Executive Summary / Key Takeaways

• Ingersoll Rand has transformed into a premier growth compounder since the 2020 merger, leveraging a disciplined bolt-on M&A strategy and operational excellence (IRX) to expand its addressable market and enhance its financial profile.
• The company's differentiated technology portfolio, including patented oil-free compressors, high-efficiency blowers, and specialized life science containment solutions, provides quantifiable benefits to customers (e.g., energy savings, TCO reduction, productivity gains) and underpins its competitive moat.
• Recent financial performance demonstrates resilience, with Q1 2025 showing revenue growth driven by acquisitions and pricing, record Q1 free cash flow, and strong full-year 2024 Adjusted EBITDA margin expansion, despite facing macroeconomic headwinds and organic volume declines.
• Management's FY 2025 guidance reflects a prudent outlook, incorporating a volume contingency despite positive leading indicators (MQLs, long-cycle funnel), while signaling confidence in sequential improvement and the ability to mitigate tariff impacts through pricing and operational actions.
• A robust M&A pipeline and significant share repurchase authorization highlight a balanced capital allocation strategy aimed at driving future value creation, incremental to the core operational and organic growth expectations.

The Transformation of Ingersoll Rand: Building a Durable Growth Compounder

Ingersoll Rand Inc.'s journey to becoming a diversified global leader in mission-critical flow creation and industrial solutions is rooted in the strategic transformation initiated with the March 2020 merger of Gardner Denver and the Industrial segment of the former Ingersoll-Rand plc. This pivotal event marked a deliberate shift, aiming to reshape the company into a "premier growth compounder" less susceptible to economic cycles. This was achieved through targeted divestitures, including the Club Car and HPS businesses, and a concurrent, aggressive reinvestment strategy focused on acquiring complementary businesses in high-growth, sustainable end markets.

Since 2020, the company has deployed approximately $5.4 billion across 65 bolt-on acquisitions, significantly expanding its technological capabilities, geographic reach, and total addressable market, which has nearly doubled. The acquisition of ILC Dover in June 2024 was particularly impactful, adding exposure to the biopharmaceutical, pharmaceutical, medical device, and space industries and contributing approximately $10 billion to the addressable market. This inorganic growth engine continued its momentum into 2024 and early 2025 with numerous bolt-on deals, including SSI Aeration, Excelsior Blower Systems, and Cullum Brown, strategically enhancing the portfolio with technologies like chillers, high-pressure pumps, and specialized filtration, while also expanding service channels. This disciplined approach to M&A, underscored by the willingness to walk away from larger deals that don't meet valuation criteria, remains a cornerstone of the company's strategy.

Beyond acquisitions, Ingersoll Rand fosters organic growth through continuous investment in product and service innovation, leveraging its global footprint and multi-channel strategy. This includes developing patented technologies and expanding recurring revenue streams through aftermarket parts and services, supported by operational excellence frameworks like IRX and proprietary demand generation tools.

Competitive Landscape and Differentiated Technology

Operating within a highly fragmented global market estimated between $57 billion and $67 billion, Ingersoll Rand competes across various segments, including industrial compression, vacuum, blowers, fluid transfer, and precision technologies. Key publicly traded competitors include Atlas Copco , a leader in compressors and industrial tools; Emerson Electric , strong in fluid management and automation; and Dover Corporation , specializing in engineered products like pumps.

Ingersoll Rand strategically positions itself through its broad portfolio, premier brands, and a robust "in-region, for-region" manufacturing and service footprint. This local presence provides a competitive advantage, allowing the company to serve customers efficiently and take market share, particularly against competitors who rely more heavily on importing products. The company actively tracks competitive dynamics and market share, noting that its in-region model helps mitigate impacts from potential trade policy shifts and tariffs.

