ITT Inc.

Welcome to ITT's 2025 fourth quarter conference call. Today is Thursday, February 5th, 2026. 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 the 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 pressing 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 Carlene Salvage, Vice President, Investor Relations, and FP&A. You may begin.

Thank you, Gigi, and good morning. Joining me in Stanford today are Luke Asavi, 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 and 12-month periods ended December 31, 2025, which we announced this morning. 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 2024 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the fourth quarter and full year results we present this morning will be compared to the fourth quarter and full year 2024 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 is now my pleasure to turn the call over to Luca, who will begin on slide three.

Thank you, Caroline, and good morning. Before we begin, I want to introduce Caroline Salvage, our new Vice President of Investor Relations and Financial Planning and Analysis. Caroline brings extensive experience in financial and operational leadership and is returning to ITT, where she spent over nine years in roles of increasing responsibility and culminating in the position of Vice President and CFO of Industrial Process. In her new expanded role at ITT, Carleen will lead our global IR and FP&A organization, driving ITT's performance and continuing to provide compelling communication of our long-term value proposition. Welcome, Carleen. We're very happy to have you back. I would like to thank both our existing and new shareholders for participating in the equity raise we completed in December to fund the pending XPX Flow acquisition. We're grateful for your support, and we will work hard to make this acquisition a success. Finally, I'm also deeply grateful to our IT tiers for their contributions in 2025, a year that marked a milestone in the execution of our long-term strategy. I'm humbled by what you have accomplished. Now to the results. The dominant theme of the year was growth, and we delivered growth across every metric at line of capital markets today. Revenue, margin, cash, orders, and all these compounded with M&A. Let's get into 2025 financial highlights. We grew revenue 8% in total and 5% organically. We grew EPS 14%, or 18%, excluding the $0.16 impact from the Walgreens divestiture and the $0.03 dilutive impact from the equity offering related to the pendent fixed-flow acquisition. We grew operating income 11% and expanded margin by 40 basis points to 18.2%. In addition, our recent acquisitions, Zvanehoi and Caesarea, both expanded margins compared to prior years. The fourth quarter was equally strong. ICT hit a milestone with orders and revenue both exceeding $1 million for the very first time. Orders grew 15% or 9% organic. Specifically, CCT grew an outstanding 40% organic with equal contribution from our legacy business and from Kesaria. Revenue grew 13% or 9% organic. Of note, both IP and CCT grew more than 11% organically. Operating margin grew 90 basis points to 18.4% with all segments expanding versus prior year. EPS of $1.85 grew 23% and 26% excluded the dilutive input of the equity raised to fund the pending SPX flow acquisition. I would also like to take a moment to underscore our cash performance in 2025. We grew free cash flow to over $550 million, up 27%. Free cash flow margin of 14% was up 200 basis points. Cash conversion was well over 100. And during the year, we put this cash to work, investing in productivity, growth and innovation, as well as deploying $500 million to repurchase shares early in 2025. Now turning to drivers of future growth, we grew orders 10% to $4 billion, up 5% organically. Backlog ended at $1.9 billion, up 18% year-over-year. We continue to look for ways to elevate our commercial performance and win market share in all our businesses. Earlier this year, we held our first sales conference, S-WIN, where the ITT sales team spent two days together in the Middle East to review our performance, hear from our customers, learn from various speakers, and strategize to win and conquer in 2026 and beyond. Looking at our investments in new products, wider inflow and high performance inflection will continue to feed the growth in previously unaddressed markets. And the pending acquisition of SPX Flow, the largest in recent ITT history, will be a significant accelerator as we focus on a higher growth, higher