ITT Q1 2025 Earnings Report

ITT EPS Results

• Actual EPS: $1.45
• Consensus EPS: $1.44
• Beat/Miss: Beat by +$0.01
• One Year Ago EPS: $1.42

ITT Revenue Results

• Actual Revenue: $913.00 million
• Expected Revenue: $901.22 million
• Beat/Miss: Beat by +$11.78 million
• YoY Revenue Growth: +0.30%

ITT Announcement Details

• Quarter: Q1 2025
• Date: 5/1/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 8:30AM ET

ITT (NYSE:ITT), together with its subsidiaries, manufactures and sells engineered critical components and customized technology solutions for the transportation, industrial, and energy markets in the United States and internationally. The Motion Technologies segment manufactures brake pads, shims, shock absorbers, and energy absorption components; and sealing technologies primarily for the transportation industry, including passenger cars, trucks, light- and heavy-duty commercial and military vehicles, buses, and trains. This segment sells its products under ITT Friction Technologies, KONI, Wolverine Advanced Materials, Axtone, Novitek, and GALT. brand names. The Industrial Process segment provides industrial pumps, valves, and plant optimization and remote monitoring systems and services; and aftermarket solutions, such as replacement parts and services. It serves various customers in industries, such as chemical, energy, mining, and other industrial process markets. This segment sells its products under Goulds Pumps, Bornemann, Engineered Valves, PRO Services, C'treat, i-ALERT, Rheinhütte Pumpen, and Habonim brand names. The Connect & Control Technologies segment designs and manufactures a range of engineered connectors and specialized products for critical applications supporting various markets, including aerospace and defense, industrial, transportation, medical, and energy. This segment provides connector products, such as circular, rectangular, radio frequency, fiber optic, D-sub miniature, micro-miniature, and cable assemblies; and control products consist of highly engineered actuation, flow control, energy absorption, environmental control, and composite component solutions for the aerospace, defense, and industrial markets under Cannon, VEAM, BIW Connector Systems, Aerospace Controls, Enidine, Compact Automation, Neo-Dyn Process Controls, Conoflow, and Micro-Mode brand names. The company was incorporated in 1920 and is headquartered in Stamford, Connecticut.

ITT Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Welcome to ITT's twenty twenty five First Quarter Conference Call. Today is Thursday, 05/01/2025. Today's call is being recorded and will be available for replay beginning at 12PM Eastern. At this time, all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. It is now my pleasure to turn the call over to Mark McAluso, vice president, investor relations and global communications.

[Operator]

You may begin.

[Mark Macaluso, Vice President of Investor Relations & Global Communications at ITT]

Thank you, Tanya, and good morning. Joining me in Sanford today are Luca Savi, ITT's chief executive officer and president and Emmanuel Capre, Chief Financial Officer. Today's call will cover ITT's financial results for the three month period ended 03/29/2025, which we announced this morning following our earnings pre release on April 10. Please refer to slide two of the present station available on our website, where we note that today's comments will include forward looking statements that are based on our current expectations. Actual results may differ materially due to several risks and uncertainties, including those described in our 2024 annual report on Form 10 ks and other recent SEC filings.

[Mark Macaluso, Vice President of Investor Relations & Global Communications at ITT]

Except for otherwise noted, the first quarter results we present this morning will be compared to the first quarter of twenty twenty four and include certain non GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures are detailed in our press release and in the appendix of our presentation, both of which are available on our website. With that, it's now my pleasure to turn the call over to Luca, who will begin on slide number three.

[Luca Savi, President, CEO at ITT]

Thank you, Mark, and good morning. ITT's first quarter results were resilient and in line with the preliminary earnings we announced on April 10. The environment has been fluid, to say the least, and still our ITTers all around the world delivered. Once again, the resilience of our people and of our businesses came through. For this, my heartfelt thank you to all our employees.

[Luca Savi, President, CEO at ITT]

One of the highlights of the quarter was our orders of more than $1,000,000,000 the most of any quarter ever in ITT. This was bolstered by the Kesaria and Svanihoye acquisitions. Talking about orders, in Q1, we grew 7% or 2% organic. Our book to bill was 1.15, resulting in an ending backlog of $1,800,000,000 up 21% year over year and 10% sequentially. Moreover, we expanded margin 30 basis points to 17.4% on flat sales.

[Luca Savi, President, CEO at ITT]

We generated adjusted EPS of $1.45 up 7% without the loss of earnings from the Wolverine divestiture. We generated record Q1 free cash flow of $77,000,000 up more than 150%, and we repurchased $100,000,000 of shares in Q1. On orders, Industrial Process grew 14% at 11% organic, driven by new large palm project awards, including Svanoy, where orders were up nearly 70%. We continue to invest in fast growing locations like our IP Saudi and India sites to drive further market share gains. In Q1, was pleased to spend time with Lala and Jaemen in Vadodara, India, to review our investments and market expansion plans in this important growth region for ITT.

[Luca Savi, President, CEO at ITT]

Connect and Control grew nearly 40%, driven by Kesaria's large platform award with Defense PRIMEs, including F-thirty five. And both IP and CCT had a book to bill above 1.2. On profitability, we continue to expand margin despite headwinds from foreign currency and M and A amortization. The team at Connie led MT to just shy of 20% margin, offsetting 150 basis points of unfavorable FX. CCT grew 170 basis points to nearly 20% excluding M and A dilution, driven by price actions and productivity.

