Thank you for standing by, welcome to Ingersoll Rand's third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Vikram Kini, Chief Financial Officer. Thank you. Please go ahead, sir.
Thank you, and welcome to the Ingersoll Rand 2020 third quarter earnings call. I'm Vik Kini, Ingersoll Rand's Chief Financial Officer, and with me today is Vicente Reynal, Chief Executive Officer. Our earnings release, which was issued yesterday, and a supplemental presentation, which will be referenced during the call, are both available on the investor relations section of our website, www.irco.com. In addition, a replay of this morning's conference call will be available later today. Before we get started, I want to remind everyone that certain statements on this call are forward-looking in nature and are subject to the risks and uncertainties discussed in our previous SEC filings, which you should read in conjunction with the information provided on this call. Please review the forward-looking statements on slide two for more details. In addition, in today's remarks, we will refer to certain non-GAAP financial measures.
You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, which are both available on the investor relations section of our website. Turning to slide three. On today's call, we will provide an update on the integration efforts of the company, as well as review our third quarter and total company and segment highlights. We will conclude today's call with a Q&A session. We ask that each caller keep to one question and one follow-up to allow for enough time for other participants. At this time, I'll turn the call over to Vicente.
Thanks, Vik. Good morning to everyone. I want to start our call by thanking all our employees around the world for their hard work and commitment to the health and safety of our teams and their families as we continue to navigate the COVID-19 pandemic, as well as their dedication to serving our customers at the highest level. Their focus and consistent contribution, coupled with the continued proliferation of IRX throughout our organization, delivered strong results we can all be proud of. Turning to slide four, I want to spend some time on our culture, because it is a competitive advantage for us. Particularly in the midst of the COVID-19 pandemic, our progress has been impressive. Let me point out a few examples of the in-flight initiatives that are helping to foster our unique culture as we integrate both companies.
We have now rolled out our purpose and values activation to nearly the entire company. These are highly engaging one-on-one sessions where we work with our employees to discuss our purpose and values and what it means to live them every day. We have continued the Owning Our Future Forum, which are virtual microtown hall meetings to create open dialogue. To date, we have engaged and heard from over 7,000 employees, and their feedback is helping us simplify our internal processes. In the third quarter, we also conducted our first all-employee engagement survey. We had a 95% participation rate across the entire company, which is nearly 15 percentage points higher than the manufacturing index we benchmark and puts us in the top quartile of participation.
Our high engagement level is a positive reflection of employee satisfaction with working at Ingersoll Rand. Employee happiness is very important to us. A great example of our employees living our purpose and values and making a positive impact in our community is the Dosatron team, which sits in our Precision and Science Technologies segment. The Dosatron team helped develop a method to deliver clean drinking water to an orphanage in a remote location in Madagascar using our technology of electricity-free dosing pumps. Examples like these are happening around the company and are a strong proof of the culture we're building at Ingersoll Rand, which firmly supports our purpose of lean on us to help you make life better. Moving to slide five. One of our key values is thinking and acting like an owner.
In the third quarter, we took a major step forward in bringing that value to life by making all of our employees shareholders of the company. On September 21st, we were proud to virtually ring the opening bell at the New York Stock Exchange and announce the issuance of $150 million in equity awards across our entire employee base. This is a meaningful distribution equal to 20% of an individual's base cash compensation. As I have said before, this is not a thank you note to the team. Instead, this is a catalyst to have all 16,000 owners all moving in the same direction to drive change and create value for all shareholders, including themselves. Like we did at Gardner Denver, we're tying the equity grant to a specific initiative of improving net working capital. We're training all employees on what it means to be an owner.
When we launched this in 2017, we improved working capital as a percentage of sales at Gardner Denver by over 500 basis points in less than three years. For us, we feel the future is extremely bright at Ingersoll Rand, and with 16,000 employee owners moving in a common direction, I am confident in our ability to create meaningful value. Turning to slide six, let me now provide an update on our integration efforts. We have built a strong foundation and are now pivoting to growth with a specific focus on executing our talent priorities, continuing to capture supply chain synergies, and driving free cash flow, which is allowing us to accelerate investment in IoT, digital, and e-commerce initiatives. Finally, advancing our work on the ESG front as we look to be a recognized leader in corporate social responsibility. It is an exciting time at Ingersoll Rand.
As we continue to meld complementary cultures, as well as leverage our deep product portfolio to serve niche end markets and accelerate growth. Speaking about growth, let's turn to slide seven to showcase a few examples. The first example is focused on how we're leveraging a differentiated compression technology to penetrate the hydrogen refueling and dispensing niche market, which is a high growth and rapidly changing market. As part of the integration planning process, we did a lot of work to better understand these end markets and the potential it could bring to our combined company. Haskel, with over 70 years of industry experience, is one of the world leaders in offering the most reliable high pressure equipment and technology today. We're very excited about Haskel's comprehensive portfolio of specialized compression solutions, as we are well-positioned to win share.
With turnkey refueling stations used for heavy-duty vehicles and buses and light-duty passenger vehicles, we have now over 100 stations across the world and a technology leadership edge that we created over the past 12 months. One example of our investments in innovation here is the launch of a new small-scale, cost-effective, standalone hydrogen fueling station, which is designed for small, simple plug-and-play installations. With a flexible configuration, it can be relocated from one location to another very easily for forklift applications. As we look ahead, the growth prospects in this space are extremely promising as the continued penetration of hydrogen fueling into key markets is expected to create a $2.5 billion addressable market for us by 2027. Turning to slide eight, this second example demonstrates how we can leverage the breadth of our technologies across multiple segments to win in targeted end markets like water and wastewater.
Take, for example, a wastewater treatment plant shown on the picture. We have begun to leverage our technologies across the IT&S and P&ST segment to drive further penetration in what is estimated to be a nearly $5 billion addressable market with a five-year CAGR of at least 2x GDP. Utilizing IRX tools, we're focused on capturing quick wins within our combined broader portfolio. First, we're focused on increasing customer share wallet by offering a broader set of product solutions. We have identified already by more than 50 new sales channels to penetrate. Second, we're coordinating internally our large project funnel to ensure all relevant businesses and brands are involved in bids with the goal of maximizing the content of Ingersoll Rand products in any project.
