Ingersoll Rand (NYSE:IR) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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Summary
Ingersoll Rand reported solid financial results for Q1 2026, with adjusted EPS growing in high single digits and revenue and adjusted EBITDA meeting expectations.
The company continues its disciplined approach to M&A, with a strong pipeline focused on differentiated technologies; recently signed the acquisition of FOX SRL.
Full-year 2026 guidance remains unchanged, expecting revenue growth between 2.5% and 4.5% and adjusted EPS in the range of $3.45 to $3.57.
Operational highlights include improvements in short cycle business and positive organic order growth in China, despite some delays in long cycle projects in the Middle East.
Management expressed confidence in future performance, emphasizing strong balance sheet, liquidity, and a focus on operational execution and capital allocation.
Full Transcript
Operator
Hello and welcome to the Ingersoll Rand first quarter 2026 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, please press Star one on your telephone keypad. I would now like to turn the conference over to Matthew Fort, Vice President, Investor Relations. You may begin.
Matthew Fort (Vice President, Investor Relations)
Thank you and welcome to the Ingersoll Rand 2026 first quarter earnings call. I'm Matthew Fort, Vice President of Investor Relations and joining me this morning are Vicente Renal, Chairman and CEO, and Vic Kinney, Chief Financial Officer. We issued our earnings release and presentation yesterday afternoon and we will reference these during the call. Both are available on the Investor Relations section of our website. In addition, a replay of this conference will be available later today. Before we start, 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 2 for more details. In addition, in today's remarks we will refer to certain non GAAP financial measures. You can find a reconciliation of these measures to the most comparable measure calculated and presented in accordance with GAAP in our slide presentation and in our earnings release, both of which are available on the Investor Relations section of our website. On today's call, we will review our company and segment financial highlights and provide an update to our full year 2026 guidance. For today's Q and A session, we ask that each caller keep to one question and one follow up to allow time for other participants. At this time I will turn the call over to Vicente.
Vicente Renal (Chairman and CEO)
Thanks Matthew. Good morning everyone and thank you for joining us today. Beginning on slide three, the first quarter represented a solid start to 2026, especially given the continued complexity of the global operating landscape. In the markets where we play, adjusted EPS grew high single digits with revenue and adjusted EBITDA finishing in line with expectations. This performance reflects the durability of our portfolio and the consistency of our execution. Conditions remain mixed, but we're seeing continued improvement across several end markets and in short cycle activity. Our disciplined approach to M and A continues to be a key driver of our success. Our acquisition pipeline remains robust, focused on differentiated technologies and services that strengthen our portfolio and enhances our organic growth profile. Finally, IR-X remains a key differentiator, allowing us to remain agile and stay focused on what we can control, including operational execution, disciplined pricing and capital allocation. On slide 4, our inorganic growth strategy remains a core element of our overall strategy and the pipeline remains robust. This is supported by our value creation flywheel which is a core engine of our performance generating durable free cash flow which further enables consistent high return capital deployment. We're pleased to announce the signing of FOX SRL which is expected to close at the end of this month. As a leading manufacturer of hydro pneumatic accumulators and pulsation dampeners, FOX enhances our pump technology by utilizing dampeners to absorb pressure pulses. This protects downstream pipes and equipment, helping customers reduce downtime and maintenance costs and thereby increasing the return on investment offered by our solutions. Today we have over 200 companies in our funnel with 10 transactions currently at the LOI stage. More than 90% of these opportunities remain internally sourced which reflect the strength of our operating model and deep industry relationships. We continue to expect 400 to 500 basis points of annualized inorganic revenue to be acquired in 2026 and we have a few additional deals expected to close in the coming months. Our approach to M and A remains unchanged, which is disciplined valuation, strategic fit and a focus on bolt on acquisitions that strengthen our core technologies or expand into attractive adjacencies. Now I will hand it over to Vic who will share an update on our financial performance for the first quarter.
Vic Kinney (Chief Financial Officer)
Thanks Vicente. Starting on slide 5, orders finished up 5% year over year resulting in a book to bill of 1.07 which is consistent with normal seasonality. Worth noting, we did see a delay in orders of approximately $40 million which was driven by a few long cycle projects. This delay was primarily driven by the conflict in the Middle East. We believe that the impact is transitory and we expect these orders to be recovered in the balance of 2026. As a matter of fact, we have already recovered approximately a third of these orders in the month of April. Excluding that delay, organic orders would have finished approximately flat year over year. Total revenue grew 8% year over year, finishing in line with expectations for the first quarter. Adjusted EBITDA also finished in line with expectations at $469 million with an adjusted EBITDA margin of 25.4%. The year over year margin pressure was primarily driven by the flow through on organic volume declines, the dilutive impact from tariffs and continued strategic investments. For commercial growth, corporate costs were $38 million. Our Q1 adjusted tax rate was 19.8% and adjusted earnings per share was 77 cents for the quarter, up 7% year over year on the Next slide Free cash flow for the first quarter was $163 million, finishing largely in line with expectations and normal working capital seasonality. With nearly $4 billion in total liquidity, our balance sheet remains a strategic asset enabling continued investment in high return opportunities. Our leverage remains well below two times, providing us with flexibility to continue to deploy capital effectively throughout 2026 and beyond. Our capital allocation strategy remains unchanged, which prioritizes M and A while also maintaining our commitment to share repurchases and quarterly dividends.
