ITT Inc.

Welcome to ITT's 2023 third quarter conference call. Today is Thursday, November 2nd, 2023. Today's call is being recorded and will be available for replay beginning at 12 p.m. Eastern time. At this time, all participants are placed in a listen-only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 11 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 11 again. We ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the floor over to Mark Macaluso, Vice President, Investor Relations and Global Communications. You may begin.

Thank you, Lisa, and good morning. Joining me in Stanford this morning are Lucas Avi, 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 ending September 30, 2023, which we announced this morning. Before we begin, please refer to slide two of the presentation 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 2022 Annual Report on Form 10-K and other recent SEC filings. Except where otherwise noted, the third quarter results we present this morning will be compared to the third quarter of 2022, 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 three.

Thank you, Mark, and good morning. Before we begin, I would like to share how shocked we all are at ITT about the terrorist attacks in Israel on October 7th. We strongly condemned these terrorist attacks. Israel is a special place to us, given the presence of our colleagues working at our Habon Invalves business, headquartered in the northeast part of the country. I was fortunate to spend time with Ilan and the team in August, and I was humbled by their capabilities, their strong work ethic, and their commitment to ITT and their customers. Obviously, all their lives were impacted by these tragic events. We're staying in close contact with our Israeli colleagues there, as the safety of our people and their families is always our primary concern. It is our hope that peace is restored in the region. Now to our latest results. The main theme of this call is a step up in performance, a step up in execution, and a step up in capital deployments. we are converting ITT's $1.2 billion backlog. At 19.4%, we are making significant progress towards our 20% long-term segment margin target. We are delivering new levels of earnings with a record EPS this quarter and expected for the full year. Last but not least, we expect over $400 million of free cash flow. And on capital deployment, we are accelerating. Yesterday, we announced the signing of a $400 million strategic acquisition in flow with the addition of Svanehoi. Now let's get into the details. On execution, in industrial process, we continue to see strength in projects and aftermarket. Our pump projects, parts, and service businesses all grew revenue double digits organically in the third quarter. demonstrating our prowess in gaining share and emerging as a leader in profitability in flow. Still, there are many more opportunities for growth. For example, this quarter, together with IP's President Fernando, I went to Brazil and Peru. He's intimately familiar with the region coming from Brazil. There, we spent time with our local teams to review our outstanding performance in the region and the new growth initiatives. The talented local ITT team gave us a greater understanding about the growth actions they are working on to capture share in mining, process, and energy. In connect and control technologies, our aerospace and defense components business grew revenue nearly 30% and 6% sequentially, which drove 8% organic growth in CCT. The growth in our connector or e-business more than offset the continued distribution destocking impact in Europe. Just to step back for a moment, as you have heard us talk about, we have been managing through the destocking in connectors distribution in Europe for the past three to four quarters. And whilst we still see weakness in Europe, our North American team has been able to offset the European weakness with actions in OEM and distribution. Well done, Art and team. Finally, in motion technologies, we again won share in the electrified vehicle market with 30 new platform wins this quarter and over 130 awards here to date at a win rate that is well above our current market share. Frictional e-outperformance continued to improve sequentially in Q3. Thanks in particular to our China business, which grew sales roughly 25%, driving 20% growth year-to-date. Also in MT, the friction team won new awards in the high-performance vehicle market ahead of the recently announced thermally plant expansion, where the new lines will be up and running in Q4 2024. And the progress did not stop here. Both Corning and Axion grew double digits on the strength of share gains, new product innovations, and pricing actions in rail. In Axton specifically, we have won many new orders this year, and as a result, we expect our orders to be up nearly 10% for the full year, versus a record year in 2019 when we were still operating in Russia. Continuing with execution, at 19.4% this quarter, we again made considerable progress towards our 20% long-term segment margin target. Industrial process eclipsed 21% for the fifth straight quarter, up 220 basis points year-over-year and 40 basis points sequentially, with an incremental margin above 40% as our operational drive continues. Motion technologies reached 17% margin in Q3, improving 100 basis points sequentially, as we anticipated, with incrementals of 40%. Notably, we saw a strong improvement in both Wolverine and Axton due largely to pricing actions, and we expect both businesses to be back to double-digit profitability in Q4. This is quite an accomplishment considering the challenges our teams confronted from high-cost steel inflation and the war in Ukraine. Moving to capital deployment, we are accelerating. In October, we announced a new $1 billion share repurchase program with an indefinite term that we will strategically implement at the completion of the current $500 million plan. But more importantly, yesterday, we entered into a definitive agreement to acquire Svanehoi, a Denmark-based supplier of cryogenic marine pumps and aftermarket services for liquefied gas. The company operates in attractive industries tied to long-term trends including decarbonization, energy transition, and growth in marine transportation. I will share more about this exciting acquisition momentarily. Coming back to our full-year results, we are raising our 2023 outlook once again across all metrics. At the midpoint, we now expect nearly 8% organic revenue growth, 140 basis points of margin expansion, nearly 17% earnings growth, and over $400 million of free cash regeneration. This sets us up for a record year, and I'm really proud of what our teams all over the world are accomplishing. Now, let's turn to slide four to talk about our pending acquisition, Sivanehoi. Yesterday, we announced our intent to acquire Sivanehoi. a leading cryogenic marine pump supplier for approximately $400 million. The purchase price multiple equates to less than 12 times estimated 2023 EBITDA, and the deal is expected to close in the first quarter of 2024. Stanehoy has leading positions in cryogenic applications for the marine sector, including deep well gas cargo, fuel, and energy pumps, which have the technology to process all future energy transition fuels. Like IP, the company has a large installed base of pumps and a sticky, profitable aftermarket business, thanks to its differentiated service model with global reach. The regulatory nature of Vessel's service allows Vanehoy to benefit from recurring aftermarket revenue with sole sourced positions. Its products and services are also widely regarded as the highest quality in the industry. which drives customer loyalty. Stepping back, there is a lot to love about this business, which adds cryogenic pumps to our flow portfolio. First, the company is a strong management team that has a deep knowledge of their markets and a clear focus on driving performance. Next, we have a good line of sight to future revenue growth coming from decarbonization and energy transition. whereas Vanehoe has leading positions in three out of four verticals in which it operates. Ship owners are required to service and upgrade their fleets, which we expect will drive recurring demand for Vanehoe's products and aftermarket services. And the shift to more environmental-friendly propulsion technology, coupled with growing ocean cargo activity, will increase demand for new marine vessel builds. With all of this, we expect Svanehoi to lead in the global energy transition across most verticals with a multi-year outgrowth supported by their backlog, by their differentiated technology and predictable aftermarket revenue. I would like to welcome Soren and the entire Svanehoi team to ITT. I also want to tell you that our M&A pipeline remains active. In Q3, The business, Emmanuel, and I continue to invest significant amount of time visiting potential target operations as we work further to further enhance our acquisitions pipeline. Let me now turn the call over to Emmanuel for more details on the quarter.