Third, by combining the demand generation database contacts across the two segments, we have now over 32,000 contacts, with an expectation to increase by 40% in the U.S. alone as part of our Impact Daily Management process. We're now beginning to educate this entire universe of potential customers about our technologies and solutions with dedicated digital campaigns. While we're still in the early days as we just launched this initiative, we have already seen an increase of over $30 million in our funnel. This commercial synergy is just the beginning of what we believe will be a future where we connect all the technologies to optimize the entire process.
Given the work we are already doing on IoT, we feel that we're well-positioned to capture this opportunity given our deep know-how of the types of sensors and controllers required in our products to best optimize the data acquisition and analytics. Let me now turn over the call to Vik for an overview on the financials. Vik?
Thanks, Vicente. Moving to slide nine. Overall, we are extremely pleased with our performance in Q3 as industrial end markets saw a gradual sequential momentum through that quarter. We saw a similar trend across the majority of our businesses as total company orders and revenue increased 13% and 6% respectively as compared to 2Q levels with strong double-digit momentum in the Industrial Technologies and Services, specialty vehicles, and High Pressure Solutions segments. The Precision and Science segment saw slight sequential declines in orders, which was in line with expectations due to the large COVID-19-related orders for medical pumps we saw in the first half of the year that we did not expect to repeat.
As we continue to navigate these uncertain times, our goal is to continue to manage those areas that are in our control by utilizing IRX to maximize the value capture on productivity and synergy initiatives and maintain ample liquidity. The teams did exactly that as they delivered adjusted EBITDA of $284 million and adjusted EBITDA margins of 21.3%. This was a 220-basis point improvement from the second quarter. On a year-over-year basis, despite double-digit revenue declines, margins were up 150 basis points, and when adjusted for the High Pressure Solutions segment, total company margins improved 240 basis points. The teams are continuing to execute extremely well on capturing cost synergies, and our annualized savings now stand at $150 million, or 60% of our stated target of $250 million.
Our strong commercial and operational execution led to company-wide decrementals of only 6%, which marks our lowest level seen thus far in 2020. From a cash flow and capital structure perspective, we saw similar strong performance as free cash flow grew to $179 million. Liquidity now stands at $2.3 billion. As a reminder, historical financials as provided in this deck on a supplemental basis, as if the transaction had happened on January 1st, 2018, to assist in clean comparatives for the quarter. The details, assumptions, and adjustments used in these supplementals can be found in the appendix to these slides and our earnings release. Turning to slide 10, from a total company perspective, FX-adjusted orders and revenue declined 8% and 11% respectively, which is a meaningful improvement from the comparable 21% and 19% declines we saw in the second quarter.
While COVID-19 continues to create challenges, we saw continued stabilization in core markets in the Americas and EMEA, particularly in the IT&S segment. Both regions saw high single-digit order declines on a total quarter basis for core compressor, blower, and vacuum equipment, with the strongest month occurring in September. Asia Pacific continued to show positive trends on both revenue and orders, led by China. Specialty vehicles saw strong orders performance, up 29% ex-FX, as the momentum for consumer vehicles continues at record levels. As expected, the High Pressure Solutions segment saw order declines of slightly over 80% due to continued overcapacity in the market and depressed activity levels. Overall, we posted a strong book-to-bill of 1.02x for the quarter, which was slightly better than the level seen in the prior year of 1.0x.
The company delivered $284 million of adjusted EBITDA, a decline of only 3% versus prior year, even with the headwinds caused by the pandemic. The IT&S, Precision and Science, and Specialty Vehicles segments all saw year-over-year improvements in adjusted EBITDA and strong triple-digit margin expansion. Offsets were seen in the High Pressure Solutions segment, as well as higher corporate costs, which saw a large benefit in prior year costs due to reduced incentive compensation costs, as well as in-year investments primarily around infrastructure and growth initiatives to stand up the new company. Turning to slide 11, free cash flow for the quarter was $179 million, driven by the strong operational performance across the business, working capital improvements, and continued cost savings and CapEx prioritization initiatives in the current uncertain environment. CapEx during the quarter totaled $8 million.
Free cash flow included $26 million of outflows related to the transaction, comprised of $13 million of synergy delivery spend and $12 million of company stand-up related spend. From a leverage perspective, we finished at 2.5x , which was an 0.1x improvement as compared to prior quarter, despite $10 million of lower LTM adjusted EBITDA. We would expect to continue to see leverage remain in the 2.5x range or slightly better as we finish the year. We feel comfortable with our current leverage position and see a path to being at 2.0x or better in the relatively near term. On the right side of the page, you can see the breakdown of total company liquidity, which now stands at $2.3 billion, based on $1.3 billion of cash and nearly $1 billion of availability on our revolving credit facility.
During the quarter, we terminated our legacy receivables finance agreement, which was due to expire at the end of the year. We were not intending to renew the RFA moving into 2021 due to our enhanced liquidity profile and given the fact that the overall impact on liquidity from the RFA exit was less than 2%. As of September end, all the company's legacy fixed interest rate swaps have now expired. This is expected to yield an approximately $5 million cash interest benefit in Q4 as compared to Q3 at current interest rate levels. As the company's debt profile is now 100% fully floating, we'll be examining the appropriate fixed versus floating structure moving forward from a risk management perspective. In total, liquidity has now increased $730 million from the end of Q1, giving us ample dry powder to execute on our organic and inorganic growth strategies.
Moving to slide 12, we continue to see strong momentum on our cost synergy delivery efforts. Within the quarter, we accelerated the phasing of this initiative, we have now already executed $150 million of annualized synergies. This includes $105 million of permanent structural cost reductions, with approximately $80 million-$85 million of those savings expected to be realized in 2020. On procurement synergies, we have captured $40 million-$50 million, with approximately $15 million-$20 million of those savings expected to be delivered in 2020. This represents an increase of $20 million of executed actions as compared to prior quarter. As a reminder, our funnel for direct material-related synergies are based on 2019 direct material spend. In total, we now expect to deliver approximately 40% of our overall synergy target in 2020, which is approximately $100 million of savings.
In addition, we now expect to deliver approximately 70% of our cumulative synergy savings by the end of 2021 and approximately 85% by the end of 2022, with the balance coming in 2023. As we have previously communicated, we are keeping the overall cost synergy target at $250 million over a three-year timeframe to remain prudent on volume-dependent synergies like procurement and i2V, given the current environment, and we'll provide an overall update when we give 2021 guidance during our February 2021 earnings call. We also continue to make strong progress on lowering decremental margins. Total company decrementals were only 6%, with IT&S, Precision and Science, and Specialty Vehicles all seeing strong flow-through, and High Pressure Solutions managing decrementals below 40% for the first time this year.