Vicente Renal (Chairman and CEO)
Now I'll hand the call over to Vicente, Vicente, who will review our segment results as well as full year guidance. Thank You Vic on slide 7, Ingersoll Rand Pneumatic Systems (IPS) orders finish up 5% for the first quarter. Book to bill for the quarter was 1.08 times. Organic orders for the quarter were down 3%. Excluding the impact of delayed orders which Vic mentioned, organic orders finished approximately flat. Important to note that on a two year stack, organic orders are up 1% on a total segment basis. Revenue grew 7% year over year. Adjusted EBITDA margin finished at 26.7% which was down year over year, largely driven by the flow through on organic volume declines, the dilutive impact of tariffs and continued commercial investments for growth on a reported basis every its product line grew orders except the power tools and lifting on an organic basis. Let me provide some additional color on orders by product line. Compressors were down year over year driven by the previously noted timing on the large projects. The blower and vacuum business continues to perform well and was up year over year. Power tools and lifting was down year over year driven by the lifting business and we remain encouraged by the core tool business growing organically mid single digits driven by launches in new product technologies as well as growth in the short cycle momentum that we're seeing from a regional perspective. Here are a few highlights on organic orders we saw stabilized compressor activity in the US and we continue to see encouraging order trends across many of our compressor categories. Additionally, China continues to outperform the underlying market, delivering another quarter of positive organic order growth. In our Innovation in Action section, we're excited to share a large win in carbon capture where Ingersoll Rand was selected to provide a combined vacuum and blower application for an innovative carbon capture technology which utilizes a proprietary gas separation process. This technology is applicable across a wide range of applications including transportation like rail power generation for data centers as well as industrial engines. Although this innovation is still in its early stages, we're encouraged by the positive outcome demonstrated through the integration of our connected technologies. Turning to slide 8 Q1 orders in PST were up 6% year over year with a book to bill of 1.04 times. Organic orders saw a modest increase of 1%. Our Life Science business maintained robust growth with a double digit increase in orders while the remainder of PST business was impacted by the timing of some large projects in precision technology business. The short cycle book and ship business continue to see organic order growth. First quarter organic revenue finished up 4% with both precision Technologies and Life Science Technologies businesses delivering positive organic revenue growth in the quarter. PST delivered adjusted EBITDA of $122 million which was up 15% year over year. Adjusted EBITDA margins improved 120 basis points year over year reflecting continued strong operational execution for our PST innovation in action. We are highlighting a great win for our life science business which integrates core its product technologies into ILC Dover's end to end Bulk Powder System solution. ILC Dover developed a comprehensive fully integrated bulk powder system which includes hardware containment and mixing in collaboration with our own vacuum technology. For a leading pharmaceutical manufacturer. This end to end design, assembly and installation utilize both ILC Dover powder solutions as well as our Ingersoll Rand Elmo Rietschle vacuum pumps or powder conveyance. As we move to Slide 9, we are reaffirming our full year guidance for 2026. Total company revenue is expected to grow between 2.5 and 4.5% driven by organic growth of 1% at the midpoint, growth from MA of approximately 2% which includes the carryover impact from all transactions completed as well as the recently announced signed transaction of funds. And finally, we expect FX to be a tailwind of approximately half. Total adjusted EBITDA for the company is expected to be in the range of $2.13 billion and $2.19 billion. Corporate costs are planned at $170 million and are expected to be incurred evenly per quarter throughout the remainder of the year. Adjusted EPS is projected to fall within the range of $3.45 and $3.57, which is approximately 5% growth at the midpoint. We anticipate our adjusted tax rate to be roughly 23%, net interest expense to be about $230 million and share count to be approximately 394 million. Free cash flow to adjusted net income conversion is expected to be approximately 95%. The phasing of revenue, adjusted EBITDA and adjusted EPS is expected to be consistent with what we have seen in prior years as outlined on the table. We continue to monitor the changes in tariffs carefully, including the recent changes in section 232 tariffs. We remain nimble and continue to pivot, adjusting our mitigation actions to best minimize the effect of care tariffs as well as inflation, and as a result, we do not currently expect any net tariff and inflation impact to our full year guidance. Additionally, as I mentioned earlier in the call, most deferred orders from the Middle east are tied to long cycle projects. We anticipate order recovery throughout the year and with strong execution from the team, expect no impact on on full year revenue or adjusted EBITDA at this time. Finally, on slide 10 as we conclude this segment of the call, I believe our performance in 2025 are solid. Start in 2026 with the book to build above 1 and the improvement in the short cycle business setups up well for continued success. Throughout the remainder of 2026. We remain agile to effectively navigate the complex global environment through disciplined execution, ample liquidity and a strong balance sheet. We continue to differentiate ingis or rent as an investment. Our approach to capital allocation remains unchanged, leveraging our strong free cash flow to drive durable earnings growth and create long term shareholder value. IRX remains the backbone of the organization, enabling operational execution. Finally, and most important, I would like to thank our employees for the ongoing dedication and commitment to embracing our ownership mindset. Thank you for help in delivering another strong quarter. And with that, I will hand the call back to the operator and open it for Q and A.
Operator
Thank you. If you would like to ask a question, please press Star one on your telephone keypad. If you would like to withdraw your question, simply press Star one again. In the interest of time, please limit yourself to one question and rejoin the queue if needed. Thank you. Your first question comes from Mike Halloran with Baird. Your line is open.
Mike Halloran (Equity Analyst)
Hi, good morning everyone. Maybe we could just start on what you're seeing on short cycle versus long cycle side of the business. On the short cycle side, are you seeing sequential acceleration? Are you seeing signs of improvement in demand normalizing? And then on the long cycle side, maybe just talk about what you're seeing outside of the Middle east where you talked about the project delays and if you're seeing delays more systemically or what the customers are saying, or if there's any signs that that side of the business might be improving.
Vicente Renal (Chairman and CEO)
Yeah, sure, Michael. So, Michael, on the short cycle, looking specifically at the us we're seeing signs of stabilization and improvement, which is definitely consistent with the ISM moving back above 50 now for the past few quarters, I'll say that, you know, compressor activity in the US stabilized during the quarter as well. And we're seeing encouraging order trend across several compressor categories. In addition, the short cycle businesses continue to improve. We mentioned on the prepared remarks, you know, core tool business is growing organically at mid single digit rate. That's a good indicator for us to see on that short cycle. And then on the, on the, on the, within the PST side in the precision technology we saw book and turn or short cycle business grow organically which also lines up really well with what we're seeing and actually continue improvement as we went through the quarter and here into into April in terms of the long cycle. We categorize the longer cycle funnel activity as remaining stable as well. And as we think about continued rising energy prices in Europe, we see these as a potential longer term tailwind given the nature of our products and the value that we create for our customers in terms of delivering energy efficiency products and services. As we indicated before, what we're seeing right now is kind of customers and APC is taking a little bit time more to decision making and finalizing pos, which is consistent to what we have said before in terms of the elongation of the funnel and the overall decision making. However, projects are not canceled or anything of that nature. So we feel this is just a bit of a timing side in terms of the elongation of the decision that has not decreased. And as we have mentioned previously specific to the Middle east, we have seen some of these longer cycle projects being delayed. But we expect that to come back over the course of 2026. And as Vic mentioned on the prepared remarks, already a third of those projects have come in and booked here in in the month of April.