A critical element of Ingersoll Rand's competitive moat lies in its differentiated technology, which offers tangible, quantifiable benefits to customers:

• Advanced Compression and Blower Technology: New patented oil-free technologies in the ITS segment, such as the PureAir compressor and Elmo Rietschle high-speed blowers, are designed for high-growth sustainable end markets like food, beverage, and clean energy. The Elmo Rietschle blower, for instance, offers a 60% reduction in energy consumption and up to a 50% reduction in total cost of ownership (TCO) compared to traditional technologies. The PureAir compressor boasts a market-leading 14% energy efficiency improvement. These advancements directly translate into lower operating costs and reduced Scope 1 and 2 emissions for customers, enhancing ROI and driving demand.
• Precision Fluid Management: In the PST segment, innovations like the new Diaphragm Metering Pump offer increased energy efficiency and a 20% reduction in TCO. The legacy Ingersoll Rand Life Science business has developed micro-fluidics technology for customized liquid handling systems, driving up to 50% productivity in biotech R&D labs and personalized therapeutics production.
• ILC Dover Containment Solutions: The patented single-use containment technology acquired with ILC Dover is crucial for high-growth biopharma applications like GLP-1 and ADC manufacturing. This technology is proven to perform better than alternatives and is 80% to 90% more cost-effective than traditional clean-in-place technology, minimizing cross-contamination risk and accelerating production timelines.
• Operational Efficiency & Innovation Processes: Beyond specific products, the IRX framework includes initiatives like Innovate 2 Value (I2V), which has driven quantifiable improvements such as a 23% reduction in total cost for certain oil-lubricated compressor components and a 10% margin improvement on Seepex progressive cavity pumps by optimizing maintenance. Leveraging data from digitally connected assets has identified over 40 revenue-generating insights with a potential to translate to over $25 million in incremental revenue, demonstrating a data-driven approach to value creation.

While competitors like Atlas Copco may hold advantages in certain profitability metrics (e.g., operating margins) and Emerson in digital integration, Ingersoll Rand's strength lies in the breadth of its integrated solutions, the quantifiable efficiency and TCO benefits of its technology, its strong aftermarket presence (contributing significantly to revenue), and its disciplined approach to acquiring and integrating niche technologies. This combination allows Ingersoll Rand to compete effectively, capture market share, and drive profitable growth.

Financial Performance and Liquidity

Ingersoll Rand's financial performance reflects the impact of its strategic transformation and operational execution within a dynamic global environment. For the three months ended March 31, 2025, the company reported revenues of $1,716.8 million, a 2.8% increase compared to the prior year period. This growth was primarily fueled by contributions from recent acquisitions and the impact of pricing actions, partially offset by unfavorable foreign currency translation and lower organic volumes. Gross profit increased by 2.6% to $765.5 million, although the gross profit margin saw a slight decrease. Selling and administrative expenses rose by 4.1% to $350.0 million, mainly due to acquired businesses.

Operating income saw a modest increase to $302.5 million. However, net income attributable to Ingersoll Rand Inc. decreased by 7.8% to $186.5 million, largely impacted by a significant increase in interest expense, which rose by $24.4 million to $61.2 million due to higher debt levels associated with funding acquisitions like ILC Dover.

Despite the pressure on net income, the company's focus on operational performance is evident in its Adjusted EBITDA, which saw a slight increase to $459.7 million in Q1 2025. While the Adjusted EBITDA margin decreased year-over-year, the increase in absolute terms was driven by the accretive impact of acquisitions and pricing, offsetting organic volume declines and unfavorable mix. Adjusted Net Income decreased by 8.4% to $293.2 million, primarily reflecting the higher interest expense.

Looking back at 2024, the company delivered strong results, with full-year Adjusted EBITDA margin reaching a record 27.9%, demonstrating robust margin expansion driven by operational initiatives. The ITS segment, in particular, achieved record margins, meeting its 2027 targets three years ahead of schedule.

Ingersoll Rand maintains a strong balance sheet and robust liquidity. As of March 31, 2025, total liquidity stood at $4.2 billion, comprising $1.6 billion in cash and cash equivalents and $2.6 billion in available capacity under its revolving credit facility. The company's net leverage was 1.6 times, remaining flat sequentially from Q4 2024 and reflecting the impact of the ILC Dover acquisition on the year-over-year comparison. The debt portfolio has been strategically transformed into a fully investment-grade structure, with a favorable fixed-to-floating ratio and extended weighted average maturity, enhancing financial flexibility.

Cash flow generation remains a key strength. Q1 2025 saw record first-quarter free cash flow of $223 million, a significant increase from the prior year, driven by improved cash flow from operating activities and lower capital expenditures. For the full year 2024, free cash flow reached $1.25 billion, representing a strong conversion rate. Capital allocation priorities remain consistent: M&A is the top focus, followed by returning capital to shareholders. The company's Board recently authorized an additional $1 billion in share repurchases, bringing the total authorization to $2 billion, with a target to execute up to $750 million by the end of 2025.

