Ingersoll Rand Inc. (IR) Earnings Call Transcript & Summary

Good afternoon, and thanks for joining us. This is the final slot of the Wolfe Industrials and Transport Conference. My name is Nigel Coe, multi-industry analyst. And I'm very pleased to welcome Ingersoll Rand to the stage, and Vik Kini, CFO. I think you all know, Vik. And Vik, first of all, it's great to have you here. Thanks for the time. And I think we're just going to get into Q&A. And this is the last one. So obviously, we've kept the best for the last and hopefully [indiscernible].

So look, I'd love you to kind of pick us up from what we heard during the first quarter, very strong start of the year, very broad-based. And maybe just talk about what you're seeing, give us some context on 2Q, and then we go from there?

Yes, absolutely. So first of all, Nigel, thanks for having me. Great to be here. Absolutely. I think when you think about kind of first quarter, obviously, a really strong start to the year. Seeing pretty broad-based strength pretty much across the core markets, frankly, first starting with the IT&S business. Double-digit organic growth, seeing really good strong strength across not just product technologies, but also the geographies. Compressors growing from an orders perspective in the low 20s. The vacuum and blower side and the low double digits as well as the power tools and lifting business. And then also pretty good strong strength across the core geographies, led by the Asia Pacific business, not surprisingly, with some of the easier comps that you've seen in China. But the great news here is we saw it pretty broad-based, even the Southeast Asia, Singapore, Malaysia, Australia areas. EMEA, low 20s orders growth. And then mid-single-digit growth in the Americas. So we're really encouraged with what we're seeing on the IT&S side, really reflective of a lot of the efforts we've put around not just demand generation, but some of the revenue synergies and kind of the portfolio combination. And then the same thing can be said on the precision and science technology side, 12% organic growth, 7% organic revenue growth. Really encouraged by the portfolio that we're seeing there, a business that's already delivering over in excess of 30%, 31% EBITDA margin. So again, great momentum coming out of the quarter. And I would think, as we mentioned on the April earnings call, I think the order momentum has continued. Q2, obviously, aside from just the COVID comps that we have from Americas and Europe perspective, I think we're encouraged by the broad kind of strength we're seeing across the majority of our end markets. And clearly, that gave us the conviction to kind of raise the guidance on an apples-to-apples basis, not just from an EBITDA perspective, but about 200 basis points of incremental organic growth that we're expecting to see in the 2 core businesses high single-digit organic growth for the total year on both. So again, continuing to be, I'd say, optimistic on what we're seeing on the commercial front, and again, continuing to execute on a lot of the blocking and tackling like you've seen us do on synergies and things of that nature. So encouraged by the momentum we're seeing, and I'd say Q2 continuing to just execute and continuing to take advantage of that.

Yes. I think the cadence, you talked about is mid-teens organic 2Q sort of mid-single-digit normalization in the back half of the year. Is that still -- so is that still the plan?

Yes. I think that's still largely in line with expectations. Obviously, the first half of 2020 was the most impacted from a COVID perspective. Q1 in China, Q2 probably more so in the Americas and Europe. And then what we really saw was Q2 of last year, you started to see a lot of normalization in China, and it was really, in some respect, almost back to normal in the second half of the year. And then you started to see sequential improvement in the back half of 2020 in Americas and Europe. So I think the cadence that you're speaking to, again, continuing to see good momentum across the business. I expect to see that in the second half. I'd say a little bit of just the normalization of kind of some of the comps in the back half of the year is what's driving a little bit of that kind of normalization in the second half of this year is our expectation.

Yes. I think obviously, price cost and inflation was a huge topic across the board on 1Q. I felt that Vicente was very sort of steady as she goes in relation to inflation, it doesn't seem to be a huge issue to you at this point. Just maybe confirm that and talk about any supply chain pressures you're seeing out there and how you're coping with the inflation across your portfolio?

