, you know, that despite everything that, that that you hear, you know, we still, uh, are very enthusiastic with the life science, uh, side of the business which I again, it was 75 75% of the, of the portion of the business in totality the ilc Dover. We expect uh to still be at Mid single digit roic by year 3.

So which we view for these kind of large transactions to be actually, not that not bad uh clearly on the Bolton. As you said we can get to meetings our icy by year 3. We always expected that you know larger transactions will be less than that. And uh and and this is providing us the platform for the life sciences that uh that we have spoken about in the in the past and now as we continue with our Playbook uh you know you make these kind of larger. Uh

Again meet teams are I see and Bolton in in terms of how uh how we do large transactions? I mean, think about too, as well, when we combine Garner Denver, I think it's a run. I mean we leverage irx for the integration 3D extensively and ever since then, you know, 5 years later after 70, 70 more than 70 transactions, we we we definitely have done a lot of lessons learned, a lot of continuous Improvement, a lot of kaisen around, how do we continue to improve, uh, our methodology. So, we do have a Playbook and part of that Playbook and holistic approach includes not only the comprehensive D diligence, but also uh negotiated, you know, representations and warranties. And, you know, in the i in these ioc do over transactions. These reps and warranties were backed by insurance and and we have filed a claim on the on the dark under that policy as you can imagine. I mean these things are complex. Uh, we we completed our internal investigation which was pretty extensive.

And and we failed ready to file. Uh, this is this is not something. Uh, I want to emphasize is also something not that is taking up management. Team away from running the business and uh, and and and and and you know, in parallel, we have continued to specifically to Elsie to invest as we have said in Prior quarters, you know, adding new new team members creating the p&ls and running the Playbook that we run uh post integration.

Great, thanks for that caller. Um, and then just on, uh, on the M mql specifically, um, anything and just the, the nature of these longer cycle projects that stand out, um, regionally vertical Market, um, you know, different different flavors, or is there kind of a consistent theme in what you're seeing on the longer cycle side?

Yeah, let me let me also say, you know, on the on the uh, above the mql. Kind of a little bit of color here, mqls in the long cycle. So as we step back, I mean, we always said that the man generation, which is our kind of what we call, our marketing, generation engine to, to help with provide a point of 2, or of growth above the market. And, uh, and that kind of demand generation is kind of what leads a lot to this, uh, mqls, and you see that, uh, on the overall compressor performance or even China where we're seeing some, uh, organic positive despite that the market that is not growing. We attribute that to the efforts to instigate the man and find pockets of growth through, uh, these mqls and the man generation, uh, activity. Clearly what? You know what you have seen here in the past couple quarters is, is definitely a little bit of uncertainty like large, projects, shifting and, and other macro factors that, that, that are masking the the mqls not converting faster and, and providing that and showing that into uh, into the organic growth overall,

Both uh picture here but we feel you know continue to feel encouraged by the momentum we see in mqls. Uh it is real demand and Market uh that we feel it will come uh over time convert to orders and uh we'll definitely continue to keep those customers in our funnel and and we're prepared to close those orders as they see the opportunities in terms of

Then the the loan cycle, I say, you know, fairly spread. I mean uh uh, you know, here in the second quarter, we saw a lot of good solid momentum in uh, in in Wastewater facilities. I mean water, and waste water infrastructure. That's why you saw our vacuum and blow our business to continue to accelerate. Uh, and uh, you know, we continue to see some pretty good performance in terms of, uh, some of the, some of the reassuring, uh, that we see, you know, whether countries like India that, uh, that is accelerating their, their, their side of, uh, of of localization for Supply chains.

Great. Thank you.

the next question comes from Rob, wartimer with melia's research, your line is open,

Uh, good morning and, and thanks for the the discussion there. I mean, it's it's a little bit related to what I was going to ask in, in the um, mql Arena where you've had a little while of and it's not unique to you but delayed decision-making projects, not making a completely true. Uh the funnel and I guess my question is is the is the reason for that changed over time. There was politics a while ago, is, is Tara for resolution and unlock here or do you do you hear more from customers around it?

Interest rates or any any sense of what might really kind of unwind that and if you would, I don't know if you can also characterize, you talked about those larger projects but when you see, hesitancy is, is does it go all the way down to smaller stuff or do you have steady flow? And then it's it's really just the the bigger things thanks.