Outlook and Key Risks

Management's guidance for full year 2025 reflects a balanced perspective, acknowledging both the positive momentum and the prevailing macroeconomic uncertainties. The company maintains its total revenue guidance, incorporating tailwinds from strong organic orders, incremental pricing actions to offset tariffs, favorable FX, and completed M&A. However, to maintain this guidance in a dynamic environment, a "prudent" contingency has been included, resulting in an implied organic volume decline assumption for the year.

Specific guidance for FY 2025 includes:

• Total Revenue Growth: 3% to 5%
• Organic Growth: 1% to 3% (split approximately 75% price, 25% volume)
• FX Impact: Approximately -2% headwind
• M&A Contribution (from deals closed in 2024/early 2025): Approximately $300 million
• Adjusted EBITDA: $2.13 billion to $2.19 billion
• Adjusted EPS: $3.38 to $3.50 (approximately +5% at the midpoint)
• Adjusted Tax Rate: Roughly 23%
• Net Interest Expense: About $220 million
• Capital Expenditures: Around 2% of revenue

Management anticipates organic growth trends to improve in the second half of 2025 (up 3-4%) compared to the first half (down 3-4%), benefiting from easier comps and the full run rate of pricing actions. The phasing of revenue, Adjusted EBITDA, and Adjusted EPS is expected to follow historical patterns, with approximately 46% in the first half and 54% in the second half.

Crucially, this guidance excludes the impact of future M&A expected to close during 2025. The company remains committed to acquiring an additional 400 to 500 basis points of annualized inorganic revenue in 2025, incremental to the current guidance, underscoring the continued importance of M&A as a growth driver.

Despite the positive outlook based on strategic execution and market indicators like double-digit MQL growth and robust long-cycle funnel activity, several risks could impact performance:

• Macroeconomic Uncertainty: Global instability, inflation, and elevated interest rates could continue to affect customer demand and capital investment decisions.
• Elongated Decision-Making: Delays in converting leads and funnel activity into orders, attributed to factors like customer site readiness, EPC engineering capacity constraints, and geopolitical uncertainty, could persist.
• Tariffs and Trade Policy: Potential changes in U.S. trade policy and the imposition of new tariffs, along with potential retaliatory measures, could impact costs and market dynamics, although the company is actively implementing mitigation strategies (pricing, supply chain adjustments).
• Acquisition Integration: While experienced, the integration of numerous acquisitions, particularly larger ones like ILC Dover, carries risks related to realizing anticipated synergies and maintaining operational focus. Intangible asset impairment risk is noted for certain PST reporting units acquired with ILC Dover.
• Competition: Intense competition across segments requires continuous innovation and operational efficiency to maintain market share and profitability.
• Supply Chain: Dependence on suppliers and potential disruptions could impact costs and delivery times.

The company believes its agility, operational framework (IRX), and in-region capabilities position it well to navigate these challenges and capitalize on opportunities.

Conclusion

Ingersoll Rand has successfully transformed into a more durable and strategically focused entity since the 2020 merger. The company's investment thesis is underpinned by a powerful economic growth engine driven by disciplined bolt-on acquisitions in high-growth sustainable end markets and a commitment to operational excellence through IRX. This strategy is complemented by a portfolio of differentiated technologies that offer quantifiable benefits to customers, creating a competitive moat against rivals like Atlas Copco (ATLKY), Emerson Electric (EMR), and Dover (DOV).

While the company faces ongoing macroeconomic uncertainty, including elongated customer decision cycles and potential tariff impacts, its recent financial performance, robust liquidity, and proactive mitigation strategies demonstrate resilience. Management's prudent 2025 guidance, while incorporating near-term volume caution, is supported by positive leading indicators and a clear path for sequential improvement. The significant pipeline of future M&A and the increased share repurchase authorization highlight a continued commitment to value creation, leveraging a strong balance balance sheet. For investors, Ingersoll Rand represents a compelling opportunity to participate in a company that is actively shaping its future through strategic growth initiatives, technological leadership, and a proven ability to execute in a dynamic global landscape.