Thanks for being here. It's great to kick off the second day with Ingersoll Rand. Before we launch into it, I do wanna kind of remind everyone that we do have a cocktail reception today at 4:30 P.M. Obviously, that's the most important thing on the schedule today. So if you're still here at 4:30 P.M., please do come to that and have a good discussion about what we're learning at the conference. So Vic, Vic Kini, CFO of Ingersoll Rand, thanks for being here.
Yeah, thank you.
I don't think you want to make opening remarks, so let's kick into it.
Sure.
So maybe just tell us, what do you see out there? You know, what's sort of the environment for Ingersoll Rand right now?
Yeah. So first of all, Nigel, thanks for having us here. It's, it's always good to see everybody, and hopefully everyone can attend that cocktail reception later today. So, I think in terms of, you know, just kind of the state of the union or what we're seeing, you know, I don't think dramatically different from kind of how we talked about things on our earnings call a few weeks ago. So, you know, as we entered the year, I'd say demand trends stay, you know, relatively stable. You know, obviously, as we move into the year, I'd say there was, you know, from a regional perspective, you know, we had a little bit of a mixed expectation in the context of just some of the end market dynamics.
The way I would probably characterize it is, you know, Americas continues to be probably the leader of the pack in the context of expectations and kind of the growth. EMEIA, relatively stable, kind of more so that statement on the core, I'd say core European side, Western Europe, definitely still some nice pockets of growth in areas like the Middle East and India. And then in Asia Pacific, which is largely China for us, we knew that the environment there was gonna be a little bit, you know, it's gonna have a little bit more headwinds, comparatively speaking, to the kind of the levels we'd seen in prior years.
And then you couple that with, you know, the expectation that the level of some of the large projects, just, interesting enough, I'd say they're still relatively stable, just not necessarily at the same level that we saw, particularly in the first half of last year. Specifically in China, with things like EV batteries, where the team did a phenomenal job in first quarter into second quarter, as well as areas like, RNG or renewable natural gas in the Americas. So in the context of Q1, I'd say that dynamic is exactly how it played itself out. As we move into Q2, you know, I think what we said on our earnings call was, you know, a couple of things. We track things like marketing qualified leads, MQLs, which is really that precursor to orders, and those continue to trend, you know, nicely.
I think that's indicative, indicative of what's going on in the base business. April continued to show what I would say, sequential growth over March and, you know, mid-teens growth year-over-year, which I think continues to give us conviction in the stability of what I'll call more of the base business. So as we sit here right now, I wouldn't point to anything playing itself out, you know, anything differently than kind of how we characterized it on the earnings call a few weeks ago. But you know, encouraged by the momentum particularly that we're seeing on the MQL side.
Okay. And, obviously, you disclosed the kind of sequential building orders during
Mm-hmm
... Q1, and you also disclosed the weekly MQLs as well. How does that shape continue? Have you seen-
Yeah
... continued momentum?
Yeah. So, you know, I think, you know, we wanted to give that visibility and that color, whether it was the kind of sequential orders or kind of the first half of the quarter versus the second half of the quarter. Really just to speak to, you know, what I'd say is the stability and some of the momentum that we were expecting to see and we did see. As we moved into April, like I said, you know, it was about a 9% sequential growth on MQLs from April versus March, and 14% from April versus prior year. So again, continues to show what I would say, stable demand trends, gives us conviction in the context of the pace of orders that, you know, we think are required to, you know, deliver our guidance from a top-line perspective.
You know, I think one thing to say from a Q2 perspective is that Q1 and Q2 will probably be, I'd just say, the toughest comps from a year-over-year basis, particularly Q1. You saw that. I think Q2, while we don't guide on orders, probably fair to say that Q2, our expectation is sequentially orders will be better than Q1, and I'd say the performance on a year-over-year basis would be better than the, than the levels you saw in Q1. And then, you know, quite frankly, as we move to the second half of the year, particularly Q3, the comps get considerably more, you know, reasonable, for lack of a better way to say it. So, I'd say that's kind of how things are playing themselves right now.