Uh, you know, need your reaction in terms of flows and the unpredictability and uncertainty of what that that creates. Um, in terms of uh of some of the uh uh you know, I will also add, you know, this bill the the, the big beautiful bill act as well. Uh, that created a hold out uh for for some projects too as well as you can imagine on renewable energy and and things of that nature. So, uh, you know, to the second question Robin in terms of, uh, kind of these these loan cycle, you know, we, uh,

We continue to see the movement. I mean, definitely much slower than what we typically have seen in the past.

And and the range. It kind of varies. Uh, I would say it would be site, not ready, you know, a bit of a change in, in technical work and technical specs kind of some tweaks in the technical spec that kind of go back to then having the APC to redesign and kind of work with us as a team to redesign

But I think the good news here is that that we continue to see that engagement and and and and is not cancellation of projects. It's just basically a much slower move of these projects through the funnel due to in that case. I'll say change in specs or over capacity or EPC is not having the engineering resources to complete the project and put it into a purchase order.

Uh got it. Perfect. Thank you.

Comes from.

Good morning, everyone.

The same day, just on PST. Can you give more color into your legacy Gardener Denver medical business? Are you seeing any green shoots there in the business turning and then setting back on PST? As you know, you haven't seen sort of that mid-single-digit plus growth algorithm in a while here. I do think of easier comps in the second half, as you talked about, but can you talk about your confidence in the acceleration of overall PSG moving forward?

Yeah, the other on that Legacy going to Denver, uh, uh, medical business. Uh, you know, I, I, I categorize it as we're, we're, we're seeing, uh, uh, good momentum on what we call the fluid handling side of the business. This is a business that, uh, particularly plays well with, uh, uh, personalization of of cancer research, uh, in cancer medicine, where where we continue to see some pretty good momentum. And, you know, when you think about that, uh what we can of put it on the on the slide, it's it's the second consecutive quarter of organic Revenue growth in the Life Sciences. Now naturally, being or organic that speaks volumes to that. That's basically the Legacy Gardener Denver business. So again, uh, another good growth. So you can see that that is turning and uh, and and seeing some uh, some some better flow in terms of kind of your mid single digit.

It's, uh, uh, for the PSD. Yeah. I mean, I, I, I, I can tell. Where, is that? As you, we, we called out, I mean, again, good orders growth in the first quarter in this quarter if he wasn't because of uh some of these large projects. And again these are large projects that specifically we decided to kind of abandon the market. In terms of hydrogen, refueling stations, and things of that nature, that we decided that it was better not to continue to pursue that, uh, then that, that is that if you were to eliminate that, uh, that puts us into positive, uh, uh, organic, uh, order growth. And when you look at canopy the onion and these kind of what it was called The Legacy PSD or we call Precision technology. That's, you know, some of those pump businesses are so growth in that mid single digit from an order perspective. So, again, that's uh, that's what we continue to feel good about. There's, there's a turning point and inflecting point and and we expect that uh, that that, you know, continue to improve, uh, on a sequential basis.

The Senate that's helpful and then maybe this 1's for Vic, maybe just a little more color into that. Itns margin in Q2 because I think you expected margin to sequentially increase and it did decrease a bit. I know you call that all the factors that impact the margin. But were there any in particular that were slightly worse than you're expecting? And can you talk about your confidence level? I know you've got improving margin, dialed in for the second half.

We we expect to see sequential margin expansion as as we stated in the kind of the earlier question kind of in line with kind of normal what I would call uh seasonality. But again nothing I would say out of sorts or anything that that we think um you know cost any concern or anything of that nature that we saw in Q2.

Appreciate the color.

the next question comes from, Nigel Co

With that, your line is open.

Thanks. Good morning guys. Um,

So just wanted to uh just want to make sure I've got the right number so price. Um I think you said vic 3 and a half 4% in the in the back half of the year so I'm just wondering you know is that equally distributed across the portfolio? So I think we hear about more more about its are we seeing that in services and equipment and are we seeing that globally or is this more contributed in, in the US equipment? So therefore uh us, you know, compressors will be uplifted at 10%, just just any color. That would be helpful.