We also mentioned last quarter that we were expecting to see approximately $30 million-$35 million of the short-term cost actions that were taken in Q2 come back to the P&L. The teams did a nice job managing those costs, and we only saw approximately $10 million come back to the P&L. Given the gradual recovery of the overall market, as well as very recent COVID-related lockdown in several countries, we are now expecting the full return of that $30 million-$35 million cost base to extend into 2021. I will now turn it back over to Vicente to discuss the segments.
Thanks, Vik. Moving to slide 13 and starting with the Industrial Technologies and Services. Overall, this segment performed better than expected with organic orders and revenue down 8% and 9% respectively, resulting in a book-to-bill ratio of 1x. Despite the revenue decline, the team delivered strong adjusted EBITDA that was up 9% at an adjusted EBITDA margin of 24%, up 370 basis points year-over-year. Moving to commercial performance, while we know that many like to compare the entire IT&S segment against some of our peers, that comparison can be a bit challenging given that we have several different businesses in this segment. Last quarter, we broke down the segment based on our internal business structure. In the spirit of transparency and desire to help you understand the business, we are now showing a product line breakdown.
Starting with Compressors, which represents about 65% of the segment, we saw orders down mid-single digit and revenue down low single digit. A further breakdown into oil-free and oil-lubricated products will show that oil-free was up low double digits in revenue, which we believe demonstrates the success of our strategic focus in this category, as well as market resiliency for oil-free products. From an oil-lubricated perspective, orders and revenue were down mid to high single digits, mainly driven by small rotary compressors, while large compressors continued to outperform. Regarding the regional split for revenue on compressors, in the Americas, the North America team performed comparatively better at down low single digits, while Latin America was down in the mid-single digits.
Mainland Europe was down low single digits, while India, Middle East, and Africa continued to see a decline in the mid-teens, which is a great improvement from Q2 levels of down nearly 40%. Performer with revenue up mid-single digits driven by positive growth in China, while Southeast Asia is still seeing declines due to COVID shutdowns in some countries. Moving to Vacuum & Blowers, which represents approximately 20% of the segment, orders were down low single digits driven by mid-single decline in the blower business, partially offset with positive order momentum in our longer cycle Nash and Garo vacuum businesses. We were encouraged also to see that the industrial vacuum business in Europe was relatively flat compared to down double digits in the second quarter, which is a sign that our OEM customers are seeing some underlying improvement in their markets.
Moving next to the Power Tools & Lifting, which is 10% of the segment. The total business was down high teens in orders and mid-20s in revenue. The encouraging sign here is that the rapid improvement from last quarter, where we were down low 40s in orders. The tool business has materially improved from the second quarter, while lifting and material handling business remained depressed. As we have said in the past, our focus here has been to materially improve the profitability of this business, and we're very happy with how the team has executed, delivering 270 basis points of sequential adjusted EBITDA margin expansion. In this quarter, we want to highlight one of our growth synergies, which is the expansion of our oil-free compressor launch in Europe. You may recall we launched a radical new technology in the oil-free space within Gardner Denver just a few years ago.
This patented technology delivers completely oil-less air with a value proposition unmatched in the market. At that time, the Gardner Denver channel was not properly set up and experienced enough to sell such a unique product focused on total cost of ownership in the oil-free space. The Ingersoll Rand team has a lot of experience in selling oil-free products, and within a matter of months, we have relaunched the product under the Ingersoll Rand brand and leveraged the Ingersoll Rand channel. We have also trained over 400 channel partners, and our funnel has increased to $15 million in a matter of months. It is good to note that more than 20% of that funnel increase was generated purely with demand generation efforts. Moving to slide 14, we'll review the Precision and Science Technologies segment. Overall, organic orders were down 9%.
As expected, total order levels were down 3% sequentially, but when normalizing for the COVID-related orders that we saw on the medical side of the business into second quarter, the sequential improvement was actually positive. Revenue performance was quite strong at down only 1% organically. Driving the strong performance within the business were the DOSATRON and medical businesses, which delivered double-digit revenue growth. The Precision and Science Technologies team also delivered strong adjusted EBITDA that was up 14% on relatively flat revenue. This led to a very resilient adjusted EBITDA margin of 30.7%, up 350 basis points year-over-year and 40 basis points sequentially. Again, driven by solid execution and use of IRX tools to drive productivity enhancements. On this call, we're excited to introduce Albin Pump to the Ingersoll Rand family.
Albin is a leader in the manufacturing of electric peristaltic pumps, which is one of the highest growth positive displacement technologies. We see strong commercial synergies as we leverage Albin alongside our ARO and Milton Roy brands, and plan to leverage the precision and science global network and channel to accelerate growth at Albin. This is a great example of the type of bolt-on acquisitions we're very excited about for the company. Moving to slide 15 and the Specialty Vehicle Technologies segment. Overall, Q3 was another strong performance for the Specialty Vehicle Technologies team, with organic orders and revenue up 29% and 1% respectively. Adjusted EBITDA of $38 million increased 36% year-over-year, leading to an adjusted EBITDA margin of 19.7%, which represents 510 basis point improvement versus prior year.
Proliferation of the IRX toolkit is allowing the Specialty Vehicles team to capture strong end market demand in the consumer vehicle segment and grow our share. The strength is based on continued digital demand generation activities, compelling new product launches, including lithium and a six-passenger offering, and extremely consistent production and channel performance. We are also pleased with the traction on the launch of the second-generation lithium battery for the golf cart market, where we are seeing an improvement in cost, reliability, and range, which we believe is now leading in the industry. Aftermarket also continues to be a strong focus, including our Club Car Connect platform, which is showcased on the right side of the slide.
With over 100,000 connected vehicles, Club Car Connect is a GPS-enabled technology platform that provides fleet managers with car control features such as geofencing and location-based speed control, as well as asset management tools such as the ability to monitor the location of the golf cars and report vehicle diagnostics. Moving to slide 16 and the High Pressure Solutions segment. The business performed largely in line with expectations amid continued low demand in the oil and gas industry. Orders and revenue were down 81% and down 68%, respectively. Nearly 90% of the revenue base continues to come from aftermarket parts and services, with consumable continuing to be the most stable component of the revenue base.
