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

Good morning, everyone, and welcome to Ingersoll Rand's 2021 Investor Day, Charting the Course for Continued Shareholder Value Creation. I'm Chris Miorin, Vice President of Investor Relations, a role I have served in for the past 10 months. I've been with Ingersoll Rand for 3.5 years, most recently as Vice President of Corporate Development. On behalf of our Board and leadership team, we'd like to thank you for your time and interest in Ingersoll Rand. We have a power-packed 4 hours lined up, and we hope you walk away from today with a better understanding of our company, the work we have put in to get to this pivotal point and the robust set of opportunities in front of us that, as we execute, will deliver continued shareholder value. Before I begin, I want to remind everyone that certain statements on this webcast are forward-looking in nature and are subject to the risks and uncertainties discussed in our SEC filings, which you should read in conjunction with the information provided today. Please review the forward-looking statements on Slide 2 of this presentation for more details. In addition, in today's remarks, we will refer to certain non-GAAP financial measures. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website. With that, let me take a minute to walk you through today's agenda. We've assembled key members from our leadership team who are excited to share with you the details about their focus areas and expertise. Kicking off today will be our CEO and newly appointed Chairman of the Board, Vicente Reynal. Vicente will provide an update on our business and strategy, including a look back at the journey we've been on since 2015, when we were a private company, to the purpose-driven Ingersoll Rand we are today and where we plan to go in the future. Following Vicente, Mike Weatherred, Senior Vice President of Ingersoll Rand Execution Excellence, will cover IRX, which is the backbone of our company. Mike will walk you through how IRX has become a competitive differentiator and its exponential power. Next, we'll walk you through our growth enablers. Cesare Trabattoni, Vice President of Demand Generation, will provide an update on demand gen and how we are increasing our digital revenue and sales productivity. Mike Medaska, Vice President of Strategy, will then provide an update on the industrial Internet of Things market and our strategy to grow capabilities and partner with customers on their digital journey. After that, Mary Betsch, our Vice President of Sustainability, will give an overview of how we're an enabler and a beneficiary of sustainability and how we've embedded this into our culture and business. Following these presentations, we will host the first of 2 Q&A sessions. We'll then take a short break before hearing details about our business segments from Enrique Minarro Viseras and Gary Gillespie, both Senior Vice Presidents in our Industrial Technologies and Services segment; and Nick Kendall-Jones, Senior Vice President of our Precision and Science Technologies segment. Next, you'll hear about our M&A engine and how we're driving high-quality growth from Liz Hepding, Senior Vice President of Corporate Development. Finally, our CFO, Vik Kini, will provide an update on our strong performance to date and our strategy to compound earnings. After closing comments from Vicente, we'll open up to the second Q&A session. With that, I'll turn it over to Vicente Reynal, Ingersoll Rand's Chairman and CEO.

Thank you, Chris, and hello to everyone, and thank you for joining us today. We're very excited to be here with you on our first Investor Day as the new Ingersoll Rand. It has been an exciting journey over the past 6 years since I joined Gardner Denver from Danaher where I spent more than a decade on their various senior leadership roles. I have to say that I have never been more excited about the current opportunity we have in front of us. We're looking forward to providing a deep dive on our company, our culture, our competitive advantages and the strategy that we're executing to achieve our midterm milestone goals and create a premier compounder. We hope you walk away from our time today with a deeper understanding about Ingersoll Rand and the opportunities in front of us and with the confidence that we will achieve what we say we will do because we have a proven track record to build on that confidence. And I hope you leave today as excited as I am about our vision for the future. So with that, let's just get into the details. I want to start with one of our leading strengths, which is the management of this company. We have promoted from within as well as attracted talent from outside. And then we have assembled a team of leaders who embrace our values and are dedicated to outperformance, driving execution excellence and delivering results. As you can see here, our extended leadership team comprises of 10 new leaders in their roles. But I'm very proud because all these are expanded responsibilities to their roles since the combination of Gardner Denver and Ingersoll Rand. And we have achieved a great balance between legacy Gardner Denver and legacy Ingersoll Rand. You can see we're committed to a melting pot of thought, capabilities and experience, and we will continue to add diverse talent to the mix. And along with our leadership team is our Board who brings great experience and enthusiasm. Coming out of our 2017 IPO, we have made tremendous progress in enhancing our corporate governance as a public company in a very short period of time. We have been very thoughtful on always adding unique domain expertise that is aligned with our strategy, strategy including technology, artificial intelligence, Industrial IoT and differentiated shareholder value creation via organic and inorganic growth. In addition, our Board is over 60% diverse in gender and ethnicity, reflecting our commitment to achieving a highly diverse and inclusive organization that starts at the top. And importantly, our Board is thoughtful and very progressive. And I'm proud that we're one of the trailblazers to form a Board-level Sustainability Committee that provides oversight on this critical area. But at this time, I want to take a special moment to especially thank Pete Stavros, our former Chairman; and Josh Weisenbeck, both with KKR, our partners, our sponsors who took Gardner Denver private and public again. And we will not be where we are today without Pete's ongoing support, guidance, and we appreciate both Pete's and Josh's dedication over the past years. I'm very honored and humbled to assume the role of Chairman. And I'm very excited to have Bill Donnelly as the new Lead Independent Director. So with that, let's move on to today's key messages. At our March 2019 Gardner Denver Investor Day, we told you that we were implementing a simple strategy to deploy talent, expand margins, accelerate growth and allocate capital effectively. And since then, we have successfully executed this strategy to build Ingersoll Rand into who we are today: a company with a profitable growth model and a proven track record of value creation with a portfolio that is aligned to global megatrends and a focus on innovative, sustainable solutions that support organic growth. We're well on our way to becoming a recognized earnings compounder, supported by our track record of robust cash flow generation and margin expansion. We have also a very disciplined M&A program that delivers high returns and supports our compounding earnings growth. And of course, all of these achievements are underpinned by our unwavering commitment to Ingersoll Rand Execution Excellence. This process, which we introduced our 2019 Investor Day, is what enables every part of our organization to achieve operational excellence and deliver value for our shareholders. Everything that we are and everything that we do starts with being a purpose-driven company. Our purpose is all about leveraging our strength to support others. And it is our purpose that guides us as we strive to make life better, a purpose that is lived with our values that you see on the outer ring, deployed via our strategic imperatives and executed via IRX. And this is how we connect the dots. This is why we have created such a unique culture in a very rapid period of time. So those of you who have been with us from the beginning know that we have been executing the transformation over the past 5 years, from a private company with legacy stretching back to 1859 to the purpose-driven public company we are today. So I just want to show you a short video that brings this transformation to life. [Presentation]

I'm so excited that it is impressive, the amount of really hard work that we have done together as a team in such a short period of time. So when we say we have a unique culture of execution, it is shown on the actions and performance. And as a newly minted public company in 2017, we identified several overhangs on our valuation and growth potential. Those included reducing our debt level, divesting businesses that were no longer a good fit for our portfolio and removing the private equity ownership. We steadily worked to address these issues while at the same time strengthening our financial capabilities and differentiators. So during the last 5 years, we executed a mega merger of Gardner Denver and Ingersoll Rand, taking the best of both companies, executing flawlessly in the middle of a global pandemic. We leveraged IRX to create a single culture in the new Ingersoll Rand. We expanded our employee ownership, making all of our associates shareholders and driving deeper engagement. We elevated sustainability to a strategic imperative. We built our M&A muscle, which has driven tremendous value through bolt-on acquisitions. We also announced the initiation of a dividend and a meaningful buyback program, and we accelerated our organic growth investments to build clear differentiation. So it's been a busy intense 5 years, and we're proud of the strong results that we have delivered for our shareholders. But we know this is just the beginning. We have grown our revenue approximately 3x while strengthening our financial profile. We know that we will continue to demonstrate superior growth as we have been able to do it before. For example, you can see on the left side of the slide where during 2016 and 2018, at Gardner Denver, excluding the high pressure, which is more representative of the core industrial markets, we grew 16% point-to-point. And while today, we're at 6% over a 2-year period, we feel this is great performance because the more important point here is that in the second half of 2021, we're expecting to deliver more than 10% growth against 2019, again, demonstrating that we can outperform the market. We have consistently delivered 20-plus EBITDA margins, showing how we're able to not only grow but improve profitability very rapidly. Our free cash flow will be approximately $800 million this year, demonstrating consistent mid-teen free cash flow margin but one that we know we can improve further. And we dramatically reduced our debt by over 5 turns and increased our enterprise value eightfold. And as you can see from our stock performance, these initiatives have helped us create enormous value for our shareholders since our IPO. Since the onset of the global pandemic in early 2020, we have consistently outperformed the S&P 500 and our premium industrial peers by over 7,000 basis points. We have achieved a share price appreciation of approximately 180% and created about $20 billion in market cap through our deliberate and decisive actions. So today, we're tying a bow on this phase of our journey because we have transformed, but more important, we're now on to our next leg of our journey because we know this is just the beginning of a new era. And as we look into the future, we're aligning and living our purpose to make life better for our employees, our planet, our customers and our stockholders. So how are we making life better for employees? It really starts with creating an opportunity. And every employee has a personal stake in Ingersoll Rand, which has empowered our owner operators to do big things and continue to work hard to deliver results. The value of our initial $100 million grant given our IPO in 2017 and later the $150 million in 2020 has now turned into approximately $600 million of value. This ownership has been life-changing for employees. We hear many stories about employees able to buy their first homes, send their children to college, pay down their debt and certainly help us attract and retain talent across all levels. And the fact that over 70% of our employees that received equity in 2020 are still holding their stock as of October of this year speak to the belief that they have on our long-term journey. And we're very excited to tell you about our latest internal announcement we made just last week. We have implemented a new program that make each new employee who has joined since our August 2020 also an owner of the company. This will be done on an annual basis for new employees after their first year of employment. And as you would expect, this has been received with great excitement. And I am very proud that we can continue to ensure that all of our employees will be able to say that they are owners of Ingersoll Rand. You can see that we also continue to prioritize diversity, equity and inclusion because we view this as a crucial component of our culture. Creating and nurturing an inclusive culture is something you can see around us, the high level of diversity in our team, leading by example, whether with our Board as 60% diverse or my extended leadership team that is 50% diverse in gender and ethnicity. And all these efforts have led to a massive increase in employee engagement, from 60% in 2018 to approaching 80% today. And our scores are way above the manufacturing industry benchmark already. And in many of the critical questions, we are already on the top 10% of industry benchmarks. But we're not stopping here because we know we can do even better, and we look forward to telling you more about our future progress. We're also making life better for our planet through our expanded focus on sustainability and ESG. Our 2020 Sustainability Report published in July, which is available on our website, outlines our ambitious goals for reducing our net greenhouse gas emissions and the greenhouse gas emissions from our products, our water usage and the amount of water and waste that we generate. We're bold with our aspirations with a net zero greenhouse gas emission by 2050. But we're going to get 60% of the way by 2030, in just 8 years from now. And while we're reducing our footprint, our goal continues to rapidly expand our handprint, with items such as 100% of our products supporting a more sustainable world, our partnership with the nongovernmental organizations such as Engineers Without Borders that promote sustainable development and better infrastructure around the world. And once again, I'm so proud of our employees who generously give their own time and expertise to make life better in communities across the globe. We also make life better for our expansive and growing installed base of customers. And we accomplish this by partnering with our customers to lower their total cost of ownership as well as providing a portfolio of products and services in a variety of sustainable end markets, including technologies that help our customers comply with regulatory change and achieve their ESG goals, and all of this while we increase the number of our products with a range of digital smart tools to help our customers improve decision-making capabilities. And finally, we strive to make life better for our stockholders by returning value to them, by achieving above-market performance in financial metrics such as revenue, EBITDA and EPS, by executing a disciplined M&A program that is targeting 400 to 500 basis points of annual growth contribution. And when you put this execution together, it allows to deliver shareholder return that consistently outperforms both the S&P 500 and our premium industrial peers. And ultimately, we want to be the company that lets you sleep at night because you know we will deliver no matter the business environment and we will be great stewards of our shareholders' capital. So today, as we set sail on this next phase of our journey to deliver outsized shareholder returns, we are a $5 billion revenue generator company with nearly 16,000 employees and 65 manufacturing facilities worldwide. We have strong margins but with much more room of runway from here, with an aftermarket recurring revenue that is approximately 40% but one that we expect to grow as we're seeing outsized equipment growth momentum now that, combined with our initiatives that you're going to hear today, will accelerate that recurring revenue. And we have already a robust free cash flow generation with also multiple levers to improve from here to consistently deliver a [Audio Gap] broad set of industries that provide revenue diversification and significant growth opportunities. Many of our top end markets are high growth, giving us a very good blend to provide above-market growth as a company. Our portfolio is based on 2 segments: Industrial Technologies and Services or ITS and Precision and Science Technologies or PST. ITS comprises [ compressors ], vacuum and blower solutions plus industrial technologies like power tools and lifting. Approximately 80% of our sales are in our ITS segment, which delivers already 40% gross margin, a 25% adjusted EBITDA margin and 40% of aftermarket revenue. And even though we have done great improvements in margins, we still see runway as we're targeting a margin in the high 20s by 2025. PST is made of our highly specialized range of technologies, including fluid management solutions, precision liquid and gas pumps and niche compression technologies. About 20% of our sales are in our PST segment, which delivers a 45% gross margin already, a 30% adjusted EBITDA margin and 15% of aftermarket revenue. But we also see more runway for margin expansion, and we're targeting a margin in the mid-30s by 2025. Both segments had significant long-term growth potential, with organic growth rates in the mid-single digits for ITS and mid-single-digit plus for PST. A key differentiator for Ingersoll Rand is that we are methodically aligning these 2 portfolio segments with 3 key global megatrends, the megatrends of digitization, sustainability and quality of life. Each of these growth megatrends are expected to have meaningful growth over the next few years. And we're tracking a number of indicators associated with each of these trends that are showing growth of double-digit levels. With digitization, we're building out our offering of intelligent and connected equipment with a focus on solving our customers' most pressing needs. With sustainability, we're focused on the conservation of water and energy. And in fact, today, more than 30% of our total revenue is focused on improving water management, consumption and purification. In addition, we're well positioned to capture the renewables opportunity with our growing leadership in technologies for hydrogen and CO2 sequestration. Finally, our products and solutions support rising living standards and the accelerating shift in our society as growing populations seek to achieve a higher quality of life. And we're capitalizing on these megatrends through our own organic and inorganic strategies. So first, let me introduce our 3 organic growth enablers that are allowing us to capture above-market growth: demand generation, Industrial Internet of Things and new product and service innovation. So let me drill down in each of these organic growth enablers. Starting with demand generation. This is our unique, only developed comprehensive organic growth engine. With demand generation, we're focused on 3 tools. First is a [ rigor ] around strategic pricing, allowing us to capture more profit while mitigating leakage. Second is leveraging artificial intelligence analytics around our current 3 million contact database and one that we continue to grow to personalize and aid our customers in their buying journey. And finally, we have a relentless focus on Net Promoter Score, which is helping us to identify and map customer life cycle journeys to further generate and prioritize revenue-generating activities in each of our customers' buying journey steps. And Cesare is going to provide more on this enabler shortly. The next organic growth enabler is Industrial [ Internet of ] Things. And we believe there is an enormous opportunity to digitally connect and monetize the connectivity from nearly 5 million of our own products that are identified in the field where currently less than 10% of our 2020 revenue is IIoT-ready, but we expect this to grow to over 25% by 2025. So clearly, you can see that we're at the early stages of this revolution. And as you're going to see later in the [Audio Gap] section and also in the ITS and PST sections, we're adding digital capabilities through our organic and inorganic investments as well as developing new service solutions to maximize efficiency and reliability. Our third organic growth enabler is new product and service innovation, which is focused on delivering increased efficiency and performance to help our customers on their sustainability journeys. A large increase in our new product innovation cadence has allowed us to deliver over 200 new products in '21 alone, all of which have improvements in energy efficiency and total cost of ownership. In addition, all of our new products and solutions are aligned with high growth and sustainably oriented end markets. And equally important, we're making sure that those products are attaching new recurring revenue streams to accelerate our total aftermarket revenue. But in addition to these organic growth enablers, we're accelerating our inorganic growth. And as you can see on this slide, we have created significant long-term growth through portfolio optimization, M&A and investments in enabling technologies. From taking an active approach to shaping our portfolio, we have generated over $2 billion in cash from noncore divestitures [Audio Gap] [ deploying ] that cash back into high-growth opportunities. We have already deployed approximately $1.2 billion towards strategic acquisitions since 2015 [Audio Gap] with approximately $1 billion since [ Q2 ] of 2020. And [ it ] is not only these new acquisitions but also the 400% increase in our investments around [ enabling ] technologies where we expect to see great revenue acceleration in the long term. And we have been steadily increasing our total addressable market. We have nearly doubled our addressable [Audio Gap] $44 billion since 2019. And as we have reshaped our portfolio over the last 2 years, including the divestitures of High Pressure Solutions segment and specialty vehicle segment, we have worked really hard to fully replace that addressable market, which was largely cyclical. And we have replaced it with high quality, high growth via acquisitions, including strengthening our core position and entering new markets such as progressive cavity pumps and precision controls. And as we look at our jump-off point today, we're targeting a $70 billion addressable market opportunity through 2025 with a threefold approach to capture that growth. First is our alignment to the long-term secular megatrends of digitization, sustainability and quality of life. Second is our organic growth enablers of demand [ gen ], IIoT and product and service [ innovation ]. And third, our inorganic growth through both our M&A engine [ and investments ] in partnership and technologies. So pulling this all together, we have a very clear framework for value creation, with the ultimate goal of becoming a premier growth compounder [Audio Gap] It begins with aligning our portfolio to higher-growth end markets supported by 3 global megatrends of digitization, [ sustainability ] [Audio Gap] and quality of life. Second is the ability to deploy our 3 organic growth [ enablers ]: demand generation, Industrial Internet of Things and new product and service [ innovation ]. Third, we layer on our inorganic growth enablers around product and service [ innovation ] [Audio Gap] I2V. And finally, we leverage our accelerant [Audio Gap] goals is going to be double-digit earnings growth and high-teen free cash flow margin over the long term. So with that, let's talk about our next midterm goalpost. Today, we're introducing the midterm [Audio Gap] [ milestone ] targets, setting the stage for value creation through 2025. Between now and 2025, we expect to deliver [Audio Gap] double-digit total revenue growth with the balance between organic and inorganic contribution. We're going to expand EBITDA margin to [ reach ] high 20s. We're going to increase our free cash flow margin from mid-teens today to high teens. And to support all this, we will [ more than ] double our revenue generated from our IIoT-ready products. We're going to grow [Audio Gap] high 30s of today. And we're going to do all this [Audio Gap] provides financial strength and flexibility. So with that, let me sum up by saying that I have never been more [ excited ] about Ingersoll Rand's future and our [ prospects ]. I am sure [ today, you ] will feel our team's passion and commitment to achieving our vision. We're very proud of all that we have accomplished so far as we have shifted our focus to high-growth and sustainability-focused end markets. We're implementing [ capabilities ] like demand gen, the Industrial Internet of [ Things ] and product and service innovation that we believe will lead to meaningful growth and margin expansion. We have developed a [ disciplined ] approach to M&A that contributes strong revenue and earnings growth. And we will continue to drive IRX across every aspect of our company because it is a proven accelerator. And through all of this, we will continue to deliver value to those of you who, just like us, are proud owners of Ingersoll Rand. Thank you for the time. And now I will turn it over to Mike for an update on IRX, our competitive differentiator.

