All right. Welcome, folks. I'm Stephen Volkmann with Jefferies, and very pleased to be hosting Ingersoll Rand for this fireside chat. Vik Kini, the CFO, has joined us, and we're going to run this as a fireside chat. I'll probably lead off with a few questions, but would love to have your participation as well. If you're interested, we have a mic that we'll come up for air at some point and see if we have any questions from the field. Vik, I've been asking this question. You can answer it as quickly or as long as you would like. Since we are on a webcast, I figured I would just provide the opportunity if there's any updates or thoughts around how Q3 is progressing that you'd like to share, we'd love to hear them.
Yeah, sure. First of all, thanks for having us, and great to be here, as always. I think simply stated here, obviously, nothing we're providing necessarily incremental around initially August or September or anything like that, further than what we spoke about on our earnings call. I'll reiterate some of the statements we made in Q2 at our earnings call because we did provide a little bit more color, particularly around July. I think the piece that we'd kind of lean on here is that in Q2, encouraged to see some of that short to medium cycle side of the business starting to kind of come back a little bit more.
Within ITS, you saw about mid-single digit orders increase on the short to medium cycle side, which is kind of the core bread-and-butter side of the equation with, not surprisingly, North America probably being the strongest contributor there on the orders front. In Q2, we did mention that some of the timing of some of the longer cycle was kind of a headwind that kind of sat on top of that, which is what brought ITS orders more flattish from an organic perspective. We provided the color in our earnings call with the benefit of sitting towards the end of July. We had four weeks of July behind us. As you know, it's not our norm to initially give intra-quarter orders updates and things like that.
We thought it was important to provide a little bit of color that we had seen in the first number of weeks of July, low double digit to mid-teens orders improvement on the ITS front. The best way I'd probably describe that here is comparable trajectory on the short to medium cycle that you saw in Q2. But the piece obviously that was encouraging on incremental to that was the long cycle piece. We've been talking for the better part of 18 - 24 months that long cycle, the funnel continues to remain active and relatively healthy, but you had seen kind of the elongation of decision making from customers for a number of reasons. As such, that had led to some, I'd say, lower orders front on the long cycle than you would historically seen over that timeframe.
July, you did see a number of those projects finally come to fruition. I think the good news here is, one, July is just one data point, but we are very encouraged to now starting to see better momentum, not just on the short to medium cycle side, but also on the long cycle side. Obviously, all of this lends itself to kind of the volume side of the equation, which is the piece that you have seen kind of the bigger headwinds on over the last two years. Again, encouraged by what we are seeing here. We will continue to track and monitor this as we obviously move forward and give you guys obviously appropriate color here as we get through earnings.
But encouraged, I think, for the first time in a couple of years to really start seeing kind of both sides of the equation starting to move in the positive direction, which is definitely encouraging from us, from our front.
Great. A couple of quick follow-ups. Just because everybody might not be as deep in the weeds here. How do you think about the breakdown between your short cycle and long cycle?
For sure. Yeah. I will talk through the lens of ITS, which is our largest segment, about 80% of the revenue of the company. Let me start by saying business composition is, I will use rough numbers, 35%-40% aftermarket. Aftermarket obviously is much more, I would say, utilization based on our equipment and things of that nature. When you park that, you have the other, let us call it, 60%, 65% that is original equipment, and that is broken down approximately 75% is kind of short to medium cycle. So I would call it core compressor, blower, vacuum type technology, kind of the bread and butter, if you will. Typically somewhere between 30 and 90 days type lead times, pretty tight book ship type business, but kind of the core. And then the balance, which would be the remaining 25%, is longer cycle in nature.
The way to kind of think about longer cycle, you might hear us refer to it as ETO or systems or projects. They typically are larger scale projects in nature, predicated around technology and then typically larger systems or skids or things like that built out, customized for our respective customer base. And they are typically anywhere from $500,000 , but typically seven figure type price tags, 6 - 18 months in terms of duration, meaning from when the order is taken to final shipment. And obviously the larger the sticker price, typically the longer the duration. So that is probably the best way to think about the composition, particularly with an ITS.
