Ingersoll Rand - Earnings Call - Q1 2025

Executive Summary

• Record Q1 orders ($1.882B, +10%) and free cash flow ($223M, +124%), with revenue at $1.717B (+3%) and adjusted EBITDA $460M (26.8% margin, down 70 bps YoY).
• Results were slightly below Street: EPS $0.72 vs $0.737*, revenue $1.717B vs $1.725B*, EBITDA $459.7M vs $473.0M*; management cited ~$15M revenue deferral to Q2 and ongoing growth investments. Values retrieved from S&P Global.
• Full-year 2025 guidance reduced: Adjusted EBITDA to $2.070–$2.130B (from $2.130–$2.190B) and Adjusted EPS to $3.28–$3.40 (from $3.38–$3.50), with organic growth now (-1%)–1% (was 1%–3%).
• Board added $1B to buyback authorization (targeting up to $750M repurchases in 2025), reinforcing capital returns as a near-term catalyst. Management stresses in‑region for‑region footprint and tariff mitigation via pricing and a “tariff war room”.

What Went Well and What Went Wrong

What Went Well

• Record orders and FCF; book-to-bill 1.10x; liquidity $4.2B (cash ~$1.6B + $2.6B revolver availability). “Record first quarter free cash flow are encouraging signs as we start off the year” — CEO Vicente Reynal.
• Aftermarket revenue mix rose to 38% of total (+110 bps YoY), underpinning resilience and margin quality.
• PST segment delivered strong reported growth (orders +28%, revenue +23%) and improved adjusted EBITDA sequentially (29.1% margin, +150 bps vs Q4’24).
• Capital deployment: $163M to M&A in Q1 and a fresh $1B buyback authorization; two bolt-ons (G&D Chillers, AGT) added capabilities in air treatment.

What Went Wrong

• ITS organic revenue declined 4% and adjusted EBITDA margin contracted 110 bps YoY (28.8%) due to volume deleverage, dilutive recent acquisitions, and growth investments.
• Company adjusted EBITDA margin fell 70 bps YoY (26.8% vs 27.5%), and adjusted EPS declined to $0.72 (from $0.78) YoY on cost and investment pressures.
• Guidance trimmed as management prudently inserted organic volume contingency despite order strength; tariff pricing actions offset costs at “zero margin,” muting EBITDA flow-through.

Transcript

Operator (participant)

Hello, and welcome to the Ingersoll Rand Q1 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session, and if you would like to ask a question during this time, please press star one on your telephone keypad. I would now like to turn the conference over to Matthew Fort, Vice President of Investor Relations. You may begin.

Matthew Fort (VP of Investor Relations)

Thank you, and welcome to the Ingersoll Rand 2025 First Quarter Earnings Call. I'm Matthew Fort, Vice President of Investor Relations, and joining me this morning are Vicente Reynal, Chairman and CEO, and Vik Kini, Chief Financial Officer. We issued our earnings release and presentation yesterday afternoon, and we will reference these during the call. Both are available on the Investor Relations section of our website. In addition, a replay of the conference call will be available later today. Before we start, I want to remind everyone that certain statements on this call are forward-looking in nature and are subject to the risks and uncertainties as discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call. Please review the forward-looking statements on slide two for more details. In addition, in today's remarks, we will refer to certain non-GAAP financial measures.

You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website. On today's call, we will review our company and segment financial highlights and provide an update to our full year 2025 guidance. For today's Q&A session, we ask that each caller keep to one question and one follow-up to allow time for other participants. At this time, I will turn the call over to Vicente.

Vicente Reynal (Chairman, President, and CEO)

Thanks, Matthew, and good morning to all. Starting on slide three, we're off to a strong start in Q1 as we deliver 10% total orders growth with a book-to-bill of 1.1x. Additionally, organic orders increased by 3.3%, and we deliver a record Q1 free cash flow of $223 million. We remain encouraged as April orders continue to show stability, finishing in line with expectations. We continue to focus on controlling what we can control, staying agile, and leveraging IRX to offset all known tariff impacts. On slide four, I want to spend a minute highlighting why, in this current environment, our in-region for-region footprint provides us with a competitive advantage. We have built a footprint that allows us to serve our customers with a wide range of technologies via an in-region for-region model.

This, in combination with our proprietary demand generation tool, has us very well positioned to take market share in this environment by serving our customers locally with technologies and solutions that offer the highest ROI. Turn to slide five. Our durable financial profile, combined with our strong cash flow generation, provides us with multiple levers to drive value creation. Our capital allocation strategy remains unchanged, with M&A continuing to be our top priority. As a reminder, our M&A strategy is centered around making smaller bolt-on acquisitions that complement existing technologies. With a highly fragmented addressable market of approximately $67 billion, we believe there are still plenty of opportunities for bolt-on acquisitions across all of our businesses.

`Our nine deals currently under LOI and the more than 200 companies currently in the acquisition funnel are largely centered around these smaller bolt-on acquisitions, which are mainly in-region for-region and are also primarily internally sourced. As part of our balanced capital allocation strategy, our board has authorized an additional $1 billion of share repurchases, bringing our total value authorization to $2 billion. This provided us with optionality for outsized opportunistic share repurchases over the short and medium term. We remain confident in our long-term value creation, and we'll leverage our strong cash flow generation to continue our focus on bolt-on acquisitions as well as share buybacks. At this point in time, we're expecting to execute up to $750 million of share repurchases by the end of 2025.

Even with this accelerated share repurchase activity, we continue to be committed to our expected 400 to 500 basis points of annualized inorganic revenue to be acquired in 2025. Moving to the next page, we are highlighting two additional transactions that were closed during the month of April. Bolt-on in nature, these acquisitions expand our capabilities in core technologies focusing on high-growth, sustainable end markets. With both acquisitions at nine times or less pre-synergy adjusted EBITDA and purchase multiples, we continue to demonstrate our disciplined approach to M&A and expect to meet a mid-teens ROIC for both deals by the end of the third year of ownership. We are off to a strong start towards achieving our 2025 annualized inorganic revenue target, with six transactions already closed this year at a weighted average purchase multiple of approximately nine times.

I will now turn the presentation over to Vik to provide an update on our Q1 financial performance.