Good morning. My name is Mike Weatherred. I have responsibility for Execution Excellence in Ingersoll Rand. We call it IRX. I came to Gardner Denver in 2018 after spending 15 years at Danaher where I spent the last 5 years in the Danaher Business System Office. I really came to Gardner Denver for 2 reasons [Audio Gap] The first reason is that it was clear to me that something very special was going on, and the team was willing to do some unique things. The most unique of all those things from my perspective was granting equity to all [ associates ]. I can tell you after about 35 years in other large, well-run companies that equity with associates is a game changer. The second reason I came was that, what if we could provide that acting-like-owners workforce a simple process with a common [ language ] that helped them get things done better and faster? Potentially, we could build a real, sustainable, high-performance culture, maybe even a competitive advantage. And I'm going to share with you where we are today on that journey. Now I know a lot of you got up this morning and said, "I can't wait to get to the Ingersoll Rand Investors Day. I sure hope they have an update on their business system." Trust me, I know you see a lot of business systems out there. There's a lot of things, a lot of good, a lot of great, a lot of variation. This morning, I'm going to show you exactly what we are doing to try and create something unique in the form of an execution language and process that we use at Ingersoll Rand called IRX. Quickly, it's simple, simple to the point of being offensive. Weekly meetings, run among self-directed work teams, work on the highest priorities, operating in 100-day sprints. And I'll explain that a little bit. Those nimble 40-minute sessions not only are focused on the highest priorities, but they drive impact in the initial few weeks of the meeting. And then a critical point there on number four. Leadership gets a chance to move away from managing tasks and gets into a real continuous feedback loop in the form of coaching. It's 100% embedded, and all we really mean by that is it's -- we use it everywhere, adoption is high, we're getting things done faster. So let's talk for a minute about what makes it unique. Like I said, I know you see a lot of business systems and operating processes out there. A lot of them are kind of focused on the what. Often they think about things like events, tools, certificates, dedicated resources, trainings, et cetera. Sometimes I know for even the employees in the company, it's hard to tell the effectiveness and the impact they make over time. Especially how well do they sustain over time? How do you really know they work? Ingersoll Rand Execution Excellence is a little bit different. It's all about the how. It's about how to get the highest priorities done faster. We use it everywhere. It rises issues very quickly. And when they come up, they're solved or countermeasures. It also presents opportunities to flex on the positive side. Cross-functional teams embrace the process because it gives them a common language in which they can get things done more quickly with better ultimate results. You heard Vicente say it, and you'll hear it throughout the day, IRX is the fuel in which we're building a high-performance culture. [ And ] about where we use it, and simply put, we use it everywhere. You'll remember the last time we talked in 2019 at our Investors Day, we talked about things like commercial growth rooms and I2V. And today, we see the usage of IRX move into some fairly progressive areas like performance management, all things integration, which you'll hear about later, ESG deployment and DE&I implementation. Let me share a few numbers with you. Again, at that meeting in March of 2019, we had 70 of what we called growth rooms going at the time. Today, we have 270 IMPACT Daily Management meetings running. We've eliminated about 750 other meetings by using IDMs. And we have 5,000 associates involved or engaged in IRX on a weekly process -- in a weekly basis. We think this is dramatically increasing our productivity. You see on the right-hand side of the slide there, the use splits about 50% in growth and innovation, and the other 50% is split equally between operations, I2V and all things integration. This is what we mean when we say it's embedded. It's in every business unit, every function in every geography being used. Let's talk about how it gets implemented. And I know there's a lot on this slide, but very simply, it starts off with an area of focus, a specific area of opportunity or needed attention. A team is formed, a leader is chosen, and then that team and leader spend some really high-quality time on what we call a growth bridge. So they've got their jump-off point. They've got -- they know where they want to get at the end of the 100-day cycle, and they're going to spend some time prioritizing headwinds, which are things that need to be accomplished to achieve that goal; and areas of focus, which are areas that have to be executed to get back to the overall target, both [Audio Gap] the meeting started and finished on time, information was ready beforehand, we're on track to achieve our 100-day goal, et cetera. I want to show you a quick example from Arnold Li. Arnold leads our Asia Pacific ITS business. And this is just very simply how you go from a strat plan. So just think about a typical 3-year strat plan with 3-year financial goals attached to it. I'm going to have the top 5 growth initiatives, which are going to be things like market expansion or new product development. I'm going to build that bridge out over the 3-year period by quarters, pick the IDM areas of opportunity, choose leaders, figure out how I'm going to use it over the cycle time. And then I'm going to build a quarter-by-quarter growth bridge for the first couple of periods. And so a lot of times, people get hung up on, "I got a great strat plan. What do I do next?" This gets them launched and into their first 100-day cycle, which happens immediately. So we're talking about going from theory to implementation. We think about this as a form of high-performance execution. Now I could talk about IRX all day, but I recently had a conversation with 3 of our power users, power IRX users from around the world. And let me just play a quick video for you and share a few of their thoughts.

Yes. I'm in the IDM session. It's of critical importance how we're going to connect the dots. In the meantime, I also see a lot of behavior change, and also like the maturity level improve also. One good example is when we start into IDM in the region. No one likes red. Everyone likes green. Everyone is so happy seeing, "Okay, for my part, everything is great. This means I have everything in control." But after coaching and coaching, round, round, round coaching, the red means the opportunity. Because we are going to see the opportunity, we can make continuous improvement. This is the basic, basic thing for IRX upholding concept. By using IRX, I'm seeing in my organization and also a lot of leaders, a lot of people outside my organization, we are using the common language. We are using the standard procedures, process. We are using the standard methodology from strategy to plan, from plan to execution. I think this will -- this already significantly improve the efficiency and effectiveness of the execution and communication. It's simple. It's straightforward. Yes, I think to me, this is the best, best way, the simplest way to manage our day-to-day business. IRX is our competitive advantage for our organization.

Yes. The biggest benefit to -- of IRX to me as a leader has to [Audio Gap] our forward-looking 3-year strategic plan to our current fiscal year annual operating plan and into 100-day sprints and being able to link that 100-day sprint to 4, 5 initiatives that we roll out across the team and get the buy-in from varying disciplines to ensure that we can achieve what we've set out to achieve is extremely powerful, reassuring and helps me sleep at night. The ability of IRX to unearth hidden talent has been quite incredible. And being able to speak to them, understand what their challenges are and what they're doing to countermeasure potential problems to drive forward-looking momentum and progress in the business has really allowed us to increase our high potential growth across the business.

Growth synergies are able to be accelerated by team collaboration in the integration -- using the IRX process within integration. And taking those into consideration really allows that advancement on the growth synergies aspect. With them -- with the team collaboration and building up the road map, it really allows accountability just to naturally come into play. Now the IRX process has allowed these cross-functional collaborations to take place. And with that, we're able to easily lay out the road map to obtain the synergy, see where there may be hurdles or barriers that we need to work through and also allows the teams to come together and see if maybe one area of the business may be overwhelmed or have resource constraints that we need to work through in order to continue to advance and accelerate the synergy that we've set as a target for ourselves.

Yes. Thank you to Sarah and Arnold and Gareth for doing that. We had a lot of fun. You may have caught, and you can see on the slide, Gareth made a statement that really kind of stopped me in my tracks for a minute. He said, "The ability of IRX to unearth hidden talent has been quite incredible." And when I thought about what he said, I think he really hit on the epicenter of 2 really critical success factors in IRX and IDMs getting traction. Number one, it gets people in the game. It gives people a chance to own something. They drive accountability. They get [ the score kept ], get helped, learn how to problem-solve and get coached on a weekly basis. Leaders, as we talk about, get the chance to move from coaching -- I mean, sorry, from managing tasks to coaching. And that over 13 weeks, we think, gives both associates and leaders a year's worth of experience for every 100-day cycle. We could spend all day talking about success stories. They're literally everywhere in every function, in every geography, in every business unit. We could have filled up probably 20 pages of this, but I'll let you review this at your leisure. Let me wrap up. So today, you're going to hear people a lot of times referring to IRX and IDMs. You're going to hear those words a lot. And what I'd like you to think about, as you hear those words and hear the teams use them, is a couple of things. First of all, it's very simple, simple to implement, simple to use. It's the language of execution that we use at IRX. It's how we get things done better and faster. The areas of focus are broad and wide, and that I think we're actually in the very early innings of leveraging IRX, really [Audio Gap]

[Audio Gap] and insights to all of our commercial IDMs. Demand generation allows to efficiently acquire and nurture customer over the entire life cycle. Third, aligned to a corporate determination to become a growth compounder, we focus on fast onboarding of acquired brands. I will show you an example in a minute. And fourth, we are constantly innovating our approach, and I will show you what we mean by breakthrough innovation to accelerate the momentum in the coming years. Demand generation in our definition is not just about creating nice collaterals and sending e-mails to generate leads. We follow a holistic approach, covering the customer buying cycle to deliver great customer experience while driving sustainable and profitable growth. We want to be there when prospects and customer need us, being perceived as value-adding, making their lives better. Today, our demand generation engine is focused on 4 areas that combine, expand the traditional marketing focus, providing to our customers and channel the best possible customer experience. Initial area is pricing with a set of proprietary analytics that we've built over the past few years and are constantly being refined. This pricing data is fed to more than 170 weekly IDMs where opportunities for action are defined and acted on. Then commercial excellence and technology help businesses in identifying opportunities for commercial growth both within our direct and indirect channels. We apply a set of frameworks to assess the potential and the right levels to capture that potential. We are focused on aftermarket share of entitlement opportunities and improving the distribution model. You will see an example later on. Third is e-commerce, another pillar of growth with great early successes. We created a team acting as an incubator to help businesses in getting up and running across multiple marketplaces. We have weekly IDMs calls with all the engaged businesses to ensure sustainable process and success. Results are showing that we are moving in the right direction, as you will see later in a case study. Last focus here of the expanding demand generation engine is data and our approach to advanced data analytics. We are consolidating analytics for more than 40 brands and investing what we believe will bring totally new insights to the organization at all levels. You will see in later slides our plan to deliver actionable, prescriptive analytics in the near future. I want here to just quickly highlight some external research explaining why demand generation is so critical to business success without reviewing every single data point. We are targeting a very fragmented customer base with millions of companies, tens of million of contacts within these companies. An increasing share of these contacts are channel-agnostic, and they have no clear preference for digital or in-person and just care about finding information. Before talking to a salesperson, they typically have already completed 2/3 of their information gathering. We meet increasing needs for digitalization with marketing automation, which is at the core of our engine and enables full traceability. Applying these advanced digital marketing techniques can deliver up to 50% increases of ROI at a significantly reduced cost per lead. And these are the elements of our demand generation. It's very interlinked system with 2 clear goals to capture both revenue growth and margin expansion. On the left and heavily relying on automated process and data, we have marketing activities that are primarily driven towards acquiring new customers in targeted verticals and geography and expanding what we call the aftermarket life cycle flywheel, a highly automated marketing process to generate more revenue from our large installed base over the life cycle of a product. Web and marketing automation play a key role in ensuring that we deliver personalized content at every moment of the life cycle. On the right side you see the elements that enable us to expand margins, with a combination of initiatives supporting both our direct and indirect channel performance and that we want to complement with advanced commercial technologies. We work, for example, with businesses in identifying distributors to optimize specific territories or to enhance distributors' online presence. We have created a framework to assess and capture aftermarket potential, leveraging IRX standard work. We see the opportunity to become even more integrated between marketing and sales and continue on developing levers like our very successful pricing analytics. Sales discipline and learning capabilities, for example, around funnel management or value selling are the focus of our team delivering internal trainings built on highly engaging and modern platforms to ensure that it sticks. How are we making our customers' life better with demand generation? Because it is a customer-oriented approach, customer is at the center of our actions. We are committed to match the choice of content to deliver the message, which is more suitable at each stage of this buyer journey. First, we need to know the right targeted audience. Next, deliver the right message while at the same time, understanding and leveraging the preferred channel mix of communication, social media, e-mail, call, online event. And last but not least, the biggest challenge in demand generation is optimizing the time of the messages delivered, leveraging the variety of automation techniques, including artificial intelligence solution and IIoT. And we are delivering results. We simply shared some of these figures at the Capital Allocation Day at the recent Earnings Call, and they are really impressed. This is having a huge impact, as you can see on the left. The figures speak by themselves, and we achieved them by strengthening the team across the globe. We are targeting a universe of 3 million contacts, up 30x from the first year. We have generated 10x more leads than 5 years ago. At the same time, the cost per lead across all product lines has dramatically decreased due to the shift to more digital sources of lead decreasing, traditional high-cost exhibition and focusing on very few key ones in targeted verticals. As a result of this cost and improvement of our engine over the last 5 years, combined with the impact of process improvement in our channels, in particular, much improved leads follow-up. The marketing-driven funnel increased over proportionally by 18x and is now at around $900 million. How did we do that? We have been scaling our engine to include newly acquired businesses and constantly improving all areas of marketing on the right to achieve our goals of fueling our growth engine and increasing our customer life cycle revenue. You feel growth by targeting new prospects in attractive, high-growth sustainable markets and by boosting the adoption of new technologies across the globe. And we improved the customer retention and aftermarket growth by leveraging highly automated execution with our installed base. As Vicente said, we are seeing significant improvement in Net Promoter Scores, reflected in much higher conversion rates. You might now ask is there a potential for more ahead? My answer is a clear yes. We have plenty of upside. I'll try to provide an overview of where we are in the maturity cycle and show you our execution plan for demand generation in the coming years. Let me quickly explain where we see the potential. First, that we are [indiscernible] shows the level for the majority of our businesses. We have reached at least Stage 1 for all premerger brands and most recent acquisition and working in the red market areas. Second, we have a clear plan to excellence with activities marked in blue. In the coming years, the focus will progress leverage artificial intelligence and other methodologies to focus on resources and more investment on the most promising opportunities. So in a nutshell, we have the foundation, we have a team that can deliver, and we have tons of upside. And we are also stepping up our gaming data analytics. We see a huge potential in providing the organization with more than descriptive analytics. We have completed key projects to put in our data infrastructure on a modern platform and we see much better performance in how we access the data, all of it and talent to move towards predictive and then prescriptive analytics. Ultimately, we want to tell what we should be doing in a strategic important situation. To summarize, despite all the successes so far, we have a very clear plan ahead and plenty of opportunity to expand our IRX demand generation model. And we want to enable our channel partners to make this a win-win approach. Let me now share a few examples of our work. First one is a case study, as an example of what I meant with our strategy being about rapid on-boarding of new brands through demand generation. We have started a work in place that we deploy in order to start running on day 1. For an integration like MD-Kinney, we were able to complete Phase 1 within 90 days and basically start generating double the number of web marketing leads at 0 additional cost. By day 180, we focused marketing-driven sales funnel addition of around $8 million for the coming year, a lead management process in place and significantly improved Net Promoter Score. We are transforming a good company into a great one. This is a successful example achieved through a great cooperation with the MD-Kinney marketing team. We are implementing the same framework and learnings with Seepex, Maximus and all the other recently and future acquired companies. The next one is a case study about how we are extending the reach of demand generation to include our channel partners. We conducted an audit of more than 1,000 ITS distributor, and we discovered that 75% of them either have no website or have poor website, limited visibility and search engines. That led us to conclude that if you really want to maximize results, we need to help them. In Phase 1, we create website guidelines for our compressors strategic brands. This has been translated in 15 languages, and we just completed several trainings for our distributors. By the end of the year, we will launch on our website, 100 distributor landing pages to make them more searchable. And we plan that to expand it in Q1 of 2022 to all GD compressors distributors. In Phase 2, we plan to drive even more demand to additional marketing programs like paid search, new website functionality also linked to e-commerce. By now, we have already activated 40 partners. Partners that have already moved to Phase II have enjoyed growth in lead generated of up to 90% and together, taxability of increased conversion rates by more than 40%. A great example is a GD distributor in Southern California, experiencing a growth of 32% in MQLs that make us very confident about the importance of enhancing the demand generation with distribution partners. I want to show also here a very early case study related to our E-commerce Breakthrough Lab. We have created this team to enable our business to participate in the growing market for marketplaces and online buying experiences. The pandemic has clearly accelerated trends and increased the share of customers that would like to fulfill many of their needs digitally. To avoid every business reinventing the wheel and selling products online, we are leveraging the IRX model to create a standard approach with central support in form of an incubator. We quickly engaged with businesses, assessed the opportunity. In a few weeks, they are up and selling online. We have currently 17 businesses working and on track for a 2-year revenue CAGR of more than 40%. We plan to build on the experiences of this year to be faster to market, to expand the product offering and to provide online experiences to connected models with high IIoT capabilities. That will open a totally new game. I hope the message came across that demand generation is more than campaigns and leads and that we created a highly scalable growth engine that delivers a great customer experience and that the journey is accelerating. Thank you very much. And now I will turn it over to Mike for an update on Industrial's Internet of Things.

