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

Good morning. What an amazing video on the power of employee ownership and the impact it's had on some of our 17,500 employees. I'm Matthew Fort, Vice President of Investor Relations, and welcome to Ingersoll Rand's 2023 Investor Day. We are excited to be here today. And I just want to say thank you to everyone for your attendance, continued support and interest in Ingersoll Rand. Today's presentation is being webcast, and both the presentation and the video will be available for replay on our Investor Relations website. The QR code that you see on the inside of your notebook cover will take you directly to both the event and the presentation. Before we get started, I'd like to remind everybody that certain statements you will hear in today's presentation are forward-looking in nature, and as such, are subject to the risks and uncertainties as laid out in our previous SEC statements as well as the disclaimer here on Slide 3. We will kick things off with an overview of the company and our strategy as provided by our Chairman and CEO, Vicente Reynal from demand generation to segment ups to M&A case studies, you will hear members of our global leadership team provide updates relating to the company's long-term growth targets, an update to our financial outlook and establishment of 2027 targets. For our Q&A, we ask the questions remain focused around the content presented. Just a few quick housekeeping items. We will break it around 9:45 a.m. with 20 minutes for snacks and beverages in the lobby. And second, we will be hosting a leadership lunch and at the end of the presentation also located in the lobby. And with that, I'll turn it over to our Chairman and CEO, Vicente Reynal.

Thanks, Matthew, and good morning, and welcome, everyone here, and welcome to those of you on the webcast. It's great to have you here on this very special day for us. I'm going to start with one of our leading strengths, the management of this company. From a global perspective we have assembled a team that embraces our values and nurtures our culture of execution every single day. What we decided to do here today at this Investor Day is to bring team members from across the world so they can tell you how they're executing every single day. So I'm going to highlight a few of the team members that you have not met that you'll get a chance to see here as they come and present. Starting at the bottom of the page with the ITS segment, we have brought here Amar Kaul. Amar runs our compression systems for Europe, Middle East, India and Africa. And Amar is going to walk you through how he's leveraging return on investment, quick paybacks based on reduction of energy and water conservation to really accelerate our growth. Then Arnold Li. Arnold runs our ITS Asia Pacific business, Arnold Li lives in Shanghai, China. You heard us say how much we have driven differentiated performance in China. Arnold is going to come here and tell you how he's doing it. Then we have Santiago Arias Duval, our new leader for the Precision Science Technology segment, the PST segment. But Santiago is not new to Ingersoll Rand. I hired Santiago in 2017 and Santiago is a great example on how we bring talent to Ingersoll Rand and we nurture that talent and develop that talent for positions like this. Andy Hider will come after. Andy Hider with a deep expertise in end markets like water and wastewater, and many other technology end markets and is going to tell you how we're taking technologies from different businesses within PST and applying them to be very uniquely in the market and take share. And then Pam Temko. Pam is a leader of our Dosatron business, a business that we acquired just a year ago. And Pam is going to tell you about her experience moving from a family owned company to joining the Ingersoll Rand family. But Pam is also another example that when we acquire a company, we not only acquire great technology, but we bring phenomenal talent. I want to highlight too as well that during the breaks and the luncheons, you're going to have a phenomenal group of teams that you should be able to share experiences. And let me highlight a few of them. We have Mary Betsch, who runs our sustainability and you will see how much and how rapidly we have advanced our sustainability efforts. We have in the room here, Dr. Christian Hansen but to Christian Hansen is another example of how we acquired a company like Seepex, which is where Christian was based out of. Christian drove and developed the IIoT platform for Seepex and it is a platform that we're now leveraging across Ingersoll Rand. So in his role as the Ingersoll Rand digital leader, he is expanding that technology across. Bert Jameson. Bert is -- has been with us for just more than a year. But Bert -- will be able to walk you through our capital structure and what we're doing to unlock more cash. And you'll see how -- we continue to see our free cash flow generation continue to grow and then Chris Neubauer. Dr. Chris Neubauer, many of you have asked me about supply chain and what is it that we have done differently? Doing the supply chain, nightmares of the pandemic and the logistics issues to be able to still deliver our products. Chris can walk you through that. And more important, he's going to tell you how we're moving from being in a defense market to now into the offensive market to be able to capture savings from supply chain. It is also our Board of Directors that we have assembled a world-class Board of Directors with leaders with proven performance. Leaders that when you think about the domain expertise that they bring, we have been very specific about what we're looking for. And we're looking for domain expertise and is very well aligned with our growth secular trends, secular trends on sustainability, digitalization and quality of life. And you can see the domain expertise that this group of Board of Directors are bringing to us, including the world-class level of diversity but they bring a combined 150 years of digitalization experience and also a combined experience of more than 150 years of experience in life sciences. I'm also very pleased to say that Bill Donnelly, our Lead Director, is here with us, so feel free that during breaks and luncheon and you can reach out to Bill. So this is what you're going to hear today. You're going to hear today that we continue to be a very attractive long-term investment. And we are because we have a proven economic engine that has demonstrated to be able to drive great performance. Performance that consistently delivers double-digit earnings growth and a very strong free cash flow. What you're going to hear today as well is that we have done a lot of work over the past 3 years to really change our growth profile by divesting non-core cyclical assets and investing in over 41 companies that play in high-growth sustainable end markets. You're going to hear today as well that we have an engine that we call demand generation that allows us to penetrate whichever end market we want to because our technologies are agnostic. And you're going to hear today how Ingersoll Rand continues to be that multiplier and engine that allows us to execute every day. And you will hear today as well from Mike Medaska, how -- we're driving new recurring revenue streams to really accelerate our aftermarket percentage and improve our profitability as well. You'll hear today also how we believe on the power of the Rand, driving great performance and having a company that leads in sustainability with our ownership mindset that is very unique and our approach to our technologies that can drive energy efficiency and water conservation. And for me, the most important piece is that you'll see that we have a platform that we believe is putting us into the early innings of being a premier growth compounder. So this is the platform of today. The Ingersoll Rand of today. We're a mission -- we're a leader in mission-critical flow creation technologies. And the best way I'd like to describe that to my daughter is who they still don't know exactly what do I do? I described to them our technologies as basically we're the heart of every process out there, and we can be very selective where we want to be. And that scale that we have at $7 billion in revenue, 26% EBITDA margins and generating a free cash flow every year of more than $1 billion allows us to continue to grow and drive performance. Performance that you can see over the past 3 years, driving a revenue CAGR of 15% and an EBITDA margin expansion of more than 400 basis points, one that will continue to help us drive great shareholder return. Is this performance that we like to say is guided by our call to action? And our call to action is our purpose. Our purpose of making life better. Making life better for our employees, the customers, the Planet and the shareholders. And when you think about our employees, we make life better because we create a great place to work that is combined with this ownership mindset and look at the data points. Our employee satisfaction is in the upper tenth percentile of the industry. Our employee satisfaction is 600 basis points higher than the industry and the ownership mindset has generated over $400 million of wealth for our employees. We make a lot better for our customers because all of our technologies drive great payback because we provide efficiencies and improvements for our customers. Efficiencies on improvements, by the way, they help the planet because all our technologies are enablers for our customers to achieve their Scope 1 and Scope 2 targets. And it is also we're making life better for the planet because of all the things that we do internally towards our Greenhouse Gas emission targets that we have for 2030 and 2050 but are pretty aggressive, but you'll see how much we have improved so far. And clearly, we make life better for our shareholders because we drive consistent performance. The performance that has allowed us to deliver over the past 6 years over 250% shareholder return and added $25 billion of market cap to our company. And it is this purpose that we then execute through our economic growth engine. An economic growth engine that we shared with you in November of 2021 at our last Investors Day, but it's a playbook that we have been playing over the past 6 years. And we said in 2021 that we were going to deliver over the period, low double-digit on average growth, driven by a great combination between organic and inorganic, while expanding margins. But I think the most important thing for us in this economic growth engine is that multiplier is that differentiator of performance, which is a combination of the ownership mindset with IRX. And it is IRX, that culture that drives our execution every day. And I'd like to best describe this simply that we start with our 4 core values on the outer ring that you see in red and with the bottom of the rings by think having a strong foundation of thinking and acting like owner because we are all owners. And that foundation creates strong attachment to our customers because we solve our most difficult problems for our customers, while being very bold with our aspirations. We're always executing with high level of humility. And we think that ownership mindset focused on the customer and being bold allow us to create phenomenal inspiration with our teams. And these 4 core values and we translate into specific metrics that we drill down into the organization via our strategic imperatives. And for us, starts with, talent is crucial and very important that we deploy talent to those most difficult problems. We deploy talent to achieve growth and accelerate differentiated organic growth while allocating capital effectively to also achieve differentiated inorganic growth. And it is a talent, the growth and ability to expand margins that creates this compounding engine that we have and it is that performance that, as we say, is the power of the and in between performance and also leading sustainably as you see as one of our strategic imperatives. So the value is moving to strategic imperatives and then they get executed through IRX. And it is that playbook and performance that has allowed us to deliver phenomenal performance over the past few years. I want to take a moment in time here back to 2016. When I took over as CEO of Gardner Denver, and I was super excited to have a platform that I could transform. Back then, we were $2 billion in revenue, $400 million in EBITDA and a working capital that needed a lot of fixing. Fast forward to today, we are a $7 billion -- approximately $7 billion revenue, 26% EBITDA margins, over 600 basis points of expansion, generating over $1 billion of cash and a balance sheet that is pristine. So I can tell you that I am younger than 2016 but also more excited about what I had in '16 and what we have today as a platform that we can continue to accelerate from here. And the power of the Rand is that performance, but also what we do as a company, is how and is our call to action, is how 3 years ago, we were not even recognized by any of the ratings in ESG. In just 3 years, we went from not being on the Dow Jones Sustainability Index to now be #1 in North America and #2 in the world. MSCI recognizing us as a AA when 3 years ago, we were not even on the list. And those are great moments of celebration and high-fives, but for us, it's more about what we do every day in our communities. And yes, keep getting recognized by U.S. News and other organizations about our corporate responsibility, but is that community work. Community work that we do, whether it's local in Charlotte with Feed and Seed [indiscernible] helping local communities nationwide partnering with the American Heart Association because we know the cardiovascular disease continues to be the #1 cause of death, and we can make a difference but also going into Uganda in Africa and partnering with Drop in the Bucket. And utilizing our technologies are compressor technologies to drill wells in a matter of hours where current technology takes weeks. We're going to India with -- and partnering with Plant & Water to utilize our nonelectric pumps to be able to create potable water in very remote villages. And it's also what we do internally. By having this aggressive 2030 and 2050 targets that we're already well on our way on achieving them. I think we have a technical issue here. That's funny. 2019 Investor Day, we also had a technical difficulty. The power went out in the middle of a presentation. They're asking for any jokes Matthew. Might as we'll do the Q&A session now. And then we're back up. So is this a great effort that we're doing on the performance and driving sustainability, but we can only do it because of our employees. 17,500 employees, all going in the same direction because they have that ownership mindset. And that we believe that creating a workplace, we have a great place to work, combined with that ownership mindset is just a catalyst of long-term performance. And you can see here how employee satisfaction is over 600 basis points higher than the industry average. And how with the ownership grants that we provided we have added provided over $400 million of incremental wealth to our employees. And these are just some quotes from our employees how this ownership and the performance that they drive every day has been life-changing whether now employees can actually afford paying for -- from very difficult procedures to improve the health of their family. We're simply having the financial banking so they can start a family or as simple as just driving that emotional attachment on employees to change their mindset to think this is a company I worked for to saying this is my company I work for. And it is that playbook and add type of culture that we think is sustainable and that we believe that we'll continue to drive great shareholder performance. But so far over the 6.5 years has been approximately 250% of shareholder return, over 16,000 basis points higher than the S&P and adding $25 billion of market cap value. And we believe that this is a platform that we can continue to accelerate from here because we play in very highly diversified end markets. And in markets that with our technologies, we can continue to pivot them to where we want to be able to place, to be able to grow more sustainably. Where you can see here now our #1 end market to be life sciences, where last Investor Day, they were not. But how we continue to accelerate our penetration in those end markets that we believe will provide long-term sustainable growth. And it is not only the diversification of markets that it's great for our platform, but it's also how big the addressable market it's for Ingersoll Rand and how we continue to accelerate and expand this. At the last Investor Day, it was $44 billion addressable market. Today, a few years later, it's already a $55 billion based on a lot of the M&A that we have done and a lot of the innovation that we have launched in the different markets. And we continue these to see moving forward to becoming a $75 billion addressable market by 2025. And we win in this diverse and big end markets because we have one of the best and broadest technology portfolio in mission-critical flow creation. We're #1 or #2 in the markets that we play. While we continuously launch great innovation with over 2,000 patents and 90 -- almost 90% of those patents are towards sustainability. What that means is that these technologies will allow to save energy and conserve water. So it is this phenomenal set of products combined with our over 80 premium well-respected, well-recognized brands that provide uniqueness in their market with a great long-lasting history of high levels of quality and reliability because that's what we -- and when I say we, all of our brands are known for. So take the technology that we have, the brands that we have and are massive operational but more important commercial footprint. Commercial footprint, where we have 5,000 employees dedicated every single day to be close to our customers. Where we have over 150 customer centers to be really close to our customers. And when we have 66 manufacturing sites globally to be close to our customers and continue with our in region, for region strategy. there has been a great differentiator for us. And it's not only what we can actually do with launching new technologies and current products will start to harvest our installed base with over $5 million assets out in the field that we're connecting as we continue to progress our digitalization technologies. And that combination of technology, brands and footprint has allowed us to deliver constant performance. Our economic growth engine, we told you at Investor Day, it was going to be on average over the cycle, we were going to generate mid-single-digit organic, mid-single-digit inorganic and, on average, 100 basis points of margin expansion. We've been able to do it every single year, including here in 2023, where we expect to generate 10% organic growth and an additional 6% inorganic growth and a margin expansion of 140 basis points. Here in 2023, where there's been a lot of geopolitical situations and secular situations that have even put PMIs and less than 50 for now more than 14 months, yet we've still been able to deliver great performance. Great performance will then translate into an EPS growth that is going to be over 20% in 2023. So that is why with confidence as we can offset our targets for 2027 that Vik is going to walk us into more detail that we're here confident that we can continue to achieve this performance. And we're confident with this performance that we're even increasing some targets. It's is the adjusted EBITDA margin on the upper range of what we were saying before, which very impressively getting to touch that 30% or free cash flow margin that we said before, mid-teens, and we see a path to have free cash flow margin that starts with that too. So it is all these results and performance that we feel really proud but I'm most proud of our is -- about our employees, but they just do it every day, day in and day out because they are owners and they think and act like owners. And they have an economic engine that we execute with IRX that we know can deliver great performance. So to all of our employees that I know they're listening to the webcast, I just want to say thank you. Thank you for what you do day in and day out. So I hope that today, you're going to have these takeaways that we have a proven economic growth engine with the enablers to help us deliver these ongoing performance. You're going to see that we still have plenty of room to improve, and that we drive ongoing growth and improvement in profitability, all with that accelerant, and our accelerant being IRX compounded with the ownership mindset. And that even though we set always ambitious targets, we're always going to execute them with a high level of humility, whether it is on performance and numbers or whether it is on sustainability. And for me, the most exciting is that I'm super excited that we have now today a great platform that we can continue to build upon here and continue to be considered as a premier growth compounder. So with that, I'm going to have Mike Weatherred come in and present IRX and also demand generation which are 2 of our most important growth levers. Mike?

