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    IR
    Earnings call· Sep 2025(Q3 FY25)

    Ingersoll Rand Inc. IR

    Oct 31, 2025 Source

    Executive summary

    Ingersoll Rand Q3 FY25 — Strong Organic Orders and Strategic M&A Amidst Tariff Headwinds

    Ingersoll Rand delivered durable growth in Q3 FY25, driven by disciplined execution, the IRX operating system, and strategic bolt-on M&A. The company navigated a dynamic macro environment marked by tariff headwinds and delayed pricing realization, which impacted full-year guidance. Management remains confident in achieving long-term margin targets and continues to leverage its strong balance sheet for capital deployment.

    Highlights

    3

    • Year-to-date organic orders increased by 2% with a book-to-bill of 1.04x, demonstrating continued momentum.

    • The company closed 14 acquisitions and has 9 additional transactions under LOI, averaging a 9.5x pre-synergy multiple.

    • PST segment adjusted EBITDA margin improved by 80 basis points year-over-year to 30.8%.

    Concerns

    3

    • The midpoint of full-year 2025 adjusted EBITDA guidance was modified to $2.075 billion, largely due to tariff impacts.

    • Full-year 2025 adjusted EPS guidance was reduced to $3.28 from $3.40.

    • Year-over-year margin decline was primarily driven by tariff-related dilution and targeted investments.

    Guidance & targets

    13
    CategoryTargetConfidence
    Full-year 2025 Total Revenue
    Unchanged
    high materiality
    High
    Full-year 2025 Organic Volume Growth
    Unchanged
    medium materiality
    High
    Full-year 2025 Adjusted EBITDA
    $2.075 billion
    high materiality
    High
    Full-year 2025 Adjusted EPS
    $3.28
    high materiality
    High
    Full-year 2025 Adjusted Tax Rate
    roughly 23.5%
    medium materiality
    High
    Full-year 2025 Net Interest Expense
    about $220 million
    medium materiality
    High
    Full-year 2025 Capital Expenditures
    around 2% of revenue
    medium materiality
    High
    Full-year 2025 Share Count
    approximately 402 million shares
    medium materiality
    High
    Q4 FY25 ITS Adjusted EBITDA Margin Percentage
    approximately flat on a sequential basis
    medium materiality
    High
    Q4 FY25 PST Adjusted EBITDA Margin Percentage
    approximately flat on a sequential basis
    medium materiality
    High
    Long-term ITS Adjusted EBITDA Margins
    30%
    high materiality
    High
    Long-term PST Adjusted EBITDA Margins
    mid-30s
    high materiality
    High
    Full-year 2025 Book-to-Bill Ratio
    at or slightly above 1.0x
    medium materiality
    High

    Segment performance

    2
    SegmentRevenueYoYQoQMargin
    Industrial Technologies and Services (ITS)
    Revenue decline driven mainly by tough comps in renewable natural gas projects in the U.S., but momentum across other end markets remains solid. The current dynamic tariff environment is viewed as a temporary impact on margin expansion. The segment is committed to delivering 30% adjusted EBITDA margins by 2027.
    Orders: up 7% (Q3)Organic orders: low single digits (Q3)Book-to-bill: 0.99x (Q3)Organic orders: low single digits (YTD)Book-to-bill: 1.04x (YTD)Compressor orders: up high single digitsIndustrial vacuum and blower orders: up low single digitsPower tools and lifting orders: up low single digitsAmericas orders: up mid-single digits (organic Q3)Europe, Middle East, India, Africa orders: up high single digits (Q3)Asia Pacific orders: up mid-single digits (Q3)China orders: up low single digits (Q3)Rest of Asia Pacific orders: up mid-teens (Q3)
    		declined slightly——29%
    Precision and Science Technologies (PST)
    Revenue growth was driven by a relatively equal balance of organic growth, FX, and M&A. The segment demonstrated continued strong execution, with significant sequential and year-over-year adjusted EBITDA margin improvements. The segment remains well positioned to meet its long-term Investor Day target of delivering adjusted EBITDA margins in the mid-30s.
    Orders: up 11% (Q3)Organic orders: up 7% (Q3)Book-to-bill: 1.01x (Q3)Organic orders: up 2% (YTD)Book-to-bill: 1.02x (YTD)Adjusted EBITDA: $128 million (up 8% YoY)Adjusted EBITDA margin sequential improvement: 130 basis pointsAdjusted EBITDA margin YoY improvement: 80 basis points
    		up 5%5%—30.8%

    Operational metrics

    16
    Adjusted EBITDA
    $545 million
    Q3 FY25

    Company-wide adjusted EBITDA for the quarter.

