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

All right. I think we are ready to go with our next virtual presentation. Really excited to have Ingersoll Rand with us today. We have folks in all different locations and Vicente Reynal, Chairman and CEO, is on location right now. So if there's any interruption, we have both Mike Weatherred, who runs IRX for the company as well as Vik Kini, the CFO, with us today as well. So thank you all for being here with us.

Yes. Thank you, Joe. Thank you for having me.

And as a reminder to the investors that are dialed in, if you have any questions, feel free to shoot me an e-mail at [email protected].

So with that, Vicente, I want to kick it off with China. Clearly, a fluid situation. It's about 15% of your sales. But really strong growth this quarter. You called out the lockdowns, but it seems like most of your facilities haven't really been impacted. Can you just maybe provide an update on what's going on, on the ground there for you guys?

Sure, Joe. I'll say that, first of all, I mean, the really great news is that we have seen no real slowdown in the demand. So even during the lockdowns, we talked about the marketing qualified leads that we spoke about in the earnings call, and that kind of continued to be actually quite good and stable, and even on the order rates, too, as well. In terms of the facilities, most of our facilities are outside Shanghai with the exception of a distribution center for the ITS segment and a small PST location, but we have received authorization to open those and be back up again and working. We did that like a couple of weeks ago. As we were going into the earnings, we mentioned that. And the key here now is to kind of get the supply chain to continue to run. And you can imagine that with the spirit of IRX and the spirit of execution, we actually implemented an IDM. And basically, now we have every day, we see how the ramp of production and the ramp of supply from the supply chain is kind of coming in for the total Ingersoll Rand kind of company. So I think it's really exciting to see how the team has just kind of got into the details and it's actually going pretty well.

That's good. That's really great to hear, Vicente. And supply chain is another, obviously, hot topic with everybody today. I'm not an engineer. And so you tell me like if you guys are operating the supply chain environment well, how reliant are you on chips in your products and maybe provide an update on the supply chain for you?

Yes, you're correct. We're definitely not reliant on chips. Maybe a few here and there, but we have been able to navigate that fairly quick, fairly well. I mean when you look at a compressor, every compressor has some sort of level of chip and sophistication because we have the controller. Controller has a display and then there's a chip in it. But we have been able to manage that effectively, again utilizing the execution process that we have and the communication and the combination of the 2 supply chains, the Gardner Denver and the Ingersoll Rand, and leveraging that to the fullest. But I think it continues to go fairly well. I will say that earlier in the year, we kind of we were saying and talking about kind of a bit of a whack-amole effect. I think it seems to be fairly more stable. We're going to see now what the outcome of China lockdowns have -- are going to create. But based on what we see on a daily basis from this kind of ramp up the supply chain, it seems to be pretty well controlled. So unless there's any other kind of real lockdowns or change in the way we see things are progressing, it should be in pretty good shape here in the quarter.

Got it. And then that's what you would -- like if there's a risk then -- and we'll get into the different pieces of the guidance going forward. But if there is a risk to the guide today, your view is that, that would be China getting worse from here?

Yes. I mean it's definitely the unknown. That's right. Exactly, yes. I think what we said going into the guidance is that we were being prudent. You saw that we beat EBITDA and consensus by roughly $20 million. We only raised by $10 million. And we did it just as purely prudency based on the lockdowns and some of the uncertainty. But as that kind of gets better, I think it provides perhaps an upside momentum to us here in the quarter and potentially in the year.

And Vicente, a lot of like concern going into your print was really around your exposure to Europe. And when you look at the quarter that you had, in your commentary from the quarter, it would -- it seems like the exact opposite is actually happening to your business, like the business is actually doing quite well. So I kind of wanted to give you a forum to just elaborate on what you're seeing in your business in Europe?