Sure. I think first and foremost, like Vicente said, I mean, we're not immune to what's going on in the market. So whether you talk about the direct material side or, frankly, the logistics side on the supply chain, we're seeing a lot of the same logistics constraints from an ocean freight perspective from China, I think of that nature. I think the way that we've really been kind of, I'd say, dealing with it is much like you've seen the way we've been executing through the majority of kind of the initiatives that we've had with barrier in Ingersoll Rand. So one, using IRX and kind of the impact daily management kind of on a weekly cadence to really, I'd say, aligned with the businesses on where you're seeing constraints and bottlenecks. And then how are we going to execute through that on a weekly basis, clearly, even more so on the supply chain side -- sorry, on the logistics side. I think in terms of the mitigants, we really have kind of probably 2 areas that we're really looking at. First is, obviously, as the combination of the 2 companies coming together, we, frankly, just have a much larger supply chain base and supplier base than we ever did before. So the opportunity where needed to be able to pull on multiple sources and dual sources to be able to, I'd say, supplement, if we do see some constraints in the supply chain, clearly, has been a good -- a positive. Second, we obviously kind of have more of an in-region for the region approach. So we don't have the sort of like one manufacturing plan, trying to imply the globe, which has really been able to give us a lot more, I'd say, freedom from an in-region perspective to build a supply and been able to mitigate any risk that would have come there. The other piece is, we talk about the synergy equation. So clearly, we've been looking at procurement and really I2V as cost mitigants. And then as Vicente mentioned, as we mentioned during the first quarter earnings call, this is a business that can push through price as needed. I think as you would expect, we're looking at areas whereas needed to push through targeted price increases to mitigate any supply chain pressures. And you can probably expect that's exactly kind of what we're looking to do right now. But I think it's really the balanced approach that we've been really executing on. And I'd say, by and large, still executing in line. And at this point in time, I would say nothing that's overly concerning in the context of being able to deliver on our short-term commitments for our guidance.

And then I mean, you're right, pricing is still to be very good for this portfolio. China has historically been a bit of a sour spot-on pricing. And for many companies, I'm not saying specifically GDI or Ingersoll Rand. Has that changed? I mean it seems that China pricing power seems to be better than maybe price cycles?

I would agree with that, Nigel. I think we have a strong product portfolio in China. That was one of the major catalysts, frankly, of the deal, where one of the beauties of the merger was where legacy Gardner Denver probably would tend to be a little bit under-penetrated legacy IR was much stronger. And so whether it was Europe, where it was probably a little bit stronger on the GD side than IR, Asia was the inverse where IR, clearly a lot stronger than the legacy GD kind of brand. So I think with, frankly, the combined product technologies portfolio, the stronger presence in China, we have been able to, I'd say, recognize price even in this environment. And so I think we're continuing to see that as an opportunity. And I would tell you the pricing opportunity, to your point, isn't just 1 region or the other. It's been relatively broad-based across the portfolio from an IT&S perspective.

And the performance in particular, compressors in the last couple of quarters compared to your big competitor, I think, suggests that you are gaining some share. I know it's very hard to judge like-for-like share gains, but it does feel like you're competing very well against the competition. And I know that the -- a big part of the merger logic was the complementary nature of the portfolio -- competitor portfolio, synergies across the blower and compressors. Maybe just talk about what you're seeing on the revenue synergy side? Are we there yet?

