ITT Inc.

play 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 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 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, Bella, and good morning. Joining me in Stanford today are Lucas Sava, 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 June 28, 2025. Please refer to slide 2 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 2024 annual report on Form 10-K and other recent SEC filings. Except for otherwise noted, the second quarter results we present this morning will be compared to the second quarter of 2024 and include certain non-GAAP financial measures. The reconciliation of such measures to 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 it over to Lucas who will begin on slide 3.

Thank you, Mark, and good morning. I'd like to begin, as always, with a heartfelt thank you to all our ITTers. We could not have delivered these results without each and every one of you and your hard work. I'm humbled by our team's ability to achieve such strong performance once again. In May, we were fortunate to see many of you at our Capital Markets Day in New York City. There, we showcased ITT's enterprise strategy and value creation pillars. First, organic growth and margin expansion. Second, the compounding with M&A. And when you look at our second quarter results, you see all of this value creation in action. Let me share some highlights. In Q2, we delivered $1 billion of orders, up 16% total and 13% organic, as all our businesses deliver a strong order intake, bolstered by the Quesaria and Savannah acquisitions. We generated record quarterly revenue of more than $970 million, up 7% total and 4% organic, with all segments contributing. Operating income grew more than twice the organic sales growth rate, and operating margin expanded over 100 basis points, excluding M&A. Our profitable growth and continued operational improvement resulted in adjusted EPS growth of 10% or 16% excluding the Wolverine divestiture. Finally, we grew free cash flow to $214 million year to date, making significant progress to nearly half a billion dollars for the full year. Furthermore, free cash flow margin was 14% in Q2. To round out the highlights, we repurchased $500 million of ITT shares year to date, reaffirming our confidence in the long-term outlook of ITT and lowering our weighted average share count by 3%. As you can see, a strong performance in Q2, built on ITT's pillars of value creation, organic growth and margin expansion, compounded now with M&A, as we laid out at Capital Markets Day. Now, let's get into the details. Orders. Definitely one of the highlights of the quarter. Industrial process grew 22% driven by strength in Goosebumps and Svanahoye. Notably, in the first six months of 2025, Svanahoye orders of nearly $200 million were above their full year 2024 revenue. A strong first half, to say the least. Furthermore, Boneyman won large awards on leading energy projects with two oil majors in Australia and the Middle East. The former, in one of the world's largest LNG fields, where Boneyman won again thanks to our superior technology, our customer service and our execution on the current pump project. The latter, at an onshore oil field in the UAE, where our customers standardized on Boneyman's twin screw pumps based on the performance track record of our existing solution. And this is despite aggressive pricing by our competition during the bidding phase. Well done, Yorun and Boneyman team. Moving to Connect and Control. We grew 9% organic driven by the Science and Commercial Aerospace Awards and grew total orders 36%. Quesaria continued to secure content on coveted defense platforms such as the Abrams tank and the battlefield communications program. As a result, their orders grew more than 25% this quarter. I was fortunate to be at Quesaria at Quarters in New Hampshire with Michael and the leadership team to work together on executing our commercial synergies. The team successfully replaced a competitor's connector with our Canon HDX on an important existing Quesaria platform. And there are many more still to capture. In Motion Technologies, the Friction team won 49 new electrified platform awards with leading OEMs in China, Europe and North America, including Zika, Cherry, BYD and Mercedes-AMG. And in Coney, once again, we saw strong orders across the board, mainly driven by rail and defense, including a notable win on a prominent U.S. battle vehicle. All in, our book to bill of 1.1 resulted in an ending backlog of nearly $2 billion, up 34% versus prior year and up 9% sequentially. On revenue, we saw broad-based organic growth across all segments as we worked to convert a robust backlog. IP grew 5% organically on project strength. Svanio also delivered strong top-line performance, growing 