Ingersoll Rand Inc. (IR) February 19, 2026 Conference Transcript

We are very excited to have Ingersoll Moran with us. We've got Vic Kinney, who is the CFO of Ingersoll Moran. And Vic, as I walk over to you, it's been about five years since you closed the ORMT. Lots gone on. I think you had a vision then to be the premier industrial compounder. So maybe what's gone right and if there's anything that you wish you could do better?

Yeah, for sure. So first of all, Andy, thanks for having us as always here. It's great to be here. Yeah, first and foremost, it is kind of crazy. I think it's been six years now, you know, since 2020 till now. So we're coming up on the six years here very shortly. You know, I think first and foremost, incredibly proud of kind of the Ingersoll Rand that we've kind of built and developed here over the last six years since the RMT. You know, if we think about, you know, what the business has executed and operated through, to first have completed the merger in the midst of COVID, integrating two companies, you know, I'd say delivering on and exceeding synergy targets, but then really setting up what I would say is a real industrial kind of premier compounder that you've seen solid organic growth momentum over the course of that five, six years, complemented by what I would say solid margin profile, kind of obviously margin profile that's improved over the years, strong free cash flow, and then really being able to re-compound that into M&A. And so if you think about the last six years we've done, since the merger, we've actually done 76 acquisitions to date and they've really been, I would say, global in nature across the entire portfolio. So I think we're really encouraged by what we have built to date. I think it's all underpinned by our kind of ownership mentality. As I think everyone's aware here, all of our employees are owners in the company. And I think that really drives a culture and a mentality of how we can continue to drive the company together, 20,000 plus employees strong, kind of moving forward. Now that being said, I feel like it's still early days, right? we're approaching roughly $8 billion in revenue in a $65 billion-plus addressable market. So as far as one of those areas that we can continue to push on, I would say as much as we're encouraged by what we've seen, I feel like all those areas have continued room for opportunity. So whether it be on the organic growth side of the equation, continuing to push on innovation, demand generation, and recurring revenue, which I know we'll talk about. While we've done a great job on the margin front, I think there still are very much areas for opportunity on margin expansion, particularly in areas like PST. And, you know, the free cash flow side of the equation, you know, we're continuing to look for ways to optimize, you know, as much as we're encouraged by, you know, 1.2 to 1.3 billion of cash that we've been generating on an annual basis here the last few years. Are there areas for optimization, whether it be working capital, I'd be remiss if I didn't look at myself and think about things around, you know, tax rate and things like that, of course. So I think we still have plenty of levers and plenty of opportunity moving forward. And clearly, you know, the inorganic side, right? The M&A engine is not slowing down, you know, bolt-on driven. We did, like I said, 16 deals last year. We've already gotten one bolt-on completed this year. And I see no reason why you won't continue to see that momentum continue. Got it. So, Vic, I like having you up here because you're like the owner of the guidance.

So, like, I can ask you about it. And just, you know, this is the third year in a row, right where we're all kind of like seeing some hints of short cycle recovery um but you know if i look at your guidance it doesn't look like you're baking much of any recovery you know and your numbers maybe you can talk about that did you take a different approach this year than past years uh in how you set your guidance sure yeah so you know i think a couple things to say here so first and foremost i think uh whether it be q4 or the second half of 2025 i think we're encouraged by the momentum that we're seeing kind of across the enterprise.

Obviously, you've seen organic growth from an orders perspective kind of, you know, be on the positive side. I think Vicente mentioned it on our earnings call. You know, for example, in ITS, we saw organic orders momentum across all of our regions from a total year perspective. If you look at the second half of the year, you know, roughly speaking, low single digit organic orders momentum. And so as we look to 2026, yes, encouraged by that momentum we're seeing, I'd say PMIs being above 50, albeit for one month. We wanted to take what I would call a prudent view from a guidance perspective. And so, yes, we set organic growth expectations 0% to 2%, so that midpoint 1%, so very consistent with that kind of low single-digit kind of momentum we've been seeing for a few quarters. And, you know, as far as, you know, our guidance, it doesn't bake in what I would call any kind of, you know, I'd say broader industrial recovery or things of that nature at this point in time. We want to see that kind of materialize a bit more, see a few more months of what I would say momentum. You know, obviously, we want to continue to watch the leading indicators. And hopefully, organic volumes are something that we can kind of revisit as the year goes on. And that's something that's, you know, hopefully a little bit of upside opportunity. But, yes, I think as we think about the guide this year, I think there was a conscious effort to be, you know, a bit prudent in the kind of expectation setting up front. And that's hopefully something we can revisit here as the year unfolds.

