Ingersoll Rand(IR) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the reporting period Financial Statements This section presents the unaudited condensed consolidated financial statements for Ingersoll Rand Inc. for the quarterly period ended March 31, 2025, including statements of operations, comprehensive income, balance sheets, stockholders' equity, and cash flows, along with detailed notes covering accounting policies, acquisitions, debt, segment reporting, and other financial details Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, Ingersoll Rand reported revenues of $1,716.8 million, a slight increase from $1,670.1 million in the prior year period, but Net Income Attributable to Ingersoll Rand Inc. decreased to $186.5 million from $202.2 million, resulting in diluted EPS of $0.46, down from $0.50 year-over-year, primarily due to higher interest and tax expenses Q1 2025 vs Q1 2024 Statement of Operations (in millions, except per share amounts) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,716.8 | $1,670.1 | +2.8% | | Gross Profit | $765.5 | $746.3 | +2.6% | | Operating Income | $302.5 | $293.2 | +3.2% | | Interest Expense | $61.2 | $36.8 | +66.3% | | Net Income Attributable to Ingersoll Rand Inc. | $186.5 | $202.2 | -7.8% | | Diluted EPS | $0.46 | $0.50 | -8.0% | Condensed Consolidated Balance Sheets As of March 31, 2025, total assets increased to $18.38 billion from $18.01 billion at year-end 2024, driven by increases in cash, inventories, and goodwill, while total liabilities also rose slightly to $7.83 billion, and total stockholders' equity grew to $10.55 billion, up from $10.25 billion at the end of 2024 Balance Sheet Summary (in millions) | Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $4,351.7 | $4,163.5 | | Goodwill | $8,339.1 | $8,148.1 | | Total Assets | $18,379.4 | $18,009.8 | | Total Current Liabilities | $1,826.8 | $1,818.9 | | Long-term Debt, net | $4,770.4 | $4,754.4 | | Total Liabilities | $7,825.7 | $7,764.5 | | Total Stockholders' Equity | $10,553.7 | $10,245.3 | Condensed Consolidated Statements of Cash Flows For the first quarter of 2025, net cash provided by operating activities significantly increased to $256.4 million from $161.6 million in the prior year, driven by favorable changes in working capital, with net cash used in investing activities at $197.1 million mainly for acquisitions, and financing activities using $10.0 million primarily for treasury stock purchases and dividends, leading to a $71.6 million increase in cash and cash equivalents during the quarter Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $256.4 | $161.6 | | Net cash used in investing activities | $(197.1) | $(205.6) | | Net cash used in financing activities | $(10.0) | $(79.6) | | Net increase (decrease) in cash | $71.6 | $(143.2) | Note 2: Acquisitions In Q1 2025, the company completed several acquisitions for a total consideration of $176.4 million, including SSI Aeration, Excelsior Blower Systems, and Cullum & Brown, all within the Industrial Technologies and Services segment, adding $113.3 million to goodwill, while numerous acquisitions from 2024, notably ILC Dover for $2.35 billion, significantly expanded the Precision and Science Technologies segment - Completed three acquisitions in Q1 2025 for total cash consideration of $167.3 million plus contingent consideration, all within the Industrial Technologies and Services segment[33][34][35] 2025 Acquisitions Summary (in millions) | Acquisition | Consideration (Cash) | Segment | | :--- | :--- | :--- | | SSI Aeration, Inc. | $96.3 | Industrial Technologies and Services | | Excelsior Blower Systems, Inc. | $17.4 | Industrial Technologies and Services | | Cullum & Brown of Kansas City, Inc. | $49.8 (initial) | Industrial Technologies and Services | - Acquisitions completed in 2024, including ILC Dover, contributed $139.5 million in revenue and $7.9 million in operating income during Q1 2025[53] Note 10: Debt As of March 31, 2025, total long-term debt stood at $4.77 billion, with the company having issued $3.3 billion in new senior unsecured notes in May 2024 to fund the ILC Dover acquisition and repay previous credit facilities, and also establishing a new $2.6 billion revolving credit facility and a $2.6 billion commercial paper program, both undrawn, while remaining in compliance with all debt covenants Debt Summary (in millions) | Category | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total long-term debt, net | $4,770.4 | $4,754.4 | - In May 2024, the company issued $3.3 billion in new senior notes with maturities ranging from 2027 to 2054[75] - A new $2.6 billion Revolving Credit Facility was established in May 2024, with no outstanding