Yes, Joe, and I think it's -- with everything else in the sense, whether it's supply chain or even the European situation now, is that we're controlling where we can control. And we know that we can control like marketing qualified leads by doing campaigns and demand generation and things like that. And that gives us the ability to really offset any potential market slowdown or at least do better than market. But yes, what we continue to see in Europe is still fairly resilient. Again, we see it on this kind of marketing qualified leads. Order patterns in Q1 kind of stayed pretty stable sequentially kind of month-on-month and even into April and now early May. So no signs of that, slowdown at this point in time based on our leading indicators. And I think the opportunity here is how we're capitalizing on the upgrade of compressors and blowers and vacuums in the market as we think about this energy situation that is accelerating the payback of one of these devices could actually do for the customer in terms of that return on that invested capital.

Got it. That makes sense. Vik, I want to bring you in here on price cost. I think heading into the year, you thought about half of your organic growth was going to come from pricing. I think now it's probably a little bit higher. Maybe talk a little bit about how you've stayed ahead of inflation here. And then do you get to keep some of this price if commodities deflate?

Yes, Joe, it's a great question. And I think the easiest way to start is, I'll go back to what Vicente said, we use IRX and IDMs in, frankly, every facet of the business. Mike's on, obviously he could speak to it as well. Pricing and the inflation dynamic is no different. So you're absolutely right. I think, frankly, even last year and into this year, as we've seen the inflationary headwinds persist in certain cases, we've been able to take very nimble, proactive pricing actions. In most cases, we're able to take pricing actions across the business, generally speaking, less than 30 days where necessary. And as such, you've been able to see us actually stay ahead, stay price cost positive on a dollar basis pretty much through the duration of all this -- the supply chain disruption and what's happened. I think in the context of the guide, you're absolutely right. When we came into the year, we were thinking about 50-50, 50% price, 50% volume in terms of our 8% organic growth guide at the beginning of the year. We've subsequently taken the organic growth guide up 100 bps to 9% across the entirety of the company. And we would say now that, yes, we do expect that to be a little bit more tipped in the scale of price, maybe closer to 60% price versus 40% in volume. So again, I think we've been really pleased with the momentum we've seen. And one thing here is we can track price not only on oncoming orders, we know what's in the backlog. So it obviously gives us very good visibility to the pricing actions we've taken and what we expect to be able to deliver in the second half of the year.

That makes a lot of sense. Vik, by the way, you look angelic with the sun coming through there.

Done on purpose, done on purpose.

Vik, I'm going to stay with you for a second. Mike, we'll get to IRX in a minute. But the incremental margins, right, really good start to the year just given the environment we're in, right? 29% incrementals, not a lot of companies in our space were able to put that up. I know it's supposed to dip a little bit in 2Q and then pick back up to be 40% plus in the second half. I mean is this mostly the price cost discussion that we just had or maybe just kind of step through the cadence as the year progresses.

Yes, absolutely. And I'll let Vicente weigh in as well. I think, generally speaking, just to calibrate on Q1, 29% incrementals in Q1. It should be mentioned that's on top of 50% plus from prior year. So on a 2-year stack, it's almost close to 40%. So we're pretty pleased with the execution that we've been able to see here. And then I think a lot of that you can also point back to. Remember, first half of last year, you saw really some outsized incrementals in the first half of 2021. Remember, some of the merger-related pricing actions we took in the back half of 2020. So now as we think about moving into the second half of the year, I think there are a couple of things. Yes, I think the comps obviously get much, frankly, easier comparatively speaking in the back half of the year. And then the other things here, price cost. Price cost, absolutely. We see -- to the point we just made here, the pricing actions we've taken, we see the momentum going into the back half of the year. And we should note here that this doesn't -- our expectation is not that we see deflation or anything of that. It's really more so that we just kind of see the inflationary pressures move sideways from 2Q levels into the back half of the year. And then the other points to make here are a couple of things. One, we obviously have the merger-related synergies, the $50 million that we've spoken to. They are effectively a lot more volume-oriented because a lot of them are coming through areas like Innovate 2 Value. So they do become more second half weighted and particularly in the ITS segment, which is where we expect to see very healthy growth from an incrementals perspective. And then the other one thing to mention here is in the PST segment, we are really pleased with the momentum we are seeing on the merger-related synergies from the bolt-on acquisitions, Seepex being the largest one. Seepex, as a reminder, acquired around 15% EBITDA margins in Q3 of 2021, already eclipsed 28% here in the first quarter. And as you can expect, we've taken a lot of the, let's call it, restructuring and cost actions are in motion as we speak. And we would expect that margin profile to even look healthier as we exit the year. So again, I think a lot of tailwinds that we have distinct line of sight to, and I think it goes back to what Vicente said, let's control what we can control. Everything that I've mentioned there are really actions that are within our control that we have pretty good line of sight to.