Hello, and good morning. My name is Mike Medaska. I'm the Vice President of Strategy for the company, and it's an absolute pleasure to be here with you this morning to describe the Industrial Internet of Things and our strategy. A quick background about myself. I've been with Ingersoll Rand for over 22 years and have served in a variety of roles from engineering to product management, marketing channel and general management, and for the last 10 years have focused exclusively strategy and business development. Let me begin with a few key points to set the table for our IIoT discussion. First, the Industrial Internet of Things market is large and growing rapidly. Second, our strategy is built on a deep understanding of customer needs and is already in motion. And third, our IIoT products revenue is anticipated to grow from about 10% of revenue in 2020 to greater than 25% by 2025. Let me begin with a few key points to frame the market opportunity and our ambition. It will come as a surprise to no one that we agree that the IIoT market is large and rapidly growing. To the left of the page, we cite a McKinsey study that estimates the IIoT spending levels to increase from $290 billion in 2020 to over $500 billion by 2025, a 12% compound annual growth rate. Perhaps more exciting is the right side of the page, where we anticipate our own IIoT-ready products revenue to increase from roughly $500 million in 2020 to over $2.1 billion in 2025 or greater than 25% of our revenue. That's a 35% CAGR, or nearly 3x the underlying market growth rate. Exciting for me is that this is already in motion. Earlier this year, each of our business and segment teams built digital strategies as part of our annual strategic planning process. And as of April, the team has been meeting using the IDM approach every Thursday to describe progress and execution to us. I'm excited about where we are already early in the game. With the opportunity dimension, let me share some more depth on our own strategy. I made the point earlier that our own strategy is built on a very deep understanding of customer needs, specifically the jobs to be done by IIoT. We spent over 2 months this summer interviewing dozens of customers across vertical markets and around the world to get a deep understanding of what they're doing with IIoT. We heard 3 things. The first job they're attempting to do is to avoid unplanned downtime. Our systems are mission-critical flow equipment downtime of these systems would result in loss of product, quality, efficiency, raw material, you name it. We also know that costs accumulate rapidly. The quote I include on this page is from a commercial baker who estimates their cost of downtime at between $1,600 and $3,200 per minute, staggering levels. We heard this across many customers. IIoT helps avoid unplanned downtime. The second job to be done is reduce energy consumption. The majority of our large customers and many of our small and medium-sized customers have established and publicly stated goals for Scope 1 and Scope 2 greenhouse gas reductions, including path to net zero. Also, air compressors can consume as much as 30% of a plant's electricity or more. We know that implementing IIoT solutions can help customers monitor and then reduce their energy consumption. The quote included in the middle column is from a leading global consumer products manufacturer who makes the connection very clear. IIoT solutions is in service of reducing energy and keeping it reduced. Third, keep employees safe, productive and inspired. We heard this from many customers we spoke with. We know that monitored machines are safer machines. We also know that as seasoned equipment experts retire and resign and are difficult to attract as our customers, but IIoT solution can fill a valuable role, leaving employees to focus on more value-add inspirational and productive work, automating the less important, less sophisticated work. Two quotes I include there. If something is not safe or out of compliance, it gets attention. A monitored system is a safer system. And secondly, when we get the protocol squared away, I'd like IR to see the compressor data for the experts. So clearly, customers are anticipating the fact that IIoT can be a solution to improve, and we want to be part of that journey. One thing I'll note is that most customer needs are common across vertical markets and regions, which is very useful for defining a strategy. But let me share some additional insight that we gained. I use this page to illustrate a typical journey of a customer. Beginning on the left side of the page, from a stand-alone machine. This is a basic machine that's operating independently. It delivers reliable flow and steady performance and customers expect to maintain it with routine maintenance. The second step is a connected machine. This is a machine that's connected digitally. It provides text and e-mail alerts to the operator, informing the operator of its status, and users can expect an improved service experience by understanding more about what the machine needs. The third level is an intelligent system. This is where the customer has multiple connected machines that are communicating with one another, enabling sequencing, balancing, real-time failure detection and monitoring on a single pane of glass. Finally, an optimized process. This is where there's widespread sensing and controls to adjust process and plant parameters, digital twins for autonomous control and machine learning and AI. This journey is very straightforward. And of course, the customers are looking for a direction of travel from the left of the page to the right. The challenge and what we heard over and over again is that they're facing numerous headwinds. These are included in the dark gray bar. These include budget constraints, lack of in-house equipment expertise, outdated IT and control systems, changing our unclear cybersecurity protocols and dozens of OEM and vendor partners pitching solutions. Our answer to this reality is to be a partner with our customers on their journey as they move from step 1 to step 2 to step 3 to step 4. In other words, meeting customers where they are on their IIoT journey as a trusted partner. So the logical question is, how will we do this? Let me share with you now our IIoT technology stack or road map and where we intend to go in the future. It consists of 4 interconnected layers. Let me start at the bottom with the core product layer. We feel we have one of the most comprehensive portfolios of air and gas compressors, blowers, vacuum pumps and liquid pumps in the industry. Above that sits the connectivity hardware and software layer. This is the layer of the stack that connects the equipment to the cloud, to a control system, to provide the data that will be ultimately analyzed. This consists of control systems, edge devices, monitors, sensors, user apps, and things like Helix, the Ingersoll Rand connected platform and ICON, the legacy Gardner Denver connected platform as well as Seepex, Maximus and Google Cloud solutions. This is the critical connectivity layer. The dark gray boxes, I should have mentioned this earlier, are areas where we've got a solution in place today, whereas the white boxes are things that are in development, either through some level of incubation, product development partnership or plans for acquisition. The third layer is the intelligence toolkit. And this is really where the value add for the customer kicks in. This is where the raw data is treaded into insights. This is largely done today by IR human experts. In the future, we anticipate that this is done through machine learning and data analytics, modeling and simulation tools, digital twins, system integrations and more. The top layer business models. This is really where the value capture for Ingersoll Rand kicks in. Today, we have a care service offering as well as service contracts and parts subscriptions. In the future, we envision flow as a service, energy services, system optimization services and more. So I think you'll agree, having seen this that we've got a strong plan and a decent road map to execute. But what's more exciting is our right to win. We feel very strongly that we have a differentiated position built on 3 key capabilities and 2 assets. Let me begin with the assets. As Cesare mentioned earlier, we have a customer contact database of over 3 million contacts across regions, markets and product lines. We feel we have tremendous reach into all key vertical markets via direct and distribution channels. Furthermore, and importantly, we feel we have a strong incumbent advantage as a long-standing and trusted advisers to the majority of our customers. They will look to us first to help them instrument their mission-critical flow equipment. Secondly, to the right, Vicente mentioned earlier our installed base. We count over 5 million connectable compressors, blowers, vacuum pumps and other types of equipment around the world in operation right now, as we speak. This is a huge number. We know that there's enormous upside of these pieces of equipment are actually connected and communicating to us. The key capabilities that we bring to bear are equally important. Let me start on the left with domain expertise. We feel we have a deeper knowledge of our own products than anyone else on Earth. It's logical, therefore, that customers would turn to us to help them with IIoT solutions related to these product lines. Second is the delivery method. We've got a two-pronged approach to instrument of communication modules, which we began on select portions of the portfolio as early as 2013. The second method is field retrofitting by our network of over 2,000 service technicians around the world to instrument machines that are already installed in the field retroactively as customers begin to move on their IIoT journey. And thirdly, M&A. As you'll hear shortly from my colleague, Liz Hepding, we've got a very powerful M&A process and pipeline in place. The note that I'll make here is that within that pipeline, we have dozens of contacts and pipeline companies that are related to IIoT we're actively working. Let me give you 2 examples of how we're bringing the strategy to life. We know that monetization will assume multiple forms because the solutions that we offer to customers will take multiple forms depending on the business line, the region or the products that we're focused on. On the left is an example from ITS, a connected compressor. The connected compressor is one that communicates its health in real time to our IR monitoring service. Any performance anomaly triggers a text or e-mail to the operator to Ingersoll Rand, informing us that service or intervention is required. We know that adding connectivity to a compressor already on our packaged care service offering increases the value of that contract delivered to the customer. We also know that the value of parts and labor for a connected compressor is approximately equal to at least the initial price of the machine. With that in mind, we think there's an incremental $100 million to $200 million of revenue opportunity by scaling the offering, our care offering to include these connectivity elements. The second example is from PST, and this one is an exciting one. This comes from our Seepex business, which we recently acquired. Seepex is a leading progressive cavity pump manufacturer. They've got an interesting solution called Seepex Service Point. It's a comprehensive machine health monitoring platform. I'll speak to one part of it, which is the use of the QR code. At the time of manufacture, a QR code is placed on the pump. When the product is in the field and in operation, the operator simply scans the QR code, pulling up a bill of materials, service manuals, a chat function, and importantly, a link to directly order spare parts, eliminating any friction and creating a seamless transaction for customers. Seepex has already generated over $5 million using this technology. We think scaling this across the PST platform is worth an incremental $25 million to $50 million for the company. Again, these are just 2 of many examples that I'll share with you as we roll out our IoT strategy. So let me conclude. [Audio Gap] on the large and rapidly growing IIoT market. We've got a very strong strategy that's built on a deep understanding of customer needs and where they are on their IoT journey. We've got a road map in place that includes product, hardware, software, intelligence toolkit and business models that will deliver increased value at the machine, process and system level. We've got a differentiated portfolio of assets that provides a definitive right to win. And finally, our IIoT program is a major enabler of future revenue mission of making life better. Thank you for your time. With that, I will turn it over to Mary for an update on sustainability.

Hi, everyone. My name is Mary Betsch, and I lead sustainability for Ingersoll Rand. I've worked for Ingersoll Rand for 17 years in environmental health and safety within various business units as well as at corporate. And I've never been so thrilled with the direction of our company to take action on some of the world's most pressing climate and water-related issues. The world is changing, and Ingersoll Rand is changing to meet the needs of our planet and our customers. Our recognition of this change is why we added Operate Sustainably as one of our strategic imperatives last year. You see the Operate Sustainability strategy is integrated with and supports all of our other 4 strategic imperatives. All of our employees are true owners of Ingersoll Rand, directly contributing to our sustainability outcomes. Sustainability aligns perfectly with our purpose and values. We make people's lives better. As you're aware, businesses are under increasing pressure to actively reduce their environmental impacts and our products and services provide solutions our customers need to meet this challenge. Ingersoll Rand is well positioned for long-term growth as an enabler and beneficiary of the sustainability mega trend, as we help change the course of our world. Sustainability is deeply connected to our strategic imperatives. We deploy talent with an ownership mindset to reach our sustainability goals. As we innovate more sustainable products, that accelerates our growth. We expand margins through reduction in energy, water and waste in our operations as well as our supply chain. And we allocate capital effectively through our strategic transactions that increase our exposure to these high-growth sustainable end markets. In the end, we operate sustainably to make life better for all of society and create economic value for our shareholders. Well, there's a lot happening on this slide, and that's because a lot has happened as we've rapidly progressed in our sustainability journey over the past 18 months. After the merger, we were met immediately with the challenges and response to our COVID-19 crisis. We came together as a team, leaning on one another to keep our employees safe and continue to deliver products and services to our customers. That same year, we also published our first sustainability report, and Vicente signed the CEO Action for Diversity and Inclusion. Moving into 2021, we progressed with our DE&I strategy and launched 4 inclusion groups, and we also announced our 2030 and 2050 environmental goals. Soon after announcing those 2030 and 2050 environmental goals, we immediately launched 2 sustainability IDMs on achieving our goals for the operations and products. Last week, Ingersoll Rand won the Best Compliance and Ethics program for large cap companies at the Annual Corporate Governance Awards. Ingersoll Rand's sustainability efforts are gaining recognition with rating agencies and scores are continuously improving. Last week, S&P announced our move into the 92nd percentile and with MSCI, we were recently upgraded to an A rating. In 2022, we will continue our journey as we serve all of our stakeholders. You heard Vicente talk about employee ownership. Let me tell you a little bit about why that is so powerful. Employee ownership is critical to our success as it creates the mindset to think and act like owners in our individual areas of influence. Over $250 million in equity awards has been granted to all of our 15,000-plus employees. We're all actively involved in growing the company and reaping the rewards of the return, which is now valued at over $600 million. We have many stories to tell about our equity rewards, but one special story comes from Rizzy. You see, Rizzy grew up in an orphanage in Pakistan, separated from his mother who was working as a house cleaner in Islamabad to support her 5 children. Years later, Rizzy found himself in Germany struggling to land a permanent job, when he found a job with us at Gardner Denver in 2014. Rizzy had only one big dream, uniting his family together into a home. And Rizzy made his dream come through by purchasing a home for his mother with the initial equity he obtained during the Gardner Denver IPO. This unique investment in our people will live on as we develop an ongoing new employee grant program in 2022. Our employees as owners are accountable for product safety, their personal safety and the safety of others, including our customers as we perform service on their sites. And time over time, safety ranks as the #1 in employee engagement score. Our record [Audio Gap] And we achieved world-class recordable rates last year as a combined company in 2020, and we're on track to do the same this year. Well, let's continue talking about our people as owners of diversity, equity and inclusion. As owners, our employees are helping to build a unified culture for everyone to reach their full potential at Ingersoll Rand. Numerous initiatives and measurable goals support each of these 3 pillars: representation, [ advancement and experience ], which is how we are building the best team. Our employees, active owners in our communities where we operate with our neighbors and shared planet. Here's a collage of examples from Earth Day to COVID-19 response and water assistance in water-scarce areas. Engineers Without Borders is our flagship partner. We will be working together with Engineers Without Borders to develop engineering projects to help build sustainable water, energy, sanitation and disaster response solutions for these underserved communities around the world. Well, let's move from the social aspect of sustainability and talk about the environment. We released our company environmental goals for our operations and our products in March of this year. we're creating that economic value through our own operations and our efficiency-focused products for our customers. Within our operations, reducing energy, conserving water and minimizing waste is simply efficient, and our businesses are actively developing strategic and technical solutions such as sourcing returnable packaging, upgrading equipment and lighting and closed-loop test bands. For our product goals, we are innovating solutions to continuously create more sustainable products to solve these energy and water challenges for our customers. Well, now let's talk about how we're getting this done in our own operations. The road map to achieving our energy, water and waste goals is deployed at the site level and owned by our business units. We have a pipeline of projects tracked from [ consent ] to completion. And as best practices are identified, we're writing standard work so that we can scale up these ideas around the world. As an example, we just finished a 3-week sustainability campaign, where we received nearly 1,000 ideas from our employees around the world how we can conserve water, minimize waste and reduce energy in our own operations. That's how our employees are thinking and acting like owners. Earlier this quarter, we initiated a procurement process for our first virtual purchase power agreement. This VPPA will fund a renewable energy project that once completed, will provide green energy to the U.S. electrical grid equal to the amount of our U.S. electrical load. This is a 30% reduction in our overall greenhouse gas emissions, a significant step towards our 2050 net zero goal. Well, our journey to achieve these aspirational goals is just beginning. However, as you can see at the bottom of this slide, significant progress is already underway as we focus on the future. Well, now I'm going to talk about what you really care about, how sustainability will drive growth at Ingersoll Rand. Our world is changing rapidly. And Ingersoll Rand is working with our customers to help shape a future defined by sustainability. As you know, businesses are under increasing pressure to reduce greenhouse gas emissions, conserve water, particularly in water-scarce areas and promote a circular economy. And our products and services are perfectly positioned to resolve these challenges by offering solutions to help reduce energy and conserve water. And solving these customer challenges will drive Ingersoll Rand's long-term future growth. In addition, we will drive growth by continuing to focus our portfolio on high-growth sustainable, and surprisingly, we are leveraging IRX to ensure execution of these growth strategies. Well, let's talk about the impact we're having right now and how we're addressing our customers' climate and water-related pressures. Here's 2 case studies demonstrating our innovations in sustainable products. Our first case study is on energy efficiency. Businesses are searching for solutions to reduce their Scope 1 and 2 emissions. And Air Dryer portfolio helps our customers address this problem. These solutions will drive our growth and create economic value. So we have 3 dryer technologies where each has a significant reduction in greenhouse gas emissions. Our refrigerated dryers reduced greenhouse gas emissions 40% per unit. Our heat of compression dryers reduced energy use by 90% compared to traditional dryers, as this dryer uses waste heat from upstream compressors to regenerate that drying agent, desiccant. And lastly, our sub-freezing dryers have a 70% efficiency improvement compared to traditional desiccant dryers and there's zero waste desiccant disposal. One example, a pasta manufacturer in Southern Italy saved 10,000 kilowatt hours per month in energy by replacing a heatless-desiccant dryer with our subfreezing dryer. This portfolio of dryers delivers above-market growth and helps our customers reduce their Scope 1 and 2 challenges. On to the next case study. This one is defined by water. Water scarcity as a result of climate change is on the rise. The pulp and paper industry, which is a substantial user of freshwater is looking for solutions to reduce their water consumption. And our Runtech product offering is designed to provide a water-free, energy-efficient vacuum solution for our customers within this industry. For every installation, our customers realize 90% or greater water savings, a 45% energy savings and a 50% material savings. This means this product has a threefold effect on our environment as it protects air, water and land. As an example, we completed a real build [Audio Gap] thousand cubic meters of water. That's equivalent to 36 Olympic-sized swimming pools. In addition, our customer achieved a savings of 5.7 gigawatt hours of energy per year. And to top it all off, they realized an average 13% productivity improvement due to increased dryness and faster machine speeds. This sustainably focused customer value proposition has resulted in our Runtech product portfolio, increasing it 65% since the acquisition in 2018. Well, as you can imagine, we are extremely excited about our future, the future of our customers and the future of our planet. So let me call out a few takeaways from today, and then I have a special announcement. First, sustainability is foundational for us. It aligns with all of our strategic imperatives. Second, with employees as owners, our mindset changes from this is the company I work for to, this is my company, which creates that overpowering force to improve our planet and continue to innovate for our customers. Operating sustainably is about the power of the and. We're making life better for our communities and we're creating economic value for our shareholders. We're also creating economic value by becoming more efficient in our own operations through reductions in energy, water and waste. We are well positioned for long-term growth as an enabler and beneficiary of this sustainability mega trend as we help change the course of our world. Now for the big announcement. In honor of Investor Day and on behalf of our shareholders, I am delighted to announce today Ingersoll Rand will be donating 150 Dosatron water powered dosing pumps to Engineers Without Borders. This onetime donation will provide approximately 150,000 people with access to clean drinking water in remote communities around the world. We are thrilled that our sustainable product donation will help make life better for families in these underserved communities. At this time, we're going to prepare for our first half of our Q&A. So please give us just a moment to -- and we will be back with you shortly.