borrowings as of March 31, 2025[82][85] Note 15: Revenue from Contracts with Customers Revenue is disaggregated by segment, geography, and product category, with the Americas remaining the largest geographic market in Q1 2025, contributing $895.8 million, while original equipment sales were $1.06 billion and aftermarket sales were $653.3 million, and the company expects to recognize $766.2 million in revenue from remaining performance obligations over the next twelve months for contracts with an original duration greater than one year Disaggregated Revenue by Category - Q1 2025 (in millions) | Category | Industrial Tech & Services | Precision & Science Tech | Total | | :--- | :--- | :--- | :--- | | Total Americas | $704.2 | $191.6 | $895.8 | | EMEIA | $431.0 | $136.4 | $567.4 | | Total Asia Pacific | $216.9 | $36.7 | $253.6 | | Original equipment | $777.1 | $286.4 | $1,063.5 | | Aftermarket | $575.0 | $78.3 | $653.3 | - As of March 31, 2025, the company has remaining performance obligations of $1.56 billion for contracts longer than one year, with $766.2 million expected to be recognized as revenue in the next twelve months[163] Note 19: Segment Reporting The Industrial Technologies and Services segment reported a 1.6% decrease in revenue to $1.35 billion, with Segment Adjusted EBITDA falling 5.4% to $389.1 million, while the Precision and Science Technologies segment saw revenue grow 22.9% to $364.7 million, driven by acquisitions, with Segment Adjusted EBITDA increasing 16.2% to $106.2 million Segment Performance - Q1 2025 vs Q1 2024 (in millions) | Segment | Revenue Q1 2025 | Revenue Q1 2024 | Adjusted EBITDA Q1 2025 | Adjusted EBITDA Q1 2024 | | :--- | :--- | :--- | :--- | :--- | | Industrial Technologies and Services | $1,352.1 | $1,373.4 | $389.1 | $411.1 | | Precision and Science Technologies | $364.7 | $296.7 | $106.2 | $91.4 | | Total | $1,716.8 | $1,670.1 | $495.3 | $502.5 | Note 21: Subsequent Event On May 1, 2025, the Board of Directors authorized a $1.0 billion increase to the company's share repurchase program, in addition to the $993.0 million remaining under the existing authorization, with no expiration date for these authorizations - The Board of Directors authorized an additional $1.0 billion for the share repurchase program on May 1, 2025, supplementing the existing $993.0 million authorization[191] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the financial results for Q1 2025, highlighting a 2.8% revenue increase to $1.72 billion, driven by acquisitions ($139.5M) and pricing ($23.8M), but offset by lower organic volume and unfavorable currency effects, with net income decreasing to $188.4 million due to higher interest and tax expenses, Adjusted EBITDA remaining flat at $459.7 million, and strong operating cash flow of $256.4 million Results of Operations In Q1 2025, revenues grew 2.8% to $1,716.8 million, primarily due to acquisitions ($139.5M) and pricing ($23.8M), partially offset by lower organic volumes (-$88.9M) and unfavorable FX (-$27.7M), while gross profit increased by 2.6%, but higher interest expense (up $24.4M) and a higher effective tax rate (23.1% vs 20.2%) led to a decrease in net income to $188.4 million, and Adjusted EBITDA was nearly flat at $459.7 million, with the margin decreasing by 70 basis points to 26.8% due to lower organic volumes and the impact of acquisitions Key Financial Results (in millions) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,716.8 | $1,670.1 | +2.8% | | Net Income | $188.4 | $204.5 | -7.9% | | Adjusted EBITDA | $459.7 | $458.5 | +0.3% | | Adjusted Net Income | $293.2 | $319.9 | -8.3% | - Revenue growth was driven by acquisitions (+$139.5M) and pricing (+$23.8M), but was offset by lower organic volumes (-$88.9M) and unfavorable foreign currency impact (-$27.7M)[211] - The increase in interest expense by $24.4 million was primarily due to higher long-term debt used to fund the ILC Dover acquisition[217] - The effective tax rate increased to 23.1% from 20.2% YoY, mainly due to a lower benefit from a windfall tax deduction in the 2025 period[219] Segment Results In Q1 2025, the Industrial Technologies and Services segment saw revenues decline 1.6% to $1.35 billion, with Adjusted EBITDA margin contracting 110 bps to 28.8%, impacted by lower organic volume, while the Precision and Science Technologies segment's revenue surged 22.9% to $364.7 million, fueled by acquisitions, though its Adjusted EBITDA margin decreased 170 bps to 29.1% due to the impact of these acquisitions and lower organic volumes Industrial Technologies and Services Segment Results (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Segment Orders | $1,487.0 | $1,398.4 | +6.3% | | Segment