ITT Inc.

Welcome to ITT's 2024 third quarter conference call. Today is Tuesday, October 29th, 2024. Today's call is being recorded and will be available for replay beginning at 12 p.m. Eastern Time. 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. If you would like to ask a question at that time, please press star 1-1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by hitting star 1-1. 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, Gigi, and good morning. Joining me this morning in Stanford 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 ending September 28, 2024, which we announced this morning. Before we begin, please refer to slide two of today's presentation, 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 2023 annual report on 410K and other recent SEC filings. Except for otherwise noted, the third quarter results that we present this morning will be compared to the third quarter of 2023 and include certain non-GAAP financial measures. The reconciliation of such measures to most comparable GAAP figures are detailed in our earnings 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 it over to Luca, who will begin on slide three.

Thank you, Mark, and good morning. I would like to begin by thanking all IT tiers for another exceptional performance in the third quarter. Once again, our teams deliver strong, profitable growth with even more robust growth in orders. First, in our legacy business, we continue to drive value creation through outsized organic growth and margin expansion, with an operating margin above our long-term target nearly two years ahead of schedule. And whilst we continue to drive profitable growth in the core, we are also building the M&A muscle through strategic capital deployment. We are seeing strong results from our recent acquisitions, while early indications on Quesaria's value proposition are encouraging. I want to thank our teams once again for over-delivering on our commitments. Let's now discuss a few highlights from Q3. We grew orders 14% on an organic basis, and importantly, 6% sequentially versus Q2. Our book-to-bill of 1.1 resulted in a record-ending backlog of $1.7 billion. This is even more impressive given that organic revenue grew 6% with all segments contributing. We also drove 60 basis points of margin expansion or 100 basis points excluding M&A impacts. All in, We deliver 7% adjusted EPS growth and 9% when excluding the impact of the Wolverine divestiture. Excluding the temporary acquisition amortization, we are driving to more than $6 of earnings in 2024. A truly strong performance, compounded by the $1 billion of capital deployed. With Kisaria closed, we have now deployed over four times more capital than we did in the corresponding period in 2023. and more than two times our expected free cash flow. Let's get into the details on RQ3. Our orders growth in the third quarter was a standout. IP grew orders 30%. We pumped project growth well above 100% for the quarter. Year to date, our project orders are now up 10% on top of 29% growth last year. overcoming the tough compares we experienced in the first half of 2024. We also saw orders growth in nearly every short cycle product category in industrial process, led by valves and aftermarket. CCT grew orders 7%, driven by continued defense share gains and connectors. The CCT team has secured several important defense wins, including connectors on a transportable surveillance radar system. And in motion technologies, ConiRail secured multiple large orders in Europe and China, while friction continued to conquer new platforms with all OEMs and on all powertrains. On revenue, all of our businesses are contributing. CCT grew 6% on the strength of defense, connectors, and the commercial aerospace aftermarket, all of which grew 20% or more organically. our connectors business continues to grow profitably with new products and faster speed to market driving share gains. IP grew 6% with strength across all short cycle product categories, including the Habonim VALS business. Notably, September was Habonim's highest month of sales since the acquisition. In MT, aftermarket demanding friction as well as share gains in Coney Rail drove 5% organic growth. Additionally, Friction's outperformance was over 700 basis points in a challenging auto OE market. In total, we grew 8%, including Zvaneo and Quesaria, despite the Wolverine divestiture. On margin, we grew 60 basis points to over 18%, with strong volume and pricing growth, completely overcoming the dilution from acquisitions and foreign currency impacts. IP remained above 20% or above 23%, including acquisition dilution, representing an incremental margin of 37%. CCT hit the 19% milestone with another outstanding performance in connectors, overcoming 40 basis points of dilution from the Casari acquisition. MT was again above 18% with strong productivity that more than offset significant foreign currency headwinds. And KONI? was above 20% margin for the very first time. Well done, Jeroen and Connie team, especially in China. Shifting to our outlook. Today, we're raising the midpoint of our full-year adjusted EPS guidance by $0.05 to $5.83, overcoming unfavorable foreign currency, higher interest expense, and temporary acquisition amortization. To recap, another strong quarter for IGC, with double-digit organic orders growth that will continue to power our future top-line performance. Now, let's turn to slide 4 to talk more about how we are furthering ITT's differentiation. The Friction China team