I am extremely proud of the team for their proactive efforts and productivity improvements around cost management controls, which allows us to deliver positive adjusted EBITDA of $1 million and decrementals below 40%, despite the meaningful revenue declines. As we look ahead to the fourth quarter, although we're seeing some market recovery, we have the unknown of extended holidays later in the quarter, as well as continued pandemic headwinds. Looking forward to 2021, we remain encouraged with how the business is positioned from a product offering and cost structure perspective. We feel there is some pent-up demand in the market, which will return at some point, beginning with the service and repair work, and we're well-positioned to capture this opportunity with the premier service centers like our Permian facility that is highlighted on the right side of the slide.
Moving to slide 17, we want to provide a quick snapshot of how the business has performed thus far in the fourth quarter. Through the first three weeks of October, the total company is down mid-single digits in orders with book-to-bill at greater than one. Within the Industrial Technologies and Services segment, the regions are largely trending in line with the year-over-year order trends that we saw in the third quarter, and the Powertool business continues to see sequential improvements. The Precision and Science Technologies segment is currently positive year-over-year, and the Specialty Vehicles segment is continuing to see healthy momentum on the consumer side coupled with growth seasonality. The High Pressure Solutions segment is down 30%-35%, which is encouraging, but we see limited expectations for activity in December.
We're not providing formal Q4 or total year guidance at this time, but from a high-level perspective, we expect the gradual market recovery to continue in the fourth quarter with revenue trending positively on a sequential basis. The Industrial Technologies and Specialty Vehicles segment should support most of that strength given normal seasonality in the shorter cycle components of Industrial Technologies, as well as larger projects that will ship later in the quarter. For the Precision and Science Technologies and High Pressure Solutions segments, we expect a comparable revenue performance relative to the third quarter. From a margin perspective, we will continue to aggressively manage decrementals and expect to be below 30%.
We're expecting some headwinds in the fourth quarter compared to what we saw in the third quarter, mainly unfavorable product mix in Precision and Science due to a lower contribution from medical as the COVID-19-related backlog has largely shipped. In Specialty Vehicles, as mix shifts more towards growth, which carries a lower margin than the consumer, which has been very strong. We also expect the cost base to increase slightly as we continue to invest in organic initiatives to fuel long-term growth. It is also worth noting that this assumes no additional material headwinds from the pandemic. We haven't seen any notable impact on order rates just yet, but we're monitoring closely, and we will be ready to execute our playbook, as we have successfully done this year to react quickly to any business interruptions. Moving to slide 18.
As we wrap up today's call, I want to reiterate that we're excited by our progress. While we're still in the early stages of our transformation, we have taken meaningful steps forward in creating a differentiated culture and improving the performance of the company. Now with 16,000 employees who are now owners of the company, I am confident that we can continue to transform Ingersoll Rand and deliver increased value to all of our shareholders. With that, I'll turn the call back to the operator and open for Q&A.
Your first question comes from Julian Mitchell from Barclays. Please go ahead. Your line is open.
Hi. Good morning.
Good morning.
Morning. Maybe just the first question around the operating leverage as we look ahead to a more normalized sort of recovery stage. You had 60% sequential incremental margins, I think, in Q3, so extremely high level, and understand that those incrementals will moderate as the recovery matures. Maybe any kind of placeholder as you're thinking about the net off of temporary costs coming back, the ongoing synergy extraction, and the extent to which you'll manage those incrementals via ongoing reinvestments as well?
Hey, Julian, this is Vik. I'll start with that and let Vicente weigh in as well. You're absolutely right. I think Q3 was an extremely strong quarter for all the reasons you mentioned. I think as we think forward, as we look into Q4, as we mentioned, we don't expect the sequential incrementals to look quite as strong. Our view as we look forward, and frankly, even look into 2021, is that we think that normalized incrementals across the portfolio on a base level should play in that 30%-35% range, with obviously some upside opportunity for the synergy extraction. Remember, there are some cost normalization and things of that nature that will continue to kind of unfold as we move into 2021, as we mentioned.
I think 30%-35% is probably a good base level to use with some upside opportunity as synergies start to materialize into 2021 and thereafter.
That's very helpful. Thank you. My second question really around the free cash flow. Very strong in the nine months, what, $470 million odd, 125% conversion to adjusted net. Realize that it's the first sort of year of the combined entity, and maybe there are some one-time pieces moving around, the working capital move perhaps a bit abnormal this year. Just wondered what you could indicate in terms of free cash conversion expectations as you look out. Within this year's number, what's the total synergy and stand up cash outflow for the year, please?
Yeah, Julian, I think we would expect to be greater than or equal to 100% of adjusted net income on a free cash flow perspective. I think what we're excited about is that, yes, you have seen that some very good momentum on the free cash generation. The most important piece here is that we still feel we have plenty of levers for us to improve. Clearly one that we just talked about here is how we're rallying up all 16,000 employee owners in the company around their working capital as a percentage of sales, and how we believe we can unlock a good amount of cash by getting everyone focused on that perspective as we did with the Gardner Denver in the past. Other levers such as tax or tax rate. We spoke a lot about that. That's also offering a good, meaningful opportunity.
I think the exciting piece here, Julian, is that we still have more improvement opportunities.
Yeah. Julian, on the second piece in terms of some of the moving components and kind of what we've spent thus far from a free cash flow perspective, specifically on the synergy and standup costs. In the first half of the year, we had about $80 million between the first and second quarter of cash outflows. Then you can see in Q3, we had about $26 million. You've had a little over $100 million of cash outflows thus far, specifically for synergy and standup-related spend through the first three quarters. We would expect right now that Q4 should look comparable to what you saw in Q3 as we've guided before. I can kind of give you an idea of kind of just the, I'll call it one time, but really the synergy and standup-related spend that has flowed through free cash flow.
Fantastic. Thank you.
Thank you.
Yep. Your next question comes from Michael Halloran from Baird. Please go ahead.
Hey, good morning, gentlemen.
Morning, Mike.
Morning, Mike.
Why don't we start with some thoughts as we're thinking about next year. Just a lot of uncertainty out there. Qualitatively, how are you guys positioning things internally in your core businesses as we sit here? What's your thought process? How are you guys going about the iterations for next year and any kind of high-level thoughts on that side?
