ITT Inc at Citi Global Industrial Tech and Mobility Conference Summary

The following is excerpted from the question-and-answer section of the transcript.

Question: Vladimir Bystricky - Citi - Analyst : Great. Thanks, Luca. That was a great overview, lots of areas we can dig in on -- maybe we'll start with, obviously, you just reported earnings a few weeks ago, still early in the year. But maybe you can give us an update on what you're seeing in terms of order rates and especially demand in some of the shorter cycle portions of your portfolio? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, ITT.N - ITT Inc at Citi Global Industrial Tech and Mobility Conference

Question: Vladimir Bystricky - Citi - Analyst : Good to hear. And then I want to dig in the segments, into the segments a little bit. IP, industrial process has actually become your largest segment now. And I know you've talked about a shift in the backlog there going more toward project versus shorter cycle. At the same time, you're talking about pretty good margin expansion this year. So can you talk about the drivers of margin expansion in IP and how we should think about potential mix impacts on profitability going forward as projects continue to ramp?

Question: Vladimir Bystricky - Citi - Analyst : Okay. That's helpful. And then just thinking about IP growth for a minute. Obviously, you've had quite strong growth in IP, I think both volume and pricing and share gains you've talked about I think, particularly in the Middle East. So can you talk just a little bit about what's been driving your outperformance in IP? How you're thinking about share gains, how you've really been able to take share and what you're doing differently in that business to drive these results?

Question: Vladimir Bystricky - Citi - Analyst : That makes a lot of sense. And then given the traction you've seen in the Middle East, how should we think about potential IP opportunities for outperformance in other regions?

Question: Vladimir Bystricky - Citi - Analyst : Got it. And then, Luca, maybe shifting to your second largest segment, which gets a lot of focus and a lot of attention, Motion Tech. So Motion Technologies, maybe if you can just talk a little bit about what the business does. And then specifically, in your friction business, which is long outgrown auto builds how you're thinking about the potential for outgrowth this year and sustaining outgrowth going forward?

Question: Vladimir Bystricky - Citi - Analyst : Just want to dig in on that a bit, Luca. I know over the past few years, you have talked about EV as contributing to outgrowth and EV penetration really is a long-term opportunity for ITT. And obviously, we've seen EV adoption slow a bit, particularly in the US. So can you just talk about how a slower ramp in EV as a share of builds could impact outperformance overall versus the market?

Question: Vladimir Bystricky - Citi - Analyst : Helpful. And then you mentioned the performance you've had in friction in China. So can you just talk a little bit about how we should be thinking about potential tariff impacts either on friction specifically or on ITT overall, any concerns related to tariffs? And then how we should be thinking about potential price cost impacts if we do see increased tariffs globally?

Question: Vladimir Bystricky - Citi - Analyst : Okay. Helpful. I did want to stick to MT for maybe another question. KONI, your rail business, can you talk about, one, what KONI does for people who are less familiar? And then I know it's a smaller piece of the portfolio, but you did have very high growth there

Question: Vladimir Bystricky - Citi - Analyst : Maybe shifting to CCT. CCT, I think, has had quite good performance. It is still your smallest segment. So I know if we look back at 4Q, I think CCT grew high single digits, which I think was certainly better than we were modeling, I think, maybe a little better than you were expecting. Can you talk about what drove that outperformance in CCT in 4Q, particularly? And then how you're thinking about the growth outlook for CCT into '25.

Question: Vladimir Bystricky - Citi - Analyst : Do you have any sense of on that distribution side, the tailwinds you saw there, whether that was really end market demand or restocking?

Question: Vladimir Bystricky - Citi - Analyst : That's good to hear. And then Mark, you touched on some of the Boeing headwinds given the challenges at Boeing, can you talk about how big of an impact that is for you in '24? And then also, I know you've got a commercial renegotiation underway with Boeing. If you could give us any update on how that's progressing?

Question: Vladimir Bystricky - Citi - Analyst : Helpful. And then just on aerospace and defense in general. I'm not sure that people realize how material it is to ITT now. I think in combination of aerospace and defense are almost 20% of your business now. As you think about the portfolio going forward and capital deployment, can you talk about whether those markets, in particular, are areas that you want to continue to lean into for?

Question: Vladimir Bystricky - Citi - Analyst : Got it. Any questions from the audience? I should open it up, if not, I'll continue. Okay. I'll stick to it then. You mentioned the profitability in connectors, Luca, but really across the portfolio, you've driven strong op margin improvement over the past few years, I think, averaging close to 100 bps of margin expansion. And you had some long-term targets out there that you've essentially hit two years ahead of schedule. So can you talk about how we should think about op margin runway here into '25 and your ability to continue to sustain these I would say, high levels of profitability improvement year in and year out.

Question: Vladimir Bystricky - Citi - Analyst : Looking forward to seeing it. Good. And Luca, I wanted to go back to the capital allocation topic. I know you mentioned IP and connectors are focus areas. You highlighted the recent acquisitions that you've done over the past couple of years. So it's been good to see M&A step up pretty meaningfully here, you still have a very underlevered balance sheet. I think we would all agree. So can you just talk about how you're thinking about ITT's capacity for M&A, the potential to do larger deals or more accelerated M&A continuing going forward? And then what you see in the M&A landscape today in terms of opportunities?

Question: Vladimir Bystricky - Citi - Analyst : Got it. I wanted to go back, Luca, you mentioned the embedded motor drive, the EMD product that you mentioned on 4Q call and you highlighted here. And I'm sure we're going to hear a lot more about it at the Capital Markets Day. But maybe you could just give us some color on what are some of the applications this could go into? How it actually came into being because this is, if I'm not mistaken, kind of a new product area for ITT completely. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, ITT.N - ITT Inc at Citi Global Industrial Tech and Mobility Conference So -- and then just how you're thinking about ramping and when maybe we could see financial impacts?

Question: Vladimir Bystricky - Citi - Analyst : That's interesting. And as you ramp production in 2Q and going forward, how should we think about EMD impacting segment margin, I'm assuming in IP?

Question: Vladimir Bystricky - Citi - Analyst : Look forward to learning more about it at the Capital Markets Day. And maybe just in that context, without asking for sort of specific long-term targets, which I'm sure you'll give at the CMD. Just given the performance we've seen and having exceeded all your targets, can you talk about beyond the EMD, what are some of the key growth opportunities that you see ahead for ITT and what you're most excited about for the company? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 20, 2025 / 1:00PM, ITT.N - ITT Inc at Citi Global Industrial Tech and Mobility Conference

Question: Vladimir Bystricky - Citi - Analyst : Looking forward to it.

Question: Vladimir Bystricky - Citi - Analyst : Luca, as we're wrapping up on time here, I'm going to ask -- I want to ask you one question that I've asked you before and that we're asking all of our companies at the conference, which is what are the top 2 or 3 innovations and structural changes affecting your company over the next five years? And are there any emerging industry trends that are maybe being overlooked in the current discourse?

Question: Vladimir Bystricky - Citi - Analyst : Great. I think that's a good place for us to wrap. Thanks again for joining us.