Ingersoll Rand (IR) Q2 2026 earnings call transcript

Thank you for joining Ingersoll Rand 2nd Quarter 2026 earnings call. I'm Max Forsheimer, Director of Investor Relations, and joining me this morning are Vicente right now, our Chairman and CEO and Vic Kinney, 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 two of this presentation, which you should read in conjunction with the information provided on this call. We will also reference certain non-GAP financial measures. Reconciliation to the most comparable GAP 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 second quarter results, discuss segment performance and provide an update to our full year 2026 guidance.

During Q&A, please limit yourself to one question and one follow-up to allow time for other participants. With that, I'll turn the call over to Vicente.

Morning, everyone. I'm thank you for joining. Before we get started, I wanted to take the opportunity to formally introduce Max Forsheimer, who has added Investor Relations responsibilities to his current role on our M&A team. He will be seeing and hearing from him going forward, and I know he looks forward to engaging with many of you. Beginning on slide three, the second quarter and first half overall reflected continuous strong execution and improved the momentum in our business.

In the second quarter, we saw organic quarter growth of 2%, organic revenue growth of 4%, and adjusted EPS growth of 7%, demonstrating the strength and resiliency of our business. Our growth this quarter was broad-based across our diversified and market-based. Every main region this quarter delivered positive organic revenue growth, and we continued to focus investment towards durable, structurally growing and markets.

Importantly, our first half performance and the healthy demand trends, we continue to see across much of the business reinforce our confidence in our outlook for the remainder of the year. As we will walk you through this morning, we are raising our four-year revenue guidance and expect adjusted EPS to land towards the higher end of our previously communicated range.

We also remain disciplined in our approach to capital allocation. Our acquisition pipeline continues to be robust, including two new announcements today, and remains focused on targeted, bold-term opportunities that strengthen our core technologies, expand our aftermarket presence, and enhance our long-term growth profile. Our teams around the world remain focused on controlling what we can control. Through the use of IRX and our economic growth engine, we continue to drive operational execution, support our customers, and outperform in the markets we serve.

Turning to slide four, before moving to our operational and financial results, I would like to briefly acknowledge the continued recognition we have received for our sustainability leadership and employee ownership culture.

During the last year, we were recognized across multiple leading ESG, workplace, and corporate citizenship rankings, including joining the 2026 Fortune 500, a milestone that reflects the scale, discipline, and momentum we have built as the inches of land we are today.

These recognitions further outline in our recently polished sustainability report, reflect the strength of our ownership mindset culture, and our commitment to making life better for our employees, our customers, our shareholders, and our planet.

Turning to slide five, I am excited today to announce the closing of one acquisition and signing of another. Just this morning, we close on the acquisition of Lone Star Blowers, the company referenced as a US-based blower manufacturer in the presentation.

Lone Star Blowers expands our expertise in key blower technologies and solutions, and expands our aftermarket presence through an established service business and rental fleet. This acquisition will add approximately $50 million in annual revenues.

We are also excited to announce the signing of the acquisition of Phi Filtery, the manufacturer of industrial filters based in Italy. This acquisition will extend our filtration capabilities and also strengthen our aftermarket offerings. We expect this acquisition to close in Q4 and add approximately $30 million in annual revenue.

Both of these transactions are highly consistent with our strategy of acquiring market leading technologies that strengthen our core while maintaining disciplined valuation standards. Notably, both acquisitions strengthen our aftermarket capabilities, a key focus area as we continue to increase the resiliency and recurring revenue characteristics of our portfolio.

We have 11 additional transactions under LOI, and our funnel remains strong, focused on proprietary and internally sourced deals. Our disciplined M&A strategy remains a key differentiator and continues to be an important driver for long-term value creation.

Now, I'll hand it over to Vic, who will review our financial performance.

Thanks, Vicente. Starting on slide six, the second quarter represented another solid quarter of execution. Orders finished just over $2 billion up 5% year over year with organic orders up 2%. Booked to bill finished at 1.0 turns slightly lower than we typically see in the second quarter, primarily reflecting the delayed timing of several large project orders. Import to note that we continue to see solid momentum in our short-to-medium cycle business where orders were up mid-single digits.

In addition, we expect these longer cycle projects to recover in the back half of the year, and Vicente will provide some color on what we have seen thus far through July.

