格南登福 (IR) 2026 Q3 法說會逐字稿

Hello, everyone. Thank you for joining us and welcome to Ingersoll Rand's third-quarter 2026 earnings call. (Operator Instructions)

I will now hand the conference over to Max Vorcheimer, Director of Investor Relations. Max, please go ahead.

Thank you for joining Ingersoll Rand's third-quarter 2026 earnings call. I'm Max Vorcheimer, Director of Investor Relations. And joining me this morning are Vicente Reynal, our Chairman and CEO; and Vik Kini, our Chief Financial Officer. Our earnings release and presentation were issued yesterday afternoon and are available on the Investor Relations section of our website, where a replay of this call will also be posted.

Before we begin, please note that today's discussion will include forward-looking statements subject to the risks and uncertainties described in our SEC filings and on slide 2 of this presentation, which you should read in conjunction with the information provided on this call. We will also reference certain non-GAAP financial measures. Reconciliations to the most comparable GAAP financial measures are included in our earnings release and this presentation, both of which are available on the Investor Relations section of our website.

Today, we will review our third-quarter results, discuss segment performance, and provide an update to our full-year 2026 guidance. (Event Instructions)

With that, I'll turn the call over to Vicente.

Thanks, Max, and good morning to everyone, and thank you for joining today. Beginning on slide 3, we delivered robust financial performance in the third quarter, highlighted by 18% organic orders growth, 4% organic revenue growth, and a 17% year-over-year increase in adjusted EPS, excluding the benefit of IEEPA Tariff Refunds received during the quarter.

Organic orders growth accelerated across both short-to-medium cycle and long-cycle businesses, including a particularly large engineered-to-order solution win that we'll discuss in more detail shortly. Important to note that excluding this large ETO order, organic orders still grew high single digits. As we will discuss this morning, we're raising our full year revenue and adjusted EPS guidance.

The Board has also authorized a $2 billion increase to our share repurchase program, providing greater flexibility to compound shareholder value. M&A continues to be our top priority for capital deployment, supported by a robust pipeline of attractive strategic bolt-on opportunities. We're excited about the momentum we're building, including another acquisition that we successfully closed this morning, which I will look forward to sharing more about in a moment.

Turning to slide 4, underpinning our performance is IRX, or Ingersoll Rand Execution Excellence. IRX remains our key enabler of execution, and it is how our teams around the world stay focused on controlling what we can control, supporting our customers, driving productivity and allocating capital effectively. A key strategic imperative of the IRX process, as you can see on the slide, is to deploy talent.

Earlier this morning, we announced new leadership appointments. Scott Watson, who was previously leading our Life Science business, has been named Senior Vice President and Group President of IT&S North America and IT&S EMEIA. And Shaun Carlson, who was previously leading our Precision Technology business, has been named Senior Vice President and Group President of the P&ST segment. These appointments reflect the growth of our businesses and the depth of our leadership bench. Their leadership in these roles will position us to move faster, execute with greater focus and better serve our customers.

I also want to recognize Mike Weatherred, who will transition to an advisory role through May 2028 before retiring. A long-time member of our leadership team, Mike helped drive IRX adoption across the company, where it is now very firmly embedded in our culture. We thank him for his many contributions and wish him well in his next chapter.

Turning to slide 5, I am pleased to share that this morning, we closed on the acquisition of IVEK Corporation, a leading provider of small volume precision liquid metering and dispensing systems. The business adds approximately $40 million in annual revenue and will sit within our P&ST segment, specifically in the Life Science business.

It expands our expertise in key precision pump technologies and strengthens our solution for life science customers and was acquired at a low double-digit multiple consistent with our disciplined valuation standards. Year-to-date, we have closed or signed 8 transactions, and we have an additional 7 transactions at the LOI stage. Our funnel remains healthy with more than 200 companies and approximately 90% of our deals continue to be internally sourced. For 2026, we now expect to be approximately 200 to 300 basis points of annualized inorganic revenue. Our 400 to 500 basis point target is an average over the cycle and not a single year goal, and it remains unchanged.

This year simply reflects transaction timing, not any change in our strategy or the strength of our funnel. Our disciplined M&A strategy remains a key differentiator and an important driver of long-term value creation.

Now, I will hand it over to Vik, who will review our financial performance.

Thanks, Vicente. Starting on slide 6, the third quarter was a strong quarter of execution. Orders finished at $2.35 billion, up 21% year over year, with organic orders up 18%. Book-to-bill finished at 1.14x, well above what we typically see in the third quarter, with the pickup in short-to-medium cycle business, coupled with long-cycle project bookings improving meaningfully.

Revenue grew 6% year over year to $2.1 billion with organic revenue growth of 4%. Aftermarket revenue represented 36% of total revenue during the quarter and continues to be an important contributor to the resiliency of our portfolio. Important to note, aftermarket grew mid-single digits in Q3. Adjusted EBITDA was $584 million. This includes $32 million of IEEPA Tariff Refunds received in the quarter, $25 million in IT&S and $7 million in P&ST. Excluding those refunds, adjusted EBITDA was $552 million, up 1% year-over-year with a margin of 26.7%.