As we talk about May, I'd say nothing dramatically different than how our expectations were coming into the quarter.
Okay. I mean, I think the sort of math that we work with is, you know, I don't know, 1.05 book-to-bill in the first half of the year, 0.95 or something in the second half of the year. Feels like this year is gonna be a bit more level on the book-to-bill. Is that?
Yeah, we are still-
fair?
... expecting that, first half will be above one, second half will be, below one. Maybe not 1.05 and 0.95, maybe a little bit tighter tolerances there. But again, I think in terms of, and you've seen this in years past, we do typically we do typically see better than booked, better than one book-to-bill in the first half, particularly as we book from those longer cycle projects. I think the good news here is funnel continues to remain quite healthy. We think we're winning our fair share of those projects on a global basis. And then they tend to ship more so in the back half of the year, which just leads to that, what I would consider to be very normal seasonality pattern.
Yeah.
This year should be really no different from that perspective.
Okay. Then obviously, Vic, you mentioned the strength in the project pipeline-
Mm-hmm
... and, you know, especially Q1 2023. I mean, the large orders, you know, we heard yesterday from Carrier, and they were talking about, you know, data centers, you know, can be 10x the number of chillers-
Mm-hmm
... in these projects. And I think it's the same thing, maybe to not the same degree, but similar dynamic with you as well, with air compressors-
Mm-hmm
... in some of these large projects. So are we seeing a bigger mix of larger orders in the backlog at this point?
I wouldn't say a dramatically bigger shift. You know, the way we've characterized it is that of our total revenue base, if you think about kind of the construct of Ingersoll Rand, let's just say for round numbers, approximately 40% of the revenue base is aftermarket, which tends to have a much more book-and-ship nature. And then if you think about the original equipment, I'd say about 20%-25% behaves more longer cycle, we'll call them the larger projects, with the balance being kind of the core compressor, blower, vacuum pump type business, typically behaves a little bit more short to medium cycle in nature. That component that's larger, larger cycle, I'd say, is a representative amount of our backlog at any given point in time. And they do typically sit in backlog from anywhere from about six months to 18 months.
Would I characterize the size of those orders as dramatically different from what you've seen historically? No. Meaning, you know, don't think that there are, you know, what, to use those numbers, $10 million, $15 million, $20 million-type projects is the majority. No, I would say the vast majority of those larger projects are, you know, typically, you know, low seven-figure, low seven, you know, million-dollar plus-
Mm-hmm.
Type orders. That's typical of what we see. I'd say that's representative of what you're seeing in the backlog right now for those longer cycle projects.
Does that change, though? You know, if we do get, you know, this trillion-dollar, you know-
Mm-hmm
... megaproject pipeline starting to come through and comes through into orders, I mean, do we start to see a bit more lumpiness?
It could. You know, there definitely are talks of some of these larger projects. You know, I think the way that we would characterize it is obviously we are, you know, poised to be able to compete and hopefully win our fair share of those. Is our guidance or our expectations predicated on those being a material driver of the top line? No. I would say to the degree of something of that magnitude were to, you know, book, first and foremost, I would consider that to be a bit of the upside scenario, and realistically, the lead times on those would be probably 12+ months. Which means it would probably be revenue in 2025, not in this year.
Okay. And I think, you know, one of the big features of the last couple of years has been, you know, the emphasis on sort of making your own luck, you know, through MQLs-
Mm-hmm
... and really going to customers, doing NGO or MRO orders and things like that. I think you've disclosed that the conversion ratio from MQL to a sales qualified lead is about 30%, and then from there on to-
Mm-hmm
... into an order conversion. I mean, is that changing at all? And what kind of resources are you putting into, you know, kind of accelerating that MQL?