margin flow business. On SPX Flow, we still expect to close the transaction in March. Let me share a few highlights on their performance for 2025. Total orders grew in the mid-teens for the full year, driven by strength in the nutrition and health segment and in mixers. Backlog was up in the high teens with a book to be comfortably above one. EBITDA margin was in line with our expectations with significant runway for expansion driven by volume growth, pricing, operational efficiencies, and synergies. On the integration front, our teams are preparing for day one readiness. We're identifying best practices to deploy and defining priorities and integration must-haves. We are currently defining the future organizational structure and aligning on performance measures to ensure clear and effective accountability and delivery. We are also very happy to have secured many key leaders from XPX Law ahead of closing who are fully engaged for the long-term success of this new platform. And from a synergy standpoint, expected savings related to G&A are on track. We continue to identify further procurement synergies and we're evaluating footprint and best cross-country opportunities to plan for seamless execution, leveraging SPX flow size in Poland and China. Let's return to ITT on slide four. I would like to talk about the incredible work our sales and engineering teams have done this past year to win in the marketplace and ensure we sustain the high single-digit growth ITT delivered over the past five years. As we discussed during Capital Markets Day, we're focused on delivering growth organically and through M&A. On the organic front, I want to elect three specific platforms for growth. Flow. What honestly started as an opportunistic award in decarbonization in Australia has grown into an approximately $50 million win for our Bornemann multi-phase pumps. Bornemann's technological superiority convince the customer to source us on the entire project, consisting of three expansion phases. We ship the first system in Q3 of 2025, and we deliver the follow-on system in 2026 and 2027. Great job, Jeroen and Boneman team. In Latin America, we are supporting Argentina's oil production ramp. And our BB3 pumps were chosen for one of the largest unconventional oil reserves outside of North America. This was thanks to the perseverance of Gabriela and Fernando, who executed the perfect commercial strategy for a project where we started as the underdog. Finally, we're working our way to supply 100% of the biopharma diaphragm valves for a leading GLP-1 drug maker for their U.S. and European expansion phases. Our patented Envision technology and the intimacy we developed with both the EPC and the end user made it happen. Moving to defense. Anodyne, a leading brand of rotorcraft energy absorption, is benefiting from defense modernization. Specifically in the U.S., we've been selected for the development of a FLARA energy absorption system by Bell. This is a platform that could be worth more than $60 million over 10 years, starting in 2028. Connectivity is another growing trend in defense that continues to benefit our connector business. In 2025, we grew orders by 27% as we secure several high-profile soldier-worn and drone applications. In land defense applications, Connie HydroRide is rapidly gaining shares in the U.S. and Europe, on marquee platforms that spending ramps up. Connie Defense Business is approaching $15 million in orders after growing more than 70% in 2025. Finally, on transportation. In Q4, we renewed a multi-year contract that will ensure aerospace controls supports Boeing growth plans. Great job, Yelena and aerospace team. In rail, Corning keeps on gaining market share as the only validated source of the CR450 high-speed train platform, thanks to the incredible work of Tim and Charles. And I could not talk about platforms for growth without mentioning our friction business, which has outperformed global OE production again for the 13th year in a row, whilst our team in Barge continues to make progress on the geopack. are a material that is now in trials with a major European OEM for a start to production in 2028. Amazing job, Umberto and Alessandro. As you can see, we have a long organic growth runway ahead of us at ITT. We are compounding it with M&A, as you have seen with Svaneoi in marine energy transition, with Caesarea in defense, and now with the SPX floor position, they will expect to close in March. Let me now turn the call over to Manuel to discuss Q4 results in detail.