The year-over-year margin decline was driven primarily by the known inflationary pressures and pricing dynamic in China. Importantly, margins improved meaningfully on a sequential basis, up 130 basis points from Q2, excluding tariff refunds, consistent with what we outlined last quarter. Unallocated corporate costs were $44 million in the quarter, and we continue to expect approximately $170 million for the full year. Notably, our adjusted tax rate for the quarter was approximately 17%. We have been simplifying our global legal entity structure since the 2020 merger, aligning it with how we operate the business.

Through strong planning and execution, we are able to now use foreign tax credits we previously could not, which drove a discrete benefit in Q3. We expect these changes to provide a durable benefit to our tax rate and cash repatriation efforts going forward. As you'll see in our updated guidance, we now expect a full year adjusted tax rate of approximately 20%. Adjusted EPS was $1.07 for the quarter. And excluding IEEPA Tariff Refunds in Q3, adjusted EPS was $1.01, up 17% year-over-year.

Turning to slide 7, free cash flow for the quarter was $623 million, which includes $162.5 million of ILC Dover transaction-related recoveries collected in the quarter. Excluding those recoveries, free cash flow was approximately $461 million, up roughly 40% year-over-year. We ended the quarter with approximately $3.9 billion of total available liquidity, including approximately $1.3 billion of cash and $2.6 billion of available revolving credit facility capacity. Leverage improved to 1.6x, down from 1.7x last quarter and 1.8x a year ago.

During the quarter, we deployed $90 million towards acquisitions and returned $358 million to shareholders through $350 million of share repurchases and our quarterly dividend. As Vicente noted, the Board authorized a $2 billion increase to our share repurchase program, incremental to the $313 million remaining under the existing authorization. This gives us flexibility for additional opportunistic repurchases over the -- over the short and medium term, while M&A remains our first priority. Our balance sheet remains a strategic asset, and this authorization does not change our ability to execute on the acquisition funnel. As an update on the ILC Dover transaction, last quarter, we announced an initial recovery of $187.5 million.

Since then, we have reached a series of additional settlement agreements that brings total gross recoveries to approximately $425.1 million. We collected $25 million in Q2 and $162.5 million in Q3, and we expect to collect the remainder of the recoveries in the fourth quarter.

Consistent with our focus on earnings quality, these recoveries are excluded from adjusted earnings. We are very pleased with the final outcome of the recovery process with respect to the ILC Dover transaction and intend to use the proceeds in line with our capital allocation strategy. I'll now turn the call back to Vicente to discuss our segment performance.

Thanks, Vik. Turning to slide 8, IT&S delivered a strong quarter. Orders increased 25% year-over-year, including 22% organic growth, resulting in a book-to-bill of 1.17x. Organic orders were driven by continued momentum in the short- to medium-cycle businesses as well as a significant pickup in long-cycle activity.

On our last call, we noted the acceleration in long-cycle bookings during the first 4 weeks of July. That momentum held throughout the quarter. And later in the period, we booked an approximately $195 million order that is an engineered-to-order solution for mission-critical data center infrastructure. This order covers integrated backup power solutions for mission-critical data center operations paired with a differentiated filtration system engineered to the customer specifications for maximum uptime, longevity and reliability. Let me give you some further color on how we have positioned ourselves to enter new growing markets and data center is just one example.

We're taking technologies proven in demand in industrial applications and bring them to a new end market.

Several companies we have acquired in recent years had power generation and thermal management capabilities that historically served industrial customers, and we were able to adapt them very quickly for data centers. We're getting faster at combining technologies from across our portfolio into differentiated solutions that competitors cannot easily copy. We also win on engineering depth and extensive network of service technicians. Let me walk through the economics of this large order. This order is accretive to EBITDA dollars and adjusted EPS from the start.

As we ramp, we're investing in dedicated capacity, engineering resources and supplier qualification, so initial shipments will carry margins below our company average. That's a deliberate choice. We're investing now to secure a position in a fast-moving market where speed and reliability decide who wins. IRX gives us a proven playbook to drive productivity, pricing discipline and aftermarket pull-through as volumes scale, and we expect margins to move towards portfolio levels as the ramp matures and additional orders follow. Revenue in this order will convert over the coming quarters, most meaningfully in 2027, and we expect future orders in this space to be a bit lumpy.

Our entry into data centers show how IRX let us move fast and win in new markets. A year ago, we had no presence here. And in less than 12 months, we have built a sizable funnel and established partnerships with several customers. That did not happen by chance. With the massive investment flowing into data centers, we have been deliberate about looking across our portfolio and bringing our unique capabilities together for this end market.

Our technology breadth gives us a clear competitive advantage. We combine power generation, thermal management, including chillers and water cooling pumping skids and other critical flow technologies, leveraging our proven legacy portfolio and acquired innovations. Combined with our global engineered-to-order capabilities, that let us deliver complete customized solutions faster than customers can get them elsewhere, which positions us to capture profitable share in these markets. I would like to also highlight that excluding this award, IT&S organic orders were up high single digits and long-cycle organic orders were up over 20% in the quarter, building solid backlog for 2027. Revenue increased 5% year-over-year, including organic growth of 4%, with all regions contributing positive organic revenue growth for the second consecutive quarter.