That's helpful, Vic. And I want to delve a little bit more into the, like, leading indicators you talked about. for the earnings call, you kind of said, look, MQL to order, that's marketing qualified leads for everyone, to order is still kind of like a little bit slow. It hasn't really changed much. And in terms of large project timing, it's still kind of like a little bit slow is kind of what I heard.

But at the same time, your shipments in Q4 did pick up a bit versus, I think, your own expectations so is that a sign that customer delays are starting to unlock sure you know i mean i think customer conversations um definitely constructive uh you know i think uh we'd say maybe the peak of uncertainty is kind of in the rear view um and that every month that transpires thereafter i think hopefully you know you can say the um customer dialogue is getting more and more constructive you know as far as the comment around mqls or long cycle funnel um from an mql perspective you know i think as we indicated on the call still healthy from a growth perspective year every year. Yes, we would acknowledge that that kind of elongation in the context of MQL to order is still existent. And from a long cycle funnel perspective, similar. Funnel itself, healthy. Yeah, maybe there's still a little bit of elongation in terms of getting to the finish line on POs. But in the same breath here, you did see good project momentum even in 2025. And you saw book to bill from a full year perspective being slightly above one. So we did build a little backlog here coming into 2026. So I think the simple answer here is, continue to have constructive discussions. We do continue to see things getting better as that uncertainty continues to be behind us. I think this is an area where Q4, for example, was just solid execution. Typically, Q4 is a quarter where you see a healthy amount of long-cycle project shipments. Just from a seasonality perspective, Q4 of 2025 was no different. I think generally things continue to play themselves out as we would expect. Q4 was no different.

So, Vic, I wanted to ask you, because I get this question a fair amount, so I kind of need to ask you. As you know, you're compared to a large European competitor, compressor-focused competitor quite often, and certainly other large U.S. short-cycle-focused industrial peers. When we look at those peers, at least lately, they tend to have orders in the mid-single-digit-plus range, and you guys are kind of low single digits. So maybe give more color why you think your growth is trailing some of these peers, and what do you think could be a catalyst to get your growth to be equal or higher than these peers?

Sure. I'll take the first part of the question at least compared to that larger other peer. I think the simple answer here is there are some product technologies that are not similar between the two portfolios, which I think is driving that wedge. We cap out at a certain horsepower range from a compressor perspective. That peer plays in a much higher range, which I think is where a lot of that said growth and at least that differential is coming from. When you look at what I would consider to be the more classical, you know, we'll call it more small, medium type compressors, whether it be on the, you know, legacy oil lubricated or even on the oil free side, I think you'll see performance to be much more in line. You know, even areas where, you know, North America and areas where you can kind of measure share and there's some third party, I think those third parties would reiterate and kind of reinforce that as well. So I think from a market performance, whether we look at North America or any of the international markets, whether we look at the product technologies, we actually feel pretty comfortable with where we're operating and where we're executing to. As far as the broader industrial peer set, obviously tough to comment. There's a lot of differing end market exposures. We don't have what I'll call classical, for example, data center or aerospace exposure and things like that. But that all being said, I think the second half momentum that we saw, which you did see a little bit broad based. We can talk about fourth quarter here that you saw momentum, not just in the kind of classical short cycle industrial compression side, you saw good momentum in our precision technologies business, which is the niche legacy kind of positive displacement pump business, as well as the life sciences business, which was actually up roughly mid-teens from an order's perspective in Q4. So I think we're really encouraged by, I'd say, the pockets of growth that we're seeing. And that, you know, like I said, if things continue in this respect, hopefully there's, you know, a little bit more, you know, organic volume type of upside that we can continue to see hopefully here as the year plays itself out.

Yeah, so, Vic, you just mentioned it. Life Sciences is actually your biggest business. It's almost 20% of the company, right? And it was up mid-teens. So I don't have to be very good at math to know that if it continues in mid-teens, and everything else is flat, you do the high end of your organic range for the year, right? So how do you feel about life sciences? Is that kind of momentum sustainable, and where is it coming from?

Yeah, so maybe just a level set of the math here for two seconds. First and foremost, so the comment about mid-teens up on life sciences, that's really pertaining to the classical, what I'll say, life science business within precision and science technologies, which is a component of life science. We also then have what I would call the compressors and air compression technology.

I'm not really good at math, that's what I'm saying.