43%. CCT grew 4% organically as defense momentum continues and aerospace demand improves. And in MT, Friction OE grew 7% organically, continuing to outperform global auto production in all geographies. On profitability, we continued to expand margin, growing 30 basis points after overcoming headwinds from temporary M&A amortization and foreign currency transaction costs. IP grew margin 100 basis points to nearly 22%, driven by volume, productivity and price. The Svanio team also drove improvements in profitability as they are efficiently ramping up production capacity. MT grew margin by 140 basis points driven by productivity savings, and this after offsetting 100 basis points of unfavorable FX impact. And finally, CCT grew margin 270 basis points excluding M&A dilution. This was driven mainly by strategic pricing actions, with two additional customer price negotiations closed this quarter. On capital deployment, an incredibly strong cash performance, which put us in a position to act quickly to repurchase $400 million of ITT shares in April and May alone. And on M&A, we continued to progress several acquisition targets of size to the funnel, building our M&A muscle that will drive the next leg of value creation for ITT. Lastly, on the outlook, given our strong first hour performance, ramping contribution from acquisition and the less volatile environment, we are raising our full year adjusted EPS outlook to $6.45 at the first point, amounting to 10% growth versus prior year or 13% growth if we exclude the loss earnings from our 2024 Wolverine divestiture. This is a testament to our team's ability to deliver day in and day out for our customers and our shareholders, no matter the environment. Emmanuel will talk more about our revised guidance shortly. Now, let's spend a few moments discussing our 2025 capital markets day and a few examples of how in Q2 we differentiated through execution, innovation, and M&A. First, on execution. In our engineered valves business, thanks to the value of our patented Envision technology and the impeccable service we are providing to a large biopharma customer, our team is expected to double the size of a previous valve order to roughly $50 million. Next, friction China. To industrialize the new awards that Zulai and the China team won in the last 18 months, we performed more than 150 process validations in Q2. This means that the team had to stop production lines two times per day to run small test batches of the newly awarded Braithead. And despite all this, our overall plant efficiency in Wuxi was more than 90% in Q2. Well done, friction. Next, on innovation. At capital markets day, you heard us talk about the Geopolymer, the next breakthrough material science in Braithead at ITT. In Barge, Italy, I was fortunate to see the production line we designed that will make the Geopolymer. We have the product, we have the manufacturing technology, and we have a customer. Today, we are one step closer to the commercialization of this unique and patented technology. Then in Svanahoye, we recently launched our new high pressure fuel pump. The lab testing demonstrated this new pump will outlast our competitors' product. It has been running on an operating vessel since March, and the second pump will be installed on another vessel in August. This type of innovation for harsh environments will sustain Svanahoye's share gain momentum. Last but not least, Vida, a revolutionary compact motor that embeds variable speed capabilities to deliver energy efficiency and better reliability for our customers. At our launch event in June in Houston, we secured strategic wins, and now we have deployed Vida in trials at two of the world's largest oil companies. The team already secured more than a million dollars in orders, and last week, we started shipping. Finally, on M&A. We are still early on our M&A journey, but the success with Habonim, Svanahoye, and Kessaria is promising as Bartek share the capital market's day. We continue to progress acquisition targets through the funnel with rigor and a disciplined framework for deal selection, execution, and integration. Now with all of these in mind, let me reiterate our 2030 financial targets on slide four. We expect to drive more than 5% organic revenue growth and approximately 10% growth in total on an average annual basis. Margin is expected to reach 23%, representing over 500 basis points of expansion compared to 2024. This will drive more than $11 of adjusted EPS from our existing businesses and more than $12 including anticipated M&A. And free cash flow margin should reach 14 to 15%. As you can see, we have now started our journey towards this target, and Q2 was a very good first step in that direction. Now let me turn the call over to Emmanuel to discuss our Q2 results in more detail.