Revenue grew 9% year over year to approximately $2 billion, with organic revenue growth of 4%. Aftermarket revenue represent 36% of total revenue during the quarter and continues to be an important contributor of the resiliency of our portfolio.

Adjusted EBITDA was $520 million in increase of 2% year over year, with an adjusted EBITDA margin of 25.4%. Adjusted EBITDA margin was down 160 basis points year over year, with the decline driven primarily by three factors.

First, inflationary pressures, particularly in China, where it is more challenging to offset inflation with price. Second, continued investments to support growth around new technology and commercial applications, and third, higher corporate costs. The higher corporate costs were largely driven by year-to-day true-up of management incentive costs reflecting incentive compensation adjustments aligned with performance, which we do not expect to recur at this level in the back half of the year.

Unallocated corporate costs were $49 million in the quarter, versus $34.6 million a year ago. Driven largely by the incentive true-up, and we continue to expect approximately $170 million in corporate cost for the full year.

Despite this quarter's year over year margin rate pressures, we remain confident in our ability to deliver within our previously-communicated adjusted EBITDA range through continued operational execution and productivity actions. In terms of the sequential margin expansion we expect to see in the second half of the year, the margin ramp in the back half of the year is normal course for us. As first-half pricing actions and benefits from first-half productivity projects are realized.

We also had the incentive comp true up here in second quarter that we do not expect to repeat the same magnitude in the back half of the year.

Adjusted EPS was $0.86 for the quarter up at 7% year over year. Turning to slide seven, recast flow for the quarter was $269 million up roughly 28% year over year. We ended the quarter with approximately $3.8 billion of total available liquidity, including approximately $1.2 billion of cash and $2.6 billion of available revolving credit facility capacity.

Leverage remained at 1.7 times, providing significant balance sheet flexibility. During the quarter, we deployed $110 million towards acquisitions and returned approximately $248 million to shareholders through Sherry purchases and dividends.

We were also pleased to receive a one-notch upgrade from Moody's to BAAI during the quarter, further reinforcing the strength of our balance sheet and capital allocation strategies.

Overall, our balance sheet remains a strategic asset and positions us well to continue investing in attractive growth opportunities. One other update I wanted to provide here, as you will see disclosed in our 10Q for the second quarter, we reached an agreement on an initial $187.5 million recovery, which certain insurers on the RWI claim that we filed last year related to the ILC Dover transaction.

We collected the first $25 million in the second quarter, and this is reflected in a free cash flow for the quarter, with the remaining $162.5 million to be received during 2026.

This is a significant and favorable initial recovery, and we continue to actively pursue additional meaningful recoveries related to the ILC Dover transaction beyond the $187.5 million.

Consistent with our focus on earnings quality, these recoveries are excluded from adjusted earnings, and the incremental cash that we expect to collect in the second half of 2026 is not reflected in our free cash flow guidance. We therefore view it as pure upside that directly strengthens our capital allocation firepower.

I'll now turn the call back to Vicente to discuss our segment performance.

Thanks, Vic. Turning to slide eight, ITS delivered another solar quarter. Revenue increased nearly 9% year-over-year, including organic revenue growth of 4%. Organic revenue growth was positive across all regions.

Orders were approximately flat organically, resulting in a book-to-bill ratio of one-time. Within our compressor business, we continue to see healthy activity, particularly in North America, where organic orders were up high single digits. Overall compressor orders increased by low single digits globally.

Organic order growth was impacted by the timing of several long cycle blower and vacuum projects in Europe, as well as the continuing impact on the Middle East, where specific project activity remains delayed rather than canceled.

ITS generated a Joterevita of $435 million, with margins of 26.8%. Margin performance was impacted primarily by challenges offsetting inflationary impacts with price, primarily in China, and continue commercial investments to support future growth. For our innovation in action highlight, we're showcasing a plug-and-play on-site nitrogen generation solution that integrates multiple products from our portfolio into a single factory tested system. The solution enables faster deployment, simplify commissioning, and full lifecycle support, demonstrating our ability to leverage the breadth of our technology portfolio to solve critical customer needs.

This solution also demonstrates the commercial synergies we continue to realize through M&A. The system combines technologies from our OxiWise, Garner Denver, and York brands into a single integrated solution for customers.