Also worth noting that on the PST side, the precision technologies business, so the core pumping business, which is about the larger piece of that equation, that also has a fairly similar exposure to long cycle projects as well and some of our pumping and dosing type technologies.
Okay. Short cycle up mid-single digits, I think in the 2Q. What really drove that after this kind of long wait?
Yeah, I think it's like you've seen kind of in the broader industrial, obviously with PMIs continuing to improve. I think you're seeing now our portfolio, which core industrial compression, blower technology, vacuum technology, pump technology, it's kind of mission critical from a process perspective. You're seeing it kind of broad base. I wouldn't point to one specific end market. I think what you've seen over the last few years is, talk by region, you've obviously seen a couple of years of headwinds from a North America perspective, particularly from areas like some of the tariff related impact you saw last year and then some of the items that from administration changes prior to that, things like renewable natural gas that kind of had a peak back in the 2024 timeframe and obviously kind of came back down back in 2025.
China, similar. China used to be about 15% of the revenue base of the company. Today it's closer to 10%. Europe has actually been the most stable business in between over the last few years. I think with some of the just inherent macro recovery you're seeing, you're seeing obviously, not surprisingly, North America and Asia, and particularly China, starting to see better traction.
That's exactly like we said we saw in Q2, with the short to medium cycle being up mid-single digits, with North America being the leader of the pack there at up high single digits on the orders front. Again, encouraged to see that I'd say regular kind of, I'd say, industrial activity starting to come back. You're seeing it obviously on the short to medium cycle side, and then we've obviously talked about the long cycle side starting to finally see some better traction on the orders front.
I was going to go to long cycle next. We've had some delays on some big projects. Those seem to be starting to loosen up. Is this more sort of a timing issue, or do you think there's a broadening of demand there as well?
Yeah, I mean, the way we'd probably describe it here is, go back to how we'd characterize it. The long cycle funnel had been relatively active and healthy. Yes, you definitely seen an elongation in terms of just customers' decision-making patterns to actually ink the final PO. But one of the big things, and frankly, some of the reason that we wanted to provide a little bit of that July commentary is inherently the question becomes if you see delays, does that ultimately lead to cancellations of these projects? That's not the case. If you actually look at our product portfolio, you actually have long cycle exposure across all of our core technologies, compressor, blower, vacuum, and pump. It's actually fairly widespread from a geographic perspective. So it's not hyper-centric one product or one region. It's actually pretty widespread.
Even in July, again, it wasn't just one or two big projects. It was actually a number of the more, call it single digit millions of dollar type projects coming to fruition, actually well spread from a geographic and end market perspective. So, I think what we'd say here is, I can't point to necessarily one single bullet, silver bullet as like, here's the reason. I think we would attribute it a little bit more to timing and just some of the customer decision making. But it also does speak to those projects valid.
We're always going to continue to move forward and now finally starting to see a little bit of that unlock. But I think the other piece that's encouraging is the long cycle funnel in general continues to be active. It's not like you're seeing a big flush and there isn't, I'd say, activity backfilling it. We're actually seeing good quoting activity continuing within the funnel, which is encouraging.
Great. Okay. The other thing that has been topical this last couple of days here is a lot of cost volatility w hether it is metals or energy or transportation, just bring us up to speed on how you are seeing that play out.
Yeah. I think like anyone, we are seeing requisite pockets here and there. Now, let us characterize who we are and who we are not. We are not heavy manufacturing. We are essentially assembly, so we are not buying raw commodities or anything like that. We are buying much more semi-finished goods and things of that nature. Obviously, I think we are managing that piece as you would expect. I think at this point in time, pricing, I think from our end, has come back into that typical norm of 1%-2% that you typically see, I would say, in a given year.
Now, obviously, the last number of years, you have seen elevated pricing levels due to tariffs and some of the supply chain disruptions. So, I think we are continuing to manage that at this point in time. We will continue to evaluate as we go forward here. I think the teams are doing a good job managing that within expectations. But nothing I would call out as dramatically out of sorts at this point in time.