Yeah, so let me, let me maybe start of the, the top of the house and I'll maybe work my way down Nigel 1. I think that that that expectation of, you know, 3 and a half to 4%, I think is actually fairly comparable between the 2 segments. Um, and like we said, a relatively Equitable split between or even split between what I'll call Base pricing, um, which as you would expect as the, the typical flow that you would expect and then the Tariff related pricing, which is essentially offsetting tariffs 1 for 1. Now, as far as the second part of your question as far as the regional splits, I would say that when you think about its I I would say it is

Pretty well equitably spread and split with maybe the exception of China is obviously a bit of a tighter pricing environment. Comparatively speaking, which is which is probably as as expected. But I think when you think about the, you know, Europe, um you know, North America Latin America, even the power tools business, I think we're generating the Equitable price you would expect. And yes, it is. I'd say comparable between the components IE, uh, the compressors Andor the aftermarket of the service. We don't take what I would call a peanut butter approach to pricing. It's very targeted, I would say that's even been the case where we've had to take certain tariff related actions. So again, it's it's very consistent, I think with the pricing kind of strategy you've seen us do historically maybe the only Nuance here, is that tariff related pricing? Which is, you know, I I'd say just offsetting costs 1 for 1.

Okay, I think that's a great color. Thanks. And then, maybe just following up on, uh, Rob's question around. You know what, what sort of unlocks this, you know, next investment cycle because I think the way you you sort of framed, the second half volumes, uh, you know, down down low, single digits, uh, was considered ASM back in, uh, back in April and now we've sort of hardwired that feels like we got better, visibility with tariffs, Etc. Um, so just just wondering, are we seeing like, a sort of a step down here and another step down in the market? Are we seeing a push out in decisions? So I guess the question is, you know, what's changed versus April, um, in terms of that sort of considered them View and what do you think? You know, percentage?

You know, kind of unlocks this this uh, demand cycle.

Yeah, no. I I uh, not your good question. I mean, I you know what? We decided to do here, and I got continue to be on the precautionary side as as we think about the the volume side.

And, and that is so easy today. There's a deadline in a lot of the tariffs. Uh, so we see some of the outcome of that. Uh, but we we, we, you know, I think a lot of that Clarity will will definitely unlock, uh, what we can see there. A lot of the conversations that were having with many customers that they're just saying, hey, we we've been holding on for a little while. What is it? Waiting waiting a few more weeks or a few more months to kind of complete this holistic picture. So I I we, we, we do think that based on a lot of the conversations, uh, whether it is a tax incentives and appreciation in in the US and Clarity of that. Or if you go to Asia, Pacific or countries outside of China customers kind of waiting to see, I mean South Korea, good to see uh the outcome of that tariff and and Japan. And so a lot of that Clarity is going to start driving the the decision and the unlocking of uh what we're seeing in our funnels. That's our view. But right now we decided to continue to be pre.

Okay, thanks. Thanks.

The next question comes from Joe Richie. With Goldman Sachs, your line is open.

Uh Hey guys. Good morning.

In the Aerospace and Defence sector. So yeah, Joe this is a, this is a new customer customer project that is really tied to the Next Generation, uh, International Space Station and which has been delayed. I mean, the funding for this seems to be kind of having approved already in the big beautiful bill, but it's kind of just getting delayed. So that's that, that's that's that's basically the decline. Yeah, Joe, the only thing I'd add to that. Though is as you saw in our guidance, though, you know, there's really no change to the organic equation other than the Tariff pricing. So I think, you know, the team is in a nice job to kind of supplement and offset that that volume. So that's again, why you're not seeing any, you know, short-term change to the to the to the current guide.

Okay, got it. No, appreciate the clarification there. And then I know we've had some some discussions around, uh, the marketing qualified leads and then ultimately that turning into better organic growth. I guess, when I, when I take a look at maybe just a compressor business, or its just the last couple of years, um, that the, the order growth has been fairly muted. And so, you know, I know, we're getting this, we're starting to get some questions from investors. Like whether the structurally there's any concerns around, maybe the longer term growth algorithm for compressors going forward. So, you know, uh, this that they maybe you can kind of tackle that question head on and how you feel about the long term, you know, kind of growth, uh, opportunity within compressors and and, and why maybe we've seen a little bit more muted growth over the last 2 years.

Years.

Yeah. Joe the the long-term absolutely does not change uh and and if anything else we continue to get more excited because obviously as as we go and attach a lot of these uh solutions for recurring Revenue that that provides in our view, you know, even even better upside than what we even consider originally, when we were looking at a lot of this back in the Garner, Denver days. Uh, I think what you have seen here over the past couple of years is that there's definitely been a lot of, uh, kind of fluctuation of large projects, or large kind of 1-time Investments, whether renewable natural gas in the US that turn to be almost a hundred million dollar, you know, Revenue that then the next year, turns to basically call it uh, you know, down to 10 to 20. Uh so I think as when you peel the onion and take a lot of those projects and look at fundamentally the base of what we're seeing in the compressor Market, we continue to see pretty, I mean I'll say positive stable growth uh comparable to what we call historically as that

