Ingersoll Rand (IR) Q3 2024 earnings summary

Executive summary

• Achieved record Q3 2024 orders of $1,799M (up 10%) and revenues of $1,861M (up 7%) year-over-year, with over 200 basis points of adjusted EBITDA margin expansion and 9% adjusted EPS growth, despite challenging macro conditions.

• Free cash flow margin reached 20% ($374M), and the company remains on track for double-digit adjusted EPS growth and strong free cash flow for 2024.

• Closed 15 M&A transactions year-to-date, exceeding annual inorganic revenue targets, with 10 more deals under LOI, mainly bolt-ons, and record annualized inorganic growth in 2024.

• Major acquisitions, including ILC Dover, expanded the Precision and Science Technologies segment and contributed to revenue and profit growth.

• Divested asbestos-related liabilities, resulting in a $58.8 million pre-tax loss and removal of all related obligations from the balance sheet.

Financial highlights

• Q3 2024 revenue: $1,861M, up 7% year-over-year; orders: $1,799M, up 10% year-over-year; gross margin improved by 130 bps to 43.8%.

• Adjusted EBITDA was $533M (28.6% margin), up 15% year-over-year; adjusted EPS was $0.84, up 9% year-over-year; net income was $222M.

• Free cash flow for Q3 was $374M (20% margin); operating cash flow was $404M; capex was $30M.

• Total liquidity at $4.0B, with $1.4B cash on hand and $2.6B revolving credit facility; leverage at 1.7x, up 0.8x year-over-year due to ILC Dover acquisition.

• Book-to-bill ratio at 0.97 for Q3; expected to be approximately 1 for full year.

Outlook and guidance

• Full-year 2024 revenue guidance revised to $7,195M–$7,330M (5–7% growth); adjusted EPS guidance narrowed to $3.28–$3.34 (up 11–13% year-over-year).

• Organic revenue growth guidance lowered to (2)%–0% for both total company and segments, due to order shipment timing.

• Adjusted EBITDA guidance for 2024 is $2,010M–$2,040M (up ~13% year-over-year at midpoint); M&A expected to contribute $455M in 2024.

• No changes to guidance on interest expense, tax rate, CapEx, or free cash flow conversion.

• Sufficient liquidity is anticipated to fund obligations, working capital, and capital spending.