Okay. For the second half, we're assuming price cost neutrality?
Neutrality to slightly better. Yeah, I think we expect it to be improving from the first half into the second half. We have taken some pricing actions in the first half that we'd expect to materialize in the back half. To your point, we'll continue to monitor what's going on. It's a pretty fluid environment. But, yeah, I think, the last few years, you obviously have seen, particularly with the tariff side, you've seen price cost be neutral, but obviously margin dilutive. I think we're slowly but surely growing out of that, and I think as we move into next year and the year after, we would expect, pending what may or may not happen there, we expect that to return back to a slightly better margin equation compared to what you've seen the last few years.
Okay. All right. Maybe let's open up the aperture a little bit. Investors keep asking about AI exposure.
Yeah.
Depends on what day they ask, whether that's a good thing or a bad thing. But talk about how compressors, vacuum blowers, pumps fit into data center and power gen and that theme.
Yeah, for sure. I think to date, our direct AI exposure or data center exposure has been relatively minimal, as you've seen. Probably fair to say, maybe second derivative impacts of some of the providers. We obviously are providing our air compression technology and process driven equipment for their manufacturing needs and things of that nature. That being said, probably the last year or so, we have spent, I'd say, more time internally, really from an organic perspective, thinking about how we can maybe play a little bit more in the data center realm. To keep it simple here, when you think about air compression technology, pumps, things that move air, gas, and liquid for cooling purposes or other purposes, we do feel like there is applicability there.
I would say also bundled with one of our core competencies is our engineering capabilities and ETO capabilities, so ETO or long cycle. Like we said, 25% of our original equipment is long cycle or ETO in nature. We do believe that, with some of the trends that we're seeing there with some of these larger hyperscalers or data center manufacturers, that is a capability they want to see. Simplest way to say it right now, Steve, is right now, is it very material in the Ingersoll Rand revenue perspective? Not today.
Do we feel like on the go forward, there are opportunities for us to play a little bit more tangibly in this space, and that we're actively working with some of these customers to actually be able to show off, showcase not just some of our technology, but then also our ETO capabilities? Yes. I think there are some opportunities and pockets that we're looking to target, across our core technology on the go-forward basis.
Okay. What about semiconductors? Another focus, and I know your big competitor has, I think, more exposure there. Is that a target for you as well?
We do have on the compressor side, I'd say, selling large-scale compression technology for air separation, things like that, which plays into the semiconductor kind of value chain. From a direct, what I'll call vacuum perspective, I think was your question here, no. We don't play on the, what I'll call the high vacuum side of vacuum. We play much more on what we call the rough industrial process vacuum. So it's much more the industrial or kind of non-semiconductor type applications. That's where we've historically played, and I don't think you're going to see that really change going forward. The direct semis exposure on vacuum that you're referencing, no, that's not part of our vacuum portfolio.
Okay. Maybe we'll do a little geographic discussion. You mentioned China's gone from 15% to 10% of revenue. Describe what happened there for those that might not be as close to it, and then of course, what's the outlook for that?
For sure. Yeah, if you flash back a couple of years, let's go quite a way back to the 2020 post-merger, up until 2023, 2024 timeframe. Obviously, China was closer to 15% of our total company revenue. I think you saw, one, just based on the markets there, but then also you saw areas like EV battery and photovoltaic and solar type application. You saw a big run-up in that market. If you've been to China anytime recently, you can see it there with your own eyes. A lot of our core compression technology plays well in that space.
What you saw kind of post that timeframe, really 2024 to 2025, is not surprisingly, you saw obviously with the EV batteries and some of that kind of coming back down, you saw, I'll use rough numbers, roughly about $100 million headwind as that kind of reset back to normalized levels. Combined with obviously some of the challenges you've just seen in the general China market. You flash forward now to where we are today, China's closer to approximately 10% of revenue from a total company perspective. As we sit here right now, though, I think we're encouraged by after about two years of the China business leveling out, for lack of a better way to say it. We have seen I'd say healthier volume here as we've sat here into the first half.
