Ingersoll Rand Inc. (IR) Cash Flow Statement

The negative net income in 2025Q2, despite positive operating cash flow, suggests a large non-cash charge, likely an impairment or write-down, rather than a cash outflow. Conversely, the high OCF/NI ratios in 2024Q4 and 2025Q4 (2.29 and 1.88) indicate that operating cash flow is substantially exceeding net income, possibly due to heavy D&A and favorable working capital changes. This volatility implies that reported net income is not a reliable indicator of cash generation quarter-to-quarter, and investors should focus on cash flow metrics for valuation.

FCF margins have recovered from a low of 5.9% in 2024Q1 to a robust 22.1% in 2025Q4, but the latest quarter (2026Q2) shows a dip to 13.1%, indicating some volatility. The company's FCF margin is respectable but not best-in-class, and the gap to peers like Roper suggests that the aftermarket mix and operational efficiency could be further optimized. The trajectory appears stable, with no clear upward or downward trend, but the recent dip warrants monitoring.

CapEx/Revenue has remained consistently low, ranging from 1.2% to 3.7%, with the highest in 2024Q1 likely due to a one-time investment. This low capital intensity is characteristic of a business with a strong aftermarket component, as the installed base generates recurring revenue without requiring heavy reinvestment. The modest CapEx suggests that the company can allocate substantial cash to acquisitions and shareholder returns, but it also implies that organic growth may be limited without M&A.

The large negative working capital changes in several quarters (e.g., -$180.1M in 2025Q2) suggest that the company is investing in receivables and inventory, possibly due to growth or supply chain issues. Conversely, positive changes in 2024Q4 and 2025Q4 indicate strong collections and inventory management. This volatility makes it difficult to assess the underlying cash generation trend, but it may reflect the cyclical nature of the business and the timing of large orders. Investors should monitor days sales outstanding and inventory turns for signs of deterioration.

The company has been aggressively returning cash to shareholders through buybacks, with a notable spike of $500.2M in 2025Q2, and simultaneously pursuing acquisitions, with a massive $2.6B outflow in 2024Q2. This dual strategy has led to elevated leverage, as noted in the risk factors, and may constrain future flexibility. While the buybacks suggest management confidence, the pace of M&A could lead to integration risks and potential goodwill impairments if growth fails to materialize.

The significant gap between cumulative OCF and net income is primarily due to D&A and other non-cash items, which are substantial given the company's acquisition history. This suggests that the company's true cash-generative ability is stronger than reported earnings imply, supporting the use of cash-based valuation metrics. However, the gap also highlights the impact of purchase price accounting, which may obscure underlying profitability. Investors should adjust for these non-cash charges when assessing the company's earnings power.