Yeah, it's a great question. So I think that conversion ratio that you've referenced there, it's still pretty tried and true. You know, we've been at the whole, you know, demand generation, really creating this engine for the better part of a decade now. And so I'd say we have a considerable amount of history. Every part of the business is kind of part of that demand generation engine. And, you know, frankly, on a daily, weekly basis, we can look at MQL trends, pretty much slice and dice, however you would expect business regions and then country, and split it however you would expect. So the concept of an MQL translating to, you know, a sales qualified lead, translating to an order, that digestion period being six to eight weeks, you know, some shorter, some longer, but that's a pretty good indicative ratio.
And then in terms of the investment and how we are actually, you know, continuing to run the business, I would tell you the demand generation side of the equation, not just for the base business, but then also for acquired assets as we think about the bolt-on M&A engine, without question, is probably one of the single biggest pieces of organic reinvestment we continue to make. So, absolutely this will be, you know... It's kind of piece and parcel to the strategy, and absolutely is how we believe that we are, I'd say, outperforming the underlying rate of growth in whatever markets we play in. Demand gen will continue to be part of that, and absolutely, we're continuing to-
Okay
... reinvest there.
Great. I want to touch on M&A.
Yeah.
Because I wouldn't normally focus on M&As early in the discussion as this, but it is sort of half your planned growth over the medium term. ILC Dover, maybe just bring us up to speed on where we are on getting the approvals and closing that deal.
Yeah. So, nothing's changed. ILC Dover, we've stated that we expect to close here in the second quarter of 2024. Nothing has changed on that end. We still expect to close here within the quarter, so hopefully, that means pretty imminently. And we're incredibly excited. As you've mentioned, Nigel, here, this will be the largest transaction we've done since the merger. Approximately $2.4 billion in purchase price, acquired at what we believe to be a really prudent pre-synergy adjusted EBITDA purchase multiple of approximately 17x.
But really brings a fantastic asset predicated in the life sciences space, that now really gives us a much more established, what I'll call beachhead, in life sciences and PST, with a fantastic management team who's coming over, that we continue to see now great opportunities, both from an organic growth perspective and inorganic. So I'm sure we'll talk about that more, but,
Yeah
... everything remains on track at this point in time.
I mean, it looks like a great asset.
Yeah.
It is a big number, $2.4 billion.
Mm-hmm.
17x EBITDA, which is a little bit higher than what you'd normally ask-
Mm-hmm
... but what is it? Maybe just talk about the, you know, what you're seeing in ILC Dover.
Yeah
... the potential, the ability for you guys to run this business better, that, that-
Yeah
... convinced you that this was a great deal?
Yeah. So, you know, a couple of things here. You know, I think we've made no secret of our, you know, what I will say, desire to continue to grow from an inorganic perspective, particularly in what we'll call higher growth, sustainable end markets, end markets that over the long haul, we think are going to have, you know, better, higher growth profile. ILC Dover obviously is exactly that, with 75% of the revenue base being in the core life sciences, with a good split between what we'll call biopharma and then medical devices, and then, quite frankly, a very strong leading presence in, you know, the smaller piece of the business, but the space side of the equation.
So to your point, yes, we did pay a slightly higher multiple than you have seen historically, comparatively speaking, but I think the concept of being able to pay 17x for a, you know, a high quality, you know, double-digit, mid-teens CAGR growth business over the last three years, 30%+ EBITDA margins. And we can talk more about the profile of the business. That's, you know, and one that still fits the mold of how we've thought about our financial framework, though still delivering a, you know, an ROIC by year three that exceeds our cost of capital. We're very excited, quite frankly, by what ILC brings to bear here.
And then in the context of how we think about it and how we're going to run it, this is an exciting asset for us in the context of the end market, end market exposure, the aftermarket consumable profile of the business, and quite frankly, the hand-in-glove fit that we really see with the business and Ingersoll Rand in the context of an asset that has been largely predicated on the production side of biopharma. We have an established life sciences business within Ingersoll Rand that's been a little bit more on the research and development side. But now the opportunity to kind of bundle an Ingersoll Rand peristaltic pump, for example, with the consumables and tubing and whatnot, that is made by ILC Dover, and really start to penetrate even further within this life sciences space.