Yeah, Mike, clearly we're now in the midst of that cycle of kind of getting with the teams through our budget cycle for 2021. This is part of our process as we completed our strategic plans a couple of months ago. While we don't have full visibility, we like what we see from the micro indicators, PMI. I mean, across the world showing some continual gradual improvement. We're encouraged about this. We know that there's some uncertainties with COVID-19 in many of the global markets and lockdowns. I think the most important thing for me to highlight here, and we're highlighting with the team, is that I believe that we have been able to demonstrate how we're able to adjust and adapt to whatever environment looks like.
You can see that from the down market and how we have controlled our decrementals very well at the same time while investing. I think the way we're working with the teams is have a perspective in terms of good, gradual, continuous sequential, nothing, but more important, making sure that we're making the right investments while controlling the cost and continuing improvements in our company. I would say, too, as well, maybe Mike, to add to that is, right now we feel good about the backlog in terms of our long cycle businesses. Like we have, whether large compressors or some of our larger vacuum businesses, and also with the specialty vehicles. They have a very solid backlog, too, as well, heading into 2021.
At least at this point in time, we're going to be working with the teams on the budgets and building as we go for 2021 with a high level of just flexibility.
No, that makes sense. Maybe help with some puts and takes on the capital optionality side. One, how are you thinking about the current portfolio as it sits here today? Any changes there? Secondarily, you're in a good balance sheet position. Vik mentioned earlier towards 2x in the near future here. How are you thinking about M&A? What's the funnel look like? Secondarily, are buybacks something you guys are considering in the near term?
Yeah, Mike, I think this is, as you saw, we got our three phases. We spoke a lot openly about our phase III of portfolio optionality that just gives us plenty of opportunity for us to evaluate that. That is equal on both sides, as you said, optionality on potential divestitures, but at the same time on the M&A. The M&A, I tell you, the funnel is very active. We're very excited with Albin, that acquisition that we just made. A lot of these acquisitions as well, I think the interesting thing is that we continue to source those ourselves in the sense that we're finding that being proactive and working with a lot of these companies in our relationships is really unlocking the opportunity to be able to be more prudent and disciplined in the terms of multiples that we pay.
I think the M&A funnel is very active, and we're really excited about what we have ahead of us in that case.
The buyback side, any thoughts there?
Not at this point, I'll say, Mike, because we see very good opportunities for us in the M&A, and you have seen how we're able to.
Yeah.
From a pre and post multiple review, the post multiple synergy dramatically. We just see greater payback right now on the M&A.
That makes a lot of sense. Thanks, Vicente. Appreciate it.
Thank you, Mike.
Your next question comes from Jeff Sprague from Vertical Research. Please go ahead, your line is open.
Thank you. Good morning, everyone.
Morning.
Hey, just coming back to kind of the synergy question. As you think about the funnel, I just wonder if the complexion of the funnel is changing at all. Some of your concern just about the ability to travel and all these sorts of things, kind of getting at the $250 million, doesn't really seem to have borne out, right? It seems like you're actually getting at it maybe a little bit quicker than you thought. Really two questions. The speed with which you can continue to knock out the $250 million, and whether there's anything really moving around on the $350 million, and when that might move from kind of funnel to actual firm target.
Yeah, sure, Jeff. This is Vik. I'll take that one. You're absolutely right. We've been pretty pleased with how we've been actually able to execute on the synergy funnel at this point in time. As we've mentioned, I don't think that, frankly, the COVID-19 environment has really prevented us from executing on the funnel. We started with, frankly, a lot of the activities, particularly on the structural side, and I'd say the beginning phases of the procurement, frankly, before the merger even was completed. That's really been able to accelerate what we've been able to see.
You've seen that we've actually sequentially every quarter, we've even accelerated the cadence, including now where we're saying about 40% of the savings to be delivered here in 2020, 70% by next year, and then 85% by the year thereafter, which is considerably, I'd say, sped up compared to what original expectations are. I'd say at this point in time, continuing to move forward, I don't think the COVID-19 environment has dramatically stopped things. We even found ways to do things like IQB and workshops and teardowns in a virtual manner, not how we planned it originally, but still being able to execute. In terms of the larger funnel of in excess of $350 million, I'd say the complexion, to your point, is still largely the same. Really what's ahead of us here is much more direct material-oriented savings as well as footprint.
As we mentioned, the direct material side does have a big component that's obviously tied to the volume equation, which, as Vicente mentioned, as we get better visibility to 2021 and thereafter, I think we'll be able to give an update accordingly. The footprint piece largely has not changed. I'd say that's the piece that clearly in this environment is probably a little bit more difficult to execute on. The good news is the funnel is continuing to progress quite nicely, and we'd always planned to be executing on that footprint funnel really into 2021 and 2022. Nothing's really changed in that manner. I'd say we're still pleased with how things are progressing, and we've largely accelerated what's within our control.
Great. Thanks for that. Just back to IT&S on some of the heavier CapEx-oriented parts of the business. You gave us the order color, appreciate that. I just wonder if you could give us a little bit more color, though, just on what your customers are saying, how the CapEx outlook in some of these vertical markets that are more industrially sensitive look as we perhaps look into at least the first part of 2021.
Yeah, Jeff. We're encouraged in terms of how we're seeing the conversations with the customers. Obviously, we spoke earlier in the year how things were kind of slow, we are seeing some fairly good momentum on some of these kind of long cycle businesses that require some very large capital investment. We're encouraged with the conversations that our teams are having it. We saw also some of that here in the second quarter. We always said that the fourth quarter is a quarter where we expect a lot of these kind of orders to get closed and booked into the orders. At least we're encouraged with that, and that was a little bit of the commentary I made about going into 2021, that we're at least positive in terms of the backlog that we have coming into the year with these businesses.
Obviously more encouraged about how our teams are pursuing more aggressively a lot of these kind of large investments that are kind of getting freed up.
Great. Thank you.
Thank you, Jeff.
Your next question comes from Nigel Coe from Wolfe Research. Please go ahead, your line is open.
Thanks. Good morning.
Morning.
I wanted to just switch to upstream oil and gas, high pressure, HPS. Obviously encouraging trends there. It seems like we've found a floor and we're starting to improve sequentially. A couple questions there. One, would you say a disproportionate amount of the temporary cost measures have gone into that business to sort of preserve the margins? Should we be dialing in some modest sequential improvement in that business similar to what we've seen in prior recoveries from here?