Thank you, Vicente. Good morning. My name is Mike Weatherred, I have responsibility for Execution Excellence at Ingersoll Rand, we call it IRX. I bet you got up this morning, and you said to yourself, man, I can't wait to get to the Ingersoll Rand Investors Day. Oh, I so hope to have a big update on the business operating system. I knew if I used it 3 times in 4 years, it would eventually bomb. I know you see a lot of this. We've talked with a lot of you about this in detail. There's a lot of random business operating systems out there. I would tell you, we're as enthusiastic as ever to talk to you about what we're learning, where we are, the progress I was talking to a couple of you early this morning. I think in 2019, when we talked about Gartner Denver Execution Excellence. It was alive and well and adding tremendous value, but we had an aspiration of it becoming something really impactful and we feel like we're on that path. I do want to pause here for a second. I was talking to Arnold Li on the way over this morning who you'll meet later, and we think there's about 100 of these employees from Wujiang China watching online. I'd just like to give him a chance to find themselves. Arnold and I found ourselves early this morning, but that was a special day a couple of months ago. So all right. I have 2 topics this morning, as Vicente mentioned, IRX is the first. It's the way we do things. You're going to hear all day. People talk about IDMs and IRX and the way they get things done. And I'm just going to give you a quick flavor for really what that means and how they're operating when they use those terms. It's a great coaching tool and I'll talk more about that. It lays a standard process of standard work that allows everybody in the organization to coach regularly. I would encourage you to talk to some of the associates that are here today. Vicente had the slide up, asked Chris Neubauer, how he's using IDMs to overcome a lot of the commodities headwinds, et cetera. Everybody who's here from Ingersoll Rand participates, owns a swim lane or runs their own IDM as part of what they do regardless of function. It works great for integration planning, integration execution. I'll talk about that. I'll give you one case study. Liz Hepding will go a little bit deeper on how we do that and how effective it is. And we think the goodness in using a regular process for integration is that it gets a lot of reps in a standard fashion. And then finally, I'll talk a little bit about the maturity curve, and we have some companies, some businesses some geographies and brands that are 5.5 years into the process, others that are relatively new, which gives us a really strong feeling about the fact that overall, we're really just getting started. Okay. So this is where it fits in the economic growth engine. You can see it over there on the right and some maybe overzealous branding at the top and bottom without that middle piece. And that middle piece around ownership mindset is the thing that separates this in my experience and opinion from a lot of other business operating systems. The reason for that, and this has taken me about 6 years to get a little bit of clarity on this is that the ownership model, the goodness of the ownership model, and I had to leave the room when the video started because yesterday when we started, when we saw it, I almost started crying. But the goodness of the ownership model is definitely financial benefit, no question. But there's 2 other things behind it that I think make it more impactful in the way the company runs every day. The first is the great equalizer of peers meaning we all come to work to get better every day. We all have a stake in the game. We're all owners of the company. And then the third thing that I've learned is that as owners of the company, when you talk about a high-performance execution system, it's not just let's try hard until we burn up. Let's just try hard until we finish this project. It's -- let's work smartly, get better over time. Let's not be afraid of setting big goals. Let's not be afraid of measuring what we're doing. We want to talk to salespeople about measuring how many sales calls they're making, you're going to start a war if you're not careful. Those kind of things with an ownership mindset, not a big deal. Also coming weekly and talking about how am I doing against what you're measuring, keeping score, rapid sessions every week, continuous improvement overtime. So to me, IRX is the how, the what is on the left-hand side, the growth step mindset is what separates it from a lot of other business operating systems. Okay. This is the slide we used quite often. We talk about the fact that IRX and IDMs are simple. And I know some of -- I've talked with a lot of you about this, I think for those of you that are hearing this story for the first time, I'll try and give you a feel for that. Simplicity, it's overall about driving a high-performance execution process focusing on the high priorities. That's another differentiator in my experience is that we don't use IDMs and IRX everywhere. We use it on the highest of the high priorities, create several moments of truth and a moment of truth, we would describe as I think about coming into a weekly report out. And you've got 4 or 5 minutes, you're going to go through your area of focus. You're going to do it in a standard form. They all look the same everywhere. Managers can instantaneously get engaged and help you by asking questions, providing assistance to help, maybe suggesting some alternatives and we think that, that gives us 2x to 3x the annual we think people get developed 2x to 3x faster annually because they're getting that 40 to 50 reps a week -- a year of showing their work, having the score be measured, getting some coaching, most importantly, having the opportunity to ask for help, okay? 100% adoption and helping us get things done faster as long as well as developing people. Okay. So it's all about the highest priorities. And again, I think this part of it, the first maybe Section 1 and 2 here are kind of boiler plate, I think a lot of -- well to exceptionally well-run companies can do this. But the way we do it is we start in Q2 by building a strategic plan. Our strategic plan we call an MLB, And MLB is going to happen locally. It's going to happen by product. It's going to happen by geography, it's going to happen by brand. It all rolls up. And in the second or third week of July every year, we take Monday through Friday, and we go through all the MLB report outs. And at the end of that week, we have the top 5 areas for focused growth and top 5 margin improvements by business. So a lot of priorities, right? We keep boiling that down, having some follow-ups with the teams, while at the same time, starting 2 equally critical processes. One is a budget. Now you guys -- all of you, I think, know Vik, all of you know, Vicente, I can tell you those level -- the budgets and the level of granularity in those budgets is pretty specific and extremely well done. The third part of the process is talent. So Kate Keene runs a process we call TRX, Talent Review Excellence. And again, it's just done as I've ever been associated with it, where we're going to talk about where do our employees fall? Every employee gets a 9 box, every employee falls into some sort of succession planning. And then if you want to hear about great development plans today at the break or at lunch grab Kate because Kate and her team have done a tremendous job of putting extraordinary focus on development plans, of which a lot of times the outcome might have something to do with an IDM. All right. So there's a moment in time where we've got the top 5, growth, top 5 margin, all the companies, roll that up. We roll that up into what we call at the bottom of the center and IROPE. The IROPE is an, Ingersoll Rand Operating Plan Execution. That's got the top 24, 25 priorities in the company. Vicente pushes off of that and runs his staff meeting every Friday by going through those KPIs and by P&L, and then we review the corporate functions of importance during those 100-day spreads, all right? And then what that IROPE does this is another -- and I missed the last part of the process, which that time spent in December, which actually ironically kind of coincides next week, that allows us to get off to a very fast start in Q1 which is always a good thing. The best thing about it for us is it gets us into the market. We know what we missed. We know what needs to be counter measured. We know what we need to do differently. And then we hit that third quarter -- second quarter with a lot of momentum to repeat the MLB process. So all those priorities are then pushed off into IDMs, and there's hundreds of them, I'll talk more about that. So a lot of people say, how do you start an IDM, how do you launch an IDM. It's really very simple. It takes less than a day. We don't do IDM or IRX training. We do installations. And the installation simply has to do with finding the highest area of focus getting the right people, usually cross-functionally, maybe 10, 12, maximum kind of 15 people together, figuring out how you're going to build the swim lanes. Now the point before the swim lanes is the growth bridge and you see the growth bridge on the bottom eleven or on the bottom left, really important part of the growth bridge is the headwind and this is the way we start the day. So we would say, what's our 100-day objective for improvement during this next cycle. And the first question we would ask is, if we don't make the number, if we don't make the objective, if we don't launch the product, if we don't get the commodity savings, whatever the area of focus is, what would be the reason why and people kind of -- they're a little bit uncomfortable. And then the next thing you know, sticky notes are flying up, you prioritize them and you end up with a list of things that critically have to be prevented or else they're going to be built into your bridge which then would reset the jump-off point. So the example I always use here is that, let's say, on a specific, let's say, the Southeast part of the United States, you did $100 million in bookings during a certain period. This year, you want to do $110 million. In my experience up until recently, you would spend a lot of time building a plan to get that $10 million you would go you might even get $11 million and you would fall solidly at $98 million and then you would say, what did we do wrong? And it's not what did we do wrong, it's what did we not consider. And what did we not consider is that things change and no 2 periods we're learning even week-over-week look identically. So you take the headwinds. The next thing you say is, if we're going to achieve this objective, what has to be critically focused on, right? So launch of this new product, win back this customer, close these specific orders, and those are areas of growth. And we don't do this. We don't take weeks and months to do the math to the fifth decimal point. These are placeholders. And late in the morning, we start pushing off into swim lanes. And swim lanes, this chart looks, I'm sure, a little complicated if you haven't seen it before, actually very simple. Top of that chart in the right-hand corner is red. That would mean this swim lane is out of control, which means that whatever period in the 100-day sprint they are by week that they either need some help or they need to countermeasure the plan. So am I in or out of control, what's my head day objective, who's on the team, what am I going to -- leading KPIs, big learning, big opportunity. Leading KPIs are all activity-based, influenceable actions, right? So a lot of companies would measure, again, for sales because it's fairly straightforward. They might measure orders, they might measure bookings, they might measure even their funnel that would be a progressive measurement in that kind of swim lane. For us, that's way too basic. We're going to measure and set goals for number of contacts, number of appointments, number of sales calls, number of demos, number of quotes, number of bookings. And then maybe the second or third cycle, we'll measure the cycle time between those things. So again, on a 6- or 7-day pace, what can I influence? What can I have activity-based movement around? And how am I doing? So teams get together weekly. We run it for 13 weeks. We call it 100-day sprint. And then at the end of the 100-day Sprint, big focus on resetting the bridge and think about what that second session of resetting that bridge might look like. And you'll hear from Pam later this morning, around her experience with IRX. All right. This is my favorite slide. I had a dream last night after about 45 minutes, had to be physically dragged off the stage because I was stuck on this one. We're not going to get some new material. Okay. So the thing I like about this is, one, the original intent of this was that people would literally -- the 12 to 15 people stand in front of the wall and look at this posted much like a safety Kuject board. Of course, COVID hit, a lot of things change, big global company, people all over. What we learned very quickly is this works great, 14 tabs, Excel workbook, 6 days a week, all these IDMs look identically. And I know some of you have participated we could show you -- I mean, China -- Arnold's IDMs look the same as the Amar's looks the same as Santiago. That's the common execution language. That's what makes it a lot of fun and gives us the opportunity to add value. So 10 minutes on the left, 20 minutes in the middle, 10 minutes to wrap up. The first 10 minutes is spent taking attendance so if you're one of those 12 to 15 people, we call you the Board of Directors for that particular IDM or you're focused on that 100-day area of improvement. I'm going to discuss the discussion guide briefly which is timed, I'll run with a shot clock 2, 3, 4 minutes per topic. And then I think something that is actually working out quite well because it's so simple. It's follow-ups from this week. Follow-ups from this week is maxed at 5. And this we talk about as a parking lot with 5 parking spots in it. And if there's 3 cars, you only have room for 2. And the reason for that is we don't want this to be an endless list of 40 things that are bogging us down. We want to chase these things off dynamically. Four minutes per swim lane. I'm in control out of control. Here's what I'm measuring. Here's what I did last week. Here's what I'm going to do next week. Here's where I need help, times 5, 20 minutes, plus 30 minutes are spent on follow-ups for this week, again, assuming there's some parking spots open, where do we need help? Where do we need help? Another critical good finding in this process is that, that IDM can request help from anybody who's not in the idea. And Vik and Vicente and everybody else in the room will occasionally get an ask from an IDM, nothing gets a higher priority, whether it's a text, e-mail, phone call, we respond to those quickly because we know the 6-day clock is running, and they're waiting on an answer. Last piece of the IDM is the self-audit form. Self-audit form Is the team, and this is what we like about the dynamics of the self-directed work team, they're going to score themselves. And listening to this is really a lot of fun because they pass it around. Sometimes it's hard, sometimes not so harsh, sometimes a little friendly, sometimes there's a little scrapping. They're measuring 3 or 4, 5 simple things like did we start and finish on time, write people in attendance, making critical progress on our 100-day objective, so on and so forth. I've said 1,000 times that if you get the right people, set the right 100-day objective, self-audit yourself to what you determine good to be, you'll figure out the stuff in the middle and seems to be proven pretty true. 400 of these IDMs running weekly. When we talked about this in 2019, we had 60. We don't really -- I don't -- I think what that means is we're using it everywhere. We don't have a goal for how many are not at 400 trying to get to 500. It's just kind of a self-polled self-selected, self-deployed process, but I know we're using it everywhere. You'll hear about it all day. 7,000 associates weekly again, we think in a high development, good process to get coaching. And then you can see the doughnut in the middle, about half on growth, half on everything else. All right. Here's just a quick wrapper. I think the ownership model is the game changer here. I think this process might work in a different environment. I don't think it would work as well. It's simple, really easy to implement. People pick it up quickly. Liz will show you how we get people ramped up as we integrate new companies. And as we go around the world and kind of spread the good news of what you can do with this tool, plenty of people that can coach if you've been to a cycle or 2, you can easily help somebody install one. I haven't found, and I get a lot of calls on how would you think about or could we use an IDM for fill in the blanks haven't found one yet, including personal things like vacation planning, running marathons, et cetera. So it's a process that the 100-day goal objective or goal setting, measuring activity-based influenceable actions seems to have some value. Last thing I'll say here is we have a -- we have some IDMs that page on the front page we have there from Wujiang China. Vicente and I were there a few months ago. They ran an IDM that IDM had been in existence for 5.5 years and basically the same format. Sales, marketing, margin improvement, aftermarket and operations. It was almost unrecognizable in its goodness because of what they had done with it. And it wasn't the same, 12 to 15 people that installed it. So we think it's early innings here. All right. Let me spend a little bit of time here on DGX. Demand Generation Excellence. We think this is a proprietary growth engine, very much focused on taking market share and growing the top line. I'll show you how we measure that and the impact we think we're having. It's a proprietary commercial process. We'll talk more about that. A lot more than just outbound marketing, which sometimes people mistake the term for. It's a combination of customer insight, which we would think about as a customer database, and that's kind of maturing and getting richer all the time. Commercial execution, outbound marketing, aftermarket assistance where needed, dynamic valued based pricing e-commerce, which we -- e-commerce, we talk about as letting allow customers to buy what they want to buy, when they want to buy it, how they want to buy it. And then at the end of the team or the other side, and I'll show you the framework here in a second, there's a business intelligence and data analytics group, which is really helping us get smarter every minute, really scalable for new acquisitions. I'll show you a quick case study on that. I think the big game changer here, and my last slide, you'll see from me this morning talks about our maturity curve, tremendous upside based on data and then, again, we think pretty early innings here as the more we learn, the more I think positive we get about the impact we can have. Here's where it fits in the economic growth engine. We strive for 100 to 200 basis points of growth here, organic growth. That's our goal. That's how we measure our success and again, all focusing on this proprietary growth engine. All right. Here's the framework. And on the left-hand side, think about the customer database, customer insights assess here. In the middle, think about those 5 areas of focus. And for example, and this could be the slide of this wall plus for the detail that goes into these things. But that web and digital marketing, you might think about we have 78 websites that are all hosted on a single platform. We can make changes dynamic real time. We host over 250 distributor websites or landing pages. We do a lot of outbound integrated campaigns. I'll take you through a couple here in a minute. Commercial, we're going to talk about standard work in sales, again measuring calls, talking about CRM, but territory management, channel management, aftermarket focus. Mike Medaska will follow me, give you an update on reoccurring revenue. You can see how a lot of the things he'll talk about can easily be deployed through IRX with this process, adding some momentum. Insightful pricing, I think this might be an understated part of this team and that we have some real pricing experts, and all they do is pricing 5 or 6 days a week, whatever time they're doing it, which, in my experience, the fact that this total 175-person team doing this full time is really the momentum that gets built over time. And a lot of companies our size, a lot of companies smaller or bigger, you'll find people with most of these responsibilities, it's usually a piece of the work that they do. This is 175 people getting up every day come to work, to think about nothing but growth and margin improvement, driving top line revenue and increasing market share. All right. centralization of the experts to me, there was a couple of decisions made about 7 years ago. One was this going to be a centralized team. Two was we're going to have a multi-brand, multichannel strategy. Those 2 things frame the rest of this. And you can see the reason for those decisions, although the brands were probably about 1/4 of these and our opportunities to get to our customer was not near as big. But a few years later, 80 brands, 87,000 pass to the customer, 25 targeted segments. Without this, I think we'd look like the rest of the industrial manufacturing market. We'd rise, we'd fall, we'd sort of be acceptable with demand generation. We feel like we can control what we can control, drive market growth, take market share, pivot to new markets, et cetera. All right. The other side of this -- the reason that this is effective is we go with a pretty complicated customer. Hold on to your seats for a second, I got a news flash for you. Most of these people are using the Internet. Okay. That's ground taken. Now they spend a lot of time online. We want to deliver a great online experience, no doubt about it, that would probably be an equalizer to everybody who looks like that. But the thing that we're coming to learn is they don't have a great job satisfaction. And the reasons, if you can think about that in everything the world has been through in the last 5 or 6 years, probably fairly obvious. The thing that has been interesting for me to learn is they have 4x to 5x more responsibility than they did just a very short period of time ago. So it's gotten complicated. They got a lot more to do. They're solving a new problem for the first time. Think about some of the micro markets that we would pivot to might be EV batteries or biogas. I'll show you a slide on that coming up right away. They don't like to deal with salespeople. They do not want to engage a salesperson until up to 75% of the decision has been made. But they do say, if I could get the right information at the right time, that would be very helpful to me. And you can see we can deliver that by paying really specific attention to where they are in their customer buying journey, right? So they're either early in the market, not in the market early in the market, getting into the market, making a decision or they own our products. And it looks pretty straightforward. But the way that we would message and communicate with them based on what we wanted to communicate with them about will look a lot different. And those 5 areas of focus that we talked about, that playbook gets moved around as well, again, depending on where they are in the buying cycle. We also ultimately are trying to deliver a great customer experience. And we -- on purpose and let me tell you, when we first started this 3 years ago, it wasn't very pretty. We measure Net Promoter Score at 3 stages during that cycle. Started off with an extra digit in the number we thought the math was wrong. Now the Net Promoter Scores are pretty good. It also drives a lot of great activity like, for example, responding to a lead in an automated fashion or real time or when we hand the leads off, and I'll talk about that in a minute, salespeople pounce on them because they know the Net Promoter Score is being measured. All right. This is how it works. Think about any situation that you want to think about, you start off in that top left-hand corner, we can take a geography, we can take a product, we can take a brand and we're going to pick an area of focus, much like an IDM, I think that's why this has worked so well with IRX and IDMs. We're going to go into our contact database figure out what we have from a contract standpoint. We have millions of people in there. I'll show you the specific number in a second. We're going to launch an integrated campaign, which I have a sample here of probably a 3-page menu of the way that we could get to these people. Again, based on where they are in their customer buying journey and how they want to receive information from us, which we pay a lot of attention to, you'll hear Arnold talk about some China-specific stuff here later. And then out of that, we get 6,000 MQLs a week, and MQL is a targeted customer, a name with a contact, with a need for which we have a product that can solve their problem. We're going to quickly and many times in an automated fashion, hand it off to a salesperson. Salesperson is going to contact them, again, almost immediately. And out of that, about 30% to convert to SQLs, SQL is everything I just said, plus we're -- we know the decision-making criteria. We know a specific product and how we'll approach solving the problem, and we know the timing is very realistic and warrants our time. So this has all changed, and it's changed really quickly in that salespeople used to not be big fans of leads for marketing. It was almost like 2 different places. Now very connected. And what this is doing is making salespeople much more efficient. If I can think about I'm spending a third to half to more of my time working on marketing qualified leads, warm leads, I'm going to be much more successful. There's always -- I've spent about 40 years in the commercial space, and there's always been this holy grail of formulaic commercial execution, right? So x times y equals z, which you can do pretty well in a factory, you can do really well in a call center. Some engineering teams pull it off. People don't even think about it in sales because it's sales and marketing because it's a random wandering, ever-changing event. I think with this process, we're well underway. I think the other thing that gives me hope in getting there and getting there really quickly is that if you look at this framework, and some of you are more expert at this than I am, but there's 6 to 8 to 10 opportunities for continuous improvement, measurement and countermeasure. And now as this is the way we run the playbook, we're doing that kind of work every day. All right. So we take the playbook and what do we think about? We think about focusing on specific target customers or markets. We think about pivoting to new micro markets, right? When you heard Vicente say control, we can control, do what we say we're going to do. We're going to be -- we have an individual in our -- a couple of individuals in our company, they're looking at 100 micro-trends all the time. We're going to accelerate new acquisitions, more to come on that. Launch new products and expand the aftermarket services and revenue. All right. Good results here. I think in -- we've talked about this in 2019. You can see the starting point from when Vicente started to build this team out. We now have about 5 million people in the contact database. I think we'll get close to 300,000 MQLs this year. The cost per lead is down to a very reasonable amount of money. I think we would compare that to a lot of places, about $1.5 billion in our sales funnel. So adding value, getting better, growing over time and again, pretty early innings. Okay, a couple of quick case studies. And I'm not going to spend a lot of time on these because I think you've seen the playbook and you're going to hear a lot more about some of these specific areas of focus from the teams with the technology. But think about food and beverage or life sciences, we can go in there. This is kind of our power alley. We might be talking to in our installed base around added services, revenue, care, things that you're going to hear about all day. We want to stay in touch with them. We might be going after new ones. You can see in these 2 particular campaigns, about 1 million contacts in the database. $34 million added to the sales funnel. I think 13,000 MQLs generated. So this is kind of the thing that keeps the salespeople highly engaged this bread and butter every day. We call this -- this would be part of the focusing playbook would be pivoting and pivoting means we're going to move quickly to a new market that's emerging. You're going to hear both from ITS and PST, how they're moving to electric vehicle batteries. And we have renewable biogas up here. Same playbook, different version, right? And the different version is these may not be customers we know well. They are highly likely 30% to 40% of the time be solving a problem for the first time, we're going to be very educational. We're not even going to talk about products until we help them get up to speed on the problem that they're trying to solve. And most importantly, 2 things. The first is that in these are new orders and buildouts, they're 2x to 3x larger than our standard orders, right? And the second thing is whether we win or lose, this is the beginning of a great customer experience that we'll have with these folks for a long time. All right. Last case study, and then I'll wrap it up. I love this. When we bought the -- and you guys all know about this, we bought the Air Treatment business from SPX Flow. SPX Flow went to market as a corporate brand. We took that corporate brand off and we relaunched five heritage brands that SPX Flow had acquired over time, did it really quickly. That gave us marketing campaigns, web platforms, social media initiatives, et cetera. We also did value-based dynamic pricing here, all in the first 100 days. A great story about a gentleman in Moore's, Germany where Hankinson is, when he heard his whole brand was coming back. He went home. He got a 25-year-old jacket out of his closet work to work the next day, and he was met on the factory floor with a standing ovation. People take pride in these brands, bringing these brands back and just immediately raises the engagement at across SPX Flow. And then a lot of MQLs, a lot of activity. The great thing about that is it gets not only the demand generation process going, but also IRX, and we're starting to work on the overall impact and value of the economic growth engine. All right. maturity path. I'll let you look at this one at your leisure. I would say a lot of pick and shovel work by the team here in the last 7 years. Tremendous amount of work. I say pick and shovel that way undermines the actual highly technical work that they've done. I think -- as I showed you a couple back, we're solidly into leveraging this commercially and problem solving and building momentum and using it in new integrations all the time. We have a column on here which we call world-class. We think the journey to world class, we're solidly on, but you guys know us well enough, we'll move the goalpost. This would be world class for a manufacturing company will change the goalpost here to something that looks more sophisticated. We think we're playing at that level. So we'll continue to make progress and come back in a couple of years and tell you where we are. All right. It's alive and well. Demand generation, adding a lot of value. Hopefully, you understand some of the simplicity. It's really scalable. The more we learn about customers, the smarter we're going to be. I think the data, which I had on that previous slide, I think once you hear Mike, just maybe make a little note, data is going to drive this to a whole another level when Mike gets finished, you'll understand why. We think the talent and the customer insight and the passion, the 175 people, the multi-brand, multichannel is really not comparable to other situations. So overall, pretty early innings in DGX. Thank you very much for your time. I'll now turn it over to Mike Medaska for an update on reoccurring revenue.

