Natalia

Natalia, on behalf of Andy Kaplowitz, asked about Ingersoll Rand's 2026 free cash flow conversion guidance being under 100% and the current customer payback periods for industrial energy efficiency solutions.

Answer

CFO Vik Kini stated that the 95% FCF conversion guidance is consistent with or slightly better than recent years, with working capital efficiency, particularly inventory build from 2025 tariff dynamics, being the biggest opportunity for improvement. Kini also noted that as electricity prices rise, customer paybacks for energy-efficient solutions like compressors improve, remaining under two years, citing a large customer in China where compressors consumed 50% of total energy.

Natalia, on behalf of Andy Kaplowitz, asked about Ingersoll Rand's free cash flow (FCF) conversion, noting that historically it reached 100% but the 2026 guidance is under 100%, and inquired if anything is holding it back. She also asked about industrial energy efficiency, specifically the customer payback for compressors, whether it has improved over the past year, and where it is headed.

Answer

CFO Vik Kini stated that 95% FCF conversion is consistent with, or slightly better than, the low-to-mid-90s realm of the last few years, with the goal remaining closer to 100%. He identified working capital efficiency, particularly around inventory (due to tariff dynamics in 2025), as the biggest opportunity for improvement in 2026. For industrial energy efficiency, Vik Kini explained that as electricity prices rise, the return on investment for customers improves, with paybacks typically under two years. He cited an example from China where compressors consumed 50% of a large customer's energy, highlighting the focus on fine-tuning to reduce energy and drive efficiency.

Natalia, on behalf of Andy Kaplowitz, asked about the funding visibility under the Infrastructure Investment and Jobs Act (IIJA) for transportation projects and inquired about the regional performance across Jacobs' end markets, specifically which regions outperformed or are expected to be softer into fiscal 2026.

Answer

Chair and CEO Bob Pragada confirmed that IIJA continues to be a catalyst with no delays, and transportation growth is global, including strong performance in the U.S., Europe, Middle East, Australia, and New Zealand. He noted overall growth across the board, with double-digit growth in the Middle East and recovery in Europe. CFO Venk Nathamuni added that PA Consulting is also experiencing solid momentum in the U.K. and Continental Europe.