Thanks, everyone. Our first question comes from Nigel Coe at Wolfe Research. Regarding the total addressable market expansion from $44 billion to $70 billion, how much of this comes from expansion into new markets and adjacencies versus market growth?

Yes. Nigel, let me take that one. What you saw on my slide and when we show that we go from $44 billion to $70 billion, all of that is basically the end markets that we're focused on today. You're going to hear more as we go into the next kind of second section of the day to day, where the teams are going to walk through the ITS and the PST segments. And you'll see that whether hydrogen or some of the end markets that we're approaching, where we play today is going to give us that addressable market of $70 billion.

Thanks, Vicente. Our next question comes from John Walsh with Credit Suisse. As you look to your growth forecast, can you disaggregate market growth versus Ingersoll Rand's specific growth, for example, new products, adjacent market expansion, et cetera?

Yes, John, I mean, the way -- I'll take that one too as well. I mean the way we're thinking about that is that when we say that we're going to grow organically at mid-single digits, total revenue growth in that low double digit, but the organic piece being mid-single, we think about it as being kind of half and half in terms of market. And the other half is based on these organic enablers that we talked to you about, demand generation, the Industrial Internet of Things and the continuation of new product and service innovation. So I think we have created a great game plan here on how we can really accelerate our growth organically.

Our next question is from Joe Ritchie at Goldman Sachs. You're planning to increase your IIoT revenues to almost $2 billion from -- by 2025 from $500 million today seems ambitious. Can you talk about how you got to 10%, whether you have an acceleration and adoption? And what gives you confidence in the path to greater than 25%? Do you also plan to achieve this organically?

Yes, I'll take that one too as well here for a minute. And then, hopefully, as we get other questions, we'll let the team also take some questions. In this IIoT revenue that we talked about, what we're doing is we're kind of tracking a leading indicator. And the way to think about it is that the $500 million of revenue that Mike spoke about in his section. It means that this is the revenue of products that we have today that we're keeping that has this enabling technology. So once we ship it, then we connect it and then we can monetize that connectivity. So the way -- because we're the early stages, the way we want to track this for now is having the ability of having this leading indicator that shows how fast and how much are we generating revenue as a total company that has this IIoT-ready connectivity is that we call it smart products. And the reason for that is that we have case studies that show that we know, once that product is enabled, once that product is connected in the compressor side, we know that aftermarket could grow above 20% on that specific compressor before and after being connected. So again, we think this is a great way for us to track this leading indicator. And as we continue to grow and see that very specific revenue, we'll give you more guidance in terms of the incremental revenue uniquely coming from these connected machines.

Thanks, Vicente. Our next question is from Julian Mitchell at Barclays. On the IoT, there's a difference between IoT ready and what the customer actually uses and pays Ingersoll Rand for. Can you provide some examples of what the lowest hanging fruit is? [Audio Gap] so the customer pays for recurring revenues. And does IoT uptake by customers vary much between the 2 segments?

Great question, Joe. I'm going to have Mike Medaska, maybe take us on that, Mike?

Yes, thanks for the question. Yes, I think the first important thing to point out is that we're laser-focused right now on building out that product road map that I shared earlier. Obviously, the core product suite is in place. We're spending a lot of time and energy on getting that hardware and software connectivity layer right. What we've seen though in terms of adoption is that when we can get solutions into the field in the hands of customers and they can see the tangible value that it's delivering in terms of reducing unplanned downtime, reducing energy consumption, keeping operators safe and productive that the orders and the interest in subscribing to our services or participating in the products increases exponentially. So really, for us, it's about getting out of the gate and providing that solution to them that they can evaluate, that they can share references from peer companies, et cetera, and really understand that value, that drives uptake. The final point I'll make is that the solutions absolutely vary from category to category from segment to segment. We heard over and over again, the customers are looking for solutions that are specific to their use cases. And so it's about engaging with them on their journey and targeting our solutions to the needs of their specific applications. And we found that to be successful. And we think that's the key to the growth in the future.

Thanks, Mike. We have another one from John Walsh of Credit Suisse. Do you expect your IoT investments to drive incremental pricing? Or is it a cost of doing business? For example, how might your IoT investments differ from competitors?

John, I'll take that one. I mean the way we think about it is that these IIoT investments and revenue that we're going to generate is going to increase our margin. So for example, here, the case story on the next section with the ITS segment on how the service agreements that we're putting on our compressors have way above our gross margin level. So it's one of those exciting stories that is not only about the ability to generate revenue, but how it comes in at a much higher gross margin profitable portion than the fleet average of the company. And could there be some incremental pricing based on our needs? I think that in some cases, when we can drive that connectivity and you're going to hear some of that from the PST team, that we can actually -- our IoT technologies, for example, on the Seepex are driving some higher efficiency. It's all about how we tell that total cost of ownership to our customers that leads on an ability for us to increase our value. And customers will be willing to pay for that increase in value in the form of pricing as long as we can demonstrate that we can achieve [Audio Gap] Total cost of ownership, which I guarantee you, that's exactly where we're very focused on now.

Thanks, Vicente. Our next question is from Mike Halloran at Baird. On IRX, how has the receptivity of the program tracked as the merger of Gardner Denver and Ingersoll Rand has taken hold, particularly within the Ingersoll Rand side [ business ]. Similarly, how has implementation tracked with newer acquisitions? What do you think of other -- why do you think other companies have not taken a similar approach to simplify and reduce complexity?

Mike, I think the best one to take this one is Mike.

Great. And thank you, Mike. Great question. I would say the receptivity of the of IRX since the merger, I guess I will just demonstrate it with the numbers. And so we had 70 premerger. Today, we have 270,so about 200 are new. And thinking about the second part of that first question, around how is the IR -- how has IR received the program, I would say extremely well. And I think Arnold Li -0 Arnold Li is probably the best example of that. And I think you heard Arnold say, IRX is a competitive advantage. And I can tell you, spending a lot of evenings on the phone with Arnold and his team, they're truly power users. With new acquisitions, I'm not going to steal the thunder from the afternoon, but you will hear this afternoon from Liz the way that IRX is used, actually premerger, to plan for fast momentum in driving of the growth initiatives to get momentum with anything. Any size, Cesare and his team are involved via IDM, actually premerger, post-merger in the first early weeks, the newly acquired company actually takes over and can run IDM meetings very efficiently on their own. And then what other companies are doing. Honestly, I don't really know. I would say that our ownership mentality, acting like owners from the standpoint that all employees are participants and the equity grants gives them some real incentive to get things done better and faster.

Our next question comes from Steve Volkmann at Jefferies. Are there team members specifically dedicated to IRX? And do you have IRX black belts or something like that? Do they have to juggle IDMs with their regular work? And if so, how do they stay focused on both? Is there any financial incentive for IRX training and execution?

Mike?

Yes, I love this. We have an extremely large team of dedicated resources to IRX, it's true and it's myself and a woman named Rina, who we refer to as a verb. And the reason for that is that we want the ownership of IRX and IDMs to be in the business unit. So when I say power users, I'm really talking about people that use it regularly and use it to get their job done. Now I would say, and the point that I made on the slide about an area of focus, the area of focus is very specifically. We don't want to use IDMs to do everything -- we want to focus on the higher priorities. And then the last part of the question I would say, on financial incentive would be really yes and no. So yes, and that we're all stockholders and no, it's just -- it's the way we work. It's the execution language.

Thanks, Mike. And as IRX -- our next question is from Rob Wertheimer at Melius. As IRX becomes more ingrained, what opportunities open up that you do not tackle today?

Well, I think, again, early innings, so 2 things. We want to think about a continuous improvement kind of mindset. So I'll give you a great example. We were not using IRX for things like integration planning and execution until we executed the Ingersoll Rand Gardner Denver transaction. And we saw the opportunity and almost -- when you think about things in the mindset of a growth bridge, those swim lanes present themselves quite readily. So we use it there. And since then, and now we feel like have a somewhat best practice in integration planning and execution. So we don't have a specific road map. I would say it's needs-based and pulled by the business units to execute based on their strategic plans and financial forecasts.

Thanks, Mike. Our next question is from Andy Kaplowitz at Citi. Can you translate the positive trajectory of Ingersoll Rand's demand generation in terms of the ability of the company to outgrow its markets? And what is embedded in your mid-single-digit organic revenue CAGR through 2025? Do you expect to see increasing market outgrowth? And what could that number be by 2025?

Great question, Andy, maybe Cesare, do you want to...

Yes, Andy. I think, first of all, we are excited about what we achieved in the last 5 years. And demand generation has clearly contributed like IIoT and product and services, the 3 elements that Vicente mentioned in how we are going to reach this mid-single-digit organic revenue CAGR by 2025. I expect, as you've seen in the presentation, clearly, to be able to outgrow the market with the help of demand generation also in the coming years, you've seen different elements. You've seen expand into the channel, helping the channel to become better demand generation. It's clearly an element that I believe will help us to outgrow the market. Second one is, for sure, the ability of onboarding companies like you [you've seen], MD-Kinney and be able within a very short period of time of basically provide them a booster and help them in outgrowing the market. So yes, I definitely expect already by these 2 levers. On top, you have seen a lot of ideas and plans, more than ideas. And now we are going to improve the engine and basically become much more surgical in what we do and being able to pin poiny opportunities to really deliver in the next 4 years. So yes, the answer is yes. and we expect to be able to help the company outgrow the market.

Thanks, Cesare. Our next question comes from Joe Ritchie at Goldman Sachs. I thought the demand generation discussion was fascinating. We don't usually underwrite sales synergies at deal announcements, but I'm curious how much does the demand generation opportunity get taken into account when evaluating deals? Could you address relative to the recent MD-Kinney and Precision & Sciences deals.

Joe, I'll take that. And you're spot on. I mean demand generation is not only fascinating, but I mean it's pretty powerful. And we've been talking about the demand generation for quite a while, and I'm really excited good taste in terms of under the hood, what does that really mean and see the power of what we're creating here. So I think it's really exciting. And to your question specifically on deals, we absolutely -- when we're doing our financial modeling, we take into account what we can do with that business from a demand generation perspective. Now having said that, when we do our ROIC calculation and where we can get on year 3 or year 5, we cannot discount that because we want to have a financial model as we look forward on what we can do, that we can have more precisely in our control, whether that could be commercial pricing execution or cost activities, that is kind of what we are kind of more baking in into our financials. While we think that then the demand generation engine that we have, is what provides that upside momentum. So yes, I mean, MD-Kinney was definitely one that we did. We were actually looking at a transaction not too long ago where basically it was really core demand generation, one of the key aspects that we were thinking about how this could really create a major impact on this technology acquisition that we were looking at. So yes, it is really core to everything that we can think about and we do. And I think there's just a lot of excitement here in terms of how you saw what Cesare talked about that what we have done, but also the room that we have to improve as we go through the different stages. So it's really fascinating and willing to go into more level of detail, as many of you would like to go because I'm very passionate about these topics.

Thanks, Vicente. Our last question for this segment comes from Mike Halloran at Baird. How much do your internal ESG targets, long-term ESG aspirations and where Ingersoll Rand sees its end market mix longer term, factor into acquisition criteria and decisions and internal capital deployment?

[ Granting that ], Mike. And I love this question because I mean, it's also a very passionate topic for us. And it is very well ingrained in how we think about M&A. Mary spoke about Runtech. Runtech was an acquisition that we did in 2018. And even though at that time, we were not talking about ESG, one of the reasons why we looked at Runtech and we were so excited is the ability of what that technology could do in the pulp and paper industry. And you saw from the numbers from Mary, how staggering the numbers are not only in energy but also water consumption savings. And so absolutely, I mean, I think it's really core. When you look at the acquisitions that we have announced this year, whether Seepex that is a strong player in the water and wastewater; whether Maximus, that is a very great player on how to optimize energy efficiency in the agricultural market, in the precision irrigation to as well; or technologies like the Tuthill Pumps that it is very highly precise technologies that are actually used in clinical chemistry and life and lab applications. So absolutely, we're looking [Audio Gap] of high-growth, sustainably minded end markets when we look at the acquisitions.

Thanks, Vicente, and thanks to all our research analysts who submitted questions. That wraps the first segment of today's discussion. We're going to take a quick break, and we're going to resume again at 10:00. Thank you.

Thank you. [Break]

Welcome back, everyone. Hope you enjoyed your break. We're really excited to do a deep dive into our business segments. So with that, I'd like to introduce Enrique, who will cover the Industrial Technologies and Services segment.

Hello. Good morning, and thank you, Chris. Yes, I am Enrique and I was here with many of you in our last Investors Day. And it's really good to be here with you again to talk through the progress and opportunities ahead in our Industrial Technologies and Services segment. I'm now approaching 6 years in the business, and I joined through the Gardner Denver site. Prior to this, I had a number of leadership positions in Emerson for 15 years. Well, a critical strategic benefit of the merger between Gardner Denver and Ingersoll Rand was the combination of the #2 and the #3 compressor portfolios. As now combined Ingersoll Rand, we have an extremely broad range technologies that allow us multiple solutions to solving customer needs. Added to this, a robust range of blower and vacuum technologies that are complementary to the compressor sale. We are highly focused on providing our customers with the most efficient solution based on the total cost of ownership so that can benefit economically and reduce their environmental exposure and footprint. We are driving mid-single-digit growth by leveraging the unique growth capabilities we have developed in demand generation and industrial Internet of Things and continue to innovate and introduce new products that deliver more efficient, more predictable and reliable services to our customers. We have made huge improvements in our margin profile from the time we work at Gardner Denver and through the combination Ingersoll Rand. But we see meaningful opportunity to improve the segment margin profile through growing our differentiated technology, our recurring revenue and services business and continued value creation through innovate value. We are going to highlight some of these opportunities today. Finally, we are playing in a huge $33 billion market that outside of the 2 largest players, ourselves included, is very fragmented on the compressor and also on the vacuum and blower side. So we see continued meaningful opportunity to be consolidators in this market as customers demand more efficient products, enhanced data analytic capabilities and world-class service. We have a robust M&A funnel to support this, and you have seen us already take action to add to the portfolio. On the next page is an overview of the ITS segment, $4 billion in revenue and 2021 EBITDA nearly 25%, up almost 500 beautiful basis points from 2019. One of the key benefits of the Gardner Denver and Ingersoll Rand merger was the geographic parity that it brought, both strong in the Americas, Gardner Denver quite strong in Europe and Ingersoll Rand a solid share in Asia Pacific. Because of our multichannel and multi-brand strategy, we have been able to leverage the relative strengths to cross-sell, rebrand technologies and go to market in all geographies from a position of great strength. Revenue by end market is diverse, with many very interesting markets, such as food and beverage, life sciences and water. We will speak shortly about how organically we are shifting the market exposure toward higher growth. We go to market both from a direct model currently sitting at 58% of the IPS revenue and through distributor partners, again, because of our multichannel, multi-brand strategy, but mostly the thoughtfulness in which we approach the combination of Gardner Denver and Ingersoll Rand, we have avoided channel conflict and position our technologies to avoid cannibalization. And this has proven to be value enhancer, not a detractor. We will speak to this as well in a bit. Finally, our current original equipment, an aftermarket split of total revenue sits at 59% and 41%, respectively. We see meaningful opportunity to improve the attachment rate of our services and part businesses as we leverage our demand generation, our industrial Internet of Things capabilities and leverage data to ensure customer uptime. Moving to the next slide. This highlights our broad range of mission-critical flow creation technologies that are the heart of the system in which they operate, yet a low percentage of total cost to that system. Our compressor platform represents approximately 65% of the segment revenue consists both of the compressor technologies as well as air treatment technologies, which are largely downstream of the compressor and they do the filtering, dry conditioning of the air before its end use. Our vacuum and blower technologies represent a combined 20% of the revenue, while other businesses like power tools and lift comprise approximately 15%. Our multi-brand strategy with each of these technology suite is prevalent, and it's allowing us to compete and win across geographies and product tiers. Now this is the slide that we choose. There was just 1 slide I would share with you today because it's showing the strategy, which we are executing today to achieve our 2025 objectives. As Vicente discussed earlier, we are leveraging and aligning our technologies to address the global mega trends of digitization, sustainability and efficiency and quality of life. As a result, our implicit net market growth rates will increase as we leverage our organic growth enablers to compound market growth. Then our demand generation capabilities allow us to target customers that benefit from these mega trends. We will continue to improve the efficiency of our machine using our i2V process and expand our industrial Internet of Things capabilities in our offering as we connect our installed base. Aftermarket is a strong growth lever as we increase attachment rate by increasing and leveraging our connected installed base to capture value through guaranteed uptime, predictive maintenance and other monetization streams enabled by data capture and analytics. Additionally, we will continue to expand margins throughout the initiatives and our highly strategic and proven pricing capabilities well and then our unwavering commitment to IRX, our accelerator to these growth levels. Through 2025, we will then deliver mid-single-digit organic revenue growth and high 20s EBITDA margin. Now the 6 case studies that follow with -- aligned with each of the growth levers and provide practical samples of what we are already doing today within our organization to achieve these goals. You're going to see -- hear in a second, my colleague, Gary Gillespie, which take us through the first 4 case studies. The first 2 case studies on end market growth with U.S. go-to-market strategy and hydrogen. Then 2 more case studies on technology differentiation in oil-free compressors and air treatment. I will then take over and close the case studies with 1 case on aftermarket growth with package care. And then the last case study on i2V use for technology and margin enhancement with our blower portfolio. With this, let me hand this over to Gary, which we will take us through the first 4 case studies.

