Ingersoll Rand(IR) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements Ingersoll Rand reported Q2 2025 revenues of $1.89 billion (up 4.6%) but a net loss of $113.8 million due to non-cash impairments Condensed Consolidated Statements of Operations | Metric | Q2 2025 ($M) | Q2 2024 ($M) | YTD 2025 ($M) | YTD 2024 ($M) | | :--- | :--- | :--- | :--- | :--- | | Revenues | 1,887.9 | 1,805.3 | 3,604.7 | 3,475.4 | | Gross Profit | 824.9 | 793.3 | 1,590.4 | 1,539.6 | | Operating Income | 76.4 | 271.8 | 378.9 | 565.0 | | Net Income (Loss) | (113.8) | 186.5 | 74.6 | 391.0 | | Diluted EPS (Loss) | (0.29) | 0.45 | 0.18 | 0.95 | - The company recorded significant impairment charges in Q2 2025, including $229.7 million for goodwill and $36.1 million for other intangible assets, which were not present in the prior year period[16] - A loss on equity method investments of $120.9 million was recognized in Q2 2025, compared to a much smaller loss of $3.5 million in Q2 2024, significantly impacting the bottom line[16] Condensed Consolidated Balance Sheets | Metric | June 30, 2025 ($M) | Dec 31, 2024 ($M) | | :--- | :--- | :--- | | Total Current Assets | 4,188.4 | 4,163.5 | | Total Assets | 18,059.1 | 18,009.8 | | Total Current Liabilities | 1,832.4 | 1,818.9 | | Total Liabilities | 7,901.7 | 7,764.5 | | Total Stockholders' Equity | 10,157.4 | 10,245.3 | - Goodwill decreased to $8.28 billion from $8.15 billion at year-end 2024, reflecting acquisitions offset by a significant impairment charge of $229.7 million[22][70] - Long-term debt, less current maturities, remained relatively stable at $4.78 billion as of June 30, 2025[22] Condensed Consolidated Statements of Cash Flows | Metric | YTD 2025 ($M) | YTD 2024 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | 502.1 | 466.5 | | Net cash used in investing activities | (279.4) | (2,834.1) | | Net cash provided by (used in) financing activities | (523.1) | 1,862.0 | - Cash from operations increased to $502.1 million for the first six months of 2025, up from $466.5 million in the prior year period[29] - Investing activities used significantly less cash ($279.4 million) compared to the prior year ($2.83 billion), primarily due to lower acquisition spending in 2025[29] - Financing activities used $523.1 million, driven mainly by $510.2 million in treasury stock purchases, a significant increase from $135.5 million in the prior year period[29][30] Notes to Condensed Consolidated Financial Statements - In 2025, the company completed several acquisitions for a total consideration of $236.7 million, including SSI Aeration, Excelsior Blower Systems, and Cullum & Brown, all within the Industrial Technologies and Services segment[37][38][39][44] - During Q2 2025, the company recognized non-cash impairment charges of $229.7 million for goodwill and $36.1 million for an indefinite-lived tradename within the Precision and Science Technologies segment, primarily related to the Biopharma and Aerospace & Defense reporting units acquired with ILC Dover[75][76][78] - The company recognized an impairment charge of $120.9 million on its 45% equity method investment in the legacy High Pressure Solutions (HPS) business, reducing its carrying value to zero[206][207] - On July 1, 2025, the company completed the acquisition of Termomeccanica Industrial Compressors (TMIC) and its subsidiary Adicomp for approximately €160 million[208] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes Q2 2025 revenue growth to acquisitions and pricing, with net income significantly impacted by non-cash impairments Results of Operations Consolidated Results Summary | Metric | Q2 2025 ($M) | Q2 2024 ($M) | % Change | YTD 2025 ($M) | YTD 2024 ($M) | % Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | 1,887.9 | 1,805.3 | 4.6% | 3,604.7 | 3,475.4 | 3.7% | | Gross Profit | 824.9 | 793.3 | 4.0% | 1,590.4 | 1,539.6 | 3.3% | | Operating Income | 76.4 | 271.8 | -71.9% | 378.9 | 565.0 | -32.9% | | Net Income (Loss) | (113.8) | 186.5 | N/A | 74.6 | 391.0 | -80.9% | | Adjusted EBITDA | 509.4 | 494.6 | 3.0% | 969.1 | 953.1 | 1.7% | - Q2 2025 revenue growth of 4.6% was driven by acquisitions (+$116.4 million) and pricing (+$33.1 million), offset by lower organic volumes (-$94.7 million)[228] - Gross profit margin decreased slightly to 43.7% in Q2 