Now you put it together, we've gotten a $700 million established platform. Corey Walker, who is the CEO of ILC Dover, will be running that combined platform within PST. As you mentioned here, I think we see a, you know, incredible opportunity to now leverage that asset, grow it organically, but rest assured, there's a healthy pipeline of bolt-on opportunities on the M&A front that we see that can add to ILC.
Well, so life sciences, I think, is now your largest single vertical. I think 15% of sales-
Correct.
- which makes it the largest. Feels like you might be leading a new segment here, or maybe a new focus, maybe life sciences grows disproportionately. Is that fair?
Yeah, I wouldn't, I wouldn't say it's a dramatic departure, frankly, from where we have been positioning. So you're absolutely right. You know, if you think back to kind of where the merger happened 4+ years ago, and even, you know, years thereafter, we've always had a presence in life sciences, but to your point, we've been, you know, explicitly, both organic and inorganically, looking to continue to increase that exposure. And you're right, you know, that mid-teens percentage now across the total business is kind of where we sit now. As far as, you know, a separate segment or anything of that nature, I'm not sure we're, you know, at that point or thinking about anything in that respect.
You know, the way we have now positioned it is within our PST segment, we are now, you know, let's just say, having two, what I'll call platforms. The Life Sciences one, which is now the combination of ILC Dover with Ingersoll Rand's, you know, legacy medical business, that'll be a, you know, a healthy $700 million platform, and the balance of PST will be our precision technologies business, which is the balance will be about $1 billion. So they both have good scale. You know, I think the concept of that $700 million growing, you know, hopefully at a, at a healthier clip over time, without question, is how we're thinking about things.
But, you know, I think the key here is this is not, you know, in our opinion, a new platform, a new third leg or anything like that. These assets on ILC are very much positioned very closely to how we have structured the business, where we have historically played. We think it's a natural extension and one that we will, you know, will continue to grow here over time, but don't think of now a third leg or anything of that nature.
Okay. Okay.
I think it's very much key to, you know, how PST has been operating.
Very clear. Very clear. And then the space business, again, I don't wanna-
Yeah.
I don't wanna make too much of this-
Yeah
... but, you know, should we view that this is a great niche business that probably has some great growth vectors, but not necessarily a nucleus for further expansion?
Yeah, I think that's probably a fair characterization. I think it gives us great optionality, to be very honest here.
Okay.
You know, it gives us a good, you know, entry point, more classically into that kind of aerospace defense side of the equation. Just to kind of put a pin on it here, ILC Dover, their presence is as well established in the space side of the equation as you can think. They are the, you know, frankly, only manufacturer of space suits, you know, from a historical perspective, very established presence there with the customer base. You would think the NASA, the Boeing, the players in that space. And, the reality here is, we even historically have seen potential opportunities to continue to push for, for example, our core compression technology into end markets like this. I think this gives us an even, you know, stronger kind of hook into that, within that space.
So we'll continue to look. I mean, to be very honest with you, are there potential bolt-on opportunities there? Sure. Is that maybe the primary focus of where our efforts are? I, I'm not sure I would go that far, but it does give us a great business, good optionality, a business that has grown at a comparable level to the, the, the classical, you know, Biopharma Life Sciences side. So again, we're pretty pleased to have it as part of the portfolio and excited to kind of see where things go. But yeah, we do, you know, space suits and, you know, a space business is an exciting space to be in.
Yeah. Well, diversification, you know-
That's exactly right.
By the way, if climate change accelerates, you know, there might be great demand for space suits going forward, so.
We would be happy to serve that market.
It's not a, not a bad little hedge there. Please, go ahead.
So, I would never say that, just for the record.
I just did. Yeah. And I buy your stock.
Yeah?
Other than general economic stuff, what am I rooting for? What am I rooting for?
I think you're continuing to root for those secular themes that I think we believe are gonna continue to drive growth from our business. So just to be very clear, yes, we are an industrial manufacturer of compressors, blowers, vacuums, and pumps. Is there a correlation to end market regional dynamics like IP or manufacturing GP? Yes, but we think about the long-term trends, whether it be, you know, digitalization, quality of life, energy efficiency. All of our products are tied so closely to those themes, particularly things like energy efficiency.