GDP plus and then on top of that, we try to overcome that. So I I think you know, it feels like over the past couple of years we have seen how easy a more normalization of these large compressors and now we're seeing like China as an example. Again, 1 month is not a trend, but China is an example where now, after all that, uh, kind of large investments in projects, such as electric vehicle, battery production, and things of that nature. Now, we're getting into my much of that normaly and and China. Hey, Market is not growing but our

Team and join us all positive, uh, order organic uh, growth here in the second quarter. And and and you know, we're not predicting that China is going to continue to be uh accelerating. But again, we continue to expect that, we take some some shares, so no fundamental change in the growth algorithm and I think as we kind of see more normalization here, x, large projects, things will be more stable.

Thank you.

The next question comes from Chris Snyder with Morgan Stanley, your line is open.

Thank you. Um, you know, so I understand that the organic guy down. Um it's just a function of less power for related price, but last quarter, it seems like a portion of, you know, the volume cut um, was just a function of this higher price coming through which brings, you know, elasticity concerns. So I guess now that we have, you know, price coming in a little bit lower but no positive of volume response from that. Like do you think that's an indication that underlying demand is softening as we've gone through the year?

Yeah, Chris I'll take that. So I think what we said, when we, when we gave the guidance framework a quarter ago, we said we're taking a, you know, a precautionary view of the Year, given the uncertainty. And I think the simple way to think about that is we just haven't changed that view as we kind of think about, um, you know, the, the, the, the equation. And that's, that's what you see in the framework, from a guidance perspective. Now, to vente's point that was kind of just made and

I think, you know what, you should see from the guidance framework. Nothing, nothing, nothing more than that.

Thank you, um, very much. Appreciate that. Um, I guess, you know, has there been any change in sentiment from International customers following the tariffs? Um, and I guess if we look at the overall company orders, flattish, is there anything you could provide on on the regional splits there? Thank you.

Yeah, sure crazy. I I I I'll say that, uh, you know, from a regional perspective, you know, we saw we saw, uh, positive orders uh, organically, uh, even in emia Europe, Middle East and India. Uh, so again, you know, if I, if I were to think about this holistically, I'll say Asia Pacific uh, you know what, I what we called out China, positive organically. I'll say the rest, rest of the countries, maybe a little bit of more kind of waiting. These customers are waiting for better better, clarification of the Tariff agreements. I'll call out uh EMA as being fairly resilient as I just said, Latin America remains very healthy and encouraged, but the results that we're driving with the Investments that we continue to make and North America, you know, sluggish, I mean, in the second quarter, giving all the uncertainty around tariffs. So we remain. But we remain very cautious optimistic about the, the medium-term here in, uh, in North America. So, you know, long cycle, uh, continue to see strong momentum in longer cycle, which helps me build that backlog for 2026.

Thank you, I appreciate that.

Hi, good morning.

Um I wanted, hey I uh I wanted to start just on on back half bridge and when we think about some of the key drivers and so the the volume assumption moving to down low single from first half of the Year down mid single.

That seems like it's really comps, and so there's no kind of underlying assumption in volume sequentially, being much better.

And then on the ebit, Da Side, price cost, seems like it would be the most important driver is that pricing in place, you know, such that, there is a, a notable step up from 22 to 2, to Q3, or is there still pricing that you plan to implement in the back half of the year?

Yeah, Joe this is Vic. Let me let me take that 1. So, you know I think the way you framed it out on the volume side is is is fairly. You know, I I'd say it's it's it's it's pretty good assessment, but I do think it's worth noting that, you know, with the with the positive or organic orders, particularly in the, its side that we've seen since the first half and the and the book to bill, you know, that does give us, you know, more conviction in that, you know, slight Improvement. Um, on the organic volume side, you see from the first half to the second half. Um as far as your price cost equation, um, yes. And I think simply stated here, um you know, those pricing actions have have essentially you know, you know they're in place um, have been taken.

You know, we we obviously, you know, our our tracking and monitoring that and I think we have, you know, good good visibility to that kind of already being in place. So um, I think the simple answer to your question is. Yeah I think you've you've framed it up fairly nicely and that's kind of, you know, I think 1 of the drivers off the back half margin expansion. Not the only 1, like I said, some of the seasonality and volume and some of the productivity factors that come in as well, as some of the, the ongoing integration of some of the bolt-on m&a, including, you know, some of the ones we we just announced here today. Uh, but yes, I think you framed it out quite nicely.

