Vicente Reynal
Chairman, President and Chief Executive Officer at Ingersoll Rand
Thanks, Matthew, and good morning to all. I would like to begin by thanking and acknowledging all of our employees for their hard work in helping us to deliver another record quarter in Q1. Our employees consistently exemplify our purpose, while thinking and acting like owners to deliver on our commitments despite the constantly changing microeconomic environment.
Still on Slide 3, In Q1 we delivered double-digit adjusted EBITDA and adjusted EPS growth with strong free cash flow generation, which is up over 350% year-over-year. Fueling this performance is our competitive differentiator IRX. We continue to align to megatrends and high-growth sustainable end-markets to deliver on our Investor Day commitments of achieving sustainable revenue growth. Based a solid Q1 performance, we're raising our 2023 full year guidance.
Turning to Slide 4, our economic growth engine continues to deliver compounding annual results. During our last Investor Day in Q4 of 2021, we present this model and highlighted our organic, inorganic and quality of earnings growth enablers. We remain committed to our strategy, and our long-term Investor Day targets outlined on this page. On the next two slides, I will provide you with deeper insights into our organic and inorganic initiatives.
On Slide 5, we started with our organic growth initiatives. So let's dive into how we approach the megatrends of sustainability, digitization and quality of life. Demand-generation excellence or DGX, which is a tool within IRX, helps us to capture above-market growth. Here we have six examples of initiatives that we launched during the first-quarter of 2023. Important to note that these six are only a few examples our 100s of these initiatives we execute every quarter. I'll review a few of these examples shown on the page.
Within their sustainability megatrend, we have a digital campaign example which is focused on carbon capture system builders and integrators. This campaign generated a global supply agreement with a key carbon capture player and has also driven a $200 million increase model with no new product development required. For digitization, we have a great example of how utilize IIoT to grow our aftermarket business. Leveraging our IIoT connected equipment, machine alerts are to trigger email notification to our customers and Ingersoll-Rand service contracts when service is needed. The result of these initiative was increased orders on new contracts for preventative maintenance. And this initiative is in its early stages and we plan to expand this approach to other key triggers in the future.
Finally at the bottom of the page, we have a great example within the quality-of-life megatrend. We launched a social media campaign tailored towards small farms and agriculture that increase our marketing qualified leads by 96% for Dosatron dosing pumps. These are merely a few examples of the tailwinds associated with megatrends and how we deploy our organic growth enablers to deliver compounding annual results.
On the inorganic initiatives, we wanted to provide an integration update of one of our larger acquisition since the merger to SEEPEX. In less than 15 months, the business has expanded, adjusted EBITDA margins by over a 1,000 basis-points and this margin expansion has come from a balanced approach on gross margin expansion and SG&A synergies. When we acquired this business, adjusted EBITDA margins were in the mid-teens and we expect to deliver low 30s in 2023, while accelerating organic growth. And this speaks to the power of our M&A approach on finding phenomenal companies and then integrating them into our economic growth engine.
With new acquisitions, we're not only focused on cost improvements, but also maintaining focus on growth. For SEEPEX, we accelerated organic growth across three levers. First, from the SEEPEX acquisition came in great IIoT technology, which we now have expanded and scaled across the entire PST segment.
The second lever is combined SEEPEX technology with Ingersoll-Rand existing channel knowledge to access Lithium-ion battery customers. And we were able to bring in mission-critical product to market in less than nine months, while expanding our addressable market by over $250 million. Finally, we have also integrated SEEPEX Pump and Compressor Technology to accelerate product differentiation within the marketplace. By combining an air compressor with SEEPEX progressive cavity pump, this patented technology enables our customers to better transfer materials with controlled airflow and improved energy efficiency.
As we move on to Slide 7, M&A continues to be at the forefront of our capital allocation strategy. We're pleased to highlight one closed transaction and one signed M&A deal. These acquisitions add both market-leading products and technologies, while accelerating our addressable market with close adjacencies. Let me walk you through these deals.
First Trace Analytics, which is a leading provider of lab-based testing and sampling for compressed air technologies. This acquisition has strong recurring revenue in air purity and quality across attractive markets such as life sciences, food and beverage and pharmaceutical. Next is Gaopeng Vacuum, which is a well-established oil-free vacuum pump manufacturer that expands our portfolio in a very attractive and growing sustainable end-markets across Asia-Pacific.
Our M&A funnel remains very strong and as of today, we continues to be over 5 times larger than it was at the time of the R&D. We currently have five transactions the LOI stage. And more importantly, we have several other transactions in process which are close to the LOI stage. Based on acquisitions today, the five transactions under LOI and our current M&A funnel, we are reaffirming our commitment to additional $200 million to $300 million in annualized inorganic revenue to be acquired in 2023.
Moving to slide 8. While our results have been strong and we continue to see orders and backlog growth, we do acknowledge that the market is in a state of constant change, and we need to remain agile and nimble in order to respond. Over the past few years, we have transformed our portfolio to be more resilient than ever. We have a large recurring and highly profitable aftermarket business that accounts for approximately 35% of our total revenue, while growing at double digits. In addition, we have divested almost $2 billion of highly cyclical assets in Club Car and High Pressure Solutions and in-turn reinvested that into acquisitions that are better aligned in high growth sustainable end-markets. And we believe that this along with a differentiated loan cycle and better geographically balanced portfolio, will ensure [Technical Issues] Performance in the next slowdown.
We also had a proven track-record of performance. For example, in 2020, during the global pandemic, we were able to expand adjusted EBITDA margins by 190 basis points year-over-year. As you recall, during the pandemic we immediately deployed merger-related synergies to ensure we were out in front and controlling cost pretty quickly. Also in 2019, the legacy Gardner Denver Industrial segment delivered 70 basis points of adjusted EBITDA margin expansion and grew adjusted EBITDA dollars 3%, in spite of revenue declining 3% organically year-over-year.
We're constantly monitoring for early indicators of an economic slowdown and we remain nimble and ready to act in the event that markets start to soften. We have highlighted in past earnings call how we are able to pivot our demand generation activities towards market that are still growing. And with an addressable market of over $45 billion, we believe that there is still plenty of room to take market share. In addition, we have multiple levers to manage adjusted EPS as seen at the bottom-right hand side of this slide.
On Slide 9, our commitment to become a market leader in ESG continues, and we're very excited to continue receiving positive feedback from the rating agencies on our efforts. In April, Ingersoll-Rand receive an ESG risk rating of low with a score of 12.8 from Morningstar Sustainalytics. These rating ranks us second in the machinery industry group and places Ingersoll-Rand in the first percentile in the machinery industry and sixth percentile of all rated companies. This is a perfect example of how we utilize IRX for agile execution across all aspects of our business. In this case, we use our own IRX execution process to go a medium risk to low risks, and are now in the top percentile in the industry and regionally.
I will turn the presentation over to Vik, to provide an update on our Q1 financial performance.