    Adjusted EBITDA Margin
    27.9%
    Q3 FY25

    Company-wide adjusted EBITDA margin for the quarter.

    Corporate Costs
    $30 million
    Q3 FY25

    Primarily reflecting incentive compensation adjustments aligned with performance.

    Adjusted Tax Rate
    23.9%
    Q3 FY25

    Adjusted tax rate for the third quarter.

    Adjusted EPS
    $0.86up 2% year-over-year
    Q3 FY25

    Adjusted earnings per share for the quarter, showing year-over-year and two-year stack growth.

    Total Liquidity
    $3.8 billion
    Q3 FY25

    Total available liquidity, highlighting balance sheet strength.

    Leverage Ratio
    1.8xmodestly increased
    Q3 FY25

    Leverage increased due to proactive capital deployment.

    M&A Deployment
    $249 million
    Q3 FY25

    Capital deployed for M&A in the third quarter and year-to-date.

    Share Repurchases
    $193 million
    Q3 FY25

    Value and volume of shares repurchased in the third quarter and year-to-date.

    Dividends Paid
    $8 million
    Q3 FY25

    Dividends paid during the third quarter.

    Inorganic Revenue Acquired
    400 to 500 basis points
    Annual

    Annual target for inorganic revenue contribution from M&A.

    M&A Pre-Synergy Adjusted EBITDA Purchase Multiple
    9.5x
    YTD FY25

    Average pre-synergy multiple for year-to-date acquisitions.

    Organic Orders Growth
    2%
    YTD FY25

    Company-wide organic order growth year-to-date.

    Organic Growth (Price Component)
    2.7%
    Q3 FY25

    Contribution of price to organic growth in Q3.

    Tariff Cost Impact
    >$100 millionup from $80 million
    FY25

    Increased tariff headwind for the full fiscal year, impacting guidance.

    Restructuring Charge
    —
    Q3 FY25

    The company recorded a specific charge related to restructuring actions, primarily headcount-oriented, with impact more pronounced in 2026.

    Industry KPIs

    3
    MetricValueDetails
    Tariff cost impact>$100 millionUSD
    Incremental margin operating leveragemid-teens%
    Order backlog order intake by segmentup high single digits (Compressor orders); up low single digits (Industrial vacuum and blower orders); up low single digits (Power tools and lifting orders); up 7% (PST organic orders)%

    Orderbook & backlog

    3
    Total Backlogup high teensQ3 FY25

    since end of 2024

    Book-to-Bill Ratio1.04xYTD FY25
    Book-to-Bill Ratio0.99xQ3 FY25

    Product announcements

    1
    ProductTypeDetails
    META Contact Cool Compressorlaunch

    Deals & partnerships

    2
    Dave Barry PlasticsDesigner and manufacturer of custom cleaning room solutions, enhancing capabilities within life science applications in biopharma production.

    This acquisition is the second addition to Ingersoll Rand's Life Science platform this year.

    FlexanSuccessful transfer of manufacturing for critical Class III implantable silicon-based devices.

    Leveraging its expertise, Flexan transferred manufacturing without disruption to downstream manufacturing or patient care supply chains, reinforcing value proposition in Life Sciences.

    Risks & headwinds

    4
    Dynamic Macro EnvironmentOngoing

    Not quantified

    Mitigation: Disciplined execution, leveraging IRX, controlling what can be controlled.

    Tariff-related DilutionFY25, with realization of offsets in 2026

    Impacted full-year 2025 adjusted EBITDA guidance (midpoint modified to $2.075B); total tariff impact slightly in excess of $100 million for FY25.

    Mitigation: Proactive pricing actions (expected to be realized in 2026), IRX for self-help initiatives (I2V), operational tariff mitigation, and continued targeted actions.

    Delayed Realization of Pricing ActionsQ4 FY25, with realization in 2026

    1/3 of the change in Q4 guidance driven by this factor.

    Mitigation: Pricing actions are in backlog and expected to come through in 2026 as orders convert to revenue.

