ITT (ITT) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Highlights Overall Financial Performance ITT Inc. Q1 2024 achieved strong financial growth, with revenue growing year-over-year by 14% (organic growth 9%), reaching $910.6 million, adjusted EPS increased by 21% to $1.42, primarily driven by sales growth and productivity improvements, and the company's operating margin and adjusted operating margin both expanded | Metric | Q1 2024 | Q1 2023 | Change | | :--------------------------- | :------ | :------ | :----- | | Revenue ($M) | 910.6 | 797.9 | 14.1 % | | Organic Growth (%) | | | 9.5 % | | Operating Income ($M) | 149.2 | 124.3 | 20.0 % | | Operating Margin (%) | 16.4 % | 15.6 % | 80 bps | | Adjusted Operating Income ($M) | 155.0 | 126.2 | 22.8 % | | Adjusted Operating Margin (%) | 17.0 % | 15.8 % | 120 bps | | EPS ($) | 1.34 | 1.20 | 11.7 % | | Adjusted EPS ($) | 1.42 | 1.17 | 21.4 % | | Net Cash from Operating Activities ($M) | 57.8 | 58.1 | (0.5) % | | Free Cash Flow ($M) | 30.1 | 29.4 | 2.4 % | - Orders increased by 13% (organic growth 7%), primarily driven by improved connector demand, growth in aerospace and defense components, and increased market share in friction and rail markets[5] - Revenue exceeded $900 million for the first time, with growth across all business volumes, and acquisitions of Svanehøj and Micro-Mode contributed 5% to total revenue growth[2][5] Management Commentary CEO and President Luca Savi stated the company continued its 2023 growth momentum, with strong Q1 operational and financial performance, new orders approaching $1 billion, and record aerospace orders, the company, through organic investments and the acquisition of Svanehøj, continued to expand its pump business capabilities and increase friction product capacity, expecting profitable growth, and based on Q1 performance and demand outlook, the company raised its full-year 2024 organic revenue, operating margin, and EPS guidance - New orders approached $1 billion, including record aerospace orders, strong connector demand, and increased market share in friction and rail businesses[7] - The company continues to invest in expanding pump business capabilities and increasing friction product capacity, and strengthens its differentiated competitive advantage through the acquisition of Svanehøj[7] - Based on strong Q1 performance, the company raised its full-year 2024 organic revenue, operating margin, and EPS guidance[7] Q1 2024 Segment Performance Segment Results Overview All ITT Inc. business segments achieved revenue growth in Q1 2024, with the Industrial Process segment showing the most significant growth, while the Motion Technologies segment demonstrated outstanding operating margin performance | Segment | Q1 2024 Revenue ($M) | Revenue Reported Change (%) | Organic Growth (%) | Q1 2024 Operating Income ($M) | Operating Income Reported Change (%) | Adjusted Operating Income Change (%) | Q1 2024 Operating Margin (%) | Operating Margin Change (bps) | Adjusted Operating Margin Change (bps) | | :------------------------ | :---------------- | :--------------- | :----------- | :-------------------- | :------------------- | :--------------------- | :--------------------- | :------------------- | :------------------------- | | Motion Technologies | 392.4 | 7.6 % | 8.2 % | 70.6 | 32.2 % | 32.0 % | 18.0 % | 340 bps | 340 bps | | Industrial Process | 333.9 | 25.3 % | 12.5 % | 63.8 | 15.4 % | 19.9 % | 19.1 % | (170) bps | (90) bps | | Connect & Control Technologies | 185.1 | 10.4 % | 7.2 % | 32.7 | 11.2 % | 14.7 % | 17.7 % | 20 bps | 70 bps | Motion Technologies Motion Technologies segment revenue grew by 7.6% (organic growth 8.2%), primarily driven by increased friction Original Equipment (OE) and KONI rail demand, operating income significantly increased