Thanks, Enrique. It's a pleasure to be here today. I'm Gary Gillespie, and I have responsibility for the Industrial Americas business. I've been in the industry for more than 40 years, and I can tell you, I've never been more excited to be here than in the last few years. The merger of Gardner Denver and Ingersoll Rand has given us so many opportunities for growth in so many markets, in so many technologies. And I'm going to share a few of those with you today. So let's jump into our first case study. California is an example of how we've targeted end growth market share in an established but underpenetrated geographic market. When we completed the merger and brought the portfolios together, we did a rigorous assessment of our combined market share by geography. It became clear that the large industrial market in California was a significant opportunity. Since then, we've leveraged our entire commercial organization to increase share by establishing new locations in the highest growth submarkets. We also converted distributors, some of who are competitors to IR and GD brands. And we've invested in expanding the presence of our own customer centers with increased sales and service personnel. Our brands and products strategies are highly coordinated to avoid both channel conflict and price erosion. Our demand generation capabilities prove crucial to finding and converting new customer opportunities, and we have fantastic results to date. We've grown market share by 350 basis points and have realized double-digit growth in both orders and revenue on a year-over-year basis. We're now taking this model to other markets where we have identified similar opportunities to expand our presence and advance our market share in those. Let's move next and talk about our next case study, which is all about opportunity in the high-growth hydrogen market. As I said, I've been in the business for 40 years. People have been talking about the potential for huge growth in the hydrogen market for a long, long time. Yes, the market has grown approximately 300% since the 1970s. And today is estimated at approximately $2 billion, where our technologies play. We believe the market will now actually realize that significant growth over the next few years. And here's why. The push to net zero and alternative fuel sources are, in fact, gaining traction. We expect the global hydrogen compression market to grow 5x through 2025 to approximately $10 billion as applications for hydrogen expand into areas like transportation, commercial and residential heating, power gen and shipping. The great thing is, our solution has an existing strong portfolio of brands and technologies in Nash, Belliss & Morcom and Ingersoll Rand as well as PST brands that you'll hear more about from Nick. And we're continuing to build out and invest in those technologies in this space. We're building our suite of products across a range of applications for hydrogen and CO2 compression through the entire value chain from production to transmission, to storage and to refueling. And while we're currently a player in niche markets in -- niche applications in this market, we see a huge opportunity to leverage our technologies in the most attractive segments of the hydrogen and carbon capture markets. Some examples of the current technology solutions are shown on the right-hand side of the page. First, we're reducing hydrogen from a gaseous state to a liquid state for storage and transport. This process is required to allow for its storage and tanks and transportation within local infrastructures. IR centrifugal compressors use hydrogen and nitrogen coolants to compress to liquid state and Belliss & Morcom high-pressure reciprocating compressors are used to compress gaseous hydrogen for transportation in tube trailers. Second example is carbon capture for steel plants. Using 2 IR compressors, which is a combination of centrifugal and high-pressure reciprocating, carbon dioxide is captured, compressed and injected into a local oil well to enhance production and also permanently store that carbon dioxide reducing greenhouse gas emissions from this plant alone amounting to 800,000 tons per year. The third application is related to marine cell recovery and compression. Ships arriving into port are required to shift from diesel engine to electric motors to reduce emissions. Batteries are much less powerful and durable. But using fuel cells, oxygen and hydrogen are fed into the cell, a Nash hydrogen recycled gas compressor captures, recycles and reinject the hydrogen into the fuel cell, improving efficiency of the cell to provide the electric energy and to recharge the batteries. Compression technologies are mission-critical for the hydrogen and carbon capture market in the value chain that lies within. We're leveraging our rich portfolio of technologies and proven brands to actually and actively pursue the most attractive segments of that value chain. Let's move out to the end markets now and into technology-enabled growth. Our next case study highlights how we have combined our oil-free compressor portfolio since the completion of our merger. The oil-free segment of the compressor market is growing -- of the oil-free commercial market is growing at double the rate of oil-lubricated market, given its sustainable, environmentally sensitive profile, and it addresses higher growth end markets. As you can see between the Gardner Denver and IR portfolios, we now cover the entire range from 0 to 4,000 kilowatts, similar to our largest competitor. We have leveraged GD's strength in the smaller kilowatt offering and IR strength in the larger kilowatt product range to provide this. By leveraging both rebranding and cross-selling in the channel, we're accelerating new product development, and we're being able to target high-growth sustainable end markets such as electric vehicles, renewable energy, and we're seeing huge payoffs. We're winning in all sizes and across all geographies. And as part of our end market strategy, we're seeing impressive wins in markets like medical, food and beverage, water treatment. We've grown 3x in the market rate since 2019. We're very pleased with the progress already made, and we're excited about the continued efforts that these differentiated technologies have made for us. Next, we're continuing the conversation on technology innovation with our air treatment portfolio. Premerger, IR had been investing in refrigeration, while Gardner Denver was buying and reselling third-party manufactured products to package with compressors. There exist a huge opportunity since 80% of the industrial compressed air applications require this technology to drive the compressed air and to remove impurities. So this is truly a complementary technology to our compressor portfolio. Since the merger, we've taken a holistic approach to penetrating this global market in a few ways. First, we focused on efficiency and accelerated new product development to deliver a refrigerated dryer portfolio that was 20% more efficient, a huge step change. Second, we leveraged our i2V process to reduce materials and labor cost, increase that product efficiency and allowing us to capture more value from the customer. As a result, our margin has gone up 1,000 gorgeous basis points. Our products are also more sustainable. With a 50% (sic) [ 40% ] reduction in greenhouse gas emissions, we've once again leveraged our multi-brand strategy to target high-growth geographies and underpenetrated markets. This combined effort has led to a greater than 5% increase in share in the U.S. in only 18 months. Customers demonstrate to us every day that they are willing to pay more for technically superior and environmentally sensitive products. And we still have a lot of room to grow. Now I'll turn it back to Enrique to wrap up our case studies.

So we move into the last 2 case studies on aftermarket growth and then the i2V and margin enhancement. I would like to highlight in this case, specifically how we are growing our aftermarket business across our global portfolio. First, we estimate the cost of parts and service over the life of the compressor as approximately the same as the original cost of the compressor. So it's critical to capture this recurring revenue. Legacy Ingersoll Rand direct heavy selling model led them to create what we call packaged care service agreement. This is a risk transfer agreement whereby the customer pays a multiyear agreement for the totality of maintenance and service events. It's a fantastic recurring revenue stream that was predominantly in the U.S. And we are now proliferating this across all geographies and implemented it into the Gardner Denver brand as well. As we connect our installed base, we have live remote monitoring, which will improve our ability to intervene, ensure routine maintenance schedule and completed on the first trip instead of multiple trips to diagnose and then resolve the issue, improve the uptime of our machines, increasing profitability related to the packaged care agreement. This opportunity represents $1 billion potential for Ingersoll Rand. We are very early innings in this journey. We have connected 10,000 machines since the merger between retrofits and new machines, and we have seen 100% growth in packaged care. But we are only in the low teens in attachment rate for this service today. So we see meaningful runway to increase that attachment rate and continue improving the benefits the customer is able to realize through our digital tools. In this last case study, we're aligning our technology portfolio to capture mega trends, attachment and alignment to high-growth end markets, wastewater in this case. We found opportunities to rapidly increase our market share by completing our portfolio in this $900 million total available market and also using our multi-brand and multichannel IR brands to expand our reach. We then address the profitability of the base range by utilizing i2V. We designed new range to be able to harmonize packages to be able to fit low and screw technologies with over 90% common material and to be an easy retrofit to competitors' installed base. Then we added 3 new technologies to the portfolio and a 30% market expansion, a range of solutions to provide best cost of ownership and efficiency to our customers. We have achieved more than 40% order growth and 25% revenue growth year-over-year. And most importantly, we have signed an agreement to provide complete portfolio to major wastewater treatment player. Well, we have seen our combined portfolio has solidified a very strong global #2 position than -- combined with our unique growth enablers will allow us to orient the portfolio to inherent higher growth and continue to take share from our largest competitor, while continuing to consolidate the market. As a result of the growth levers, some highlighted in the case studies, we will achieve mid-single-digit growth underpinned by an aftermarket business in the 40s of sales. This, with continued i2V and pricing discipline, will deliver 100 basis points of margin expansion year-over-year, yielding an EBITDA margin of high 20s by 2025. Thank you. I will now turn it over to Nick, who will take us through the Precision and Science Technologies segment.

Good morning, everyone. My name is Nick Kendall-Jones, and I lead the Precision and Science Technologies segment of Ingersoll Rand. I'm truly excited to be here to present to you today more about this high-performing precision dosing and transfer business and explain how we create value and why we will create more value in the future. A little on my background. I've been in General Management, P&L management roles for the past 20-plus years, mainly focused in the Flow Control segment having worked for ITT, Xylem, Crane, and I was the President of the former PFS group sold from private equity to Ingersoll Rand in 2019. Let me begin by describing a few bullets why PST delivers and will continue to deliver exceptional results. Firstly, our core focus and strategy is to continue to grow in niche mission-critical applications requiring the highest precision in dosing and transfer, as basically the customer is willing to pay more for a solution to a problem. We have also positioned ourselves into some of the highest growth end markets in this segment. These are tied to long-term sustainability trends. We have established ourselves a leadership position in end markets such as medical, water and the food agritech space. As a result, there is abundant opportunity for us to grow, both in our core and close adjacencies aligned with these high-growth end markets. For example, in the last 24 months, we've added 15 new product lines to the portfolio and we'll add an additional 25 new product lines in the next 24 months. With our main focus on sustainable solutions, which are digitally enabled and this, coupled with our M&A activity means we've tripled our served available market this year. With our great technologies, strong leadership position and with IRX's disciplined execution model, we are now deploying growth strategies in these areas to deliver industry-leading results. Let's now take a look at some high-level highlights of the business. PST is made up of gold standard brands with clear market leadership, build of 75-plus years of application knowledge. As you can see on the bottom of the screen, our business is well balanced geographically with a strong foothold in some of the higher-growth regions. This, coupled with a strong footprint and with our make in region, for region strategy helps us manage through critical supply chain challenges. We fulfill demand with many of our brands with a very strong, very loyal distribution network who provides superior lead times and service, which is critical as we serve very highly fragmented niche markets. This has been amplified with our recent acquisitions, where we now offer multiple solutions to customers' problem. Our demand generation process complements its strong channel, targeting the end users and creating a better pull-through. And our large installed base and strong brand loyalty lead to a strong, high-margin aftermarket and like-for-like replacement market. With our strategies and growth initiatives, we've laid out since the merger, we'll begin to gain traction, leading to 7% growth and margin expansion of 280 basis points. PST's strategy is founded in its core product portfolio, positive displacement pumps, where the business holds a strong market-leading position. We have a house of fortress brands as shown on this page, that lead in both specific PD pump technology as well as in specific applications. Images of some of our pumps are listed on the left, with some of the applications and then which type of PD pump technology they stretch across. With 8 types of PD pumps, the market is still highly fragmented and there's ample room for PST to expand horizontally. The recent acquisitions of Seepex, Tuthill and Air Dimensions are examples of this. There is also still much more room to expand both organically and inorganically within these technologies with examples such as peristaltic pumps, screw pumps and low pumps. So why is it important to have multiple types of these pumps in our portfolio? And what advantage does that give us? Firstly, depending on the application, the viscosity of the fluid, the pressure and flow rate, there could be any one of these pump types that could be used as a solution. Now we have a broad portfolio. We have multiple ways to solve the problem for our customer. Secondly, when you walk into a food and beverage facility or a wastewater treatment facility, there are multiple types of these pumps. We are now the one-stop shop solution for these customers. And at our plant level, having one company to call for service and maintenance is clearly a clear advantage to our customer. Finally, at the distribution level, our channel partners can now offer multiple IR products to solve -- we multiply our chances of winning every time. PST's strategy is also to target some vertical expansion as the business brands are anchored in 4 high-growth, sustainably-orientated markets: medical, water, food and clean energy. Here, PST is moving up the value chain beyond pumps to add more value with complementary adjacent equipment, connectivity, software and services. The market structure and dynamics of each of these verticals present different opportunities and therefore, different solutions. For example, in some cases, we'll go as far as full facility IoT software solutions. While in others, we'll simply extend connectivity offerings to pumps for asset monitoring. Additionally, in some select end markets, we'll go more vertically integrated, into automated systems or packaged platforms as long as they are not dilutive to our overall margins. The acquisitions of Zinsser Analytics and Maximus were part of these vertical strategies, which will be covered further in the upcoming use case examples. Similar to ITS, we harness the IRX playbook from Ingersoll Rand with disciplined and certain execution and cadence. Ultimately, by deploying the horizontal and vertical strategies through this playbook, we intend to grow mid-single-digit plus and mid-30s EBITDA by 2025. Now let me share with you some of our attractive markets and case studies on why we win. Our first case study is in the medical business, and it's a tremendous opportunity we have. It's roughly 1/3 of our business, consisting of liquid, gas and vacuum pumps across a wide range of medical applications in patient care, lab, R&D and biopharma. Firstly, the opportunity we have. The strategy of our medical business is to continue innovate in this portfolio to meet the ever-increasing need for lower volume flow with high precision levels of dosing. This need will only intensify with the rise in the pandemic and other complex human health issues that require more vaccines and therapeutics to develop using methods that require microdosing and fluidics. Historically, our medical business has been strong within the attractive patient care market, as you see on the left-hand side of this page, with applications like ventilators, oxygen concentrators and lab and diagnostic equipment. Markets that typically focus on a healthy mid-single level digit growth, and we'll continue to focus here, differentiating ourselves in the ability to provide quick, efficient and tailored designs customized to our OEMs' requirements. On the 2019 Gardner Denver Investor Day, we announced plans to expand presence in lab and R&D facilities through Zinsser Analytics lab automation solutions. In addition to driving above-market growth, this strategy also helped us to expand the customer base with a large device and instrumentation OEMs that also operate in bioprocessing, the highest growth opportunity in Medical for PST to bring its current and new products to. Further, with Zinsser, PST Medical is the only supplier that provides a total technology solution, including syringe, gas and vacuum pumps and fully automated systems. A dedicated focus on this strategy has started to reap the results. Firstly, the core medical business has grown double-digit year-to-date organically versus 2020. In addition, the Zinsser business grew at 3x that rate but winning projects in these high-growth spaces and capturing more of the top OEMs that sell to bioprocessing. We estimate more than 80% of these top OEMs are now our customers, and those relationships are strong with high recurring sales. Our NPD pipeline has been focused on this high-growth bioprocessing market. For example, on the right-hand side of this page, you see our new peristaltic pumps, which will be launched next year. By combining our knowledge of our Oina acquisition, coupled with our Albin acquisition and peristaltic knowledge and our incumbent dosing knowledge, we've developed these new ETL-peristaltic pumps, which will be uniquely designed for precise, reliable and efficient transfer of dosing of critical fluids in the growing area of biopharma manufacturing. This will open up approximately a $450 million market for PST, growing double digit over the next 5 years. Now let me talk about water and our opportunity, consisting of pumps, mixes and systems that are used in industrial, commercial, municipal and wastewater markets. Our water strategy is to focus on some of the most challenging niche applications within water treatment. The things that kick operators up at night and requires specialists and precision pumping and mixing. This allows us to sell on value. Usually, we're the lowest in total cost of ownership, yet a small cost of the overall system, ultimately leading to a high level of profitability versus some of the more commoditized offerings. Today, these most critical applications are driven by some of water's strongest secular trends, increasing regulations on contaminants and source water, stricter requirements on how to process to dispose of sludge driven by new directives globally. Our Milton Roy and LMI brands lead in metering pumps with treatment of water and wastewater, and Seepex leads in the progressive cavity pumps for transfer and processing of sludge. Seepex has brought some great new IoT technology to our portfolio, and Seepex assets -- asset monitoring called Connected Services is solving customers' problems across the world. And then we're taking that technology across our other brands, enabling our digital portfolio. The opportunity for us now is to harness the strength of these 2 leading brands for pull-through via channel, geographic presence and digital technology, and we're already seeing new wins. Already, our water business continues to perform well, double-digit growth year-to-date and now incremental opportunities for growth arising from leveraging Milton Roy and Seepex's water treatment networks and channels. An example of a recent win in Singapore, the Keppel Marina desalination plant, one of the most advanced in the world and where we have over 60 pumps and 6 mixes from Milton Roy. Here, we have an opportunity with Seepex's connected services to bring products and bring much more potential in this area. An example of the value customers can obtain from these connected services is a recent project win with Thames Water, the U.K.'s largest water utility. They have 90 Seepex sludge pumps and connected services at its Mogden Sewage plant in London. Here through our data analytics, we uncovered a process issue within the first year of operation that once resolved, increased the plant sludge treatment throughput by 30% with no capital outlay, a huge benefit to one of London's largest treatment facilities. Milton Roy frame agreements with the top 2 global water EPCs now with an opportunity to pull through Seepex. Consider today, nearly half of our water sales are recurring, we have an installed base of over 400,000 pumps globally. This is ideal for cross-selling and brand pull-through. So to summarize on water, on top of the solid base businesses we have, we've got great synergistic opportunities that leverage, which will drive sustained double-digit growth over the 5-year period. Now let's discuss 2 emerging market verticals, which we are very excited about, starting with Agritech. Our Agritech platform is roughly $100 million that consists of pumps for dosing into medicines and vaccines as well as a full IoT solution for remotely controlling and optimizing all processes within indoor ag operations. These indoor ag operations often refer to as controlled environment ag or CEA. They receive an enormous investment as outdoor ag is increasingly challenged in several ways. Climate change is intensifying floods and drought. Foodborne illnesses outbreaks that are requiring more controls. Increasing pandemics within livestock like the African swine flu are having major impacts, and resource limitations with water and arable land, Which require growers to do more with less. Interestingly, of all the global industries, agriculture is being ranked as one of the least digitized, meaning that operations are the most manual, without real-time controls and lack in data insights. The trends have given rise to the high-growth market referred to as Agritech, which combines new tech innovation with some of the more traditional growing techniques. With the recent acquisition of Maximus, we now have a leading position in this segment. The image on the lower left shows an example of the Maximus solution, which controls all critical functions within indoor farming, like temperature, humidity, fans, fertilizer or feed rates, irrigation, vaccine and medicine, to name a few. Our strategy for this is to combine all this data and application domain knowledge to make indoor farming more safe, secure, efficient and profitable. And already we've seen great results, mid-teens year-on-year organic growth to date. Further, Maximus software and controls are the market leader, yet only a fraction of funds globally are digital, which gives us enormous opportunity to expand. Typically, farmers gained 2% to 10% efficiency improvement from a real-time control as well as lower operating costs. So our monthly SaaS subscription-based model has become very attractive. Other stakeholders are also finding value, like the farmers insurers. Through real-time data monitoring, our systems can proactively detect electrical ports and other types of causes of fire before they happen. The insurance companies can therefore tier their premiums based on whether a farmer does or does not have a Maximus system driving growth for us and a reduced cost for the farmer. Our Dosatron business has also seen increased growth opportunity with Maximus. The combined businesses are now approaching the livestock pharmaceutical companies to bring data on the effectivity of various medicines and vaccines based on real-time farm operations. One example of this is our partnership with Boehringer, where we provide data which helps the pig farmers manage their daily activities for medicines and vaccines based on real-time data. Also, Maximus provides real-time monitoring control for the Dosatron pump, which provides farms attractive payback for converting to us. And given that the Maximus has an installed base of over 6,000 farms, this pull-through would drive growth for years to come. To close, these IoT-enabled offerings will transform the ag industry to be more digitalized. And from that, PST expects to grow this segment double digit annually over the next few years. Now let's discuss hydrogen. Today, a sub-$50 million business for us that is essentially in start-up mode. We have designed and developed some of the first and market-leading hydrogen refueling stations known as HRS for the Mobility segment. The refueling stations are critical for the rollout of the hydrogen mobility market. HRS market, which is projected to grow 40% annually to $2.8 billion by 2025. As you can imagine, there are some unique challenges with handling hydrogen such as flammability and the need for compression that presents a high barrier to entry for certain players in this space. But this also represents an opportunity for businesses who have historically operated in the specialty gas and hydrogen compression arena like our Haskel business. We have over 70 years of experience in compression storage and boosting of gases, including hydrogen for aerospace and defense, learning historically providing solutions for NASA and more recently, SpaceX and Blue Origin. Haskel saw this emerging H2 opportunity a few years ago, and we've been modifying our technology to develop vertically integrated H2 refueling solutions. We differentiate from nearly all of our competitors by owning the compression technology within the system, the heart of the system. We understand the secret sauce of taking the hydrogen from any source, compressing, chilling and moving it then to be able to dispense at the same rate as a gasoline solution. This early development led to the launch of the refueling stations shown on the lower left of this page. They're modular, scalable, easy to service and operate at the lowest cost per k of hydrogen. Year-to-date, the business has grown organically 100% by securing projects across the globe to refuel cars, buses, other light-duty vehicles and even the first hydrogen-powered train. Most notably, the multi-dollar contract we won to supply New Zealand with 24 stations over the next 5 years to establish its vision of becoming a hydro and pad vehicle economy. Our opportunity funnel exceeds over $150 million of well-qualified leads and the businesses win in new orders every week, and we expect the business to grow greater than 70% annually through 2025, to become a leader in this highest growth sustainable segment. To conclude, let's recap the main takeaways we just discussed. We lead in niche mission-critical applications requiring the highest precision in dosing and transfer and thereby maximizing value to our customers and to Ingersoll Rand. We are well positioned in high-growth end markets tied to the long-term sustainability, which require our expertise in precision dosing and transfer. We continue to see abundant growth both organically and inorganically as we build out these market-leading businesses. And with IRX's disciplined execution model, we will deliver mid-single-digit plus growth, improve our margins on average greater than 100 basis points per year to deliver EBITDA margins in the mid-30s. And beyond financial performance, we will lead in making life better, bringing solutions which will enable improved health outcomes, water quality, food safety and sustainability and clean energy. I really thank you for your interest. I would now like to introduce Liz Hepding, our Senior Vice President of Corporate Development.