[Luca Savi, President, CEO at ITT]

And lastly, IP grew 60 basis points to over 23% excluding M and A dilution. Now on capital deployment, we started 2025 moving at ITT speed. Immediately after quarter end, we decided to release preliminary earnings. We then went into the market and started repurchasing ITT shares to reaffirm our confidence in the long term outlook of ITT. We repurchased $300,000,000 of ITT shares in April, in addition to the $100,000,000 we did in Q1, lowering our share count by 4% for the year, and still, our capacity to execute M and A remains.

[Luca Savi, President, CEO at ITT]

Lastly, the outlook. After a resilient Q1, we have good visibility to a strong second quarter, with adjusted EPS growth expected to be roughly 8% at the midpoint. With this, we are maintaining our full year adjusted guidance for 2025, even with the uncertainty around the macro environment in the second half. Our strong cash generation is also expected to continue, driving us towards nearly $500,000,000 for the year, a new milestone for ITT. Now, moving on from the results, earlier in Q1 we announced the launch of Vida.

[Luca Savi, President, CEO at ITT]

This is a perfect example of ITT's innovation, driven by our engineering DNA. With innovation, we stay ahead of competition. We do it in friction, where our engineers in Europe, North America and China turn engineering challenges into market share gains. We are doing it in Svanohoj with our new cryogenic fuel pumps. Emmanuel and I were fortunate enough to be together with Soren and the entire Svanohoj team last quarter in Denmark, as their new high pressure pumps were tested with liquid nitrogen at minus three ten degrees Fahrenheit to replicate cryogenic operating conditions.

[Luca Savi, President, CEO at ITT]

We are doing it in our connectors defense business, where our new product development team is co designing new connectors for harsh environments with our customers and quickly prototyping them. This is driving new awards, including share gains on the world's most advanced defense platforms. And we're doing it through ITT Ventures, with our game changing industrial motor VITAL, which we believe is going to solve one of the biggest problems facing the global flow industry, wasted energy. Let's turn to slide four to discuss Vidar in more detail. Vidar is truly a game changer.

[Luca Savi, President, CEO at ITT]

Let me explain exactly how it will change the flow industry. Nearly 10% of the world's electricity is used to power the motors that drive industrial pumps and pumps, translating to an annual energy bill of over $300,000,000,000 Yet, most of these systems rely on outdated motor technology that runs at fixed speed, requiring mechanical controls to regulate the flow. In these instances, the only solution available is a variable speed drive. But variable speed drives need space. Not only space, they require a clean room, and they are expensive.

[Luca Savi, President, CEO at ITT]

Therefore, they are using less than 20% of the cases. And this is where comes in. Not only does Vida embed variable speed technology into the motor to deliver energy savings and drastically reduce costs and emissions, but buy there is also a drop in replacement, meaning customers can simply swap out their existing motor. It does not require a clean room, it does not need more space, but it does quickly pay for itself. There are multiple customer pilots either underway or completed with thousands of hours of run time under our belt.

[Luca Savi, President, CEO at ITT]

Then, our Vidor GM can tell you that at one such pilot site, we replaced existing motor with Vidor, and we opened the control valve to 100%. The transformation was immediate. The motor speed dropped by 24%, energy use decreased by over 50%, and noise levels were limited. All whilst Vidar delivered the exact same flow at half the operating cost. This single motor saved our customers' plant two and twenty four thousand kilowatt hours annually, enough electricity to power 30 ohms for an entire year.

[Luca Savi, President, CEO at ITT]

Additionally, it helped our customer eliminate 160 metric tons of CO2 emissions, the equivalent of removing 34 gas powered cars from the road. And the financial impact was impressive. The plant saved roughly $20,000 per year from just one pump. A typical industrial plant will have hundreds. This revolutionary motor technology enables ITT to enter a new $6,000,000,000 addressable market.

[Luca Savi, President, CEO at ITT]

You will see and hear much more about Beidar at our Capital Markets Day on May 15, including our targets for revenue growth. As you can see, Baader is a game changer for our customers, for ITT and for the world. Now, let me turn the call over to Emmanuel to discuss our Q1 results in more detail.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Thank you, Luca, and good morning. ITT delivered another solid quarter. Let's begin with revenue. Growth was flat to prior year on a total and organic basis, mainly driven by our acquisitions and pricing actions, which fully offset lower volumes including from the Wolverine divestiture in the prior year. There were however a number of highlights.

[Emmanuel Caprais, Senior VP & CFO at ITT]

In CCT, Defense Connectors grew over 20% and General Industrial Connectors grew 4%. Kesaria contributed 26 points of total growth. This was more than offset by lower aerospace volumes, primarily due to Boeing as we anticipated. CCT also had the stronger price realization of all the businesses in Q1. In Motion Technologies, the highlight was double digit growth from COLI share gains.

[Emmanuel Caprais, Senior VP & CFO at ITT]

In Friction OE, we saw strength in China as well as continued growth in Friction's independent aftermarket, which offset a market slowdown in North America and Europe. Finally, in Industrial Process, strong marine pump shipments in Svenahoy as well as growth in valves offset lower pump shipments. On profitability, operating income grew 2% on flat sales or 7% excluding the Wolverine divestiture, primarily driven by shop floor productivity and price, which more than offset lower volumes in auto and aerospace as well as cost inflation and unfavorable FX. IKEA was once again above 20% margin. Excluding Sven Hoy, margin would have been up 60 basis points.