So we want to continue to see those themes resonate, because ultimately speaking, those are gonna be the drivers for us and how we're going to, you know, outgrow the underlying rate of growth in those markets that we're operating in. So for us, that's what we want to continue to see. You've seen that trend now, you've seen the level of outgrowth and performance that we've seen over the last three, four years, and then we want to be able to enhance it through areas like demand generation, and I think prudent, smart, targeted, bolt-on inorganic growth, which to date now, with ILC Dover closing this quarter, we will have done approximately 45 bolt-on or slightly larger than bolt-on now with ILC deals. But you've seen how we've kind of reconstituted the, you know, composition, the growth profile, and our end market base.
It's no secret that Life Sciences, Water, Wastewater , Food and Beverage, Clean Energy, are four of our five top end markets. That's been very conscious because we think that those have better growth vectors over the long haul. You bet.
... and he's not, he's not wrong, by the way.
I would never have said that. I agree. Any more questions?
I've got plenty, so I'll continue. So you touched on, in your response to that question, you did touch on some of the kind of thematics around CO2 abatements-
Mm-hmm
... energy efficiency. We're clearly seeing some of those themes playing out in the HVAC markets, commercial HVAC markets-
Mm-hmm
... especially in Europe. What's your view? Is it material for you guys yet, or is it just around the edges?
I think the concept of energy efficiency, sustainability, those themes, absolutely has been, you know, part of the story, you know, for the past few years, and continues to be. 'Cause we feel that this is not a, we'll call it a flash in the pan, this is a long-term driver of growth, and you've seen it, particularly, you know, as we went through some of the, you know, the, you know, the last few years where energy prices were at sky high, and they continue to be relatively high. When you think about a compressor, blower, vacuum pump, a compressor is a great example. You know, it's a relatively low cost of the overall system that it operates in. It is mission critical and can consume up to 30% of the energy in a manufacturing facility.
So if you can show the requisite energy efficiency, the payback periods are, quite frankly, very compelling to our customers. Would I say that mega projects and things like that have been the, you know, the core to the thesis? No, I wouldn't go that quite far. I think that that provides some potential, you know, good optionality on the go forward. You know, we're very poised and able to, you know, to execute on that. And, you know, one other piece that without question, we have seen good trends on is, you know, some of those localization trends. You know, we have been very conscious of, you know, our strategy is in region, for region. We have been very explicit about that. We continue to double down on that strategy.
You've seen, for example, a couple of years ago, reopening plants, for example, in Buffalo and New York, to be able to capitalize on the large compressor business. That business has effectively been sold out since the minute we opened it. That's now two years on, and so we're really excited. The reality here is we're putting new capacity into Brazil, we're putting new capacity into India. These are all for really in-region growth, and those happen to be, I'd say, growth vectors, particularly some of those under-penetrated, you know, regions comparatively speaking for us, Latin America, India, Middle East, Southeast Asia, that you will continue to see, I'd say, reinvestment in, as well as, you know, outpaced growth compared to, you know, the more developed U.S., Western Europe, China.
Yeah. Obviously, you're talking about localization from an English perspective there, but obviously localization's a theme for your customers, too.
Mm-hmm.
I think we think about it as just a North American phenomenon, but it sounds like you're seeing some real-
Well, for sure.
... in the EMEIA as well.
Oh, for sure.
Maybe talk about that a bit more.
Yeah, absolutely. I think the desire to, you know, to be able to, you know, buy more in region, I think has become a bit more of a global theme. Particularly as you think about the last few years, where lead time supply chains have been challenged, we do very much believe that having a much more local presence, absolutely has been a competitive advantage. And, you know, that's, you know, for, for many reasons why we have this in region, for region strategy. So, generally speaking, our regions are autonomous, self-sufficient.