Thank you, Lucas, and good morning. As you can see, ITT delivered another strong performance in the second quarter. We saw a step up in nearly every financial metric, while also putting a significant amount of capital to work earlier in the quarter. Let's talk about some of the many highlights. On revenue, all segments contributed to the performance, growing 7% in total and 4% organically. Industrial process led the way with 5% organic growth on the strength of the project business. And from an order's perspective, we saw growth in every short cycle product category this quarter, leading to a book to bill of 1.2. TCT grew 4% organically with strength in both aerospace and defense, and grew revenue over 30% in total, including Kessaria. Organic orders growth was also strong at 9% led by commercial aerospace and defense awards on coveted platforms. Finally, in motion technologies, our rail business grew 10% driven by share gains in Coney. Frictionally, I'll perform global auto production by over 500 basis points, growing 7%, led once again by our differentiation in China and strong execution in Europe and North America. Friction's performance has been remarkable in what continues to be a highly competitive global automotive market. On profitability, we grew operating margin 30 basis points to .4% on higher volumes, pricing actions, including related to tariffs, and continued operational improvement. More than offset, unfavorable foreign currency transaction impact stemming from a weaker US dollar and the impact of temporary acquisition amortization from Kessaria. At this point, the temporary amortization from Zanahoye has ceased and it will end for Kessaria in Q4. Notably in MT, Yeroon and the Coney team delivered outstanding profitability, which is driving MT above 20% margin. The revenue growth and continued margin expansion drove adjusted EPS to $1.64, up 10% year over year and up 13% sequentially. If you exclude the loss of earnings from a 2024 divestiture of Wolverine, EPS growth in Q2 would be 16% year over year. Finally, on cash, the teams drove strong cash collections while making progress on managing inventory and executing customer advances in the project business. These actions pushed free cash flow margin in the quarter to 14% while still funding further strategic capex toward innovation and productivity to ensure performance will continue. We are driving improvements in working capital, especially in MT, and leveraging the learnings from Zanahoye, whose working capital has a percentage of sales, is just 9%. We also repurchased half a billion dollars of ITG shares through May, which lowered our weighted average share count by 3%. All in a very strong high quality performance across the board. Let's quickly turn to the Q2 adjusted EPS bridge on slide 6. The key takeaway here is that the strong operational performance across our businesses, contributions from our acquisitions, and a lower share count enabled us to grow EPS while overcoming temporary M&A amortization impacts and favorable foreign currency transaction costs, higher interest expense, and the lost earnings from the Wolverine divestiture. Excluding the divestiture, adjusted EPS would be up 16%. Now let's move to slide 7 to discuss our revised 2025 guidance. After a strong first half performance during which we grew revenue, expanded margin, repurchased 500 million dollars of ITG shares, we are raising our total revenue and adjusted EPS outlook for 2025. On revenue, our total growth is now expected to be slightly higher, 5 to 7%, given the tailwind from foreign currency compared to our assumptions at the beginning of the year, while organic revenue remains within our original range of 3 to 5%. Our visibility to a strong second half is improving given the Q2 execution and the better than expected backlog position. We expect continued growth in the project business in IP, firm demand in aerospace and defense, and outperformance in friction OE and rail to continue in the second half. On margin, we're narrowing adjusted operating margin to approximately .4% at the midpoint, up 60 basis points versus prior. We expect this improvement will be driven by continued productivity in the legacy businesses and significant margin expansion in our acquisitions to year end. In addition, we are driving considerable pricing, particularly in CCT. Excluding M&A, we expect margin expansion to be more than 100 basis points for the year. On EPS, we are raising the midpoint of our guidance by 15 cents to $6.45, a step change in our EPS outlook for the year. With a 25 cent increase at the low end and 5 cent improvement at the high end. This is due to improved productivity and effects benefits, partially offset by unfavorable mix and higher M&A related costs. On cash, higher operating income and improving working capital puts us in a position to deliver close to half a billion dollars of free cash flow this year. Next, I would like to spend a moment addressing our updated assumptions on tariffs. Given the current economic landscape and status of negotiations with key US trade partners, we now estimate the gross tariff costs before mitigation to be approximately $25 million in 2025, half our previous estimate. We're offsetting this with pricing and productivity actions, and as such, there is no material impact expected in 2025. Briefly looking ahead to Q3, we expect double digit growth in revenue or low single digit growth on an organic basis, led by industrial process and connecting control. Friction will once again outperform global auto production, while strength in real should continue, driving empty to end roughly flat for the quarter. Operating margin will be up slightly year over year, led by continued margin expansion at IP and MTD. In CCT, pricing and productivity will only partially offset temporary amortization from Kessaria, while total corporate costs will increase slightly compared to Q2 due to anticipated M&A related costs. All this should result in EPS representing low teens growth year over year, slightly above the second quarter. I will now turn the call back to Luca to wrap up.