[Emmanuel Caprais, Senior VP & CFO at ITT]

In MT, the team just just about reached its 20% long term target, despite a larger than expected FX headwind, expanding margin 160 basis points versus prior year and over 300 basis points excluding FX. Finally, in CCT, excluding M and A dilution, margin was up 170 basis points to nearly 20%, driven by price gains and productivity. We expect CCT to continue to drive higher price realization as renegotiations in aerospace are finalized. This performance, combined with a 1% lower share count, resulted in adjusted EPS of $1.45 We overcame zero six dollars of lost earnings from Wolverine and $06 from unfavorable FX. Lastly, on free cash flow.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Our cash generation increased over 2.5 times versus prior year and was a record for the first quarter. Our free cash flow margin also increased more than 500 basis points this quarter. This is thanks to the efforts of our team to drive stronger cash collections as well as more than $15,000,000 of operating cash flow from our acquisitions. Let's turn to the Q1 operating margin and EPS bridges on Slide six. The key takeaway here is the strong operational performance of our businesses that allowed us to grow margin on flat sales.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Included in the figures are 150 basis points of operational leverage, 40 basis points of productivity, which outweighed the dilutive margin impact of acquisitions and foreign currency. As you can see on the right, our operational performance, along with the contribution from our acquisitions, helped us overcome earnings headwinds from the 2024 divestiture of Wolverine, unfavorable foreign currency, higher interest expense and a higher tax rate. Excluding the divestiture, Q1 EPS would be up 7% for the quarter. Now let's move to slide seven to discuss our 2025 guidance. After a solid Q1 performance, we are confirming our full year adjusted outlook.

[Emmanuel Caprais, Senior VP & CFO at ITT]

We have good visibility to our performance in the second quarter, which gives us confidence despite the highly uncertain trade environment. On revenue, our total growth is expected to be slightly higher due to FX, while organic revenue is expected to be within our original range of 3% to 5%. In CCT, we expect to drive growth in Defense as well as in Aerospace, with the ramp in shipments to Boeing and benefits from pricing actions. In IP, we expect growth in project shipments to accelerate in the second quarter, while demand in aftermarkets and in valves remains robust. This is partially attributable to the 90 plus percent on time delivery in our North America aftermarket business, which is allowing us to gain share.

[Emmanuel Caprais, Senior VP & CFO at ITT]

And in MT, we expect outperformance in Friction in The U. S. And Europe to accelerate throughout the year. For total ITT, price should account roughly one to two points of growth. On margin, as we saw in Q1, productivity and price should continue to drive the bulk of our margin expansion overcoming the impact of lower volume and higher cost inflation.

[Emmanuel Caprais, Senior VP & CFO at ITT]

We have already taken further actions to reduce structural costs while prudently investing in areas of our business that will drive growth such as Vidar. Our revenue growth and margin expansion are expected to drive adjusted EPS at the midpoint to $6.3 This includes the $0.17 unfavorable impact from temporary intangible amortization that ended in April for Svaneroi and will conclude by the end of the year for Kassaria. Still, the twenty twenty four acquisitions are expected to add approximately $0.20 of accretion this year. We will also realize an approximate $0.10 benefit from the $400,000,000 of share repurchases executed through April, net of interest expense. Finally, on cash, the solid start in Q1 puts us in position to deliver close to $05,000,000,000 of free cash flow this year.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Let's talk briefly about our Q2 outlook. Revenue growth should be in the mid single digit range in total and low single digit range on an organic basis, led mainly by project shipments in Industrial Process including Van Hoy. Growth in CCT should accelerate quarter to quarter as shipments to Boeing run. On margin, Motion Technologies should surpass 20% and Industrial Process is expected to be over 21%. CCT margin should improve sequentially by roughly 200 basis points, but will be down year over year due to Kesaria amortization.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Legacy CCT would have effectively hit their long term margin targets in Q2. In total, this should drive operating margin expansion of roughly 50 basis points year over year and more than 100 basis points sequentially, overcoming higher corporate costs related to the Vidar launch. Higher income and lower share count is expected to drive adjusted EPS growth of 6% to 10% year over year and 8% growth at the midpoint. Excluding the lost earnings from Wolverine, EPS growth would be 14%. Before we wrap up, I wanted to address our assumptions on tariffs.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Our supply chain and sourcing teams have been working to quantify the potential exposure to ICT and to develop granular action plans to mitigate the impact by working with our customers and suppliers. As it stands today, our estimates of the tariff cost for the balance of 2025 is approximately 50,000,000 to $60,000,000 prior to our mitigation strategies. Given the divestiture of Wolverine in MT, the largest impacts are expected in CCT and in IP. Most of our products are USMCA certified, and we have assumed these exemptions remain intact. We issued price increases to our customers for the products that are not exempt and we also continue to strictly control our costs such as the restructuring actions we took in the first quarter in the event of a slowdown in the second half.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Taken all together, we expect our actions will offset the impact from an operating income perspective. There may, however, be some impact on margin as well as a timing element that could affect cash flow. One more thing to note. Our 2025 EPS guidance has not changed. This is due to the uncertainty in the second half of the year given the volatility in the macro environment.

[Emmanuel Caprais, Senior VP & CFO at ITT]

This is a very fluid situation and we will stay close to this and take further actions as needed. Let me turn the call back to Luca to wrap up.

[Luca Savi, President, CEO at ITT]

Thanks, Emmanuel. Few points before moving to Q and A. This was another resilient performance. We delivered on our Q1 commitments and have good visibility to a strong second quarter. We continue to expand our margin with more opportunities still to capture.