Turning to slide 9, PST delivered an excellent quarter and continues to demonstrate the strength of the platform we have built. Orders increase 11% year-over-year, including 7% organic growth. Lifesciences deliver low double-digit organic order growth, while precision technologies grew mid-single digits organically.

Revenue increased by 8% year-over-year, including 4% organic growth. Importantly, both light sciences and precision technologies deliver positive organic revenue growth in the quarter.

Adjusted EBITDA increased 15% year-over-year to $125 million. Adjusted EBITDA margin expanded 200 basis points year-over-year to 31.5%, reflecting strong execution across the portfolio and the continued benefits of IRX.

We're encouraged by the breadth of growth we're seeing across the segment. And remain excited about the long-term opportunities within both life science and precision technologies.

For innovation in action, we're showcasing those trends, installation-ready dosing systems. These standardized solutions simplify deployment, improve reliability, and reduce installation complexity for customers, while supporting strong commercial momentum across the business.

I'm also proud to share that following the significant earthquake that recently struck the Philippines, ingots around partner with Planet Water Foundation to deploy safe drinking water stations across the hardest heat areas.

Planet Water Foundation is not only a partner but also valued those who are from customers, as our pumps are a key component of the aqua block kiosks that deliver safe drinking water in these situations without the need for electricity.

It serves a good reminder of the mission critical nature of our portfolio and an example of our purpose of making life better in action.

Turning to slide 10, giving our momentum through the first half of the year, today we are updating our full-year guidance. Starting with revenue, we now expect revenue growth of 4.5% to 6.5%, 200 basis points higher at the midpoint, driven primarily by organic volume, reflecting a strong first half and healthy demand, particularly in the short to medium cycle side of the business.

This outlook assumes approximately 1% to 3% organic growth, approximately 2.5% growth from M&A, and approximately 1% growth from FX.

We're maintaining our adjusted EVTA guidance range of $2.13 billion to $2.19 billion, as we mentioned, the margin ramp we see in the second half is largely driven by first half pricing actions taking effect, the non-recurrence of the incentive compensation threw up in Q2, and benefits from stronger productivity in the back half of the year from projects executed in the first half, all of which is normal, commerce and consistent with prior years. Adjusted EPS remains projected at $3.45 to $3.57, and based on our current expectations, we expect results to finish near the high end of the range.

Free cash flow conversion is currently expected to remain approximately 95%. The facing of revenue, adjusted EVTA and adjusted EPS, remains consistent with prior years.

One additional clarification on our guidance is that our adjusted EVTA and adjusted EPS ranges exclude any benefit from IIPA, 10 free funds, we expect in the second half of the year, which we will view as upside. We will update guidance once those amounts are materially received.

And to give a bit of a call on our start to Q3, while we don't guide on orders, I am happy to share that we have had a great start to July where we have seen double-digit order growth through the first four weeks of the month. We have seen strong realization of several long cycle orders, which were delayed in the first half across all of our main regions, along with continuation of the short to medium cycle strength that Big mentioned earlier.

We're encouraged in what we're seeing, and we're confident in achieving our updated guidance for the remainder of the year.

Finally, on slide 11, as we conclude this portion of the call, I am encouraged by the momentum we continue to see across the business. Demand remains healthy across the portfolio, our teams continue to execute at a high level, and our M&A Python remains robust. We remain well positioned with a strong balance sheet, ample liquidity, and significant flexibility to continue investing in growth.

IRX remains the backbone of our organization and continues to enable execution and outperformance across the company. As we look ahead in the second half of the year, we believe we're in well positioned to continue to deliver durable growth, strong cash flow generation, and long-term value creation for our shareholders.

Finally, I'm more important. I want to thank our employees around the world for the continued commitment, dedication, and ownership mindset. Your efforts continue to drive our success and help of the liver strong results for all stakeholders.

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

Let me first give you by region. America has roughly 50% of our revenue, and it's been the strongest region so far. ITS orders of high single digits, healthy compressor activity, and we're seeing the short cycle indicators that are the best in the portfolio.

EMEA is about a third of the revenue orders were down low double digits organically, and I want to be precise about why it is two things. Both timing rather than demand is the facing of some long cycle projects orders in our blower and vacuum inside of the business in Europe, and it's also the Middle East. Underneath that core compressor orders in the region were up low single digits organically, which is better read on the underlying market.