Thanks Emanuel. A few points before Q&A. Our Q2 performance is a great first step towards our long term commitments. We keep on driving the organic value creation through growth and margin expansion. All our businesses grew organically, and we saw strong margin expansion in the capital markets today. This is here to stay. On the inorganic front, our acquisitions are performing well and over delivering on their commitments. Cash continues to ramp towards an expected half billion dollars of free cash flow this year, with a 14% free cash flow margin in Q2. And lastly, as a result of all of this, we raised the midpoint of our full year EPS outlook by 15 cents. It is ITT's differentiation through execution, innovation, and now M&A that will ensure the value creation continues. As you can see, it was a strong quarter on all fronts. Fully aligned to the value creation pillars, we laid out a capital markets day. Thank you for joining ITT today. As always, it has been my pleasure to speak with you. Bella, please open the Q&A.

The floor is now open for questions. At this time, if you have a question or comment, please press star 1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1. Again, we do ask that while you post your question, you pick up your handset to provide optimal sound quality. Please limit your questions to one question and one follow-up. Thank you. Our first question comes from the line of Mike Halloran with Baird. Please go ahead. Your line is now open.

Hi, Mike.

Thanks for taking the questions. So first, maybe just get some thoughts on what you're seeing on the capital side of things, capital equipment, larger projects, not specifically to any segment. Did you see any pauses in the second quarter? Obviously, the orders were pretty good. I know the short cycle piece was up across all segments. Any signs of hesitancy or push-outs or any change in the forward doc process from your customers anywhere?

Hi, Mike. Thanks for the question. Yeah, when you look at our performance in terms of orders, it's been remarkable. And of course, there is a lot of market share gains in there when you look at the projects, even of the legacy business going up 22% -over-year and was not an easy compare when you look at 2024. And then you look at the performance of the orders -to-date for six months, which is equivalent to their 2024 full-year revenue. So definitely a great performance on the orders front. Now when we look at the funnel, the funnel is still elevated, is down -over-year, but this is because of really a tough compare. So we haven't seen any major shift, and we have seen probably just a couple of orders that shifted to the right, but no major change that will make us concerned right now. So when we look at the orders, very strong. You were talking about markets, very strong on the oil and gas, very strong also in the general industry.

That's helpful. And then maybe you could just give your latest view on what you see the auto landscape developing as, and obviously the outperformance in this quarter, and well, as long as I've covered the stock really, it's been incredible. So maybe talk about what you're assuming on that side as well.

Sure. So let me start with the market first. So the market in Q2, the production was up 2.6%, so that was a nice figure. And if you look at the forecast for the full year, it's a little bit better than what we thought three months ago. So we think that the full year production will be roughly flat or slightly positive to the market. So we have 90 million vehicles produced that will be produced in 2025. Granted, the story here is mainly a China story. Both Europe and North America will be down. But this is the market. Now, when you look at our outperformance, the outperformance was spread across all the three different regions. You're talking about outperforming in Europe, outperforming in China by a lot, and outperforming in China by three different types of power trains, internal combustion engine, hybrid, and EV. So the outperformance I'm happy to see is continuing.