IT&S adjusted EBITDA, excluding IEEPA Tariff Refunds, was $451 million with a 27.8% margin, down 120 basis points year-over-year, driven primarily by known inflationary pressures and the China pricing dynamics noted earlier. But margins rose 100 basis points sequentially from Q2 as price/cost continues to improve. Over time, we still believe that the IT&S business outside of the data center ramp we just discussed has the right to play in the 30% to 40% incremental margin range, and we believe the current pressures are transitory. For our innovation in action highlight, we're showcasing our new line of oil-free rotary screw compressors, redesigned for world-class energy efficiency performance and reliability, including a new rotor design and an optimized cooling jacket.

Advanced sensor technology transmits real-time operating data to the Ingersoll Rand service network, enabling proactive monitoring and maintenance. That connectivity supports our customers' uptime and also strengthens our aftermarket and recurring revenue opportunity over the life of the installed base.

Turning to slide 9, P&ST delivered another excellent quarter and continues to demonstrate the strength of the platform we have built. Orders increased 7% year-over-year, including 4% organic growth with a book-to-bill of 1.01x.

Revenue increased 7%, including 6% organic growth. Life Science Technologies continued to deliver solid momentum with low double-digit growth in both orders and revenue. Excluding IEEPA Tariff Refunds, adjusted EBITDA was $145 million with a 32.6% margin, up 180 basis points year-over-year and 110 basis points sequentially. Margins expanded in both Precision Technologies and Life Science Technologies, reflecting strong execution and continued IRX benefits. We're pleased with the P&ST sustained margin improvement, including 5 consecutive quarters of incremental margins above 40%.

For our innovation in action, we're highlighting YZ Systems' Zero Emission Odorization or ZEO platform. Gas odorization is a critical safety requirement that ensures communities have a safe supply of natural gas. ZEO incorporates a Milton Roy electric pump to dramatically reduce utility company's carbon footprint across the pipeline network and an average-sized utility can reduce methane emissions by up to 15 million cubic feet per year using this next-generation platform. It is a great example of commercial synergies across our brands and how our portfolio supports mission-critical infrastructure.

Turning to slide 10, given our performance through the first 9 months, today, we are updating our full year guidance. Starting with revenue, we now expect revenue growth for the year to be in the range of 5.5% and 7%. The increase in outlook is driven by an increase in organic growth expectations, now expected between 2% to 3.5% for the year. We continue to expect approximately 2.5% growth from M&A and approximately 1% from FX.

Our adjusted EBITDA guidance, excluding Q3 IEEPA Tariff Refunds is unchanged at $2.13 billion to $2.19 billion. Despite ongoing inflationary pressures and challenging pricing environment in China, we're holding our range, and we currently expect to finish at the bottom half of the range. Our corporate cost estimate remains on track at approximately $170 million for the year. We're raising adjusted EPS, excluding Q3 IEEPA Tariff Refunds to $3.58 to $3.70. The increase is driven primarily by a lower adjusted tax rate, now approximately at 20% and a lower share count of approximately 390.5 million, reflecting our year-to-date repurchases. Net interest expenses is still expected to finish at approximately $230 million.

For free cash flow, we now expect to deliver more than 100% conversion of adjusted net income, including the ILC Dover-related recoveries. Our underlying operational free cash flow conversion remains unchanged at approximately 95%. Our CapEx forecast remains at approximately 2% of sales.

Finally, on slide 11, as we continue this portion of the call, I am encouraged by the momentum we're seeing across the business. Demand continues to improve across both short- and long-cycle activity. Our teams continue to execute at a high level, and our M&A pipeline remains very robust. In a complex global environment, we continue to stay nimble, leveraging our in-region, for-region manufacturing footprint and pivoting quickly toward the most attractive end markets.

Our strong balance sheet, ample liquidity and expanded repurchase authorization gives us significant flexibility to keep executing on our disciplined capital allocation strategy, which compounds earnings and delivers durable value creation for our shareholders. IRX remains the backbone of our organization and continues to enable execution and outperformance across the company. With a 1.14x book-to-bill and a growing long-cycle backlog, we believe we're well positioned to finish 2026 strong and carry real momentum into 2027.

Finally and most importantly, I want to thank you, our employees around the world for their continued commitment, dedication and ownership mindset. Your efforts continue to drive our success and help us deliver strong results for all the stakeholders.

With that, I will turn the call back to the operator and open the line for questions.

(Operator Instructions) Mike Halloran, Baird.

Maybe we just start on where you were ending there, Vicente, and the momentum you're seeing across the portfolio. Maybe just dig a little deeper on end markets, geographies, where you're seeing the most success right now? Any areas or pockets where you haven't seen that recovery curve materialize? And then obviously, the sustainability as we move into next year?

Mike, I'll say that we're very encouraged by the global momentum we're seeing across basically all the regions. So if I take, for example, IT&S, let me break that by each of the respective regions. I mean, America -- on the order side, Americas was up mid-single digits. EMEIA was up low 20s, which included a very nice acceleration on some long-cycle projects. And Asia Pacific, ex that large data center, which was -- it is for Asia Pacific outside of China, was definitely up also low single digits.