And then um, on the clean energy, vertical in its can you unpack that a little bit? Just talk about what you're seeing in terms of demand Trends. Uh some of the end markets um kind of regional activity just overall kind of what what you're watching there for the opportunity set.

Yeah, Joe, if I take it by by, by, by Regional, I see, I think here in the, in the, in the US. What? Uh, and I I made a comment about that, you know, not about renewable, natural gas. We'll see you in stagnation there. Uh,

Well, as we saw prior a couple years ago, I mean, so I'm very good Resurgence and acceleration due to the IRA, uh, implementation. We, we we, we're seeing, you know, really slow down now. So again, that that continues to be the case, you know, if you, uh, go to then, uh, uh, Europe, I think Europe, uh, in terms of, uh, uh, you know, bio gas and, and, and RNG production that continues to be, I would say, fairly good fairly good investment.

1 will be Latin America, good Investments that we're seeing on on clean energy.

Great. Thank you.

The next question comes from.

Your line is open.

Good morning, everyone. I just wanted to ask I wanted to just ask a follow-up on the the building of the platform for the for live Sciences here. Um, you know, late fluids obviously pretty small, um, and it'll take some time to to build out a life sciences platform. At that pace, uh, any kind of color you can give us on, you know, if there are larger bolt-ons out there that uh, that you could use to, to build that more rapidly, do you think you need to to deploy more Capital into that to build scale? Or just any color you can give us around? You know, the Strategic Pathway to building that that business out.

And I I I mean not not not at this point, I will say and keep in mind that you know, we we like to be more into kind of more Niche applications and Niche specific steps within the process. So uh and that's that was basically I'll see it over. I mean, I'll see it over a great play into the glp1 and the and the power containment and ABC High potency apis, that kind of call okay to immunotherapies in the future grand scheme of things. Uh, same thing with lift lift fluid. I mean, lift fluid, uh, very highly, uh, uh, great technology in perspective pump technology. Then now we can leverage not only in Asia, but globally, and, and these, uh, that we have in l.

That will close again small Bolton but provides a very Niche application that is uh, is highly highly complimentary with what we do in ilc and how we sell to customers. So that's a path. I mean, the path will continue to be in this kind of very Niche uh applications that where we can command, uh, great share and that will lead into good price, great margin and uh, and our ability to, to be more closely to the customer.

I guess 1 on uh the accelerated depreciation that's in uh the baby baby. Um it's probably unfair to ask, you know, if you think that'll be a catalyst for 4 q spending but we have had periods. Historically, where we've had accelerated depreciation, maybe you could just comment on what? Historically, you've seen that in terms of it being a catalyst for maybe late year spending to take advantage of those kinds of things.

Yeah, no, it's not. I'll take that 1. I'll keep it pretty simple. You're right, kind of hard to prognosticate what that may or may not mean. I think, you know, we view it as definitely, you know, a bit of a tailwind, um, you know, a good positive factor. Um, you know, we hope to see it kind of drive some degree of acceleration in second half orders, but I don't think that our guide or the framework we put forth contemplates that, right? So historically, you know, maybe some movement there, but nothing that I would consider to be, you know, an extreme needle mover comparatively speaking.

Great. Thanks for taking the questions.

The next question is.

Yeah, thanks for squeezing me in guys. Good morning, morning.

Um, maybe just starting with uh, the power tools and lifting business, I think the orders here, you know, got a bit worse. Turn negative again. Can you give a little bit more color on what you're seeing there? And, you know, that's been a business that's been kind of tough from an order perspective for a while. Now, do you think that we're getting close to a bottom there?

Yeah, because I, I, you know, I think Q1, we said that orders were actually positive in Q1, I recall. Uh, yeah, I mean, I, I would say, uh, nothing of significant, uh, color that I would call as being, you know, negative. You know, we're seeing, you know, we have in this business inside the business, there's a couple different businesses, one around Material Handling.

The Continuous to actually do fairly well. And uh, and, and we're very positive with what we're seeing here in the power tools side. As we're launching new, uh, new products into the market. And, uh, so nothing else significant again. You know, it's a business that we continue to invest. Uh, we see as you see, I mean margins are pretty close to the fleet average. And, and, and generates a good cash.

Okay, got it. Thank you. And then just as a follow-up. Um, I know you guys said that, you wouldn't give guidance on second half orders totally, understand that. But if you kind of do the math on normal seasonality, which is what you have said, you do kind of get to like an organic order decline in the third quarter, I believe. Unless my math is wrong. Would you guys push back to that? Just curious on your perspective.