[Luca Savi, President, CEO at ITT]

We are maintaining our full year guidance despite a great deal of uncertainty. We quickly deployed capital repurchase shares in April, and still, there is a lot of value we can create at ITT, including through game changing innovations like VITAR. On May 15, you will be able to see this value creation come to life at ITT's next Capital Markets Day, and hear from some of the ITT leaders delivering our results today and for the years to come. I look forward to seeing you there. Thank you for your ongoing support of ITT.

[Luca Savi, President, CEO at ITT]

As always, it has been my pleasure. Tanja, please open the line for Q and A.

[Operator]

Certainly. The floor is now open for questions. Thank Our first question will be coming from the line of Scott Davis, Amelius Research. Your line is open, Scott.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Thank you, operator. Good morning, guys.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Morning, Scott.

[Scott Davis, CEO & Chairman at Melius Research LLC]

I think that the headline to me at least is order numbers are pretty big. Can you give us a little bit of color on why you think orders picked up so much? Is there maybe some impact of people trying to get ahead price increases? Is there any other variables out there that you can kind of point to that could explain sequentially and year over year why you had such a big increase?

[Luca Savi, President, CEO at ITT]

Sure. No, Scott, we don't think there is any purchasing ahead of what might happen. Also, reason for that is if you think about it, IP, for example, IP project orders were up 47%. Those projects you have been working on those projects for a month, in some cases, for years. So there is no acceleration in any shape or form on that one.

[Luca Savi, President, CEO at ITT]

And then, of course, are the great acquisition performance, both from Kesaria as well as from Svanoy. If you think about Svanoy, it was up 70% year over year with a book to bill of two point zero. So I would say this is for sure partly the market, but partly also market share gains in several sectors.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Okay, helpful. And then just to clarify the big buyback that you did presumably to help offset Wolverine, but not fully of course, but help, but was that because of market weakness or because you see perhaps a lull in M and A? What any color behind that, please?

[Luca Savi, President, CEO at ITT]

Sure. No, I would say that it's not related to the M and A. As a matter of fact, our pipeline is healthy. We keep it on cultivating, and we are still targeting to do M and A this year. In an ideal world, we will be able to deploy 500,000,000 to $700,000,000 or a little bit more this year on M and A.

[Luca Savi, President, CEO at ITT]

So it's not related to the lack of opportunity in M and A. It's just to reaffirm really the confidence in ITT and our medium and long term outlook. And as you've seen, our net debt ratio was probably one of the lowest in the multi industrial. Think in one of your slides, you show us that's at 0.3. So you might have participated to that decision, Scott.

[Scott Davis, CEO & Chairman at Melius Research LLC]

Well, best of luck, guys.

[Operator]

our next question will be coming from Mike Halloran of Baird. Your line is open.

[Mike Halloran, Analyst at Robert W. Baird & Co]

Hey, good morning, everyone.

[Luca Savi, President, CEO at ITT]

Hi, Mike.

[Mike Halloran, Analyst at Robert W. Baird & Co]

First, can we just bridge the previous guidance to the current guidance? Feels like pricing moves revenue up a little bit, probably some implicit pressure on the volumes. Not that you're seeing it today, but you're assuming back half maybe a little something, FX more favorable.

[Mike Halloran, Analyst at Robert W. Baird & Co]

Anything else I should be thinking about from a put and take from previous guide to the current guide?

[Emmanuel Caprais, Senior VP & CFO at ITT]

Yeah, Mike. So when you look at guidance to guidance, obviously, as you mentioned, we have a little bit of a positive impact from FX and also from share count, as we discussed.

[Mike Halloran, Analyst at Robert W. Baird & Co]

Yeah, share count.

[Emmanuel Caprais, Senior VP & CFO at ITT]

I think when you look at a little bit of the headwinds, we have some an increased tax rate, a little bit of more cost inflation. And also, we expect the second half to be a little lower than originally. So not baking at all a recession, but economic activity maybe to be a little bit slower. So all in all, this is where we stand. We expect acquisitions to deliver a little bit better than originally, so that's really good news.

[Emmanuel Caprais, Senior VP & CFO at ITT]

And then when you look at the different components of the guidance, so as we discussed mid single digit organic revenue growth, we expect IP to be leading the pack with around 5% and CCT closely behind and NT to be roughly flat. One of the things that I think it's important to highlight is that we continue to expect obviously margin expansion. We expect that IP for the year will land at close to 22%. MT is expected to be solidly at 20%, in line with our long term target. And CCT just shy of 18%, because obviously it is impacted by the margin dilution.

[Emmanuel Caprais, Senior VP & CFO at ITT]

But without a Kesaria, CCT would be above 21, which is really close to long term target. So I think that all in all, EPS aligned with prior guidance. If everything goes well and the tariffs are resolved, this is good news. Other than this, no major change.

[Mike Halloran, Analyst at Robert W. Baird & Co]

That's super helpful. I appreciate that. So then just kind of thinking about the resilience in the model here. I think the IP side, curious your thoughts on how that should track if you do get a little bit of softness. I know the pipeline, the backlog, the front log are all very attractive.

[Mike Halloran, Analyst at Robert W. Baird & Co]

How do you think that tracks? How do you think the customer base responds? And do you think there's enough inertia in what you're doing as well as the need in the market to have some sort of offsets or at least be pretty resilient in the face of that?