So you can see that the momentum we saw really well into most of, kind of, all the regions. From an end market perspective, I'll say anything related to food, beverage, I mean, kind of the more core fundamental end markets that we have always played into, we're seeing -- we're seeing better momentum across all of them.

So I would say nothing in particular that I would categorize as negative, except the kind of known things such as, for example, electric vehicle and also renewable natural gas that those are kind of end markets that have been kind of down and flattish here for now quite some time, but we're not seeing pickup. But in terms of kind of the fundamental, I mean, mostly food and beverage, I mean, clearly, biopharma with the life sciences businesses that you saw, power generation, wastewater, some nuclear exposure too as well. That's where we're seeing good momentum now.

No, that's helpful. And then on the margin side, maybe just talk through kind of the two components. First, the Chinese pricing. How -- when do you think you start lapping that? Any signs of change there, at least stability? And then secondarily, on the price/cost side, when do you think your margin and -- and/or EBITDA dollar neutral? Just some updated thoughts there, please.

Yes. Sure, Mike. I'll take that one. So I'll start with your last question on the price/cost side. So on the price/cost side, I think we continue to be encouraged by kind of the momentum we're seeing.

Fair to say here that in Q3, price/cost was slightly dollar positive, but obviously still a margin headwind. That being said, I think as we said in our last quarter call, we've been taking the requisite actions through the course of the year. And we did see, I'd say, some sequential improvement from Q2 now into Q3 and the back half of the year, which I think was a strong catalyst, obviously, of the sequential margin expansion you saw across the enterprise and particularly on the IT&S side. So, I think our view as we continue to move forward is that equation will continue to improve as we move through the balance of the year, but really into 2027.

And then on the China side of the equation, similar. I wouldn't say anything has dramatically changed there. We acknowledge that China still is a headwind from a pricing perspective in a very comparable range to what you saw in Q2. But we would acknowledge here that things are largely stabilizing in that respect from the levels we saw kind of exiting Q2. And we would expect that we will be lapping that really as we get through kind of by the first half of next year.

Nigel Coe, Wolfe Research.

So just look -- first of all, congratulations on the large data center order. I just want to make sure that you're competing here against the likes of Carrier, Trane, the traditional chiller manufacturers. Just want to make sure that's the case. And then obviously, ex this one order, high single-digit 9% order growth.

If we took out other large orders in the -- larger compressor orders in -- how would you characterize the growth in the small and medium-sized compressors? And then, Vik, just maybe just to clarify on this $195 million order, that will be kind of accounted for sort of over time sort of percentage completion accounting on that order?

Yes. So, on the first question around some of the data center capabilities, I'll say -- I'll talk more about kind of what's more unique and differentiated on what we're doing. I mean I think we're playing here across both power and thermal management with technologies that can be more holistically put together. And as you have known, I mean, we do -- we do a very good sizable of our business is engineered-to-order solutions. And that's the area where we are -- where we believe we have a competitive advantage.

The ability to be able to create a combined engineered-to-order mission-critical where there's high density, low footprint, modularity and be able to kind of ship it to the location so you can do a plug and play. That is a unique capability that we have, that we have been utilizing in other end markets. And now that we're kind of leveraging the power of the technologies that we have and creating some unique solutions. So I think that's more on kind of where I would say we have a competitive advantage. On the second question around the high single digit.

So last quarter, as you remember, we reported low to mid-single-digit order growth in short-to-medium cycle. And this quarter, we were squarely in the mid-single-digit range. So that tells you that we continue to see that sequential acceleration and some very good kind of momentum here. I would say this was due to a continued broad-based industrial improvement, as we just kind of said, and as well as that strong execution by our teams in the equipment that it was basically up low double digit, outpacing aftermarket, although aftermarket was still also high or positive in the kind of mid-single digits. So again, we're -- even excluding anything else, I mean, we still see both short cycle -- short-to-medium cycle as well as long-cycle momentum here.

Yes. And then, Nigel, your question regarding the revenue cadence, the accounting treatment, yes, to answer your question, this will be -- the $195 million order will be POC with the majority expected to be kind of consumed or digested through the course of 2027.

It's great. And I know I have three questions there, but I just have a quick follow-on. Really nice momentum, sequential momentum in IT&S margins in 3Q. Just based on your commentary around the EBITDA for the full year, what should we expect for IT&S margins in 4Q?

Yes, Nigel, I'll take that one. So I think the simplest way to think about Q4 is we expect to see essentially a similar level of sequential improvement from Q3 to Q4 as you saw from Q2 to Q3, so approximately 100 basis points. And I would point to a lot of the same drivers that we've called out before. I'd say slightly improving price/cost equation, the Q4 volume that sequentially continues into Q4. Obviously, Q4 is our -- typically our strongest volume from a quarter from a seasonality perspective.

And then obviously, the productivity equation, which generally follows that, which whether it be the classical procurement side or some of the i2V type initiatives. So very similar, I'd say, drivers, but comparable margin expansion sequentially in Q4.

Steve Volkmann, Jefferies.

Back to the big $195 million order, how should we think about that sort of more medium term? Is there a funnel of additional orders that could be similar? And would you be surprised if we didn't have more of these to talk about a year from now?