We have very limited amount of regions supplying other components in other parts of the world, which we think, you know, effectively, you know, insulates the business quite nicely, but is able to serve the customer in a much more efficient manner, which has been, in our opinion, the, you know, the name of the game here, especially in the market we've been playing. So you're completely right, and that strategy will not change on a go-forward basis.
Great. ITS margins were blockbuster in 1Q, not quite 30%, but as close as you can get, 20.9%. I think your medium-term target was 30% or thereabout. So you're, I think you're more or less there now, so-
Sure
... anything sort of one-time-ish in nature, in one Q that really helps you? What, what are you assuming going forward?
Yeah, so nothing I would point to as one, you know, one time in nature. You know, we are incredibly pleased with the margin trajectory we have seen, not just here in first quarter, but if you now just, you know, go back over the last four years, ITS margins have expanded by triple digits each year. Q1 was a, I'll use your word, blockbuster quarter. I think I'll speak to a few things here that really drove that momentum, and then we can talk about where things go from here. First and foremost, you know, the price cost equation continues to be quite favorable. You know, as we expected coming into the year, we expected kind of the inflationary levels to kind of move sideways.
That's exactly what happened in Q1, generated 3% net price, so effectively your dollar price cost, you know, accretive, margin accretive, you know, you saw that ripple through to the bottom line very nicely. The other pieces here I'd point to, though, that were not immaterial, were the productivity side, really on things like the Innovate to Value, i2V initiatives. You know, we've talked pretty at length here, the continued push on the recurring revenue side. It's by no means at necessarily the level of maturity we expect to get to, but I will say recurring revenue is now definitely becoming a lot bigger piece of the equation, comparatively speaking. And while we haven't necessarily given an update since the Investor Day, what I will say was Q1 was a record bookings quarter for our North America business, which is the mainstay of recurring revenues today.
So it speaks to not only are we talking about this, not only putting attention, and it's probably the single biggest initiative within the organization, we are seeing the traction there. And then, you know, maybe to a slightly lesser degree, but it's there. We did take some, what I'd call proactive restructuring, both in Q4 of last year and Q1 of this year. I would say it was probably pretty cross-business, but quite frankly, with ITS being 80% of the revenue base, you can expect that that was a good percentage of the rest restructuring, and we saw that obviously in the margin profile. So really pleased with, you know, being approximately 30%, which I recognize is pretty darn close to the long-term stated target that we gave at our Investor Day.
I think at this point, we're not necessarily changing said target. You know, clearly, we expect that the margin profile of ITS should stay that north of 29%, you know, in and around the ballpark you saw for Q1. I think there's probably some upside opportunity as we think going forward, but we think that 30% is still a prudent target. We are going to be very conscious of gross margin expansion, but requisite reinvestment in organic growth, and that's exactly the equation you saw in Q1. You know, I think on a go-forward basis here, we get the question quite a bit: Do you see a cap inherently on where our margins get to? No, we don't think about it that way. I mean, without question, we see continued room for margin expansion.
But I think for us, more important than that is making sure that we are seeing the requisite reinvestment in organic growth, 'cause for us, continuing to drive, you know, sustained organic growth momentum as we sit here, 12, 24, 36 months from now, that'll be the real name of the game.
Okay. But wherever you land this year on EBITDA margins, the incremental margin, even with all the reinvestment you talked about, the incremental margin should be comparable to where they are now, 40%. There's no reason-
Yeah, I think 30%-40% is a good target range. I think that gives us sufficient cushion to make sure we're making those requisite reinvestments, that we think are, they're appropriate. And that's really, you know, system-wide. I'd say on the PST side, as we think going forward, PST is probably the area that has a little bit more of the, you know, I'd say, outsized continued margin expansion opportunity. Really pleased that, you know, we're still sitting at 30%+, almost 31% in Q1. This is a business that we think can get to that mid-30s level over the next few years.