Thank you. Really appreciate it. Thank you, Mike. Operator, I think we can go to the next question.

Your next question comes from

the line of Nathan Jones with Sistifl. Please go ahead.

Morning,

Nathan. Hi, Nathan.

Good morning, guys. This is Adam Farley on for Nathan. Hey, Adam. Hey, so maybe starting

on the CCT orders, really starting orders growth. I know you're getting a lot of price. Maybe you could help us think about the differences in share gains versus just overall market growth.

Yeah, thank you, Adam. Adam. So, yeah, you're right. We saw significant growth, 9% from an order standpoint in the quarter. And a lot of that growth was fueled by aerospace and defense, specifically defense, where both our legacy business and our Kessaria business continues to do really well. Our legacy business was up 25%. Kessaria was up 36%. So on the defense, we are pretty confident that we continue to make the difference and differentiate for our customers. And as a result, we're gaining share on some some really good platforms. We know we talked about in Q1 about the large award that Kessaria had on the F-35. And then we have more awards this quarter on coveted platforms. Aerospace is doing well as well at plus 12%. And here, frankly, we are doing the best we can to support Boeing in their ramp up plans, especially on the 737 MAX.

Thank you for that. Then shifting gears a little bit to motion technologies margins. The FX impact of margins kind of stood out. What is the FX relationship there that's causing the margin compression?

Sure. So, you know, we've seen during the first half a depreciation of the dollar compared to the euro. And so while this helps from a translation standpoint, it hurts us from a transaction standpoint. And so what we're seeing here is the transaction impact that has an outside impact on motion tech margins.

All right. Thanks for taking my questions.

Thanks, Adam.

Your next question comes from the line of Joe Richey with Goldman Sachs. Please go ahead.

Morning, Joe. Hi, Joe. Hey, guys. Hey, good morning. Can we can we double click on Svante Hoy for a second? You know, growing greater than 40 percent this quarter, you can't imagine that the end market is growing that quickly. Like, just maybe maybe just give us a little bit more color. What's happening there? What's what's where are you really seeing the strength in that business?

Sure. You know, probably you remember that when we communicated this acquisition, we always expected, you know, this business to grow substantially in the in the years to come. I think that what is driving these outperformers of the market is really a flawless execution by by our team when it comes to projects and also service as well as a differentiation on the product side. Differentiation on the product side that they keep on feeding with R&D investment and with new products like the one that I share in the preparing marks, the new high pressure fuel pumps. And it is across the board when you think about LNG, LPG, ammonia and also large, large carriers.

And, Joe, if I can complement what Luca was saying with some numbers. So in the in the first half, Svante Hoy grew orders by more than 80 percent. We expect for the four year for them to be a little bit above 20 percent. And this is because we have anticipated a lot of the orders that we were expecting in the second half in the first half. So really strong performance, even for the four year and from a revenue standpoint, also for the four year, we expect them to be up 30 percent because we are converting all those orders that we got in 2024. We now converting them in terms of revenue. So, obviously, from a book to be a standpoint, the picture is really strong for the first half. We're over two, two times and then we'll be largely over one for

the four year. And, Joe, it's not just a question of orders and growth. I mean, if I can credit store and join an entire team, they generated here today in terms of cash, almost the same amount of cash that they generated in full year 2024. And their working capital is a single digit. So great performance across the board.

Yes, that's that's amazing. That's great color and congrats so far on that acquisition. The maybe just my second question really focusing on the, the pump business clearly really good order growth this quarter. You did mention a couple project delays. There's been other peers that have also been mentioning some, some things kind of slipping to the side. And at the same time, Luca, you had some comments around aggressive pricing as well. So just maybe just give a it's hard to kind of like totally square the fact that your orders have been really good. You guys are executing really well. But at the same time, there's there's there's some gyrations in the market. So we're just trying to understand that a little bit better.