We are. Obviously, when we did the merger, we announced $250 million of cost synergies. And I think as you've noticed and you've seen, we've been able to execute very well, frankly, accelerated kind of the cadence there, delivered $115 million of in-year savings in 2020 and obviously gave us the conviction to be able to raise that $250 million to $300 million. And that was clearly on the cost side. On the revenue side, obviously, a number that we didn't necessarily quantify externally. But clearly, there have been, frankly, some great wins. When you think about the combined portfolio, a stronger presence on the oil-free side to kind of have a more holistic offering to the point that was made earlier, Nigel, the point that I think the complementary nature of the geographies, where one business was historically a little bit weaker than the other, you kind of now put, I'd say, very good platform in place, both America, Europe and Asia. And now you're able to even to kind of leverage some of the best practices from both. So for example, some oil-free [indiscernible] from a legacy Gardner Denver perspective, being able to rebrand in the Ingersoll Rand name and push through a more direct channel from an Ingersoll Rand perspective. And then vice versa, where Ingersoll Rand clearly historically had a really strong presence within the aftermarket side. Legacy Ingersoll Rand compressor business, nearly 50% aftermarket as a percent of sales. Legacy Gardner Denver, more 33%, 35%, the combined portfolio closer to 40%. Now we're leveraging some of those best practices in terms of some of the direct to market service and packaged care and type elements that legacy IR has done a really good job of how do we extend that now more as practices on the legacy Gardner Denver side, just starting to get some more parity there. Ultimately speaking, the higher we can push that aftermarket profile, one, stickier revenue base; but two, generally speaking, a relatively better margin profile. And that continues to kind of, I'd say, transform the overall margin profile of the segment. So I would say absolutely. Clearly, we've already started some of those revenue synergies. You start to see them in the business. Clearly, some pricing opportunity, quality of earnings being a major focus. And I think you've already started to see that kind of rippling through the P&L, second half of the year and into 2021 here as we speak.

Yes. Was there a reason -- sort of a reason why Ingersoll Rand had such a dramatically higher offtake mix than legacy GD?

Yes. I'd say part of it was clearly the go to market. Legacy Gardner Denver kind of had a more mixed model distribution and direct focus. But for example, in the Americas distribution focus, so for example, service was something that we didn't perform, it was kind of performed by our distributors. On the legacy IR side with a little bit more of a direct presence, you're kind of capturing that aftermarket value chain all the way through. Now the balance here has been how do we kind of leverage that direct portfolio, direct profile over the Gardner Denver size, but then also do it in a profitable manner. And so even though legacy Gardner Denver probably had less aftermarket from an overall perspective, margin profile is a little bit higher. So now we're kind of finding our way to balance the two, being able to increase the aftermarket but do in a profitable manner. And I think that's what you're starting to see kind of across the IT&S platform. But clearly a source of opportunity, one that, I think, continues to provide opportunity as we move forward. And now you kind of mix that with some of the platforms you've seen like demand generation, which has really been that kind of digital marketing and how do you kind of increase leads in terms of providing kind of more [ add backs ] for lack of a better way to say this to your commercial team, now kind of pushing that over the entire platform, that's where we're starting to see a lot more of the momentum. And that ultimately is how we want to kind of, let's say, drive this to be a GDP-plus-type business. That plus is really going to come from areas like the revenue synergies, new products, but also demand gen in the way that we're actually selling to the market.

Okay. That's great. So switching back to the cost synergies. And obviously, you know you made great progress on those. $115 million locked in by year-end. And I think you're still targeting another $100 million incremental this year. Are we still on track with that $100 million? And I think that this year is still weighing pretty heavily on procurement and sourcing if I'm not mistaken. Does the current situation with supply chains, does that sort of imperil the cadence of those procurements, the same to enduring?

Yes. So Nigel, just to confirm, you're absolutely right, about $115 million delivered in the P&L in 2020, expecting another incremental $100 million in 2020 -- sorry, in 2021. And that will leave about $85 million to continue to deliver in 2022 and 2023. I think in the context of where we sit right now, do we still see line of sight for that $100 million? The answer is yes. To your point, you had mentioned that, I'd say the lion's share that is coming from, I'd say, direct material-oriented initiatives. So both kind of classical procurement as well as the I2V side. Not easily changed in that manner. I would tell you, the other piece that we are focused on here is really getting that kind of footprint kind of funnel kind of lined up here. So again, and that's really mean to start delivering more so into 2022 onwards. In terms of the inflationary environment, both of those pieces were really kind of in our guidance, both whether the original guidance or kind of our revised. And so is it obviously there and claiming the same direct material? Yes, it is. But I would tell you in the same breath, obviously, some of the areas like I2V as a mitigant, some of the incremental pricing opportunities. Those are kind of levers that we're playing with to really offset some of that inflationary pressure. Can we still deliver the $100 million? Is that our expectation? 100%, absolutely.