In second quarter, just an example, we saw low double-digit revenue growth in China, and that's really all volume driven. I think we're encouraged to finally start to see some return to, I'd say, hopefully some normalization on the growth front in China. I think if you think about where our business plays in China, Ingersoll Rand's presence in China historically has been very compressor centric. That's really where its base was. Obviously, that team has done an incredible job bringing in and I'd say leveraging technologies that they historically didn't have as much access to. What I mean by that is, what came as part of the merger that the legacy IR China franchise didn't have? That would be product technologies like blower and vacuum, which came from Gardner Denver.
Air treatment technology that came via acquisition post-merger, and then if you remember, we've done now 80 + bolt-on transactions since the merger. Not every one of them is necessarily applicable through this lens, but there have been a number that have, whether they be U.S., Western Europe, even India based acquisitions that have differentiated technology that that China team is probably their poster child internally in terms of being able to localize and localize with speed. They've done a really good job.
Even if you look, despite even some of the headwinds we've seen over the last few years, if you were to go under the covers and look, you'll actually see some nice growth in some of those differentiated technologies, albeit off a much lower baseline. I think we're encouraged by where that portfolio is at least positioned to continue to leverage some of those strengths in terms of differentiating technology, while still being, I think, what we'd consider to be an industry leader on the compression side, that we'll continue to see hopefully, growth off of a, albeit a reset baseline that we talked about for the last two years.
Okay. I think pricing has been a bit of a challenge there. You mentioned low double-digit volume i n terms of recent growth. Is that stabilizing?
Yeah. I think the way we'd say it here, and just maybe to give a little bit of color, I think we talked about this during our second quarter earnings call. We always talked about, this year after, I'd say, the pricing dynamics of the last few years with supply chain and tariffs that obviously drove an outsized pricing impact. We would expect that pricing to kind of return back to that 1%-2% level, which is pretty normal in this industry. And that's exactly where we are. Now, it should be mentioned here that includes a negative low single digit headwind from China specifically. Now, I would say China, even historically, has probably been a much more competitive pricing environment. So I wouldn't say that even historically speaking, China was at the levels of North America or Western Europe or areas like that.
But to your point, yeah, I think with just given some of the resets you've seen in the market, some of the capacity that's been in the market and things like that, in the broader sense, not just necessarily our technology, but broader sense, you have seen some more pricing headwinds. We would view that as something that over the medium term should moderate. Again, as things continue to normalize, as volumes continue to get healthier out there, we would expect that to get back to historic levels. But that's not going to be something that happens necessarily overnight or in one quarter. That's more of a 2027 onwards dynamic. So, definitely something we're seeing right now, but an area that we would expect to moderate and improve as we move over the course of the next number of quarters.
Okay, good. Maybe switching to EMEA. Things have been a little more, I guess, volatile over there in terms of timing around lower vacuum, some Middle East delays, etc. What is the outlook there?
Yeah. To your point here, I think if you look over the last few years, EMEA has actually probably been our most stable region, comparatively speaking. The way we look at it is, we have EMEA inclusive, so Europe as well as the Middle East, India, and Africa. If you look at the puts and takes, not surprisingly, I would say India has been probably the best performing region of the entire company. Obviously not the biggest piece of the equation, but India has been a big growth region for us. In fact, we are pretty explicit, we actually opened a new, second manufacturing plant from a compression technology perspective there late last year. And I think we continue to see good traction on the India front. Not surprisingly, areas like the Middle East. Middle East is approximately 3%-4% revenue base, roughly speaking.
Obviously impacted by what is going on here in the Middle East right now. I think if there is good news to be had here, that is that, hopefully when we get a bit of a stability and things normalize there, we do feel that there is maybe some pent-up demand or whatnot from a Middle East perspective. But, that aside, Middle East and probably Central Europe have probably been on the other side of the equation from a headwind perspective.