Sure. So I would say when you look at when you look at the funnel, the funnel is down here over here, but was exceptionally high last year. So it's still a very healthy funnel. What what we see and really the move that we saw to the right were just a couple a couple of examples. I think that the story here is really a story of sheer gains, Joe. And even when you look at the bone man, I mean, the rate that we were able to win those orders because the service that the team has provided the project execution with the customer. And therefore, in one case, the customer came straight to us, no competition at all. In the second case, despite incredible competition from a price point of view, they stayed loyal because of the performance and the service. So it's really a market share game story.

Great to hear. Thanks, guys. Thank you, Joe. Next

question comes from the line of Jeff Hammett with KeyBank Capital Markets. Please go ahead. Good

morning, Jeff. Hey, good morning, guys.

Hi, Jeff.

So I think you said third quarter low single digit organic. I'm just trying to understand the cadence in the fourth quarter. It seems like you'd have to have a step up and just as you look at this order strength, how much is kind of giving you the visibility for second half versus giving you longer dated visibility into 26?

Yeah, so I would say that for the projects that we're getting today, those are going to be delivered in 2026. So from a project standpoint, our backlog is full and we are secured in terms of delivering the revenue. It's a little bit different for the short cycle that we still need to get mostly in pumps and also in connectors. But other than this, I think from an order standpoint, when it relates to projects, we are covered. We expect in Q4, similar growth rate, organic growth rate from a revenue standpoint than in Q3. And yeah, so in the low to the mid single digit.

Okay, great. I think you called out a healthy funnel, some acquisitions of size. I think you called out a step up in corporate around M&A. Just speak to, I guess maybe put a frame around what you consider an acquisition of size and just a little more color on the funnel.

Sure. When we look at the funnel, the majority of the company that we are cultivating and that we see in the funnel have a revenue between 200 and 400 million dollars. So this is the bulk of the opportunity that we have in the funnel. And if you look, this is also the last couple of acquisitions that we made, the Spanio and Quesario that are executing and over delivering have approximately that size. So the majority are around that size.

Okay, thanks a lot. Thanks, Jeff.

Your next question comes from the line of Brad Hewitt with Wolf Research. Please go ahead.

Good morning, Brad. Good morning, guys. Thanks for taking my questions.

Hi, Brad.

So you mentioned Spanio and Quesario trending ahead of expectations and I think that's pretty visible in the order numbers. But as we think about next year, is there any help you can give us in terms of thinking about the building blocks of the incremental -over-year accretion from the two deals in 2026?

Yeah, so thank you, Brad, for the question. So when you look at from a profitability standpoint, both Zvenihoi and Quesario are progressing well compared to our plans. So when Luca is saying they're outperforming, they are outperforming from an orders, sales, profitability and cash. And so we saw some really strong -over-year EBITDA margin improvements in Zvenihoi as well as in Quesario. So we're very pleased with that. I think that to have in mind kind of a guideline for what we expect out of acquisitions, we probably expect around 100 basis points of margin improvements every year. Maybe in some years it will be a little bit more, maybe others it will be a little bit less, but that's the average we expect.

Okay, great. That's helpful. And then maybe switching over to the short cycle side of IP. So you mentioned that orders inflected from negative in Q1 to positive in Q2. I'm curious if you saw any change in order activity on the short cycle side as you progressed through the quarter or maybe even end of July?

Not through the quarter, Brad. I think that Q2 was a very good quarter across the board, both the baseline parts, service and valves, which service and valves are growing double digit when you look at the orders. As a matter of fact, Q2 was probably the second highest quarterly orders performance in short cycle when you look at the weekly rate. Now, July was a little bit softer, but that tends to be the thing. July is the first week, it's always a little bit softer. So that happened last year and happened again this year. So no different trend I would say in the quarter. Great, thanks Luca. Thank you Brad.