And then Asia Pacific, which is about 15%, with China around 10% of total, China organic revenue was up low double digits in the quarter. The volume story there is very good, but as we indicated in the prepared remarks, it continues to be the most challenged market from a pricing perspective, but we're encouraged by how our original equipment is getting into the market again in China for China in some very kind of unique applications that we expect will generate some very good aftermarket in future years.

From a market perspective, PSD, we mentioned life sciences. Obviously, up with teens, during mainly in this case here by a pharma, by a pharma, we continue to see that low double digit growth there, and very encouraged about the timing of bringing the full interest of rent and portfolio into by a pharma. So not just what we get in PSC, but now the team is driving pull through of other technologies into by a pharma. And then in the ITS, it's blood base. I mean, America, as we saw momentum in power gen, electricity infrastructure, some air separation for semiconductor, Europe, it's resiliency, continues in general, industrial food, beverage, kind of the more normal industrial side. We still expect maybe defense picking up here soon, hopefully.

And Asia Pacific is growing in kind of electronics, shipbuilding among others. So you can see kind of multiple fairly broad base in many cases.

And how do you think that long cycle activity plays out as we look forward? Yeah, I think Mike, that's where we are getting more and more encouraged. For a while, we were talking about this elongation and kind of what we're seeing now is basically customer getting more enthusiastic and project getting kind of moved in a better direction. So we're seeing better momentum on the long cycle project. Yes.

Yeah, Jeff. Good point. I mean, this is actually one of the more encouraging conversations we're having in terms of that energy efficiency. I mean, as we, you know, being compressed air is typically 30% of the industrial electricity consumption in a manufacturing facility, and it could be higher based on application. So, so we're seeing more as power prices have moved up the payback from replacing an older, less efficient machine.

It's, it's getting shorter. So definitely that is definitely one of the key indicators here that we're seeing that is driving some, some better momentum among all the things. I think, you know, historically past few earnings calls, we were talking about kind of delays in project just due to engineering capacity or it could be PC and a lot of that is also kind of free, you know, up to as well.

Right.

And maybe then just a quick one for Vick. Also, just on the organic revenue guide, just primarily a reflection of going after additional price or is there actually, you know, some improved volume sort of underpinning that bump?

And what would the volume improvement be if there is some? Yeah. So, Jeff, I think it's, it's, it's, it's more the latter. So it's the volumes, the organic volumes. So, you know, I think as, as we indicated in the prepared comments here, encourage by what we saw in Q2, where you saw, you know, 4% overall organic growth.

You know, I think, you know, volume was obviously relatively healthy there, particularly on the short and medium cycle side of the business. So I think that's where you're really seeing, you know, the, the uptick. So the incremental 1% organic for the, the full year is really volume driven. And, you know, I think as Vicente said here, you know, encourage by what we're seeing both on the, you know, in the Americas front, you know, China continues, you know, to show good momentum there.

And so, you know, that's really where we're seeing it price. We have taken certain pricing actions in the first half of the year, which was consistent with our expectations. And those are starting to kind of more materialize into the back half of the year. But I would say that's, that's fairly consistent with what we had expected, you know, you know, in previous guidance.

Nigel, let me take the first one and let me comment about the second one. Yes.

I mean, organic is a low double digit meeting, basically, is what we're seeing here in the month of July. Yeah. And then, Nigel, just to follow up on that, as far as the long cycle projects, definitely building, you know, the backlog out for 2027, you know, as you would expect. Most of these are our long cycle projects are, you know, the typical six to 18 month type duration in terms of projects, typical to what you've seen. So they are, they're largely building out the backlog for 2027. That's not to say that some won't have some revenue recognition here in the back half of the year, but a yes, solid solid backlog build more as we move into time.

And then maybe just a bit more detailed on the ITS margin momentum through the backup for the year. And can you just maybe just clarify, was the, was the sort of the margin weakness in the quarter? Was that confined to China and the price pressure in China? Was it a bit poorer than that?

No, it's really, it's really confined to, to China, basically. And, and in addition to some of the investments that we're making, I mean, you saw we made an announcement about earlier in the quarter about a partnership that we made for some new technology to as well. So, so it continues to be some good investments that we were doing. I mean, despite what, what kind of market conditions might be. And in top of that, it's been the, the pricing on challenge in, in China.

Great. Thank you. Good.