Thank you, Luca, and good morning. We ended the year with another strong quarter. In Q4, we delivered strong performance across the board in orders, revenue, margin, EPS, and cash. Our teams delivered over $1 billion in revenue, up 13% in total, and 9% organically from higher volumes and price realization. Within IP, Zvenehoi grew over 50%, while legacy pump projects were up 30% organically. CCT grew 11% organically, thanks to strong aerospace and defense, up 27% and 17% respectively, while Caesarea grew 11%. In MT, Kony Defense grew 13%, as we continue to penetrate the ground vehicle markets in Europe. Friction OE outperformed global automotive production by 400 basis points, while aftermarket was up 9%, from an easy 2024 compare. On profitability, operating income grew 19%, driven primarily by strong operational performance and contributions from our acquisitions. MT operating income grew 13%, and margin reached 19.7%. The team at IP drove 100 basis points of margin expansion, including Svanehoy EBITDA improvement of 350 basis points. Moreover, CCT margin was up 240 basis points, excluding M&A dilution. With the Boeing contract negotiation now closed, we are confident that our teams can focus on supporting the accelerated aerospace growth expected in the next few years. EPS of $1.85 was up 23%, or 26%, excluding the dilutive impact of the equity offering related to the XPXO acquisition. Lastly, on free cash flow, our performance accelerated sequentially to deliver 27% growth for the full year and 14% free cash flow margins. we are already at the level we targeted for 2030 at capital market space. Here I want to point out the significant progress regarding customer advances. Following the example of Vanahoy, the team in IT collected 20% more cash advances compared to the prior year, which represents 300 basis points improvement as a percentage of the inventory brought in-house. Great momentum with more opportunities to drive further improvement in working capital. Let's turn to the four-year EPS bridge on Site 6. For the four-year, EPS grew 14% compared to the prior year and 15% excluding the dilutive impact of the December equity raise related to the XPX flow acquisition. The $0.62 from operational performance, including volume growth, pricing actions, and productivity were compounded by $0.25 contribution from our acquisitions. The $0.16 headwind from the loss of income from the Wolverine divestiture, the impact from the high tax rate, and interest expense was offset by a lower weighted average share count. Here, I would like to spend a moment describing the foundational progress we have made, particularly in IP and CCT, as we're driving towards the MT benchmark. SQDC, or Safety, Quality, Delivery, and Cost, is the framework we use to measure our operational performance. On safety, both IP and CCT are below the injury frequency rate benchmark of 0.4. Specifically, IP delivered a 50% recordable incident reduction in 2025 compared to the prior year. Quality performance also improved with 20% fewer claims in IP and a 60% PPM reduction in CCT in 2025. On delivery, overall IP improved on-time performance by 600 basis points, and our NC Pump product line improved by 2,700 basis points in December compared to the prior year. Both businesses significantly improved their cost position during the year, which led to the margin expansion performance we presented earlier. This positions us very well to grow profitably in the future. With that set up, Let's now move to slide seven to discuss our 2026 outlook. Let's review the assumptions underpinning our revenue growth outlook by segments, beginning with connect and control technologies. Accelerating commercial aero production supported by a wide body recovery ramp is expected to drive meaningful growth across our aerospace portfolio. Repricing of long-term aero contracts is poised to deliver multi-year benefits, enhancing visibility and profitability over the cycle. In defense, expanding demand for advanced electronics and the introduction of product innovations will continue to drive incremental share gains. At the same time, Kessaria backlog conversion provides an additional tailwind, further strengthening CCT's outlook for sustained above-market growth. Industrial process is positioned to strong growth as we convert our $1 billion backlog and continue gaining share in pump projects. Svanehoy continues to benefit from the accelerating marine energy transition, while our execution differentiation further drives short cycle demand. As mentioned previously, the expansion of GLP-1 production will support valves growth thanks to our patented Envision technology. In motion technologies, continuous friction OE outperformance positions the business well despite flat vehicle production and softness in North America. Share gains in IT trains in China and Europe are fueling strong growth in our rail portfolio. Finally, IT's growth in Coney Defense, driven by product differentiation and expanding military ground vehicle programs in the U.S. and Europe, provide an additional impetus for the segment. Let's move to slide 8 to continue our log discussion. The plan SPX closing in March will focus today on Q1 guidance. This does not include any of the accretion we expect from the acquisition. For Q1, we expect total revenue growth over approximately 11% and 5% organically. This is driven by mid single digit growth in IP and CCT due to share gains in pump projects and aerospace and defense. MT will continue to outperform global auto and rail production to deliver low single digit growth. In addition, Q1 2026 will have four more days than prior year. All segments are expected to expand margin versus the prior year to deliver over 100 basis points of EBIT margin growth, driven by higher volume, positive price costs, and fixed cost controls. We expect both Zanahoy and Casaria to improve profitability year over year as revenue ramps up and productivity accelerates. All this will translate into 17% EPS at the midpoint in Q1. On slide 9, we can see the different components of the Q1 EPS outlook. We expect EPS to land at $1.70 for Q1 at the midpoint, up 29% when excluding the impact of the December equity offering. This is primarily driven by operational improvements. we expect a flat tax rate, higher corporate expenses, and a share count of 86 million shares given the December public offering. This does not include the impact related to the Lone Star equity consideration to be issued at the closing of the XPXO acquisition. For the four-year, we expect ITT to grow organic revenue mid-single digits. This top-line momentum, combined with favorable price costs, fixed cost discipline and productivity gains across our recent acquisitions position us to deliver at least 50 basis points of margin expansion for the four year. We look forward to providing updated guidance inclusive of the acquisition impact of XPX Flow at our next earnings fall. As previously mentioned, we expect the XPX Flow acquisition to close in March and we continue to estimate it will generate a net single digit EPS accretion in full year 2026. As a reminder, following the close of the transaction, ITT will revise the definitions of adjusted operating income and adjusted income from continuing operations to exclude all acquisition-related intangible amortization reflecting ITT's ongoing M&A activity. Let me turn the call over to Luca on flight 10.