Okay. Great. So portfolio, I mean, we've all been asking questions about where do we stand on the portfolio, and all of a sudden, you do 2 large transactions. And I guess those questions go away. But there are still 1 or 2 smaller businesses that maybe don't fit the flow creation sort of strategic focus. Are we sort of like pretty much happy where we are now and be more opportunistic going forward? Or do you still think there's scope for some actions this year?

Sure. I mean, I think, first and foremost, yes, I mean, clearly, when we did the RMT transaction, we did note that clearly, there were probably 3 assets that weren't necessarily mission-critical flow creation in the broader sense. And clearly, you've seen that the team utilizing IRX has really been able to not just drive the integration in year 1 as a new company and to build a new culture of the team, deliver synergies, but then also really figure a way out to kind of really pivot to growth as well as the portfolio optimization. And so you've seen kind of 2 divestitures, the HPS segment, which was sold on April 1 and the specialty vehicle segment, which the announcement was April expect to be complete by Q3. We have talked about the power tool business. I think our view right now is we're going to continue to operate as long-term owners of this business. Like we said before, if there are areas for opportunity where we can create value by doing something different from a strategic perspective, we won't be averse to that. You've seen 2 assets where we've already kind of executed. But we don't feel like we're in any big rush. And obviously, with those 2 behind us, power tools, roughly about 10% of the IT&S business, we're going to continue to be patient, continue to execute. And we're really encouraged by what we're seeing from the PTL business. I think 2020 was the year where you kind of really fixed the, I'd say, cost structure and margin profile of the business. And now in first quarter, we're finally starting to see a little bit of that inflection point in the commercial trajectory, low double-digit growth in the first quarter, continue to see kind of an optimistic run rate from here forward. So we'll continue to be patient, but if there's value creation, I think you won't see us be averse to execute or need it. Other than that, no, I think you think about the balance of the portfolio of compressor, blower, vacuum type assets and IT&S and specialty comp assets in precision science, I mean, I think that's the core of what we think about as mission-critical flow creation with that aftermarket profile and the margin profile that we really like. So I think you really see us kind of honing in on where the core will be.

Yes. Just sticking with the disposals for a moment. So when you make chunky disposals, stranded costs are always an issue. How are you coping with any stranded costs emerging from the Club Car disposal?

Yes. So whether it be HPS or the specialty vehicle business, first and foremost, all of our segments are, what I'll call allocation burden. But it just happens that the 2 businesses that you've seen us divest or announced a divestiture were largely the two most stand-alone businesses, largely discrete and separate, whether it be from a systems perspective or from a team perspective. So there wasn't what I would call a lot of co-mingling with the balance of the portfolio. So again... [Technical Difficulty] Sorry, can you hear me now, Nigel?

Yes.

Sorry, I think I went on mute there. But you've seen us being able to execute pretty quickly. And what I was saying is HPS and Club Car largely stand-alone assets. So again, any stranded cost implications are relatively minor. And again, we've always talked about the fact that there still is, I would call it, back office, corporate optimization. So any kind of stranded cost implications, albeit relatively minor, we expect to be able to mitigate here in the medium -- short to medium term. So again, nothing I would point to a major concern, largely just given the largely stand-alone nature of both HPS and SVT.

Yes. I want to get on to balance sheet and cap allocation. But before we do that, you're now down to 2 segments. Is that the right reporting structure? Is there a potential for maybe a resegmentation down the road?

Yes. I think we're pretty comfortable with the segmentation that we have now. I mean, I think we'll talk here about capital allocation. Clearly, one of our big focus points here is, how do we make that Precision Science Technology segment bigger kind of bringing it more into parity with IT&S. So again, we've said it kind of very loudly that the funnel, it's about 5x larger than it was about a year ago. But it's been, I'd say, purposely a little bit more overweight towards precision and science for that exact reason. So I think we're quite comfortable where we stand right now. We're going to continue to focus on M&A from an organic perspective, and we'll see down the line, but any major rush or anything like that from a resegmentation but not at this point in time.

Okay. Okay. So that's a great segue into the next topic. What's changed in the BD process to expand the funnel so aggressively? I mean have you invested in sort of building the team there? I mean was it just a case of now you're looking for deals, deals that come into you? I mean what's caused such a dramatic increase in the pipeline?