It should be mentioned here that, you know, as we've talked about pretty explicitly over the last few quarters, really kind of all through 2023, this is a business that's faced some of the headwinds from the life sciences business that now is kinda coming out of that trough, but we still delivered 30% despite some of those headwinds. So we're excited by, I'd say, the growth profile going forward, and obviously in the not-too-distant future here, we're gonna be adding an ILC Dover asset that effectively is, you know, it's accretive from both the top and bottom line to the segment from day one.
Good. I've got a few more questions, but any more questions from the audience?
Nope. Okay, good.
So you touched on, you know, the recurring revenues and-
Mm-hmm
... you know, you've got a number of initiatives in play. The IoT-
Mm-hmm
- connectivity.
Mm-hmm.
I think today it's 20% of devices. I think your goal is 27% in 2025. Maybe talk about the importance of that, but also, you know, the Care initiative.
Yeah.
I think today, the revenues are maybe, I don't know, $150 or thereabouts, but you've got a billion-dollar target out there.
Mm-hmm.
So maybe talk about that as well as a key driver.
Yeah, I think the two are, without question, kind of correlated. So if you think about the IoT-ready kind of metric, the reason for us that that's, you know, I think so relevant is, at the end of the day, a connected asset is key to that kind of aftermarket equation, you know, and particularly Care, as we think about it. So the more assets that we have that are IoT-ready, connected, that allows us to monitor, that allows us to be monitoring said asset, and it really is the ticket to, let's just say, being able to then offer things like a Care contract. So Care, for those who may not be as familiar, Care is, you know, I'd say the kind of, I'd say the biggest piece of our recurring revenue portfolio today.
We've stated that we have, you know, total aftermarket. Aftermarket is exactly what you would think, parts, lubricant service, things like that. Recurring revenue is a subset of aftermarket, and it's really what I would call long-term contracts that we are entering into with our customer base to provide, you know, some degree of ongoing maintenance service. And at the, you know, with Care, the gold standard is really a risk transfer agreement. So, customer, we are locking into an agreement where you are paying me $X thousand per month for the next five years. You are writing that check every single month, and you are turning over the maintenance, upkeep, and, you know, ultimately the risk of that machine working to Ingersoll Rand.
The reality is, between IoT and connectivity, we can monitor, measure that asset, and then frankly, with our, you know, service tech environment, we can then actually service those compressors. And frankly, at that point, we are taking that risk off your hand, which for the customer base is a fantastic proposal because now, customer, you don't need to maintain an in-house service tech. The concept of keeping your compressor up and running at 96%-98% uptime, that's our commitment to you. The peace of mind of that piece of machinery not going down, which, just to be very clear, you know, the concept of a compressor going down in any manufacturing environment, it'll bring that environment to a screeching halt. You can think about the opportunity loss for lost revenue. And so from our perspective, it's a win-win, from their perspective, it's a win-win.
It should be noted here that while total aftermarket typically pays like 500 basis points higher than original equipment, Care or the recurring revenue piece, today, you know, approximately $200 million, Care is the single biggest component of that. These are playing at, like, 60%+ type gross margin profile. So it's the, I'd say, the most accretive of the aftermarket profile. And yes, we have a billion-dollar target that we've put out by 2027. I use the word bold. Some might use the word aspirational, but the reason I say bold is today, we know exactly where we are targeting to go from 200 to that billion. Clearly, right now, the most mature component of that is the legacy Ingersoll Rand North America. That is where the critical mass of that Care contracts come from.
The opportunity to now translate that globally, as well as to the legacy Gardner Denver portfolio, as well as to some of the assets in PST, and now supplement it with some of the other offerings like EcoPlant and the Air Treatment. We're incredibly excited. I would tell you, without question, this is probably the single biggest metric that we are now measuring and initiative system-wide. Every week, monitoring care bookings, as an example, measuring the adoption of EcoPlant now within the enterprise. So this has as much attention as you would expect.
Great. Well, good luck with that. I had a few more questions, but we're out of time, unfortunately, so let's leave it there. But thanks, Vic.
Yeah.
This was great.
Thank you, guys.
Good.
Pleasure.