Hi. I'm Liz Hepding, the Senior Vice President of Corporate Development. I joined Ingersoll Rand in July, and I'm thrilled to be part of the team. I spent the first decade of my career in investment banking, and more recently, have held leadership roles in strategy and corporate development at both publicly traded and private equity-owned companies. I'm excited to talk to you today about our M&A program and how we're using it to continue to reshape our portfolio in a highly disciplined and strategic manner. So let's get started. In my time with you today, I'm going to attempt to answer 2 key questions. One, what makes our M&A program unique? And two, how does our differentiated approach create a sustainable competitive advantage that enables us to deliver 400 to 500 basis points of annual revenue growth from M&A? It's actually pretty simple. As you have heard all day, we use IRX in everything we do at Ingersoll Rand, and that includes M&A. In my world, we have used IRX to establish a repeatable, highly efficient process to build our funnel, evaluate and execute transactions and capture meaningful value through integration. We drive our funnel from the ground up through corporate development teams in the P&Ls who are in the market day in and day out, with support from the corporate team on strategic vision and execution. We use our culture, including employee engagement and our employee ownership model to position Ingersoll Rand as a buyer of choice, which helps create proprietary opportunities and minimize the competitive processes in which we participate. We have defined strategic and financial acquisition criteria and we prioritize and pursue targets that align with these criteria. And we are focused. Our sweet spot is highly synergistic bolt-on opportunities. This type of transaction keeps us in businesses that we know and enables us to realize significant value from synergies and outperform our business cases. So let's talk about our M&A criteria. Everything we do on the acquisition front is focused on expanding and improving our existing portfolio to better serve our customers. You may have seen this slide before, and that is because our focus in our criteria are not new and have not changed. We are focused on mission-critical flow creation technologies and data gathering and digital solutions. On a very selective basis, we will also pursue strategic channel partners to increase our market share in critical geographies. So how do we determine which opportunities we prioritize? Well, we have a defined set of criteria against which we evaluate each opportunity. Our strategic criteria are highlighted in the middle of the slide. From a strategic perspective, we target market leaders with strong historical organic growth profile and meaningful exposure to sustainable high-growth end markets. We also look for companies with significant recurring revenue or aftermarket streams. We're most successful with acquisitions when we are able to realize significant synergies and buy down our upfront purchase multiple over time. So to do that, we look for opportunities that leverage our current technologies, channel presence, footprint, et cetera, to enable us to do this. As Mike Medaska highlighted earlier, we are also very focused on the IIoT. And so we're looking for companies that enhance our capabilities and either bring hardware, software or connectivity to us. As you have heard Vik and Vicente say many times before, we are a disciplined acquirer. So how do we maintain this discipline? Well, we use our financial criteria, which are highlighted on the right side of this slide. So from a financial criteria standpoint, who do we look for? We are focused on companies with mid-single-digit revenue growth and gross margins at or above 40%. We are also looking for companies with low capital intensity. So that means net working capital less than 20% of sales and CapEx less than 3% of sales. And finally, we are very focused on return on invested capital. And so we target companies with business cases that can deliver ROIC in the mid-teens by year 3 of our investment, with an absolute minimum threshold of ROIC exceeding WACC. So we have a demonstrated track record of alignment of executing transactions that align with our acquisition criteria. So if you look at this slide, every transaction on the slide aligns with both our strategic and our financial criteria. So for example, Tuthill Pumps, our most recently announced transaction at a gear, rotary and piston pump technology and significantly increased our exposure to sustainable high-growth end markets. Air Dimensions added the market leader in vacuum diaphragm pumps for environmental applications, including bioprocessing, utilities, chemical processing, amongst others and has 50% plus EBITDA margins. Seepex added progressive cavity pump technology and increased our addressable market by $1.7 billion. Maximus added digital capabilities in Agritech software and controls and increased our market -- our addressable market by another $2 billion. And finally, MD-Kinney expanded our vacuum and blower product offering with premium brands. Our ability to continue to complete transactions like these is highly dependent on our funnel. So let's talk about our funnel. Our funnel is a key driver of our acquisition program, and it is at the center of everything we are doing on the acquisition front. Like everything we do, funnel generation is powered by IRX. Our funnel is comprised of 6 stages and is probability weighted based on target sales and the likelihood of closing. So as you'll see in the center of the slide, a prospect or an idea get a 0% weighting, while a target under LOI has a 50% weighting and a company with whom we are negotiating a purchase agreement gets full credit. It's actually really hard to get full credit in our funnel because it's not just about being in negotiations. We have to be done with all of our diligence, all of the key deal terms have to be agreed upon, so financial, legal, et cetera. And we have to have received approval from our internal steering committee or if required, our Board. So we are very focused on developing and growing our funnel, and it continues to grow. Currently, our funnel is approximately 5x larger than it was at the time of the Gardner Denver-Ingersoll Rand transaction. And the average size of our targets in the funnel has more than doubled since that time. Additionally, velocity through the funnel has never been higher. We are moving prospects in, out and through the funnel faster than ever. Funnel generation resides within each of our business units with a dedicated corporate development leader in each unit. These people are industry veterans who partner with our P&L leaders to identify, cultivate and nurture relationships with potential targets. Our funnel is focused on highly synergistic bolt-ons like the deals I just highlighted and it's internally sourced through local teams. As I said at the outset of this slide, our funnel is the key driver behind both our current and future levels of acquisition activity. So earlier, I referenced us being a disciplined acquirer. Now I'm going to quantify it. Since 2017, we have achieved a weighted average pre-synergy purchase multiple of 11.3x. Through the implementation of our IRX-driven playbook, we have been able to reduce this multiple by 37% to just over 7x on a post-synergy basis. This 4-turn reduction demonstrates the power of joining Ingersoll Rand and our ability to execute on value-creation opportunities. We have also been very busy. Since the Gardner Denver-Ingersoll Rand transaction, we have completed 16 transactions and deployed over $1 billion of capital on these transactions. These deals have added over $300 million in annual sales and have replaced more than 60% of the EBITDA we lost from the divestitures of our High Pressure and Specialty Vehicle segments. IRX is the key enabler of everything we do in M&A and drives long-term value creation. IRX enables us to build highly efficient and repeatable processes that drive integration and enable us to run multiple integration simultaneously. The key to executing on our integration playbook is preplanning. We partner with acquisition targets very early in the deal process and always before day 1 to develop integration plans. This planning enabled us to hit the ground running and deploy a fully developed joint plan on day 1 as opposed to day 30 or later, which is more common. And then we use the IDM process that Mike Weatherred highlighted earlier, to manage these work streams to ensure a high level of focus and visibility on each work stream. The objective of our integration activities is to drive value capture through synergy realization, both by accelerating top line growth and executing on cost savings opportunities. The same IRX-driven integration processes that resulted in the over delivery of cost savings by more than $50 million in the Gardner Denver-Ingersoll Rand transaction are used in all deals. Additionally, we make all acquired employees owners through equity grants. In the Ingersoll Rand transaction, this came in the form of a $150 million equity grant, the largest ever by an industrial company. In our more recent deals, this will materialize in the form of equity grants from the new pool that both Vicente and Mary talked about earlier, which provides equity for all new employees, including those who come to us through acquisitions. So earlier today, you saw videos of people talking about IRX. One of those videos was Sarah Meehan. Sarah is in our ITS Americas team and works for Gary Gillespie. The specific deals she was talking about is MD-Kinney. The MD-Kinney integration is a great example of our integration playbook at work. This integration was owned and run by Gary and his ITS Americas team, and they were able to complete it in less than 7 months, a full 5 months ahead of schedule, and that included a full SAP conversion. MD-Kinney's results are running ahead of the business case. And in the first 9 months of our ownership, our team has delivered 1,000 basis points of margin expansion. The expedited integration time line and the improvement in financial performance are both due to our fast start, which was enabled by our integration muscle memory and established playbook. One of the things that makes my job really fun is that people like to sell to us. Our culture resonates with both owners and management teams. The combination of our highly engaged workforce that think and act like owners, the use of IRX in everything we do and our commitment to speed and decisiveness all while being focused on making life better sets us apart and helps establish us as an acquirer of choice. This unique positioning enables us to create proprietary opportunities and frequently bypass auctions. For example, in the fall of 2020, we purchased Albin Pump founder and owner, Christian Söderholm. Christian chose to sell to Ingersoll Rand due to his long-term relationship with our team and his view that we were the right hands to help grow and develop his business for its next stage. Christian even joined Ingersoll Rand for 6 months to ensure a smooth transition. Another great example of the power of being a differentiated buyer is our relationship with the Tuthill Corporation, a fourth-generation family-owned business and its CEO, Steve Westfall. Tuthill elected to sell its MD-Kinney on a bilateral basis despite having hired a banker. Steve had a long relationship with Vicente, and he and the Tuthill family saw our culture and mindset as very aligned with their own and viewed Ingersoll Rand as a great place for the Tuthill employees to end up. More recently, Tuthill decided to sell its pumps business, a highly regarded asset that I'm sure would have garnered interest from multiple bidders. However, Steve made one call to Vicente. Within a few months, we went from conversations to an announced transaction. These 2 transactions with Tuthill demonstrate the power of long-term relationships and what we're really trying to do with our cultivation efforts. Before I hand the reins over to Vik, I want to reiterate what differentiates us and creates our sustainable competitive advantage. In summary, we utilize IRX across the M&A life cycle from funnel generation to integration and everything in between. We have a strong institutional commitment to M&A that starts with Vicente and our whole executive team and pervades through the organization. We have dedicated M&A resources both in the business units and at the corporate level, which ensures a high level of focus and accountability. We have clear strategic and financial objectives for acquisitions, and we have the discipline to only pursue targets that align with these criteria. We have a demonstrated track record of execution excellence and a proven ability to realize the value we expect in deals. And finally, our culture, including our employee engagement and employee ownership model differentiate us as a buyer and help create proprietary and unique opportunities. Together, these create an M&A program that delivers 400 to 500 basis points in annual growth. Thank you for your time. I will now turn it over to Vik to talk about our financials.