[Emmanuel Caprais, Senior VP & CFO at ITT]

So when we look at the market in IP, we see a little bit of a slowdown in the funnel. So the funnel is down year over year and we think it accounts for all those projects that have been awarded that have not replenished as fast as we have seen in the past. But I think it's fair to say that the funnel remains at elevated level even though it's declining. Some of that decline is coming from North America and specifically in there we see decline also from a oil and gas and chemical standpoint. But for us, as we discussed, we have a really strong backlog.

[Emmanuel Caprais, Senior VP & CFO at ITT]

The backlog in IP is at $1,000,000,000 which is a record. It's up year over year 15%, sequentially up 8%. As we discussed, book to bill above 1.2. So I think that we are really confident in terms of our revenue number and our growth in 2025 for IP.

[Luca Savi, President, CEO at ITT]

If I may add one point, Mike, if you look at the backlog that Emmanuel was talking about, in the last three years, it grew from $05,000,000,000 to $1,000,000,000 so 100% up in three years, and 50% organically. And then also when you look at our project execution, when we close the project now, the closing margin of this project is higher than the margin of the project when we book them. So I think that this gives us confidence to continue to perform in IP.

[Mike Halloran, Analyst at Robert W. Baird & Co]

Really appreciate it. Thanks, gentlemen.

[Luca Savi, President, CEO at ITT]

Thank you, Mike.

[Operator]

Thank you. And our next question comes from Vlad Bostrekke of Citigroup. Vlad, your line is open.

[Vladimir Bystricky, VP & Equity Research Analyst at Citigroup]

Good morning, guys.

[Luca Savi, President, CEO at ITT]

Good morning, Vlad.

[Vladimir Bystricky, VP & Equity Research Analyst at Citigroup]

Thanks for taking my question. So maybe just following up on IP, mentioned continued investments that you're making in Saudi and in India. I guess in the Saudi region in particular, can you talk about whether or how you're thinking about any potential risks to Saudi spending plans as we've seen crude oil prices pull back this year and whether you're hearing any change in tone from your customers there?

[Luca Savi, President, CEO at ITT]

Sure. No, actually, we do not see any change in tone. As a matter of fact, when you look at the orders, if you look at the last three years, our orders by market, the oil and gas have been orders up every single year, 2022, '20 '20 '3, '20 '20 '4. Chemical, same. General and Industrial, the same.

[Luca Savi, President, CEO at ITT]

Q1 twenty twenty five, energy, oil and gas keeps on growing. So no major noise on that front. And I would say also that on top of the market, we are benefiting, of course, from market share gains because of our because the way that Khaled and the team are performing in Saudi. More than 95% of time delivery, perfect project execution, So the customers are very loyal to us.

[Vladimir Bystricky, VP & Equity Research Analyst at Citigroup]

That's great to hear, Luca. Appreciate it. And then maybe just shifting to MT. You mentioned, I think, an expectation for friction OE outperformance to ramp in North America and Europe over the course of the year. Can you just talk about is that based on OEM production schedules and platform introductions?

[Vladimir Bystricky, VP & Equity Research Analyst at Citigroup]

And do you see any risk of further modifications to those schedules just given the current uncertainty in the environment?

[Luca Savi, President, CEO at ITT]

No, and to be honest with you, Q1 was very challenging for the European and North American market. The European market was down almost 7% in terms of production, North America is down 5%. So the only resilient market that showed good growth was China with manufacturing up 11%. So these were the market number, and in China we outperformed by a few hundred basis points. The reason why we are confident on the 400 basis points for the full year and ramping up is the platform that we won, the start of production that we see and also the order book that we see now, for example, for the next three months.

[Luca Savi, President, CEO at ITT]

So all of that give us confidence of the outperformance of 400 to 500 basis points for the full year.

[Vladimir Bystricky, VP & Equity Research Analyst at Citigroup]

Great. Appreciate it, guys.

[Luca Savi, President, CEO at ITT]

Thank you, Vlad.

[Operator]

Thank you. And our next question will be coming from Jeff Hammond of KeyBanc Capital Markets. Your line is open.

[Jeffrey Hammond, Managing Director at KeyBanc Capital Markets]

Yes. How are you doing, Jeff. Hey, so just want to hit the good color on the tariff exposure. Can you just talk about how much of the $50 to $60 you cover with price where specifically you're announcing price increases? And then just any changes you're implementing around sourcing or otherwise to kind of further mitigate the headwinds?

[Luca Savi, President, CEO at ITT]

Sure. When you look at the total exposure, Jeff, which is roughly between $110,000,000 for the next nine months. As we said, we are acting on cost, so and on the sourcing. So when you're looking at the sourcing, where you have material, for example, where you have two suppliers that are qualified and might be in different geographical location, we are able to use that flexibility and that resilience that we built in the supply chain in the last few years to reduce the impact of the tariff. And then when it comes to the commercial actions, the commercial actions are really on all the products that for instance are not USMCA compliant, and a lot of those commercial actions that are executed in progress tend to be the majority through the distribution, so where we also have more pricing powers.

[Luca Savi, President, CEO at ITT]

So all of these enable us to have no net impact to the EPS guidance for 2025.

[Jeffrey Hammond, Managing Director at KeyBanc Capital Markets]

Okay, that's helpful. And then just back on M and A, a lot of companies have said, gosh, it's gotten more difficult. We got to ask a million questions on tariffs and we don't know what's going to happen from a demand perspective and that makes M and A difficult. But it sounds like you guys still feel like you can get stuff to the finish line. Maybe just speak to actionability if you've seen stuff fall out because of all this noise.