Vik Kini (SVP and CFO)

Thanks, Vicente. Starting on slide seven, organic orders got off to a strong start, up 3.3% year-over-year with a book-to-bill of 1.10x. We were pleased with the organic order performance across both segments, and specifically within ITS, which saw organic order growth within all three regions. Aftermarket revenue finished at 38% of total revenue, which was up 110 basis points year-over-year. The 6% growth in aftermarket revenue underscores the focused efforts and progress we continue to make on aftermarket and recurring revenue. The first quarter finished largely in line with expectations for revenue, adjusted EBITDA, and adjusted EPS. It's important to note that approximately $15 million in revenue initially anticipated to be recognized within the first quarter has been deferred to the second quarter, due in large part to customer requests.

Additionally, we continue to make requisite investments for growth in the business, which did impact our year-over-year margin profile. The company delivered first quarter adjusted EBITDA of $460 million, with an adjusted EBITDA margin of 26.8%. Adjusted earnings per share was $0.72 for the quarter, and free cash flow for the quarter was a Q1 record of $223 million. Total liquidity was $4.2 billion, with a net leverage of 1.6x, demonstrating the tremendous strength of our balance sheet, which we believe enables value creation optionality in volatile environments like the one we are currently facing. Turning to slide eight, for the company, total Q1 orders were up 10% and revenue increased by 3%. Book-to-bill for the quarter was a robust 1.10x, showing great momentum, and total company adjusted EBITDA was flat compared to the prior year.

Corporate costs came in at $36 million for the quarter, and finally, adjusted EPS for the quarter finished at $0.72 per share, including a Q1 adjusted tax rate of 22.6%. On the next slide, free cash flow for the quarter was $223 million, including CapEx, which totaled $34 million. Total liquidity now stands at $4.2 billion based on approximately $1.6 billion of cash and $2.6 billion of availability on our revolving credit facility. As Vicente mentioned earlier, we're off to a strong start towards realizing our 2025 commitment of 400 to 500 basis points of annualized inorganic revenue acquired in 2025. Leverage for the quarter was 1.6x turns, which was a 0.9x turn increase year-over-year and flat sequentially versus Q4 2024. As a reminder, the year-over-year increase in leverage was driven primarily due to the purchase of ILC Dover in June of the prior year.

Specifically, within the quarter, cash outflows included $163 million deployed to M&A, as well as $18 million returned to shareholders through $10 million in share repurchases and $8 million for our dividend payment. I'll now turn the call back to Vicente to discuss our segment results.

Vicente Reynal (Chairman, President, and CEO)

Thanks, Vik. On slide 10, first quarter orders for ITS finished up 6% year-over-year with a book-to-bill of 1.1x. Organic orders grew 3.5%. It's important to note that we saw organic orders growth across all regions, including Asia-Pacific, and we remain encouraged by the market activity we're seeing in China. Revenue finished down 2%. We continue to be encouraged by the growth in recurring revenue, which was up double digits year-over-year. Adjusted EBITDA margins declined year-over-year, driven by the flow-through of organic volume, the expected dilutive impact from recently acquired companies, and continued commercial investments for growth in the business. Moving to the product line highlights, compressor organic orders were up mid-single digits. Industrial vacuum and blower organic orders were up low single digits, and power tools and lifting organic orders were up low single digits.

Highlighted here in our Innovation to Action section is an example of our Innovate to Value process, or I2V. The North American compressor team harmonized core components across multiple offerings of our oil-lubricated product, driving a 23% reduction in total cost. This is one example of how we continue to see gross margin improvement opportunities, even with technologies that have been in our portfolio for a while. Turn to slide 11. Q1 orders in PST were up 28% year-over-year and up mid-single digits sequentially from Q4 2024 to Q1 2025. Organic orders finished up 3%, and it's important to note that we saw organic orders growth in both the precision technologies and life science businesses. Revenue finished up 23% year-over-year, driven by M&A, and finished down 3% organically.

PST delivered adjusted EBITDA of $106 million, which was up approximately 16% year-over-year, with a margin of 29.1%. Adjusted EBITDA margins improved 150 basis points sequentially and finished in line with expectations. For PST Innovation in Action, we're highlighting a great I2V solution for Seepex progressive cavity pumps. This new solution optimizes the maintenance process for the replacement of key consumable components, reducing critical downtime for our customers and improving margins by 10%. As a reminder, Seepex was a company we acquired with mid-teens EBITDA margins, and in less than three years, we improved that to PST fleet average. As you can see from this example, we continue to find ways to increase value in both to the customer and to the financial profile of the business.

As we move to slide 12, I wanted to provide an update to the potential tariff impact on our business and how we're mitigating it. Starting on the left side of the slide, based on announced tariff rates as they stand today, our in-year exposure for tariffs is approximately $150 million. You can see the tariff rates outlined on the slide, and it is worth noting that the approximate $150 million estimate also includes the secondary impact of tariffs, which refers to price increases we're anticipating largely from our domestic U.S. suppliers who are procuring components from outside the U.S. On the right-hand side of the page, we're showing the mitigation actions that we have currently deployed and which are well underway.

Starting first with pricing actions, we have taken a multi-step approach with list price actions across our impacted businesses, put in place as of April 1, followed by targeted surcharges effective the week of May 1. Based on these pricing actions, we expect to offset the impact of tariffs one for one. In addition to pricing actions, we have launched a tariff war room to operationalize our tiered supply chain mitigation plans. These include operational and/or routing changes at Ingersoll Rand manufacturing locations, supply chain relocation of existing supplier production to alternative manufacturing locations, and leveraging the global supply base to source from new suppliers. It is worth noting that many of these actions will take some time to fully implement, so we're not expecting a material impact from these actions in year, but we'll continue to utilize IRX to drive these actions to completion in an accelerated manner.

On slide 13, regarding our current guidance, we decided to take a prudent view by maintaining total revenue consistent with prior guidance despite the tailwinds we're seeing from a strong start in organic orders through April, incremental pricing actions to mitigate the impact of tariffs, FX tailwinds, and incremental revenue from recently completed acquisitions. In order to maintain total revenue, we're including a contingency in organic volume as outlined on the table. We're taking that contingency in volume at normal flow-through, which creates a change in adjusted EBITDA and adjusted EPS, also shown in the table. For the rest of the components of our full-year guide, we anticipate our adjusted tax rate to be roughly 23%, net interest expense to be about $220 million, and CapEx to be around 2% of revenue.