Thanks Emmanuel. A few points before Q&A. 2025 was a milestone. We executed on all fronts, delivering strong growth, higher profitability, and making strategic use of our capital. We delivered on all our commitments, and we have started the next chapter of strong. Our execution and innovation will continue to drive future growth, as you have seen 2025. We are accelerating our 2030 vision, as we compound our organic performance with the announced SPX floor position. We're well positioned for continued value creation. Thank you for joining us today. As always, it's been my pleasure to speak with you. Gigi, please open the line for Q&A.

The floor is now open for questions. At this time, if you have a question or comment, please press star one one 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 do ask that while you pose your question, you pick up your handset to provide optimal sound quality. Please limit your question to one question and one follow-up. Our first question comes from the line of Jeff Hammond from KeyBank.

Yeah, hi, good morning. Hi, Jeff. A lot of moving pieces. Please appreciate all the color. Maybe just to start with IP, I know those orders can be lumpy and the backlog sounds great and gives you visibility, but just wanted to get an update on the funnel and just how you see orders flowing through the year just based on that funnel visibility.

Sure. When you look at the funnel in terms of the orders, the funnel It's slightly down versus the prior year. But if you look at the quarter, Q4 funnel actually is stable versus Q3 and still very, very healthy. And within that funnel, you will actually see that the funnel in the Middle East and in Asia Pacific actually grew nicely. So we are feeling pretty good on the funnel. And just to give a little bit more color, when we were in the Middle East at the expansion of our facilities in Saudi Arabia, and I was able to talk to our customer, actually they were quite positive about the future investment and 26 be better than 25.

And Jeff, if you look at our 2026 orders, we expect to deliver growth with really all end markets contributing to roughly probably low to mid single growth, single-digit growth.

Okay, great. And then on CCT, you talk specifically about, I think, a Casario order, but just unpack that 40% organic growth in the orders and if there's any kind of one-time-ish or lumpiness in there. And then just separately, just wanted to clarify the 1Q guide, still includes amortization, and then once you close SPX below, you'll exclude it. Thanks.

Okay. I mean, take the orders, and of course, Emmanuel, you will tackle the second one. So when you look at that incredible performance in terms of the orders in Q4, I would say that everything was nicely up. It was connectors was up more than 20. Controls were up... Aftermarket was up 35%. Quesada was up 33%. So all the orders were nicely up in the quarter. And this is very true also for the full year. I think that there is probably just one item, which probably is a few million dollars, which is a price adjustment because of the contract renegotiation with Boeing. That's the only thing. But I would say very nice across the board.

Yeah, and regarding our Q1 guidance, so we're very happy to deliver a 17% expected growth from an EPS standpoint. This does not include any change to the accounting we have on the intangible amortization. So we'll do that when the acquisition close sometime in Q1. And so it includes the dilution from the equity raise that we did in December.

Okay, great. Appreciate it, guys. Thank you, Jeff.

Thank you. One moment for our next question. Our next question comes from the line of Mike Halloran from Baird.