[Luca Savi, President, CEO at ITT]

I think that now is the time to spend more in cultivating these opportunities on the M and A front. Now, the uncertainty means that, of course, you're going to be more granular and understand that it will be more the impact in the short term. But if you have a very good strategic acquisition with a lot of value creation, sure, you need to be more granular, but largely, the long term picture will not change. And this is the approach that we are having on the M and A front. So Bartek, myself and the entire team are busy in cultivating, meeting, and analyzing the opportunity.

[Luca Savi, President, CEO at ITT]

Granted, you might need to be a little bit more granular in your model in the first three, four years.

[Jeffrey Hammond, Managing Director at KeyBanc Capital Markets]

Okay, great. We'll see you guys in a couple of weeks.

[Luca Savi, President, CEO at ITT]

You. See you, Jeff.

[Operator]

Thank you. Our next question will be coming from Brad Hewitt of Wolfe Research. Brad, your line is open.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

Hey, good morning, guys. Thanks for taking my question.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Hi, Brad.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

So on the IP side, very strong project orders in Q1 with the 47% growth. Just curious if you can walk through your updated growth assumptions for IP between projects and short cycle. I believe your prior guidance was like mid teens growth in projects and kind of low to mid singles in short cycle.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Yeah, sure. So the guidance really hasn't changed much. Keep in mind, Brad, that while we're very happy with the project orders and the growth of 47%, this will not convert into revenue growth in 2025. Those are long lead projects. They take anywhere between twelve to twenty four months.

[Emmanuel Caprais, Senior VP & CFO at ITT]

So our assumptions between projects and short cycle, they remain essentially the same. I think that as I mentioned, in IP really for us, the focus is to make sure that we convert that backlog in a timely fashion. We're not really concerned of hitting our revenue target for 2025.

[Luca Savi, President, CEO at ITT]

And when you look at short cycle, Brad, if I may add, if we look at, sure, the growth in project was very strong and short cycle not so much. But to be honest, if we look at the short cycle orders sequentially, we were up 1%. And the book to bill in the short cycle was 1.07. And then even looking at the short cycle, on a weekly basis, the run rate in Q1 was higher than the average weekly rate of 2024. So doesn't have the growth that we saw in the past, but it's still staying at a very high level.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

Okay, that's helpful. And then maybe switching over to the tariff side of things, you mentioned the 50,000,000 to $60,000,000 gross headwind for the rest of the year, most of that offset coming from price. I guess just curious, in your guidance, what are you embedding in terms of demand elasticity in response to those price increases?

[Emmanuel Caprais, Senior VP & CFO at ITT]

So as we mentioned, Brad, we do not we did not bake anything in terms of in the guidance in terms of demand destructions due to those tariffs. We expect able we expect to be able, obviously, to pass all the cost increase through price and cost reduction actions as well. I think one thing that it's important to highlight is the fact that we pretty much are in the same condition as everybody else. Like for instance, in IP, most of the competitors buy their castings from China or from India. So we don't believe that there'll be any competitive disadvantages.

[Emmanuel Caprais, Senior VP & CFO at ITT]

So we expect to be passing on and we'll see if that results in a bit of a hit to demand in the second half. We continue to be very prudent monitor the activity.

[Brad Hewitt, VP - Equity Research at Wolfe Research LLC]

Great. Thank you.

[Luca Savi, President, CEO at ITT]

Thank you, Brad.

[Operator]

And our next question will be coming from Joe Ritchie of Goldman Sachs. Your line is open, Joe.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Good morning, Joe.

[Joseph Ritchie, Analyst at Goldman Sachs]

Thanks. Good morning, guys.

[Luca Savi, President, CEO at ITT]

Good morning, Joe.

[Joseph Ritchie, Analyst at Goldman Sachs]

Hey, I'm sorry if I missed it. But have you guys said how much of the 50,000,000 to $60,000,000 in tariff cost impact is coming from each segment? Just trying to gauge just in terms of your ability to kind of pass pricing. I know that sometimes it takes a little bit longer for the friction business.

[Luca Savi, President, CEO at ITT]

Sure, Joe. The majority of the impact is actually in IP and in CCT. Because as you remember, in Motion Technologies, with the divestiture of Wolverine, the impact of the tariffs has been greatly reduced. We are in the region for the region, Europe for Europe, China for China, and Mexico for North America, and all our products are USMCA compliant. So when it comes to MT, the exposure in MT is only in the Coneyshock absorbers that play a role in the aftermarket in The U.

[Luca Savi, President, CEO at ITT]

S. So majority is IP and CCT.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Which is, in a way very favorable, if you think about it from a business case, because this is where we also have the largest pricing power, both in distribution and indirect.

[Joseph Ritchie, Analyst at Goldman Sachs]

Yeah. That's good to hear. Thank you. And then just a follow on question. Vidar seems really interesting.

[Joseph Ritchie, Analyst at Goldman Sachs]

I'm curious as you think about the opportunity and getting after this opportunity, Luca, is it the same like Salesforce? Are you able to kind of cross sell this with your pumps business as well? Just like help us understand how you see this playing out.

[Luca Savi, President, CEO at ITT]

Sure. The way that we are running this business is a completely separate job. So we run it in ventures under Barty Makovievski, who is both the leader of business development and M and A as well as the leader of IP, but it's completely separated. So there is Dan Kernan and his team who are based out of Syracuse. We have their own sales force, and therefore, is its own business.