Finally, our guidance does not include the impact of any anticipated share repurchases we spoke about or incremental M&A, which we expect to complete over the balance of the year. At the bottom of the slide, we have also added commentary regarding the current market indicators we track, which continue to show good signs. MQLs were up double digits in Q1 2025 and remained strong in April. large long-cycle funnel activity continues to be robust, with projects continuing to progress through the decision-making process. April orders have continued to show stability and in line with expectations. While we are operating in a dynamic environment, business conditions remain solid, and we're encouraged by the organic order growth we saw in Q1 and the continued momentum we have seen in April. We're focused on controlling what we can control, and our teams continue to execute very well.

We remain committed to leveraging our robust balance sheet to strategically deploy capital and drive value for our shareholders. On slide 14, as we wrap up this portion of the call, I would like to highlight that we remain nimble and are prepared to pivot in what continues to be a dynamic global market environment. We will continue to leverage our robust global in-region for region manufacturing capabilities and pivot towards opportunistic end markets, remaining aggressive and focused on taking share regardless of the macro conditions. We have multiple levers to deliver shareholder value, which differentiates Ingersoll Rand as an investment. To our employees, I want to thank you again for your part in delivering another strong quarter. Remain focused on controlling what we can control and staying agile through the use of IRX.

With that, I will turn the call back to the operator and open it for Q&A.

Operator (participant)

Thank you. If you would like to ask a question, please press star one on your telephone keypad. Again, we ask that you please limit yourself to one question and one follow-up. Please ensure you are not on speakerphone and that your phone is not on mute when called upon. Thank you. Your first question comes from Mike Halloran with Baird. Your line is open.

Mike Halloran (Senior Research Analyst)

Hey, good morning, everyone.

Vik Kini (SVP and CFO)

Good morning, Mike.

Vicente Reynal (Chairman, President, and CEO)

Mike.

Mike Halloran (Senior Research Analyst)

You know, the last comments on the guide, I just want to make sure we're all on the same page here. Essentially, could you bridge previous guide to current guide? It seems like you are taking the organic volume assumptions down, but it's more precautionary as opposed to anything you're seeing today from an order trend, backlog, et cetera. Maybe you could just break that out and how you're thinking about the volume, price, confirm the precautionary, FX, and just kind of walk through those moving pieces.

Vicente Reynal (Chairman, President, and CEO)

Hey, Mike, yeah, you're absolutely right. It is what we call it precautionary or prudent. Because what we decided to do is to keep the total revenue guide consistent with the prior guide, even though when you look at the components, we could have increased that guide in the sense that tariff pricing goes up 2% in incremental growth. When you look at a combination of FX and M&A, and I'll say FX as of the end of March, the combination of FX at the end of March and M&A should have given us another two points of growth. We decided that in order to keep the total revenue guide consistent based on this environment, we felt it was prudent to not raise that revenue.

We decided to then take the offset in organic volume, which then basically plugs in at a down 4%, which we believe is both prudent and also de-risking the year and holding the total revenue guideline.

Mike Halloran (Senior Research Analyst)

Helpful. A twofold question. Can you just talk through any nuance you're seeing on the short-cycle businesses versus the long-cycle businesses, more on the ITS side there? On the PST side, you've had positive orders for, what, Q4 or so in a row now. At what point did that turn to positive organic growth on the revenue line?

Vicente Reynal (Chairman, President, and CEO)

Yeah, Mike, in terms of the short and long cycle, I would say we saw a very good balance on both. As you remember, we have spoken a lot about MQLs being up double digits for also a couple of quarters, but the elongation of decision-making was taking longer and also on the long cycle. We also highlighted in the previous quarter too as well that, and the same thing now, is that we're not seeing any of those order or potential orders kind of leads in the funnel getting canceled. It was just taking a little bit longer. We are seeing still good momentum on kind of flushing those through the system and getting good orders. That we are seeing on both.

I'd say, as we said, and you can also see on the slides, MQLs in the first quarter and also through April continue to be very positive, double digit. Also, long cycle continues to be fairly robust, not only in terms of the total size, but in terms of projects that we're adding on.

Mike Halloran (Senior Research Analyst)

The PST question.

Vik Kini (SVP and CFO)

Yeah. Hey, Mike, this is Vik. Yeah, I think first of all, to your point, I think similarly, we're encouraged by the momentum we've been seeing on the PST side. You know, I think a couple of comments I think we made in the upfront comments here that we did see organic growth on both components of PST, so both the precision technology side as well as the life sciences. That life sciences is really referring to the piece of that that's organic is the legacy, what we call the medical business. Obviously, that has had probably the most challenging comps for a period of time. I don't think we'd say we've seen a, you know, necessarily an inflection point fully yet, but we are encouraged that we're seeing a little bit of a return to organic growth.

I think we're encouraged here about kind of what we're seeing going forward and that, you know, that will lead to better growth momentum as we move, particularly into the back half of the year, which would also help the margin profile as well.

Mike Halloran (Senior Research Analyst)

Really appreciate it, guys. Thanks for all the help.

Vicente Reynal (Chairman, President, and CEO)

Thank you.

Operator (participant)

The next question comes from Julian Mitchell with Barclays. Your line is open.

Julian Mitchell (Equity Research Analyst for US Industrials)

Yes, good morning. Just wanted to start.

Vik Kini (SVP and CFO)

Good morning.

Julian Mitchell (Equity Research Analyst for US Industrials)

Just wanted to start with the organic growth outlook. As you said, it seems like trends year to date in orders have been as you thought. There's some sales sort of moving around as normal. When we're looking at the sort of seasonality of revenue this year, you know, maybe help us understand how the quarterly organic sales are expected to progress, anything abnormal seasonality-wise, and what sort of exit rate for the year from the year does your guidance embed on organic sales?

Vik Kini (SVP and CFO)

Yeah. Jul, let me maybe kind of take that in two pieces, including also kind of just talking about maybe half one, half two probably is the right way to frame that up. First and foremost, I do think that from a seasonality perspective, when you think about either percentage of revenue or percentage of earnings first half or second half, very comparable to what you've seen historically, nothing really out of sorts from that perspective. I think when you think about the, you know, the moving components, and I'll probably answer your question here in terms of, you know, the organic, first and foremost, we do expect, obviously, organic growth trends to improve moving into the back half of the year as compared to the first half of the year.