Thanks, Liz, and good morning to everyone joining us today for our virtual Investor Day. I'm Vik Kini, Ingersoll Rand CFO, and I have responsibility for the company's finance and IT functions. I'm excited to share with you an overview of our historical financial performance as well as the long-term financial framework of the company, which is very much grounded in the strategy you see presented throughout the course of the day. Before I get into the presentation, just a quick background on myself. I've been with Ingersoll Rand for approximately 11 years, having started originally with the legacy Gardner Denver business. I've held a number of roles within the organization, including leading FP&A, Investor Relations, Treasury, IT as well as Finance for Gardner Denver's Industrial segment before becoming CFO in June of 2020. And prior to Ingersoll Rand, I started my career at General Electric. Having been with Gardner Denver since 2011, the transformation that Vicente spoke about earlier today really resonates with me, as I've seen the progress over the years from a public company to private ownership to our IPO back in 2017 and the Gardner Denver and IR merger just last year to create today's Ingersoll Rand. It's been a remarkable journey thus far. And without question, the best years are still out of us. So you've heard about our compelling growth profile, improving margins, cash flow generation, operational execution and our comprehensive capital allocation strategy. It all comes together to support our long-term financial framework of compounding earnings growth and delivering continued superior shareholder returns. Ingersoll Rand is a premier company. And being in this role over the last 18 months, I'd like to provide 2 key observations. First, I've had the privilege of spending time with employees and realize how special our employee ownership culture is around the globe. Having been in various finance roles, I have a deep appreciation for what the teams do. And what I've discovered is that same work ethic and passion is in all of our businesses and functions. Our people really want our company to succeed and to make sure we do things right. And earlier, you heard Mary mentioned that we were just recently awarded the best ethics and compliance program, and I see that drive to be the best every day across our company's culture. And second, IRX is real. This is not an operating system. It's not lip service. As Mike indicated, our teams embrace it to ensure fast and nimble execution on the most important priorities and you're going to really see that in the financial performance of the company. So as we look at our historical financial results, the efforts of the past 20 months since the Gardner Denver and Ingersoll Rand merger are evident in the strong commercial and operational results and really [Audio Gap] and SVT and as such are apples-to-apples. So orders on an LTM Q3 2021 basis were $5.5 billion, which stand 24% above 2020 levels and 13% above the pre-COVID impacted levels of 2019. The efforts around demand generation, innovation and alignment to higher growth sustainable end markets are evident in the results and have led to nearly $5 billion in revenue for the LTM Q3 2021 period, which stands slightly above 2019 levels. Book-to-bill was 1.11 for the LTM Q3 '21 period as the company has built really solid backlog across both the ITS and PST segments, which position the company very well moving forward both into Q4 2021 and 2022. Adjusted EBITDA for the Q3 LTM period of 2021 stands at $1.147 billion, with an adjusted EBITDA margin of 23.2%, which is 360 basis points higher than 2019. And even during the COVID-impacted year of 2020, you can see that despite the expected decline in revenue, we kept EBITDA levels nearly flat with the previous year, but increased margin by 190 basis points. That right there, that's the power of IRx to drive ongoing improvement as this momentum has been sustained through the COVID pandemic, despite remote work conditions and the challenges that we've seen with global supply chains and inflation. So 1 of our 5 main strategic pillars is expanding margins. And a key catalyst to the results we have seen in the past 2 years has been our execution of the cost synergies related to the Gardner Denver and Ingersoll Rand Industrial segment transaction. As a reminder, for those of you who may not be as familiar with the background, when we announced the merger, we had a commitment of $250 million of cost synergies to be delivered by the end of year 3 after the close of the transaction. However, due to rigorous planning, cross-functional IDMs that were used for both synergy identification and execution, we were not only able to accelerate the pace of execution, but by the end of 2020, just 9 to 10 months after the closure of the merger, we actually raised our synergy target by $50 million to $300 million in total. Today, we're reaffirming this commitment to deliver $300 million of cost synergies with the same cadence of annual delivery we have previously discussed, composed of $215 million of savings being delivered by the end of 2021, another $50 million to come in 2022 and with the final $35 million in 2023. The majority of the savings that are left to deliver at this point come largely from i2V and footprint-oriented initiatives. And while our funnel does continue to stand in excess of $350 million, the teams we have executed on the synergies are the very same teams working through the global supply chain and logistics challenges that everyone is aware of. So as a result, we believe the $300 million target continues to be a very prudent one and we'll continue to evaluate as we move into 2022 and thereafter. So if we turn to the individual segment performance, we're extremely pleased with the progress we have seen in the past 2 years. Both segments have delivered strong triple-digit adjusted EBITDA margin expansion, with the ITS segment reaching nearly 25% margins and nearly 500 basis points of margin improvement for the LTM period and PST is eclipsing the 30% mark, and you can see almost 300 basis points of margin expansion since 2019. The key drivers as to how we have delivered these results goes back to what you've heard through the course of the day. First, high-quality growth and a distinct focus on quality of earnings. Our processes around pricing excellence have evolved significantly over the past 5 years, so that we can actually measure pricing realization at the incoming bookings level, understand concessions activity at the salesperson level to minimize pricing leakage and ultimately ensure that we are delivering margin to the bottom line as expected. In addition, we continue to drive aftermarket expansion and new innovation which ensure we are driving the strongest incremental as possible on our revenue growth. Second, we supplement our revenue growth with those operational drivers within our control, whether that be merger-related synergies I just spoke to on the previous slide or ongoing simplification through organizational delayering, supply chain optimization and ongoing i2V. In addition, the flywheel that Liz spoke to you regarding M&A, we're starting to now bring in premium assets that are typically in line with our company gross margin profile of 40% or better. But we know that we can improve from those levels and drive EBITDA expansion through synergy realization. An example like MD-Kinney is a perfect example of a company that came into the enterprise and an attractive EBITDA margin profile in the mid- to high-20s percent range. And in just the past 10 months, we've been able to drive nearly 1,000 basis points to the margin expansion through high-quality and disciplined cost synergy execution. With the multitude of drivers across the enterprise, we are confident in our abilities to keep pushing the segment EBITDA margins higher, which you'll see when we talk about our long-term financial framework. So if we transition to the asset base of the company, we operate in a relatively asset-light model. Starting first with CapEx. We typically operate between 1% to 2% of revenues on capital expenditures on an annual basis, with a very strong return to focused mentality. Typically, approximately 50% of that spend is on maintenance CapEx across our facilities, and the other approximately 50% is on growth-oriented projects. And you've seen our commitment to continued investment in the company to support including the recent commitment to invest upwards of $45 million in the coming years in our PST platform to drive the expected growth in the hydrogen mobility platform, that Nick actually spoke to earlier. And on the right side of the page, you can see how we continue to evolve and drive efficiency from a net working capital perspective. The first bar on the chart is 2019 and actually represents stand-alone Gardner Denver at that time, where the overall enterprise was at 24.6% in terms of working capital as a percent of revenue. While we actually brought that down from closer to 30% at the time of our IPO back in 2017, we knew we had more runway. And you can see that as a new Ingersoll Rand, we've actually driven further efficiencies in both 2020 and 2021, with a nearly 460 basis point improvement in less than 2 years. What I find even more exciting is that the runway we have -- is that we're just now putting in global shared services across the combined Ingersoll Rand enterprise to drive further efficiencies in our more transactional processes like accounts receivable and accounts payable as well as the meaningful inventory opportunity that lies ahead as we deploy IRX across the enterprise as well as the benefit we should expect as we drive our footprint synergies and streamline our working capital needs. What really makes this model different is that, as Vicente indicated at the beginning of the day, we have nearly 16,000 employee owners. And we have tied our ownership model to a distinct focus on cash and working capital as we fundamentally believe that all employees can tangibly impact the working capital equation. And the results thus far are evident. We recognize that we're just -- we're still relatively early in this journey. So we've talked about many of the components of our cash equation like earnings, CapEx and net working capital. And here, you can see the cash generation power of the organization. As we look to full year 2021, we are expecting to deliver adjusted free cash flow of approximately $800 million and greater than 100% conversion to adjusted net income. This equates to mid-teens free cash flow margin, which we believe has continued room for improvement as we look ahead, giving ongoing improvement from a tax and interest expense perspective as well as many of the opportunities that I previously highlighted around working capital reduction, and the increased earnings power for both the core business as well as acquired companies. So shifting to the overall state of the balance sheet, I will focus on our leverage position and the overall capital structure. Starting first with leverage, the efforts to both prudently manage gross debt, along with improving the earnings power and cash generation profile of the company can be seen in our improved leverage position since the time of the Gardner Denver IPO. Leverage has come down from 4.2x in May of 2017, which is the first bar on the left, all the way down to 1.3 turns at the end of Q3 2021, which is a 2.9 turn improvement. This provides us with significant flexibility as we now stand well below our stated 2x leverage target. And importantly, we actually have a more stable earnings base today. Historically, Gardner Denver was able to manage leverage levels down to levels near about 2x, which you can see there in 2017 through 2019, but it always had a bit of an overhang due to the earnings cyclicality that was inherent from the upstream oil and gas business. Well, as you know, that overhang went away in the first quarter of this year due to the divestiture of the ITS segment. And as Liz indicated, we have a large and growing funnel of M&A opportunities and our current cash position and cash flow generation should allow for sufficient firepower to execute on our bolt-on strategy. And if a more medium-sized M&A transaction were to become an opportunity that we want to strategically pursue, we have sufficient ability to be able to flex up our balance sheet accordingly as long as we see a path back to sub-2x leverage in a reasonable time frame. So moving to the right side of the page and the capital structure. We currently have a term loan B structure with $2.8 billion of U.S. dollar term loans and $685 million of euro term loans, all of which currently mature in February of 2027. In addition, in the third quarter of 2021, we prepaid the $400 million tranche of debt that was taken out during COVID, which carried a higher interest rate on it. Prudent debt management as well as the expiration of all of our legacy fixed interest rate swaps at the end of 2020 have led to continued interest expense savings, as we've gone from approximately $111 million of interest in 2020 to an expected approximately $90 million here in 2021. And there's a further tailwind of savings moving into 2022 due to the debt prepayment we actually just completed. Our efforts have also been recognized by both of the rating agencies, as we've been upgraded 3 times by both agencies since the IPO. As we look ahead, we've implemented a comprehensive capital allocation strategy that we believe aligns well to both advance the compounding growth and earnings model that Vicente articulated earlier as well as returning value directly to our shareholders. To start, as you've heard, all of our presenters before me indicate sustained organic growth is at the core of our go-forward strategy. And we will continue to invest in growth initiatives like demand generation, IIoT, aftermarket and commercial resources to be able to execute that plan. From a capital allocation perspective, the focal part of the strategy is M&A, continuing to compound our growth and earnings profile through highly synergistic acquisitions that improve the quality of the portfolio is our key goal. And as you heard from Liz, we've executed 16 transactions since the merger, acquiring to nearly $1 billion in deployed capital over that time. Given the M&A funnel and the disciplined framework that we have in place, coupled with our strong balance sheet and cash generation, we see no reason why we can't replicate this model on an annual basis with upwards of $1 billion deployed to M&A in the next 12 months. And in addition, we intend to directly return value to our shareholder community, starting first with our share repurchase program. In Q3 of 2021, we actually deployed $731 million towards buying back shares directly from KKR as part of their final sell-down of equity in Ingersoll Rand. In addition, the Board optimized a new and separate $750 million program, which we expect to utilize to manage normal equity dilution from our ongoing equity plans as well as opportunistic purchases when we see appropriate. We also initiated a quarterly dividend of $0.02 per share, which begins here in Q4 2021. And as far as leverage, as I previously indicated, we will continue to target maintaining a leverage ratio under 2x, and we do target becoming investment grade from a credit ratings perspective, which we believe our financial profile and execution puts us on a good track to achieve. So when we began this morning, you saw this graph from Vicente. And you can look at the stock price performance in comparison to the relevant benchmarks and peers, and I surely hope you do. But what I really see is the progress we've made as an organization. Since 2017, we've prudently reduced our debt, completed the Gardner Denver and IR transaction, divested businesses that were no longer a good fit for our portfolio and removed the private equity ownership in our stock. And at the same time, we strengthened our company through disciplined M&A, strong growth, consistent execution and transparent disclosure. And we've delivered differentiated shareholder returns. Our total shareholder returns outperformed the S&P and our peers with our share price increasing in value more than 180% during this time frame. And looking ahead, we are poised to continue consistently delivering above market growth. So as we look ahead, we're going to continue to unleash the power of our IRX operating engine to accelerate our organic and inorganic growth performance to build clear differentiation. And looking at what that means for long-term financial targets, you can see that we're providing a financial framework out to 2025. Starting first in terms of total revenue growth, we expect to achieve low double-digit growth annually with mid-single-digit organic growth and a 4% to 5% annual inorganic growth through a robust M&A process. We expect our adjusted EBITDA margins to reach to be in the high 20s and our adjusted free cash flow margin to reach the high teens. And finally, like I said, we will continue to target our net leverage to be less than 2x. Digging a little deeper into total revenue growth, you can see that on the right-hand side of the page, we expect to achieve greater than 25% of revenue from IIoT ready products and overall aftermarket revenue to be in the mid-40s. That shows why we have placed a heavy emphasis today in talking with you about these as our growth enablers. So going from the long-term outlook to a more immediate view, let me touch on 2021 guidance. We are reaffirming our 2021 guidance today that we set when we issued our Q3 earnings on November 3. Through the course of 2021, we have outperformed on our commercial and operational commitments and raised guidance for the third time this year. Looking at the left side of the slide, our prior guidance at the end of Q2 was for revenue to be up mid-teens on a reported basis, comprised of low double-digit organic growth across both of our segments. Today, we are reconfirming our guidance, which calls for revenue to be up high teens in total with low double-digit organic growth across both segments. This reflects approximately a 100 basis point increase on organic growth for the total company as compared to the prior guidance. FX has continued to be -- is expected to continue to be a low single-digit tailwind and M&A is expected to contribute $135 million in total revenue. Based on these revenue assumptions, our 2021 adjusted EBITDA guidance is $1.175 billion to $1.195 billion, which represents a $20 million improvement at the midpoint of the range as compared to the prior guidance provided at the end of Q2. In terms of cash generation, we expect adjusted free cash flow to adjusted net income conversion to remain greater than or equal to 100%. CapEx is expected to be approximately 1.5% of revenues. And finally, we expect our adjusted tax rate for the year to be in the mid-teens. And just as we're reaffirming our 2021 guidance, I'll reaffirm our commitment to everyone to be transparent, accessible and work on building a world-class investor relations function. Many of you have already met and interacted with Chris, and you might agree, he's a bit of a step-up from the last guy, which, if you don't know, that's that, that was actually me. I'm thrilled to be able to work with Chris and look forward to advancing Investor Relations even further in the future. We've already been able to conduct a perception study and get feedback on where we have strengths and where we have opportunities. And we call this the voice of the shareholder. And you can see on the top right chart of this page, accessibility is a strength for us and one we take very seriously. The webcast we've held this year on our capital allocation strategy and our sustainability strategy have been instrumental dialogues in receiving feedback and strengthening our programs. You'll also see we have areas to work on, and we're committed to doing that. We're working to communicate with you more often through our newly created IR-squared newsletter as well as perpetually improving our public disclosures and presentations and taking more proactive efforts to engage our shareholder base. Having this Investor Day is one of those examples, and we're committed to doing an Investor Day just like this, every other year. Chris and I welcome your feedback and know you're not a shy bunch. So we look forward to your comments as we advance our Investor Relations function. So with that, I want to just leave you with some final thoughts. Ingersoll Rand is an exceptional company as our employee ownership culture, customer-centric and sustainability focused growth initiatives and rigorous execution have led to outstanding financial performance. But what excites me even more is that we have so much more runway ahead of us both organically and through M&A to continue transforming the company and creating a true industrial compounder that can deliver ongoing shareholder value creation. So with that, I'm going to turn it back over to Vicente, who's going to wrap us up with some closing remarks.

Thank you, Vik. Before my last key takeaways here, I just want to take a moment to thank all of our 16,000 employees. Many of them I know are listening today to this call. And all of you have been able to demonstrate that a highly engaged employee base, combined with this ownership mindset, is a catalyst for accelerating sustainable performance. We believe that this amazing culture that is so powerful that when combined with a process like IRX as our backbone will enable us to perform in every facet of the company. And as we continue to accelerate our cash generation and redeploy that organically or inorganically, we know we will be able to compound our earnings while delivering low double-digit total revenue growth. So with that, we're going to wrap here the formal session. Please give us a couple of minutes to get ready for the Q&A.

We'll begin our second question-and-answer session. Our first question is from Andy Kaplowitz at Citi. You mentioned that Ingersoll Rand combines the #2 and #3 players in the compressor space. What do you think IR needs to do to continue closing the gap with your larger competitor? Where are the white spaces that IR needs to add? And could the company do it organically? Or do you expect M&A to help you get there?

Yes. Thank you, Andy. Maybe I'll take that one. And I think as you saw from the case study on critical product lines like oil free, we feel that we have been able to close that gap. And I think the job here for us to continue to do is continue to accelerate our innovation and continue to demonstrate that our products and compressor lines here continue to be superior from a level of efficiency and total cost of ownership. We still see meaningful opportunity to acquire some more technologies if we think about it, I mean, there's kind of maybe some white small product spaces that we may have. But we feel that we're going to continue to invest organically. And as we see opportunistic on the inorganic piece will be great. And the last thing that last thing I'll just add to that, Andy, is that you have seen how we continue to improve that M&A on the side with a company like Lawrence Factor that we announced during the Q3 earnings call, that gives us the ability to measure and remote monitor the level of quality of the air that comes from the compressor. So we think technologies like that are going to be really exciting for us to expand the solution that we offer and become more unique in the market.

Thanks, Vicente. Our next question comes from Markus Mittermaier at UBS. What proportion of your compressor product -- compressor customers buy products based on a systematic total cost of ownership approach. Has this chair changed recently? And do channel partners have an incentive to sell on total cost of ownership parameters? And does this allow you to price at a premium based on efficiency?

Thank you, Markus. Maybe we have Enrique take that one.

Yes. Thank you, Markus. I mean yes, the first element to consider here is 30% of electricity consumption in a normal plant is due to the compressor and compressor, which is where we play. So based on this, obviously, with the evolution of energy prices, we see more and more total cost of ownership being part of the selling discussion. And that's in discussion, obviously, we train and we developed internally. And it's a product itself, and it's also the system from some of the case examples that we talk about. We talk about the dryers, for example, a key part and key element of consumption of energy in those systems. So as we see, the more energy prices, the more the sustainability discussion is on the table, the more effort us and the customers are making on our total cost of ownership and what that brings in the decision-making. If it drives is a price premium, it does, it does because it is a return on that investment, and it is talking about the longevity and the cycle in which that product is going to be in that installation.

Thanks, Enrique. Our next question is from Joe O'Dea at Wells Fargo. Your market growth -- your market outgrowth implies share gain. Where do you see the most meaningful share gain opportunities, either in the segments, regions or products? Are the share gains in the traditional part of the business? Or do you expect advantage positioning in areas like IIoT to drive outperformance in new revenue streams?

Joe, maybe I'll take that one. And I think the best way I'll describe it is that you see how purposeful we are into the end markets that we want to penetrate and go. And these are the markets that we believe we can take share. We can combine a leadership position and accelerate our growth. We are doing that. You saw that clearly on the PST, where Nick highlighted some of these end markets. And hopefully, you get a taste as well on the ITS segment. But we feel that this is a way that we're going to outgrow the market. It's just being very purposeful driven in terms of these high-growth, sustainable end markets, where the need of our compressors and technologies like blowers, vacuums, dosing technologies, fluid management systems are enablers and beneficiaries of this sustainability movement that we see as a global macro trend.

Thanks, Vicente. We've got another question from Marcus. Could you comment on the growth levels you expect within oil and oil-free growth end markets? And what are the fastest-growing regions and end markets? And what is your competitive position in these?

Marcus, maybe Enrique, you take a portion, and I can add on as you speak it.

Perfect. Yes. Marcus again. Okay. So definitely, we love both markets. The oil-loop and oil-free market, they are growth rates that we feel very attractive. And what we find even more interesting is the focus that we have in some of these high-growth markets within them, which we are on purpose selecting, as Vicente has gone through our mega trends and the key areas where we see higher growth and higher margin creation in those. It is clear that within oil lube and oil free, the oil-free market is going to continue to grow faster around 2x the oil lubricated elements and we are very, very strongly positioned now. This is really a game of 2 players in the market where we have a very, very strong oil-free full range positioning. We have a fantastic job. In the new portfolio, creation with Ingersoll Rand and Gardner Denver, we have some incredibly world-class efficient products now. And we see that we are doing 3 times market growth in the oil-free element. So excited about what's going to come ahead in this area.

Yes. Maybe if I just add just a quick on your last portion of that on the question market around the growing regions and some of the end markets, we're seeing very good broad-based growth across all the regions. We spoke on the earnings call how sequentially in the second quarter to the third quarter, we saw a sequential improvement in order rates in places like Europe and China, while still very stable order rates in regions like the U.S. So I think we've spoken a lot about our self-help initiatives on the commercial side. You get a good taste of those here today around the margin, industrial IoT and new products and service innovation. We think those are really helping us drive that accelerated performance against our market and is exciting because that can be spread across all the product lines in our portfolio.

Our next question is from Joe Ritchie at Goldman Sachs. A little surprising to see ITS selling 60%, roughly direct. Do you see that number changing materially in the coming years as key growth markets accelerate? And does your pricing power differ going direct versus distribution?

Yes, Joe, I'll take that one. I'll say that we don't see change in these materially in the sense that we have always said that we believe in this very well balance of multichannel, multi-brand. And I think a great example of this was Gary Gillespie talking about that very -- at the micro level with the state of California and how we have leveraged our direct footprint to add and surround with a multichannel and still be able to cohesively work that very, very well. So we think this is one of our competitive advantages that we know that a strategy of multichannel, multi-brand works really well when executing well, of course. And I think it's been a great fit differentiator for us. In terms of the pricing power, from direct distribution, no difference, I would say, Joe, in the sense that we have a long-standing relationship with our distribution network. You have seen that even on the legacy Gardner Denver, when we were mostly on the compressor side, selling through distribution, we were already executing a lot of the good pricing strategy, and we continue to replicate that now on the Ingersoll Rand distribution channel and obviously, on the direct channel to as well. So I think no differentiation between direct and distribution. We think we have a great balance and a great process to be able to deliver good pricing power across both channels.