So, no, no, no, it's just to clarify here that mid-teens is much more from the precision and science technologies life sciences, but the point is still valid. Very encouraged by what we're seeing there. Our life sciences exposure, you've got kind of three different components of life sciences and precision technologies. You've got the legacy, what we used to call Gardner Denver or Ingersoll Rand medical business, which is kind of more OEM components to medical lab life sciences, diagnostic tools manufacturers. You've got our biopharma business, and then you've got a kind of medical device manufacturing business. And the good news is you're seeing momentum across all three. They're all playing in slightly different aspects of the life sciences business. But they're, you know, one, I'd say showed healthy growth in Q4. And I think the expectation of whether you call it short to medium term, I think those trends are still encouraging going forward. So we're very, I think, pleased with the growth that we're seeing on the life sciences side. I would also correlate that to some of the margin expansion you've continued to see now on the precision and science technology side. As you've seen those life sciences businesses grow, you've obviously He's seen some of the commensurate flow through come with that, which is why you've seen now margins sustained over 30% for a number of quarters, which we'd expect to continue going forward.

Got it. So I wanted to ask you about your demand by region because, you know, you're known as, you know, more exposed to regions such as Asia and China, right? I think you said three quarters now in a row of positive organic order growth and you're growing low single digit there. you've got product innovation, you're bringing acquired technology to China. So is it fair to say that, you know, at least the underlying China market is stabilized for you guys? And then, you know, your ability to outperform the market seems like it's improving. So maybe talk about that.

Yeah. So maybe we'll just look on a level set on China in general. So first and foremost, China for us is about a 10, 11% exposure from a total company perspective on a revenue base, actually comparable levels of exposure across both ITS and PST now it's worth mentioning that you know roughly two three years ago that number was probably closer to 15% so yes you have seen obviously China reset a little bit which is not unexpected given the market in China and things of that nature now that being said I think that team has done a really good job from an execution perspective in what has been a pretty tough macro backdrop to your point if you think about kind of what we've seen in 2025 you know multiple quarters of what are called low single-digit organic orders momentum. And, you know, this is a market that, you know, it's a competitive market out there. Obviously, the business there historically has been largely compressor-centric. That's because the roots of our China business are much more on the Ingersoll-Rand compressor side of the business. Where you've seen, I think, a lot of that outperformance and outgrowth is what I'll say is solid performance on the compressor side, but then also leveraging what I would say those differentiated technologies that our China a business historically didn't have as much access to. So whether that be the blower vacuum portfolio from the Gardner Denver side, whether that be even relaunching the Gardner Denver compressor series itself, air treatment technology as we've bought SPX flow and things of that nature and, you know, seeing some of those technologies. And then, like I said, 76 bolt-ons over the last six years, some of those acquired technology being localized. And I think that's where the team is showing nice differentiated performance in what is still a pretty tough market. So So, yeah, I mean, we're encouraged by what that team is doing. You know, the China business is still 10%. It's still a very healthy business, very healthy margin profile, and that business continues to execute well in what is obviously a different backdrop than it was three, four years ago.

Do you think the potential now is different? Like, can you grow mid-single digits plus in that business?

Yeah, I mean, that's not necessarily our expectation at this point in time. And, again, I think it's probably, you know, a bit of just, you know, one way to see the China market in general get to some degree of what I would call, you know, rebound. Yeah, I don't think we expect it to be back to where it used to be once upon a time, but, you know, some degree of sustainable growth. And also just, you know, making sure that, you know, level setting expectations from a prudency perspective. But that being said, you know, I'd say that team has done a really nice job. And it's also worth noting, and probably a question we'll touch upon here, that that team has also done a great job doubling down on the non-China components.

Yeah, so let me ask you about that, Vic. So you're up 20% in Q4 in organic orders in the rest of Asia. That's a big number, right? I know it's a small part of Ingersoll, but that kind of growth is difficult to ignore. So maybe talk about that. Should we be paying attention to that? And how big is that versus, you know, China?