by 32.2% due to higher sales volume, productivity savings, and lower material and overhead costs - Revenue increased by $28 million, primarily driven by higher friction OE sales volume and KONI rail demand, partially offset by unfavorable foreign exchange rates[8] - Operating income increased by $17 million, primarily due to higher sales volume, productivity savings, and lower material and overhead costs[8] Industrial Process Industrial Process segment revenue grew by 25.3% (organic growth 12.5%), primarily driven by pump project growth and the Svanehøj acquisition, operating income increased by 15.4% due to higher sales volume and productivity savings - Revenue increased by $67 million, primarily driven by pump project growth and the Svanehøj acquisition completed in January 2024, partially offset by foreign exchange rates[9][10] - Operating income increased by $9 million, primarily due to higher sales volume and productivity savings[10] Connect & Control Technologies Connect & Control Technologies segment revenue grew by 10.4% (organic growth 7.2%), driven by pricing strategies, increased connector and aerospace & defense component volumes, and the Micro-Mode acquisition, operating income increased by 11.2% primarily due to pricing, volume, and productivity initiatives - Revenue increased by $18 million, primarily driven by pricing strategies, increased connector and aerospace & defense component volumes, and the Micro-Mode acquisition[10] - Operating income increased by $3 million, primarily due to pricing, volume, and productivity initiatives, partially offset by higher material, labor, and overhead costs[10] Corporate Actions & Outlook Quarterly Dividend ITT Inc.'s Board of Directors approved a Q2 2024 cash dividend of $0.319 per share, payable on July 1, 2024, to shareholders of record as of the close of business on June 3, 2024 - The company declared a quarterly dividend of $0.319 per share[11] - The dividend is payable on July 1, 2024, to shareholders of record as of the close of business on June 3, 2024[11] 2024 Full Year Guidance ITT Inc. raised its full-year 2024 financial guidance, expecting revenue growth of 9% to 12% (organic growth 4% to 7%), adjusted operating margin is projected to improve, adjusted EPS is expected to grow by 8% to 13%, and free cash flow guidance remains unchanged | Metric | FY 2024 Guidance (Low) | FY 2024 Guidance (High) | | :--------------------------- | :-------------------- | :-------------------- | | Revenue Growth (%) | 9 % | 12 % | | Organic Revenue Growth (%) | 4 % | 7 % | | Operating Margin (%) | 16.9 % | 17.5 % | | Adjusted Operating Margin (%) | 17.1 % | 17.7 % | | EPS ($) | 5.51 | 5.76 | | Adjusted EPS ($) | 5.65 | 5.90 | | Adjusted EPS Growth (%) | 8 % | 13 % | | Free Cash Flow ($M) | 435 | 475 | | Free Cash Flow Margin (%) | 12 % | 13 % | - Adjusted operating margin is expected to improve by 20 to 80 basis points (excluding the dilutive impact of the Svanehøj acquisition, an improvement of 100 to 160 basis points)[12] - The company stated that due to the uncertainty and unpredictability of foreign exchange fluctuations, acquisitions, and certain special items, it is unable to quantify the GAAP reconciliation impact for organic revenue growth and adjusted segment operating margin without unreasonable effort[13] Financial Statements (Unaudited) Consolidated Condensed Statements of Operations In Q1 2024, ITT Inc.'s revenue increased to $910.6 million, both gross profit and operating income achieved significant growth, and net income rose to $112 million | Metric | March 30, 2024 ($M) | April 1, 2023 ($M) | | :-------------------------------- | :------------------- | :------------------ | | Revenue | 910.6 | 797.9 | | Cost of Sales | 609.8 | 536.0 | | Gross Profit | 300.8 | 261.9 | | Selling