I would think about the first half of the year from an organic perspective in total being down approximately 3%-4%, with price contributing approximately 2% of growth, including, I would say, the beginning of some of the tariff-related pricing actions here in the April and May timeframe. As you move to the second half of the year, we're expected to be up approximately 3%-4% total organic, with organic volume expected to be down low single digits and the balance coming from the full run rate of pricing, including the tariff-related pricing actions. That can kind of help frame it up, including the pricing and volume components. It is worth noting here that the comps in the back half of the year do moderate a bit, which does help with that comparison point.

Julian Mitchell (Equity Research Analyst for US Industrials)

That's helpful. Thank you, Vik. Just my follow-up would be looking at the EBITDA margins. Those were down slightly year on year in the first quarter. I think the guide for the year, they're sort of flattish overall. Maybe help us understand kind of any effects on the margin rate from tariffs as we go through the balance of the year. Should we expect sort of margins to just be up a bit in each of the remaining three quarters year on year?

Vik Kini (SVP and CFO)

Yeah, Jul, I think the way I would explain it and to keep it relatively simple here is you're completely right. Total year, it implies relatively flattish. I think that's essentially what you will see in ITS, a little bit better on the PST front. In terms of the biggest driver, the single biggest driver is the tariff pricing. We are taking pricing actions that are one-for-one offsetting the tariff costs. That size is approximately $150 million, both of price and cost. Obviously, with that being at zero flow-through, that is, you know, let's call it dollar cost and margin, essentially. You know, it's not, it's deluded to the overall. That's essentially the biggest driver.

I think when we look at the other factors of productivity, normal pricing actions, things of that nature, we actually feel relatively good, kind of very much in line with how you've seen us historically behave. In terms of the quarterlies, yes, a little bit of moving parts, but generally speaking, right around that kind of flattish expectation Q2 to Q4.

Julian Mitchell (Equity Research Analyst for US Industrials)

Great. Thank you.

Vik Kini (SVP and CFO)

You bet.

Operator (participant)

Your next question comes from Jeff Sprague with Vertical Research Partners. Your line is open.

Jeff Sprague (Founder and Managing Partner)

Hey, thank you. Good morning, everyone. Hey, I'm a little bit late, but just coming back to tariffs, if I could. Vicente, I think you, you know, when kind of explaining the hedges of sorts in the guide, right, you kind of characterized the tariff impact as 2% of sales. It doesn't sound like you're going for it all in price. If you haven't already, can you just provide a little bit more color on how much you think of it as kind of price versus kind of cost or other sourcing actions to offset this gross amount?

Vicente Reynal (Chairman, President, and CEO)

Yeah, Jeff, I'd say it's a pretty good blend between price and surcharges. Everything that we did in April 1st was 100% on price. What we did as of May 1st included a good combination between price and surcharges. We are doing that to give us plenty of flexibility as we kind of go into the second half and better understand too as well what happens here with the surcharges, kind of what stays or doesn't stay. I will also kind of emphasize and mention too as well, Jeff, that typically when we do a price increase, it stays. We have been very disciplined and diligent that when we do a price increase, we don't then discount that price.

I will also mention kind of what I said on the call is that a lot of these tariffs today do not include some of the meaningful cost mitigation that is not included here, but we're also working on a lot of cost mitigation. That means whether supply chain relocalization or moving one product from one factory to another as you saw, I mean, we have a pretty vast global footprint and we have the ability and capability of moving product from one facility to another. That is not included in our guide, but clearly something that, as you know us very well, we are always actively working on cost mitigations.

Jeff Sprague (Founder and Managing Partner)

Yeah, great. No, that's what I was sort of getting at. Yeah, the plan is all price, but you're obviously doing a lot of other stuff to provide some cushion. Could you also just speak to the China business specifically, China for China, kind of the tone of demand that you're seeing there and sort of any evidence of backlash against U.S. companies or anything of that nature?

Vicente Reynal (Chairman, President, and CEO)

Yeah, Jeff, I was actually, I'll say, you know, I was actually with the China team a couple of times already this year. I'll tell you that the team continues to be fairly optimistic about what could happen here in this year based on some of the push that the government seems to be doing now here in China for China and how everything that we do in China really stays in China. We're kind of being viewed as a very local company in China for China. Things seem to be very stable. Clearly, throughout the quarter, we saw, you know, better improvements. Still, for the year, we're predicting that China is going to be materially, is going to still be down. It's kind of what we imply in our guide.

We're encouraged by what we're seeing and how our teams continue to really accelerate the process of localization and also share taking in new technologies and products such as blowers and vacuums. Also highlight too as well, Jeff, you know, you heard us talk a lot about how outside of China, we have put a lot of attention on how do we accelerate our share take or, you know, market share, which is underpenetrated. We call it the underpenetrated regions. It is pleased to say that obviously overall, you know, within the ITS, we saw Asia-Pacific up organically in orders. That speaks to the fact that we continue to see good momentum outside of China with the organic investment initiatives that we have done outside of China.

That remains to be a great, good encouragement to offset any potential, you know, softness that China may seem to be continuing to see throughout the rest of the year. Again, China, I'll say, encourage. No negative retaliatory, I'll say, gestures that we're seeing from customers against us.

Jeff Sprague (Founder and Managing Partner)

Thank you for that. I'll leave it there.

Operator (participant)

The next question comes from Rob Wertheimer with Melius Research. Your line is open.

Rob Wertheimer (Founding Partner and Machinery Analyst)

Thank you. I'm curious how you think about acquisitions, your desire to close, how conversations change, just given obviously there's more uncertainty that you've reflected in your own guidance. You know, do you assume a safety factor and are willing to go forward? Or, you know, what is the outlook for kind of closing deals in the year? Thank you.

Vicente Reynal (Chairman, President, and CEO)

Yeah, Rob, I'll say it continues to be a very strong funnel that we have on the M&A. You have seen that we have closed already quite a few transactions here in the year already. We're off to a very good start. As you have seen us do, you know, we're very focused on bolt-on in nature acquisitions. We're very disciplined with price. You can see that the last two that we mentioned here, roughly nine times pre-synergy multiple with expectation that on a post-synergy, we can lower that to another three turns. Very good return on those investments that we're making there. I'll also highlight that our funnel is consistent to what we have always done before, which is sole source. We go to family and companies.