Mike Halloran (Equity Analyst)
Thanks for that. And then maybe the follow up is just put that in the context of how you're thinking about the guidance for this year. You know how much of that is embedded sequentially? Are you embedding some level of improvement as we work through the year and as we think about how the orders are going to cadence out? I know you guys don't give specific guidance here, but how should that work out through the year when you consider comps, the timing of some of the projects, some sequential improvement as we're thinking about the short cycle side of things.
Vicente Renal (Chairman and CEO)
Yeah, Micah, as we think about delivering the full year organic revenue guide, our expectations for organic growth and the cadence through the year has not changed from the original guidance. As you have seen at the midpoint of our guide, we're expecting about 1% full year organic growth. And when we provided our original Guidance, we indicated slightly negative organic growth in Q1 and then low single digit growth for Q2 to Q4. Q1 kind of came in as we expected. And even actually if you were to exclude the Middle east pushouts, it kind of came even better than what we expected. So, you know, as we think about our second half guide, that implies low single digit organic growth which is supported by a very, you know, good solid backlog growth from 2025 where a full year book to bill was above 1q1 here in 2026, again book to bill above 1.1.07. As we mentioned here before, the ongoing momentum in the short cycle activity, which we have seen in both segments, you know, provides a good setup as we go into the second half. You know, ongoing commercial investments for growth including a very focus on under penetrating markets. And then as we all know, you know, the prior year comes. We'll continue to moderate, particularly in IPS as we kind of move into the second half.
Mike Halloran (Equity Analyst)
Thank you, Appreciate it.
Vicente Renal (Chairman and CEO)
Thank you.
Operator
Your next question comes from Julian Mitchell with Barclays. Your line is open.
Julian Mitchell (Equity Analyst)
Hi, good morning. I know you've given the color on sort of first half, second half splits on revenue and earnings and so forth in the deck, but just wondered if you could perhaps home in a little bit on what you're anticipating for the second quarter. You know, just backing the numbers out. It looks like kind of organic sales company wide may be flattish year on year in Q2. And then the EBITDA margin is down 50 to 100bps year on year in the quarter. I just wonder if those are roughly accurate and any kind of segment color for what you're seeing in the current quarter.
Vicente Renal (Chairman and CEO)
Yeah, Julian, I'll take that one here. So first your read is directionally correct. You know, I think Vicente kind of outlined kind of the full year and kind of the expectations. But maybe to give a touch more color specifically, you know, in terms of the phasing, both first half, second half as well as second quarter. First and foremost, just to reiterate our expectations and assumptions for phasing for EBITDA delivery in the year haven't changed. You know, first half of the year being in that kind of 45.5 to 46% range. The balance in the second half as far as Q2, you know, 1, we do expect sequential improvement on margins from Q1 to Q2, but in Q2 margins we do still expect to be slightly down year over year. You know, kind of in that, you know, 50 to 100 basis point kind of range. It's primarily driven by its. We do still expect to see continued margin expansion year over year on the, on the PST side. And then you know, just to fill in the color there on the organic revenue side of the equation, you know Ascente just mentioned Q1 was expected to be slightly down and that's exactly what we saw from an overall perspective. Q2 is expected to be, you know, flattish to slightly up and then you know, the low single digit growth in on the organic side is what we're expecting the second half based on the kind of the drivers that the Vicente just walked through.
Julian Mitchell (Equity Analyst)
That's very helpful, thank you. And then just my follow up would be around the ITS business as you said, sort of margins I think are down there for five quarters in a row, year on year, down again second quarter. Maybe help us understand kind of the confidence on those being up in the second half and anything you could flesh out in terms of price, cost impacts, anything changing competitively with what's happening on tariffs and inflation in its, please.
Vicente Renal (Chairman and CEO)
Sure, I'll start on that one there Julian. So you know, obviously fair comment from your side. I'll note that obviously you know, the last five quarters, the majority of those have been impacted by the, you know, the kind of the tariff dynamics and kind of the underlying impact that's had on some of the demand environment which is really the driver of what you're seeing on the margin front. You know, I think from a total year perspective our expectation on a full year basis is that its will be approximately flat year over year. As we indicated, Q1 was going to be the most challenging quarter particularly given we hadn't really started comping or lapping the liberation day tariffs from prior year which really started in second quarter as far as the second half. And to your question, we do expect that's where margin expansion kind of comes back supported by I would say the slightly better organic volume outlook that we have expected in the back half of the year, continued improvement in price cost, you know, driven by I'd say full implementation of you know, all the tariff related pricing actions that have been taken as well as kind of some of the targeted in year actions that we always kind of have executed on and then many of the productivity initiatives including you know, we were, I think you saw us take some pretty meaningful restructuring charges in the back half of last year which we would expect to continue to bolster margins particularly as we move into the back half of this year. So you know, I think that's what kind of gets us to that kind of flattish margin expansion on a year over year basis. But yes, it is, you know, a little bit more back end weighted as a result of those drivers. And the only thing I will add is that the exit rate on margin expansion will be consistent with our long term targets.
Julian Mitchell (Equity Analyst)
Great, thank you.
Jeff Sprague (Equity Analyst)
Your next question comes from Jeff Sprague with Vertical Research Partners. Your line is open. Hey, thank you. Good morning. Just a couple things. First, just the language on tariff here that you don't expect any impact. Does that mean you haven't sorted it all yet and you're still kind of working through it? Maybe you could just kind of talk us through, you know, the IEPA change versus the 232 change. I guess you're saying you think you land kind of net neutral, but again, just looking for a little more clarity there.