Hey, good morning, everyone. Hi, Mike. Can we start on some of the SPX flow comments you made there, Luke? Obviously, really good momentum exiting the year with the order trajectory, backlog, commentary, et cetera. Maybe just dig into a little bit how sustainable that trajectory looks and what the core drivers from your perspective are that should allow that momentum to continue.

Sure. So we are working very closely with SPX, with the SPX flow team. So, you know, we still haven't closed the deal yet. So more color will come later. But I can tell you that when you look at the nutrition and health, I think that when you look at many of the customers that they're working with, they are in a good CapEx cycle, and SPX Flow is a very good position with several of them. As a matter of fact, I participated to a call together with the SPX leadership team with one of their major customers, And it was really good to see the intimacy that they have and how they work with the customer in building the CapEx and building the execution for the years to come. I think that this is confirming a little bit our visibility into what we said at the beginning when we communicated acquisition, that we see this SPX flow as really a growth opportunity. And when it comes to mixers, I would say we have some good opportunities there as well. Granted, probably that was coming from an easy compare when it comes to 2024.

Thank you for that. And then maybe just a generic question and a specific one associated with it. If you think about your outlook for 2026, How much has changed over the last three, six months in terms of how you're thinking about next year, or at least versus the 3Q earnings release? And more specifically, within the motion piece, has there anything changed on how you're thinking about the end market outlook for auto?

Sure. I would say that some of the trend continues. Some of the trend probably reinforced. So if you look at the aerospace recovery, we've been talking about the aerospace recovery now for a few quarters, and now you see some good results in there in terms of the orders and in terms of the revenue as well. And the aftermarket is stronger. We see the production ramp up. We see also the wide bodies. So those were something that were happening, and now they're getting a little bit stronger. Defense was good. It's getting a little bit stronger. And that is what's happening. So a confirmation. Now, when you look specifically at moisture technologies, I would say in terms of the auto market, if you look at 2025, it was a positive year in terms of growth of production, but was mainly because of China. Both Europe and North America were down, less than what we expected at the beginning of the year. When you look at 2026, we expected the production, the global production to be flat slightly down. And once again, it will be across the board, you know, probably Europe being flattish and North America and China flat to low single digit down.

Thank you. Thank you, Luca.

Thank you, Mike.

Thank you. Our next question comes from the line of Joe Giordano from TD Cowen. Good morning.

Hey, good morning, guys. Hi, guys. So for businesses like Spanahoy, Casaria, you know, it's great to see them scaling and getting orders to this magnitude. But, like, I guess the other side of that mountain is sometimes challenging, right? So how do you kind of prepare these companies? Like, are these, like, stable run rate orders? Or, like, are we going to have to kind of find new ways to keep the level of business to that magnitude? Like, how do we prevent, you know, a plus 40 becoming an impossible comp in, like, out years?

Sure. So when you look at, I would say there are slightly difference between Kessaria and Zvanoi. I think that when you look at Kessaria, incredible order performance. And I would say that is, I would say, quite sustainable if you think that, you know, more and more expenditure will happen in defense. And Kessaria play 80% of the Kessaria business is actually in defense. So I think that that is sustainable in the short and medium term from our perspective. The comments in terms of Svanehoi, I think it would be difficult to repeat the level of performance of orders in 2026 versus 2025. I mean, 2025 orders grew 44%. So obviously that will not be repeated. Having said that, we are working to expand the opportunity in Svanehoi with new product introduction, and also from, you know, small addition from an organic perspective, like the acquisition of Coho that we did at the end of last year, which introduces compressors into the mix. So working on that from an innovation and product point of view, Joe.

Perfect. And Luca, you touched on this in your prepared remarks, but like as you get ready for to come in, like, you know, it's a much larger deal than anything you guys have done. So how do you, like, what do you do ahead of time before you can really dig, like, before you get your hands on it? What can you do to prep internally to make, like, the early stage integration as fast and efficient as possible?

I can tell you that the team are working very closely together. Actually, it was really good to see the team working together over here in Stanford. We had it a few weeks ago, both the SPX team and the ITT team working to really kick the ground running on day one and know exactly how the organization is going to look like and working on those synergies that we expect to deliver in year one. and also working commercially. As I said before as well, you know, both Bartek and myself participate to a call with one of our major customers that we will meet in person after closing next week. I will be in London. I will be able to spend one day with the nutrition and health leadership team all together, you know, looking at the projects and the opportunities. So we are all in it already. Thanks, guys. Thank you, John.