Moments like this in this macro environment provide a lot of uncertainty to those multi-generation families and also provide a good opportunity for us to continue to emphasize how we're a good home for those acquisitions. Clearly, in the financial diligence, we do a lot of work to understand is the macro kind of making changes or not. We're, you know, being prudent on how we're, you know, kind of writing the model to create that ROIC. Last two points, I'll say, you know, a lot of these acquisitions are very in region for region, which obviously proves again a very good concept in this environment. Last point I'll say, Rob, is that a lot of these multi-generation families, they're encouraged to come to us because of our ownership model.

I mean, regardless of the macro environment, they view that we are a great home for transitioning their legacy, especially the way we treat employees and how we treat the long-term ownership of having those employees be part and owners of the company.

Rob Wertheimer (Founding Partner and Machinery Analyst)

Thank you.

Vicente Reynal (Chairman, President, and CEO)

Thank you, Rob.

Operator (participant)

The next question comes from Andrew Kaplowitz with Citigroup. Your line is open.

Andrew Kaplowitz (Senior Analyst)

Hey, good morning, everyone.

Vicente Reynal (Chairman, President, and CEO)

Morning, Andrew.

Andrew Kaplowitz (Senior Analyst)

The center of it, book-to-bill over one time, as you said, which was strong and still strong in April. I know you said your MQLs remain strong. Maybe you could talk about your order expectations for the year. Does this year end up actually being normal for you where book-to-bill stays over 1x in Q2 and you end up booking book-to-bill at or above one for 2025?

Vik Kini (SVP and CFO)

Yeah, Andy, this is Vik. Maybe I'll take that one. Obviously, we're not going to necessarily try to guide on orders. I think what we'll say is this. You know, one, encouraged by the momentum we saw in Q1. Worth noting that a good balance between both what we'll call short to medium cycle products as well as longer cycle activity. I think it speaks to a lot of what we've been talking about even in prior quarters that MQL activity has remained healthy. We've been seeing that, I'd say, funnel activity and, you know, was just waiting for some of those longer cycle projects to kind of get to the finish line, if you will, in terms of the PO. Encouraged that we saw a nice balance of that.

You know, I think right now, you know, listen, our expectation is that, you know, we're not expecting to see, you know, dramatic changes from what we've seen historically in terms of book-to-bill from a seasonal perspective and things of that nature. You know, that's kind of the best view we have at this point in time, just given the macro environment.

Andrew Kaplowitz (Senior Analyst)

It's helpful, Vik. Vik, can you talk about the Q1 margin performance in the segments? I know you got hit with operating deleverage in ITS given the $15 million moving to the right, as you said. If I look over the last couple of quarters, you know, margins at least versus, you know, high expectations have been a bit choppier. We know your acquisition activity has continued to be robust. Is there anything to read into here that acquisition noise and margins are a little higher these days? Is there anything you could do to mitigate that noise?

Vicente Reynal (Chairman, President, and CEO)

Yeah, Andy, let me start by on kind of maybe the ITS and just remind everyone that Q1 2024, the ITS EBITDA margins were really strong. I mean, they were 29.9% in the first quarter of last year, which was up 370 basis points. Still, when you look at it at a two-year stack, you know, that Q1 2024 and Q1 2025, we're still up 260 basis points, which is we're very pleased with what the teams continue to do, including obviously bringing new M&As and also, as you said, some of the deleveraging because of the organic decline. We continue to be very pleased with how the teams continue to execute within the ITS. To your point, I mean, there's still plenty of runway for us to improve.

I mean, you saw the great example that we gave in the slide of the ITS, how even on very kind of core technologies that have been with us for quite some time, we're still finding ways with the use of innovative value to really consolidate those product lines and still save, I think it was like 23% improvement in the bill of material cost of that specific product line. I think we're encouraged. We continue to see tremendous runway. We spoke a lot about how recurrent revenue and things like that will also improve the margin profile of the ITS. On the PST segment, you saw sequentially great improvement, you know, 150 basis points Q4 to Q1.

We continue to be very pleased to what we see on kind of what it was kind of that legacy PST that we call Precision Technologies now that continues to see some very good improvements. Also the operational improvements that we saw on the ILC Dover business on a sequential basis Q4 to Q1. I think everything seems to be moving along with expectations. Clearly, there's still plenty of runway for us to see improvement on both segments.

Andrew Kaplowitz (Senior Analyst)

Appreciate the call, everyone.

Vicente Reynal (Chairman, President, and CEO)

Yep. Thank you, Andy.

Operator (participant)

The next question comes from Nigel Coe with Wolf Research. Your line is open.

Nigel Coe (Managing Director)

Thanks. Good morning.

Vik Kini (SVP and CFO)

Morning, Nigel.

Nigel Coe (Managing Director)

Morning, guys. Just wanted to maybe sharpen up the 2Q kind of thinking here. You said previously, I think 46%, 54% on EBITDA, but obviously a lot's changed since February. Are we still on that sort of 46% phasing for the first half, Vik?

Vik Kini (SVP and CFO)

Yeah, I think you're still very much right in line with that expectation.

Nigel Coe (Managing Director)

About $505 million of EBITDA, $0.80 of EPS in that kind of zone?

Vik Kini (SVP and CFO)

You're in the right ballpark, Nigel.

Nigel Coe (Managing Director)

Okay. Fair enough. Fair enough. That's helpful. I mean, you know, the services growth, the aftermarket growth of 6% is really encouraging and shows resilience of that franchise. That sort of backs into equipment down close to 10%, 9%-10%, I think is the number. That feels recessionary. I understand there was some push from 1Q to 2Q, but any sort of perspectives you have on the cycle would be really helpful.

Vicente Reynal (Chairman, President, and CEO)

No, I'd say, Nigel, you know, keep in mind that we're putting a big effort on the recurrent revenue that we said, that recurrent revenue kind of up double digit. I think we still feel fairly good on the overall compressor product portfolio. As you saw, whether compressors, blowers, and vacuum technologies, and even including the power tool, that we continue to see, we saw positive, good order organic momentum. You know, we do analyze a lot of the data that we kind of get from associations, particularly here in the one in the U.S., which continues to show that we're holding to taking share. We remain encouraged. We have an amazing install base of kind of core equipment. I think it's very important for us to start connecting a lot of that, which is what we're very focused on.

In addition to that, we continue to seed more equipment across the world. You know, so nothing that it is concerning here to us.

Nigel Coe (Managing Director)

Okay. Thanks a lot. Cheers.

