Ingersoll Rand(IR) - 2025 Q2 - Quarterly Results

Q2 2025 Performance Overview Ingersoll Rand achieved record Q2 orders, revenue, and Adjusted EBITDA, despite a net loss due to impairments, driven by strong segment performance and M&A Financial Highlights Ingersoll Rand reported a record second quarter for orders, revenue, and Adjusted EBITDA. Despite a reported net loss of $115 million due to significant non-cash impairments, the company's adjusted net income stood at $325 million. Strong performance and an active M&A pipeline led to raised full-year guidance Q2 2025 Key Financial Metrics (vs. Q2 2024) | Metric | Q2 2025 | Change (YoY) | | :--- | :--- | :--- | | Reported Orders | $1,940 million | +8% | | Reported Revenues | $1,888 million | +5% | | Adjusted EBITDA | $509 million | +3% | | Adjusted EBITDA Margin | 27.0% | -40 bps | | Net Loss Attributable to IR | ($115) million | vs. $185M Income | | Adjusted Net Income | $325 million | -4.7% | | Adjusted EPS | $0.80 | -3.6% | | Free Cash Flow | $210 million | -25.8% | - The company reported a strong quarter with organic orders growth and a robust book-to-bill ratio, leading to raised guidance for revenue, Adjusted EBITDA, and Adjusted EPS[3] - The company maintains a strong liquidity position of $3.9 billion as of June 30, 2025, comprising $1.3 billion in cash and $2.6 billion in undrawn credit facilities[5] Segment Performance The Industrial Technologies and Services (IT&S) segment's revenue growth was driven by acquisitions, which offset an organic decline. Its Adjusted EBITDA margin contracted due to volume declines and acquisition impacts. The Precision and Science Technologies (P&ST) segment saw strong reported revenue growth, also fueled by acquisitions, while organic orders declined due to non-recurring large orders in the prior year Q2 2025 Segment Performance (vs. Q2 2024) | Segment | Reported Orders | Organic Orders | Reported Revenues | Organic Revenues | Segment Adj. EBITDA | Adj. EBITDA Margin | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | IT&S | $1,561M (+7%) | +1% | $1,492M (+2%) | -4% | $427M (-2%) | 28.6% (-110 bps) | | P&ST | $379M (+13%) | -5% | $396M (+17%) | -2% | $117M (+14%) | 29.5% (-80 bps) | - The IT&S segment achieved its second consecutive quarter of organic orders growth with a book-to-bill ratio of 1.05x[6] - The P&ST segment's organic order decline was primarily due to large, long-cycle orders in Q2 2024 that did not repeat. Excluding these, organic orders grew in the low-single-digits[7] Financial Position and Capital Allocation The company maintains a strong financial position with robust liquidity, actively allocating capital through M&A and shareholder returns, despite non-cash impairments impacting reported net income Balance Sheet and Cash Flow Ingersoll Rand maintains a strong financial position with $3.9 billion in liquidity. While Q2 free cash flow was $210 million, down from $283 million in the prior year, year-to-date free cash flow increased 13%. Net debt to Adjusted EBITDA leverage improved, decreasing by 0.3x year-over-year to 1.7x - The company generated $210 million in free cash flow in Q2 2025, compared to $283 million in Q2 2024. However, year-to-date free cash flow is up 13% year-over-year[8] - Net debt to Adjusted EBITDA leverage was 1.7x, a decrease of 0.3x compared to the prior year, indicating an improved leverage position[8] Capital Allocation and M&A In Q2 2025, the company deployed $47 million towards M&A and returned approximately $508 million to shareholders, primarily through $500 million in share repurchases. The company also completed the acquisitions of Lead Fluid in China and Termomeccanica Industrial Compressor S.p.A. in Italy - Returned approximately $508 million to shareholders in Q2, consisting of $500 million in share repurchases and $8 million in dividends[8] - Completed two acquisitions: Lead Fluid, a Chinese manufacturer for life science applications, and TMIC, an Italian provider of solutions for the renewable natural gas industry[11] Non-cash Impairments The reported net loss in Q2 was driven by non-cash impairments that do not affect adjusted earnings. These impairments stemmed from revised forecasts for its minority stake in the High Pressure Solution business, reduced business with a major customer in the ILC Dover Aerospace & Defense unit, and a higher discount rate affecting the goodwill of the ILC Dover Biopharma unit - The majority of the impairment resulted from revised long-term forecasts for the High Pressure Solution business due to lower demand in the upstream oil & gas sector[9] - Additional impairments were related to a reduction in business with a significant customer in the ILC Dover Aerospace & Defense unit and a reduction in the value of the ILC Dover trade name[9] - The goodwill for the ILC Dover Biopharma reporting unit was impaired primarily due to an increased discount rate and contraction of peer market multiples, despite a robust long-term forecast[10] 2025 Full-Year Guidance Ingersoll Rand has raised its full-year 2025 guidance, projecting increased total revenue, Adjusted EBITDA, and Adjusted EPS Updated Outlook Ingersoll Rand has raised its full-year 2025 guidance. The company now expects total revenue growth of 4-6%, Adjusted EBITDA between $2,100M and $2,160M, and Adjusted EPS in the range of $3.34 to $3.46 Revised Full-Year 2025 Guidance | Metric | Revised Guidance | | :--- | :--- | | Revenue Growth | | | Total Ingersoll Rand | 4% to 6% | | Organic | (2%) to 0% | | FX Impact | ~1% | | M&A Impact | ~$375M | | Adjusted EBITDA | $2,100M - $2,160M (+4% to +7% YoY) | | Adjusted EPS | $3.34 - $3.46 (+2% to +5% YoY) | Financial Statements and Reconciliations This section provides detailed financial statements, including income, balance sheet, and cash flow, along with non-GAAP reconciliations, highlighting the impact of impairments on reported net loss Condensed Consolidated Statements of Operations For Q2 2025, revenues increased 5% year-over-year to $1.89 billion. However, significant goodwill and intangible asset impairment charges totaling $265.8 million resulted in an operating income of $76.4 million and a net loss attributable to Ingersoll Rand of $115.3 million, compared to a net income of $185.0 million in the prior-year period Q2 Income Statement Highlights (in millions) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $1,887.9 | $1,805.3 | | Gross Profit | $824.9 | $793.3 | | Impairment of goodwill & intangibles | $265.8 | $0.0 | | Operating Income | $76.4 | $271.8 | | Net Loss Attributable to IR | $(115.3) | $185.0 | | Diluted EPS | $(0.29) | $0.45 | Condensed Consolidated Balance Sheets As of June 30, 2025, the company's balance sheet showed total assets of $18.06 billion, relatively flat from year-end 2024. Cash and cash equivalents stood at $1.31 billion, down from $1.54 billion at the end of 2024, while total liabilities were $7.90 billion Balance Sheet Summary (in millions) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,310.6 | $1,541.2 | | Total current assets | $4,188.4 | $4,163.5 | | Goodwill | $8,276.6 | $8,148.1 | | 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 | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased to $502.1 million from $466.5 million in the prior year. Investing activities used $279.4 million, primarily for acquisitions. Financing activities used $523.1 million, driven by $510.2 million in treasury stock purchases Six-Month Cash Flow Summary (in millions) | Account | H1 2025 | H1 2024 | | :--- | :--- | :--- | | 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 | | Net decrease in cash | $(230.6) | $(533.0) | Non-GAAP Reconciliations This section reconciles GAAP results to non-GAAP metrics. For Q2 2025, the company's Net Loss of $113.8 million was adjusted to an Adjusted Net Income of $325.2 million after excluding items like impairments, amortization, and restructuring costs. Total revenue growth of 4.6% was composed of a 3.4% organic decline, a 1.5% positive FX impact, and a 6.5% contribution from acquisitions Q2 2025 Reconciliation of Net Loss to Adjusted EBITDA (in millions) | Item | Amount | | :--- | :--- | | Net Loss | $(113.8) | | Plus: Interest expense | $62.7 | | Plus: Provision for income taxes | $21.0 | | Plus: Depreciation & Amortization | $119.2 | | Plus: Impairment of goodwill & intangibles | $265.8 | | Plus: Other adjustments | $44.5 | | Adjusted EBITDA | $509.4 | Q2 2025 Revenue Growth Breakdown | Component | Ingersoll Rand Total | | :--- | :--- | | Organic decline | (3.4%) | | Impact of foreign currency | 1.5% | | Impact of acquisitions | 6.5% | | Total revenue growth | 4.6% |