Yeah, Nigel. Definitely a good amount of temporary, but I would say it's similar in nature to what we have done. If you remember, the HPS is a business that even backing the second half of last year, we started to restructuring and the business looks really different from a footprint perspective and also from the CapEx investment that we have done. I think we're encouraged with what the team have been able to rapidly adjust, and I think that is really encouraging as we see some of the kind of comeback that we're seeing in the market.
Sequential growth from here, do you think that's reasonable based on your customer conversations and what you've seen in the market?
We think so, Nigel. We're being kind of thoughtful and prudent from the perspective only just because you never know what's going to happen on some of the holidays here after Thanksgiving and into Christmas. Based on fleet count continues to increase sequentially, our order rates continue to increase. Now, year-over-year, as we pointed out in the first week in October, we're down only 30%-35%, which is also encouraging. We still also feel that the pent-up demand has not come through. I think that's also highly encouraging, I would say.
Okay, great. My follow-up question on IT&S is, first of all, thanks for all the detail. I think you preempted about 10 questions with this detail. How did services track within that mix? I know that was hit pretty hard by the shutdowns. I'm just wondering if we've seen some pent-up demand coming through there and whether we're back to growth in services.
Yeah, no, good question, Nigel. I would say that the big service business that we have is really mainly, mostly in the U.S., and Europe where we mostly, in many places, we go direct. We saw the good sequential improvement through the quarter. What we have seen is that aftermarket and services, all that holistically is roughly two times better than the whole goods, than the complete. I wouldn't call it as a massive pent-up demand. I'll just say kind of more gradual improvement as people are kind of getting and opening the locations to allow us to go and kind of going, but nothing dramatic. Just good gradual improvement. Yep. Sure.
Great. Thank you.
Yep.
Your next question comes from Rob Wertheimer from Melius Research. Please go ahead, your line is open.
Hey, good morning, everyone.
Morning, Rob.
Vicente, I think you've touched a couple of times on sort of long cycle versus short cycle dynamics, but I wonder if you could just tell us underlying demand sort of trends. Is there a very wide gap between the two? How wide is it? Is it already narrowing down so you know that the longer cycle stuff is in fact coming up, we're not just relying on the short cycle stuff?
It feels that way, Rob. It feels that definitely, we can tell you that on the long cycle business was actually positive from our perspective in the third quarter. Again, that could be sometimes spotty based on the size of the project that you see. We're seeing some good momentum in CO2 capture. We're seeing some good momentum in air separation and industrial gases. We're seeing some kind of projects that are more related to onshoring, getting kind of relief and allowing us to implement our technology on those. We're seeing some good, I would say, sequential improvement on that. I guess for me, more encouraging is the conversations that our teams are having with the customers seem to be just much more active than what it was in the past. Is there a big separation between the two?
Not dramatically, I would say, but encouraging signs on both.
Okay. That's very helpful. Thank you. If I could ask just one other on pivot to growth on phase II, I wonder if you can characterize where you think you have the organization focused. Has the intense focus been on synergies the past few months, and you've already internally sort of pivoted to growth with some of the focus you're doing, and that will show up in the next few quarters? Where would you say you put the organization right now? Thanks.
Sure. Yeah, Rob, that was a great question. One of the things that we're able to do in our business with the increased amount of agility and nimbleness that we're driving with the use of IRX. As you know, we have over 200 of those every week with an impact daily management. Yeah, I can tell you that in our conversations, we talk a lot more about growth synergies now that we see some good momentum on the cost synergies. We still have the KPI on the cost synergies, but now we have added the KPI on the growth synergies. The conversation is really pivoting more towards that. It takes time to see that solid momentum in the business.
Again, we were able to pivot and pivot kind of right, I'll say we did a mid third quarter kind of pivoting to that. Again, more encouraging and as we go into 2021, that we could see some of the fruit of those actions that we're taking.
Thanks very much.
Your next question comes from Stephen Volkmann from Jefferies. Please go ahead. Your line is open.
Hi, good morning guys. If I could just go back, Vik, to some of your comments about the margin incrementals. I think we had originally thought about 30-ish% this quarter, and obviously you kind of blew that away and talked about some of the temporary costs not coming back as you expected. I'm just trying to understand, how does that work? It sounds like you don't actually drive that from a top-down perspective. Maybe it's more driven by the businesses, and obviously I'm trying to think about how that all plays out in the fourth quarter. Thanks.
Steve, I'll categorize it. Our teams, as I said, even as we are preparing our budgets for 2021, our teams are really attuned in terms of what incrementals and decrementals are kind of being viewed as for best in class, and we'll strive to get to those. I think when we provided some of the kind of conversation or, not guidance, but framework as we were going into Q3, there was a lot of discretionary costs that was supposed to come that obviously not all of that showed up into the third quarter. I'll tell you that our teams just pay close attention to a lot of these leading indicators that we're tracking.
I think in our commentary, we'll just kind of be more attuned in terms of just telling you kind of what we expect to see, but obviously with the room for our teams to be able to drive further improvements to that.
Just to be clear then, Vik mentioned, I think 35%-ish incrementals. Is that the right way to think about the fourth quarter?
No. Steve, I think the way we were thinking about it is that was kind of more of a longer term into 2021. From a four-quarter perspective, if you look year-over-year, I think in our prepared commentary, obviously we're still going to see a challenged view versus prior year. We mentioned the decrementals should be lower than 30%, frankly, we would expect to be able to control it frankly lower than that level, bringing it more in line with probably levels you saw in the 2Q realm or slightly better. Clearly not as well as Q3, which was at 6%. Clearly a lot of good tailwinds in some of the margin mix items we talked about.
I think Q4 specifically, continue to see decrementals well below 30%. I think as we look further out and as hopefully the business turns to more of a growth mode, that was kind of the comment as we look ahead.
Great. Thank you. That's exactly what I was looking for. I should have said decrementals, sorry. That's all I got. Thank you.
Great. Thank you.
Your next question comes from Andy Kaplowitz from Citigroup. Please go ahead. Your line is open.
Hey, good morning, guys.
Morning, Andy.
Morning, Andy.
Vicente, can you give us a little more color on what you're seeing in terms of the growth within Precision and Science? You mentioned the expected decline in the former PFS business. It was down 6% in Q3. GDI Medical, I think, was up 10%. You mentioned the overall segment is positive through the first weeks of Q4. Is PFS continuing to turn more positive, or is it really strength in that GDI Medical business? Could you give us more color on what's driving the improvement in PFS?