Thank you, Mike, and good morning, everyone. My name is Mike Medaska. I'm the Vice President of Corporate Strategy for the company, and it's a pleasure to be here with you this morning to talk about our recurring revenue strategy. What you'll hear today really 3 key points. The first is that we've more than doubled the percent of revenue from our IIoT ready products from 10% to approximately 20% in the last 3 years and that we are on path to hit our 25% target by the year 2025. Two, we're establishing a bold target to reach $1 billion in recurring revenue by the year 2027, and three, that we intend to achieve that target by growing our industry-leading care, comprehensive service offering, expanding our Ecoplant system optimization platform and growing our air quality services business. So let's dive in. First, digitalization. As I mentioned, we've doubled the percent of revenue from IIoT ready products and services to approximately 20% this year, and we will meet our 25% target by the year 2025. Beyond the metrics, we've appointed Dr. Christian Hansen to lead our digital effort as a company. Christian's team consists of 50 experts in hardware, software, controls, analytics and e-commerce that are centralized but work every day with the teams in each of our business units to drive a digital journey forward. We execute that using IRX. Importantly, we've begun the transition to monetization. The simple illustration on the right shows you what I'm talking about. A very simple connected machine communicating information to the cloud services, providing data and insights that we then monetize in one of 4 primary pathways. The first, alerts from connected machines that allow us to execute with parts replacement, complete equipment replacement or new services, subscription revenue from system optimization offerings, QR code scans that allow ready ordering of parts from a website and an asset life plan that functions much like a maintenance reminder for your personal automobile, providing reminders to order consumables or replacement parts when needed. Beyond revenue, it's delivering value as well in terms of service productivity, allowing us to be more surgical in dispatching service technicians with exactly the right parts at exactly the right time to make sure the machines at our customer sites are optimized. Let me back up a minute and provide some context. Great strategy always starts with meeting customer needs. Long-standing customer needs are intact, uptime, return on investment, operator safety and product integrity, long-standing customer needs that continue to persist today. But what's very exciting the fact that we're hearing with increasing frequency to new and accelerating needs. The first, customers are asking us to help them decarbonize in service of meeting their 2030 or 2050 net 0 commitments and reducing Scope 1 and Scope 2 emissions. Two, they're asking us to help outsource servicing to us. They don't want to be in the business of servicing rotating equipment. They lack the talent, they lack the desire to be experts in that and are turning to us with increasing frequency and saying, help us do that. So the way we meet those needs as shown on the right, beyond our original equipment offering, our comprehensive aftermarket portfolio consists of a number of elements. The first, hard parts like rotors, motors and bearings, Secondly, consumables, this would be cool and lubricants filters that are replaced frequently. Third, accessories like piping tanks condensate management and then equipment service and system level service as well. Let me bring the opportunity to life with an example from our compressed air business. Air compressors are obviously important to us. It represents about 70% of ITS revenue. We know are important to customers as well. Approximately 70% of customer and manufacturing industrial sites use compressed air and compressed air can represent up to 30% or more of an annual electricity expense for an industrial customer. It's ubiquitous, right? Compressed air is everywhere. It's often called the fourth utility. But unlike water, electricity and natural gas, customers are often left to provide their own, right? And that introduces a lot of complexity at customer operations, both at the component level or the compressor level and the system level. This would be like -- this would include things like mid-sized machines, right, leakage, lack of piping, adequate storage, lack of redundancy. The result is that customers often suboptimize their systems. The Department of Energy is estimated up to 50% of all produced compressed air is wasted, right? It's a staggering amount of waste. So the opportunity for us is clear. Just a 15% improvement in compressed air system efficiency in the U.S. would result in 15 billion-kilowatt hours saved, 9 million metric tons of CO2 avoided and over $1 billion in savings annually for U.S. customers alone. So the obvious question is, how can we help? One of the most powerful tools in our arsenal is something we call the air system assessment. It creates customer awareness of issues and catalyzes action. It's executed by a team of experts that we have around the world that will go on site and work with customers using their expertise in the science of compressed air. They follow a 3-step process: one, score the site. This is a simple on-site walk through, a dialogue with the customer to understand their issues and needs typically using a scorecard as shown there on the lower left to identify preliminary areas of opportunity for improvement. Second, assessment. This is a more detailed process. It can take a week or 2. The systems are instrumented with sensors and monitors. So we're logging and collecting data and then using that data to provide a recommendation or a remediation path forward. I should mention that assessment often includes the creation of a digital twin as shown here on the lower right, an example of a model that we created for a customer in the Southeast U.S. Step 3 is implementation. This is where we hope the customer pursues the remediation that we proposed in the form of new equipment, new parts or new service actions. What's exciting is that air system assessments deliver real impact. In 2022, we executed 1,300 assessments that resulted in over $130 million in orders. That's up 12% year-over-year with the value of those orders typically exceeding 2x the value of a traditional order that is not -- that does not follow an air system assessment. Let me bring that to life with a few examples. The first, a leader from the paper industry with 20 mills and over 150 compressors in the U.S. asked us to conduct an assessment across all 20 sites. We did so. We identified a number of areas for opportunity. We estimate the potential revenue from execution of those actions over the next 5 to 10 years to be in the vicinity of $360 million, an enormous potential for us. But typically, we can find opportunities for fast payback for the customer as well. In one particular site, you can see there, 19-month payback by eliminating the use of a rental equipment and a number of leaks that were existing at that site. Quick anecdote at that same customer, a major competitor of ours offered a 30% discount below their typical pricing, an attempt to get that customer to convert. Customer refused to convert, and I think that's a sign of the power of our partnership and the strength of the relationship that's created when you help customers solve problems. Second example comes from the construction materials industry. This customer had 30 sites with over 90 compressors. The assessment revealed a high risk of downtime potential at 12 sites with very old machines and lack of redundancy. So in a market that will be flat to down this year, an end market that will be flat to down, we'll grow revenue with this one customer 7x and more than 2x again next year. Okay. Let me provide a look at unit economics to make it even more clear, the opportunity that we're engaging on here. The total cost of ownership for a typical rotary compressor over its 10-year useful life is shown on the left. It might consist of 10% upfront equipment cost, 10% parts and maintenance and over 80% of electricity costs. For small- to medium-sized site with 3 compressors running at 6,000 hours a year, that could be more than $1 million of electricity expense over 10 years. So it's a big number, creates a big opportunity for us to generate revenue throughout the life cycle of that equipment. So to illustrate even more clearly in the center of the page for a single 100-horsepower compressor that we might sell for $50,000, when you add the typical aftermarket add-ons of parts and service, you might get a 1x multiplier of that original equipment price. When you think about the recurring elements -- recurring revenue elements of care, system optimization, air quality and testing services, you quickly get to a value that's 4x that of the original equipment. And we're very excited about the size of that opportunity. What's also exciting is that we know that this is extensive will be on air compressors to other equipment with high value and long useful life, such as a progressive cavity pump, a blower package or a turbo vacuum unit. Okay. So with that as background, let's talk about where we're going. As I mentioned earlier, we've established a bold aspiration to move recurring revenue from $200 million to $1 billion by 2027. We're very focused on growth in aftermarket overall, but we're particularly excited about the growth in recurring revenue where we define recurring revenue as revenue for multiyear agreements that deliver equipment or system level services or outcomes to customers. We're going to pull 3 primary levers: care, system optimization and air quality. And I'll cover each of those in turn. First, care. Care is our industry-leading comprehensive service offering, typically takes the form of a 5- to 10-year agreement where we assume responsibility for the performance and maintenance of a compressor. It's priced according to the age of the machines and the operating environment of those machines. Customers absolutely love it, delivers peace of mind, predictable operating expense, reduced downtime and no internal requirement for expertise. We love it because it delivers recurring revenue. It drives very high customer satisfaction loyalty, great gross margins at north of 60% and we win for several reasons. The first, consistent delivery and pricing across sites important for multinational customers that want consistency and experience. Two, accumulated insights from millions of assets managed over decades of time. We think that's unmatchable. Three, execution by experts. As I mentioned, we have experts trained in the science of compressed air, trained in the execution of service contract execution. And third, we're often competing with local providers, self-service or in action, and we like our odds against each of those competitors. Care is delivering results. At the end of 2023, we'll have approximately $375 million in order value of care contracts yet to be delivered. That's up 80% from 2021. Customers on care contracts report customer satisfaction 20 points higher than those not on care contracts and are seeing greater machine uptime as well. Let me share just a few examples from a few different markets. First, a leading semiconductor manufacturer gave us a nice equipment order several years ago. They asked us to engage 80 machines across multiple sites, awarded us a $4.5 million contract for care. And in a sign of the partners -- the strength of the partnership that we have, not only are we executing on-site and off-site service, we're also managing their parts inventory for them. Second example, a solar equipment manufacturer, exceptionally frustrated with the inconsistency of the service experience they were getting from a network of local providers, asked us to standardize that service through care and awarded us a $2.6 million contract and have been exceptionally satisfied. Finally, a raw material provider to the steel industry gave us a $5.5 million contract to look after their compressors across multiple sites and are so satisfied with the service execution that they're beginning to convert their competitor compressors to Ingersoll Rand. So it has impact. Let's turn next to system optimization. I'm so excited today to introduce you to Ecoplant. Ecoplant is our revolutionary technology for optimizing compressed air system efficiency. It sits squarely at the intersection of digitalization and sustainability. It was founded in 2016 by Aviran and Moti Yakov and Yaron Harel in Tel Aviv, Israel, and joined IR earlier this year. The system uses amazing patented IP proprietary algorithms, a controller and a sensor array to dynamically control in real time a compressed air system to deliver exactly the amount of air needed by the customer in the most energy-efficient way. It works with multiple compression technologies and is brand agnostic, and it yields fast results. After less than 2-day installation period and a short training period for the algorithm, the system is switched on and begins immediately controlling the system, delivering typically 15% to 20% energy savings and a less than 1-year payback. We're so excited about the potential of this technology. Quick anecdote, when we were working with the board of directors to review and approve this transaction. I shared with them that in my 24 years with the company, this is the single most exciting project that I've had a chance to be a part of. Okay. Air quality analysis, the third and final driver. Just as ensuring the quality of air in buildings and environments -- home environments is critical. The same is true for compressed air systems especially so in sensitive environments like food and beverage and pharmaceutical manufacturing where air purity is critical as well as human breathing applications, including hospitals, divers and fire and rescue personnel. What we're doing here is talking about ensuring that the air is free of contaminants, particulates, water, oil and microorganisms as well as helping customers meet their regulatory requirements. The foundation of our offering is a company called Trace Analytics that we acquired earlier this year based in Austin, Texas. Trace is the only lab in the U.S. to test all classes of the ISO 8573 standard and has contracts in place with all 5 major pharmaceutical companies in the U.S. We're so excited to have Nikki Smith and our team of air quality experts on board and are excited to scale this platform around the world. Okay. Before I wrap up, a quick view of the future. What you'll see from us is an extension of the care portfolio from the traditional Ingersoll Rand brand of compressors to the other brands within the compressor portfolio. An example is shown here as it relates to CompAir that we executed in 2023. In the future, extension of care into the PST business as well as integration of care, Ecoplant and air quality analysis into bundled services and offerings that deliver greater value for our customers. So in conclusion, our investments in digitalization are paying off. We're on track to achieve our 25% by 2025 target. We're setting a bold aspiration for recurring revenue growth and intend to achieve $1 billion in revenue by 2027. And we'll get there by the growth of our care comprehensive service offering, our Ecoplant system optimization platform and our Trace Analytics air quality and testing services. So with that, I will say thank you for your time and invite Vicente, Vik and Mike to join me on stage for the first Q&A session. Thank you very much.

Julian here. Maybe a first question for Vicente around the end market split that you put up on Slide 17. The top few there, things like clean energy, food and beverage, life sciences. Are those kind of 3 where we should expect most M&A capital to flow in the next sort of 3 to 5 years and also the other Slide 21, you have the geographic site footprint, very Europe-heavy. Should we expect, over time, there's a more even distribution, perhaps less in Europe, more in Asia?

Sure. Julian, on the first question, I think one of the beauties of our technologies is that they can be agnostic to the end markets. Do we want to be more pronounced on those end markets that have a higher growth and more sustainable CAGR over the next few years? The answer to that is yes. So could that lead some M&A to be more specific to those end markets? Potentially, yes. As we want to continue to penetrate those markets, obviously, organically as we people technologies, but also inorganically as we continue to add adjacencies to a lot of the technologies. So yes to that. On the next one, I think we like to be in region for region because we can be really close to our customers. It has shown that to be a very good strategy for us over the past few years. So we don't foresee that we need to shut down a factory in Europe and move it to Asia. Right now, as we speak, what Arnold does is that he takes the technology and then he localizes that in the region for region. Now if there's eventually a moment in time that we need to consolidate? Yes, that offers a great opportunity for footprint. But at this point in time, we don't see that to be a lever that we have to pull in order to achieve our margin targets.

Great. And just a quick one for Mike Medaska on the profitability of the recurring piece, any color at all? Do you have a sort of an investment phase up front and then the margins move up towards the back end of the period? Any perspective on profits on that piece?

Sure, I can start and then ask Vicente to add on. Yes, as I mentioned, we've shared typically our care contracts come in at revenue -- or sorry, gross margin 60% or higher depending on the particular application. So you should expect to see that continue going forward and grow. But certainly, sure, as Ecoplant and Trace Analytics are both new additions -- relatively new additions to the portfolio, you would expect to see early investment to scale those, and that's in process now but eventually to reach and exceed recurring revenue targets consistent with what we're seeing for care.

Yes. And that's a great question, Julian. I mean definitely Ecoplant, we're an investment period, same thing with Trace as we ramp them up. So from a gross margin perspective, they're even better than the care gross margin. But from an EBITDA based on the investments that we're doing, definitely not as good as the care. But net-net, I mean, super excited of what we can create there.

The brand situation is very interesting, right? You see that 80 brands and particularly the SPX example of how they homogenize the brands and destroyed them. But the question is, how scalable is this? I mean, are we back here in 2 years and there's 120 brands on the slide? And does that customer on the 80th brand know that they're dealing with Ingersoll Rand? Like is there -- how do you make sure you capture the cross-sell. Clearly, you do it. I'm kind of asking how you do is really the question.

Yes. So Jeff, I'll say a few things and then Mike, you jump in. I -- we believe in this multi-brand, multichannel because it really helps us create just a blanket of coverage. As you remember, back in the days when we merged GD and IR, we said it was perfect to keep both brands because GD more distribution, IR more direct. And that kind of gave us an ability to -- in the channel, protect other entrants from coming in because we were owned in the channel, while also pushing direct brands. . So is it going to be 120? I don't know. But we also have rationalized on brands. So we show that these are kind of the 80, but we have very systematically rationalized some brands that we don't see the need to have them moving forward. But these are very highly respected premium brands that I think just very highly recognized by our customers. So we think that right now, the strategy is working really well and we believe that we continue to move that way. In terms of the cross sharing, I think this is the beauty of the demand generation because when we acquired a company, we take all the contacts and put them into our contact database. And now we can flex from there to be able to cross-sell other technologies. And you're going to see some examples of that on the PST segment when Andy will come here and tells you about 4 technologies across PST, different brands. We went into an electric vehicle battery production, and we were able to be very uniquely positioned to optimize the process with our 4 technologies, all via driven demand generation. Mike?

Yes. The only thing I would add and just maybe the other side of the demand generation benefit is that think about the single hosting from a single website so a lot of times -- I mean, I think either ego or complexity usually ruin brands. I mean people want to put a big brand on or the complexity too, I think the point you're raising, which is a good one. We don't have that complexity at that level and we do pay a lot of attention to the brands as we acquire them. And to Vicente's point, we love the multi-brand multichannel. So I don't know -- we don't have a goal for brands much like IDMs, but we're not afraid of adding more brands.

And then maybe just a quick one on the IIoT-enabled equipment. To what extent are customers buying it because it's enabled? Or is it more you embedding the capability to come back on the back end at some point in time and drive the service that you're talking about?

Yes, Jeff, great question. It's really more of the latter. We're -- it's embedded -- and we do have the GSM network, cellular network, so we don't have to be inside their firewalls of the customer, so we can see it immediately. Service techs goes in, flip the switch, we can see data. I think the beauty of that, that allows us to even see efficiency and usage of compressors by end markets, by regions and so on. So it offers another leading indicator.

So my first question, that end market slide that you showed us, 12% of your business tied to general manufacturing. Yes, there's a lot of talk right now about mega projects and just know that we haven't yet touched on that topic. So I'm just curious how you think Ingersoll plays at that, especially considering that typically compressors are in most facilities. So any commentary around that would be helpful.

Yes, Joe, absolutely. I think we will see all these announcements of the mega projects and even whether even Hyundai now in Georgia, putting in the new electric vehicle and all that. And that's -- all of those mega projects that, yes, to your point, I mean, they're good news for us because I -- we get the chance to play in those mega projects. So I'll just say that we're excited about it. We see money flowing. I mean, it's kind of, I would say, steady, not in a big exponential way. But yes, you can bet that our teams are chasing a lot of those projects.