Got it. Vicente, I'm assuming that there's not much to add there. That was pretty comprehensive. So...

Yes, I know, exactly, very comprehensive.

Okay. When you think about the order rates have been incredible. Your backlog is building. I'm just curious like as you kind of think about the high single-digit, low double-digit guide -- growth guide for the year, how do you think about the risk associated with that guide? Any qualitative commentary there?

Yes. I mean, I think, Joe, I think we're gaining a lot of visibility here due to the China lockdowns easing. Obviously, as we said, a pretty fluid situation, but I mean we're pretty pleased with the stability. We took all -- in our guidance, we took out all Russia exposure although less than 1%, but that's already included in our guidance, included also some of the slowdown and maybe ramp-up again of China. And Europe, we continue to monitor that pretty closely, as we said here in the opening or all the leading indicators at this point in time, they're not showing any signs of slowdown. And we even had a conversation yesterday with the European team about how do we kind of double down on some campaigns to really continue the momentum of the marketing qualified leads on specific product lines. So I think it's just basically going back to let's just make sure that we continue to control what we can control. We cannot control the market but there's a lot of things that we can do to control to really overdrive and be better than market. And that's kind of what we're doing. Whether price, some of the things and actions, like also Vik mentioned here on accelerating the improvement on the M&A that we have done, continue with the synergy savings. I mean we always spoke about our funnel to be $350 million revenue synergy savings, we committed to $300 million, but that tells you that we still have a funnel that has the potential of being able -- what we can put from the shelf actions that we can take if we deem necessary. But I think it's just all about that, control what we can control, and that's what we're very good at.

Vicente, you brought up the funnel. We haven't seen an increase in the funnel in a while. So how are you feeling about potential upside then to the synergies at this point?

Yes, I mean -- yes, I know that's right. I should have mentioned that, yes. It's ongoing, Joe. I think we -- if you remember back in the day when we said that in order to hit the $250 million, we have a 2x funnel. So that's the way we were playing that game. And so when we committed to then upping that to the $300 million and continue -- I mean, continue to see that visibility of the funnel, yes, I mean, there's plenty of opportunities. I mean during the past 2 years, we shelved any major kind of site consolidation clearly because of the pandemic, but also due to the supply chain effect. And still, we were able to deliver a lot of the synergy savings. So I think there continues to be a lot of great opportunities, whether kind of back office consolidation and back office and sales offices that based on the current times have been able to work remotely and hybrid, not necessarily. So I mean it's a very large footprint that we had, and we continue to see great visibility on what we can add on and then execute as we see the need.

Great. Mike, let's bring you in here. For those that aren't as familiar with IRX or I2V, just describe the operating system and explain how it's been helping you guys navigate what's been obviously a pretty choppy environment.