Vicente Renal (Chairman and CEO)
Yeah, Jeff, happy to provide a little bit more obviously, you know, number of moving pieces of the indicator to keep it simple here. No, we have obviously, you know, worked through all those individual moving components. And I think the simple takeaway is kind of what you indicated here, that you know, at this time, those moving factors, whether it be the tariff related changes, some of the underlying kind of just inflationary movements in the market, as well as a lot of the proactive measures that our internal teams have been working on from a mitigation perspective, those are kind of netting out relatively neutral on a full year basis. So our rate at this point in time based on what has been announced is relatively neutral. And obviously like everyone else, we're anxious to kind of see how things continue to play themselves out for the balance of the year.
Jeff Sprague (Equity Analyst)
And then maybe unrelated, just a little more color on life sciences. If you could just, you know, how the year is unfolding, what you see in the pipeline, you know, it looks like some of the life sciences reshoring announcements of, you know, a year or two ago, we're seeing some groundbreak on some bigger projects. Just wondering what the funnel looks like there and is the visibility actually improving?
Vicente Renal (Chairman and CEO)
Yeah, yes, definitely proven and clearly we're pleased with what we saw here in the first quarter, double digit organic quarter growth momentum on the life science side and a lot of these reshoring and investments that we're seeing, particularly in biopharma and very specific around API production in the US it's really a great trend for us in terms of the product that we have so good visibility. As a matter of fact, this week we had a great session with one of the largest biopharma companies here in the US where you know, we kind of collaborate as we look into specific technologies that we can actually put and help them to really accelerate some of the productivity and production that they have to do here in the US So good looking, looking good and we're, we feel positive about it.
Jeff Sprague (Equity Analyst)
Great, thanks. I'll leave it there.
Vicente Renal (Chairman and CEO)
Thank you.
Operator
The next question comes from Joe o' Day with Wells Fargo. Please go ahead.
Joe o' Day (Equity Analyst)
Hi, good morning. Just wanted to circle back on the EBITDA margin kind of trajectory with ITS because I expect that will be the biggest area of focus coming out of this quarter. And if we're talking about something like call it 27 and a half to 28 in Q2 and moving to something that approximates 30 in the back half. Just if you could unpack any quantification around that. I know you gave some of the items, but any more detail around like the pricing that you put in place for tariffs, but the timing of when that starts to flow through the P and L or the impact from the restructuring. Any other cost mitigation just to help with a little bit of the quantification around that bridge from Q2 into the back half?
Vicente Renal (Chairman and CEO)
Yeah, sure, Joe. Obviously we're not going to necessarily provide, you know, the exact specifics on the individual components, but let me, let me give a little bit more color on some of the moving parts. So, you know, one, I think obviously kind of your read on, you know, the directional movement of margins is, is, is in line with expectations. As we've indicated, we do expect to see kind of sequential margin improvements here as we move through the year. Frankly, both a statement about ITS as well as PST for that matter on the ITS front, you know, just to kind of delve into the components, a couple moving factors. One, obviously as I indicated here, we do expect to see organic volumes improve in the second half as comparatively to the first half levels. Clearly, you know, those do come with what I would call normal flow through which clearly will be a benefit that you haven't really seen kind of in the numbers, you know, over the last few quarters just given some of the volume dynamics. Second piece would be price. So specific to price, you know, all of the, I will call it tariff related pricing actions have, are in the numbers. They were all largely taken to the back, you know, through 2025. And I would say you're seeing those in the numbers as we speak. You know, what you haven't necessarily seen is some of the, I'd say in year 2026 actions, which is, I think a catalyst of some of the margin expansion you would expect to see in the back half of the year. The other factors I would probably point to here would be on the productivity side of the equation. So you mentioned one on the restructuring. The restructuring has been taken, as you can expect that restructuring is global in nature. So it does take some time for some of those actions to be fully executed, which we expect to kind of largely conclude here through the first half of this year and those benefits to start being more visible into the back half of the year. And the other piece would be, I would say the direct material side as a reminder. Direct material is approximately 70% of our cost of goods sold and there is a lot of activity going on, whether it be on the i2V front or the classical, I would just call it direct material procurement side of the equation. And as you've seen in years past, those benefits tend to be much more visible when you have kind of your seasonally strongest quarter, which is always in the back half of the year and particularly fourth quarter. So again, that's another driver of kind of some of the back half margin expansion that you're not necessarily seeing manifest right now in the first quarter.
Joe o' Day (Equity Analyst)
All helpful details. And then just on the demand front, when you talk about some of the order delays and some of that coming back in the quarter, but trying to understand a little bit of the ripple effect from the conflict. And so if you could just talk about what you're seeing in Europe overall demand and then over the course of March and April, if you have seen any impact associated with the conflict or if that order impact is largely contained to the Middle east region.
Vicente Renal (Chairman and CEO)
Yeah, it is mainly contained right now to the Middle east and the Middle East. It was really, as we said, a handful of these kind of long cycle large projects that as the conflict started and people had to just stay at home and not being able to leave. I mean, we have a lot of our team members, they're all safe and sound, but they had to, they could not leave the house to go and talk to customers. Same thing at the customer side. So that is really what created some of the delay and the impact and thought, therefore, as you can see here already in the, in the month of April, as we said, already a third of those orders kind of already plugged into us and we don't see any cancellation whatsoever. So yeah, so I think it's just at this point in time mainly due to fairly contained on that as we think about continue perhaps impacting in Europe. You know, the main impact that we see is clearly the increase in energy prices which we view it as a potential long term tailwind for us given the nature of our product, as we said before, and how we can create customer energy efficiency for our products and services. There was actually teams were telling me about a win that they had where they're saving, you know, upwards of, you know, $15,000 per month on a specific location at a customer, creating a payback of compressor to be, you know, anywhere into the one year. Not everyone's going to be like that. But I mean, I think that is really part of what we're very focused on. How can we help our customers lower those energy cost so that with the technology that we have.
Joe o' Day (Equity Analyst)
I appreciate it.
Operator
Your next question comes from Manit Mehrotra with UBS. Your line is open.