    Uncertainty in Industrial Landscape due to Tariff SituationOngoing

    Not quantified, described as 'main drag'.

    Mitigation: Focus on controlling internal factors, leveraging secular trends (wastewater, life sciences), and monitoring tariff policy changes.

    What to watch in Q4 FY25

    5

    Tariff Impact and Pricing Realization

    Q4 FY25 / H1 FY26
    CurrentFY25 tariff impact >$100M, pricing realization delayed to 2026
    TargetPricing actions converting to revenue, potential tariff reductions impacting profitability

    Why it matters

    Tariffs and delayed pricing are the primary drivers of FY25 guidance reduction and muted H1 FY26 margin expansion.

    First, the effect of incremental Section 232 tariffs and other tariff increases announced in August. Pricing actions have been executed to offset these incremental tariffs. However, based on the timing of📎 customers' notifications and the timing of📎 those pricing actions to convert from orders to revenue, we expect this pricing to be realized in 2026.

    Q&A highlights

    7

    What are the end market trends and momentum for 2026 across segments and geographies, and are there any systemic green shoots emerging?

    Organic orders have shown sequential improvement for three consecutive quarters, with Q3 being positive across all regions except for a lumpy vacuum and blower business in Europe. The company expects full-year 2025 book-to-bill to be at or slightly above 1.0x. Secular trends in wastewater and life sciences are providing offsets to slower core industrial markets, and the long-cycle funnel remains strong with no cancellations.

    “I'll say that, first of all, I'll say we're pleased how the organic orders have continued to progress sequentially so far in 2025. Clearly, they're going to translate here into the revenue. But I think from an order perspective, we -- this is the third quarter of positive organic orders.”

    asked by Michael Halloran · answered by Vicente Reynal

    2 min read6 chapters

    Detailed Narrative

    01

    M&A Strategy and Execution

    Ingersoll Rand continues its disciplined M&A approach, closing 14 transactions year-to-date with 9 additional deals under LOI. These bolt-on acquisitions average a 9.5x pre-synergy multiple and are expected to deliver mid-teens ROIC by year three. The company remains on track to add 400 to 500 basis points of inorganic revenue annually, exemplified by the acquisition of Dave Barry Plastics, which enhances its Life Science platform capabilities in biopharma production.

    02

    Organic Order Momentum

    The company reported positive organic order growth for the third consecutive quarter, with year-to-date organic orders up 2% and a book-to-bill of 1.04x. Q3 organic orders were up 2% overall, with ITS showing low single-digit growth and PST accelerating to 7%. This momentum was broad-based across regions, with Americas and Asia Pacific showing positive trends, offsetting specific timing-related📎 softness in a European business.

    03

    Tariff Impact and Pricing Actions

    Incremental Section 232 tariffs and other tariff increases announced in August have significantly impacted the FY25 guidance, with the total tariff headwind🌐 now exceeding $100 million. While pricing actions have been executed to offset these costs, their realization is delayed into 2026 due to the timing of📎 customer notifications and the conversion of orders to revenue. This lag, combined with growing backlog, has muted current-year profitability.

    04

    Margin Trajectory and Long-Term Targets

    Ingersoll Rand delivered a Q3 adjusted EBITDA margin of 27.9%, with ITS at 29% and PST at 30.8%. Despite current tariff-related dilution, management remains committed to achieving its long-term Investor Day targets of 30% adjusted EBITDA margins for ITS and mid-30s for PST by 2027. Proactive cost optimization measures have been implemented, positioning the company for improved profitability in 2026.

    05

    Innovation Highlights

    The company introduced the META Contact Cool Compressor in Europe, which offers an 11% increase in flow, 40% less space, and a 14% reduction in energy consumption, demonstrating significant advancements in efficiency. Additionally, the Flexan product line successfully transferred manufacturing of critical Class III implantable silicon-based devices, improving customer product yield rates from 55% to over 90%.

    06

    Capital Allocation

    Ingersoll Rand's value creation flywheel is fueled by strong free cash flow, enabling disciplined capital deployment. Year-to-date, the company deployed $460 million to M&A and returned approximately $700 million to shareholders through share repurchases. With $3.8 billion in total liquidity and a leverage ratio of 1.8x, the balance sheet remains a strategic asset, supporting continued high-return investments and share buybacks.

    AI-generated summary of the company’s earnings call. Not investment advice.