Operator (participant)

The next question is from Joe Ritchie of Goldman Sachs. Your line is open.

Joe Ritchie (Managing Director and Senior Equity Research Analyst)

Hey, guys. Good morning.

Vicente Reynal (Chairman, President, and CEO)

Morning, Joe.

Joe Ritchie (Managing Director and Senior Equity Research Analyst)

Hey, just tackling this new guidance from a little bit of a different angle. If I take a look at the kind of like midpoint of your EBITDA for the year, it's like $2.1 billion. It feels like we can get there just from your completed M&A. I want to make sure that I've got that straight. All else being equal, there really isn't much baked in for the rest of the business.

Vik Kini (SVP and CFO)

Yeah, Joe, let me take that one. Obviously, with regards to the M&A that we have completed, that, you know, we sized that in the earnings at approximately $330 million, which I think is at relatively normal flow-throughs, as you would expect for things that are completed kind of year one. As far as the other moving parts, remember, with the organic volume adjustments we talked about and the pricing, a meaningful component of which comes through at zero margin, it's a little bit atypical to kind of prior years, but we think, as we said, kind of prudent given kind of what we're seeing. Again, are you kind of far off the mark in the kind of moving parts? No, I don't think so in that respect.

I would say that I'd say the composition of the growth elements, particularly the zero flow-through on tariff pricing, is probably the unique aspect of this year compared to years past.

Joe Ritchie (Managing Director and Senior Equity Research Analyst)

Okay. Okay. Great, Vik. Vicente, maybe bigger picture question and, you know, tough to play in hypotheticals here, just given the environment that we're in. If the tariffs were to kind of resolve themselves, you know, let's call it sometime in the next couple of months, given just the demand picture that you're seeing in your business today and that contingency that you have built in, would your expectation then be that, like, okay, you're going to get a little bit better growth then as the year progresses and we can get back to potentially, you know, what the original guidance was for the year?

Vicente Reynal (Chairman, President, and CEO)

Yeah, potentially, Joe. I mean, I think there's a lot of things that can happen. Yeah, I mean, absolutely. Again, I think we're incredibly encouraged that even though in this environment, we're seeing what we're seeing in terms of kind of the organic order growth momentum through on a year-to-date basis. As we said, we just decided to take a prudent view because if you start stacking up all the positives, it kind of became more of a situation that we said, hey, we want to be more prudently. If tariffs come off, could they be accelerated growth? Yes. I mean, but TBD when that moment happens. At that time, we will definitely evaluate what the situation is.

Joe Ritchie (Managing Director and Senior Equity Research Analyst)

Makes a lot of sense. Thanks, guys. Appreciate it.

Operator (participant)

The next question comes from Stephen Volkman with Jefferies. Your line is open.

Stephen Volkmann (Equity Analyst)

Great. Good morning, guys. Just a couple of quick follow-ups here. I think you talked, Vik, about like $150 million or something of pricing. Is that pretty much even in the two segments?

Vik Kini (SVP and CFO)

Yes, obviously, it's, I'd say, proportional between the two given the size. What I would say is the level of tariffs and/or the level of pricing actions have been very commensurate across the two is probably the best way to think about it.

Stephen Volkmann (Equity Analyst)

Okay. I am just trying to get my head around, you know, you are obviously doing some other things on the cost side, sourcing, etc. It would seem to me like those would take a little while to sort of filter in. It also does not seem like you are really sort of saying the second quarter will be weaker and we will sort of grow into it. I just thought that was interesting. Any way to square that circle?

Vik Kini (SVP and CFO)

Yeah, Steve, I'll take that one. You know, I think a couple of ways to think about it. I think the way you've thought about the, I'm going to call it the cost actions, as Vicente mentioned earlier, 100%. You know, we're taking a prudent view here. Teams, we've launched tariff war rooms and things of that nature, which is very collaborative across the enterprise. We're just, you know, expecting that to take some time to kind of get to completion and taking a prudent view on the in-year impact. You know, we're offsetting the tariffs essentially one for one with the pricing actions. I think the reason you're seeing that, you know, essentially being net neutral from a dollar perspective, quarter to quarter is we have taken those actions in kind of two tranches.

We took immediate action here kind of coming into April 1st, which I think has helped mitigate, you know, a lot of the noise that you would see here in Q2, as well as a second round of actions here effectively as we speak here on May 1st. I think the two-tiered approach kind of on the pricing front compared with the tariffs themselves are kind of folding in, I think is keeping us, you know, largely intact.

Stephen Volkmann (Equity Analyst)

Got it. Okay. Thank you, guys.

Vicente Reynal (Chairman, President, and CEO)

Yeah, thank you.

Operator (participant)

The next question comes from Joe O'Dea with Wells Fargo. Your line is open.

Joe O'Dea (Managing Director of Senior Equity Analyst)

Hi, good morning.

Vicente Reynal (Chairman, President, and CEO)

Hey, Joe.

Joe O'Dea (Managing Director of Senior Equity Analyst)

Hey, can you unpack the 4% volume impact, I guess embedded as contingency? It would seem that that's an annualized number, so it's an even bigger hit that you're taking primarily to the back half of the year. Where you think about that vulnerability really sitting between segments and then within segments by, you know, end markets or product groups, just to understand what you're watching most closely for the volume vulnerability?

Vik Kini (SVP and CFO)

Yeah, Joe, this is Vik. I'll take that one. You know, I think a couple of things here. You know, one, we've taken what we think to be a prudent view for the balance of the year. Obviously, with only three quarters in the year, yes, there obviously is an impact in the second half. As far as how to think about it between the two segments, we view it actually very comparable, right? Like Vicente has mentioned here, you know, you look at this in kind of two fronts. One, I'd say prudently de-risking the guide, but then also keeping total revenue intact. You'd see that we actually kept that across, you know, it's commensurate across both segments.

You know, as far as, you know, product lines or anything of that nature, no, I don't think we view it necessarily any different, you know, what I'd say product line by product line or anything of that nature. You know, we're taking a prudent view on the volume expectations to keep the revenue guide kind of intact from a total perspective. Yes, obviously, the second half impact, as I kind of outlined before, we are expecting organic volumes to be down low single digits in the back half of the year.

Joe O'Dea (Managing Director of Senior Equity Analyst)

Got it. I guess just related to that, like are you seeing different demand trends? You know, you've got products that price at, you know, pretty wide range of points. Are you seeing anything in differing demand trends between those, you know, whether something that would be more at the reciprocating scroll compressor price points or up to centrifugal, like any hesitation out there on higher price points?