Amit Mehrotra
Thanks. Good morning. I just, sorry to revisit this, but I just want to sort of revisit the triangulation between organic growth in the quarter orders both kind of flat to down and then this 1% full year organic growth and then the comps actually get a little bit harder as we progress through the year on organic growth. So I'm just trying to triangulate those three things and if there's kind of this embedded expectation of demand that we're not seeing yet as we progress through the year or maybe that's not.
Vicente Renal (Chairman and CEO)
Maybe you can clarify that for me. Thank you. Yeah, sure, Amit, I'll start. So, you know, I think as Vicente indicated here, first and foremost, you know, the short cycle side of our business, whether you look at either on the ITS side or the PST side, is the piece that we're definitely seeing. I'd say stabilization and even, you know, I'd say improvement on as we, as we think back to, you know, the last few quarters. So that's obviously very encouraging. It's kind of the base of the business and obviously what will be a driver of, you know, the, the, the improvement that we see in the demand environment. As far as, as far as the, the, you know, the order numbers you saw in Q1. I think as Vicente said here, clearly more impacted by the longer cycle of projects. Those are projects that, you know, you typically book in the first half of the year. They go into backlog and Those might be six to 18 months in duration. Right. So yes, obviously we want to continue to see those get to the finish line. But you know, one, our expectation is a lot of it was just timing and transitory. We do expect those projects to kind of, you know, not just stay in the funnel but ultimately get to the finish line and you know, those will continue to feed the backlog not just in the back half of this year, but even into 2027. So again, yes, we do want to see that longer cycle, you know, those projects get to the finish line. But you know, that, that for us is, you know, more of the longer term side of the equation. We're very encouraged by what we're seeing on the shorter cycle and some of the book ship businesses as well as, you know, some of the momentum we continue to see on the life sciences side as well.
Amit Mehrotra
Okay, thank you. And I just wanted to follow up on that point and maybe Vincente, you know, the short cycle stuff seems encouraging underneath the surface, but ultimately it's not piercing its way through to the organic growth profile of the business. And I'd like to get maybe your perspective on this because obviously you know the business better than anybody else. And my understanding, my feeling is, is that you know, you guys took a lot of price over the last several years. I'd love for you to opine on whether there's a demand elasticity. I mean because energy prices are high and, and surge during the quarter, which arguably would create a little bit of a cycle for your products. Maybe just opine of whether there's a demand elasticity issue vis a vis pricing a market share. Like is there something else going on where some of this short cycle momentum that we're seeing across the broader industrial is not really piercing through your organic growth in the moment?
Vicente Renal (Chairman and CEO)
Yeah, I'll say. I mean we're, I mean underneath obviously all the data that we have, I mean we can kind of clear seeing it. I mean if I think about the PST side, when you think about the two year stack organic orders on pst, they're basically up single digit organic. And when you kind of unpack what we saw in the first quarter, precision technology, which is kind of the more short cycle in nature, we saw the short cycle in nature piece actually continue to do fairly well offset by some long cycle kind of year over year comps. I mean some of the long cycle, I think we tend to like to look at it better more on a first half and second half kind of comparison versus on a quarter to quarter basis within the its. When you think about the blower and the vacuum side of the business, those tend to be more short cycle. We have always indicated in the past, historically that we have our vacuum business that is based in Europe as a good leading indicator for upswings in manufacturing demand based on short cycle. And we're seeing that, we see that, that clearly. So kind of when we unpack at a high level and you kind of start excluding some of these long cycles, we definitely see that short cycle continues to improve. And you know, keep in mind, I mean, I the demand elasticity based on price, I mean, we'd have a lot of statistics and a lot of analysis. We see that as long as we continue to innovate and we sell based on cost of ownership and payback, that remains strong. That's how our sales teams, they sell today. They sell based on that total cost of ownership on the ipsi, but also on the PST side too as well.
Amit Mehrotra
Got it. Okay, very helpful. Thank you very much.
Operator
Thank you.
Nathan Jones (Equity Analyst)
Your next question comes from Nathan Jones with Stifel. Your line is open.
Vicente Renal (Chairman and CEO)
Good morning everyone. The center, but I'd like to just ask about the. You've made a couple of comments on the call today about the potential for high oil prices, high energy prices in Europe to be a catalyst. We had a similar circumstance in 2022 and I believe there was a surge in demand for your products then. I'm hoping you can kind of compare where we are today in Europe to where we were maybe in 2022. I know there were some government programs that helped there, but maybe just any color you can give us on the similarities that you see and differences that you see between now and then and how rising energy prices or high energy prices impacted the business back then. Yeah, well said. I mean, as you can imagine, we're looking at a lot of those indicators to see how comparable it is. You know, gas prices are not to the same level as what it was back then, but definitely have spiked an increase. And even also, you know, gasoline and oil prices, I mean, I was just in Europe with the team not too long ago and diesel prices are actually higher than petrol prices, which in the European market they have not seen in quite some time. So it's going to take a little bit of time. I think. As you can imagine, we're still early into what I would say the conflict in the Middle east and we're still early into that acceleration of the oil and gas prices. But clearly that is definitely going to help us and we're leveraging our demand generation tools. We're leveraging going back into the funnels and reassessing that return on investment and communicating with customers as to that energy efficiency that we can achieve based on our new technology. So again, staying optimistic in terms of being able to provide better solutions to our customers that will allow them to lower that energy cost
Nathan Jones (Equity Analyst)
and I guess my follow up question, you guys have frequently talked about the time from RFQ to booking, you know, as a sign of customer confidence. Can you talk about any changes you've seen there? Has it got, you know, any shorter or are we still waiting for that to come?
Vicente Renal (Chairman and CEO)
Thanks. Yeah, it has improved. It is definitely not to the early days when we said that a marketing qualified lead will take four to. I mean we said historically before all these elongation it could take anywhere between six to eight weeks and clearly got elongated. It has improved a little bit, but it's nowhere near back to the levels that it was before.
Nathan Jones (Equity Analyst)
Thanks for taking the questions.
Operator
Thank you.
Nicole Deblaze (Equity Analyst)
Your next question comes from Joseph Gablaise with Deutsche Bank. Your line is open. Yeah, thanks. It's Nicole Deblaze. I don't know where that came from, so. Good morning guys. Thanks for the questions. I guess maybe first organic growth for PST pretty strong and I think it was better than your expectations were, maybe flattish originally for the first quarter. So if you could unpack that a little bit. And do you think that that 4% growth that we saw in 1Q is sustainable throughout the rest of the year, meaning that maybe PST outperforms Its in 2026? Thank you.