Okay. Good to hear. And then, I guess, Mike, I still love the jokes, keep using them. The -- going back to IRX, clearly, it's been a differentiator for you guys. I'm curious, how often do things bubble up to Vicente and Vik? And then ultimately, what is kind of like the impetus for things to bubble up?

Well, the impetus and some of you have heard this before, is Vicente calls at a staff meeting, I tell them it's an IDM and then we reverse argue the other side of the -- so weekly. And again, these are -- one of the things we've thought about and some of you have even written about is that in those 100-day cycles, there's a lot of tension which means we think it pulls the bad news forward quickly. So you're going to see bad news in week 3, 4, 5. And bad news, we love it because it just means we're going to flex the plan or countermeasures. So I would let these guys answer for themselves, but weekly minimal.

Yes. I'll give you a good example of Roots. We acquired Roots. A week after the acquisition, we took a factory floor and as you'll hear from Liz, on day one, we're already showing them IRX and IDMs and all that. So 5 days later, I'm on the manufacturing floor, and there have on the board the areas where they need my help. So just that quickly that it happens. I mean that ability for employees to be able to speak up and say what help they need. They grab it. It's our duty to then take action, so they can speak up more often.

Rob Wertheimer. My question is on recurring revenue and business model. Should we think about air quality and optimization as being sort of software like and where you lever it over time? And is care rolling trucks? Or is that to too tough and then is care an evolution of things you already do now in service? And do you think you can do better? Or is it really kind of a new push to be more into service and evolving what your staffing is and how you kind of go to market with...

So maybe I'll take the first piece and, Mike, you take the care. Yes, Ecoplant is purely like a software revenue. And I think it's very -- I mean, I know Aviran and Yaron are listening to the call. So those guys are incredible. And Trace Analytics is a very unique -- I mean, if you were to go to that lab, they use the highest level of spectrometry, and mass spectrometry and they do microbial analysis. So it is really high-end lab. It's one of the only like 4 labs in the U.S. that are only ISO approved and you saw that all the pharma facilities are actually coming to us, for us to do that analysis. So that today is really more about sending a sample. But as you can imagine, we already apply for -- we're applying for patents and so on and how do we do that more remotely on a software-like basis.

Yes, as it relates to care. Care is really mature when you look at the base that we've started from in the United States, for example, where the majority of the care revenue is generated today, of course, we're going to intend to grow pretty quickly outside the U.S. But we've got very, very excellent process in place for understanding where the assets that are on care agreements are, what the maintenance schedule is -- what the maintenance schedule requires. So we're executing service very efficiently to make sure that those machines are up, running, customers are satisfied. And depending on maturity of the customer, it may be the case that we might put personnel on site to look after a network of compressors that are on a customer location. So in terms of improvement, we'll intend to -- we'll get more efficient at executing care contracts. But really, it's meeting the customer on that journey -- of outsourcing service. And I would say if you look back 10, 20 years ago, the percent of companies that were intending to do that themselves are much higher. That's what I mentioned when this -- the trend is accelerating. More and more customers are saying, "We want to be out of the business of maintaining compressors. You're the expert, why don't you take over that for us," right? And we're glad to, and that's what's driving the impetus for care and the focus on care and weren't really satisfied with it.

It's Joe O'Dea. Can you talk a little bit about the conversion through the chains. You talked MQL to sales qualified lead is roughly a 30% conversion. What are you generally targeting from sales to order and when you think about that value chain, where do you see the biggest opportunities today in terms of growing? Is it more the bigger pipeline in MQL or doing better on that conversion to sales or better in that conversion to orders? Where are you most focused on the opportunity?

The first part of the question is on the math from MQL to SQL?

SQL to order.

To order. Well, it varies, right? Because while we put the opportunities in the funnel equally, which it ends up in a weighted funnel. We do think that marketing qualified leads are 3x higher than a non-marketing qualified lead. And what that means is that as it comes through marketing, it's warm, so we would think there's 3x more likely positive outcome through the funnel. And then the second part of your question is we're problem solving, and we want both. I mean we want to raise that conversion level. We want to raise that conversion level from MQL to SQL. And as importantly, the cycle time. We think if we can get on that pace of knowing that customer database, providing them the right information, we can move some of these projects through the pipeline faster. So...

I think maybe the other important piece as well, and Mike mentioned that, but I want to put an emphasis to it is that these MQLs, like half of them are from new accounts which is obviously penetrating an ability to take share. That is the beauty of this demand generation.

And then when you think about the '27 targets, I mean, obviously, a defining feature over the past couple of years was the price contribution. As you move forward and you think about the next 4 years, how are you thinking about that sort of mix of price and volume, really markets, how much you depend on the end markets versus how much you can drive the volume outgrowth and then what the setup is for price, whether you're seeing fatigue out there with the inflationary factors we've seen?

Yes, I'll take that one. So I think Barry simply stated here. We continue to be quality of earnings focused. But given the mission-critical nature of our products, we think that generating 1% to 2% price on an annual basis is without question kind of the target going forward. So if you take that mid-single-digit kind of overall target, you would say 1% to 2% from price, the balance obviously coming from volume. And I think you've seen this historically. Obviously, the last 2 years, you've seen pricing levels at clearly differentiated levels. But even prior to that, and we've seen it particularly even in regard to number of days before even when you saw even slight corrections in markets and things like that, we were still able to generate price given the differentiated mission-critical nature of our products and the fact that, frankly, there's still a very, very, very low cost to the overall enterprise and system that they're going into. So again, we have no concerns about that ability. And it's worth noting here that even in this year, as we came into 2023, we said that we're still taking some targeted pricing actions, and you should expect that we're going to continue to generate an incremental 1% to 2% price in addition to all the carryover that came into this year, and that's absolutely proving itself out to be true.

Guys, a couple of questions. This is Mike Halloran. So first, staying on the service side. One, how does that network look today from a footprint perspective? How much do you have to build it out? And then the follow-on to that is, what's the opportunity then to leverage that more aggressively on the new equipment side, ultimately, pull through more content, whether it's expansion or just making sure you keep sticky on any kind of replacement needs?

Let me take the first part of the question, Mike, you touch on the stickiness. But really strong service network. I mean I think one of the investment thesis when we were contemplating the Ingersoll Rand acquisition, it was about that service network because it provides a huge barrier of entry for others. So we have over 400 technicians just in the U.S. alone. And I think you saw in one of my slides that I say over 5,000 employees that are touching our customers and that includes a couple of thousand on a global basis of service tax. So I think we have a really strong service network that we're now making more efficient and I think as we scale the care is not a one-to-one ratio because we do concentration maps in terms of how concentrated is the specific technologies and then reallocate service technicians. We're also now doing route optimizations in many of the countries. So I think the efficiency of that is getting improved. So we don't need to do a one-to-one as we grow. And I think it's -- we're going to be able to leverage the scale.

Yes. And I would add to that too as well, in addition to our kind of company-owned customer centers and service centers, don't forget about the scale that we've got through our authorized distribution network, very, very powerful. We're recruiting new distributors or working with them each year. The ability to execute service on our equipment is of paramount importance. And so when you think about the data point that Mike shared, 87,000 paths to market, the 45-55 split of direct and indirect, we've got great capability either direct or indirect to make sure that we're servicing customer equipment. As it relates to stickiness, absolutely. I mentioned the one data point I shared that care customers are 20 points higher -- 20 points more satisfied than noncare customers. And we know with certainty that they're happy about the quality of service and experience they're getting with care, and they're very likely to come to us when they need to replace equipment or even convert competitive equipment in the future.

The second one then DGX, you almost make it sound like it's easier to take market share, right? I certainly understand the process behind everything. What are the competitors doing? I mean, is there a response? Or are we just talking about enough fragmentation that you're going against unsophisticated competitors? Is there something the bigger competitors are doing? Kind of any context to the other side of the coin -- the competitive side?

Yes. I tell you, Mike, as you know, and you clearly know the story that this demand generation started back in 2015, one person and it was a lot on right now building up a proven engines that we had seen, in particular here, an engine that we saw that it was working really well with Mettler-Toledo. As we look at this space, we don't see anything that really compares to what we have. And we feel confident on saying that because it's difficult to know what good looks like if you don't know where to go and find it. And look at us. I mean, we went to Mettler to be able to find that and then replicate that engine into everything that we do, and it's working really well in industrial space but also life sciences and also some of the other markets because of the high level of fragmentation. So I think you said it that well, is that when you have a high level of diverging markets with such a massive fragmentation of customer base and decision makers, it is the one way on how you can improve the efficiencies by doing it the way we do it. And I think the other competitive advantage that we have against any of the competitors is our contact database. I mean I think 5 million contacts, unique contacts in our contact database that we can extrapolate inside data and use a lot of these artificial intelligence to understand where we take one technology versus other, I'd say it's uncomparable.

The only thing I would add is I haven't seen -- I mean this is not a -- it's not a new playbook. I think it's executed here in a very unique fashion. It doesn't work without scale. You just can't. I mean, I've seen it fail time and time again without any scale. So Vicente and I were talking the other day, in our past history. If you went back, so let's just say today, whatever company said, we're going to globalize this. We're going to take this fragmentation. We're going to put it together. You would shatter the company. I mean just the GMs, the regions, and so on and so forth. And the way this is built up organically over time is -- and you'll hear a lot of the other people you're going to hear from on the P&Ls works pretty seamlessly between the business units in this centralized team.

David Raso. Two quick questions. One, obviously, there's a lot of idiosyncratic self-help to your story, and you're well positioned for secular trends. But when you're contemplating the commentary we're on target -- on track for our '25 targets, you thought about your '27 targets. What was the macro thought in that? Do you contemplate a downturn near term from the rate hikes from a cyclical kind of angle? And then I have a follow-up question about M&A.

Yes. Sure, David. I'll take that one. Specifically, are we thinking about what's going to happen distinctly in '24 versus '25 or '26. Listen, we recognize and just look at the last 2 years, there's always going to be ebbs and flows in the markets. No one could have foreseen, for example, what's happened over the last 2 years. I think what you're hearing from us here is we think we have a proven model, the economic growth engine that over a multiyear time frame, just like you've seen over the last 2 years, if you flash forward to the next 4, we can overcome weather -- whatever it might be in the markets. We play in a very diversified end markets. We're in multitude of geographies. And so you'll hear it even from Arnold where one market may be down, we can pivot, refocus demand generation, point to -- campaigns point to another market. And so we see the opportunity to outperform even when, if, for example, things do take a step backwards. But over that 4-year time frame going forward, we absolutely see the ability to deliver on those targets as we indicated.

Okay. And then the M&A question. Oxywise recently felt a little more of an adjacency. Just curious your appetite, how is that building? And if you maybe indulge us on what are those adjacencies you would be willing to expand your platform, the whole ecosystem?

Absolutely. Yes. Great question. Yes. I mean, Oxywise, those of you that don't know, it's technology we bought in Slovakia and what they do is they do oxygen generation on-site by attaching a compressor. So think about hospitals that may need that or pharma industry that may need that or other labs. And so it's very, very unique technology. And so that's one that we consider adjacent, pretty close to where we are. And Liz is going to touch base a little bit more on those, and you'll see more on that. So I don't want to kind of get their punchline out. But yes, I mean, I think we continue to look at these adjacencies that are closely connected to us. And she'll give you maybe a couple of examples on that view. But absolutely, David. I mean that's -- those are areas that we see.

And just quick on that. Obviously, Ingersoll legacy a little more direct GD distribution. When you think of going to adjacencies, is that more through distribution, more shelf space? Or do you think you can go to adjacencies because of the strength of the direct Ingersoll legacy?

Both. To be honest, both in those cases. I mean, we even -- yes, both. Yes.

All right. We have time for one more here. Steve?

Great. And I'll just keep it to one, Steve Volkmann with Jefferies. Mike, I think you gave an example of a situation where you're able to actually convert some competitor equipment because of the care. And I'm curious how much of your current, say, $200 million or the targeted $1 billion would be sort of non-IR equipment that you'd be taking care of?

Yes. I don't think we'd give you an exact figure, but what I can tell you is that there are a large portion of compressor rooms out there in the world that sometimes called rainbow rooms or multi-brand rooms. There's a lot of compressor rooms out there that we are servicing, and we are engaging with our care agreements where adjacent to our equipment are competitive machines. And so we're excited about the potential to convert those and yes, it's a variety of applications and situations that we're walking into. But we walk into each one of those with confidence that at the end of the day, by delivering a satisfying care experience for the customer that in the short or long term, they're becoming your [indiscernible] equipment customers.

All right. Well, thank you, everybody. We're going to take a quick 20-minute break. We'll reconvene at 10:05 a.m. [Break]

Okay. Welcome back. Hopefully, you got a chance to watch that video. It's a very impressive technology. And I'll just tell you a little story as well as you can all grab your seats. [ Avran ] who I'm sure he's watching, hey, [ Avran ] and [ Yaron ], very young, very entrepreneur software individuals. And [ Avran's ] dad, he was a compressor person, service tech, that did a lot of air audits, the air audits that Mike Medaska talking about. And [ Avran ] said, "Hey, this is an unmet need. It's a lot of work. Why don't we automate this?" And that's how the entire story really started with [ Avran ] and [ Yaron ] and now a team of 25 individual software technicians are continue to develop and in a place where we continue to invest. So next section here, I'm going to kick it off. Industrial Technologies and Services, the ITS, and here's what you're going to hear today. ITS is a segment with pretty good scale, $6 billion. It plays in a $40 billion addressable market, high level of fragmentation, provides great opportunity for us to continue to grow organic and inorganic. You're going to hear today too as well, it's a segment with great profitability, 28% EBITDA margins, and one that we continue to see improvement here. Second bullet point is kind of the key core of what Amar and Arnold are going to show you, which is how are they driving differentiated growth in challenged markets back to the question in terms of what -- how do we do it? How do we do this self-help? And you're going to see that it's all about leveraging our technologies that have great return on investment, leveraging demand generation to pivot from one end market that might not be growing to the one that is growing because our technologies can be very easily moved to those specific end markets. And the third is leveraging our global commercial footprint by taking M&A that we have done in other regions and then applying that in the regions where they're more participant. So ITS, the way to think about ITS is just basically a leading technology platform that allows our customers to reduce energy consumption and improve efficiencies. That's it. Compressors, blowers, vacuums, technologies, but it's all about energy efficiency, water conservation with all the technologies that we have. It's a segment that has been performing really well, 15% CAGR. And again, not because of the market but because of a lot of the self-help that you'll see that the team is driving with the help of IRX. And great EBITDA expansion at almost 500 basis points in just the past 3 years, delivering great performance. It's a segment that about 36% is aftermarket but one that, as you saw from Mike Medaska, we expect that to continue to inflect upwards as we drive these recurring revenue streams at an even higher margin. So this is -- these are kind of the leading technology platforms. 70% of the $6 billion is compressors and air treatment systems. And the way to think about it is that we think about them being connected because we can generate -- that was one of the questions before. You can take a compressor air treatment system, and you can generate on-site nitrogen, on-site hydrogen, on-site oxygenation. And I think that's really what's going to drive the future of the connectivity of our technologies. 25% is blowers and vacuums, and roughly 5% is a power tool. This segment, the way we structured this is, again, all case studies, you can get a view on how we're driving execution. We're going to begin with Amar. Amar is going to focus on ROI and sustainability. How do we drive that in Mainland Europe? By providing great ROI to our customers by showing them how can they reduce water and energy to be able to drive paybacks that are less than 2 years. Amar is also going to start by talking about India. India, some of you remember a few earnings calls ago, probably like 2 years ago, I said that India was going to be a market that we were going to double down. And we have doubled down in India. And you'll see that acceleration that we're seeing in India, growing at approximately 4x the GDP of India, a GDP that is already seeing some good growth. And then we're going to have Arnold. And Arnold is going to talk -- even though Arnold manages all Asia Pacific, he's going to be focused specifically on China because I know there was a lot of China -- questions on China from many of you on how do we drive that differentiated performance. Arnold is going to show you that. He's going to show you how he's driving, pivoting from one market to the other, how he's taking oil-free technology after the merge of the 2 companies and overdrive performance, how he relaunched Gardner Denver into now one of the top brands in China, and how he's taking M&A that we have done in other countries, whether India and the U.S., re-localizing in China and penetrating new end markets. So with that, I'm going to hand it over to Amar. Amar?

Thanks, Vicente. Good morning, everybody. My name is Amar Kaul, and I'm the Vice President, General Manager for ITS Compression Systems, EMEA. I've been working with Ingersoll Rand for 12 years plus, have enjoyed every moment of it. But what stands out is last 3 years, graduating my thinking to ownership mindset. Now what is this ownership mindset? It's very simple to me. Empowerment to strategize, take bold decisions, steps and execute. That's what it looks like. And today, I'm standing in front of you talking about some success stories that we had in the last 3 years and how our innovative solutions are helping our customers in being successful and we inching more towards our sustainability goals. Now first one, as Vicente said, our journey as a growth market in India. Now this journey has been fueled by 5 key pillars, starting with markets. So the markets, we think global but act local because we always believe that being close to the customer, understanding their buying behaviors and strategize according to that, will always be helpful rather than staying 10,000 feet above the ground. That's something that our laser-sharp focus has been there. Channels, direct and distribution channel. Now distributors also -- what kind of distributors do we need? Onboarding, rationalization and optimization of those channel partners so that we grow together. Products, 7x increase in new product launches we had since 2020. And that's the big jump where we used Ingersoll Rand and Gardner Denver technologies to bring the best to the market. Demand generation. You heard Mike talking passionately, cutting some jokes, et cetera. But you see the outcome of demand generation. We could not have reached such a wide spectrum of customers, physically going to all of them. By focusing on NPS, which is Net Promoter Score, having that sense of urgency for responding to the customers, since 2020, we increased 6x the bookings out of demand generation in just 3 years. Now what does it mean in terms of numbers? It's very simple. On the right bottom corner chart says it all. From -- before 2020, 7% compounded annual growth rate to 26%, which is 4x GDP as Vicente mentioned as well. Now by applying this economic growth engine with the robust foundation of Ingersoll Rand execution excellence process that we have, we continue to have sustained business results. A couple of case studies. As you know, that our products have application across the industries. But for today, we have picked up 2 industries, which is food and beverage and paper and pulp industry. Now let me start with the first one. In food and beverage industry, large account, large customer, a competitive account. We did an air assessment for this customer, and the outcome was that they had about 11 oil-free rotary machines, which we upgraded to the latest technology in centrifugal with just 3 machines. And what did customer get? $1.1 million in energy savings per year, 875,000 kg of carbon emission reduction or avoidance, which means simply 2.2 million passenger car miles were avoided. And return on investment for customer was 15 months. Now establishing this credibility with the customer for their 2 plants, this happened in U.K. For next 2 plants, we got the packaged care contract for 5 years. That's the way we are establishing and creating more and more business for ourselves. Second case is that you have another large customer in food and beverage industry. They asked us to conduct the air assessment for 18 of their sites. The team conducted the assessment, made a plan to upgrade all the sites over the next 10 years, created an opportunity of approximately $98 million worth of business, including the service. Now this is just the tip of the iceberg of the potential that the business that we are trying to create, while partnering with our customers on their sustainable journey. Now on paper and pulp industry, now 2 of our big businesses, compressors and Runtech turbo blowers. Now let me talk about compressors first. The compressor team carried out air system assessment at 88 sites across Europe and made a plan for next 10 years on how it can be upgraded, optimized with energy efficiency and savings for the customer. Initial results. The first order, we see $1 million. Second one, $1.5 million is going to come, and you can do the math what will happen to 88 sites. And that's the way we are creating more and more opportunities. Second external example is Runtech, which is our turbo blower team. So their play -- the action that we had with the customer was on 6 turbo blowers. Out of which, 3 have already been executed, 3 sites, and 3 more sites are in the pipeline. Now once this is done, there is potential energy saving of 61.5 million kilowatt hour, avoiding 15,900 metric tons of carbon emission. In simple terms, means 112 million passenger car miles. This is about the energy, which is electricity. Now we talk about water. With this change, the customer was approximately consuming 264 million gallons of water, which will get close to 0 because these are highly efficient turbo screw blowers. Next one that I have is on the steel industry. Now why is -- why am I talking about steel industry and hydrogen compressors in this? Because globally, 11% of carbon emission is coming from conventional steelmaking process. Now this becomes a very, very critical industry for us, especially with our commitment on decarbonization. Now DRI is a process which is direct reduced iron, where we utilize hydrogen versus a blast furnace, which you already know how much of energy is consumed for that to make iron. Now our recent acquisition, Roots. Now this team really worked with the technology in partnership with Midrex, which is a large industry player, and developed a solution for this DRI process. Okay. Now this technology is noninvasive, which means it can be implemented for the existing sites as well as the greenfield sites, thereby generated an opportunity of $500 million worth of opportunity, which practically was not existing. And also, this kind of segment will also grow by about 10x because of being carbon neutral over the next decade. Now this is how we are unfolding the opportunities by getting these acquisitions like Roots and unfolding the opportunities and create more revenue for us. And simple example of each opportunity for these DRI sites is approximately $15 million, and we already have the first order in hand in Q3. So ladies and gentlemen, this is just the beginning. So stay tuned for the exciting times ahead. And thank you for listening to me. And with this, I will hand it over to my friend, Arnold.