Yeah, for sure. So obviously it's the smaller piece of the equation. So the non-China pieces of AIPAC we're really referring to would be Korea, Australia, and Southeast Asia. You know, would I say we should be paying attention? You know, in the context stuff, yes, it's smaller. Obviously, China is, you know, a bigger component of the equation, comparatively speaking. But we have mentioned a number of times that there are certain areas of the world that we kind of consider to be underpenetrated from an Ingersoll-Rand perspective. And what we mean by that is there are kind of four key regions that we've talked about explicitly that we have a presence in, we have had a presence in, but our share in those respective markets we know is not at the same levels as what you see in more developed markets like the U.S., Western Europe, and China. And so those areas would be Latin America, particularly Brazil, or Latin America in general with Brazil being kind of our biggest component, Middle East, India, and Southeast Asia. And yeah, Southeast Asia, obviously there's, you know, I'd say some dovetails to places like Australia and areas like that. So in Q4, I think what you're seeing there is a combination of that focus and some, you know, I'd say good momentum in certain areas, as well as some nice project wins. Obviously, you're not going to see 20% type growth every single quarter. That's not the expectation. But I do think this is an area much like Brazil, much like India, much like Middle East, where you should continue to see, I'd say, comparative outperformance. just because, you know, we know our share has room to grow there. And, you know, we're making the targeted investments. I think that's also the key part here. So in Southeast Asia, we've been making some very concerted, I would say, commercial investments to make sure that we have the right feet on the street. India and Latin America, commercial investments. We actually opened two new facilities last year for in-region manufacturing. In India, our second compressor manufacturing facility. In Brazil, our first ever compressor manufacturing facility to really just be able to have more in-region for region presence, which is very consistent with our in-region for region model around the rest of the globe. So I think we're really encouraged. You know, obviously Q4, we specifically talked about Southeast Asia or the non-China piece of APAC. But I think we're very encouraged by, I think, the momentum here that we'll continue to see for the medium to long term.

Got it. And just as an aside, when you build all these things out, I think to myself, you know, that it could add extra costs. So you're being careful about keeping, because you have very high margins, as you know. You can get the margins you need in a place like India, for example.

For sure. You know, I think one thing that's important to note here is that, you know, obviously we talked about a lot of the headwinds and whatnot that existed in 2025, whether it be tariffs and things of that nature, which obviously created uncertainty from a growth perspective, so forth and so on. But I think it's worth noting that, you know, from an ITS perspective, for example, still maintain 29-ish percent EBITDA margins, right? So to your point, what we consider to be very healthy margin profile, That was in the face of, I'd say, some known macro headwinds like tariffs, an environment that didn't, frankly, have a lot of organic volume momentum, and we were still investing for growth, right? And you could see that in the SG&A dollars and things like that. And that's a concerted effort, whether it be in areas like that, whether it be for recurring revenue, things of that nature. We're going to continue to make those investments. In fact, we have a requisite amount of investments still baked into, for example, 2026. But I think it also speaks to the ability of the teams to be able to, whether it be drive pricing excellence, drive productivity. You know, you saw in our financials here in the second half of the year, we took some very targeted restructuring actions enterprise-wide. And that really continues to be to, I'd say, bolster the quality of earnings, continue to right-size, particularly back-office and things of that nature, while still being able to invest for growth in areas like you mentioned.

For sure. So I want to do the other two big regions for one second, just in Europe. I think orders were down in Q4, but Vicente mentioned strong growth in Central Europe in 2025. And, you know, you seem positive for Europe to have some growth in 26. So where does it come from? I know Europe is more of a sustainability market. Like, is that growing? Like, what do you think about it?

Yeah, I mean, I think it's a continuation there. So, you know, I think from our Europe perspective, encouraged by what was probably, over the course of the last 18 months, probably our most stable region, comparatively speaking to China and what we saw in North America, you know, selling good momentum in areas like, for example, you know, France, Italy, Spain, you know, countries of that nature. Yes, sustainability kind of being a driver there. But I'd say also, you know, good execution across both short cycle as well as some of the long cycle project type opportunities. India is an area that we obviously also kind of manage together with Europe. And India, obviously, it's arguably probably for the last five years been our single best growth region itself, where you've been seeing double digit type momentum in India. Like I said, we've invested in a second compressor manufacturing facility there. And we actually have very good presence in both our ITS and PST businesses. You've even seen inorganic opportunities there. We've got multiple bolt-on acquisitions in India, just given the attractiveness of that market. So, you know, I think continue to be encouraged by what we're seeing there. Would we expect to see dramatically different, you know, performance? No, I think it's, you know, continuing to be relatively stable in those markets that we play. And, you know, a continued, you know, I'd say balance of execution. It's also worth noting, and I know we'll talk about it here probably shortly, the recurring revenue piece of the equation. you know continuing to see very good traction outside of just the u.s where that recurring revenue model kind of grew up so that's what you're also seeing i think help bolster not just the top line side of the equation but also the margins because that recurring revenue model is quite margin accretive when it's done at kind of its highest standard and you're starting to see that pick up momentum in areas like western europe and even asia yeah no i'll definitely get to that in a second i'm going to open up to the audience in a minute just rounding out into the americas i think you've talked about it being sort of for now a low single digit grower but it seems like things are setting up for you guys over there you know you talked about pharma bio you know maybe reshoring could help you obviously electricity prices are going up that should lead to shorter paybacks for things like compressors so why can't you have a little more torque in the americas is anything holding you back there yeah no i mean i think the factors you mentioned whether it be life sciences momentum reshoring or onshoring obviously energy pricing being higher and you know just to put in perspective you know a compressor typically is at the top of the list in terms of energy consumption in any degree of a manufacturing setting you find yourself up up to 30 percent and in certain cases can even be more than that so i think i'll go back to kind of how we started encouraged by the trends we're seeing but we also want to see that continuation right um and so i think from our perspective it's just prudency as we kind of come into the year um is there anything holding us back per se no i think from a capacity