Vicente Reynal (Chairman, President, and CEO)

I'd say, I mean, Joe, nothing of significance that we can think about. I mean, as you kind of well point out, when you think about centrifugal and some of the kind of medium to large, those tend to be more CapEx oriented versus maybe the smaller compressors will be more really the kind of, I'd say, OpEx. We play more on that kind of, you know, the kind of medium-ish to large compressor side. I mean, we don't do, we clearly are not in the game of do-it-yourself sort of compressor style piston compressors, which I assume that's maybe more related to consumer spend, do-it-yourself, which that we don't play in that market. Our products are more on the highly engineered, and they do provide that return on investment. Everything we sell is based on the payback.

As long as we have proven that, as long as we show the customer that the payback is, you know, 15 months or less, they will put that project up on the list because obviously it is a great payback. The technologies that we are launching and how we save energy, how we conserve water and everything else, it is a great way for customers to view that total cost of ownership that offers the payback.

Joe O'Dea (Managing Director of Senior Equity Analyst)

Just on tariffs, $150 million, can you size how much of that is China? Within that, you know, how much is import and how much is export, you know, really so that we have a sense of moving forward? If we see headlines on changes to these, you know, we have a sense of how much of that applies to the $150 million?

Vik Kini (SVP and CFO)

Yeah, sure, Joel. I'll take that one. I'd say the majority of the costs are China oriented. I would say relating to, you know, imports from China, I would say much more on what I'd say just, you know, third-party spend. As we mentioned, we're largely in region for region. While there's a small impact there, that's by no means the major driver. It's also kind of worth noting here that in that number, we do include what we'll call, you know, I call, I refer to it almost as the tier two impact, but that really refers to increases that in the U.S. we're expecting from domestic suppliers because they are getting components internationally. You know, we have included that in our $150 million estimate, and we do attribute that largely to that kind of China component.

That is very much the majority of the driver of the 150.

Joe O'Dea (Managing Director of Senior Equity Analyst)

Thanks a lot.

Operator (participant)

The next question comes from Chris Snyder with Morgan Stanley. Your line is open.

Chris Snyder (US Multi-Industry Analyst)

Thank you. I wanted to ask just on the contrast between the Q1 1.0x, 1.10x book-to-bill, which I know there's positive seasonality, but I think that was the best since 2022, and then just the four-point volume guide down. You know, is there a view that these orders could have included some pull forward ahead of the tariffs? Or are you, are customer conversations changing at all in Q2 that's making you guys a little bit more cautious on the back half? Just on that, like anything specifically on China where it does feel like the demand for manufactured products may have changed a lot versus what was going on in Q1? Thank you.

Vicente Reynal (Chairman, President, and CEO)

Yeah, Chris, thank you. I'll say on a pull forward, nothing that we could see. Because keep in mind, I mean, I think a lot of our, the majority of our products, a very large percentage of them, they are, you get to select the options, and it's kind of almost, I'll say, a little bit customized to the need. It is not possible for our customers to really create a lot of inventory of our particularly compressors and things of that nature.

As we said before, historically, we do track point of sale on those distributors that mostly on a precision technology side, we track, you know, what are selling and then the sell out. We basically track the amount of inventory, and we do not want our distributors to carry excessive amounts of inventory. Based on the data that we have seen, we don't see any of that pull forward.

I think in terms of your question around China, again, you know, positive, I'd say positively enthusiastic about what we saw throughout the quarter and also kind of as we kind of come into April. The team remains very encouraged of all the activity that we're seeing. You know, in, you know, we're not expecting like a fast recovery clearly in China. We're putting a lot of emphasis on growth outside of China, particularly Asia-Pacific, where we see good solid momentum today.

Chris Snyder (US Multi-Industry Analyst)

Thank you. I appreciate that. I am just following up. Have tariffs changed the competitive positioning for you in the U.S. market, you know, whether it is some of your bigger competitors or to the extent, are there, you know, do you guys compete at all against maybe, you know, lower cost foreign imports, you know, whether it is China or elsewhere that could be impacted by the tariffs? Thank you.

Vicente Reynal (Chairman, President, and CEO)

Yeah, Chris, you know, we do have a competitive advantage because of our in-region for region model. I mean, that is clearly because when you look at, you know, all of our competitors, whether, you know, they bring product from the outside, I mean, the majority, most of them. That offers definitely a competitive advantage and one that we're putting now, not only just in the U.S., but on a global basis. A lot of our customers, they're asking for local products. That is what we are able to offer to a lot of them.

Chris Snyder (US Multi-Industry Analyst)

Thank you.

Operator (participant)

The next question.

Vicente Reynal (Chairman, President, and CEO)

Thank you, Chris.

Operator (participant)

Sorry. The next question comes from Nicole DeBlase with Deutsche Bank. Your line is open.

Nicole DeBlase (Managing Director for US Multi-Industry and Electrical Equipment Equity)

Yeah, thanks. Good morning, guys.

Vicente Reynal (Chairman, President, and CEO)

Morning, Nicole.

Vik Kini (SVP and CFO)

Hey, Nicole.

Nicole DeBlase (Managing Director for US Multi-Industry and Electrical Equipment Equity)

Just one quick follow-up on the 1Q margins. Were margins impacted at all by price cost headwinds just because the inflation kind of came in really quickly? I think you guys started to attack this with pricing in April rather than during 1Q.

Vik Kini (SVP and CFO)

Yeah, Nicole, I think the simple answer is not dramatically. You know, I would say, you know, the tariff impact has become more of a Q2 dynamic forward. You know, we did have some of the kind of carryover pricing that kind of comes normally from prior year into this year. I wouldn't say there was anything of a dramatic nature there.

Nicole DeBlase (Managing Director for US Multi-Industry and Electrical Equipment Equity)

Okay, thanks, Nick. We have gotten through a lot of my questions here, but I guess one thing we did not talk about is what you are seeing in Europe. I suspect that it is probably stability, not really much change relative to what we have seen in the past few quarters. Could you talk a little bit about, you know, order activity in that region?

Vicente Reynal (Chairman, President, and CEO)

Yeah, we were actually, Nicole, great question. Thank you for that. We're actually very pleased with what we saw in Europe. We saw kind of mid-single digit organic in the ITS segment through, I mean, in Europe. So I guess that, you know, encourage with what we actually saw.