Okay. Thanks, Amar. Hi, good morning. My name is Arnold Li. I'm with the company for 17 years in charge of ITS Asia Pacific. Today, I'm very honored to be here to share the story about ITS China. In the last 3 years, ITS China will grow our business at 18% CAGR, which is 4x the market growth. In the meantime, we expand our EBITDA by 380 basis points. In China, we have around 2,100 employees, including commercial operation, engineering and other enabled functions. We built a very strong channel and sales in China. In total, we have more than 30 customer centers to cover the market. We have more than 500 sales and service people in our commercial organization, plus we developed over 300 authorized distributors and dealers as our extended sales arm. We build in region for region, in country for country in engineering innovation capability. In the last 3 years, we launched over 140 new products in China for China. As of this year, all of this NPD accounts for more than 30% of our revenue portfolio. If we talk about China market, okay, overall, the China market trend is very tied to the global mega-trend, sustainability, quality of life, et cetera. While there are headwinds, geopolitical issues, declining in international tradings, some multinational company, they experience business year-over-year declining while we, ITS, we still grow the business over the last 3 years. The major reason behind it is the strong ownership mindset, the culture of our team, control what we can control. With the differentiated results, if you look at the right-hand side, these are our growth strategies. For example, how we grow in a growth vertical, sustainable market, how we grow the blower and vacuums in China, how we play multi-brand, multichannel strategies. I'm going to share with you some stories in the following session. EV and battery, electric vehicle and battery. Here, I'm going to share with you a story about how we grow in a growth vertical, in a sustainability vertical, EV. And particularly in this vertical, how we are able to provide the best solution to our customers. EV is a big vertical. It's a big market globally. It's growing very fast, 50%, 60% CAGR. And China is a very big market of EV. It accounts for almost 60% of the global market. Back to 3 years ago, ITS China team were already start our vertical market approach to study the EV verticals. Not only for EV itself, but we also studied the whole value chain, including the midstream and upstream, like the chemical business and the mature industries. After this study, we'll come back to revisit our offerings. We did product expansion and upgrading from oil-free rotary compressor to centrifugal compressor to blowers, vacuums and service contract offerings. So as a result, we are able to see -- we are able to grow the business at 14x in the last 2 or 3 years, just in EV vertical. And here, I show you 2 wins we have in China. Both wins are from our key account from this vertical. The reason why we are able to make the success here is we understand the customer requirement. We understand the customer applications. And in the meantime, we have the ready now offerings, which require very, very limited modifications. So we are able to provide the best solution to our customers in terms of the best cost of ownership, return on investment, lead time and services, et cetera. All these are from the vertical market study we did in the last 3 years. So we plan and get ourself ready ahead of the curve. Okay. Okay. Oil-free rotary compressor. In this session, I'm going to share with you about how we grow the oil-free rotary business in China by relentlessly focus on innovation, technology and in region for region supply chain and operation. On the engineering and innovation side, we built full capability in China for China from design to upgrade to I2V. Last year, we launched in China a 500-kilowatt oil-free rotary compressor. This is the biggest frame oil-free rotary compressor globally. Just for this frame, we registered 12 patents in China National Patent Association. Just one frame. And in the next 12 months, this frame bring us $25 million incremental business to ITS China, just this frame, one frame, which is fantastic. On the supply chain and manufacture side, we pushed very aggressively in region for region. As of now, for all the oil-free compressors we have, over 98% of the package and the components are made in China. Beyond the cost advantage we have, we are able to squeeze our lead time to be less than 4 weeks. 4 weeks lead time for oil-free compressor is very, very competitive in the market compared to 6 to 8 weeks lead time from our major competitors. With all the effort made, we see differentiated results. If you look at the right-hand side, we are able to drive the business growth at 35% CAGR year-over-year in the last 3 years. We expand our gross margin by 500 basis points in oil-free space. And with the strong momentum, we target to triple our business by year 2026 versus year 2020. Okay. Gardner Denver-branded compressor. Gardner Denver is a very well-known brand globally. Very good technology, great offerings. But in China, before the merge, it is not very well executed commercially. Here, I'm going to share with you a story about how we relaunched the Gardner Denver compressor in China and how we play in multi-brand, multichannel in China. Look at the results first. We are able to see we grew the business at 60% CAGR in the last 3 years with margin expansion of about 680 basis points. With the strong momentum, we target to grow the business at 10x by year 2026 versus year 2020. How did we get there? Our multi-brand multichannel strategy are from 3 aspects. Firstly, differentiated product. In 2 years, we revisit and upgrade and refresh all the frames, 100%, for Gardner Denver compressors. This is leveraging the technology between Ingersoll Rand and Gardner Denver. So we use our air end from Ingersoll Rand, and we leverage the package design from Gardner Denver, which equip a 5% to 10% efficiency improvement. And now all the Gardner Denver compressors in China are IoT equipped, which provide a better customer experience and improve our aftermarket business as well. Secondly, go-to-market strategy. In order to avoid cannibalization, we decided to put dedicated sales team and dedicated channels just for Gardner Denver compressors. As of now, we newly developed 45 new distributors. They are qualified, they are authorized, and they are exclusive just for Gardner Denver compressors. Thirdly, strong brand awareness by demand generation. In China, we promote Gardner Denver brand through different channels. If you look at the pictures on the bottom side, these are the most popular social medium in China, TikTok and WeChat. And in the meantime, we promote Gardner Denver brand in exhibitions. So as of now, we are very happy to see, for Gardner Denver-branded compressors, the marketing-driven order has increased by 300% compared to 2 years ago. Fantastic results. Okay. Blower and vacuum. Blower and vacuum is a great, great business globally. Very good technology, very good offerings. But before merge in China, the blower and vacuum business is not very self-sufficient. So here, I'm going to share with you a story about how we drive the innovation, technology, localization organically and inorganically to grow the business at 23% CAGR in the last 3 years. Organically, in the last 30 months, we launched 31 products for blower and vacuum in China. Our quick math here is for every 30 days, we launch one new product in China in the blower and vacuum space. Just this month, in November, in China's biggest exhibition, China International Import Expo, we launched a [ negative drive ] blower publicly, officially. This is the first launch we have globally. Inorganically, we also go one step further to explore the new technology in the market. One great example is the most recent M&A we did in China, Gaopeng. Gaopeng is one of the top players in China for dry screw vacuum. In the due diligence phase, we already start to study and learn the technology and the design. And in the meantime, we also purchased other competitors' equipment to tear down and learn. So after deal is closed, in summertime, our engineering team, they are able to spend only 6 months to finish the design of the first frame, which is high performance, high efficiency. MD-Kinney is a global product. It's a global M&A we did. In China, we leverage global expertise, global technology to the localization. We localize it in China for China. Plus, we leverage the sales and the channels we built in China to sell. So as a result, you are able to see -- in the last 3 years, we are able to increase sales by approximately 8x just for this product in China. On the technology side, I'm very happy to share for the new designed dry screw vacuum. We are ready to launch it in China in next month. Just December next month, we are going to launch the new product for dry screw vacuum. Overall, our in region for region and our localization target for blower and vacuum is we want to move ourselves from approximately 30% in year 2020 to be 90% by year 2026. As of now, for this year, we will be very close to 80%. So we are on the right track. We are on the right path. Okay. Here is kind of the wrap-up for the whole ITS session. So key takeaway here is ITS, we have a very, very strong offerings for product and services. We are playing the leading position in the market. We are winning. We are winning in different market, traditional market, growth market, sustainable market. Always, we provide the best solution to our customers in terms of the best cost of ownership, return on investment, energy efficiency, et cetera. When we grow the business, we also improve the quality of our business, margin expansion, EBITDA improvement by pricing, I2V and aftermarket. One thing very important. Most important thing for us is in ITS, we have a great team. We have a great team in ITS. The team are very, very ambitious. Team have desire to win. Team always deliver commitment, deliver results. So these are the culture of our team. Ownership mindset, ownership culture, control what we can control. With that, this conclude the ITS session. Thanks for listening. I want to pass over to Santiago for PST session. Thank you.

Thank you, Arnold. Good morning, everyone. My name is Santiago Arias Duval, and I lead the Precision and Science Technologies segment, also known as PST. I have been with Gardner Denver and Ingersoll Rand for the past 6 years, and I have witnessed firsthand the transformation that Vicente highlighted earlier. I am excited to present to you this unique and high-performance business. Today, my team and I will go over our historical results, strategy and how we drive value for our customers. Here are some of the things you will hear today. PST is a $1.3 billion leader in precision dosing, fluid management systems and positive displacement pumps, operating in a highly fragmented and high-growth $15 billion market, which gives us room for both organic and inorganic growth. You will also hear through a case of -- through a series of case studies how we win and how we differentiate. We do this in 3 simple yet powerful ways. We do this through our precision portfolio. Sometimes, to the nano layer level. We do this through customer intimacy through brands that are over 75 years old. And we do this through our ability to connect and automate workflows. This allows us to create high ROI for our customers and above-market level growth for Ingersoll Rand. You will also hear how this strategy, paired with IRX and our highly recurring revenue, allows us to drive 30% EBITDA. Finally, everything that you'll hear today is built on the backs of IRX and demand generation. It help us control what we can control, and it also helps us adapt to changes in the market. I think a neat example is some of the pumps that you will see later today that we have historically deployed in, in vitro diagnostics and DNA sequencers. We have used IRX to pivot those pumps and use them in industrial applications such as air vending and other industrial applications. Now let me give you a high-level view of our business and performance. PST is made up of highly valuable brands, which are either #1 or #2 in the markets that they play in. Furthermore, our products go into critical steps in niche applications within large markets. This allows us to grow. As you can see, in the top middle chart, we have been growing at an impressive 15% CAGR over the past 3 years. We're also a very profitable business with EBITDA margins of 30%. However, you can see in the chart in the top right that we have only expanded our margins by 10 basis points over the last 3 years. This is due mainly due to the Seepex acquisition in 2021. I am happy to tell you that today, Seepex is close to our fleet margins. Also, 20% of our portfolio is above the 40% EBITDA mark. More importantly is that we still have a lot of room to improve. We're going to do this through I2V, pricing and continuing to deliver on synergies. Now going to the bottom of the page, you can see that we have a nice balance between high-growth end markets and geographies. It's important to note that over 50% of the revenue comes from outside the United States. Now moving to the bottom right, and this is perhaps my favorite chart here, you can see our revenue split. 45% of our revenue comes from original equipment sales, and 55% of our revenue comes either from aftermarket or like-for-like replacements. What this means is that our products are spec-ed into applications and they become very, very sticky, which creates a stream of ongoing revenue as these pumps get replaced. Next, I will turn the presentation to Andy, who will walk you through our strategy and a couple of our case studies.

Thank you, Santiago. Well, my name is Andy Hider, Vice President of Strategy for PST, and I appreciate the time here today with you all to talk a little bit more about what PST is and how it wins. So PST is 20 businesses, which are spread across the center of the page. They have a majority presence in and a strategy focused intently on the 5 high-growth end market applications you see listed across the top of the page. And while each of these 20 businesses have carved out their own niche, unique leadership positions over the last years, as Santiago has mentioned, there is still a unified strategy across all. And in short, that's listed on the left-hand side of the page. It is in how PST: firstly, leverages its unique portfolio; second, it's deep application expertise; and third, digital automation. So we're going to give 5 case examples, myself and my colleagues, of how the strategy works. And you can see these case stories listed here highlighted in red. But let's start with portfolio. So PST has the most diverse portfolio of positive displacement or PD pumps on the market as the market leader. And it uses this to solve customers' most precise fluidic needs. We're going to give an example here in the next slide where disadvantage in electric vehicle batteries. In fact, it's the -- we're the only manufacturer that has 4 critical PD technology types, which when designed into the customer process together in the right way, can actually reduce battery manufacturers' scrap rate cost by 20%. The second component of PST's strategy is in how it harnesses deep application expertise across all 20 of these businesses together. Here, we're going to give an example where PST pulls application expertise from 3 different parts of the business together to solve one of wastewater treatment operators' biggest pain points, which is sludge, and reduces the cost associated with sludge by 80%. And then the third component of the strategy is around how PST rolls out new digital solutions to automate customers' most critical workflows. Here, we're going to give 3 examples. First, in cannabis fertigation where PST can help growers increase their yields of various plants by 20%. Next, where PST uses the Industrial Internet of Things or IIoT to help pipeline out -- natural gas pipeline operators reduce costly methane leaks by 10%. And then lastly, in genomics and biotech R&D, where PST's liquid handling automation can reduce lab cost by 50%. So to recap here, PST's unique advantage and strategy lies in its portfolio, application expertise and digital automation, which together provide massive savings to customers. Be it the 20%, 50% or 80% I just mentioned, all in these high-growth, high-margin end markets. So let's start with the first case example of how the portfolio advantage works in the electric vehicle battery market, where PST's unique breadth of PD pumps is helping these battery manufacturers with one of the most pressing needs, reducing costs. The cost to manufacture electric vehicle batteries will effectively need to be halved as the industry scales up in the coming decade to 6 terawatt hours of annual production. This is, essentially, as a point of reference, 170x the theoretical capacity of Tesla's Nevada Gigafactory. And to get cost savings of this scale, battery manufacturers are going to have to focus on scrap rates, which can reach as high as 30% and especially so in the electrode production process, which accounts for over 2/3 of the total battery cost. Here's where PST's solution center came in and brought the 4 positive displacement pump types you see listed down the center of the page together, where each of these PD pumps provide their own critical place in the battery manufacturing process. And no other manufacturer out there has this breadth of PD pumps in the battery space and, therefore, can do things like PST can. For example, to reduce defects and impurities in things like the electrode slurries like PST can. And this can have a major effect on scrap rates. In fact, it's been shown that scrap rates can be reduced by 25% when these types of pumps here are designed into the battery manufacturing process together in the right way together to do things like dispense the pure homogenous slurries right down to 100 micrometers. These pumps together have been designed in and maintain that down to the nanometer level. So with this portfolio advantage and these compelling cost savings from scrap rate reductions, the PST business has already been growing in electrical vehicle batteries strongly in the double-digit rate. And we expect that to continue with all the major battery manufacturers out there like BYD, CATL and others. Not just to tag along this EV battery growth but, in fact, to be a forcing function to furthering EV adoption. So let's change gears now and go to the second component of PST's strategy, application expertise but in a different industry, in water. Now one of the most challenged yet steadily growing areas of the water treatment industry happens to be in the byproduct of wastewater, which is called sludge. The U.S. alone generates 14 million tons of this sludge annually, and it chews up over 1/3 of wastewater treatment electricity. And with emerging contaminants like PFAS and micro-plastics, which are harmful to humans, there's only more and more regulation coming out that requires water utilities around the globe to ensure that they have appropriate disposal and treatment of that sludge. So what does this mean for the utilities around the globe? Well, you could take Thames Water's Reading water treatment plant, as an example, where they're having to use their existing legacy pumps to convey sludge over longer and longer distances to get it to a point of treatment and disposal. And that results in higher and higher energy cost of conveyance and higher wear and tear cost on those pumps. And here is where PST's Seepex business, in fact, has 50 years of market leadership experience in conveying viscous fluids like sludge. So what did PST do? We brought together that application expertise, along with our market leadership experience in air compression and lubricant dosing, to develop and patent a truly novel approach to conveying sludge called Smart Air Injection or SAI that's shown here. And in short, what SAI does is it injects lubricated plugs of compressed air into the sludge for far more efficient conveyance over long distances. It provides 50% less energy costs and 80% less maintenance costs as compared to alternatives. So with this patent-protected solution, PST expect to grow more than double the market rate over the coming years, 10% plus annually, and in a market sector that has long-term secular growth trends and low cyclicality. So now in these prior couple of slides, I've shown 2 examples of the first 2 components of PST's strategy. Firstly, the portfolio; second, the application expertise. In the coming 3 slides, my colleagues, Pam and Santiago, are going to show the third component of PST's strategy, digital automation. So with that, it's my pleasure now to hand it over to my esteemed colleague, Pam, to take it from here. Pam?