Your next question comes from the line. From Vlad, this tricky. Would Citigroup please go ahead?

Good morning guys, thanks for taking my call. Hi Brad. Morning. So I

just wanted to ask you about the IP projects a little more. You mentioned the price competition you saw in Bournemouth, sounds like you were able to hold margins despite that. Can you talk in general about margins you're booking into backlog on project wins in IP today versus the margin and how we should think about mix going forward?

Sure. So very good point because when you look at our mix in the backlog, you go back two years and the mix was 60% short cycle, 40% project. Now you look at the backlog today, it's the reverse. 58% project, 42% short cycle. So this makes the improvement that you see in the margin of IP even more remarkable when you see that these big headwinds that they have in terms of mix. And the reason for that is because the team is able to improve the margin in the project when we're booking, when we're winning, thanks to the execution, thanks to the performance that we have with those customers. And the second point, Brad, very important, is that when we look at this project, when we close the project, when we ship everything, the margin of that project tends to be higher than the margin of when we booked the project, when we won the order. Which is a testimony to the great execution of the team, of the project manager. So well done Max and the project manager and team. So mix is a headwind, but we're able to compensate for the continuous improvement in execution.

And so if you look at the year over year margin progression on all the projects that we shipped, we're in the neighborhood of 400 basis points improvement versus the prior.

That's really helpful,

I appreciate that. And then just shifting to CCT, can you just talk about shorter cycle visibility at CCT and how you're thinking about the durability of growth momentum there?

Sure. When we look at the short cycle in CCT, we're mainly talking about connectors. And I would say connectors orders in Q2 was the second highest quarter order performance ever. And after a growth in orders in Q1 of 11%, the orders grew 12%. I'm just talking about connectors without Qisaria here, so without the acquisition. And so very good performance on the orders front. And granted, a lot of that comes from arrow and defense. But we will expect for the full year also continue to grow double digit.

Got it. That's helpful Luca, I

appreciate it. I'll get back

into you. Thank you. Your

next question comes from the line of Sabrina Abrams with Bank of America. Please go ahead.

Good morning, Sabrina. Hey,

good morning everyone.

Good morning. Thanks for the question. So I just want to be clear. I think you trimmed the, so at last this is a two-part or so, I guess you trimmed the high end of margin guide. I just want to understand what the driver of that is. And then I think because of the cadence of the three Q year over year comments, you need to have a bigger year over year margin expansion in four Q. So I just want to understand that dynamic a little bit better. Thank you.

Sure. So, I mean, it's really a small adjustment and you know, we like to be precise. So I would say that the headwinds we're facing is a little bit of a higher M&A cost than what we were expecting. And then from a mixed endpoint, you know, those numbers that we talked about for Svannoye, them growing really fast, their margin, even though it's improving, it's still dilutive to the overall ITT margin. And so as a result, we take a little bit of a hit there. And then from a four Q performance, yeah, I mean, we're expecting not a big difference between third Q and fourth Q from a margin standpoint. So we're pretty confident that our outlook from a margin standpoint is achievable and realistic.

Thank you.

And, you know, I think looking at the CCT, I guess, if I take the core earnings, you know, excluding the temporary amortization, you have really strong incrementals. I think the core incrementals are over 80 percent. And I think in the slides there was some mention about pricing actions. I know this has been a big focus for you, particularly on the Aero side. Can you talk about what's going so well here, like the strong execution in CCT? And yeah, we'd just love to know what's driving the really strong incrementals, whether it's more Aero or a short cycle side. Thank you.