perspective execution perspective supply chain no no concerns whatsoever from that perspective we just want to continue to see that momentum build and obviously that's an area that will you know hopefully be able to revisit here as the year goes on for sure any questions for the lines over there thank you so just just a question on that big pair of yours they had very strong growth in gas and process in the quarter where you have less exposure but just curious on sort of market share movements on the larger and small and mid-sized compressors, you mentioned that you're outperforming a bit in China, and I'm just curious whether you think that you're taking some market share in China on the compressor side.

So inherently difficult to kind of measure. There's no, like, empirical third party or things like that that measures this stuff. So I'll say, you know, one, you know, the competitive suite that we operate against It's great competition, very, what I'd say, prudent, rational, you know, very established, as well as ourselves. I think from a China perspective, you know, I feel like we're holding our fair share without question. Like I said, I think where we're seeing those pockets of incremental opportunity are some of those differentiated technologies, not just compressors, but around the compressor spectrum, where either historically we haven't operated in or historically we just haven't had those offerings in region. And so, yes, obviously compressors, without question, is still the biggest piece of our China exposure. And so to even have low single-digit organic, there has to be contribution from the compressor perspective, right? You can't have compressors going down and the other pieces going up. That equation still won't get to low single digits. So you are seeing contributions from the compressor perspective. And I think it's also then leveraging, you know, the Ingersoll-Rand name, the channel there to be able to leverage a lot of the other different technologies that I spoke to earlier.

Quick follow-up is on replacement demand relative to sort of capacity additions on the larger side in China. I mean, what we're hearing is replacement is coming back. The fleet is quite old, but anything growth is basically off the table. Is that how you see China as well?

Yeah, I mean, obviously, you know, when you look at kind of China growth in general, it's not what it was. So I think your statement is very fair in the context of at least where demand has at least been trending over time. The good news, though, is replacement, when we have the presence that we have, then also being able to supplement that not only with the differential technologies, but also with the recurring revenue model. We're very comfortable that that is still an equation and an environment where we can do quite well in. And then obviously, yeah, if true, true growth, Greenfield or otherwise, comes back in the future, listen, we're well poised to be able to execute there. but the concept of just being able to execute on replacement of older technology services through the aftermarket and hopefully convert to recurring revenue where possible that's without question i would say more in the control what you can control almost self-help perspective of continuing to perpetuate where we see a lot of our opportunities particularly on the recurring revenue side so let's talk recurring vic um so you're up to 450 in 2025 200 a couple years ago your target that you said your investor day a couple years ago was one billion for 27 so it's a big number versus where we are you know last year so i mean do i just think big step up in 26 and 27 when we get there how do i think yeah so let me just kind of level set here that um it was a little over two years ago at our investor day late 2023 where we kind of rolled out the recurring revenue initiative and we said at that time you know squiggle 200 million dollars of recurring revenue. But it was really a model that existed, I wouldn't say 100%, but it was the preponderance was in the kind of legacy Ingersoll ran North America compressor side of the business, which is where this model grew up. And we saw a meaningful opportunity, the numbers you kind of outlined there, a billion dollars in 2027. And we kind of outlined it and kind of laid it out at that point in time. And, you know, if you kind of flash forward here, we've eclipsed $300 million in 2024, and now eclipsed $450 million in 2026. So I think the momentum from having gone from roughly 200 million in 2023 and by the way it was like 100 million not but a few years before that to go from 100 million to 450 million dollars plus in a handful of years i think it speaks to the power of kind of this model um you know i think what we're really encouraged by is twofold one the fact that you're now seeing this have global adoption right so yes off that 450 million dollars plus is north america compressor still the biggest piece of that of course but is it at the same you know same percentage of what it was no obviously you've seen the rest of the portfolio start to adopt the model quite nicely. You're also seeing it outside of just compressor specific technology. So blowers, pumps, even parts of our life sciences portfolio that have parts or service needs, there's a care or care-like model that can be adapted. So I think we're incredibly encouraged by what we're seeing. As far as the 26 and 27, obviously we haven't guided on specifics there, but do we expect to see, I'd say, a continued ramp as we move through the next few years yes you know i think one thing that we mentioned on the call that i think is a nice milestone that we've hit is uh we have what we said uh you know at the end of 2025 1.1 billion dollars in the backlog or 1.1 billion dollars in what we'll call the bank and what that really means is 1.1 billion dollars in future contracts that we already have kind of inked so you know that by no means is the the ending point that's just a nice solid building block as we know execute now for the next couple years obviously we expect to see continued momentum and ramp on in-year orders and as we go into 2027 um and as expected you know as expected you know a nice ramp