Yes, Steve, I'll say that the funnel is fairly substantial and robust. I mean I think it's -- this has been -- about a year ago, we were not playing in this end market. We obviously structuredourselves, and selected a few team members. And over the past 12 months, that's what we've been able, being able to talk to a lot of hyperscalers, colocators and understand the voice of customer in terms of what's needed and what's missing, and that's where we're playing right now, basically fulfilling those critical needs that are today in some ways, unmet. And -- so yes, funnel is growing and continues to accelerate.

Okay. And then my follow-on, I guess, Vicente is, how do you sort of manage this from a top-down perspective? And what I mean is that there's a lot of angst around sort of the rate and cadence of data center spending and lots of views around what that's going to look like. But you're allocating some capital, building out some supply chain, et cetera. Is this a risk if things don't come out the way you think they should, or can you somehow sort of this variable?

Great question, Steve. I think the beauty of this one here is that we're taking products that we have in our portfolio that are actually widely used in the industrial landscape based on current solutions that we have. And I think if later down the road, some of these data center volume kind of goes down, we -- I mean, we still have the products that we're selling into the industrial space.

So, in terms of incremental CapEx and OpEx, I mean, just think about it from a CapEx perspective, we're still going to be well within our 2% of sales on that CapEx. So I think it's -- we're a low CapEx intensity, and we're being very thoughtful in the places that we play.

I mean we're not going super broad-based. We're going very focused on some specific customers. We've done a lot of customer segmentation, and we're selecting either one, call it, a few hand-selected hyperscalers as well as colocators, and that's basically we're very focused on deep customer relationships.

Rob Wertheimer, Melius Research.

I had a quick clarification on the data center order. Is that a framework kind of agreement? Or is that specific to one site where you might see other sites of similar scope?

This is one site.

Wow. Okay. Perfect. And then, Vicente, this is a little bit of a bigger picture one. But think about AI's impact across biopharma, and there's already some kind of glimmerings of new drug discovery, new applications, all sorts of things that are changing faster than we're used to. If you look ahead a few years, do you see this as a thing that changes your opportunity in this space? Do you see any momentum there? And maybe just talk about how that world is changing?

Yes. Great question, Rob. We -- as you have seen, we have been investing actually in lab automation. We made an acquisition with Scinomix, but also inside our business, we have another company called Zinsser Analytic. And those are companies that basically do robotic automation for drug discovery.

And we are a participant of developing this machinery and actually providing this robotic automation to customers that are leveraging AI to actually create recipe for personalization of medicine, particularly in the immunotherapies. So yes, so we think that as more customers continue to use AI and they continue to do this personalization, whether immunotherapy therapy -- therapies or other things that require some mixing of different compounds, and that is going to be actually a very good play for us moving forward.

Nathan Jones, Stifel.

I guess I'll ask one on the P&ST side. You mentioned five consecutive quarters with incrementals above 40%. Is that kind of the way we should be thinking about, I don't know, the next five quarters? And longer term, how we should think about the path back to -- or to the targeted 35% margin level?

Yes, Nathan, I'll take that one. So, listen, we've always talked about the P&ST business being one that obviously, it's a higher-margin profile business. And you clearly are now seeing, I think, the benefits of, I'd say, solid pricing momentum, but obviously, the volume, particularly led by areas like biopharma, like Vicente just mentioned.

So I think now, obviously, with a well-integrated segment between the 2 platforms we have with Precision Technologies and Life Sciences, yes, we think that this is one that with, I'd say the kind of normal growth algorithm, executing towards that 40% type incrementals is kind of where this business wants to operate. And to your point here, we've now solidly been above -- well, above 30% EBITDA margins here for several quarters, executing in that now above 32% range here in Q3 with expectations to be in a similar range here in Q4. So I think our exit momentum is quite solid. And clearly, the mid-30s kind of EBITDA target range that we put out is, I'd say, well within sight.

Okay. I'm going to ask about the same question that I asked Vicente on every call about quote-to-order times. Obviously, you've seen an improvement in momentum here in orders. You're talking about strengthening in end markets. Are you seeing that quote-to-order times start to shrink?

Or are customers still fairly hesitant on pulling the trigger?

I mean I'd say we're seeing -- we're definitely seeing a better momentum and acceleration through the process. I don't say it's back to normal levels. But clearly, we're encouraged by the decision-making improvement. But quote-to-order cycle, I'd say they have not shortened meaningfully, improving. I would say projects getting to the finish line, yes, definitely, we're not seeing cancellations.

And I think the most important leading indicator here that we're tracking really extensive across the entire company is the number and obviously, dollar amount of RFQs, so request for quotes and request for pricing. So these are customers trying to get a preliminary pricing on specific projects. And that, we're definitely seeing rapid acceleration.

Joe O'Dea, Vertical Research.

I'll start on the data center topic, but could you just go through a little bit the process that you went through for adapting the technologies you have for data centers and expand on what you do internally, what technologies you use from partners? Did you need to establish some new partnerships in doing this? And then just regionally, do you have some advantages in Asia? Or what about the US as an opportunity for you just given the size of the market there?

Yes. So we're taking technologies from companies that over the past few years, we have acquired around thermal management and also combining our ability of developing very quick engineered-to-order skid solutions. It could be skids for filtration. It could be skids for moving liquids and fluids. And that's core of what we have done for many, many, many years.