2025 from 43.9% in Q2 2024, primarily due to unfavorable cost leverage on lower organic volumes[231] - Other operating expense decreased significantly to $19.9 million in Q2 2025 from $88.2 million in Q2 2024, mainly because a $58.8 million loss on an asbestos sale in 2024 did not recur[237] - The effective tax rate for Q2 2025 was 74.7%, a substantial increase from 19.5% in Q2 2024, primarily due to nondeductible impairments of goodwill, tradenames, and an equity investment[242] Segment Results Industrial Technologies and Services Segment - Q2 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Segment Revenues | $1,491.6 M | $1,466.5 M | 1.7% | | Segment Adjusted EBITDA | $427.2 M | $436.2 M | -2.1% | | Segment Margin | 28.6% | 29.7% | -110 bps | - The Industrial Technologies and Services segment's Q2 revenue increase of 1.7% was driven by acquisitions (4.2%) and pricing (1.6%), but offset by a 5.4% decline in organic volume[267] Precision and Science Technologies Segment - Q2 Performance | Metric | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Segment Revenues | $396.3 M | $338.8 M | 17.0% | | Segment Adjusted EBITDA | $116.8 M | $102.5 M | 14.0% | | Segment Margin | 29.5% | 30.3% | -80 bps | - The Precision and Science Technologies segment's strong Q2 revenue growth of 17.0% was primarily due to acquisitions (16.3%), with organic volumes declining by 4.4%[274] Liquidity and Capital Resources - As of June 30, 2025, the company had $1.31 billion in cash and cash equivalents and $2.6 billion of unused availability under its Revolving Credit Facility and Commercial Paper Program[280][283] - Total debt stood at $4.78 billion as of June 30, 2025, a slight increase from $4.76 billion at the end of 2024[283] - Operating working capital increased by $224.8 million since year-end 2024, primarily due to higher inventories and accounts receivable[287] - Free cash flow for the first six months of 2025 was $433.1 million, an increase of $50.7 million from the same period in 2024, driven by higher operating cash flow and lower capital expenditures[295] Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rate and foreign currency fluctuations using derivative instruments, with no material changes reported - The company's primary market risks are interest rate fluctuations and foreign currency exchange rate changes[299][300] - Risk mitigation strategies include using derivative instruments like interest rate swaps, cross-currency swaps, and foreign currency forward contracts[299][301] - There have been no material changes to the company's market risk profile since the 2024 Annual Report[302] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[303] - No material changes to the internal control over financial reporting occurred during the second quarter of 2025[304] PART II. OTHER INFORMATION Legal Proceedings The company is involved in various ordinary legal proceedings not expected to materially affect its operations or financial condition - The company is involved in various legal proceedings of an ordinary or routine nature, which are not expected to be materially adverse[185][305] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's 2024 Annual Report - No material changes to the company's risk factors have occurred since the filing of the 2024 Annual Report[306] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 6.15 million shares in Q2 2025 at $81.35 per share, with $1.49 billion remaining under expanded repurchase programs Q2 2025 Share Repurchases | Month | Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | April 2025 | — | $ — | | May 2025 | 6,147,812 | $81.35 | | June 2025 | — | $ — | | Total | 6,147,812 | $81.35 | - The Board of Directors authorized a $1.0 billion increase to the share repurchase program on May 1, 2025. As of June 30, 2025, approximately $1.49 billion was available for future repurchases[308][309][310] Other Information CEO Vicente Reynal adopted a Rule 10b5-1 trading plan, and the company approved a new Executive Change in Control & Severance Plan - CEO Vicente Reynal adopted a Rule 10b5-1 trading plan on May 22, 2025, for the potential sale of up to 496,746 shares[313] - On July 30, 2025, the company approved a new Executive Change in Control & Severance Plan for certain executives (excluding the CEO)[316]