Yeah, Andy, I'll say that most of the businesses are kind of continuing to strengthen with the Precision and Science. That's clearly you're seeing some of that here in early October. When we saw throughout the quarter, in the third quarter, we saw continued improvement through the months of Q3.
Vicente, obviously you spent some time talking about hydrogen. Obviously, ESG becomes more important every day. You just mentioned onshoring and the initiatives there. If you look at all these sort of newer trends together, is it having an impact on your business overall right now? As you think about 2021, how well positioned are you to sort of grow above market because of all these new trends that you guys are exposed to?
That is, I think, the exciting piece there, Andy, that a lot of these kind of trends continue to go in our favor from that perspective, and not just by pure luck, but mainly because of the, I'll say, call it self-help innovation that the team is doing. We find some of these kind of growth secular trends, and then we evaluate how can our technology be applicable to those trends, and then we go deeply and then create some unique differentiated innovation. I think that is what is very different in our case, is that our teams are pretty agile on that. Yeah, I think it's more going to be indicative in 2021 and further. You can see how expectations for hydrogen are just kind of massive in terms of growth. We want to be participants with our new kind of unique technology.
It's going to be kind of more, I'll say, medium to long term.
Thanks, Vicente.
Pleasure.
Your next question comes from David Raso from Evercore ISI. Please go ahead. Your line is open.
Hi. Thank you for the time. A question about what's in the backlog for each business. The color you provided on IT&S appears to be a positive mix when I hear that the bigger compressors are strong. Within precision, just thinking about medical, maybe that driving the growth diminishes a little bit. Should we think about that as maybe potentially a little bit of a less positive mix moving forward? I'm just trying to get a sense of what's in the backlog, what we have seen so far in October to better understand the mix developments of the revenue within those two segments.
Sure, David, I'll start kind of the inverse order. You hit it on the head with Precision and Science. We did definitely have, I'd say, an elevated medical backlog that we were really leveraging through second quarter, third quarter, and largely kind of shipping through here as we get into the beginning of the fourth quarter. The medical piece definitely has a little bit of a margin upside, comparatively speaking. It's not to say that the balance of the Precision and Science is actually healthy margins. It's just not quite at those medical COVID-related orders. Again, that'll normalize here as we move through fourth quarter and into 2021. On the IT&S side, it's actually not dramatically different.
Each project is a little bit unique, but I would say that the margin profile is actually kind of comparable to what you see on the typically shorter cycle compressors or blower and vacuum equipment. As such, I would say the Q4 margin profile should be comparable to what you saw in Q3. It's project by project can look a little bit different, but I think in totality, it's relatively comparable, especially given the momentum we've seen on margins across the balance of the short cycle product mix.
That's helpful. Lastly, on the COVID impact, especially some of the lockdowns we've begun to see in Europe, and hopefully we don't see any here, but when you think about a potential impact, are you trying to get ahead of that a bit, maybe securing some kind of buffer component inventory, or are you just sort of playing it straight and as it unfolds, it unfolds? Just curious how you're reacting to potential impact.
David, I wouldn't call that we're accelerating any inventories as we speak. No. What our teams have been doing is that based on the lessons learned, they clearly work with the suppliers so that the suppliers can hold more buffer inventory for us versus us holding that inventory. I think we're prepared and working with the supply chains to be able to service us proactively.
So far, no implications on any facilities from some of the French or U.K.
No.
The lockdown lights we've seen in Germany? No? [crosstalk]
No implication. No.
Terrific. Thank you. Appreciate it.
Thank you.
Sure, David.
Your next question comes from Joe Ritchie from Goldman Sachs. Please go ahead. Your line is open.
Thanks. Good morning, everybody.
Good morning.
Vicente, could you maybe just touch on that opportunity that you're seeing, specifically on the oil-free side, with selling through your European channels? I'd love to know any kind of thoughts on cadence of that opportunity over the next couple of years.
Joe, I think this is actually-- as you remember, we were pretty excited with the combination of the two companies because of the complementary technology and how much we consider oil-free to be just a good kind of growth end market, just based on the market that we play. This is a very good opportunity because the Ingersoll Rand team definitely has a lot of good experience selling oil-free compressors. I would say that at this point in time, we're just kind of scratching the surface still on just purely kind of aligning the technologies to where the best channel could be served for those technologies. What you saw here is basically our kind of launch of that oil-free technology that we developed during the Gardner Denver days and having the Ingersoll Rand team have access to that through their channel.
The teams are very excited. Our channel partners as well as the direct teams are very excited positioning those technologies into the primarily fluid and pharma end markets.
That's a helpful color, Vicente. Thanks. I think maybe my one follow-up, I know we touched on this a little bit earlier on in IT&S for short cycle versus long cycle. Can you just remind us, how much of your IT&S business is tied to short cycle with the ISM improving versus long cycle project related?
Joe, I'll take that one. This is Vik. I would say that probably I would ballpark it about 80%, roughly speaking, is probably shorter cycle, kind of typical standard fare compressor, blower, vacuum, power tool type equipment. 15%-20%, somewhere in that range, is probably a little bit more tied to the longer cycle components, so things around the larger centrifugal compressors as well as things like the Nash/Garo kind of vacuum, liquid ring pump, and compressor business. That's probably a pretty good indication.
Great. Thanks, guys.
Thank you.
Thank you.
Your next question comes from John Walsh from Credit Suisse. Please go ahead. Your line is open.
Hi. Good morning.
Good morning, John.
Hi. I was wondering if you could just first kind of touch on maybe your customer inventory levels. I'm thinking about kind of those distributors that are stocking the smaller side of the compression range.
Yeah, John. We don't have that many distributors that will stock a lot of our compressors. Our exposure to the kind of smaller reciprocating compressors are that basically kind of will be maybe the do-it-yourself, or we also don't play on that. I would say inventory levels are just definitely not seen by anybody kind of stocking anything. It's kind of very shelf-less.
Great. Then I guess just thinking about some of the adjustments and as we go into next year, I guess there was a non-cash impairment this quarter. The acquisition-related expenses are ramping down. There's puts and takes, but how do we think about those items as we update our models for next year? Is there visibility into any big adjustments as you see it today?