I think what's very unique here is how we took the approach of -- basically, I personally spent a lot of time with a hand-selected group of teams on a global basis to go out and really understand what were the meaningful gaps that were not being offered to some of these customers. And then now we're going back into the kind of regional execution as we always do.

So, in this case, I started with Asia-Pacific because in Asia-Pacific, we had a bit more experience around that kind of power management and some thermal management solutions. And that's really why we started in Asia Pacific. Clearly, the US, we're seeing now, as we always do, I mean, we typically start in one region and then we start kind of piloting that and then we move into the other regions, similar to what we have done in historical with like CARE solutions or recurring revenue, right?

In this case, for data centers, we started in Asia Pacific, and now we're moving globally. So about six, nine months ago, then we kind of came to the US and with a very similar approach in solutions, and now we're seeing good momentum there. And the last area of focus for us as well has now started to be is India, where I was there -- we were there a few weeks ago, and we're seeing some rapid acceleration. And again, taking the same solutions that we developed in Asia Pacific and moving them to the other specific regions to offer something similar to the needs that are out there.

In terms of partnerships, I mean, not -- I mean, for the most part, this is not too dissimilar to what we do in our engineered-to-order solutions. So we always have a very good solid supply chain, and we're leveraging that supply chain to really create what we're creating here. Specific kind of signed partnerships and things of that nature, nothing that I will call out.

Got it. That's great. And then just a near-term one, when we think about growth into the end of the year, the full year range gives a pretty wide range of outcomes for fourth quarter organic. And so I mean, is it a base case where the comp does get a little bit tougher, but there's some demand acceleration. Can you do a pretty similar level of organic growth in Q4 as you did in Q3, pretty similar between the segments? Just, any color you're willing to provide there.

Yes, Joe, I'll take that one. So I think you're spot on here in the context of, obviously, Q4 has a little bit more of a meaningful comp on a year-over-year basis. So I think the way to think about Q4 is right now, expectation is in the 2% plus kind of range for the total company on an organic basis and actually both segments looking fairly comparable. So that's kind of the expectation at this point in time. But I think as you've seen us before here, with there's opportunity to obviously outperform that, clearly, we'll continue to execute. But I think that's probably the right way to think about Q4 based on the guide at this point in time.

Joe Ritchie, Goldman Sachs.

I'm curious on the margin profile of this order, the data center order. It sounds like you're using a solution that you've used previously, you sold these types of products before. Is the fact that it is kind of dilutive to the portfolio margins a function of the investments that you're making? Is this type of solution typically dilutive? I just want to -- and if there's any way to kind of like level set the margin profile of this particular award, that would be great?

Yes, sure, Joe. So think about it similar to sometimes when we do an M&A that typically, as we bring in M&A, it kind of comes in, in the kind of 20s and then obviously, we ramp it up to fleet average over the course of the medium term. So I think it's very similar here. I mean, obviously, this is all organic, but the investments in some of the OpEx that is needed to kind of do this ramp, it comes in at that kind of level, call it, start to be in that low 20s. And then obviously, fairly quickly as we start seeing more incremental volume as well as the continued execution of the output, this business can get to that fleet average that we have.

Got it. That's helpful context, Vicente. And then it sounds like the demand environment even outside of this award has been pretty healthy. I'm curious if you're willing to comment on October trends and how things have started so far this quarter.

Yes, Joe, not commenting on October. I mean, I think last quarter, we were commenting on July just because it was a unique moment in time. I will say things continue to be healthy. We're seeing healthy demand broad-based on a global basis, and we're just encouraged with how the teams continue to execute and are seeing some of the wins.

Andy Kaplowitz, Citi.

Vicente, I know you said transaction timing around M&A has been a bit more difficult this year. But with the financial metrics you want to get, can you get what you need here? And then it seems like you're laddering into repurchases a bit more. So in terms of your priorities around capital deployment, does it sort of -- are you adapting a bit to sort of the current environment?

No, Andy. I mean, I think M&A continues to be that priority. I mean I think we continue -- we're a very disciplined buyer. So we remain disciplined. And -- but in terms of the funnel, I mean, funnel continues to be over 200 companies and very active.

And I think it's nothing that we're worried about M&A flywheel at all. I think in some respects, we're very, very encouraged with what we're seeing here on the M&A front, I mean it's just basically a matter of year timing. Nothing to worry about.

Great. And then can you give a little more color into what you're seeing in P&ST in the near term? I think your order comps were more difficult in Q3 than Q2, but growth seemed to stay strong, at least on the Life Sciences side of the business. So maybe just comment on the durability of the order and revenue strength you're seeing in P&ST.

Yes, Andy, I'll take that one. So I think we're -- we continue to be really encouraged by what we're seeing in P&ST. I think as we mentioned here, Life Sciences orders were up low double digits on an organic basis, which I think continues to speak to the strength in just kind of the Life Sciences kind of platform and kind of the trends that Vicente mentioned earlier. On the Precision Technologies side, obviously, when you look at the total and you see low single digits for our Life Sciences, there was a slight headwind on the -- on the overall Precision Technologies orders, which was really driven, I would say, by just the timing of some of our longer cycle pump projects, which was down roughly mid-single digits. When you actually look at the, what I'll call more short-to-medium cycle kind of core pump business within Precision Technologies, that grew low single digits on an organic basis.