And there were some kind of cross currents around the industry that, that don't seem to have affected you in the quarter. So, I wonder if you could just sort of characterize the market as it, is it, you know, steadily rolling? Is it accelerating? You know, how do you see it right now? Thank you.

Yeah. Hey Rob. So I, you know, we, we see, we see good momentum on the life science business as, as we kind of alluded here. You know, we see that is largely driven by the bio pharma. In our case, the exposure that we continue to have to GLP one is, is very, you know, strong. So that, as that market continues to grow and seeing some investments, we're, we're pleased to see that in addition where we have made some investments to play in the larger bio pharma side.

And I working on what you also kind of here in the news on the bio pharma expansion. Now a lot of that hasn't come to fruition yet, but we're excited about what the potential of that could be as we move into the second half or even 2027 based on the new facilities that are kind of getting invested now. So again, we, we, we, we see continuous stability in, in, in that market and good growth based on, you know, I get investments that we're making and the focus that we're putting in to really accelerate our penetration in the bio pharma side.

Oh, say Nathan, nothing, nothing dramatically significant. I mean, I, I mean, you're seeing the short cycle business and big mission that I mean, a mid single digit organic order growth on, on 10 hour short cycle business. And so we continue to see, you know, momentum. And when you will it, when we see a, see how that sequentially continue to improve, and obviously now here in July as well.

But in terms of that quote to order, I don't think anything that customers are trying, at least not on our products or the end markets where we play that we have seen that customer quote to order cycle get shortened dramatically.

Maybe just a question on China and the pricing power over there. You know, I think it's all around has, has always tended to try and play in, in areas and products where it has significant differentiation and can command price. Are there opportunities here for you to, to consider, you know, what you want to sell in China, how you want to sell it and, you know, look at the portfolio overall, through that kind of lens where, you know, maybe some of these products you're selling in China don't have pricing power and you don't need to be in that business or, you know, anything from that perspective.

Sure. And I, I would say, I mean, we're always going to play mission critical products where, you know, total cost is low based on the total process in the equation. I mean, right now what you see in China is just basically a timing issue in our view. You know, more broadly, you know, we're spending quite a bit of time localizing newly acquired technologies into China and typically under an existing brand that we have in China. So I want to say that we're cutting back on our portfolio, but rather investing in new technologies in the market where we have seen success from acquired businesses elsewhere and, and kind of have unique technology that, that we can, we can have the second big piece is that, you know, a lot of the growth that we see in China is related to original equipment, whole goods, which come in, comes at a lower margin typically than the aftermarket.

And in some cases, what we have done here in China, there being some very unique applications with specific customers that we never had before, but that we see that can have a great potential in the future for us. We're making some commercial investments to really penetrate those new applications. And again, in China for China. So I say, you know, we feel good about the product portfolio we have in China and we continue to invest in China for China.

It is definitely more transient. Yes. Great. Thanks for taking the questions. Yeah, no, thank you.

Yeah, Andy. I mean, I think we're very pleased with what we're seeing on the on the PSD side. I mean, as you remember, even going back to our last investor day, we said that this segment should be in kind of that mid 30, EBITAS, or not just a mid single digit grower organically. And, you know, we're getting back to that.

So again, great progress that we're seeing here on the on the on the growth, but also on the margin expansion.

Yeah. And then Andy on the, you know, specific to the precision technology side, we would agree. You're seeing you're seeing solid momentum. You know, that business has a comparable look and feel in some respects to ITS. So yes, you have seen a good continued momentum on what I'll call some of the shorter cycle kind of core pump businesses.

There is longer cycle project activity there as well. And, you know, I think we're working through that just like you'd see on the ITS side. So I'd say fairly comparable trends specifically on the precision technology side as to kind of what you've seen on the ITS side.

I mean, our funnel is very healthy over 200 companies that we have in the funnel. And so no difference. I mean, right now so far, including these transactions that we announced today on a year, I mean, we're kind of halfway point to the commitment of the annualized acquire. So I think we're making some good progress. And I think it's difficult to compare the cadence of deal activity each year against another. But I mean, we're excited where we are. We got great prospects, you learn transactions on their L. O. I. and healthy activity. And, you know, with a very good discipline, pre synergy multiple.

And then also, as you kind of think about the year, is your expectation that you can kind of still hold margins kind of like flattish, which with where I guess margins were a year ago?