Thank you. One moment for our next question. Our next question comes in the line of Nathan Jones from Stifel.

Good morning, everyone. Hi, Nathan. I guess just following up on some of the SPX stuff, interested in hearing a little bit more about the organizational structure, you know, post getting the deal closed here. There's some parts where there's overlap. There's some completely different customer bases between your industrial process business and some of their flow of businesses. So just any commentary on how you'll structurally go about integrating those, what will run separately, what gets integrated into IP, just how you're thinking about running those businesses once you get them in the door, please.

Sure. First of all, SPX is well run. we saw, you know, the margin that they were delivering, right? So we have a good, well-run company with a good management team, really, that we have in the businesses. So when we are approaching this, it's really to ensure that the businesses that are performing well with strong management team, you know, are staying as stable and are delivering the base case. And on top of that, we're going to deliver the synergies. But most of the synergies, particularly in year one, are coming from the GNA, from the fact that we are not going to have a duplication from a corporate point of view. So we are using the best athletes, and we've got very good athletes and very good management team in SPX. So we will integrate some parts, and those are the must-have conversations that we're having today. But, you know, the parts that are running well, you know, you want to keep on running well and ensure that you do not disturb them.

Thanks for that. I guess a question on the finalization of the contract negotiations with Boeing. I'm sure you're glad to finally have that behind you. Can you talk about... The potential margin improvement that CCT sees from those contract negotiations, I know that some of that benefits come in over the last few years and some of it will come in over the next few years. Just where we get to or what the contribution is from that and how quickly that rolls in and over what time period. Thanks.

Thanks, Nathan. So we're very happy, as you said, about the conclusion of the Boeing contract. And here, really, we want to applaud the work of the CCT Aerospace team that really worked really hard to deliver that contract. So this is a high double-digit price adjustment for a five-year contract. So most of the price adjustment or the price increase is going to come in the first and the second year with additional price increase to offset expected inflation in year three, four, and five. This is obviously compensating for the absence of price adjustment we have had since 2015 and 2017, and the cost inflation that we have experienced. So as a result, as you can imagine, this will be a large improvement of our profitability, our aerospace profitability, specifically with Boeing. And we're very happy because it allows us to focus on supporting the growth at Boeing that we've seen both on the narrow body and the wide body platforms.

Thanks for taking the questions. Thanks, Nathan.

Thank you. One moment for our next question. Our next question comes from the line of Amit Mehrotra from UBS.

Thank you. Morning, everybody. Good morning. Good morning. Luca, you know, we're just currently, I guess, in an environment where folks are getting maybe a bit more positive on some cyclical tempo improving. If you kind of just look at, you know, the more cyclical parts of your business, are you seeing any evidence of that? Because obviously there are certain large parts of your business that that sell into cyclical markets, but you've been able to outperform that, obviously, with autos, for example. But if we were to just sort of isolate the cyclicality of the market, I'd just be curious, does it feel better to you, or is it really no change?

I would say that, you know... There are some small signs of improvement, I would say. If you look at the last, I would say, probably six weeks, if we look at some of the parts in the short cycle in IP, the order book in terms of automotive in Europe, I would say, is stable. The aftermarket in Q4 was growing nicely, even granted was from an easy compare. So there are some signs, I mean, that would imply that maybe the situation is a little bit better, but it's probably too early to tell.

And I would add to that that our short cycle performance really is standing out. We are focusing on improving our on-time delivery. which really brings a lot of opportunities forward for us to gain market share. And when you look at the short cycle in IP, we had pretty strong spares orders in Q4, and we started the year also super strong. And so we're very encouraged by this.