Revenues | $1,352.1 | $1,373.4 | -1.6% | | Segment Adjusted EBITDA | $389.1 | $411.1 | -5.4% | | Segment Margin | 28.8% | 29.9% | -110 bps | Precision and Science Technologies Segment Results (in millions) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Segment Orders | $395.3 | $309.0 | +27.9% | | Segment Revenues | $364.7 | $296.7 | +22.9% | | Segment Adjusted EBITDA | $106.2 | $91.4 | +16.2% | | Segment Margin | 29.1% | 30.8% | -170 bps | Liquidity and Capital Resources As of March 31, 2025, the company had a strong liquidity position with $1.61 billion in cash and cash equivalents and $2.6 billion of unused availability under its revolving credit facility, with total debt at $4.77 billion, and operating cash flow for the quarter was robust at $256.4 million, a significant increase from $161.6 million in the prior year, while free cash flow also improved substantially to $222.7 million from $99.3 million, and working capital increased, driven by higher inventories and receivables Liquidity Position as of March 31, 2025 (in millions) | Metric | Amount | | :--- | :--- | | Cash and cash equivalents | $1,612.8 | | Total debt | $4,772.1 | | Unused availability under Revolving Credit Facility | $2,600.0 | Cash Flow Performance - Q1 2025 vs Q1 2024 (in millions) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Cash flows provided by operating activities | $256.4 | $161.6 | | Free cash flow | $222.7 | $99.3 | - Operating working capital increased by $151.9 million from year-end 2024, primarily due to higher inventories and accounts receivable[250] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to market risks from changes in interest rates and foreign currency exchange rates, with interest rate risk managed through a portfolio of fixed and variable rate debt and interest rate swaps, and foreign currency risk mitigated by matching revenues and expenses in local currencies and using derivative contracts, with no material changes to the company's market risk assessment since the 2024 Annual Report - The company is exposed to interest rate risk, primarily managed via fixed-to-floating rate swap contracts[263] - Foreign currency risks are managed through operational matching of local currency revenues and expenses, as well as the use of cross-currency swaps and forward contracts[265] - There have been no material changes to the market risk assessment previously disclosed in the 2024 Annual Report[266] Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2025, confirming that information required for SEC filings is recorded, processed, summarized, and reported in a timely manner, with no material changes in the company's internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[267] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[268] PART II. OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, and other disclosures Legal Proceedings The company is party to various routine legal proceedings and administrative actions, which it does not believe will have a material adverse effect on its operations or financial condition, with further details available in Note 18 of the financial statements - Information regarding legal proceedings is incorporated by reference from Note 18, "Contingencies"[269] Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - As of March 31, 2025, there have been no material changes to the risk factors included in the 2024 Annual Report[270] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2025, the company repurchased 111,139 shares of its common stock, primarily to satisfy tax withholding obligations related to vested restricted stock units, with approximately $993 million remaining available under the share repurchase program as of March 31, 2025, and subsequently, on May 1, 2025, the Board authorized an additional $1.0 billion for the program - In Q1 2025, the company repurchased 111,139 shares, which were surrendered to satisfy tax withholding obligations on vested RSUs[272] - On May 1, 2025, the Board of Directors authorized an additional $1.0 billion for the share repurchase program, on top of the $993.0 million remaining under the existing authorization[274] Other Information During the quarter ended March 31, 2025, none of the company's directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during the first quarter of 2025[277] Exhibits This section lists the exhibits filed with the Form 10-Q, including the company's Restated Certificate of Incorporation, Bylaws, and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act, along with the Inline XBRL documents - The report includes CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, along with Inline XBRL data files[280]