Thanks, Vicente. We'll sneak another one for Marcus in here. What proportion of your sales are on care contracts? And is there a long-term target for this? Could you walk us through typical economics of such a contract like duration, revenue potential and margins?

Perfect. Maybe, Enrique, do you want to continue with the that.

Sure. Okay, Marcus, yes. yes, I mean you saw the excitement there on the care contracts potential, right? I mean we talked about that $1 billion potential for us, and it is on our installed base. I mean today, we are doing about 10% to 15% of our -- what we have the products under care contract, which obviously with the margin given around $150 million we already have today in this proven process. So here, the challenge completely in our hands is to go after our installed base using our IRX, which is in place today and keep increase in this $150 million under this well solid program now. In terms of the -- obviously, we see the growth rates of this to be above the average that we are driving in our business. It's one of the core areas of our aftermarket and our aftermarket attachment program. So definitely very excited that we have this in our hands that it's on our installed base, and it's driving above-average margin contribution to us.

Thanks, Enrique. Our next question is from Nathan Jones at Stifel. What are the product gaps left to be filled in the Precision Sciences segment? Can they be filled organically? Or will it need acquisitions? What is the target environment and valuations like?

Perfect, Nick, you might be best suited.

Yes. Thanks Vicente, and thanks Nathan. When we think about product gap fill, if we refer back to that slide I showed earlier, the 8 different types of positive displacement pumps, we're looking at those 8 different types. And then we're going to overlay a filter, which looks at those attractive end markets. So where those 2 things meet is where our attractive space is and where we want to continue to fill out the gaps. The question around organic versus inorganic, the answer is both. As you saw earlier, we had some great development going on, for instance, in peristaltic pumps, which showed our new ETL-500 absolutely fills a gap in that transaction of what I just described. But also, we've got a very, very rich funnel. Luckily, myself and my team have been in this space for a long time, 20-plus years. So understanding where to play, what the targets are is kind of second nature to us, which is great. And what does pricing look like, we're going to remain disciplined. As you've seen in the last few transactions, and as Liz described in her presentation.

Thanks, Nick. The next question is from Joshua Pokrzywinski at Morgan Stanley. Why isn't the pump market consolidated more? There are a lot of pump out assets out there and the margin ranges you acquire in? How do you discern those with the potential to get to IR levels versus those that can't?

Nick.

It's another one. Thanks, Josh. Probably can't answer why it's not consolidated, but I will attempt to go on to the pump assets out there. So after we've put through this lens, where the product gaps are, we then take it through a criterion and say, are these the right fits for our PST strategy? Do they check the box on these nice margin profiles that we like? Do they check the box on, do they have a decent aftermarket content like-for-like wear and tear, et cetera? And then we'll look though and we'll start applying our synergy model and looking at IRX to see how we can improve these businesses. So there is a lot of potential out there. We do have a very disciplined approach to it. I would say also that we do like the PD pump space rather than I would say the centrifugal pumps space as well.

Thanks, Nick. Our next question comes from Andy Kaplowitz at Citi. Can you talk about your longer-term aspirations in the water space? Water treatment tends to be a relatively fragmented industry. Do you need to make a larger acquisition in the space to get to critical mass? And what would you say the competitive advantages that IR has in water to help drive that double-digit growth you've talked about?

Andy, I'll tell you that, as you have seen, one of our core values is to be bold with our aspirations. So we definitely have some pretty bold aspirations in the water space. And in the water treatment side, what we have done specifically here is doing our strategic plan, we did a deep dive of every single step process in a water -- wastewater treatment process. And then from there, we selected the steps that we wanted to penetrate today even further. And this is why, for example, Seepex came about because we wanted to be in the market for sludge removal. So we went after a technology that is new to our portfolio, but also with one of the most leading industry companies in that particular step of the process. And you even saw how, in the case study that Nick mentioned in the PST segment of Seepex, being able to remotely connect that pump and be able to accelerate the efficiency. So it speaks to the high level of quality of assets that we were able to obtain and the phenomenal team that we have with the Seepex teams to continue to penetrate some of the steps. So we think there's still, as you said, very fragmented market. There's still a lot of technologies, as Nick mentioned, that as we can all create these metrics and find them at the perfect cross-section, that is what we're targeting. And then this is where Liz and entire team here working on helping put that through the funnel and execute that. So in terms of larger acquisitions right now in the space, I think our funnel consists of mostly bolt-on companies in nature. Nothing that I'll say is transformational. We still see a lot of runway from that, and that's what we're very focused on.

Thanks, Vicente. Our next question comes from Mike Halloran of Baird. Could you bucket out the elements of your margin expansion plan? Your targets imply significant expansion ahead. Could you discuss the balance and risks of driving expanded margins meaningfully against accelerating innovation, funding growth, layering acquisitions, inflation drivers and others. And how do you frame the risks and potential pitfalls?

Maybe Nick.

Sure. Yes. So Mike, first of all, thanks for the question. I think in terms of how we think about the different elements of the margin expansion story, only first start with on the organic growth side. We've always said that our businesses, both ITS and PST should be delivering 1% to 2% net price on an annual basis. If you go back to 2020, we were definitely seeing that. And frankly, even here in 2021, you've been seeing obviously much higher levels than that given some of the inflationary conditions that we've been seeing. But you've actually seen us be able to maintain being price cost positive for the entirety of the year. And then you also heard about a lot of the areas in terms of driving higher quality assets and higher quality growth. So things like aftermarket, the IIoT-type initiatives that we spoke about. Demand generation, targeting those higher-growth markets that you heard from Gary, you heard from Enrique, you heard from Nick. So again, I think there's a lot of levers to continue to be driven just on the organic growth side. And then when you think about some of the cost side, one, obviously, we have the merger-related synergies that are going to continue. We still have $85 million to be able to deliver just to hit the $300 million target. And then in terms of some of the other opportunities out there, yes, the funnel, like I said, is still 350 -- above $350 million. Right now, we're still sticking at the $300 million target, but there is potential opportunity thereafter. And then the other piece here is M&A. We've shown a very disciplined track record on M&A being able to bring in assets that many of which are in line, if not higher, with the segment margin profile of the business already, but still an ability to be able to drive ongoing cost synergies to be able to hit our returns metrics. And then even some of the acquisitions that we've brought in that I've been a little bit more dilutive upfront, Seepex has been a perfect example. We have a very clear runway and a really clear funnel in terms of how we're going to get to PST segment margin profiles. In terms of the other component of the question in terms of the risks and potential pit falls, listen, I think it's like any other year. If you look over the last 2 years, we've had a number of potential risk and potential pitfalls, not the least of which were global pandemic, supply chain challenges, logistics, freight. And obviously, we're working through all that as we speak and still being able to deliver what I would say is ongoing margin expansion. So from my perspective, yes, there's going to be a lot of blocking and tackling. It is very much about IRX, making sure that you have full visibility to what those challenges may be and being able to execute through them. And I think the last 2 years has shown our ability to do that.

Thanks, Nick. Our next question is from Steve Volkmann at Jefferies. A question on M&A targets. You're targeting $200 million to $300 million in revenue ads per year in M&A. Is there that much opportunity out there? Higher-margin M&A generally costs more, so is it harder to drive to the return on capital targets that you have spoken about? And finally, acquisitions come in usually at lower margins. So it potentially works against your internal margin expansion plans. Can you hit both the margin and M&A targets concurrently?

Perfect. Liz, do you want to...

Sure. Well, I think the first thing is that, as you heard Vicente say earlier, we play in a $44 billion addressable markets today going to $70 billion. So within that market, we still think there is tons of runway to do transactions. And so yes, we think we can hit these kind of targets. We've got a team of people out focused on building and developing our funnel, and we continue to generate and grow this funnel. So I think from that standpoint, there's runway. We were talking about ROIC. Yes, sure, it gets harder to generate. But I think the beauty of what we're doing today is we are incredibly focused on highly synergistic transactions that are expand or adjacent to our existing businesses. And so what that means for us is that there's real synergy potential, both on the top line -- by accelerating top line growth, by putting it through our existing channels, by geographic expansion, right, take a U.S. business, and we did this with MD-Kinney, for example, we already have sales in Asia and Europe. And then also cost savings. And I think we're -- our IRX-driven integration playbook is proven and it enables us to drive significant cost savings. So I think it is possible to hit both the margin and the M&A targets concurrently, just based on our processes.

Great Thanks, Liz. Our next question is from Rob Wertheimer at Melius. On acquisitions, what is your experience and outlook on desirability of the whole portfolio? Do acquired companies bleed a little revenue because not all of the mix is attractive and worth investing in, do you need to -- For example, do you need to acquire 5% to get net 4% growth? And how does this play into the funnel and process?

Great question. Revenue, Liz.

Okay. Sure. I think this is actually very similar -- my answer will be very similar to the previous question, in that we are -- because we're focused on bolt-ons, these transactions, we like everything we're getting with them, right? We -- Tuthill Pumps, we're getting rotary gear and piston pumps that just expand mix business and fit right in. And so because we're on that sort of smaller to mid-sized bolt-on, we're not getting a lot of stuff we don't want. So we like all the revenue we're keeping it and we're driving it and hopefully accelerating its growth.

Thanks, Liz. Our next question is from Julian Mitchell at Barclays. Is most of the targeted margin expansion through 2025 coming from gross margin or OpEx? Is there any big difference of this weighting between the 2 segments?

Nick, do you want to take that?

Yes. Sure. So Julian, I'll go back to kind of some of the -- I think the previous question, we spoke to some of the drivers of that margin expansion. And when you think about -- we're very much focused on prudent gross margin expansion across both of the segments, whether it be pricing, whether they innovate to value or just the high-quality growth I spoke to in terms of mixing it up from an aftermarket perspective. So we do think there's a meaningful piece that comes from the gross margin side of the equation. Now that being said, some of the synergies, we still do have coming forward here are things around footprint. There is, obviously, when we talk about some of the acquisitions, there is some areas for what I'll call organizational simplification and some cost efficiency. So there is very much, I'd say, a balance between the two. But I will tell you without question, we are focused on high-quality gross margin expansion because we certainly feel that have 2 segments that both play in the 40% to 45% realm at this point in time that we can continue to see meaningful expansion as we tailor the portfolio, specifically on those 2 segments.

Thanks, Nick. We've got a couple of questions on large M&A, including ones from Jeff Sprague at Vertical Research and Josh Pokrzywinski at Morgan Stanley. Do you expect there will be some kind of new platform or new leg of the company as you execute on M&A? And does the possibility exist for larger transformational deals?

Liz?

So I would say we are not focused on adding the third leg at this point. We are very early in the Gardner Denver-Ingersoll Rand come together post transaction journey. And so all of our M&A resources today are really focused on these bolt-on transactions. We have invested in the M&A team. We've added resources in business units in new geographies, really to look for the highly synergistic adjacent type deals. And so that's what the team and I are focused on.

Thanks, Liz. Our next question is from Nigel Coe at Wolfe Research. The high 20% EBITDA margin profile puts you in pretty hallowed territory. What are the implications for the credit rating and leverage? For example, other companies have been prepared to lever higher as it is mixed up. Do you see scope for higher leverage over the next several years?

Great. Nick.

Sure. Yes, let me take that in 2 pieces. So first, on the credit rating perspective. Yes, listen, we stated it -- I think I said it pretty explicitly that we do aspire to be investment grade. We've seen 3 notch upgrades from both the rating agencies since the time of the Gardner Denver IPO. And we believe that based on the financial profile that we have today, the more stable earnings base of the company as we've kind of tailored that portfolio and the 2 divestitures we've done as we reinvest that into high-quality assets within the ITS and PST segments, we do feel -- we fundamentally believe with ongoing execution, getting our credit ratings to investment grade over time is without question and achievable target. In terms of the leverage, like we said, we feel that a sub-2x leverage is a very comfortable range and an area to operate in. Now that being said, Vicente said that the funnel today on M&A is largely composed of bolt-on acquisitions, very much in line with what you've seen us do, whether it be Seepex or Maximus or MD-Kinney or Air Dimensions. Now that being said, there's maybe a handful of acquisitions that are called more medium in size, maybe $1 billion to $2 billion in size today. But over time, could there be potential runway for something larger? Sure. There always has. And I will tell you, obviously, you've seen us by virtue of the merger, being able to do larger acquisitions and be able to, let's say, integrate and digest those fairly well. So I think right now, yes, focused on bolt-ons. That's what the funnel is really predicated on in the future? Could there be some room for something larger? Sure. But I think right now, we're focused on the bolt-ons, and we'll kind of cross that bridge when we get there.

Thanks, Nick. We've got a follow-up from Nigel. So to what extent do you see software-type acquisitions in the mix going forward?

Yes, absolutely. So as you heard us talk about today, Mike Medaska, talked about the IIoT, and I talked about our focus areas and one is digital and data gathering capabilities. And so whether it's software or hardware or connectivity or controls, we are looking for that kind of IIOT assets that can be leveraged across the Ingersoll-Rand platform and it's one of the areas that we're focused on.

Thanks, Liz. Our next question is from Nathan Jones at Stifel. How do you increase the penetration of usage to IIoT and connected products? Are you initially giving away the subscriptions or are customers paying upfront?

The other thing, I think this is one that I'll answer -- I'll take that one by saying that it's all about kind of what Mike Medasaka spoke about in his section. That deep voice of customer to understand what is that unmet need that we need to actually enhance our products. And if you are able to propose that to the customer, with the usage of these connected products in IIoT, it's proven that customers are definitely paying for it because they see the benefit. You saw the benefit that Nick spoke about on Seepex, how with the connectivity of that Seepex pump at a water -- wastewater treatment facility, we were able to increase that efficiency by 30% without any capital investment. So the more we continue to have a lot of these kind of case studies that we're able to show and demonstrate that we know really well our products, and we know how we can actually enhance the efficiency and the total cost of ownership, we can sell that and be able to get that as part of that increased penetration of the usage. We're not giving away secretions. I mean, basically, when we ship our product, it comes -- it's kind of what about being enabled. So for example, a compressor above certain horsepower, it is already digitally enabled. And then it is up to us and to then upsell the capability or the service agreement that also Enrique spoke about. So it's kind of included that device -- that edge device is included in the upfront price of the equipment. And then on top of that, then we can monetize based on whatever that customer may desire or what the application of that product might be.

Thanks, Vicente. And a follow-up from Nathan. With the high growth expected in Precision and Sciences for hydrogen, are there complementary products that Ingersoll Rand can develop or acquire to accelerate that growth.

Nick?

Yes. Thanks, Nathan. So if you think about where we play in hydrogen, which is the mobility segment and as I described earlier, these hydrogen refueling stations, hydrogen comes in through multiple sources, and we can take it off of that source, whether it be electrolyzer or a tube trailer. And the hydrogen goes through a journey. From there, as it gets then to the vehicle or forklift truck, whatever you're going to refuel. And we look at that entire journey and say, where can we own space in that journey. So starting maybe with storage, you're then going through compression, high-pressure valve in, chilling, then finally into the dispenser and into the vehicle. And we want to own as much content and valuable content where it makes sense, with inside that journey. Today, we're very strong, as you know, in compression. We're also very, very strong in high-pressure tubing and valving as well. In terms of organic development, we put some focus there around especially the forklift truck market and material handling, which is a very attractive space and one that's going into a lot of conversion. And we recently launched our electric, what we call It's a very energy-efficient product, very, very quiet, specifically target in that material handling a forklift market, and we're super excited about that.

Thanks, Nick. And our last question comes from Nigel Coe at Wolfe. The hydrogen opportunity in the Industrial and Technologies and Services segment is probably the most exciting growth opportunity across the portfolio. Are you seeing the funnel and pipeline of opportunities today to support that expansion of 5x total addressable market expansion. What is the relevant market opportunity for compression? And do you see other ways to play in hydrogen transport and storage?

Yes, Nigel, I fully agree with you that this hydrogen opportunity in the ITS is meaningful and really exciting. And you saw that this hydrogen opportunity touches the ITS and PST. Nick just talked about how on the PST, we're focused more on that end usage on the mobility side, just kind of the dispensing side. And that is a market that we see that can grow up to $2 billion plus by 2025. And where we have already the products and now, obviously, as the market and customers continue to accept that, we see that growth. On the ITS, because of our broad base of compressors, blowers and vacuums, this is where you saw on that map of the hydrogen value equation, how we can be a great player in the production as well as the transport and storage with our current capabilities. And I think this is just a matter of really tweaking some on modification of some of our products or combining products. So for example, you take a ballast mark on reciprocating compressor and combine that with Haskel, and now you -- not only you have the ability to compress, but also to boost the hydrogen in a very unique application that no one else can actually do because they don't have those 2 technologies within the same umbrella. So we have identified the places that we want to play. We're definitely working with our customers, some of the large air and gas companies on identifying those solutions that we need to do to enhance our portfolio to continue to be penetrated in this market. So today, the expansion that you saw on the ITS segment, this is what we see can get on to with our products or modifying some of our products and it could be a $10 billion opportunity for us by 2025. So it is very exciting. It is one that we're at the center of it. You saw also the exciting case stories that Gary spoke about, whether the hydrogen liquefaction or even the carbon sequestration. And these are concepts that in the past were just talked about at a high level, but we're kind of bringing this to reality. And I think the exciting piece is that our products are in the middle of it. So yes, we spent a lot of time mapping this out and making sure that we put investments. You saw how Vik and I spoke about that $45 million investment over the next few years and a portion of that is for PST, but a portion of that is for accelerating the technology and the ITS. So it's super exciting. And this is why we talk a lot about how all of our products are enablers and beneficiaries of these kind of major conversion in sustainability, and we will continue to make sure that we accelerate that.

Thanks, Vicente. This brings us to the end of our Q&A and our presentation today. We thank you for your attendance and for your interest in Ingersoll Rand.

Thank you.