T hen the balance of where we play is really in Western Europe. So areas like, Italy, Spain, France, the U.K., Nordics, and they have each had, I would say, some have been a little bit better than others. The best way I can probably say it right now is, I would say Europe is relatively neutral when you put those areas together, as kind of we are seeing right now with some of the puts and takes.
Okay. We've already sort of talked about North America, but I'm curious, you guys are often, I think, identified as sort of one of the beneficiaries of reshoring, onshoring in North America. Can you specifically say that you're seeing demand from that theme?
Yeah, I think you're seeing an improvement in just broadening trends as we sit here right now. Have there been pockets of reshoring, onshoring that you've seen benefits from? Yes. Would I point to that being the biggest catalyst or driver? I wouldn't necessarily say that's the biggest catalyst. I think we continue to be encouraged by seeing what were some of these trends and these themes. I think what you're seeing right now is just an improvement in the overall just demand environment. But to your point, yes, absolutely, to the degree there continues to be more onshoring and reshoring type capabilities or opportunities. This business tends to be a bit more CapEx driven in terms of compression technology and things like that, and that would be an area that we would expect to be a beneficiary from.
Okay, good. Let's talk a little bit about ITS margins. They've been a little bit pressured, I guess, tariffs, volumes, China pricing we talked about, s ome of your commercial investments. I think you are guiding a stronger second half. What gives you confidence in that?
Yeah. To your point here, ITS margins, were in the upper 20% towards 30%. They have kind of been more in the 26%, 27%-ish realm here. So, still operating at a healthy level, especially in lieu of, I won't repeat them all, the headwinds that you've talked about over the last few years. And I think we do continue to be encouraged by, if you look under the covers, continuing to see good momentum in areas like aftermarket recurring revenue that have at least, I'd say, bolstered the margins, albeit not necessarily mitigating the full extent of the areas we talked about.
Now, as far as going forward, whether it be second half of the year or barely into the next year, a couple of the areas that we feel like should be tailwinds to the margin equation. So a couple things. One, we talked about the price/cost dynamic starting to, I'd say, normalize and, clearly, even in the first half of the year, we've taken certain targeted pricing actions as you would expect, that we'd expect to deliver into the back half of the year.
Probably the biggest one here, and probably the barrier that's had the biggest headwind from the last two years, is volumes. We've been in an environment for the last two years that's really been absent of organic volume, particularly on the OE front. And if you think about our portfolio, again, whether it be ITS or even PST, these are both segments that play above 40% gross margin, and I would say original equipment and aftermarket play at healthy levels. It's not like you have low margin original equipment and high, it's razor instrument. No, they're both very good margin profile businesses.
Just as volumes continue to improve, that should help the margin front. The other pieces here that I would speak to in terms of just the margin progression within the business, a couple things to think about. One, the productivity equation. So as a reminder, direct material is about 70% of our cost of goods sold. And generally speaking, and this is not necessarily a statement necessarily about 2026, you see this generally most year, if not you see this every year, your margin profile tends to be healthier in the back half of the year as compared to the first half of the year, if nothing else, because of the seasonality factor. Typically speaking, ITS has revenue base lighter in first quarter, heaviest in Q4, Q2, Q3 in between.
Particularly as that cost of goods sold flows through in the back half of the year, you tend to see that productivity follow it. The other piece here, you saw us talk pretty explicitly in the back half of last year into the first quarter of this year, excuse me, about some targeted restructuring that we did portfolio wide. So it was total enterprise wide, but ITS is 80% of the revenue of the business, so you can expect that was the biggest piece. That is largely been consumed and digested at this point in time.
F or all those factors, we would expect a healthier margin profile as we exit the back half of this year. Again, we will wait to kind of guide on 2027 and things like that. For us, the biggest piece that should be helping ITS margins as we move forward is, price/cost aside here for a second, it is just getting back to, I would say, a regular, normalized volume cadence, which is the piece you really have not seen the last few years.
Okay, good. Let us switch to PST then. Life sciences, I guess, has been sort of a highlight there. Orders running low double digits, mid-teens for several quarters now. Just talk about what is driving that and the bigger themes and whether they are sustainable.