Vicente Renal (Chairman and CEO)
Yeah, Nicole. So we definitely were pleased with what we saw and very pleased with what we saw as we mentioned on the life science side of the business and kind of the short cycle nature that we saw on the pt. And I think we said too as well that we're pleased with what we're seeing here as we kind of move into the month of April too as well. So hey, I think we're encouraged, encourage. Also I made the statistic that when you think about PST organic two year stack, I mean they're in the mid single digit which is kind of what we always said that that segment should be operating at that mid single digit plus.
Nicole Deblaze (Equity Analyst)
Okay, got it. Understood. And then just thinking a little bit more about the progression of short cycle. I know this has been asked a lot of times, so I don't want to beat a dead horse, but did you guys actually see improvement in order activity on the short cycle businesses throughout the quarter and then into April. And Vicente, if you could just remind us like what roughly what percentage of your total sales are short cycled today? Thank you.
Vicente Renal (Chairman and CEO)
Yeah, we definitely saw, we saw progression, improvement I would say on the short cycle through the quarter and kind of as we continue, as I said here, moving into the more months of month of April, but you know, order cadence continues to go Fairly well in terms of line in line with expectations. And so I think we're pleased with that. Nicole, on the second part of your question about the kind of short cycle versus long cycle, probably the easiest way to frame it up would be at the enterprise wide level. Roughly 40% of our revenue is aftermarket, which obviously has more of a activity based book and ship kind of dynamic to it. And then when you kind of peel that apart on the whole goods side or the balance or the original equipment side, it's approximately 75 to 80%, 75% probably good proxy is more shorter cycled in nature and that leaves about 25% which is more of the, I would call it longer cycle project type business. And you do see a relatively equitable split between both segments. Both segments have had that longer cycle dynamic, as we mentioned before.
Nicole Deblaze (Equity Analyst)
Thank you, Vic and Vicente. I'll turn it over.
Operator
Thank you, Nicole.
Chris Snyder (Equity Analyst)
Your next question comes from Chris Snyder with Morgan Stanley. Your line is open. Thank you. I understand that price cost is I guess basically a net neutral for you guys throughout the rest of the year when we net out all the tariff changes and any sort of mitigation. But I guess is the expectation that the company will push more price in 2026 than what you thought coming into the year in response to inflation and just kind of part of that mitigation efforts? I mean, if so, any way to think about how much more price in 26 versus, you know, the expectations in January? Thank you.
Vicente Renal (Chairman and CEO)
Yeah, Chris, let me, let me unpack that and clarify a few things here. So I think the price cost being more neutral, particularly here in the first quarter as we're continuing to lap some of the tariff dynamics, I think that's more of a fair statement. I think as you move into the back half of the year, we do expect the price cost dynamic to turn a bit more positive. And what I would point to that is are we taking what I would call incremental tariff related actions at this point? No, I don't think that's the case anymore. As we indicated as we came into the year, we expect pricing to kind of revert back to that kind of more normalized 1 to 2% that you've seen in historic times. That does include just some of the, I would say, normal course pricing actions you would expect. Again, not kind of peanut butter and vanilla across the entire enterprise, but you know, targeted pricing where it makes sense. And so that's the piece that's still, you know, I'd say in play here, which does drive some of the more second half, particularly Q4, you know, price cost being positive. So again, nothing necessarily more on the tariff at this point in time. Just given things have kind of stabilized, it's much more what I would call normal course pricing.
Chris Snyder (Equity Analyst)
I thank you for that. I appreciate it. And then, you know, maybe if I could just follow up on the Middle East. You know, I understand there was an impact on orders in Q1, but for the full year, you guys are saying no impact on sales or orders. It seems like for the full year, but I guess did the Middle east have an impact on Q1 sales? And is there any impact that you expect to come through in Q2 on the middle East? And again, just on the revenue side. Thank you.
Vicente Renal (Chairman and CEO)
Yeah, Chris, to keep it fairly simple, I think the teams did a exceptional job here in Q1. So on the. On the shipments or revenue side. No, no, no meaningful impact one way or the other in Q1 at this point in time. Obviously not expecting any material movement here in Q2, but you know, obviously clearly an area that we're watching just like everyone else in terms of how the conflict continues to play itself out.
Chris Snyder (Equity Analyst)
Thank you.
Operator
I appreciate that.
Stephen Volkman (Equity Analyst)
Your next question comes from Stephen Volkman with Jefferies. Your line is open. Hi. Good morning, guys. Thanks for taking the question. Most of it's been answered, but I guess I'm. I'm curious. We're approaching the two year anniversary of ILC Dover now. Is there anything qualitative you can say around how that asset specifically is performing relative to the segment? Maybe in terms of, I don't know, growth or margin just kind of bring us up to speed on how that's doing.
Vicente Renal (Chairman and CEO)
Yeah, Steve, we don't tend to go into kind of unpeeling each of the businesses in particularly across any of the two segments. But I mean, after a two year anniversary, we're pleased with all the investments that we have done. I mean, we have a full lineup of new team really leveraging the tools that we have around irx. And really, as you can see, obviously that and investments that we have done in commercial investments to really accelerate and penetrate more. And you're seeing it now here in the numbers. I mean, obviously ILC Dover is a good part of the PST segment today. And as we said, and particularly the life sciences and life science technology, you know, at a double digit kind of order run rate. We're pleased with that because we have now created a really good platform for the M and A. And as you remember, that was kind of what we were looking for with the ILC Dover 2 as well. And now we have embedded, you know, quite a few of these now bolt on acquisitions into the life science business of ILC Dover. So continue to be pleased. I think the team is executing very well and we see a bright future ahead.
Stephen Volkman (Equity Analyst)
Okay, thank you. And then just follow on to that. Is there anything in the M and A funnel maybe of the 10 Lois or something that would be even close to that size of ILC Dover, or is this all more like what we've seen year to date?