Sure, John, I'll take that one. I think in terms of, as we said, whether it be kind of the restructuring or acquisition-related items, you can see that the large majority of the purchase accounting items have fled themselves through. Again, you saw that dramatically decrease from Q2 to Q3. I think with regard to some of the restructuring items, you'll see the normal cadence of that as we move into 2021 as we still do have restructuring in the form of footprint optimization and things like that ahead of us. In terms of the trade name item, you are correct.
We did have a small trade name impairment specific to the power tools and lifting unit within the IT&S segment, very discrete and frankly, just a reflection of some of the revenue declines that we've seen in the power tools and lifting piece, specifically on the trade name side. Again, I would say that was one time in nature. As we look forward, we would expect that the nature of adjustments would be very comparable to kind of the trajectory you're seeing with regards to restructuring some of the normal course adjustments. Other large adjustments and things of that nature, no, we wouldn't expect those. Those are very discrete and unique in terms of what you've seen through the first two to three quarters of this year.
Great, very helpful. Thank you.
Thank you.
Your next question comes from Nathan Jones from Stifel. Please go ahead, your line is open.
Good morning, everyone.
Morning, Nathan.
Morning, Nathan.
I've got a bit of a follow-up to questions Joe and Andy asked before. On these new product developments and adjacent markets that you're moving into, and maybe if you're looking at it over a little bit of a longer term, markets are going to grow at what they're going to grow. Do you guys have a number that you're targeting in growing that addressable market over time? Do you think you can grow the addressable market 50 basis points a year, 100 basis points a year through these new product developments and acquisitions to get yourself into new markets to really expand that addressable market consistently over time?
That's a really great question, Nathan. We have always been. If you remember the days of the medical team, how we doubled that addressable market over a course of two years. I think it depends on the business, but we want to continue to expand the addressable market. We don't have it pegged at a number. In the Precision and Science team, it is clearly kind of dramatic in terms of how we want to increase the addressable market based on penetrating with the new technologies that the team is working. Specifically to a number, I don't have it. We don't have it pegged. We just have it more as a holistically over the strategic period, which is three years.
We want to double the addressable market in some of the specific businesses that we're focusing ourselves.
Fair enough. One other number that caught my eye was the 29% order growth in SVT.
Can you talk about what's driving that number up, how that impacts the outlook for fourth quarter, and what's an average kind of book to ship in that business?
Yeah, Nathan, the impact, the team is just executing really well on a lot of initiatives, and particularly one around the launch of new products on the consumer side. Basically, these are kind of golf carts that are customized to your needs. You can go online and, which you should do, Nathan, go online and then kind of customize to your specific kind of desire, and basically that's kind of pretty unique solution for personalizing the vehicles for the individuals. We have seen tremendous demand of that over the past couple of quarters.
I'll say that based on the demand that we're seeing is typically maybe weeks, but not quarters in terms of kind of the backlog, and specifically, I don't want to call out a number just because we view it as kind of being very strategic in terms of how quickly we can deliver those golf carts for the consumer side. It's driven by a lot of initiatives that the teams are doing around direct-to-consumer demand generation, as well as kind of new launches of products. We launched a new lithium battery that extends the range of these consumer carts. We spoke today on the call about the connectivity, and the connectivity platform is also providing some good recurring revenue streams for that team.
Great. Thanks very much.
Thanks, Nathan.
Your last question comes from Ivana Delevska from Gordon Haskett. Please go ahead. Your line is open.
Good morning, guys.
Morning, Ivana.
Morning, Ivana.
Just to follow up on specialty vehicles, what's driving this significant margin improvement? Is mix a big driver, and how do you expect it to kind of develop going forward?
Sure, Ivana. Q3 was obviously an exceptionally strong margin performance, really driven by kind of two main factors. One being the consumer piece, second being the aftermarket piece. I think the mix, frankly, was the single biggest driver. Consumer, as we've spoken about before, is the highest margin profile component of the entire portfolio, and frankly, aftermarket is right there with it. When that comprises a healthier component of the mix, you can see kind of the margin profile that goes with it. Then we've obviously done a lot with regards to i2V, self-help IRX initiatives, which are seeing kind of play themselves out.
I think as we think about Q4, as we mentioned, again, consumer is still expected to be strong. This becomes a very typical, very strong golf shipment quarter. Golf just does frankly have a slightly lower margin profile comparatively speaking to consumer and the aftermarket component. Again, we would expect to see the kind of margin profile normalize a little bit. That's really mix-driven. Even then, you're going to see meaningful margin expansion year-over-year. Again, we're quite pleased with kind of how the team is executing, both on the self-help productivity side as well as just frankly the top-line side of the equation.
Got it. One question on IT&S. How do margins compare between your core businesses, compressors and blowers versus power tools and other? What do you see as medium to long-term targets for each?
Sure. We don't break down necessarily the sub-components of the portfolio, but let's just say that I think that as we've historically said, the compressor, blower, and vacuum components actually all have, I'd say, fairly comparable margin profile. While there tends to be a little bit of mix between original equipment and aftermarket, what you can expect here is though compressors tend to have a higher aftermarket component, which tends to be a little bit healthier margin. As such, I'd say the compressor, blower, vacuum piece tends to be a little bit healthier. Clearly, components of portfolio like power tools tend to be a lower margin profile. We've said that before, I think we're quite encouraged by the steps the team has taken. Vicente mentioned the prepared remarks, 270 basis points of sequential improvement as we move from Q2 to Q3.
I think in terms of medium to longer term targets, like we've said, we feel very good about where the profile of the total segment is, kind of reaching that mid-20s range. I think that's frankly we want to see kind of those levels, and we have frankly, a lot of opportunity with regards to synergy execution and things like that are going to kind of start delivering in 2021 onwards. Again, we haven't put a formal, I'd say, target on it, nor have we put a cap on it. I think we're encouraged by what we're seeing. Yes, we would frankly still expect that the core component of the portfolio, compressors, blowers, and vacuums, to have a higher margin profile than the balance.
Thank you.
Thank you.
We have no further questions. I would like to turn the call over to Vicente Reynal for closing remarks.
Thank you. Thank you everyone for the interest in Ingersoll Rand. I'm very appreciative of the tremendous amount of work that our employees are doing here, even in this kind of difficult environment, and delivering tremendous results. Thank you. Thanks to our employees. Thank you. Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.