Yes. Thanks, Joe. Yes, so -- and we've talked about this a couple of times. So for those that it's repetitive, I apologize. But we have an annual calendar process that we run, and it really starts right now. In fact, some of it kicks off next week with -- we do a make life better or strategic planning process. And then in Q3 and Q4, we're going to go through a real rigorous budget building to support that make life better strat or plan, same thing around TRX or talent review. So we've got talent, budget, priorities around the MLB, which gives us in the early fall or the beginning of the fourth quarter, we know what the priorities for the coming year are. So we've got priorities around strategy, and we've got priorities around execution via call it, budget or forecast. Out of that, we run a weekly process. You've heard both Vik and Vicente use it this morning called impact daily management. And impact daily management is a ridiculously simple 40-minute session where you've got 5 areas of focus. You're thinking about a bridge. And the big key in there, and I think it's also interesting listening to Vik and Vicente talk is that all that focus is spent on leading things that we can measure, leading indicators, we call it. So like in the area of demand generation, you keep hearing Vicente talk about marketing qualified leads, but there's actually leading indicators behind marketing qualified leads. And that would be things like campaigns and things like quality of the contact database, et cetera. So we've got -- to specifically answer your question, Joe, we've got about 300 of those, call it, 40-minute sessions running weekly. They're just about unified geography -- spread across the various geographies. So there's no geography that's heavier than the other and equally spread across the business units, running those 40-minute sessions or 40-minute impact daily management on the highest priorities. And what it's shown us, and we actually -- we used it for integration. We used it in the early days of the merger of the two organizations, somewhat under duress in an effort to work remotely. But what we found is, along with the ownership reality of our employee workforce, a real ability to get things done faster while focused on the highest priorities in the business.

Yes, Mike, that's super helpful. And I know sometimes people think of your operating system as a cost improvement plan, but obviously, it's much more beyond that as you mentioned with the leading indicators that are behind the marketing qualified leads. One question that we've gotten multiple times at the conference with companies, and this could be -- or whether Mike or Vicente, you want to answer this question, is really around recession planning and it's how does your business perform in a recession? What does growth look like, what do decremental or incremental margins look like? Although I would argue most people will believe that your business will decline in a recession. I'm just -- how do you see your playbook in a recession scenario?

Yes, Joe, I think it's -- I will say that, I mean, clearly, we're a very, very different business today than maybe the last past recessions. So that's maybe point number one. So kind of difficult to pinpoint exactly, but I can give you some data points, which are kind of good indicators as to how we operate. The most recent indicator here is the 2020 pandemic when we were combining the two companies. I mean, as we know, it was the most severe disruptive times that we have seen in decades. And it was not only how fast it happened, but how deep it went. And yes, it came back up again pretty quickly but still with a lot of hiccups with supply chain and so on. And you can see that during the 2020, we were able to accomplish EBITDA margin expansion of more than 200 basis points. And this is with also EBITDA dollars kind of flat to maybe slightly down. All of these while revenues were down 12%, again, pretty severe downturn. So revenues went down 12%. We maintained EBITDA dollars, and EBITDA margin expansion clearly expanded by 200 basis points. And then the next example is kind of 2019 where there was a bit of a small recession at the end of the year, kind of correction, as some may call it. And during 2019, we can only speak about the GDI Industrial segments because that's what we were running. And during that time, in 2019, that GDI, the Gardner Denver Industrial segment, which is kind of correlated to more or less kind of what we have today within the big ITS and so on. EBITDA margin was actually increased by almost 70 basis points. And EBITDA dollars were up 3% as reported. And all of this while revenue were basically flat as reported or down 3% organic because there was a lot of FX kind of changes. So again, it just speaks to the ability of we control what we can control. And even in downtimes, in down markets, we protect the earnings and not only protect the earnings, but we also doubled down in investments because then when the market kind of came back up, we were really strong and ready to be able to deliver kind of the upside momentum that we're seeing. Specifically, you can see it now as kind of we came out of the pandemic, and we continue to deliver double-digit orders and revenue growth. So I think it's just one of those that we believe that today, with the combined IR and Gardner Denver portfolio, we're much better balanced geographically. We have a much more diverse longer-cycle portfolio as well, with our larger centrifugal offering, for example, both of which would provide increased resiliency. We also feel that our total aftermarket business that is 40% is better for also weathering any slowdown. We saw it during the pandemic that our aftermarket was pretty resilient. And we have done a lot of work to refocus the company to more sustainable, less cyclical markets that should ensure more lasting stable performance.