All right. Hello, everyone. My name is Pam Temko, and I'm the General Manager for Agritech Americas, so I'm responsible for both Dosatron and Maximus. Dosatrons, these are water-powered chemical delivery pumps. And Maximus is control-based automation for monitoring and managing all of the parameters inside of agricultural buildings. Today, I'd like to talk to you a little bit about my background working for our family business, my experience integrating into Ingersoll Rand as a new acquisition, which was just about a year ago, and then provide some examples of our deep-rooted customer relationships, and how we're leveraging these relationships in combination with IRX in order to drive our growth. So a quick summary of my background. I began working for our family business, Dosatron, when I was 16, so I have over 32 years of experience with our products. So when I decided to take over as General Manager, when my parents really took a step back, I was able to grow the business from $9 million in revenue to $40 million in revenue. And one of key drivers to our success was the ability to understand emerging trends inside of markets, our core markets. One of these trends is the cannabis industry. Cannabis, right, a little crazy. So kind of all of our traditional growers. So if you see these point setters over here, they're grown most likely used with a Dosatron to fertilize them. So a lot of our growers at the time were like, you guys are crazy. What are you doing, cannabis? But as legislation began to take center stage, I decided to jump into the market and really understand what do these growers want, what do they need in order to make themselves successful? And what did I find, I found a group of customers really hungry for knowledge and hungry for tools to make their jobs easier. And this is really where we come in. So as we start to look at the case study behind me, this is Green Dot Labs. They're a Colorado-based cannabis grower, and their mission at the time was to upscale. So what they were doing prior to using our equipment was they were literally hand mixing fertilizer, hand applying fertilizer plant by plant. So as you can imagine, this process is like wildly labor-intensive applying all this fertilizer. So this was really where we came in. So in combination with our equipment, with Dosatron in combination with our control-based technology, we were able to get in there, help them give them consultative selling advice. They were able to see a rise in their harvest yields by 30%. They eliminated this need to hand mix because our equipment automated process for them. I'm often asked why do customers even use our equipment. And it's really about the precision and the efficiency. It really cuts down on labor costs. So the annual growth rate for indoor growing applications is forecasted to grow at 12% through 2027. And as I mentioned earlier, we're a brand-new acquisition integrating into Ingersoll Rand. And it's really 2 key factors that I'd like to -- I'd like you to take away. One is when I understood the ownership mindset, think and act like an owner. I was like this is exactly what I did. This is exactly how I think and how I ran our business. So to me, that really resonated wildly. Then the second piece is IRX, not only for execution, but also for accountability, accountability that we really needed. So with this, we were able, over this past year to increase our EBITDA by over 37%. All the while jumping further into demand generation, taking a deep dive into the world of e-commerce, but also being able to preserve and maintain our entrepreneurial spirit. And to me, this is the win in combination, and that this is what makes Ingersoll Rand really a standout. So with that, I'd like to turn it back over to Santiago. He's got a few more case studies and some of the exciting things we have going on at PST. Santiago Arias Duval.

Thank you, Pam. Next, I will tell you how we're using our application expertise and position in the market and pairing it with an acquired technology in order to reduce methane leaks for pipeline operators. First, a little bit of trivia. Do you know there are over 3 million miles of pipelines in the U.S. alone, not only that, but there is also increasing regulation in the U.S. and Europe to reduce methane emissions as this is a greenhouse gas and pipelines are an important piece of this. This is a challenge because pipelines go through remote areas than many times lack power to operators are blind and they cannot fix what they cannot measure. This is where we come in. Today, one of our brands, YZ is a world leader in other injection and sampling systems. So you can already find our equipment all over that map. Also, we recently acquired Aircom, which is a manufacturer of long-range and long power -- and low power monitoring systems, serving pipeline operators. These systems are so low power that the battery can last up to 10 years. So what we're doing is we're combining the reach that we have through our YZ business with technology in order to reduce methane leaks for pipeline operators. And this is only the beginning. We're also working on our solution that will allow these operators to regulate pressure based on demand, further reducing these leaks. And we can not only do this with natural gas, but we can also do it with renewal gases such as hydrogen. This has allowed us to help pipeline operators reduce methane leaks in hard-to-reach areas by 10%. As a result of this, we have been able to grow orders in our Aircom business by 400% through Q3. We're also projecting that we're going to be able to grow in this market by a 30% CAGR through 2027. Now let's move to our last case today. And this is perhaps my favorite case because in this case, we use all 3 PST strategic levers in order to drive value. We use our precision dosing portfolio. We use our application expertise and our ability to automate in order to accelerate the personalization of medicine. As you may know, cancer is a second leading cause of death in the U.S. and in the world. Something that gets missed sometimes is that this is not only happening because the population is aging, but younger people are also getting diagnosed with cancer at a higher level. This has led to an increase in funding, both in the R&D side and on the treatment side. And this increasing funding has led to innovation. One of these innovations is in the personalization of medicine. What personalization of medicine means is doctors can now look at your cells. They can also look at your genome and decide a customized treatment for you that will lead to better outcomes. This is a fast-growing area that is [ fluidics ] and an opportunity for us. At a high level, this workflow has 3 parts. You have diagnosis side, the genomics profiling and the tumor personalization. On the diagnosis side, doctors and researchers are using in vitro diagnostics and flow cytometers in order to diagnose the disease. Manufacturers of these devices, they turn to our pumps because of our life, sometimes to the millions of cycles and also to our availability. On the genomics side, doctors and researchers are used in DNA sequencers in order to design treatments. They turn to a DNA sequencer manufacturers turning to our pumps because of the precision, sometimes to the billions of a leader level and also the life of our pumps. Finally, on the tumor personalization side, biopharma companies turning to our sensor robotics, both on the R&D and the manufacturing side where we win due to our ability to customize our robotics to their very specific workflows and our application knowledge. As a result, biopharma companies that have turned to our robotics have seen a 50% ROI due to increasing productivity. Not only that, but they've also seen higher quality drug substance. This has made us the #1 mRNA automation supplier. Also, our pumps are specced in top sequencer manufacturers for years to come. This will lead to a 20% revenue growth in this area through 2027. Now to conclude, let's do a recap of what my team and I have gone over today. PST is a leading provider of niche solutions, and we operate in niche applications in large, sustainable, high-growth markets. We will also continue to drive our strategy based on our portfolio, customer intimacy and ability to automate workflows and combine technologies along with IRX and demand gen to continue to drive growth. Finally, we will continue using our strong brands, highly recurring revenue, pricing and I2V to continue to expand margins. Thank you for your time today. And now I will turn the presentation over to Liz for [ indiscernible ] M&A.

Hi. I'm Liz Hepding, Senior Vice President of Strategy and Corporate Development. I'm excited to be back from my second Investor Day and to have the opportunity to talk to you about the inorganic component of our compounder model. Today, I intend to give you a better sense for what we've done, which is execute a highly successful acquisition program, how we've done it, which is through an IRX-driven disciplined process and how we will keep doing it, which is through proactive pipeline development. So let's start with what we've done. Since the merger in March of 2020, we've enhanced our portfolio with the 41 businesses highlighted here. These strategic transactions have expanded our product portfolio, enhanced our geographic reach and our channel positions. They've accelerated our top line growth and helped us drive margin improvement and the increased exposure to high-growth sustainable end markets while adding $7.5 billion to our addressable market. In aggregate, we've invested approximately $2.3 billion across these transactions. And we've done that at a weighted average purchase multiple of approximately 12x adjusted EBITDA, which reflects our discipline as a buyer. And we expect to reduce this multiple by more than 4 turns by our third year of ownership through the execution of synergies. Approximately 90% of our transactions were internally sourced and transacted on a bilateral basis with sellers outside of competitive processes. And finally, we target a year 3 ROIC of mid-teens in every transaction in order to ensure we deliver appropriate returns to our shareholders. A lot of you have asked questions about the performance of our acquisitions. So what I've done here is highlighted a few of our larger transactions to show how we've created incremental value through top line growth and margin improvement. And that's really where the magic is through the power of compounding higher growth rates and margins over the long term. So while the specifics vary across transactions, these -- the results demonstrate the power of joining Ingersoll Rand. We have the ability through IRX to leverage our global footprint and commercial channels, add sophisticated demand generation and pricing capabilities and launch innovative new products all while driving down input costs and executing cost synergies. So consider taking you through every deal on this page, I'm going to hit a few highlights. I will start with our early 2021 acquisition of MD-Kinney as this is the only deal where we can almost calculate a 3-year ROIC. We've already achieved mid-teen returns, and they keep increasing. MD-Kinney is also a great example of our ability to take our global platform and use it to jump start growth. Since the time of acquisition, we've nearly doubled top line revenues, and we've taken a business that historically was 100% U.S. focused, the one that today, 15% of sales come from international markets. Let's move on to Seepex. Seepex is a great example of our ability to dramatically improve profitability while still driving growth. When we acquired Seepex, it had adjusted EBITDA margins in the low teens. In just over 2 years of ownership, we've driven these margins to the high 20s through focused execution. And all of Ingersoll Rand has benefited from Seepex's IIoT capabilities, our current Head of IR digital Dr. Christian Hansen, came from Seepex, added a lot of his leadership team. It is such a huge win when we can leverage the talent and capabilities from an acquired business across our whole platform. So in the interest of time, I'm going to skip to the end of the slide to the 2 most recent transactions. And while we have less history on these, we've actually made significant progress beyond even the financial metrics highlighted here. Let's start with Everest. Everest added blower and vacuum manufacturing capabilities in India, which we did not have. and we've been able to take the Everest footprint and in-source the production of select Ingersoll Rand blowers to dramatically reduce the cost of this product. The SPX Flow Air Treatment business was a carve-out. So that introduces some integration complexity. In less than a year since we've owned them, we've already exited more than half of the transition service agreements that were in place at close. And we've regionalized the business to align with our ITS segment operating model in order to more effectively drive global growth. So I'm going to switch gears for a second and talk about how we think about inorganic growth. You guys have probably seen this slide before, it was in our last Investor Day deck, and that's because our strategy has not changed. We are focused on mission-critical flow creation technologies and digital solutions that enhance our value proposition. We will also make selected investments in strategic channel partners in order to increase our market share in key geographies and products. We measure every acquisition opportunity against our strategic and financial criteria. And we're really focused on only pursuing transactions that improve the quality of our portfolio. And when we talk about improving the quality of our portfolio, that really means we're moving cyclicality and increasing margins. So if we look at our strategic criteria, we know that from a strategic standpoint, market position and differentiation drive sustained higher margins. So we look for businesses with leadership in niche technologies, geographies, applications. We see 2 key paths to reducing cyclicality, increasing exposure to high-growth sustainable end markets were increasing aftermarket or recurring revenue streams. So we look for businesses with these characteristics. And as you all know, acquisitions are most successful when 1 plus 1 equals 3 and not 2. So we place tremendous value on our ability to execute cost synergies, which increases margins and buys down the upfront purchase multiple. From a financial standpoint, we target businesses with mid-single-digit or greater organic growth and gross margins at or above 40%. We want to buy good businesses and we view gross margin as a key indicator of the mission-critical nature of the products and their differentiation in the marketplace. We also value capital efficiency. So we look for businesses with long-term net working capital needs, less than 20% of sales and CapEx of less than 10% of sales. And finally, like I said earlier, we use ROIC as a guiding criteria for what investments we make, and we target a mid-teens ROIC in every transaction with an absolute minimum threshold of exceeding our cost of capital by year 3. But it's not enough to just do good deals. The real moment of truth happens during integration. A critical competitive differentiator and the key driver of our acquisition performance is the use of IRX integration in every transaction that we do. IRX integration is a standard, highly efficient process that we adapt to each unique acquisition and team. Having a standard playbook enables us to run integrations in a highly decentralized fashion, where they're owned and managed by the acquiring business unit and not some corporate team. This model results in literally hundreds of employees having integration expertise, which enables us to run multiple integrations simultaneously without resource constraints. We start integration planning well before we ever close the deal, so we are ready to go on day 1. During the planning period, we identified the unique must dues for the integration, and we set up an integration IDM with the Ingersoll Rand team. At this stage, we're really focused on blocking and tackling, we're going to make sure that our new employees are going to get paid, have benefits, have e-mail addresses, et cetera. We know that these highly personal items can set the tone for the integration, and we must get them right. We kick off each integration with a day 1 celebration with the Ingersoll Rand team is on site to welcome the new employees to the family, introduce them to our culture and values and set expectations for the first 100 days. In the days immediately following, we invite the acquired team into the integration IDM, and we introduce them to our commercial accelerator. By the end of the first IDM cycle, the majority of those must-do integration items should really be closed out. And what that does is it enables us to shift our focus to our commercial accelerator program. At this time, the acquired team to understand our strategy and synergy targets and be able to implement a plan to execute against these. Most integration IDMs officially end after 2 cycles. That being said, if there's some critical path must use that haven't been closed out, we will run another cycle. We have built significant integration muscle through the 41 transactions that we've done, and we continue to build and strengthen this muscle every time we do a deal. So how are you going to keep our inorganic growth engine going? Our funnel is the key driver of acquisition activity, and we take a very proactive approach to funnel development and management. Funnel generation resides with our business units with the M&A leader in that business unit. M&A idea generation starts with our business unit strategic plans. Inorganic growth is incremental to these plans. Are there product technology, geographic holes we need to fill? How can we accelerate our organic growth goals? We supplement this thinking with market back work focused on new and emerging trends and technologies and we survey market segments to create comprehensive list of potential targets. And then we use desktop research and market insights to prioritize this list and then we start proactively calling and cultivating potential sellers. We are very focused on creating proprietary opportunities and transacting unilaterally with sellers outside of auction processes. Approximately 90% of the deals we've done have been internally sourced. And that's one of the reasons that I love working for Ingersoll Rand. People genuinely want 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 will be focused on making life better, helps set us apart and establishes us as an acquirer of choice. A key differentiator is our employee equity program. We make every employee of an acquired company, an Ingersoll Rand owner after the first year anniversary of the transaction through a onetime equity grant. This model is extremely unique and particularly resonates with founders and multigenerational family companies. So now I'm going to take a second and dive into our funnel. We use IRX to run a very standard funnel process, much like a salesperson would use. Our funnel has 6 stages with weighting from 0% to 100% based on the likelihood of deal closing. Our funnel is tracked and reviewed in detail on a weekly basis through my M&A IDM. Our funnel is large and dynamic. Today, it's currently more than 5x larger than it was at the time of the merger, and it includes 5 transactions under LOI, which provides great runway and momentum going into 2024. So I'm very confident in both our current funnel and our runway for future growth. So let me spend a minute to talk about what you can expect to see from us going forward. You will continue to see us do bolt-ons in our core product categories. We'll use this type of acquisition to fill a white space and to enhance scale. You'll also see us continue to expand our addressable market through the addition of adjacent technologies that are used in connection with our core products. This type of transaction extends our offering. We can offer more products and services to the customer, and it can create a new platform for growth. Let me give you an example. This year, we've made several investments in air treatment specifically air dryers. Why? Well, the air coming out of nearly every compressor needs to be dried in order to remove moisture or other impurities, so it makes sense that dryers are frequently sold with compressors and therefore, it's pretty logical for us to offer both. Let's take a second to think about the dryer. Well, almost every air dryer uses a filter. So now that we have a large dryer business, maybe we want to expand or enhance our filter capabilities. And just like that, we have a new hunting ground for acquisitions. Over the past several years, we've been intentionally focused on doing smaller bolt-ons. In our recent earnings call, you may have heard Vicente referenced the potential for a couple of deals -- near-term deals in the $1 billion size. It is true that we've been looking at some more scaled options to further extend our core and increase our addressable market. So let's be clear. We are not talking about a third leg here. These opportunities are still highly aligned with mission-critical flow creation and related markets. We view this type of larger deal as a mechanism to increase our relevance in good, higher growth end markets and add recurring revenue streams in a meaningful needle-moving way. That all being said, given the episodic and highly uncontrollable nature of transactions, our core focus is going to remain on the highly synergistic proprietary bolt-ons where we have such a strong track record of success. So thank you for the time. I appreciate you listening as I wrap up here. I'm going to leave you with just a few parting thoughts. First, inorganic growth is a key pillar of our compounder model, and we had the engine and runway to continue to drive mid-single-digit annual growth from acquisitions. We are a differentiated buyer with a large and growing pipeline of proprietary opportunities, and we're a disciplined buyer, who is committed to remaining highly selective about the transactions we pursue. The use of IRX integration in every transaction has driven our acquisition performance and so we're not going to deviate from that practice. And finally, as you'll hear momentarily, M&A remains our top priority for capital allocation, so I expect to remain very busy. And with that, I will hand it over to our Chief Financial Officer, Vikram Kini, for the final section of today's presentation.