Yeah, Joe. I'll take that into pieces here. So, you know, the first part here, China was without question the biggest piece, you know, obviously. So I would say it would have been much more comparable is probably the best way to say that's not obviously the only moving factor. But that is without question the single biggest driver for the for the factors that, you know, Vicente indicated with regards to, you know, much more of the pricing side, comparatively speaking to some of the inflationary headwinds. As far as on the full year and kind of what the guide kind of implies into the back half. I think as we, you know, exit the year, particularly in fourth quarter, I think you're in much more in line with prior and actually probably even slightly, you know, slightly above the exit rates we had for prior year.

But, you know, I would say on a full year basis, it's still, you know, probably trending a little bit below on a full year basis, comparatively speaking to where we were in full year 25. But again, I think we view that as Vicente said, a lot more timing oriented here. I think with the momentum, we continue to see particularly on the organic volume front as we exit the year, as well as kind of some of the China items that we view as a bit more transient for like a better way to say it. You know, we don't see any reason why, you know, the, the ITS business can't continue to have that earnings power approaching that 30% even the margin profile consistent with what we've talked about in our prior investor.

And then, and then the same day, just just touching on those longer cycle orders from July. I'm curious and maybe I didn't hear it, but like from an end market standpoint, there's a particular end market stand out to you on what's converting into into orders. And then as you kind of think about your pipeline for the rest of the year, how does that large project pipeline look.

Yeah, I think nothing that I will say one specific end market focus. I mean, it was it's kind of becoming a bit very nicely broad base food beverage, pharma, power, and air separation for semiconductors. So, so it's actually a very good blend on multiple end markets as we, which is which we like. And as we think about kind of the rest of the year in terms of the pipeline, very consistent with that, consistent with having a good blend of multiple end markets in in the in the long cycle.

Thank you. Yeah, Chris, I'll kind of bucketize it to keep it simple here, maybe into kind of three major kind of drivers here. First and foremost, to kind of in line with what you said, there is, I would say, you know, better price realization just in the context of some of the actions that we took through the first half of the year and executed, you know, in the second quarter.

So again, I would say that was, that's kind of a third of it, or a third of it. A third, you know, to kind of repeat on an enterprise-wide basis, obviously corporate, we expect to be a bit more normalized into the back half of the year. Clearly, we had the, you know, the incentive compensation throughout that we took in Q2 that we don't expect to repeat at the same level in the back half. And then the balance is what I would say is somewhat, you know, generally normal course here is the, you know, the expectation on the productivity.

And to some degree, some of the mix you would expect to see coming into the back half of the year. You know, as a reminder, we typically see a lot more of our productivity benefits from actions taken, whether it be on the classical direct material or I2V side, as well as, you know, to repeat some of the restructuring actions we took towards the end of last year into the beginning of this year materialized more into the back half of the year. And remember that direct material productivity generally follows our cost of goods sold, and particularly as you typically have your strongest finished towards the fourth quarter, that's where you tend to see a lot of that come through.

So I'd say those are probably the three biggest drivers.

And then maybe tying that to the July order comment, which was obviously a really strong inflection for you guys on the long cycle side. I just want to confirm it seems like this order inflection came after you guys put price in, which is more constructive than seeing the order inflection, of course, before the price action. So I'm just going to confirm that. Thank you.

Yeah, I think I think Chris, that's a fair point here. So, you know, the way I would probably think about it is remember a lot of these longer cycle projects that, you know, that are booking through here in July, they've been in the funnel for some time. These have been, you know, active dialogue negotiations, things of that nature. So yes, I mean, it's great to see them kind of now get to, you know, the finish line for like, by the way, I say this. But, you know, I wouldn't also lose track of the fact that in in the midst of July, we're also seeing, I'd say, continued solid short cycle momentum. So I think your comment is quite fair.

Yes, the long cycle is probably the biggest driver of that number you're seeing in July, but that's not coming without some good contribution also from the short cycle side as well. Thank you.

So maybe you can give us a little bit of color on that. Yeah, maybe I'll start here. So, you know, one, you know, a couple of comments here. One, I think if you go back over the course of several quarters, we've spoken to the health of the long cycle funnel. Right. And as the sente has mentioned, we had acknowledged that there had been some elongation and that had been some of the drivers of why you'd seen some of the timing on on some of the long cycle, you know, comps and things like that, including even in second quarter. So I think first and foremost, you know, encouraged by seeing some of those projects, you know, get to the finish line.