Ing Trends, things like that. And, and listen, this is still kind of in the wake of, I would say the uncertainty around tariffs, as we mentioned here. So hopefully, you know, as certainty gets a little bit more, uh, you know, a bit more certainty, on the Tariff front. Hopefully, that's something that can can drive a little bit more certainty and acceleration. But again, not being, I would say that today, we're seeing this anything dramatically. Different is what we saw X and Q2.

Understood. Thank you, Vic. I'll pass it on.

Thank you, Nicole.

The next question comes from Andrew bisque. Leah with BMP parabas, your line is open.

Hey, good morning, everyone.

Morning, Andrew.

Just wanted to um check it on uh on Capital allocation just uh it sounds like you have some m&a, um, still in the pipeline per usual. But what's your profits maybe for share repo uh, over the near term. Um, how are you thinking about that?

Yeah, Andrew. I'll I'll keep it pretty simple here. I don't think anything's changed from our kind of capital allocation strategy. Um, yes you did see uh some you know, uh, you know accelerated. Um you know, share repurchase activity in Q2 um of the 500 million dollars. Um, we have said that we'll do up to about 250 million dollars more for the balance of the year, but without question. Uh, the focal point of the, uh, the capital Astra Capital, allocation strategy sitting here today, as well as even moving into future years. We'll continue to be, you know, the m&a led by the bolt-on strategy as we send you mentioned. So again, not being has really changed and uh we'll continue to execute on share repurchase very much in line with what you've kind of seen in.

Barriers.

Yeah. Okay. Okay. And then maybe just to check, you know, your aftermarket um, expansion has been solid. What what how do you foresee the the year playing out or the next or the next couple years playing out maybe if we get a release on some decision making in the Capital Equipment side um I guess. Yeah. I guess what are the how are the Dynamics? How are the Dynamics field? Are you on, on that kind of mix?

Yeah, no. I I think we we, we have always said that we want to continue to accelerate the growth on the aftermarket and particularly. That's why the recurrent revenue is, is a very, very important step and initiative on that. Uh, we we want that, that, you know, a percentage to continue to grow even if the whole Goods or new equipment, uh, gets, you know, unlocked and release and grow. We want to continue to out grow, uh, that. So that, that percentage continues to be a bigger piece of the total equation.

Question comes from admit me rotra with UBS. Your line is open.

Thanks. Um, I'll I'll keep it quick here. Uh, I I we've obviously um, we've we've observed, you know, um, Pharma companies kind of announced pretty meaningful us production capacity increases. I think we're tracking something like 300 billion over the next, you know, 4 or 5 years. None of those have been constructed yet.

So, maybe it's too early, but can you just talk about, you know, the opportunity that offers you given obviously the exposure to that vertical?

Yeah. I mean a great question. I mean this is this is why we continue to be, you know uh I guess optimistic about the the what we call these long cycle. I mean that that will typically based on the size of some scope of those projects it will fall into that, not only in the compressor side.

But then even also as you think from an ilc perspective, because I mean uh, some of that expansion happens with some of our customers that uh, that are currently buying our products uh today and obviously that that will help uh, even more. So so yeah, it's it's an area that, uh, we're staying pretty close, pretty close with the epcs that that are doing it with the construction firms, and then also clearly very close to the customer,

Top book to Bill, typically it's sub 1 and then it's above 1 in the back half, but obviously, you outperform that in the first half is any of that in the book to Bill and, and, and do you still expect, you know, the the normal seasonality of book to bill being above 1 in the second half to continue.

Yeah, I know. I so we're we're that I mean, too early to see a lot of that. I mean as you can imagine this project get get the project gets announced and it takes it takes a while to get going, uh, and but but no no improvement. Uh, I mean as as it is right now we're saying, you know, book to Bill of roughly 1 for the entire year as I said. And uh that means you know, maybe above 1.

As we sold out. But that means that it will be less than 1. That's kind of what we see in terms of the seasonality and nothing that we change changes our mind right now as we continue to be precautionary in this environment,

Got it. Okay, thank you very much. Appreciate it. Thank you.

What time do we have for questions? I'll turn the call over to Vicente for closing remarks.

Is there anything else I run? Thank you for all the great questions and thank you to employees that are listening to the call, and let's just uh keep staying focused on controlling what you can control. Thank you, everyone.

This concludes today's conference call, thank you for joining. You may now disconnect