and Marketing Expenses | 50.1 | 42.9 | | R&D Expenses | 30.0 | 26.4 | | Operating Income | 149.2 | 124.3 | | Net Income | 112.0 | 100.7 | | Net Income Attributable to ITT Inc. | 111.0 | 100.0 | | Diluted EPS | 1.34 | 1.20 | Consolidated Condensed Balance Sheets As of March 30, 2024, ITT Inc.'s total assets increased to $4.4037 billion, primarily driven by a significant increase in goodwill and other intangible assets, total liabilities also increased, while stockholders' equity maintained robust growth | Metric | March 30, 2024 ($M) | December 31, 2023 ($M) | | :--------------------------- | :------------------- | :-------------------- | | Assets | | | | Cash and Cash Equivalents | 423.0 | 489.2 | | Accounts Receivable, Net | 752.0 | 675.2 | | Inventories | 609.4 | 575.4 | | Total Current Assets | 1,907.7 | 1,857.7 | | Property, Plant and Equipment, Net | 568.1 | 561.0 | | Goodwill | 1,207.7 | 1,016.3 | | Other Intangible Assets, Net | 332.2 | 116.6 | | Total Non-Current Assets | 2,496.0 | 2,074.9 | | Total Assets | 4,403.7 | 3,932.6 | | Liabilities and Stockholders' Equity | | | | Short-Term Borrowings | 322.7 | 187.7 | | Accounts Payable | 459.2 | 437.0 | | Total Current Liabilities | 1,197.0 | 1,037.8 | | Long-Term Debt | 230.5 | 5.7 | | Total Non-Current Liabilities | 620.5 | 355.7 | | Total Liabilities | 1,817.5 | 1,393.5 | | Stockholders' Equity Attributable to ITT Inc. | 2,574.7 | 2,528.2 | | Total Stockholders' Equity | 2,586.2 | 2,539.1 | | Total Liabilities and Stockholders' Equity | 4,403.7 | 3,932.6 | Consolidated Condensed Statements of Cash Flows In Q1 2024, cash flow from operating activities remained consistent with the prior year, cash outflow from investing activities significantly increased to $435.3 million, primarily due to acquisition activities, and cash flow from financing activities shifted to a net inflow of $323.4 million | Metric | March 30, 2024 ($M) | April 1, 2023 ($M) | | :--------------------------- | :------------------- | :------------------ | | Net Cash from Operating Activities | 57.8 | 58.1 | | Net Cash from Investing Activities | (435.3) | (28.5) | | Net Cash from Financing Activities | 323.4 | (132.9) | | Net Change in Cash and Cash Equivalents | (66.2) | (99.1) | | Cash and Cash Equivalents at End of Period | 423.7 | 462.8 | - Cash outflow from investing activities significantly increased, primarily due to acquisition activities (net cash acquisitions of $407.6 million)[23] - Cash flow from financing activities shifted from a net outflow last year to a net inflow, primarily due to net commercial paper borrowings and long-term debt issuance[23] Non-GAAP Financial Measures & Reconciliations Definitions of Non-GAAP Measures ITT Inc. uses various non-GAAP financial measures to assess operational performance, including organic revenue, organic orders, adjusted operating income, adjusted operating margin, adjusted income from continuing operations, adjusted EPS, free cash flow, and free cash flow margin, these measures aim to provide clearer insights into the company's ongoing operations and asset management and help investors evaluate financial performance and capital generation capabilities - Organic revenue and organic orders are defined as revenue and orders excluding the impact of foreign exchange fluctuations and acquisitions, used to identify underlying business trends[26] - Adjusted operating income and adjusted operating margin exclude restructuring, divestiture-related costs, certain asset impairment charges, acquisition-related impacts, and unusual or infrequent operating items[27] - Free cash flow is defined as net cash provided by operating activities less capital expenditures, and free cash flow margin is free cash flow divided by revenue, used to measure cash flow generated from