I do think that's obviously what you're seeing in July. Now, that being said, I think I would couple that to say that, you know, obviously we're continuing to be encouraged by the long cycle funnel, right? Obviously, I don't think we're necessarily implying that at these levels is the level to indicate on a consistent go forward basis. But I think it speaks to the fact that that long cycle funnel continues to remain healthy.

As we've indicated, there really weren't cancellations. It was more timing. So I think that's now proven itself out and that, you know, obviously the short cycle side continues to be, you know, pretty, pretty short to medium cycle side continues to be, you know, relatively strong and constructive. So I take that all in totality. But, you know, I think the July comment is just be, you know, inflicting and the fact that we're, we're, you know, happy with what we're seeing there getting the finish line on those projects.

So those are more difficult to kind of keep in inventory. So our distribution is mostly kind of buy and sell pretty quickly.

Got it. Okay. Thank you very much. Appreciate it. Have a good weekend. Thank you.

Maybe just digging into the pricing environment a little bit more. I understand what's going on in China. There's been plenty of discourse around that. But I guess, what are you guys seeing with respect to pricing in America's for compressors? Any shifts at all in the dynamics or market share dynamics as well?

No, I mean, not in the outside dramatic, I mean, that we're seeing, I mean, typically, we're back to this kind of one to two percent price that we see consistent and stable. And, you know, even having said that, you saw, you know, that we talked about order momentum to be high single digit in the America. So again, very encouraged that a lot of that kind of tends to be more volume related than pricing. So nothing that I will dramatically say that we're seeing changes in the pricing environment besides what the difficulty that happens in China. And again, China, I'll get to where I was at as transitory due to some over capacity that hasn't happened over the past prior years of investing.

But we're definitely seeing inflicting better momentum in China as well. But again, from the pricing dynamic outside of China, fairly stable.

Is it possible to get your view on how second half margins look within PSK? Sure. Yeah, I think the simplest way to say it here is we would expect to continue to see sequential momentum as the year played itself out. You know, really encouraged that we were 31 and a half percent even done margin here in Q2. I think our expectations would be that number is, you know, slightly better as we move into the back half of the year. So, you know, in the, you know, 32% type range is not slightly better and definitely approaching that kind of mid 30s. You know, even the margin target that we've kind of historically laid out is definitely in sight and definitely the goal.

Is valuation rather attractive for larger size deals? Can you just give us a little more color there? Yeah, you know, the 11 that we talked about L. O. I. was tend to be in same nature as kind of what you saw announced today, the bolt on in nature, low double digit pre synergy multiple prior quarter. We spoke about having a couple of about a billion dollar purchase price in the funnel. We actually decided to walk away from one of them due to valuation.

So again, we remain pretty disciplined on the transactions that we're going after. So again, the 11 very, very, very similar to what you saw getting announced today.

Yeah, absolutely. Andrew, I appreciate the question. You know, I mentioned at the beginning of the call that, yeah, on some of the Q&A, you know, power, power chain as being one of the markets and or infrastructure. What we play, I mean, compressors are definitely air compressors are definitely needed in in the power generation and electricity infrastructure. So as those investments kind of take on and pick up definitely our compressor systems will definitely have a play. Clearly, you know, a lot of conversations around the utilization of water and how to continue to create close loop systems in the center. And then we have pumps that can move water. We have lowers that can actually help with the aeration in some of the system.

So it's kind of a pretty wide range, but it's very, very broad base in many multiple different different markets, even including, you know, as new natural gas power is needed. You know, we're the market leader of authorizing that natural gas. So that is on our precision technology kind of PST segment, sort of thing. So as those projects that kind of start coming up live, I mean, obviously those take a long time to get implemented, but we're pleased to see that that we can play in that kind of broad base in market application that that is driven by a lot of the data center infrastructure investments.

Got it. Thank you.

Thank you, Sarah. I just want to say one more time. Thank you all for your time and continue interesting as a run. And another special call out and thank you to our employees around the world who's ownership mindset and commitment while executing through our helps compound durable long term value for all of our shareholders, which, by the way, our employees are also. Sure, all owners of the company. So again, thanks again and we'll talk soon. Appreciate it.