Okay, that's great. And just as a follow-up on SPX flow, you know, I think the market obviously sort of understands and knows this asset as it used to exist. but it's gone through a lot of change. And, Luke, I know you've – I think you and Vartek have probably visited every single facility of the company over the last couple years, I guess. And so I guess, like, you know, there's some people that are skeptical of the asset but know you guys are excellent executors, and they're just trying to reconcile that. And so I'd love it for you, Luke, to just talk about, you know, what SPX was, what it is now, and what you think you can make it, just given sort of applying some of your track record and execution to that business?

So when you look at SPX, it's true, I would say. But let's not forget that the acquisition that we're bringing in has already got a very good profitability and a very good EBITDA margin. Right? So they've already done a good job in terms of that cost containment. Now, on top of that, you need to lay the synergies that we have, which are roughly $80 million to be executed in the last three years. A lot of that will be from the GNA. One-third from the procurement, and then there's going to be roughly one-tenth percent that is coming also from the footprint rationalization. I think that this is the area where we are pretty good, and I believe that they also are good and we're working together on executing. I think that what we are going to add as well is the impetus on growth, on the growth momentum. And there are a lot of revenue synergies that are not in the model that we're already working on. You're talking about Latin America, where we have a very strong base, about the Middle East, where we have a very strong base. So that is an area where we will be able to grow. They have some product gaps that we'll be able to cover with our twin screw born-in-man twin screw pumps. And then I would say probably a little bit more focus on growth that is in our DNA. and probably be less religious when it comes to 80-20 market size and customer size.

And just to confirm that, the high single-digit accretion in this year pro forma for the closing does not include any revenue. Have you talked about maybe the magnitude? I mean, we're talking about a few hundred million dollars of revenue synergies as an opportunity. Any thoughts there?

Yeah, so I think that when you think about revenue synergies, I think we expect them beyond the 2026. Right now, we're going to focus on understanding the business. Obviously, there's a short-term opportunity we will take it, but I think it's fair to say that the cross-selling and the commercial synergies are going to happen most likely starting 2027. So we haven't really bona fide how much those commercial synergies are, but we expect that they're going to be meaningful as we're really able to leverage the portfolio of both companies.

Right. Got it. Thank you very much, guys. Appreciate it.

Thank you.

Thank you. Our next question comes from the line of Vladimir Bistritsky from Citi.

Morning, Vlad. Hey, good morning. Good morning, guys. Impressive pronunciation, my last name there. I like it. Anyhow, thanks for taking my questions. So just, you know, following up on IP and, you know, your ability to continue to outperform the market there, can you just talk about whether you've seen any change in competitive behavior in that business, or are you thinking about potential risks for more aggressive competition on pricing or on terms and conditions?

Thanks, Vlad. No, we don't see any change in terms of behavior in the competitive landscape. That has not changed. I've never seen any change in the last six years, as a matter of fact, I can tell you. But I think what is changing is really the performance that keeps on improving. Let's take the project example, the project business, Vlad. You know, this was a business that was losing money, that was making a little bit of money, a little bit, then we give a target of 15% plus, then 20. Today, those execution, those projects that get executed and deliver margin in the high 20s, and they are growing. perfectly on time, and when you have this level of performance in the market, your customers tend to be loyal. And as I said, some of the best intimacy and loyalty, I've seen it actually when I was in Saudi and I met with the customers over there. This is what really is happening in the market.

That's helpful and great to hear, Luca. And then maybe just sticking with IP and digging into the – biopharma valves wins that you mentioned. We've heard, you know, from some others about, you know, pretty positive commentary around the capital investment cycle in pharma and biopharma. So can you just talk about, you know, sort of incremental opportunities that you see in the pipeline, specifically in that market segment and how you're thinking about potential for incremental wins over the course of 26 in the biopharma space?

Yeah, thanks Vlad. So yeah, the GLP-1 business opportunity that we have has been growing really fast. So this was a roughly $20 million opportunity that we got awarded a couple years ago and then that has grown into more than 50 million as this customer is expanding production sites in the US and also in Europe. This is what's really interesting about this as well, is that those are diaphragm valves, and so there's a meaningful recurring aftermarket when you have to replace diaphragms every time you change the composition of the formula that you are developing. So this is really interesting for us. I think that when you look at our biopharma valve business, it has been expanding. I think it's up 10% this year from an order standpoint. And we continue to see other opportunities, especially because in Europe, we have penetrated Europe much less than in the U.S. So we have many opportunities. And then the last point I wanted to make is that Habenim is doing really well as well, more on the new energy. But this is a significant platform for growth for Aval's business. You know, Habenim now is a little bit more than $60 million business. When we bought it, it was barely $50 million. and the margin is still very good, and we are finding new ways to grow and gain market share, especially in the U.S.