as we move from the 450 but if you look at even the sequential momentum we've seen you've seen solid double digit growth here which we would expect to continue here moving forward got it that's helpful vic and then i think one of the ways that you're getting there is by focusing on the digitization of your products so maybe given ai is a dominant theme right now in industrials how are you using ai to improve your deliverables such as improving the connectability efficiency of products.

Yeah, I mean, exactly. You know, I think when you think about some of the kind of megatrends here, AI obviously has strong applicability in our space, and that's kind of going from more, you know, historical kind of mechanical industrial assets to more smart connected industrial assets. And so, yes, using AI to, you know, the connectivity, the preventive maintenance, kind of those predictive models, how can we use AI embedded in our machines to actually drive that type of, you know, efficiency and whatnot. Also, just from an efficiency of our commercial force right how do we actually make doing business with Ingersoll Rand how do we equip our commercial teams to be able to execute deliver quotes in a much more faster real-time manner you're seeing applicability on both sides so I would say one from a true product technology perspective and one from just what I will call it a sales and commercial efficiency perspective of course things in the back office and like that of course you know we'll continue to focus on that but I think we're hyper focused on how do we improve the connected aspect of our machines and then sales force efficiency which are still I would say early days but areas that we are hyper focused on from an AI perspective.

Got it and then Vic with the understanding that you do have high margins like when I look at your price versus cost right I look at tariffs in particular it's been kind of holding you back a little bit on the margin side as you know price cost neutral in the first half of 26 positive in the second half that leads to margin expansion in the second half but maybe talk about why there does seem like there's a lag for you guys versus maybe some other short cycle industrial peers? And, you know, how do we feel about the risk that, you know, commodity prices are still all over the place? Can you price that?

Yeah, for sure. So, you know, I think as far as the price cost or the tariff equation, you know, I think we've been pretty transparent about the fact that, you know, a couple things. One, we weren't looking, we're not looking to make margin per se on tariffs, right? We've been very clear that, you know, where we have to take price, it's really meant to offset tariffs from a one-for-one perspective. Other than a little bit of timing aside, where, yeah, there are situations where tariffs hit you a little bit more kind of real-time, and then, you know, when you have to go take price increases, you all, you know, have to give the channel a certain time notice and things like that. So there'll be a little bit of a lag there. We indicated that even in, you know, as we moved into Q4 of last year, and I'd say the team's actually executed quite nicely. You actually saw us kind of deliver at the higher end of both our revenue and our earnings expectations in Q4 specifically. So I'd say, yeah, maybe a little bit of lag, but I'd say even that that the team has done a nice job executing. As we move into 2026, I think the simplest way to think about it here is those pricing actions have largely been taken as we've indicated really in the back half of this year. So the fact that price is offsetting tariffs in the first half, that's a fair statement. I would call it price cost dollar neutral. Obviously that is a bit of a headwind to margins. And then as we lap that tariff equation moving to the second half of the year, as well as I'd say a combination of maybe some targeted normal course in-year pricing actions that will materialize more in the back half of the year, some of the normal productivity that you would expect, which typically follows your cost of goods sold and seasonality, which tends to be a little bit more back half-weighted, as well as some of that restructuring we talked about materializing through, probably partially offset by some of the commercial investments for growth we can make. That's that equation, what we're on, I'd say, second-half margin expansion. But I think the team has done a really nice job executing. It's been a very, for lack of a better way to say, this dynamic environment in the sense of tariffs. And I think the team has executed quite nicely in terms of taking the requisite actions, moving with pace. And, yeah, generally speaking, a little bit of timing aside, you've seen those match up pretty nicely.

So, Vic, we already talked about, you know, again, ITS, 29% margins, nothing to snuff at. But it's been kind of flattish for a while, right? And I think it's just easily because organic growth has also been flattish. So if you start to see better organic growth, let's say starting in the second half, can you get sort of normalized incrementals of 35 to 40? or should maybe use even more torque than that? You've been doing a lot during the time. You mentioned some restructuring. You're always doing I2V. So, you know, can you get inflection in margins that maybe is better?