That's great to hear, Vicente. I guess going back to Mike's comment around like the planning cycle, right, and how you're thinking about your business. This is like a it's a really interesting dynamic, right, where the market believes that we're potentially going to head into a recession. You take a look at your order rates, and you're like your order rates basically haven't been this robust ever, right, and your backlog is building. How are you thinking about the planning for a potential recession? Are you even thinking about that at this point, given that like the dynamics in your business are so strong right now?

No. I mean, we're always operating assuming the worst conditions that can happen in the market. And then basically, we put the plans in place to be ready for it. And kind of as our team say, be ready for -- I mean, plan for the worse and hope for the better kind of thing, but always with the execution in mind. So yes, we have the playbooks. I mean we're looking into making sure that we have the actions that if we go into a slowdown, what is it that we execute. Not too dissimilar to when we were doing the planning of the integration of Gardner Denver and Ingersoll Rand. I mean we planned that integration for almost 9 months before -- because we said on day 1, we want to go and purely execute. And in a similar way, we're doing a lot of planning but not pulling the trigger until we see -- because we don't want to damage the momentum that we have. We don't want to damage disruption of providing product to our customer but we're going to be ready. I mean we were ready on day 1 with the combination of Gardner Denver and Ingersoll Rand, and we'll be ready for on day 1 when we see kind of slowdown and take action. And again, it's also one of those that cannot be a peanut butter across all the businesses because you have to be very specific based on their markets and based on product situation also. This is the beauty of the IRX and the processes that we have that allows us to kind of mix and blend different outcomes while continuing to invest in on those businesses that we continue to see really good growth momentum.

Yes. There's also a balance, I would think, also from a cyclical versus secular perspective as well across your businesses. And the energy-efficient compressors has been one area that you've now started to highlight as a potential positive for your business despite this kind of negative backdrop that's helping cause the demand generation there. I'm just curious, like you guys put up like 30% order growth in your compressor business. Are you already starting to see incoming on you wanting to make CapEx replacements around like energy-efficient compressors in Europe?

We do. And I think a good indicator -- and we gave a data point actually in the U.S. because we even thought during the earnings call that it will be more pronounced to show how much we have seen that improvement, and we call it the audits. The audits that we do for energy efficiency, which in 2021, we did 4,000 of those leading to about $100 million revenue, and it was kind of split of $70 million of new products kind of changing the compressor and $30 million of better service and aftermarket kind of solutions. And that was a 60% increase from 2019 pre-pandemic. And you can actually correlate that to Europe. I mean definitely seeing that and if not even more, because of the energy being way much higher compared to what we have seen in the U.S. So absolutely, Joe. I mean there's a lot of more conversations happening on what can customers do to help reduce your energy cost. I mean even ourselves, we're doing it. We have plenty of manufacturing footprint in Europe, and we're constantly talking about -- I mean we have the most efficient compressors already in the factory. So now we're talking about the next thing that we can do to continuously drive that energy efficiency because it's expensive, and it's going to be expensive for a little while.

Yes. And Vicente, that was a great data point that you guys gave at the quarter. Just more around the audits because I know that, that's something that you started in the U.S., haven't really completely rolled it out yet in Europe. Like what's the process like? And how long does it take to convert an audit into a revenue opportunity?

It could vary by the customer, and it could vary by the application. But in some customers, we can be for a week -- up to a week doing measurements and testing. So I mean, it's a pretty sophisticated way that we want to make sure that it is comprehensive. And then -- but it could also be 1 day if the manufacturing facility or the production facility is not that complicated. But typically, you may see it more multiple days. And then we create a report, we sit down with the customer, and it's a really consultative kind of process where we talk about total cost of ownership and what we can do. And I think it's just -- it's really well done. And I think, Joe, also exciting thing is that it's not only for compressors, but when you think about blowers, a company that we have called Runtech that makes turbo blowers for the pulp and paper facility, the conversation is about we do the audits where the conversation is about not only energy but also water conservation. And the numbers are pretty sizable. But yes, it's all along the lines of being consultative and helping the customer.