Yeah, for sure. Very encouraged by what we are seeing on the life sciences side. So, we have talked about this for a few years that we created this life sciences platform by the combination of the legacy, we used to call it Gardner Denver, then the Ingersoll Rand medical business. Now we refer to it as our flow control solutions business internally. That is the biggest piece, but then you also have the assets from ILC Dover that really are now creating a $600 million - $700 million life sciences platform that you really did not have historically.
I think when you look at our exposures across the life sciences spectrum, whether it be the legacy IR Gardner Denver medical business, which is selling more, what I will call OEM compression and pump technology into medical lab, life sciences, lab automation, diagnostics type equipment. The second largest business is the biopharma business from ILC Dover, which clearly has been the best growth business in the entire portfolio exposed to GLP-1s and obviously making single-use powder containment technology for drug manufacturing.
Even the medical device business, which is the contract manufacturing business, exposed to some good trends in urology and cardiac type applications on a contract manufacturing basis. You are actually seeing good drivers of growth across all three, albeit they are all exposed to slightly different aspects of the life sciences platform or the life sciences spectrum. The way Steve would probably say it here is that, to your point, life sciences has been the best growth profile business of the entire equation. It is worth noting here that the precision technology side has also shown pretty good traction here as of late. These are businesses that both play at very healthy margin profiles.
It is worth noting that now over the last two years, the life sciences business has definitely closed the gap towards the precision technologies, and you have seen that now in the overall PST margins, where now this business has played above 30% for at least three or four now consecutive quarters. We are starting to now finally approach that mid-30% kind of EBITDA margin target that we have historically laid out. I think our simple way to think about it is we do not expect that at least the levers or at least the growth drivers are seeing to dramatically change on the go forward.
I think we continue to be encouraged there. As far as the balance of whether it be pricing, whether it be productivity, I think a lot of those you will see as fairly similar themes and trends as to what you saw on the ITS side. Clearly, the volume side here has probably been a little bit quicker and more evident as of late, but again, continues to be quite healthy on the go forward.
Okay. To your point, you hit 35.5% EBITDA margin the second quarter in PST, if my numbers are right. You have described this mid-30% target. What do you need to do there operationally mix? What gets you to the mid-30%?
Yeah. I think we've kind of probably been in that 31%-32% range thereabouts. Again, to your point, not that far away from the mid-30%. I think it's just continued execution. I think a lot of the blocking and tackling in the context of what I would call the restructuring integration of the ILC Dover asset is behind us. That asset, it's been a little over two, almost 2.5 years now since the acquisition. I think now the structure, hard-line P&L, you've really seen it adopt IRX, Demand Gen, the same toolkit that you've seen across the rest of the spectrum. Now I think it's really just the blocking and tackling. To that point, pricing will be comparable to what you see on the ITS front. The productivity equation is very much there.
I think a lot of it just comes down to core volume growth. The other piece here that now is becoming a little bit more evident, particularly on the life sciences side, is the bolt-on M&A routine. We've now done four bolt-on acquisitions since the ILC Dover acquisition into that life sciences business. We continue to do bolt-on acquisitions on the PT side of the equation, too. I think it's just essentially a blocking and tackling and just continued volume growth. There's no reason at the margin profile that that business plays at and the gross margin profile at 45% plus that you shouldn't continue to see good incrementals and good flow through there.
Great. Okay. I'm going to come up for air for just a second. Does anybody here want to ask a question? We have a mic if you do, and if you don't, I'll keep going. All right, no takers? Maybe we'll just finalize the margin discussion. Just how should we think about incrementals in the two segments, sort of medium term?
Yeah. I think this business, we've historically said the business over the cycle or medium term wants to play in that 30%-40% realm with ITS probably towards the lower end of that realm, PST plays towards the higher end. I think that's the right way to target things over that kind of medium-term spectrum, given some of the inputs and factors we've talked about. But as we've mentioned here a number of times, the volume piece of that equation is clearly the catalyst to kind of keep it in those ranges.