Yes. I'd say it's a couple of factors. First and foremost, much like you've heard us talk about how we run the business, the IRX process, we really kind of put that to work, frankly on M&A as well. Whether you talk about growing the top line of the business, the integration or, frankly, even building out the funnel from an M&A perspective, IRX is really kind of sitting at the center there. So we have a weekly cadence where we're doing IDMs or impact daily management. We have one for M&A. We're looking at that funnel and how we're increasing the funnel size of actionable targets. And we review it on a weekly basis. So we have a really good cadence that we've now had in place for over a year. And obviously, you've seen the results there. In terms of the size of the team, I would tell you that the investments that we frankly made from a BD perspective really haven't been at the top of the house at the corporate level, they've been more so within the business. So we have a fairly slim and trim corporate BD team. The reality is any BD resources that we've really invested have really sat more within the businesses so within IT&S within the regions and within precision and science because ultimately speaking, that's where we see ourselves being able to cultivate and internally build that funnel. And if you look at kind of where we've been, whether it be in Gardner Denver or even now through the last 12, 14 months, I think we've done roughly speaking, 15 bolt-on size acquisitions pretty much all if not -- I think pretty much all of them have frankly come through internally sourced, meaning they're not really banker-driven deals. They're really internally cultivated. Tuthill, the latest one, is a perfect example, a deal that Vicente and our business leader in the Americas has been cultivating for about 3, 4 years. And then time was right with a carve-out, and we were able to execute in a pretty quick time frame. So again, I'd say the BD structure from a top of the house perspective, largely what you've seen before. The investment has really been more so within the business because that's where the point of action is. And we kind of use the IRX toolkit to really kind of manage the process. And so far, so good. We're really pleased with kind of where the funnel has really played itself out here over the last 12 months.

Maybe you can talk about how you build out the PST segment. I think of this as 2 distinct groups. Pumps, you got some 30 pump portfolio products and you've got sort of medical devices, medical components kind of cluster. Where do you think you can do the best job in the near term? Do you think expanding the pump portfolio, expanding the medical exposure? Or maybe in different directions. I mean how do you think about that?

Yes. So the way I really clarify -- classified is the reality is that the theme across the entire business, whether it be the medical piece that came from Gardner Denver, the ARO asset from legacy Ingersoll Rand or the PFS asset that was acquired right before the merger, all of them really are specialty pumps and compressors. They just happen to be playing in different end markets or have different applications. So the reality is they share a very common technology theme, comparable go-to-market type profiles. It just happens that, for example, medical is serving more medical lab, life sciences end markets; ARO, more industrial; and PFS kind of plays across the spectrum, whether it be industrial, water, hydrogen, animal health. So again, I think that's where we see inherently kind of under the cover, it's those 3 businesses or maybe 8 core brands. But the reality here is they're all good secular growth businesses. Generally speaking here, a little bit of variety, but you're seeing the overall profile above 30% EBITDA margins and strong organic growth characteristics. The reality is we see opportunities to kind of across the spectrum. And that's frankly why the PST M&A funnel is as robust as it is. So I think we're quite excited. It's a $800 million, $900 million segment today, playing above 30% EBITDA margins. The goal here is how can we, over time, double the size of that because ultimately speaking, if you buy assets that have that characteristic, we don't see fundamentally why you can't get it to the fleet average, if not better, from where you see today. And the reality is we have 7, 8 different businesses that are all example of all playing under the same roof. So again, there's no reason why we can't see we can't do that with strategic bolt-on M&A. And you've seen a few already like the Albin Pump business, a bolt-on in nature, but again, it's that exact same theme, and we're now about 7, 8 months into the integration and it's going fantastic.

I mean, there are plenty of pump companies out there, but some are sort of in the low double-digit type margin ranges. Are you prepared to take on a larger deal that there'll be a fixer upper for IRX and improve returns? Or are you really still focused very much on specialty niche applications?