Yes, it's interesting. You bring up water. I think you had a data point on your earnings call that 30% of your business came from products and improved water management, purification and reducing water consumption. I got to tell you, I was surprised by that number. And so just help elaborate how your products are helping that specific industry. Obviously, that's one where you should continue to see some pretty good growth as well.

Yes. I think, Joe, I think this is one that is a fantastic area for us. But yes, whether Runtech -- a company called Runtech or even Dosatron which plays in the water purification market with nonelectric pumps. So again, talk about energy efficiency, no energy consumption, you can purify the water via the flow of the water. So it's kind of some very unique technologies that we have were built on Roy in the wastewater facility for mixing, LMI for those in Seepex, utilizing a mechanical way for removing this sludge and conserving a lot of water usage. So I think it's very exciting how a lot of the technologies that we have are playing a very crucial role on the sustainability side of not only the energy but also the water consumption and the purification of the water.

Yes. That's great. I want to switch gears a little bit and talk about the balance sheet. So you've got -- the net leverage is around 1x by my math. You've got at least like $3 billion of firepower, and you talked about some exclusive LOIs that you signed. So talk us through what -- where you're putting your capital to use and how you feel about those 6 deals that you talked through, is having exclusive LOIs actually coming to fruition?

Yes. Yes, sure. I'll start, and I'll let Vicente add in as well. You're absolutely right, Joe. So the 6 LOIs just speaks to the fact that the funnel is still very healthy. Nothing's necessarily really changed in terms of where our prioritization is, how we're looking at M&A, the 6 LOIs, consider them bolt-on in nature. I think the sizes of acquisitions like the LeROIs, York, Air Dimensions, those are kind of the size of deals. We typically have very strong high hit rates. Once it's exclusively kind of under LOI, we kind of go through diligence. And then generally speaking, you've seen the hit rate before. And I would characterize most of these as exactly in line with what you've seen us do historically. So still very attractive, what I would call, valuations. Return criteria, return profile, very much in line with what you've seen us do historically, additive technologies in terms of the portfolio. And generally speaking, every single one of these has been kind of internally sourced. So these are not deals coming to us from the outside. These are based on our knowledge of the markets and our relationships. It should also be mentioned that the stick here is very widespread in terms of across both segments and across, I'd say, different geographies. which I think is very interesting and very intriguing for us in the context of continuing to add to the portfolio. So I think broad strokes here, Joe, nothing has really changed dramatically. You are right, we obviously have a meaningful amount of firepower. And we're going to be prudent, I think, in this market in terms of how you've seen us do it before and what we're going to actually look to acquire. But again, really, I'd say the funnel continues to remain really healthy. And I would also say, it still continues to be from a funnel perspective probably slightly overweighted towards PST, which has been kind of what you've seen historically.

Vik, I know LeROI has been a great story for you guys. Do you want to maybe provide some color on how that acquisition has performed?

Yes. It's like the home run. It's been acquired premerger, so back in the legacy Gardner Denver days. This is a business that historically was focused more on gas compression. And a lot of what the team has been focused on, as you would expect, was executing on, let's call it, the cost synergies, the blocking and tackling, which the team did a very nice job of, but then diversifying, I would say, a lot of the, what I would say, the end markets to what Vicente has mentioned before, higher growth, more sustainable end markets, one of which being biogas. And so effectively, how can they repurpose, let's call it, excess gas and waste from landfills and things like that towards being reutilized as energy sources. And the growth we've seen there has been remarkable. I mean, just to put it in perspective, we have seen in excess of about $100 million worth of orders just in the last 12 months. Effectively, the -- and it's not a misprint, the post-synergy multiple, if you kind of take into consideration what we expect for this year, it gets close to about 1x. And the ROIC on a post-tax basis is very healthy double digits, like almost 78%. So it just speaks to the fact that a lot of what we're doing is adding, let's call it, additive technologies, relooking at kind of the end markets, where can we reposition to be able to kind of reorient towards markets that make sense in this day and age even if that might be a little bit different from where these business historically played. LeROI has been fantastic. I would tell you the team there -- in fact, the Vicente and Mike were there probably about a month ago, and they can kind of speak to it. But even the team, they're energized and which has marked owners in the business. So it obviously speaks to this kind of ownership mindset and what this team can kind of do. So I think LeROI is just the home run example, but Vicente is sitting today in a site in Air Dimensions. So one of the bolt-ons we did in the second half of last year. I think we have high aspirations for what that business can be able to create as well.