Vicente Renal (Chairman and CEO)
Yeah, I think on the loi, it's kind of more on the bolt on in nature. You know, having said that, I mean there's definitely couple of transactions and particularly one that is not of the size of ILC but about, you know, a little bit more than a billion dollar purchase price transaction. But that one is not on the loi, it's in the funnel. And we're having great conversations, but it is not one of the ten Lois.
Stephen Volkman (Equity Analyst)
Super appreciated. Thanks.
Operator
Thank you.
Andy Kaplowitz
You are next. Next question comes from Andy Kaplowitz with Citigroup. Your line is open. Good morning everyone. Vicente, you mentioned, I think 40% of the business now aftermarket. I think, you know, we've talked a lot about recurring revenue. I think it exceeded 450 million last year. And you talked about a backlog of 1.1 billion in future revenue. Has that continued to grow and what do you see in terms of mix for 26 and sort of moving forward?
Vicente Renal (Chairman and CEO)
Yeah, Andy, I think continues to be an area of emphasis and focus and yes, particularly continues to do very well. We have launched new solutions and we're pleased with making the great progress towards achieving that billion dollar recurring revenue target that we set by kind of run rate at the end of 2027. So it's an area of focus. The team is putting a lot of attention and as you can imagine, it has created incredible customer loyalty and stickiness when we have these solutions to the customer. So it's going to continue to be an area of investment for us.
Andy Kaplowitz
That's helpful. Just one more on the Middle East. You mentioned you got a third of the delayed 40 million of longer cycle orders back in April. But could you give us more color on what the nature of these orders are? And do you think you need the Middle east conflict to end to get all of the orders back? Or are your people telling you that it's just a matter of time, even if the conflict lasts, that you get these delays back?
Vicente Renal (Chairman and CEO)
Yeah, so these were really kind of plant expansion and production capacity Expansions, related, kind of long cycle project orders we don't need, at least at this point in time, we don't expect that it needs the conflict to end. And it was just a matter of kind of putting the final details of these purchase orders. But obviously as you can imagine, I mean the teams and the customer were not able to even in some cases leave their homes to be able to have that kind of close communication and finalizing things. So I think it's just at this point in time, we think it's timing. You know, there's definitely going to be a rebuild in a lot of the petrochemical facilities that have been kind of damaged. So that, I mean we clearly have products that participate in that regard. So I think it's going to be good for the long term. We also believe.
Andy Kaplowitz
Appreciate the color.
Operator
Thank you.
Nigel Koh (Equity Analyst)
Your next question comes from Nigel Koh with Wolf Research. Your line is open.
Vicente Renal (Chairman and CEO)
Thanks. Good morning. It's been a long time since I asked this question, but what percentage of the current portfolio do you think is levered to energy, be it process market, oil and gas, chems, etc.
Nigel Koh (Equity Analyst)
Yeah, good question.
Vicente Renal (Chairman and CEO)
It's, you know, a lot of our technologies are very applicable to multiple industries and they're in some cases kind of agnostic. And clearly we're pivoting and kind of trying to help in some of these cases situations as we see expansion into production capacities like petrochemical facilities. How are for example our Nash liquid ring vacuum that is widely used in the pulp and paper, it's also and can be very well utilized in the, in the distillation towers of petrochemical facilities to be able to decompose products even further. So I think we're putting attention to obviously help our customer where help is needed. And that percentage of total revenue kind of could fluctuate based on the approach that we give to certain customer levels.
Nigel Koh (Equity Analyst)
Okay, okay, so what you're saying is that it doesn't matter what it is today. There's, there's opportunities to grow that number. Okay. And then just maybe a follow to Joe DeBlaze's question, the life sciences. Do you think that the double digit life sciences revenue growth can continue? And I guess what I'm asking here is was there anything unusual on the destocking or restocking activity there? What do you think that life sciences can be sustained and how does the life sciences margin compare to the average within psp?
Vicente Renal (Chairman and CEO)
Yeah, Nigel, I'll take that. So maybe I'll answer it kind of backwards here. So I'd Say on an overall basis the, you know, the life sciences margin profile is comparable to the overall segment. You know, clearly it's the area where you've had more of the integration with the ILC Dover assets, with the legacy life sciences assets of Ingersoll Rand and things of that nature. So. But it's also probably the area we see continued opportunity, particularly as some of those life cycle life sciences businesses continue to show good growth momentum. It's solid margin profile, particularly areas like Biopharma. So again I would say relatively in line with overall segment, but clearly an area for opportunity as far as the growth cadence, things like that. Listen, I think clearly we're encouraged by what we saw. Obviously a double digit growth cadence over the entirety of LST is not necessarily something that we've called for over the entire year or anything of that nature. But clearly we're encouraged by what we're seeing here. We expect to continue to see good momentum and I think to Vicente's point earlier, the fact that you have a two year stack on orders that's in that mid single digit realm I think definitely is where we have been targeting this segment to operate. And we continue to expect to see, you know, continued momentum here as we move forward. So I think we're really encouraged by what we're seeing here and you know, we definitely see continued margin expansion, particularly as we move sequentially through the course of the year.
Nigel Koh (Equity Analyst)
Okay, thanks Nick.
Operator
Your next question comes from Joe Richie with Goldman Sachs. Your line is open.
Joe Richie (Equity Analyst)
Hey guys, good morning. Yeah, so lots been covered, maybe just kind of just parsing out the its margins this quarter. I know you've attributed it to volumes, tariffs and investments. Seems like tariffs probably had the outsized impact this quarter. I don't know, I'm estimating maybe something in that 10 to 15 million dollars zone. You maybe just give us some, some quantification on the tariff impact this quarter and then ultimately if we're getting back to neutral as the year progresses, I guess we should probably see that come back in the upcoming quarters.