Okay. Great. Recurring revenue and sort of attachment rates have been something you guys have been very focused on. I think you have $1 billion target for recurring revenue up from, what was it, $450 million last year?
$450 million, yeah. Not too long ago, back in 2021, that number was closer to $100 million. So yeah, we've had quite the run here. It's clearly been probably the single biggest organic growth driver or focus from an initiative perspective internally. To your point here, this is a model that really kind of started in the compressor side of North America, legacy Ingersoll Rand. I will still say compressors North America is the biggest piece of the equation. But now really expanding that model on how do you drive multi-year contractually driven, whether it be service or other type aftermarket contracts with your customer base to really kind of lock in that true recurring revenue base.
I think now what you've seen is the model really being adapted to the other regions, as well as kind of some of the Gardner Denver portfolio, as well as some of the other product technologies that at least inherently historically, you maybe didn't think about through the same lens. Blower, vacuum, pumps, areas that if they have a wrench-turning service type applications and need, there may be something that can be applicable there. So you sit here today, to your point, yes, we eclipsed $450 million last year. Obviously, still plenty of room to run. Continue to be really excited about the opportunity set here. And now we actually have measurable baselines and momentum across essentially the wide variety of the business. I will still say that the majority of what you're seeing is really on the direct side of the equation.
I think earlier this year, trying to take this model and adapt it a little bit more through the channel and partnering with our channel partners. That's, I think, continued opportunity on the go forward. But I think we continue to be really excited about the opportunity set here. And this obviously is, I'd say, a healthy aftermarket margin business. So again, continuing to see traction. And this should hopefully be an area, I'd say, a lever over the medium to long term that should continue to bolster margins in the grand scheme of things.
Great. Okay. Let's flip to M&A, since you mentioned that a moment ago. Obviously, you have a 400 - 500 basis points of growth is your long-term target. I think you are about halfway through that this year. What does the pipeline look like?
Yeah. I would say pipeline continues to remain active and healthy. If we flashback here to our last earnings call, I think we mentioned that we still have over 200 active companies in the funnel. At that time, 11 transactions under LOI. The way I describe it right now is these are very much of the bolt-on variety, very similar to the types of transactions you have seen announced over the last number of years, but even over the first half of the year. So again, right down the middle of the fairway type opportunities. I think we have mentioned that there is always inherently maybe a slightly larger transaction that we vet or things like that. But at this point in time, I would say the funnel is largely of that smaller bolt-on variety, and I would say conversations continue to be very fruitful and active.
To your point, yeah, roughly about halfway to the target, halfway through the year. Again, we continue to remain optimistic on over the medium term here, continuing to operate in that 400 - 500 basis point range is a good target for us. Nothing that we would say really is changing our viewpoint there. And I will note good traction on both sides of the equation, ITS and PST. So very similar to what you hear us said historically, and I think the funnel continues to be relatively healthy and robust.
Okay, great. All right. We have about two minutes left. Is there anything I should have asked you or you think investors are not fully appreciating?
No, listen, I think you've covered the big bases here. Not to repeat myself from earlier, but I think the piece here that after a couple of years of macro headwinds and things like that we continue to remain or we're becoming, I'd say, more encouraged by is just the growth side of the equation. You've heard us talk pretty explicitly over the last number of years, even despite some of the headwinds we've seen, that we're continuing to invest, whether it be in manufacturing sites in areas like India or Brazil, whether it be commercial investments, whether it be feet on the street. Even in, I think it was Q2, we announced a strategic partnership with a third party on some oil-free technology, which is really kind of R&D co-development.
The common theme and trend amongst all these, even some of the AI discussion we had earlier, this is all about driving sustainable organic growth for the longer term. We'll continue to invest in the company and the business to drive organic volume growth. I think we're encouraged to now starting to see end markets and the major regions we play in starting to be a little bit better than where you've seen them the last couple of years. Now it's really more so operationally and executing thereafter. I think we remain encouraged here. Other than that, I think you've covered the bases and the highlights.
Very good. Well, appreciate it as always, and thank you all for your attention.
Yeah. Thank you.