So again, I think it speaks to, I'd say, the durability of what we're seeing. To your point here, I think the strength in the orders profile that we've seen over the last few quarters is translating nice to revenue, and you see obviously the margins going with it.

So again, we'll spare any commentary on 2027 guidance at this point in time, but I think we continue to feel encouraged by the momentum we're seeing and kind of the exit we're seeing here to the balance of the year.

Nicole DeBlase, Deutsche Bank.

Just after Vik, you said that you're not going to talk about 2027, I'm try to -- I'm going to try to ask a question about 2027. So I guess thinking about some of the puts and takes on IT&S margins, right, obviously, kind of impacted by price cost this year. Inflation has continued, but it sounds like from the opening remarks, you guys are feeling better about the price/cost roll forward into next year. But we've also got this dilutive large order that's going to ship in 2027. So what I'm trying to think through is the likelihood that you guys can kind of get back to expanding IT&S margins like 50 bps a year next year, or is that maybe too optimistic with some of these headwinds?

Yes. So, Nicole, we'll obviously give a lot more color here in a few months when we get through -- when we give guidance and whatnot. But maybe just to give a little bit of color commentary here. Let's talk obviously about kind of, I'll say, the core IT&S, and I'll park the data center order here for a moment. I think our view moving into next year is that we would expect kind of pricing -- again, similar to what we talked about entering this year to be kind of in that normal 1% to 2% range.

I think we will get some carryover, obviously, from the actions that we've taken through the course of 2026, not too dissimilar from what we've spoken about before. But I think the good news here is I don't think we're necessarily comping the tariff-driven pricing and things of that nature. So obviously, we'll continue to calibrate based on how any inflationary headwinds and things like that. You've seen us be able to be very proactive on that sense. And then obviously, we're going to continue to drive the productivity equation.

And I think we're encouraged by at least how volumes have continued to trend here over the back half. So I think back to kind of Vicente's prepared comments here, we do think that the core business kind of operating in that 30% to 40% incrementals range, probably IT&S maybe more towards the lower end of that range, but we think that that's a probably prudent way to think about how we think expectations are at least framing up.

And as such, we'll obviously give a little bit more of a finer point on the overall margin equation. But I think we feel good about how IT&S is trending and now you see that obviously in the margin profile sequentially improving here as we move through the back half of this year.

Okay. Perfect. That's actually really helpful. And then just with respect to another orders question, the short- and medium-cycle orders, that mid-single-digit figure that you guys gave for 2Q, was that pretty stable across the quarter? And did we kind of exit there in September?

Yes. Nicole, I would say it's fairly stable through the course of the quarter. So nothing I would point to in terms of any variability or anything of that during the course of the quarter, very comparable and relatively stable.

Amit Mehrotra, UBS.

I just -- maybe I had a question on growth and what you're seeing sort of as a leading indicator. I know, Vicente, you have some visibility into sort of the utilization of the assets in the field, not complete visibility, but some visibility. I know that was sort of inching up above 70%. Can you just maybe update us on that? And then ultimately, we're all trying to figure out if this order inflection, if I can even call it that, ex the data centers is actually ultimately going to translate to accelerating growth.

And so any color you can say about where we are today, obviously, low to mid-ish single-digit growth. Is what you're seeing on the utilization and the order front giving you confidence that we're going to be accelerating growth next year?

I mean, I think based on everything that we're seeing here, Amit, at this point in time, whether it is the utilization of compressors in machines that are connected, yes, I mean we -- we do think that, that momentum continues. I mean there's definitely -- you see it on the PMIs as well. We always said that typically, IT&S will turn and accelerate as a couple of quarters after PMI has demonstrated to be above 50 for a few months. And obviously, you saw that in January in the Q1. And basically, now it's a couple of quarters later that we're seeing some of that acceleration.

So, we always said that it just takes that tailwind to see for us. So, I think at this point in time, I mean, despite some of the kind of geopolitical macro environment going on, I mean, we're seeing that good momentum and hopefully, things will continue to get better and improve moving from here. But yes, we're seeing things on that acceleration and positive momentum.

Okay. And then just, Vik, on the margin, I mean, it was nice to see the step-up sequentially in margins as you guys expected. There's a pretty big sort of implied step-up, obviously, in the fourth quarter. You talked about the 100 basis points sequentially. But if I just look at, I guess, the sequential change in profit versus the sequential change in revenue implied by the guidance, it's sort of like 65%, which is a big number. So, could you just help us think about maybe some of the puts and takes there that gives you that type of drop-through sequentially at least?

Sure. Yes, I'll take that one. So I think a couple of things to think about here. One, as we indicated here, we've been taking certain pricing actions through the course of the year, fairly standard for us. So I think the concept of continuing to see sequential slight improvements on the price/cost equation, I think, is kind of what's embedded.

The other piece here that I think also is a piece of the equation here is, remember, a lot of our, I'd say, direct material-driven savings, whether it be classical procurement savings, i2V, they tend to follow kind of your cost of goods sold profile, which typically tends to be much better second half weighted and typically a lot more into the Q4 time frame. So I think between those factors as well as just some of the kind of, I'd say, normal course things we've been doing, whether it be some of the prior restructuring actions, things of that nature, that's kind of all what's kind of built into the, I'd say, the build from Q3 to Q4.