Vicente Renal (Chairman and CEO)
Yeah, Joe. So I think, you know, without question, I think the two drivers you mentioned there, both the tariff related dynamics as well as, you know, just the flow through on organic volume, which obviously this is a healthy gross margin business. So clearly those are the two biggest factors. We haven't necessarily quantified one versus another, but those are the two bigger drivers. You know, to your point, yes, clearly as we move into Q2, remember the tariff related noise really started in April of last year or kind of in the second quarter of last year. So I think on a year over year basis this is where the comps on the margin side of the equation start to moderate a bit more. And that's why the margin expansion expectation is more backhand weighted here, particularly now as all the pricing actions and mitigation actions and things like that have really gone into place. I think it's also worth noting here that even over the course of the last year and even to Q1, we've continued to invest on the, on the cost side of the equation and on the SGA side really feed on the street R and D, you know, the same areas we've talked about quite a bit. And so for us that's an area that we wanted to be hyper focused on continuing to invest because that's going to drive the ongoing organic growth moving forward. So I'd say those are the biggest drivers. But yes, your point is valid that as we move sequentially through Q2 and really into the back half of the year, that's where those tariff related headwinds moderate.
Joe Richie (Equity Analyst)
Okay, helpful Vic. And then maybe Vicente just on the M and A pipeline and the. Lois, I know, you know, back in the day I think you guys had a goal ultimately to get the PST business up to you know like a 2 billion ish type run rate business from a revenue perspective as you think about your pipeline and whether that's the LOI or maybe the broader company pipeline that you're looking at. Like how much of that is centered on the PSP business versus its going forward.
Vicente Renal (Chairman and CEO)
Yes, Joe. So I'll say that, you know, on the PST side, back to your commentary about making it larger and bigger. I mean it's kind of double in size since we, we started talking about PST and, And, and those 10 Lois, I would say a good blend between both ITS and PST and but again we, we, we continue to see a lot of great prospects in the, in the PST side that we're very excited about.
Joe Richie (Equity Analyst)
Okay, great. Thank you.
Operator
Thank you.
David Rasso (Equity Analyst)
Your next question comes from David Rasso with Evercore isi. Your line is open. Hi, thank you. For the second half of the year its the margins. Can you give us a sense of where do you think that growth will come from organically between compressors, vacuum and blowers and the lifting power tool segments and just remind us on the relative margin between those three.
Vicente Renal (Chairman and CEO)
Yeah, sure David. I'll kind of give you a quick overview. So you know, obviously the power tools piece is relatively small. It's kind of the smallest piece of the equation, to keep it very simple, the margin profile between compressors, blowers and vacuum actually quite comparable. You know, you don't see a dramatic mix impact between them or things of that nature. Clearly some of those technologies maybe have more aftermarket than others, but in totality fairly comparable. So I think the simple answer to your question here is, and clearly with compressors being upwards of 65% of the revenue base, clearly that's going to be the biggest driver just because it's the biggest piece. But I do think that we expect to see, I'd say, positive contributions from all the underlying technologies. And as Jason said here, when you think about the shorter cycle kind of momentum we've seen in the blower vacuum side, we've seen it in pieces of the compressor side. So I think we're encouraged at least by, I'd say some of the underlying market activity that we're seeing that should kind of lend itself to some of that expansion you see in the back half of the year.
David Rasso (Equity Analyst)
All right, so sort of mix agnostic. Just we just need the volume essentially regardless, either subsector generally correct. And the tariff impact, and you say it gets better as the year goes on. Can you just clarify in the first quarter, is that pricing you put in against tariffs and they're dropping revenues at 0 margin or are we actually getting an EBITDA hit and we need the price to catch up to that in the second half of the year?
Vicente Renal (Chairman and CEO)
It's more the former of what you've said. So the pricing actions related to tariffs have largely all been taken through the balance of 2025. You're seeing that come through now, offsetting tariffs. I would say it's dollar neutral, but obviously margin dilutive. And now obviously on a year over year basis, you move through Q2 to Q4, you're seeing the tariff piece of that start to normalize because you had the tariffs in prior year. And clearly with the mitigation actually taken, combined with some of the ongoing pricing actions we're taking, that's why we expect to see better momentum, particularly exiting the year and in Q4.
David Rasso (Equity Analyst)
All right, that's helpful. I appreciate it. Thank you.
Andrew Buscaglia (Equity Analyst)
your next question comes from Andrew Buscaglia with BNP Paribas. Your line is open. Hey, good morning everyone. Andrew, still think I got one. One, one last question. Even, even this far in the queue, but I think no one's brought up China yet. And I want to, I want to say that your comment there was, as they were called, orders still outperforming underlying market Is that, is that, is that a comment around like improving, improving improvement up of the stabilization, stabilization you've been commenting on the past couple quarters or what are you seeing in, in that market?
Vicente Renal (Chairman and CEO)
Yeah, Andrew, I, I, you know, China, for us again, we have been able to outperform the market that we have that we're playing in China with, with basically new technologies, taking technologies from other, other acquisitions and localizing that in China for China. And the team has done now consistently a pretty good job over the past, I say three quarters of being positive on an organic order basis. And so again, we're pleased with the execution. It's just another form of kind of highlighting the self help commercial that we
Andrew Buscaglia (Equity Analyst)
continue to push on a global basis. Yeah.
Vicente Renal (Chairman and CEO)
What do you see for the China market this year? What's your sense in terms of where, where that market's going for you guys? I think, you know, we still don't see the market, the market itself outgrowing now. What we see is us outgrowing and taking share in the, in the market itself. If the market is not, we don't see China market shrinking. It is obviously highly competitive, but we still see a lot of good opportunities based on the technologies that we have and how we're approaching the market. I mean, and we got hundreds of examples. I was in China earlier this year and one of our medical device facilities and the. In China for China for that medical device operation is.
Andrew Buscaglia (Equity Analyst)
Opportunity is very high as an example.
Operator
Yeah. Okay, great. Thanks, Vicente.
Vicente Renal (Chairman and CEO)
Thank you.
Operator
That is all the time we have for questions. I'll turn the call to Vincente for closing remarks. Thank you, Sarah. Just finally, I just want to pass one more thank you to our employees for their ongoing dedication and commitment to having that ownership mindset and controlling what we can control and continue to deliver performance for our shareholders, which by the way, all of our employees are, and they have that rewarding skin in the game to continue to deliver long term value performance for all of us. So thanks again for the interest and we'll talk soon. This concludes today's conference call. Thank you for joining. You may now disconnect.
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