Yeah, so, you know, like you said, I mean, I think it's probably worth noting here that 29% margins, despite all the headwinds we've mentioned here, it speaks to the fact that the team has been, I'd say, very deliberate and focused on maintaining margins despite some known headwinds that we've been moving against this last few years. So very encouraged by what the team has done there. As far as, to your point, yes, with, you know, I would say organic volume, if, you know, you see any degree of kind of torque on that side or return to kind of organic volume growth, as you indicated, the concept of what are called 30 to 40% incrementals, and it'll play across that spectrum depending on month and quarter and things like that. Yeah, there's no reason that those types of numbers aren't possible. Can you see potentially higher than that in certain periods? Perhaps, you know, I'd say that that's, you've seen that before, so there's no reason to say you couldn't see that again. but I do think you're going to continue to see prudent reinvestment you know for us it's about maintaining that organic growth momentum for not just a quarter or two but sustainably over the medium to long term so we are continuing to be very focused on the requisite investments whether it be a lot of the areas we talked about innovation R&D feet on the street and those under penetrated markets commercial resources even our developed markets and the recurring revenue model we're going to continue to reinvest in that so you saw that even in 25 in an environment where you know you obviously did not see as much growth but we're committed to that kind of reinvestment in the business so you know I think the answer here is yes normalized incrementals absolutely

should be part of the equation but you know we also want to be very conscious of making the reinvestments from a growth perspective that we need to make sure and so PST you finished just over 30% EBITDA margin you're going to a triple-digit margin expansion in 26 you seem pretty optimistic actually about margin expansion for 26 so but I know you're aware you still have a mid 30s PNST, adjusted margin target for 27, does seem like kind of a big jump. So, well, can you get there?

Yeah, I mean, so, you know, a couple of things here. I think we're really encouraged by what we've now seen. You know, it's no secret that PST margins, if you look kind of from the merger up until even kind of, you know, 24, 25, it had gone from roughly 30% to 30%. And, you know, if you look under the covers over that time frame, there were a lot of moving factors. COVID, you know, you saw some upticks there, but then you saw a downturn in the you know the legacy iron medical business which came with some healthy flow through you've seen the cpex business which we knew was coming in 15 percent even the margins that business now plays around fleet average so you know despite the fact that you went from 30 to 30 there were some known headwinds in there and the team has done a nice job offsetting that to still you know stay at 30. now to your point how do we kind of sustainably kind of get this now moving forward into that kind of mid 30s range a couple things here one as you saw i think you know good momentum here as we move through 2025 right we indicated that you know a couple aspects here as you get I'd say irx and kind of some of the i2v and kind of just some of that blocking and tackling mentality really embedded within not just the precision technology side of the equation but also the the life sciences side particularly the ILC Dover acquisition that was going to be a catalyst for opportunity one two life sciences growth just in general obviously we talked about the orders momentum we saw in Q4 this is a part of of the business we expect to see, I'd say, better than the rest of portfolio potential growth moving forward. And it comes with, I would say, healthy margin profile as well. And then three, we talked about restructuring and some of the productivity measures and things like that. That's not just an ITS comment, right? So in the second half of the year, when we took, for example, targeted restructuring, that was enterprise-wide. ITS, PST, as well as even the corporate enterprise. And so, you know, I think those will all be catalysts here. But, you know, I think the simple answer here is um you know again we're being prudent on the growth expectations excuse me i think incremental organic volume will obviously be an even you know a kicker on top of that for lack of a better way to say that um and you know even things like recurring revenue again very small comparatively speaking in pst versus its but even starting to see some you know i'd say you know early wins there and some some momentum in parts of the portfolio that historically never thought about recurring revenue yeah um i think that'll also be a be a help as well it's helpful And so you ended up having a good year, I think, in M&A in 25, 16 acquisitions, $275 million of acquired revenue.

So we know you're going to, again, 400 to 500 base points of annualized and organic revenue for 26. But maybe characterize the environment in terms of the pipeline you have. We sit here together in February. How does it compare to last year? Is it the same, better, worse? How do you think about it?