Yes. I mean, I think, first of foremost, it has to be a strategic fit, right? So it's going to be mission-critical flow creation, strong growth margin profile, good aftermarket recurring revenue type opportunities, if not already there, but then the opportunity to be able to improve that over time. Are we averse to having something that's a little bit lower margin, but we see a runway to being able to get it closer to fleet average over time by application of the IRX tool synergies and be able to leverage some of the commercial synergies inherently that should come by plugging it into the infrastructure? I don't think you'll see us averse to that as long as we continue to see that kind of profile and it kind of fits the return characteristics that we've really kind of deployed in pretty much all the deals that you've seen us do thus far. So again, not averse of that, but we've got to be able to see runway to being able to get it closer to kind of that overall margin profile in those characteristics like you see currently within the segment.

Yes. So it seems to me that your biggest problem right now, which really isn't a problem, is that you've got a lot of [indiscernible] capital to deploy. I mean that cash posted by mostly net cash flows by year-end. We take asset capital of about $3 million, $3.5 million to get you back to your leverage target. Do you think you can efficiently deploy that capital over the next 12 to 18 months?

Yes. I mean, we've got a robust funnel from an M&A perspective. I would probably characterize it as you still got a good core amount of, what I'll call the bolt-ons comparable to what you've seen us do, probably then, I'd say, a good amount of what I'll call the medium-sized, multiple hundred millions of dollars of purchase price. And then a handful of those $1 billion-plus type. I won't necessarily say transformational overall to make transformational, for example, the PST segment. That being said, the opportunity to deploy $1 billion, $2 billion-plus worth of capital over that 12, 18 months, absolutely. I think we absolutely see the funnel and the runway. I think, frankly, we'd be a little disappointed if you didn't see us execute to that level. And clearly, we stated that in addition to kind of core organic investment and continuing to fund the synergies and the integration, that's clearly our biggest focal point right now. So as we saw 2 divestitures on the horizon, clearly, you saw us kind of ramp the funnel on the M&A side accordingly, just, frankly, for the same reason you just mentioned there, Nigel. So yes, we absolutely believe that we can do that. And then from an integration perspective, you've seen IRX in action, whether it's the IR and GD merger, the ability to do 2 divestitures simultaneously and buying Tuthill and integrating at the same time, we feel like we have the team and frankly, the framework to be able to kind of integrate one or multiple kind of acquisition simultaneously, depending on size and fit. So yes, we feel pretty comfortable that we're in a good position here. And to your point, maybe a good problem to have, but one that we look to hopefully remedy here in the not-too-distant future.

And do buybacks and dividend, do they come into the mix? Or are we full bore M&A growth at this point?

Well, I think like Vicente mentioned, kind of in our earnings, I think we're constantly revisiting kind of the capital allocation strategy with the Board. Nothing's changed in that respect. So in due course here, could there be some opportunities there? Sure. But well, clearly, the focal point continues to still be the inorganic side. I think that's where we continue to see a lot of value creation opportunities much less whether it be the IR-GD merger, the Tuthill acquisition or many of the bolt-ons you've seen before. We just continue to see a very fragmented market and opportunity to really kind of consolidate, if you will. So again, I think that will still continue to be the major focal point as we think about things going forward.

Okay. Great. And then it seems to me, and if I'm saying thing [indiscernible], please correct me, but it seems that IT&S is on a path towards the upper 20s margins, EBITDA margins. PTS is already in the 30s, maybe kind of mid-ish 30 longer term organically. Why is [indiscernible] time still the right range? I know that public companies tend to run the lower leverage than private companies. But could that range be higher given your margin structure?

Yes. Nigel, aside from a leverage perspective?

Yes. Another [indiscernible].