operations[29] Reconciliation of Revenue to Organic Revenue In Q1 2024, ITT Inc.'s total revenue was $910.6 million, with acquisitions contributing $41.4 million, foreign exchange impact was a negative $4.3 million, resulting in organic revenue of $873.5 million, and an organic revenue growth rate of 9.5% | Metric | MT ($M) | IP ($M) | CCT ($M) | Elim ($M) | Total ($M) | | :-------------------- | :------ | :------ | :------ | :-------- | :--------- | | Revenue | 392.4 | 333.9 | 185.1 | (0.8) | 910.6 | | Less: Acquisitions | — | 35.8 | 5.6 | — | 41.4 | | Less: Foreign Exchange | (2.3) | (1.8) | (0.1) | (0.1) | (4.3) | | Organic Revenue - Current Year | 394.7 | 299.9 | 179.6 | (0.7) | 873.5 | | Less: Prior Year Revenue | 364.8 | 266.5 | 167.6 | (1.0) | 797.9 | | Organic Revenue Growth - $ | 29.9 | 33.4 | 12.0 | 0.3 | 75.6 | | Organic Revenue Growth - % | 8.2 % | 12.5 % | 7.2 % | | 9.5 % | | Reported Revenue Growth - % | 7.6 % | 25.3 % | 10.4 % | | 14.1 % | Reconciliation of Orders to Organic Orders In Q1 2024, ITT Inc.'s total orders were $976.2 million, with acquisitions contributing $52.3 million, foreign exchange impact was a negative $3.4 million, resulting in organic orders of $927.3 million, and an organic orders growth rate of 7.0% | Metric | MT ($M) | IP ($M) | CCT ($M) | Elim ($M) | Total ($M) | | :-------------------- | :------ | :------ | :------ | :-------- | :--------- | | Orders | 410.5 | 354.0 | 212.8 | (1.1) | 976.2 | | Less: Acquisitions | — | 47.0 | 5.3 | — | 52.3 | | Less: Foreign Exchange | (2.2) | (0.7) | (0.5) | — | (3.4) | | Organic Orders - Current Year | 412.7 | 307.7 | 208.0 | (1.1) | 927.3 | | Less: Prior Year Orders | 371.2 | 327.3 | 169.3 | (1.0) | 866.8 | | Organic Orders Growth - $ | 41.5 | (19.6) | 38.7 | | 60.5 | | Organic Orders Growth - % | 11.2 % | (6.0)% | 22.9 % | | 7.0 % | | Reported Orders Growth - % | 10.6 % | 8.2 % | 25.7 % | | 12.6 % | Reconciliation of Operating Income/Margin to Adjusted Operating Income/Margin In Q1 2024, ITT Inc. reported operating income of $149.2 million, adjusted operating income was $155.0 million, with an adjusted operating margin of 17.0%, and adjustments primarily included restructuring costs and acquisition-related expenses | Metric | Q1 2024 Reported Operating Income ($M) | Q1 2024 Adjusted Operating Income ($M) | Q1 2024 Reported Operating Margin (%) | Q1 2024 Adjusted Operating Margin (%) | | :-------------------- | :-------------------------- | :-------------------------- | :------------------------- | :-------------------------- | | Motion Technologies | 70.6 | 71.3 | 18.0 % | 18.2 % | | Industrial Process | 63.8 | 68.0 | 19.1 % | 20.4 % | | Connect & Control Technologies | 32.7 | 33.6 | 17.7 % | 18.2 % | | ITT Total | 149.2 | 155.0 | 16.4 % | 17.0 % | | Adjustments (Total) | | 5.8 | | 0.6 % | | Restructuring Costs | | 1.9 | | | | Acquisition-Related Costs | | 3.7 | | | | Russia-Ukraine Conflict Impact | | 0.2 | | | - Adjusted operating income increased by 22.8% year-over-year, and adjusted operating margin expanded by 120 basis points[36] Reconciliation of Income from Continuing Operations and Diluted EPS to Adjusted In Q1 2024, ITT Inc. reported income from continuing operations of $111.0 million and diluted EPS of $1.34, after adjusting for special items, adjusted income from continuing operations was $117.2 million, adjusted diluted EPS was $1.42, a year-over-year increase of 21.4% | Metric | Q1 2024 Income from Continuing Operations ($M) | Q1 2023 Income from Continuing Operations ($M) | % Change | Q1 2024 Diluted EPS ($) | Q1 2023 Diluted EPS ($) | % Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------- | :------------------------- | :------------------------- | :------- | | Reported | 111.0 | 100.0 | 11.0 % | 1.34 | 1.20 | 11.7 % | | Special Items Expense / (Income): | | | | | | | | Restructuring Costs | 1.9 | 0.3 | | 0.03 | — | | | Acquisition-Related Costs | 3.7 | — | | 0.05 | — | | | Russia-Ukraine War Impact | 0.2 | 1.8 | | — | 0.02 | | | Other | — | 1.2 | | — | 0.02 | | | Tax Impact of Special Items | (1.3) | 0.1 | | (0.02) | — | | | Other Tax Special Items | 1.7 | (6.1) | | 0.02 | (0.07) | | | Adjusted | 117.2 | 97.3 | 20.5 % | 1.42 | 1.17 | 21.4 % | - Acquisition-related costs in Q1 2024 primarily relate to Svanehøj acquisition and integration expenses[42] - Other tax special items in Q1 2024 include taxes on undistributed foreign earnings[43] Reconciliation of GAAP vs Adjusted EPS Guidance - Full Year 2024 ITT Inc.'s full-year 2024 GAAP EPS guidance is $5.51 to $5.76, with adjusted EPS guidance of $5.65 to $5.90, and key adjustments include restructuring costs, other special items, and their tax impacts | Metric | FY 2024 Guidance (Low) | FY 2024 Guidance (High) | | :--------------------------- | :-------------------- | :-------------------- | | EPS from Continuing Operations - GAAP | 5.51 | 5.76 | | Estimated Restructuring | 0.06 | 0.06 | | Other Special Items | 0.06 | 0.06 | | Tax Impact of Special Items | 0.02 | 0.02 | | EPS from Continuing Operations - Adjusted | 5.65 | 5.90 | - The company cannot quantify the GAAP reconciliation impact for organic revenue growth and adjusted operating margin without unreasonable effort, as these items are uncertain and difficult to predict[48] Reconciliation of Cash from Operating Activities to Free Cash Flow In Q1 2024, ITT Inc.'s net cash from operating activities was $57.8 million, capital expenditures were $27.7 million, free cash flow was $30.1 million, with a free cash flow margin of 3.3%, and the company maintained its full-year 2024 free cash flow guidance | Metric | Q1 2024 ($M) | Q1 2023 ($M) | FY 2024 Guidance (Low) ($M) | FY 2024 Guidance (High) ($M) | | :--------------------------- | :----------- | :----------- | :--------------------- | :--------------------- | | Net Cash from Operating Activities | 57.8 | 58.1 | 590 | 630 | | Less: Capital Expenditures | 27.7 | 28.7 | 155 | 155 | | Free Cash Flow | 30.1 | 29.4 | 435 | 475 | | Revenue | 910.6 | 797.9 | 3,625 | 3,625 | | Free Cash Flow Margin | 3.3 % | 3.7 % | 12 % | 13 % | Additional Information Investor Relations & Media Contacts ITT Inc. provides investor and media contact information, along with details for the investor conference call and access to webcast replays - The investor conference call will be held on May 2 at 8:30 AM ET, with a webcast accessible via the company's website at https://investors.itt.com[15](index=15&type=chunk) - Contact information for investor relations (Mark Macaluso) and media relations (Phil Terrigno) is provided[16] Safe Harbor Statement This press release contains "forward-looking statements" within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, these statements are not historical facts but rather beliefs about future events based on current expectations, estimates, and assumptions, involving known and unknown risks, uncertainties, and other important factors that could cause actual results to differ materially from forward-looking statements, and the company undertakes no obligation to update any forward-looking statements - Forward-looking statements are based on current expectations, estimates, assumptions, and projections regarding the company's business, future financial results, and industry operations[17] - Forward-looking statements are subject to uncertainties, involving known and unknown risks, that could cause actual results to differ materially from expectations[18] - The company undertakes no obligation to update any forward-looking statements, whether written, oral, as a result of new information, future events, or otherwise[20]