[Luca Savi, President, CEO at ITT]

Now granted, there might be some synergies, so there might be some incentives that you put in place for your pump sales if they are successful in helping buy their launch, but it's completely separated.

[Joseph Ritchie, Analyst at Goldman Sachs]

Okay, understood. I'm sure we'll get more details at Investor Day. Thank you.

[Luca Savi, President, CEO at ITT]

Exactly. So we're waiting to see you there at the customer market at the Capital Markets Day. So

[Operator]

And our next question will be coming from Andrew Obin of Bank of America. Your line is open, Andrew.

[Sabrina Abrams, Analyst at Bank of America]

Hey. You have Sabrina Abrams on for Andrew Obin. Good morning.

[Luca Savi, President, CEO at ITT]

Good morning, Sabrina.

[Sabrina Abrams, Analyst at Bank of America]

Guys. Apologies. This is gonna be a little long. But, you've given some helpful color on the bridge from prior guide to the updated guide, which is helpful and you're keeping the 3% to 5% organic with slower economic activity in the second half. And I guess part of this question is, is the $5,060,000,000 dollars of gross tariff impact, is that over the course of the second half of the year?

[Sabrina Abrams, Analyst at Bank of America]

Or is that an annualized number? And I guess could you just, a, talk about what's embedded in 3% to 5% organic for pricing versus volume and how that's changed? And then I guess the $5,060,000,000 dollars if that's an in your number, I think like the annualized price increase needed to offset would be around 2%. So is that the right way of thinking about tariff pricing?

[Emmanuel Caprais, Senior VP & CFO at ITT]

Hi, Sabrina. Okay. So the 50,000,000 to $60,000,000 is for the remaining nine months of the year. Right? So this is not an annualized impact, just the remaining month.

[Emmanuel Caprais, Senior VP & CFO at ITT]

In terms terms of it's obviously included in the guidance and no net impact because we're expecting to offset, as I mentioned, with commercial actions as well as cost reductions. So that's one. In terms of pricing, yes, you're correct. It's around 2% price increase that we're planning in organic growth of mid single digit.

[Sabrina Abrams, Analyst at Bank of America]

Thank you. And then the short cycle distribution business in CCT tends to be, I guess, a canary in the coal mine for you you in terms of general macro industrial activity. And I just wanted to ask how that business is trending. I understand you've had really great share gains in that business as well, but wanna understand how is that business trending? And then maybe any commentary on the tone you're hearing from your distributors.

[Sabrina Abrams, Analyst at Bank of America]

Are they showing any signs of weakness?

[Luca Savi, President, CEO at ITT]

Sure, Sabrina. So when you look at the revenue, Connectors revenue grew 4% organic and of course here the Sense and Air were the main contributors. If you want to look at the leading indicators in terms of orders, Connectors orders were up 11% year over year, and they were up 27% sequentially. Now a lot of this is the big play is, of course, from defense, but then if you look at the distribution, you have distribution orders that year over year are down, but is up sequentially 20% and it's at a very high elevated level. So overall, still a positive picture, I would say.

[Sabrina Abrams, Analyst at Bank of America]

Thank you.

[Luca Savi, President, CEO at ITT]

Thank you.

[Operator]

And our next question will be coming from Damian Karas of UBS. Your line is open.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Good morning,

[Damian Karas, Executive Director at UBS Group]

Hey, morning, everyone. Sorry if I missed this, but I wanted to ask about some of the pricing trends that you're seeing in MT. I'm just curious, like, is there going to be a transient period here in which you're going to maybe get hit with some of these tariff cost headwinds more immediately and then over time you'll offset that with price? Or could you

[Damian Karas, Executive Director at UBS Group]

just give us a sense like what kind of

[Damian Karas, Executive Director at UBS Group]

how pricing is playing out in that market?

[Luca Savi, President, CEO at ITT]

Sure. So when you look at just to talk about the tariffs for a second, tariff impact is mainly in IP and CCT. There is very minimum tariff impact in Motion Technologies and very little in friction because we are in the region for the region. And when you're talking about North America, our products are USMCA compliant. So that is on the tariffs front.

[Luca Savi, President, CEO at ITT]

I think that when you look at the price cost equation for ITT overall, we are positive in Q1 and would be positive for the full year, both in dollars and margin. And that picture is the same on the motion technology side. So the team is able to gain efficiency through operations as well as sourcing, and granted, we are sharing some of these efficiencies with our customers, but the price cost equation in MT is positive today.

[Emmanuel Caprais, Senior VP & CFO at ITT]

And as we said in the past, we are focused on making sure that we recover any fluctuations in commodity from our customers. And I think that as the team really progressed in making sure that they quantify those impacts, they're able to go back to customers and get a fair compensation.

[Damian Karas, Executive Director at UBS Group]

Okay, that's really helpful. And I'm not sure if

[Damian Karas, Executive Director at UBS Group]

you talked about it, but could you just give us a little bit better sense on what's going on with Spanahoy and what's driving all the strength in the 2x book to bill and orders up 70 Sure.

[Luca Savi, President, CEO at ITT]

When we cultivated VanEnoy, when we decided to acquire VanEnoy, saw the opportunity in market growing substantially in the foreseeable future. And so there is definitely a trend there due to the market they're operating in, in terms of the marine market and the shift to green energy. So there is a market component to it. But I will say also that the good quality product, the great performance and Soren and the team together with Glenn and everybody is delivering to the customers on time performance, etcetera, enable them to win market share. And they are seen as leaders in three of the sectors they are operating in.