Great. That's helpful, Emmanuel. Thanks for your question, too.

Thank you. One moment for our next question. Our next question comes from the line of Matt Somerville from D.A. Davidson.

Morning, Matt. Thanks. Just a couple of quick ones. Morning. Can you talk about how much relative price capture you're expecting across the three reportable business segments that's embedded in your full year 26 organic outlook? And then I have a quick follow-up.

Yeah. So let me start by saying that 2025 was a really successful year in terms of price capture. We were able to capture a lot of price in IP and CCT above our cost inflation. And we were able to limit, as well, the price decrease in motion tech and friction, compensated, obviously, by the raw material disinflation that we've seen during the year. In 2026, we expect our price capture to be as strong. Obviously, it's incremental. We expect IP and CCT to lead the way. overcoming the cost inflation, so being positive, price-cost positive from a dollar and a margin standpoint. And in terms of MT, we expect to be neutral.

Got it. And then you've mentioned aftermarket in friction a couple times being up 9% against an easy compare. How should we be thinking about kind of what's embedded in your guidance for friction aftermarket in 26 relative to how it performed over the course of the full year 25? Thank you.

Yeah, so in terms of the friction independent aftermarket, we expect this to be roughly flat in 2026. You know, this is mainly a European business, and as we described, you know, Europe is really flatlining from a growth standpoint, so that's why we don't expect much of an uptick. And then in terms of the spares, the original equipment spares, we expect also to be flat. Here there's a lot of market share gains that are at bay, and we're working with our customers to provide low-cost quality solutions.

Thank you. Our last question comes from the line of Andrew Obin from Bank of America.

Hey, good morning, everyone. You have Sabrina on for Andrew, Sabrina Abrams. Good morning, Sabrina.

Hi, Sabrina.

You guys have had a really impressive trend of accelerating organic growth this year. I think we went from flat to 4 to 6 to 10. And you're ending the year on such a strong note, and I think above the commentary from where we sat a quarter ago. Any comment on, I guess, if so, like what went better than expectations? And then as a follow-up, other than guiding with some conservatism, any reason why things would decelerate to mid-single digits next quarter? Thank you.

Thank you, Sabrina. So, yes, we are very happy. We were able to grow organically. 5% in 2025, and almost 9% total. Large contribution from industrial process and connecting control technologies. So when you think about what has driven that growth in connecting control technologies, obviously aerospace and defense is helping a lot. And in that, we have a significant contribution from a self-standpoint from aftermarket. Aftermarket was aftermarket aero, especially from a sales standpoint, was up more than 20%. Kisaria is doing also really well. We talked about the orders that they were able to get and convert some of them. So CCT, a lot of really good activity from an aerospace standpoint, as well as some price capture, as I mentioned a little earlier. In IP, I think here what you see is all the pump projects that we've been able to deliver. When you think about the pump projects for the year, they were up 30%. And I would say that a large majority of those pump projects were delivered in quarter three and quarter four, both at Legacy IP and Xenohor.

Thank you. And as a follow-up sort of to the last comment, I know – The project mix in IP is diluted to margins, but I think we had the best, I think we had the highest margins you guys have seen since you closed Fonahoy. So anything in particular you want to call out, like given the mix headwinds, anything in particular you want to call out that's gone super well in the execution for this segment?

Nothing in particular is really broad in terms of the execution of the projects. When you look at these projects, when we close and ship the projects, the margin is always higher than what we book those projects at, which is a testament to the good project execution, good project management, management of the changes, and also the cost management. And also good project order acquisitions. So this is general. We have seen the trend, and the trend keeps on improving. So go to the next improvement.

Thank you.

Thank you, Sabrina.

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