has nearly reached its full-year target for total platform awards, thanks to wins with local OEMs including Geely, Cherry, BYD, Zikr, and Tesla. One of the ways we continue to differentiate in this competitive market is our world-class testing capabilities. In August, I was together with Zulai, Sunny, and the team in China to see the testing facility we've invested in and built there. Our investment in a new state-of-the-art Braper testing center in Wanshan, China, is already delivering strong returns. Our engineers and drivers trained in Baggio, Italy, are able to deliver fast and real-time testing data to our customers that accurately predicts the braking system's performance in harsh conditions and terrain. And because of the investment we made in Wanshan, we are also able to replicate extreme temperatures and humidity levels indoors. This unique facility enables our team to work side by side with all our customers in China, hence the level of our performance. Moving to IP. First, Svanehoi secured awards for 24 new vessels, including 11 that are capable of handling ammonia. Svanehoi is leading the way for ammonia pumps on commercial vessels with over 2,000 ammonia-ready marine pumps in operation or on order. Svanehoi's deep well fuel pumps can handle LNG, RPG, methanol, and ammonia. This will ensure that vessels are essentially future-proof while also securing a long-term installed base for growth at Svanehoi. As you can see, Svanehoi is indeed powering a better future. Next, on goods pumps. Thanks to Saudi's best-in-class quality and 100% on-time delivery in the third quarter, we have become a preferred partner to EPCs and end-users in the regions. Additionally, thanks to our close technical support and product localization, the team drove a near-perfect win rate with these customers. And as a result, we secured close to $50 million in orders for pumps on the Amira Petrochemical Complex in Saudi Arabia. Because of this, and to ensure we continue to outperform in this important region, we are investing further to enlarge our facility in Saudi, building on our capacity investments we announced last year. Well done, Khaled, Omar, and the entire Middle East team for delivering on our commitments and driving more than 100% project awards growth this quarter. Moving to aerospace and defense. Our connectors team is continuing to differentiate through the speed at which we deliver these highly customized interconnect solutions. In Q3, we won awards on leading defense platforms. including the Net Warrior Soldier War Communication System and the world's leading integrated defense system. On top of this, we won developmental engineering contests for the next-gen advanced military aircraft. These are just a few of the awards from across the portfolio that will continue to feed ITT's backlog and future growth. Let's now take a deeper dive into our record backlog on slide five. In the last nine months, We have grown our backlog to a record $1.7 billion, a whopping 34% increase with a book to be solidly above one. This is driven both by our legacy business and our strategic acquisitions. First on our legacy business, aerospace and defense orders were up 15% due to large program awards. Rail orders grew roughly 20% driven by Europe and China share gains. Rail continues to be a great market for ITT. A recent example is KONI China, where the team is in the final testing phase on a new high-speed train, which will operate at 400 kilometers per hour. A significant step to ensure KONI shocks are the right engineering solution for when the trains begin operating in 2026. Based on all of this and the project's shared gains in IP, it is clear that our legacy business is growing. and this will be enhanced further by our recent acquisitions. On Svanehoi, less than a year in, the results are already outstanding. With a book-to-bill of 1.4, we added $190 million to our backlog. We expect Svanehoi's leadership in the energy transition and our engineering expertise to drive stronger growth as low-carbon and sustainable fuels are more widely adopted. In Q3, as an example, Svanehoy unveiled a new high-pressure ammonia fuel pump capable of safely handling highly corrosive carbon-free liquids. This, and the wings we have already secured, gives us confidence in hitting Svanehoy's double-digit growth outlook. Finally, on Kesaria. Kesaria serves as an extension of customer engineering teams, taking high-level concept to production in record time. Revenue is highly visible with the programs we are on, including content on the F-35, F-16, and the Joint Strike Fighter program, among others. Kisaria cable assemblies are the connectivity that ties defense systems together. Like Svanehoi, Kisaria provides good visibility to future revenue given the programmatic nature of the business, which we expect will drive high single-digit growth over the near term and has already added $130 million to ITT's backlog. Recently, Michael and CCT leadership were on the ground at Caesarea sites across North America to welcome the local teams to ITT, including at headquarters in New Hampshire, where cable assemblies are currently being built for the Virginia-class submarine. We continue to have confidence in Caesarea's value proposition and are focused on executing the commercial synergies we identified. As you can see, our value creation through strong organic growth and margin expansion continues. And now, through M&A as well. Now, let me turn the call over to Emmanuel to discuss our results in more detail.