[Luca Savi, President, CEO at ITT]

So market plus performance are delivering these exceptional results. You may remember that after the acquisition, we also committed to probably a double digit growth for Svanoy for the next few years, and this is what we are seeing, and the orders will continue to deliver that.

[Damian Karas, Executive Director at UBS Group]

Yeah, it seems like that deal is certainly bearing fruit. All right, guys, thanks. Best of luck.

[Luca Savi, President, CEO at ITT]

Thank you, Damian. Ciao.

[Operator]

Thank you. And our next question will be coming from Joseph Giordano of TD Cowen. Your line is open, Joseph.

[Michael Anastasiou, Analyst at Cowen]

Hey, guys. This is Michael on for Joe.

[Luca Savi, President, CEO at ITT]

Hey, Michael.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Hey, Michael.

[Michael Anastasiou, Analyst at Cowen]

You mentioned earlier about connector strength, and I know some people have been kind of contemplating a pre buy. If there's any kind of color there, that would be certainly helpful, any end market dynamics at play as well, would appreciate it.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Yeah, Michael. So we are not aware of any pre buy. When we look at our distributor inventory, it is not excessive. The point of sale information is also healthy. So there's nothing that really points to a pre buy.

[Emmanuel Caprais, Senior VP & CFO at ITT]

What's really difficult to understand is that you may have inventory buildup at our customers' customers and at before the end customer, right? So there may be that possibility. So we do everything we can to understand the situation from a distribution standpoint. One thing that I wanted to highlight, unrelated to tariffs, but, we do see evidence of, excess inventory in aerospace, and so we are working with our tier ones and also our the airframers to to make sure that, they address the situation and that, we continue to be good partners to them.

[Michael Anastasiou, Analyst at Cowen]

Great. That's That's actually another question I had too. I know you mentioned you saw Aero down low or excuse me, mid teens in the quarter. My understanding, if I remember correctly, there was supposed to be like an OE ramp in 2Q. Does this destocking dynamic for A and D change that ramp timing?

[Michael Anastasiou, Analyst at Cowen]

Any color I know you guys are mostly levered to wide body, but any color there would be great. Thank you.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Yes. So we expect in the second half sequentially aerospace orders to pick up. They're still going to be slightly down versus the prior year. And then if you look at the full year, we expect our orders to be slightly up, so a recovery in the second half. So we're going to see improvement in the second quarter, continue to improve in the third and in the fourth.

[Emmanuel Caprais, Senior VP & CFO at ITT]

And then they're going to start converting into revenue probably in the second half.

[Michael Anastasiou, Analyst at Cowen]

Great. Thanks, guys.

[Operator]

Our next question be coming from Nathan Jones of Stifel. Your line is open, Nathan.

[Adam Farley, Associate Analyst at Stifel Financial]

Yes, good morning. This is Adam Farley on for Nathan.

[Luca Savi, President, CEO at ITT]

Morning.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Good morning, Adam.

[Adam Farley, Associate Analyst at Stifel Financial]

Hi, good morning. One more on tariffs. So your largest exposure to tariffs is in CCT. What are the primary components that are being exposed there? And do you have confidence in dual sourcing there or finding new sources of supply?

[Luca Savi, President, CEO at ITT]

So when we look at CCT, is that the main exposure there is the trade between Mexico and The U. S. That is mainly because there are many things that are going from The U. S. To Mexico, Mexico, U.

[Luca Savi, President, CEO at ITT]

S. So you're talking mainly about connectors. And in most of the cases, those are USMCA products, and when it's not, we are able to act on a pricing side. And this is in CCT through distribution is also where we have more pricing power. So it's not so much a resourcing strategy when it comes to CCT and connectors as much as a commercial action.

[Adam Farley, Associate Analyst at Stifel Financial]

Okay, that's helpful. And then just maybe high level, I mean, are you actually seeing any signs of customers deferring their capital investment decisions or is it more just caution on the back half? I'll leave it there. Thank you.

[Luca Savi, President, CEO at ITT]

Sure. I would say no, we do not see those kind of things. Sure, you might have one project or two that have shifted to the right, but not to call it a trend, and you see it in the orders of the project, which were up 47%, and the funnel of opportunity in IP is actually staying at elevated level, is practically flat sequentially, and there are some regions like Europe, Middle East, and Asia Pacific, where actually the funnel is up. So, so far, we really haven't seen a major shift to the right. Just a couple of example and that's it.

[Adam Farley, Associate Analyst at Stifel Financial]

Thank you for taking my questions.

[Luca Savi, President, CEO at ITT]

Thanks Adam.

[Emmanuel Caprais, Senior VP & CFO at ITT]

Thanks Adam.

[Operator]

Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.

Participants

Executives

• Mark Macaluso, Vice President of Investor Relations & Global Communications
• Luca Savi, President, CEO
• Emmanuel Caprais, Senior VP & CFO

Analysts

• Scott Davis, CEO & Chairman at Melius Research LLC
• Mike Halloran, Analyst at Robert W. Baird & Co
• Vladimir Bystricky, VP & Equity Research Analyst at Citigroup
• Jeffrey Hammond, Managing Director at KeyBanc Capital Markets
• Brad Hewitt, VP - Equity Research at Wolfe Research LLC
• Joseph Ritchie, Analyst at Goldman Sachs
• Sabrina Abrams, Analyst at Bank of America
• Damian Karas, Executive Director at UBS Group
• Michael Anastasiou, Analyst at Cowen
• Adam Farley, Associate Analyst at Stifel Financial