So to answer your question, yes. I mean, obviously, we stated that we want to be in the mid-20s on the IT&S side. You can obviously, that's probably more of a short-term target than anything medium or longer term, and then being able to push that number a little bit higher with regards to some of the organic growth initiatives as well as the synergies that are still left to come, clearly continuing to kind of get that in the upper 20s and hopefully close to 30% over time, without question, I think, is a stated goal. And then on the PST side, you're absolutely right. We're already playing in that 31% range. It's not that long ago, for example, that you had the medical segment for Gardner Denver, that was in the mid-25%, 26.7% range, playing over 30% EBITDA [indiscernible] today. So clearly, the opportunity to continue to move the profile close to mid-30s, as you said, clearly an opportunity. With regards to the leverage, I think it's a fair comment. We're obviously playing right around sub-2 right now, 1.5 to 2x kind of that stated comfort zone. But the concept of taking leverage up to something maybe around 3x for the right potential acquisition, but then to be able to see kind of that leverage being able to come back down to that 2 range or somewhere in that kind of comfort zone, I don't think we have any discomfort for the right opportunity. But again, it goes back to -- has to be the right strategic fit, it has to be good value and fit the return criteria. I don't think you're going to see us necessarily do an acquisition for the sake of an acquisition. It's really got to be the right strategic fit. But the content of being a little bit higher levered, you've seen the cash flow generation of the company. We feel pretty comfortable that we can bring that back down into the levels where we're playing right now.

We're slightly a little bit, Vik, but I did ask 2 quick ones here. Just [indiscernible] Tuthill and it seems like that's a perfect acquisition right in the wheelhouse. And 20% plus EBITDA margins at a very reasonable multiple, lots of synergies. Is there kind of a long path of -- is there a pipeline of these kinds of acquisitions, these tuck-ins in your pipeline?

Yes. I mean I think there are a lot of opportunities in the context of smaller private companies or carve-outs that can look like Tuthill. Now does every deal going to have the financial characteristics of Tuthill? I wish. I hope so. But obviously, they're going to look a little bit different time to time. But I think the concept of being able to find assets that fit the core, lower vacuum and the example of Tuthill be able to integrate and be able to do it in a really quick time frame. And then be able to drive both operational and commercial synergies. Absolutely, there are many targets like that. The exact financials and return criteria are going to look a little bit different. But again, we've found success with deals like Tuthill. And like I said, internally sourced and cultivated. So again, we have, I'd say, a lot of comparable size and type opportunities within the funnel. So again, encouraged and Tuthill it's been now a little over 3 months, almost 4 months, and I can tell you the integration has gone as well as could be expected. And even though the profile of the company is exactly, as you said, already pretty compelling before we bought it, clearly, even continued room for opportunity as we kind of plug it into the Ingersoll Rand structure.

Okay. And then just finally, hydrogen. And I can guarantee in the last 3 days, I have not mentioned the word hydrogen once until now. So you've got a hydrogen fueling business, very small, $23 million range, if that's right. But still a mix, probably the most hydrogen-focused industrial that we cover. How do you think this business scales over the next, say, 3 to 5 years?

Yes. I mean we've stated pretty explicitly that this is an exciting end market for us. The Haskel business within the PST segment, they're kind of one of those core brands. To your point, it's relatively small in nature right now, but the projections that go out for 8, 10 years, this is a multibillion-dollar type opportunity from an end market perspective. And so for us, clearly, this is a very attractive kind of growth area and growth arena. As you said, hydrogen, maybe not in the conference, but overall, obviously, there's a lot of excitement about the infrastructure that we've built there. And we have a very differentiated technology in terms of the compression -- high compression that goes into the refueling station. So I think right now, you're starting to see, I'd say, us scaling up in that respect. This is a business and again, it fits with that criteria we talked about in PST, good, strong, niche end markets that can drive outsized growth. I think this is the perfect example. And I think you're right. We're kind of in our infancy right now, but we see a lot of good opportunity. You've already started to see some good opportunities in Europe as well as Asia. I think we continue to see a lot of good opportunity moving ahead not just into 2021, but as we look at 2022 onwards. So again, I think this is going to be a core focal point for us. The hydrogen exposure there is really exciting. And I think that the PST business to your point, relatively small now, but we have pretty good growth aspirations for this business as we think about not just the next 6 to 12 months, but we're looking ahead 3, 5 years.

All right. Vik, that's great. We're out of time. But I really appreciate you, you sharing your thoughts with us and give us the time here, and good luck, and look forward to [indiscernible].

Yes. Thanks, Nigel. Really appreciate it. Take care.