Yeah, I'd say it's very comparable. And the reason I say that is, you know, our M&A engine and model isn't necessarily predicated on, you know, waiting for third parties to come to us and bankers and whatnot. You know, our deal model and the way we kind of run it, you know, 90% of our deals are sole sourced, right? So we are typically going out and cultivating deals. A lot of these are multi-year kind of duration in terms of the cultivation of these assets. you know to put this in perspective you know last year we did 16 bolt-on acquisitions kind of at the low end of the 400 to 500 basis points but still you know very comfortably kind of executing to what we expected as we sit here today and you know we did earnings last week we announced now one we've already done one bolt-on in January actually in our life sciences business a nice complementary bolt-on to our kind of parts of our legacy kind of Ingersoll Rand medical business two we have nine additional deals under LOI and I would say those nine are very much down the middle of the fairway smaller bolt-on type deals three we have you know roughly over 200 types of you know types of assets in the funnel itself which indicates the health of said funnel and I would point to the fact that it's a very good equitable mix across the entire portfolio otherwise say we're not diverting capital just one business or another you're actually seeing a good healthy mix across the business just to put this in perspective the 16 deals we did last year plus the one we just did in January, so there's 17, four in the life sciences space. So, you know, you're starting to see some good momentum there, but that also means 13 between the kind of core ITS and precision technologies businesses. So a good equitable mix. And I think as we think about 2026, our expectation right now is you should probably expect to see something very comparable, which is on 2025. So, you know, smaller bolt-ons. Yes, I know on the earnings call, we did indicate that there's, you know, a couple of maybe slightly larger bolt-ons, maybe a billion-ish dollar type purchase price. but don't think of those as outside the norm. Those are still very much within, I'd say, the wheelhouse of compressor blower, vacuum pump, life sciences, kind of core technologies. They might just be a slightly larger size, but very comparable to what you've been seeing. And the other thing to note here, and I'll reflect back on the last year, not only have we seen the good momentum, but I think you continue to see us do it from a very prudent perspective. The blended average of those 16 deals, roughly speaking, nine times pre-synergy, adjusted EBITDA, purchase multiple, return profiles in the double digits, mid-teens, like you've seen us do before the ability to reduce that purchase multiple multiple turns nothing is different you know obviously I think this year we would expect to see comparable dynamics.

Vic I think to your point 25 was kind of about getting back to your roots in terms of M&A because you know the year before you did ILC Dover right which was larger and I think you know I sometimes in covering industries for a long time worry about like the law of large numbers for companies you get up to a size you start competing with private equity you You know, and then you do a big deal, and it's harder to sort of see what's going on a big deal. So I probably asked you this before, but sort of now that you're, you know, further away from ILC Dover, any sort of, you know, thoughts or lessons learned? And, you know, was it really just a one-off around spacesuits, and there's still, you know?

Oh, sure, yeah. I mean, I think, you know, first and foremost, maybe to a level set, high level. You know, one, we said that, you know, an ILC Dover-sized type acquisition or something a little bit larger, every few years no concerns whatsoever about being able to execute on something like that in between you're going to see us kind of be right down the middle of the fairway in terms of the smaller bolt-ons and that's exactly what you saw in 2025 as far as lessons learned and things like that yeah you know the space as we talked about it kind of you know at length here you know that dynamics behind us right um and so you know i think what we're more focused on here is if you look at that business particularly from a life sciences perspective a couple things one the business has been restructured you know it's you know now being run exactly like the rest of the enterprise with new GMs kind of running top to bottom no matrix P&Ls things of that nature you've now gotten good foothold on I'd say some of the kind of key aspects of IRX demand generation things of that nature the productivity equation you know the business themselves we talked about the order rates in Q4 so we're encouraged by the momentum we're seeing in the life sciences side and the other piece here is you know and I think one of the parts of the original thesis the deal that very much is still playing itself out is that now we have a very established what I'll call true life sciences beachhead you know that's six seven hundred million dollars in revenue that now you can look to start doing that bolt-on routine that you've seen you know on the ITS and pump side of the equation historically and like I mentioned we've done four now bolt-ons by the way private you know largely from The private ownership, sole-sourced, the economics, whether it be purchase multiples or return profile, look very similar to what you've seen on the ITS or precision technology side. So, yes, I'll say a lot of that noise kind of behind us that you referenced. And more importantly here, I think we're encouraged by what we're seeing going forward, as well as not just the organic side, but also that ability to compound from an inorganic side as well.

So, we're out of time, but let me ask you this for 15 seconds, because I just should ask you. What are the top two or three innovations and structural changes affecting your company over the next five years?

Yeah, real quickly here, I think we talked about AI, so I won't blabber that one any further. The other one is just energy efficiency, right? When you think about a compressor in any degree of manufacturing setting or wherever it is, it's at the high end of the list in terms of energy consumption and things like that from a total cost perspective. Typically up to 30% in terms of the energy being consumed. In certain cases, it can be even higher than that. So continuing to see energy efficiency, how do we continue to show good returns for our customers, that's going to continue to be, I'd say, a focal point. And so that is obviously probably the single biggest buying criteria. And then how do you service it, frankly, through the aftermarket and recurring revenue?

Awesome, Dick. Thank you very much. Appreciate it. Thank you.