So thanks, Liz. Good morning to everyone. Vik Kini, I think I know everyone here, but I've been with Ingersoll Rand for nearly 13 years, of which 3.5 years as CFO. I'm really excited to share both a snapshot of our historical financials as well as our long-term financial framework, which not surprisingly is grounded in the strategy that you've heard from all of our presenters today. So what are you going to hear today? I think if there's one thing that I can -- you can take from this section. It's frankly what you've heard for the entirety of the morning today. It says that our economic growth engine is the core of how we operate. I think that's seen in the financials of the company over the past 3.5 years, where we've delivered very, very strong results and generally delivered on essentially every aspect of that economic growth engine, all enabled by IRX. And I think what's even more exciting is the runway that we have ahead. We have a proven model to deliver compounding results, and it's really backed by a disciplined capital allocation strategy. And as a result, we're excited to provide an update on our long-term financial framework and one that we believe is going to continue to establish Ingersoll Rand as a premier growth compounder. So let's jump right into it here in the financials. I'm going to start from a top line perspective. I'm going to start with orders. Now one thing you've heard from all of our presenters is that really that focus on organic growth. You've heard demand generation. You've heard innovation alignment to higher growth sustainable end markets. Christian I'll point to you again, IoT because these are all organic growth enablers that we think is going to continue to drive compounding growth. And I think you see that on the left side of the slide, it's visible in the orders, which on an LTM basis, Q3 2023, $6.6 billion, which is essentially a CAGR of 15% since 2020. Not surprisingly, you transition to the right side of the slide, and you see that similar trend on the revenue side. $6.7 billion of revenue on an LTM basis, also a 15% CAGR since 2020. I think one thing to kind of compare the 2 sides of the slide here, if you look at the gray bars, which is 2020 to 2022, you see actually the book-to-bill ratio if you compare the bars well above 1. And for the LTM period, you've actually seen that book-to-bill normalizing a bit closer to that onetime level, which is very much in line with what we guide for as we entered this year for 2023, particularly due to supply chains and lead times start to normalize a bit. But importantly here, we should be ending the year here with the comparable backlog to what we started the year, which sets us up nicely as we move into 2024. So I think everyone has talked about their favorite slide in their respective sections. I think I'm going to have to go through this one right here. You see what that top line result has translated to you on to the bottom line. So first and foremost, that double-digit revenue growth. You see it there translating very nicely. First on the left side of the page. We've delivered over $1.7 billion of adjusted EBITDA in the LTM period, and we're expecting that to actually grow to approximately $1.75 billion based on the midpoint of the range that we provided earlier this month at our earnings. And if you take a look at that LTM performance that $1.7 billion, I think it's pretty impressive here that, that's 80% higher than where we were in 2020, which I think speaks to what all the speakers today have been presenting, particularly on growth and that delivering the bottom line and doing things like honoring our commitments and hitting merger-related synergies and things of that nature. And it's impressive that, that represents a 22% CAGR from an earnings perspective. But I think one thing that we're just as pleased with is that the quality of that earnings. You could see that margins have grown over the time frame, 410 basis points to nearly 26%. And not surprisingly, on the right side of the page here, adjusted earnings per share growing at a 30% CAGR to $2.81 in the LTM period. I want to pause here because I think this -- the last 2 slides, this is really the power of IRX, really delivering compounding results, and you see it kind of shining through in the financials. So let's do a little bit of a double click here and look at the segments. I think what you're seeing here is continued strong momentum on margins, really driven by our quality of earnings enablers. So starting first on the top left with IT&S. IT&S margins are at 27.5% in the LTM period, nearly 500 basis points of margin expansion since 2020. I think this is one that's an incredible milestone for the team. Last Investor Day, we said we were going to be getting to that high 20s by 2025, high 20s EBITDA margin by 2025. We essentially are there 2 years early, right? So again, fantastic momentum and progress by the team. And on the PST side of the equation, we're encouraged that we're getting back to that 30% threshold that 30% margin barrier. And as Santiago spoke to, you could see that over the 2021 and 2022 time frame, the biggest catalyst for why you haven't seen more margin expansion. The primary driver was the Seepex acquisition. Fantastic business, great products, great gross margin profile, differentiated technology. But as we said, it came in at a lower margin profile, one that was dilutive I think Liz just spoke to it. You've seen well over 1,000 basis points of margin expansion now reaching that high 20s closer to fleet average and now sets us up nicely as we move from 2023 onwards. So how do we get here? How are we driving this performance? A multitude of levers. First and foremost, the merger-related synergies. As a reminder to everybody, when we announced the merger back in 2020, we said we were going to deliver $250 million of cost savings attributable to the merger. Well, in less than a year, we raised that target to $300 million and I'm happy to say here we're now in kind of the final legs here. This was the last year of that kind of time frame, and we very much are on pace to deliver that $300 million cumulative by the end of this year. Second has been the pricing side of the equation. You've heard many of our speakers speak to our pricing processes. I think this is one that for those of you who followed the story from the Gardner Denver days through the merger to today, you know that this evolution of pricing is continuing to be part of the narrative and the story. And it speaks highly to the efforts of the team as well as on DGX that we've been so nimble on the pricing side. You've seen all the direct material inflation that's come over the last 2 years, particularly and happy to say that over that time frame, we've been actually dollar cost positive from a pricing perspective dollar cost positives as well as margin positive over that entire time frame, which I think speaks to the ability of the team to not just take price but do it in a nimble manner targeted that really delivers results. As you can see, we continue to be focused on productivity, like I2V as well as probably a part of the equation that maybe doesn't get as much airtime but is equally important with 41 bolt-on acquisitions, there continues to be a nice tailwind on the synergies from our bolt-on M&A. But I think what's even more exciting here is that we have plenty of room moving forward. First and foremost, as we've spoken to here, we always had a higher funnel for the merger-related synergies than the $300 million. In fact, we said we always had $350 million plus. So that gives us a nice $50 million funnel on opportunities that will fall into the productivity equation going forward, particularly in areas like supply chain and supplier optimization and footprint. Another big opportunity is on the gross margin side. You heard Mike Medaska speak to the recurring revenue and our aspirational targets to get to $1 billion and hopefully even higher. Well, that's going to come at a margin premium. And then we also have a big opportunity on the direct material side. Obviously, everyone knows kind of the supply chain equation we've been in over the last few years. And as a reminder, direct material is approximately 70% of our cost of goods sold. So Chris Neubauer and his team are very much focused. I think Vicente said, moving from the defensive now to move into the offensive and how we're going to start to see some of that direct material clawback opportunity as we move forward. So switching a little bit now to the asset base of the company. We continue to operate an asset-light model. You can see from our historicals there on the left side of the page, CapEx, approximately 1.5% to 2% of revenue, split approximately evenly 50-50 between maintenance and growth CapEx. In the middle, you can see the operating working capital side of the equation, which has been approximately around 20% for the last 3 to 4 years. But it's worth noting here that in the LTM period, you can see that, that organ capital level has risen to about 21.3%. And I'd say the biggest driver of why you've seen that increase has been inventory levels. We today are carrying approximately $200 million plus of inventory as compared to the end of 2021, primarily due to supply chain conditions as well as the elevated level of backlog. But we view this as a huge opportunity going forward. Again, as supply chains continue to normalize and we execute on that backlog, that should be a nice tailwind from a working capital perspective as we think about 2024 onwards. But that's not the only opportunity. We have opportunities in areas like accounts payable and accounts receivable as we think about further deployment of shared services, for example, across our enterprise. At this point in time, there still is meaningful opportunity to push shared services in areas like our PST business as well as those 41-plus bolt-ons that we've acquired over the last 3 to 3.5 years. And I think this kind of cash mentality and kind of how we've been thinking about things, it really permeates the enterprise. You might remember back when we did our all employee equity grants, whether at the Gardner number IPO or at the merger, we really tried to educate our employee base about how they can drive value as owners of the company through unlocking working capital. And fundamentally, it's because every employee in the company, and we feel can touch some aspect of that working capital equation. Inventory, accounts payable, accounts receivable. We've now taken that 1 step further and we've really kind of aligned our annual incentive plans for those employees who are eligible for that within the company, to now be focused on free cash flow, whether it be at the business level or at the enterprise level to continue to drive what we consider to be that cash mentality for the company. So speaking of cash flows, a nice segue to the next slide here, and you can speak to the cash generation power at Ingersoll Rand. So you can see, over the last 3 years, 2020 to 2022, we've been generating on average approximately $800 million of free cash flow or let's say, mid-teens free cash flow conversion. In the LTM period, you've seen that actually grow to over $1 billion. And we're actually expecting based on our guidance that we provided earlier this month, for that number to be approximately close to $1.1 billion of free cash flow generation for this year. So we're really pleased with the performance and this acceleration in terms of the absolute cash generation. But I think you know us, we're obviously excited about the opportunity ahead because we really see an opportunity to get this free cash flow margin to closer to 20% free cash flow margins. And you can see on the right side, how are we going to drive that? Well, first and foremost, continued opportunities on the capital structure. We're going to speak to this in a moment and reducing our annualized interest expense, continued optimization of the tax rate as well as the working capital opportunities that we've discussed. And again, we shouldn't underestimate the opportunity of 41 bolt-ons being integrated and driving margins and working capital opportunities that become part of the larger Ingersoll Rand enterprise. So to kind of take a step back here, and Vicente showed this slide earlier, and look at the performance of the company really through the lens of the economic growth engine. I think it speaks to the fact that we really are differentiating IR as a premier growth compounder. I think with IRX as an enabler, as Mike Weathered spoke to, you've seen that we've delivered on all of our stated targets to date on organic and inorganic growth as well as margin expansion. And this has translated nicely to the right side of the page on double-digit earnings growth and strong free cash flow generation. But I think as you've heard from Vicente and others, we're really excited about the future because we remain committed to this framework. And we believe it will drive continued differentiated above-market performance for the long term. So switching gears here now to the balance sheet. And I think this is -- again, this is a great story in terms of the transformation you continue to see of the enterprise and really seen it in the results. So starting first on the left side of the page on the leverage side. I think since 2020, and if you even go back further in history into the Gardner Denver days, you see that prudent gross debt management, coupled with the earnings power of the company and strong free cash flow generation has led to a leverage profile that now sits below 1, actually at 0.9x at the end of Q3 2023, which is well below our stated 2x leverage target. I think as Liz just mentioned here, we continue to have a really strong funnel for M&A. And so whether it be in some of those potentially billion-dollar-sized deals, we feel that we're in a very good position that we can continue to flex up for larger deals and be able to kind of integrate them and as well as continuing to see a strong path back down to that less than 2x leverage in a reasonable time frame through good integration, strong cash generation and managing that leverage. I think one thing that's really exciting, though, is the right side of this slide. We're joined here today by Bert Jameson and our treasury he's in the back corner back there. I think celebrated his 1-year anniversary if I'm not mistaken here. And Bert's really been a huge catalyst to really the efforts you see on the right side. And so one thing we trying to flash back here, we've always said, whether it be pre-merger time of the IPO for Gardner Denver, we always aspire to be an investment-grade profile company. Well, due to the strong financial profile of the company, improved credit metrics, a positive outlook going forward. I'm excited to say earlier this year, all 3 rating agencies upgraded us to an investment-grade credit profile, which is a huge milestone for the company. And as such, Due to Bert's efforts as well as the entire team, we took the opportunity to start to transform our capital structure. So first and foremost, as you might remember, we historically had an all term loan structure, $2.7 billion. We took the opportunity to refinance $1.5 billion to unsecured bonds. And that's led to the metrics you see at the bottom of the slide there. We now have approximately 75% of our -- of our debt that's at fixed rate -- fixed rate structure. We actually extended the entire maturity of the debt stack 2 years, and we reduced annualized interest expense by approximately $20 million. But I'll say that's just the first step. And you can still see at the top of the page, first line there that we still do have some legacy term loan debt still on the balance sheet. So as we look to continue to transform the capital structure to a fully investment-grade structure, we're going to take further steps in what I'll call the short to medium term to fully refinance that $1.2 billion and really probably make it look much more like you see the rest of the $1.5 billion more of an unsecured structure like we did earlier this year. So shifting gears now to what does that mean for capital allocation. Just frankly, easily said here, we're reaffirming our commitment to what we have historically executed from a capital allocation perspective. So first and foremost, again, you're going to see from the company a commitment to driving organic growth. So there will continue to be a healthy amount of reinvestment within our existing business, and you're going to see that. That's part of our long-term framework and part of the numbers that we're going to be providing on a go-forward basis as far as that framework. But for efforts like DGX, IIoT, aftermarket recurring revenue initiatives and commercial fee on the Street because fundamentally, we just see that, that's going to continue to drive that ongoing, let's just say, compounding growth on a year-over-year basis. So if we flip the 3 kind of aspects that are shown on the page in terms of capital allocation, not surprisingly, and Liz spoke to it in her section, the focal part of our strategy will continue to be M&A. You've heard that we've done over 40 transactions over the last 3.5 years, deployed over $2.3 billion cumulatively over that time. And if you look at the donut chart on the far left side, you can see that since the merger to date, we've deployed over 80% of our cumulative capital towards M&A. And we fundamentally believe that this is an equation that should still continue to work on a go-forward basis. On the delivery and value back to shareholders, you'll see the other 2 elements. First, starting with our share repurchase plan. So a little bit of a reminder, approximately 2 years ago, the Board did authorize a $750 million share repurchase plan. To date, as of the end of Q3 of 2023, we've executed on approximately $377 million of buybacks. And here in Q4, we expect to do another $130 million of share repurchases within the quarter. And so that's going to essentially bring us to approximately $500 million over the last 2 years, which nicely works out to about $250 million per year. And we feel that that's a good requisite amount that we're going to look to target and execute on, on an annual basis. In terms of the dividend, simply stated, the dividend at $0.02 and it continues to remain at $0.02 per quarter. We don't expect to change that for the short term. But as you would expect, we will continue to reassess capital allocation with the board on a periodic basis and obviously update you guys in due course as and if things were to change. So exciting slide here. Vicente showed this graph earlier. I think it really speaks to the transformation of the company since 2017. If you go back over this kind of 6-plus year time frame, a lot of milestones. But if I can kind of simply boil it down to a few key points. First and foremost, you've seen us continue to reduce our debt profile as a company since 2017 onwards. We've successfully completed and integrated the Gardner Denver and IR merger, and now I'm happy to say, in the tail end of delivering those synergies that we committed to as a result of the merger. We've divested businesses that didn't fit the Club Car business and the upstream energy business from legacy Gardner Denver, both good businesses, but they came with the level of cyclicality that we just didn't see fitting the overall enterprise. And we removed the private equity overhang that used to remain in our stock. And now you start to see us kind of transform the capital structure, which we know we have plenty of opportunity going forward. All at the same time, we've delivered strong organic growth, consistent margin expansion and added 40-plus new businesses through M&A to the enterprise. And I think you can see here on the slide, Vicente spoke to it, it's really the results have been differentiated shareholder returns. We've outperformed the S&P 500 and peers, 250% plus share price appreciation and approximately $25 billion of market cap being generated over this time frame. So again, we think the model works, and we're really excited to continue this momentum and continue to deliver that shareholder value creation that you've seen over the last 6 years. So that kind of brings us now to updating our long-term financial framework. First and foremost, I think it's worth saying here that folks on the left side of the slide, with IRX really at our core as our enabler, really happy to say here that we continue to be on track to deliver all of our original targets, which you can see indicated by the green check marks. And if you look at the black column here, effectively extending many of those targets now out to 2027. So let's touch upon what those kind of different elements are. First of all, on the growth side of the equation. We're committed to continue to deliver out to 2027 mid-single-digit organic growth and mid-single-digit inorganic growth, which would equate to low double-digit overall total growth. We're now raising that adjusted EBITDA margin profile, you can see on the page, 28% to 30% on adjusted EBITDA margins, nearly reaching that 30% level, which would be an incredible milestone for the company, and that should equate to double-digit earnings per share growth. As I mentioned earlier, on the free cash flow side of the equation, we can expect free cash flow margin to reach approximately 20% and leverage to remain below 2x. And as Mike Medaska stated in the morning section here, we expect that revenue from IIoT-ready products to surpass 30% by 2027. Now one thing I wanted to kind of speak to here is do a little bit of a double click on the right side of the chart, on the right side of the page, which speaks to the performance from '21 to expected '23 and then layering on these kind of new long-term framework from '23 to '27. And I think there's one thing that you can take away from this is that on that first column, I think it really speaks to the degree of outperformance that you've seen since our last Investor Day. Mid-teens overall growth comprised of low double-digit organic and that mid-single-digit inorganic. And I think one thing here to really focus on is that EBITDA margin side of the equation. Where, on average, based on our guidance for this year, we're expecting to deliver on average approximately 130 basis points of adjusted EBITDA margin expansion over the last 2 years. And so as we look forward here, we are slightly refining our margin target expectation from '23 to '27 to approximately 75 basis points of margin expansion for the next 4 years. But I think what's more important takeaway is the far right column there. But if you look over a 6-year time frame, that's still going to equate to approximately 100 basis points of adjusted EBITDA margin expansion, whereby delivering close to 30% adjusted EBITDA margins for the overall enterprise by the end of 2027. So again, we think this speaks to the differentiation that we continue to provide and really over this 6-year time frame, I think the differentiated growth and margin expansion you should continue to see from Ingersoll Rand. I want to provide a little bit of a double-click here into the margin side that fits with these long-term targets as we continue to see meaningful room for continued revenue growth and margin expansion at the segment level. So ITS, as we've said here, we're on track to deliver our prior targets, continue to see runway for mid-single-digit organic growth. And as I mentioned before, the margin profile today, we're almost -- we're 2 years ahead of effectively our last targets, on pace to deliver approximately 150 basis points on average of margin expansion over the last 2 years and reaching that high 20s adjusted EBITDA margin profile here in 2023. So as a result of that outperformance, we are refining our expectation for ITS going forward to approximately 50 basis points of margin expansion per year going forward. But I think what's incredibly important here, and again, like I said, a huge milestone is by 2027, with this framework, delivering 30% approximately adjusted EBITDA margin profile for the segment, which, again, is a level that, I think, once upon a time, if we could say 30% adjusted EBITDA margin profile in the foreseeable future, that's something that is something that we're very proud of. On the PST side of the equation, continuing to deliver mid-single-digit plus organic growth, and we're recommitting to that target out to 2027. I think one area here that we'll say, obviously is now kind of pushing out to the 2027 time frame is the margin profile. We are expecting now to deliver mid-30s adjusted EBITDA market profile by 2027. And one area that kind of gives us conviction is kind of how we're going to drive that, which would be approximately 100 basis points per year, is that chart on the bottom right. You heard Santiago reference this kind of in his portion, but we still have approximately 35%, over 1/3 of the portfolio that's under 30% adjusted EBITDA margin. So again, the inverse of that is we have 65% of the business that operates above 30%. There's no reason why those businesses on the far left side of the chart can't continue to push to the right and continue to be able to get into that 30% plus and in certain cases, over 40% adjusted EBITDA margin profile. We've done it with several different businesses. We know we can do it with the left side, and now we know we have the engine with IRX to be able to deliver that. So we'll shift a little bit of gears here and focus on the short term. And very simply stated here, we're reaffirming our 2023 guidance that we gave earlier this month on November 1. It's worth noting here that, that marked actually the third time this year that we raised guidance for the year. In terms of the components, the guidance calls for 14% to 16% overall revenue growth comprised of 9% to 11% organic growth, a 1% headwind on FX and approximately $360 million of revenue contribution from deals that we had closed as of November 1. On the adjusted EBITDA side of the equation, expecting to target a range of $1.73 billion to $1.77 billion and adjusted earnings per share between a range of $2.81 to $2.89. And one thing I do want to make sure that you take away from this page is that if you look at the midpoints of those 2 respective EBITDA and EPS ranges, they each mark over a 20% growth as compared to the prior year, which we're pretty pleased with in terms of performance and obviously, this environment. We continue to expect free cash flow conversion to be approximately 100%. In the bottom right side of the page, we do continue to expect to see orders in the fourth quarter, up sequentially and year-over-year on an organic basis. So I'm going to leave you with a few takeaways here from the finance section. First and foremost, IR, Ingersoll Rand continues to differentiate itself as a premier company that has a proven economic growth engine with IRX as our enabler. Since the merger, you've seen us deliver double-digit revenue and earnings growth and strong cash generation while prudently deploying capital. And I think what's most exciting here is we continue to have a long runway ahead to continue delivering compounding results and delivering differentiated and substantial shareholder value creation for all of our investors. So with that, I'm going to turn it back over to Vicente for a few closing remarks.

Thanks, Vik. So what an exciting day for me, for sure, I hope for you do. And for sure, for all of our employees and our team members that are here. But I think simply stated, I think we have proven to you that we continue to be a very attractive investment. That Ingersoll Rand, it is an attractive investment. And the reason for that is that because a lot of our levers in the economic growth engine, we get a chance to show you how they're helping us to achieve an economic growth engine that can deliver this compounding value of double digits of earnings growth and a free cash flow margin that continues, but it's good now, but it's going to be great. I hope that you get a chance to see as well that it is sustainable because of our culture. And you get a little bit of a glimpse, deeper insights into our team members from across the world that consistently deliver the same message of embracing our values but executing always with humility with the levers that we have, IRX Demand Generation. I hope that you get a chance to see that how we have completely changed our growth profile that we remove cyclicality, and we have proven that we've been able to overdrive differentiated growth performance even in a year in 2023, that has seen PMIs below 50 and other factors that have been affecting the market. I also think that you get a chance to see that our recurring revenue stream, which is very important to us, will continue to accelerate and will dramatically change the profile of our margins to as well and how we think and hope that as we get together at the next Investors Day, we can continue to increase the bold target that Mike and the team showed you today. I think you also got a chance to see how committed we are to the power of the and in between the performance and doing what is right for the environment and doing what is right for the employees with this very unique culture that we have of ownership mindset. I think for me, the most important piece, and I said it on that, what -- I said it on that one slide that I showed early on that I was very energized back in 2016, when I took over as Gardner Denver because I saw the potential of what we could create with the platform I am even way, much more excited today as I stand here today of what we can create with the platform that we have at Ingersoll Rand. Thank you again, and we're going to go into Q&A. Thank you.