Yes. Thank you, Sabrina. So, yeah, I think we're really happy with the way CCT is performing, even the legacy CCT. We are at twenty one point five percent margin if you exclude Kassaria, which is a really, really strong number. And so the incrementals are around 70 percent, as you mentioned. So really strong performance. We have a really good contribution from pricing. And here pricing is on two aspects. One is to make sure that we get compensated for inflation on some of the old contracts we had. And as we mentioned, we closed another two contracts this quarter. And the second one is strategic pricing. And that's more around the aftermarket and the repair and overall. And so that is generating 450 basis points of margin improvement just due to pricing. Some of that is offset by inflation, but it's a net. It's a net positive. I would say the last point I would make about CCT is that we talked for a long time about automation and we're getting those projects in action right now. So we have implemented automation projects in our ultra park facility and they're now up and running, especially in the machining area, which is causing a lot of productivity. And then we are about to kick off automation also in our Valencia plant for valves and switches, which should continue to help us expand margin.

Thank you. I'll pass it on. Your next

question comes from the line of Damien Carriz with UBS. Please go ahead.

Hey, good morning, everyone.

Hi, Damien. Morning.

Hi. Sorry if I missed this earlier, but I was wondering if you could maybe talk to us a little bit about the pricing actions that you've taken since last quarter. And is there any additional price that you think you'll need to take in the second half, just thinking about some of the updated tariffs? And maybe just to fill us in on what your updated assessment is of your tariff exposure as well. Thanks.

Sure. When you look at the tariffs, the exposure for 2025 today is half of what we thought a quarter ago, so roughly $25 million. And these is mainly for some of the things that were imported from Asia, some exposure on products for corn shock absorbers from Europe to North America, and a small portion of non-USMCA compliant products in CCT. But when you look at that 25% in 25 million impact, we're able to mitigate it through price and actions together with the supplier and productivity actions also ourselves. So zero impact when it comes to income. Now, if you look at the pricing, I would say price cost has been positive for Q2 for ITT, both from an income point of view and also margin. We expect that to be the same for the full year and across all the three different businesses. And I would say no major difference in terms of our pricing actions from Q2 to Q3. Strategic pricing and pricing to cover for inflation and tariffs.

Okay, that's helpful.

Luca, there's been a lot of deal activity and industrial process out there. For example, Baker Hughes has been involved in a couple of transactions. From your perspective, are you starting to see a riper deal environment in IP space? And I'd be curious to hear your thoughts on where you think some of these deals are pricing.

Sure. So when we look at our funnel, the majority of the opportunity, you know that we are going after in terms of the funnel in the connector, specifically on the area of defense and inflow. And therefore, when we're looking at the funnel, those are the areas where we are focusing. And it's fair to say that the majority of opportunities are actually in the flow area. So we are actively working the funnel. We are cultivating. And as you can see, you know, our M&A costs are probably ramping up. So two of the past acquisitions that we made, Habonim and Spanio are in flow. So it's still very fragmented market. So for sure more acquisitions there will happen.

Sounds good. Looking forward to see what that ends up looking like. Good luck.

Me too. Thank you. Thanks, Damien.

Our final question comes from the line of Joe Giordano with CDCOW. And please go ahead.

Hi. Good morning. This is Chris Onferjo. Most of my questions have been addressed. But maybe when you look at the strengths on POMPS, what types of applications are driving that strength? Is it green fields versus expansions of existing sites? And how would you characterize customer urgency versus a normal level?

Yeah. Thanks, Chris. So yeah, we got some fantastic orders in IP in Q2, up 23%. And we saw some real strength in oil and gas, so energy, as well as in general industrial. And then on the green type of projects, we are also very happy with that because if you look at our year to date green orders, they're almost in line with what we got for the four year in 2024. So that's very positive, obviously. Luca mentioned an order for Australia that we got. And this is a decarbonization order with a major oil company. And we got the first project in 2023, which was for more than 20 million. And we got a follow on order as we executed perfectly from a project management standpoint with that same customer for that same field. So we were happy with the way the green projects are developing and the market share we're able to

make. Thanks very much. Thank you, Chris.

Thank you. This does conclude today's

teleconference. Please disconnect your lines at this time and have a wonderful day.