Nicole DeBlase (Managing Director for US Multi-Industry and Electrical Equipment Equity)

Thank you. I'll pass it on.

Operator (participant)

The next question comes from Nathan Jones of Stifel. Your line is open.

Nathan Jones (Managing Director of Industry Equity Analyst)

Good morning, everyone.

Vicente Reynal (Chairman, President, and CEO)

Morning, Nathan.

Nathan Jones (Managing Director of Industry Equity Analyst)

I wanted to ask a question thinking about these price increases from your customer's perspective. I mean, we're talking about, you know, 2% price for Ingersoll Rand. If we start thinking about that being across three quarters and 40%-45% of revenues in the U.S., if you just spread that across kind of the U.S. portfolio, you're talking more about a 6% price increase on that kind of stuff. Probably some of the services do not need to see that price. You know, maybe you're pushing into the high single digits on products. Everybody else is raising price the same amount. Do these things start to impact customers, you know, go/no-go decisions on projects because the return metrics for their investments have changed because of these price increases as they go into effect?

Vicente Reynal (Chairman, President, and CEO)

Yeah, no, Nathan, great question. You know, I'll say, you know, a couple of things. You know, one, I mean, clearly our products are mission-critical in nature. So they're needed. It's a must-have for the specific projects and the specific application. And it's just not us that are increasing prices. I mean, clearly we track the competitive dynamic and everyone is along the lines kind of doing it. I will say that customers continue to pursue what, I mean, clearly they will do the math in terms of the return on that investment, whether that will make sense, as I kind of mentioned before. We do a lot of presentation to our customers on how we are able to create that payback and then return on that investment. I think, you know, what, so is this happening in the market?

Could it create some customers to maybe put a pause? We haven't seen it at this point in time yet. That is why even more so being prudent as we kind of do what we did with our guide. Again, nothing that we have seen on a year-to-date basis, kind of Q1 and through April from an order perspective. The last point I'll say is that this is why we emphasize our in-region for region because we do see many customers, they're asking for products that are made locally. That is the advantage that we have, not just on compressors, but you saw on the map, I mean, blowers, vacuums, and other technologies that are very prevalent in the markets.

Nathan Jones (Managing Director of Industry Equity Analyst)

Thanks for that. I guess the second question for me is a bit of a longer-term one. We've seen, you know, things like fiscal stimulus announcements in Europe and Germany specifically, probably get some more of that. We've started to hear stories about South America looking to invest in capacity to decouple from the U.S. A lot of those things talked about and probably don't impact you this year, but maybe start impacting you next year. Maybe just talk about the opportunities that that could provide for the business.

Vicente Reynal (Chairman, President, and CEO)

Yeah, Nathan, it's a great question. You know, one that, I mean, so far this year, I probably have been out to all the, across all the regions. I've been in Latin America, Europe, Asia, Middle East, and clearly throughout the U.S. I spent a lot of time talking to a lot of our customers. It is coming kind of loud and clear, customers want localized product. That is the offering that we are able to provide pretty uniquely to many of them. Yes, we see some good investments that are happening. I think these localizations, whether you think about India, even Brazil, that I just, you know, basically was inaugurating our new facility there not too long ago, a couple of few weeks ago. Customers, they want some local content in those products.

I think that provides us very well positioned in that environment.

Nathan Jones (Managing Director of Industry Equity Analyst)

Thanks very much for taking my questions.

Vicente Reynal (Chairman, President, and CEO)

Thank you, Nathan.

Operator (participant)

The next question comes from Andrew Buscaglia with BNP Paribas. Your line is open.

Andrew Buscaglia (Senior Analyst for US Industrial Technology)

Hey, good morning, everyone.

Vicente Reynal (Chairman, President, and CEO)

Morning, Andrew.

Andrew Buscaglia (Senior Analyst for US Industrial Technology)

Hey, maybe just one for me. Everyone kind of took my last few questions I had. I wanted to get an update on ILC Dover and how that is tracking during the tariffs. It's not a market I'm too familiar with, but I'm wondering what the exposures are there and if you're seeing any change in demand trends in that specific area. Thanks.

Vicente Reynal (Chairman, President, and CEO)

Yeah, yeah, sure, Andrew. You know, we continue to remain really encouraged by the momentum we're seeing in the life science front. I'll just kind of highlight that, you know, the life science components of ILC Dover, which is everything except the aerospace business, you know, had a book-to-bill of 1.11x. You know, core single-use powder handling portfolio bookings are up low double digits year-over-year in Q1. Operationally, very encouraged to what we saw kind of Q4 moving into Q1, as I mentioned on the call. Clearly we continue to make a lot of investments in the ILC. Over the long term, we continue to see that clear path for that long-term margin target that we outlined when we announced the deal and the transaction. Particularly to your question on tariffs, I'd say fairly minimal in nature.

Where we have seen them, we can actually work with our customers to pass that, whether it is price or surcharges.

Andrew Buscaglia (Senior Analyst for US Industrial Technology)

Okay, got it. That's it for me. Thank you.

Vicente Reynal (Chairman, President, and CEO)

Thank you.

Operator (participant)

This concludes the question and answer session. I'll turn the call to Vicente Reynal for closing remarks.

Vicente Reynal (Chairman, President, and CEO)

Yeah, thank you, Sarah. I just kind of want to highlight that, you know, congratulations, last month we crossed our five-year anniversary of combining Gardner Denver and Ingersoll Rand. As you have seen over the past five years, you know, we have been through a lot, COVID, supply chains, freight, a couple of wars, and things of that nature. We like to say that we're now much stronger than ever and completed divestitures, acquired, you know, 65 companies. We have a pretty unique portfolio. Needless to say, we know how to navigate this market. We have a management team that has done it before. We have done it over the past five years. Regardless of what comes out, we're pretty agile and nimble in this environment.

We know that we'll definitely come out even stronger out of this situation than we have done historically in the past. I remain very excited, remain very encouraged about what's future ahead of us at Ingersoll Rand. One more time, I want to thank all 21,000 employees who are owners of the company. That is one of the reasons why we continue to remain very agile and nimble despite any of the market situations, because all of them are pushing towards the same goals and same characteristics that we want to live, we want to do, and we know that we will be successful. With that, call it out for today. Thank you, everyone.

Operator (participant)

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