Yes. No, I was -- I mean, you kind of took my words there, Vik. As soon as I work at kind of the is that the target that they're going to...

I hope they're not listening in. That's a pretty high bar.

I mean it's a business that -- Air Dimensions that -- family owned, 90% of the revenues in the U.S. And it's really exciting what I just saw here walking through the manufacturing floor and the lab on the initiatives to really grow this outside of the U.S. but also launching new products. And the team was showing me one product that they're testing here that, I mean, it's pretty unique, what they've been able to do. So I think it will be similar. I mean, 5 years from now, talking about a double-digit pretty high number ROIC for this business.

That's great. I know we're going to be bumping up on time soon. I do want to talk about kind of like the longer cycle piece of your business, you talked about being roughly 20% to 25% of your business. And that was -- that also came through in the legacy Ingersoll Rand acquisition. I'm just curious, like it sounds to me like you're seeing some green shoots in that business. So help provide some more color around what you're seeing from -- on the long cycle piece of your business?

Yes. I think this is also one that when we talk about kind of refocusing our technology to better sustainable end markets, a lot of these kind of large compressors, centrifugal machines historically in the past were used kind of more gassy kind of oil and gas driven and now we're driving it more towards the hydrogen conversion as well as liquefaction for natural gas or even hydrogen in this case. And that's where we're seeing the very good momentum. I mean we're seeing -- and also air separation systems for large facilities such as semiconductor facilities. So that's kind of what we're seeing. I mean, we're seeing pretty exciting momentum on LNG. I mean a lot of people talk about LNG, so the LNG funnel is good. But it's pretty widespread in terms of what we call this air separation market that gives you the ability to really separate different gases and liquefy the gas. We're seeing conversations about CO2 capture because also our compressors, we have proven and tested that we can actually capture CO2 and repurpose that CO2 through the process with the use of our compressors. So I think there's just a lot of good applications that the engineers have really accelerated, and we're seeing good quotes, good conversations and good utilization of our technology for whatever conversion we're seeing the momentum that we're seeing in the market that is kind of much more sustainable in our view.

Vicente, maybe one follow-up there. I thought Emerson did a good job of contextualizing the potential opportunity over the next 10 years in LNG and just as big or maybe even double the size of what we've seen in the previous last 2 decades in terms of investment. I'm curious, when you think about your compression technology, do you mostly just play on the LNG side? Is there an opportunity also on the regasification side as well as infrastructure terminals get built? How does your technology fit into both?

It is -- it fits really into both, Joe. I mean, every time that you -- when you need to convert from gas to liquid, you need to compress. And then when you need to retransform that from the liquid to the gas to be able to get -- you need to decompress. So I mean it's all compression technology. And I think we are very well known for the small to medium LNG facilities and LNG stations based on the technology that we have with our compression technology. So we play at different points. And it's not only also the compressors, but also when you think about the utilization of reciprocating compressors, centrifugal compressors, liquid ring compression technology with our business called Garo, that is basically a vapor recovery system, but it's now getting actually the applicability of utilizing that for other gas compression systems that are being spoken today. So it's exciting. I mean, you need -- we always said that compressed air is like the fourth utility, you need to compress air and gases in order to create what you hear a lot about out there in the market.

Makes a lot of sense. Guys, we're up on time, Vicente, Mike, Vik, thank you all for spending time with us today. It's always great to see you.

Great. Thank you, Joe, for the opportunity. Thank you.

Take care.

Thank you. Thank you. Bye-bye.