And the other way I'd kind of think about this here is the level of sequential margin expansion from Q3 to Q4, not too dissimilar from what you saw from Q2 to Q3. So obviously, we're going to continue to execute here. But obviously, that's kind of what's built in and not too dissimilar, I think, from sequential improvements you've seen in years past as well in terms of the Q4 being the high watermark on margins.

David Raso, Evercore ISI.

A little minutia here, but I wanted to dig into the China business and IT&S, how it's dragging on the margins. Can you help us a bit -- obviously, we have the revenue size. We don't have the (inaudible) yet, but it's roughly 11%, 12% of the segment. Are the China margins -- what's the relationship of the China margins to the segment average for IT&S right now?

Yes, David, I'll take that one. So broad strokes, whether it's the China business or frankly, total Asia Pacific, but obviously, China is the biggest piece of it. It plays in a range that's very comparable, I would say, to the fleet average. Now it's fair to say, obviously, it's been healthier than that historically. Clearly, we've seen headwinds for some of the aforementioned pricing dynamics.

So, I think right now, it's still in the general range of, I'd say, the total IT&S segment, nothing dramatically different. We don't actually see a tremendous amount of mix between our regions, but you've clearly seen headwinds there. And I'd say the other piece that's become, I'd say, a little bit more relevant over the last few quarters is, obviously, off of a different baseline than where we were a few years ago, you are seeing good -- good -- good growth. We've talked about that low double-digit type -- type -- volume type increases in the China type realm. But it is fair to say that that's obviously been much more original equipment driven than aftermarket at this point in time.

But again, we view that as a positive from a more medium-term perspective as obviously more installed base that we will then ultimately be able to serve through the aftermarket. But I think that point is -- your point about it being a headwind has clearly been valid over the last number of quarters.

And is the margin improvement sequentially for the whole group consistent with what we saw in China in the quarter? Or the China margin still flat to down sequentially? I'm just trying to get a sense because you said that has right -- the segment has a right to play in the 30% to 40% incrementals. And I'm just trying to get a sense of China's impact on that for '27.

Yes. I would say from a sequential perspective, I'd say China has obviously seen, I'd say, sequential improvement, very similar to other regions. But on a year-over-year basis, obviously, continues to still be a bit of a headwind.

Brandon Knutson, Morgan Stanley.

On the $195 million order, it sounds like as you take that -- or you want to start at lower margins and then scale up the volumes there and get that to segment level margins. As you take this solution to other regions, do you also foresee if it's like a bigger initial order that those would come through at a margin dilutive level initially before ramping up to segment level?

Yes, Brandon, I'd say, again, as we continue to execute, probably fair to say that they'll probably start a little bit better. But I would say we would expect to see a continued improvement over the medium term as we continue to kind of ramp up in this area.

So, I think the simplest way to say it is maybe a little bit better than probably what you see on this initial order. But again, take that as nothing but a starting point. And as Vicente said, as we continue to ramp and almost see this kind of almost like acquired M&A and things like that as it continues to mature in the medium term, we would expect to get kind of this overall platform to closer to fleet average as you've seen us do for other parts of the business as well.

Great. And then to ask a question on M&A slightly differently. So you highlighted this year is going to be roughly 200 basis points below the through-cycle M&A target that you're looking to hit. What have been the factors that have been impacting deal timing this year? And do you see those factors and the environment around M&A getting better as we start looking towards '27?

Yes, Brandon, I'll say, I mean, the couple of factors have been mostly just one, at the beginning of the year, kind of with what was happening in the Middle East. I think some -- I mean, keep in mind, we're doing sole-source family-owned entrepreneurial companies.

Some of -- some of these companies kind of put a bit of a pause and kind of moved to the sidelines. But again, deeper due diligence that we continue to do, obviously, in some cases, being prudent due to the pricing dynamics of some of the transactions that we were seeing. I mean nothing I'd say too dissimilar that is kind of really concerning to us. I think the only kind of aspect here that I will say maybe moving forward is maybe better -- whether it is better Middle East or better other things that geopolitical stability I think that might be the only thing that could change. But again, with over 200 companies in the funnel, and I mean, we have a pretty active funnel here.

And like I said, I mean, nothing really to pinpoint exactly to one issue or another and why the transition in terms of the delays, but we're not worried about continue doing that 400 to 500 basis points through the cycle.

And Brandon, the only other thing I'd add is even this morning here, the announcement of IVEK, I think, speaks to that. Obviously, one that's been in the funnel, one that got to the finish line here. So, I think it speaks to obviously the activity, and we would expect to see transactions like that continue to unfold here over the -- over the near term, if you will.

There are no further questions at this time. I will now turn the call back to Vicente Reynal for closing remarks.

Thank you. And I'll say thank you all for your time and continued interest in Ingersoll Rand. And one more special thank you to our employees around the world whose ownership mindset and commitment to executing through IRX helps compound durable long-term value for all of our shareholders, which, again, of course, includes our employees who are shareholders of the company. So thanks again, and have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.