Hey, everyone, Mike here. So couple of questions here. First, Vik, could you build up or provide a bridge on that mid-single-digit organic growth profile? I know that's a flexible number, mid-single digits. But you listen to what you talked about today, 1 to 2 points of price. You run some math on the $200 million of service going to $1 billion. It's a couple of points of growth, talk about demand generation. You talk about the organic -- the ability to compound the inorganic on the organic side. The push in the upper bounds, it feels like with any kind of end market growth. So maybe just talk to a little bit on that buildup if I'm thinking about it wrong at any level or if there's just some flex in there to make sure you understand what the environment gives you and you have some flexibility there.

Yes. I'll start. I'll let Vicente add. I think it's the latter here that, obviously, we want to provide what we consider to be prudent but ambitious targets over a multiyear time frame. And I think the question we got earlier the day here that, obviously, not all years are going to be held equal here in terms of what the macro may look like over the next 4 years. But very simply stated, whether it be the mid-single-digit side of the equation in ITS or the mid-single-digit plus in PST. You are correct. About 1% to 2% price. We've shown the ability to deliver that. We think that's a prudent number going forward. The balance coming from a volume perspective on the organic growth side of the equation. And yes, it is comprised of a multitude of drivers, whether it be the innovation side. We think probably the single biggest driver over the entirety of that time frame, that's kind of the kicker here is the recurring revenue side of the equation, going from $200 million to $1 billion over that 4-year time frame as well as what we'll say here, demand generation kind of being that enabler to be able to drive that over a multiyear time frame. So I think in terms of taking a step back and looking at the numbers here, we think mid-single digits and [indiscernible] are prudent. We like the composition of how we've kind of outlined things. Are there going to be opportunities to exceed that potentially in certain areas depending on market conditions as well as our internal initiatives. Yes, absolutely. But we think that that's a prudent number to outlay here for a multiyear time frame and one that hopefully come back here in 2 years on, we can say, hopefully, maybe we may even not delivered on.

Makes sense. And then just one quick follow-up. Liz, your section, really a lot of good detail here. I'm guessing the answer is going to be around ownership and the ability to scale what you're bringing in. But competitively, are you seeing any change in the dynamic of maybe private equity coming in trying to roll up some of these subsystems or some of the sub-verticals or just price competition or whatever it is. Are you seeing changes there that would maybe force you to change the philosophy at all or make you more concerned?

No. I think in these proprietary smaller bolt-ons that we've done, this has been a great environment. The world has been through a lot, COVID, supply chain, et cetera, lots of challenges. So for some of these family businesses, right, they're tired and they're ready to sell, and we're offering them an alternative to private equity, right, that they want to stay with Ingersoll Rand family like Pam. We love to have them. If they don't want to stay with the Ingersoll Rand family, we can also exit the owners, right, because we have management teams. So we've been -- I think we've -- it's been a really good time for us to be doing transactions. And I think we've got a very robust pipeline that makes me feel good that, that model doesn't need to change right now.

And I think, Mike, the uniqueness of the ownership mindset, it's a big, big differentiator too as well of what we can offer these companies, but the ability to pass on the legacy, keep the brands and have employees become owners.

Maybe just the first question, following up on M&A. You've done one deal a month for 45 months or something. I don't think that's what you envisaged 2 or 3 years ago. So maybe kind of help us understand why have we ended up there? And it sounds like it might be changing that maybe there'll be some more $1 billion-plus acquisitions. But I have to think you were exploring those already the last 2 or 3 years. So maybe help us understand something changing internally or it's the environment around you changing?

Sure. I'll say that maybe a couple of years ago when we expressed the target of mid-single digits inorganic piece. I know that we received the question, how could you do it? I mean, is there enough. And we were very confident based on what we were seeing in the funnel. So I mean, we always knew that we could do it and be able to achieve those targets in a very strategic kind of way. I'll say that the couple of large targets that we've been mentioning is that I think every -- in every point in time, and we always say that every 3 to 5 years, you kind of see maybe like a large transformation or anchor acquisition that can clearly continue to do more or it could be a very larger bolt-on, well in between continue to do many bolt-ons. We think that this bolt-on strategy and Liz alluded to that, it's kind of like going to the gym every day. I mean you're going to be in shape because, I mean, the teams continue to execute, continue to deliver. They don't have to wait and being sporadic and doing one big one now and then just wait 3 years and kind of dust off the playbook and do it again. So I think the team is ready for doing that. And so the strategy was always that. We always saw a competitive advantage. And we always said, if we could do a lot of these small bolt-ons and be a roll-up, why let others like private equity do it, when we know we could do it in a probably a better way because we're going to keep them for a long term and strategically, we're going to bolt them on to be more holistically together.

Great. And just a quick follow-up. The PST margins. You talked about 100 points a year on average, and that's a big step up from where they have been for 3 years. Is that step-up kind of linear or it's more towards the back end of the period? Like do you think next year, you can start to see that step up...

That a -- that's a great question. Thank you. I am really encouraged what I have seen in this past few months, great teams, and there is a lot of potential to continue to be driving IRX further into the business. I think something that excites me about our margin profile. It's what they got in one of his slides, where we still have a big chunk of our portfolio that is under the 30% EBITDA margin, right? And that is what we're going to be focusing, coming up, trying to get those up and therefore, increasing our margins. Vik, anything you want to add?

Yes. I think, Julian, I think Santiago said it well. To answer your question, is there any reason why we wouldn't expect to continue to see it in a relatively linear manner. No, we're not expecting for it to all be back-end weighted, simply stated. We expect to see a good expansion on an annual basis.

First, just one on service. I think previously, you had an explicit target on service of mid-40s now kind of talking recurring revenues, which is a subsegment. But maybe just update us, are you pushing towards 50-ish? Is there something explicit in the plan that we're talking about today?

Yes. No, absolutely, yes. I mean, I think we always have really high aspirations on that number to be 50 and above. So clearly, we're going to continue to push that number to be higher. Clearly, you've seen a lot of the outgrowth that we have seen with new products and M&A on the equipment. That's why that needle hasn't moved as rapidly. But we'll continue to have that line of sight, and that is definitely -- we don't see any reason why without these recurring revenues and also the ongoing aftermarket and also applying this service model to a lot of the M&A that we can continue to move that percentage higher.

And just on the M&A, adjacent versus aligned was the Oxywise acquisition, an example of aligned? Or how would you define the line versus adjacent?

Sure. I'll view that as adjacent. So kind of align or core is when we say compressor blowers, vacuum pumps and then adjacent will be anything that can be attached to that core technology. And Oxywise will be adjacent to that.

So aligned. Give us an example of what aligned then would might mean?

Aligned meaning within the core.

Is it that -- maybe I'm looking...

On the framework -- we said core adjacent aligned. So aligned with like a further step, but still in a high growth sustainable end market, right, and highly related to the things that we're doing.

Filtration in the example that Liz mentioned that core was a compressor. Adjacent was basically the Oxywise or the dryer. And then inside, you have all these like filtration, for example, that can give us that higher revenue but also higher consumable site.

Great. And then maybe just one for Pam. Pam was your -- just kind of the sale process for you. Was this one of these Ingersoll Rand internally generated ideas? Was your business shopped? Maybe just kind of tell us how you guys connect it and how the process went?

Yes, it was really internal. And to be honest, we weren't sure we wanted to sell the company. But -- and I'm not going to say this because Vicente standing right next to me. But it really was a turning point when he flew down, met with our family, sat across the table. We really got to understand more about Ingersoll Rand. And then clearly, he was understanding where we were coming from with our business. So to us, that was a piece. But no, we never shopped it and because we loved it, so -- and we still do. So it's really fun.

Two questions for Arnold, if I may, and maybe for the team. So for one, China has been a bit of an unexpected drag in the global macro, and you guys have grown right through it, so congratulations. But could you give us a little bit of a teach-in on market positioning within China, your price points versus others, where the market is going, whether it's moving up market or not? And then my second question is China's way ahead of the rest of the world in clean tech and batteries, as you guys mentioned, and in solar and other places. So is there any cross-pollination from positioning for Ingersoll Rand in China as the rest of the world tries to replicate some of what has been built out there?

Okay. Thanks for the question. I think I'll answer the first one and then following by the second one. So I think overall, for the market, we have a lot of moving dynamics in China. Some market is up, some market is down. As I shared in the vertical market study for EV and batteries. So actually, for us, on an annual basis, we have this as our standard process. In the beginning of the year, we started the market with layout like top 10, top 20 growth market we want to penetrate. And these are the markets we're not going to play at all. And this year, because of the external moving dynamics, we did it twice, once the beginning of the year and the second time in June. For some strategical reasons or -- I'm not going to share a lot of details on what kind of the particular market we are going to penetrate. But something I can share is starting from June, when we lay out a new vertical market approach, we picked the top 5, top 10. And on a monthly basis, on a weekly basis, we track all the pipelines, all the visits and all the wins looks like we're on track. And also on a monthly basis, in our MBR with a monthly business review with -- we view and we talk, looks like we are on a good track. So different performance for different markets, definitely. In terms of the relationship or geopolitical issues, I think for Ingersoll Rand, our advantage is we think globally, but we act locally. The reason why I mentioned this even in my sheet or our story sharing here is we play very, very strong in-region for-region, in country for country in China. So I think as I shared for supply chain, for commercial, for engineering design, everything we have already in-region for-region. So yes, I think that this is our competitive advantage in the market compared to a lot of multinational companies in the market. And also in the meantime, we are authorized to make a very good decision locally. I remember very few times I go to Vicente for some approval or for some decision-making. So a lot of local decisions. So this is our competitive advantage.

And as your question two as well on the -- yes. I mean EV and battery the players that we have play within -- in China, as they move to other countries, we're expecting already in the processes. Kind of like what Andy Hider showed on his slide.

Just first, a question for Vik. Just to confirm, in the EBITDA margin target for 2027, I assume you haven't embedded any sort of M&A dilution because I know that was a factor in why PST has been kind of behind the curve?

That's correct. I don't think there's anything actually explicit. But what I will also say here is that even if you've seen, for example, with Seepex. If you think now out from a 4-year time frame, so even if there was a deal that looked like Seepex per se that came to fruition now, given what our synergy targets are given the return thresholds that Liz laid out, we'd probably expect to be able to consume that if it was done kind of in the next year by that 2027. Is there anything that's explicitly in there for deals to be -- No, but we feel very confident here that we can overcome just like you've seen with Seepex, as long as there's a 2- to 3-year time frame to be able to consume and digest.

Okay, makes sense. And then, Pam, I have a question for you, too. So you talked about how the EBITDA has improved by 37% already. Can you talk about some of the initial focus areas that the Ingersoll Rand team had as you came together? And what you're still excited about from a margin expansion potential prospects?

Yes. So to be fair, coming in with Ingersoll Rand, the power of IRX really gave us the professionalism, right, and this accountability of getting things done. So what's been so great for us in that process is when we say we're going to do something, we actually get it done. And then we're also holding each other accountable. So this is a piece that I love. So Mike kind of was speaking about that a little bit before. We never really tracked our numbers. We're a family business, right? So if we shipped it 1 month, then ship at the other. It really wasn't that big of a deal. But now we are keeping score, and we love it. We're watching it every single week. So these are some of the cleanup items, so to speak, that's really helping us accelerate some of the growth.

So my first question is for Santiago. Can you maybe give us an update on how the life sciences business has been trending. That's -- you've seen some negative orders now for several quarters. And I'm also curious, when you think about getting to that mid-30s margin target, how important is that business coming back?

Yes. Absolutely. Thank you for the question. So yes, we're not impalpable to the market, and we have seen our life sciences business run behind the rest of the business. We still see that business continue to be depressed for Q4 as well. And as you said before, it is an important part of our margin because our -- that business actually runs a little bit above -- or runs above our fleet margin. So as we -- as that business recovers, we do expect also to help our margins.

Great. And then my second question is for Vik. Vik, I remember when back in the Gardner Denver days when we went toward that facility in Sedalia, you had a ton of net working capital opportunity, and as you highlighted that as an opportunity on the free cash flow margin side as well. Just curious like how much is actually left to get to that 20% free cash flow bridge?

Yes, it's still meaningful. Now just simply stated from those days, you're right. I think just as a reminder, at the time of the IPO, we were about like 30% working capital percent of sales. So a ton of credit for the teams, many of whom are on the stage here for bringing it to 20-ish, 21% level we are now. But we would fundamentally say whether you want to look at it from a dollar inventory growth perspective, turns perspective, we know there's opportunity. Dollar-for-dollar, we've grown over $200 million since the end of 2021. Now that's been in reaction to the market. We think those are great strategic investments and has obviously positioned us well particularly over the last, let's call it, 1 to 2 years to be able to deliver in this environment. But is that a sustained level that we need to operate at as we think forward? The answer is no. So I think easily said here, we would expect to be at a company that operates below 20% working capital. We've been there before. We expect to get there again. That definitely is a meaningful catalyst and a driver of getting that 20% free cash flow margin, but not the only one, right? Like we said, whether it be accounts payable, accounts receivable, a lot of the opportunities that Bert's working on in the capital structure, tax rate, a lot of the deals that we're bringing in from an M&A perspective, where we know relatively healthy working capital, you saw the targets, but they're not part of things like shared services and things like that. So there's an opportunity to even drive further efficiencies. There's a lot of different levers to pull.

First one, I guess, is probably for Vik. You gave us an update on the cost synergies out of the merger. There were clearly going to be revenue synergies out of that deal and highlighted some of those today. Is there a quantification you can give us on what you think you've generated in terms of revenue synergies over the 3.5-year period? And what inning we are on that? Like is there considerably more revenue synergies to generate on that deal? Have you squeezed most of the juice out of that?

I'll answer it maybe backwards forwards here. No, we don't fundamentally feel like we are done. I mean you've heard, frankly, every one of our presenters today, and particularly the 2 standing next to me here, Amar and Arnold speak to a lot of the synergies they drove, I mean, the case studies. Think about the Gardner Denver compressor and the blower vacuum. Those are literally the epitome of revenue synergies. Two historical great technologies, but frankly, underpenetrated in the China market. This was part of the thesis, and you've seen that. We spoke on our last Investor Day about the U.S. market and being able to drive the synergy between the Gardner Denver and Ingersoll Rand brand. So again, I think we're still -- we've still got plenty of room to run in that respect, whether it be in-region or even the globalization and localization of some of the product lines there. David, the first part of your question, have we quantified it? We haven't. And to be honest with you here, we've seen it across a multitude of levers, whether it be some of the volume market share type opportunities you spoke -- you hear spoken to. And one of the other fundamental areas where we talked about a pricing opportunity that we started improving and taking advantage of late 2020 into 2021. And that was one area that we said we knew we had some opportunities to bring parts of the portfolio closer to parity with others just based on our historical knowledge of where Gardner Denver and Ingersoll Rand historically played. And it worked to our benefit, not just because of the pricing impact because we were taking actions well before the supply chain disruption started. And so that's been a big catalyst of how we've been able to kind of get ahead of the curve, but then also continue that momentum through IRX, IDMs, all the work that Chris Neubauer and Mike have done to make sure the visibility is there, and we continue to take those actions. So are we going to quantify revenue synergy number? No. But do we think there's plenty of room to run still, absolutely so.

And I've got one for Santiago. The 35% of revenue that you highlighted that comes from like-for-like replacement. Can you give us some more color on kind of what the average life span of these products are? What kind of your retention rate on that like-for-like replacement is and what kind of things you're doing to move that higher?

Yes, absolutely. So that like-for-like replacement is basically as -- right, we're really spec into those applications. So then what happens is when that life ends, they replace a bump with the same one. I think it varies -- that life varies in the -- depending on which technology -- in which technology it is, right? If you look at some of some water -- wastewater, you're going to find that is shorter. And some on the industrial side, it's a little bit longer. I'm trying not to be very specific here for competitive reasons. But I would say, on average, you can see about 7 to 10 years.

[indiscernible]

It's very, very high.

Vlad Bystricky from Citigroup. So just going back to the service opportunity. And as you ramp your service offerings and penetration, can you talk about different skill sets that you may need to bring into the company to support that growth? And also how you're thinking about IRX's applicability to these newer service models versus your traditional OE offerings?

Yes. So I think one of the things that we see more and more -- well, I'll say 2 things in terms of providing those solutions a bit more software engineers. And but you saw how increasing Hansen's team, we have already a deep bench of software technologies that is even in addition to what we have in Ecoplant, which is even in addition to what we have embedded on the businesses. So if you were to think about everything that we have across the spectrum of for developing the technologies, we feel we're pretty good where we have now. In terms of providing that service in the field, yes, I mean we have different levels of service technician. I mean we have entry-level 1 to master service tech, but that is already existent and one that we continue to build upon. So I don't think that as we continue to ramp, as I said before, we don't need a 1:1 ratio growth of that service network. I mean we have good service network. We can continue to optimize it and make it better. And the second part of the question was?

Just the applicability of IRX to the service models versus your historical OE businesses?

Fully applicable. Fully applicable. I mean even right now, I can tell you that -- give you an example. I mean I know David Thomas here in the U.S. is watching carefully because we're pushing him hard for more care contracts. But he's got to deploy down to the sales guy for attachment rate of care agreements that at the local zip code level. So yes, I mean, IRX very applicable to how do we accelerate the penetration of these service agreements.

Arnold, I want to ask about sort of in-region for-region and the product development process and how you do that from a localized approach, but then how you leverage sort of global Ingersoll Rand capabilities to try to do that in perhaps the most efficient process because we're talking multi-brand and multi-region, I imagine it gets pretty complicated but how the organization is structured to do in-region for-region but leverage global scale?

Yes. I think from this part, and always, I think we are working on both. One is how we are able to leverage the global technology, global expertise to localize in China for China. The other piece is locally developed design and for the China market. So I think for our organization, we have Asia Pacific, EMEA and Europe -- and EMEA and U.S. And also on -- the teams set up some cadence between the product management team and engineering team. They really share information together. So just like this week, I think EMEA engineering team, they share all the great designs to American engineering and Asia Pacific engineering, very exciting to team in Asia, in China, they're able to learn what the team over there, they develop. And anything applicable to China, we are able to localize. We're not going to double investment or double make the effort to duplicate all the process in China. But in the meantime, for some very specific areas like the piece I share, like a big, big frame or 3 rotary compressors. This only existing in China because of such a big scale facility requirement. So this is an area, I think we designed and localized -- designed and only designed in China for China.

All right. Well, that concludes our 2023 Investor Day. For those of you here, we will have a lunch on out -- in the lobby there. And for everybody else, thank you for joining.

Thank you.