ITT (ITT) FY Conference Transcript

ITT FY Conference Summary Company Overview - Company: ITT - Industry: Engineering manufacturing, focusing on components for harsh environments across various sectors including automotive, rail, defense, chemical, mining, oil and gas, and energy transition [4][5] Key Financial Highlights - Q1 Performance: Generated over $1 billion in orders, with a strong capital deployment strategy including$ 100 million in share repurchases during Q1 and $500 million year-to-date [5][6] - **Long-term Targets**: - Organic revenue growth of over 5% through 2030 - Total growth target of 10% - Adjusted operating margin of approximately 23% - EBITDA above 25% - EPS target of$ 11 (organic) or over $12 (total) [8] Growth Strategy - **Organic Growth**: - Targeting 5-7% in Industrial Process (IP), 2-4% in Motion Technologies (MT), and 7-9% in Connect and Control Technologies (CCT) [9] - Emphasis on higher growth and margin businesses, particularly in flow and connectors [11] - **Market Outperformance**: Historically outperformed market growth by 300-400 basis points through execution and innovation [15] - **Margin Expansion**: Aiming for 500 basis points of margin expansion by 2030 through efficiency improvements, automation, and better supply chain management [16][19] Capital Allocation and M&A Strategy - **M&A Focus**: - Targeting high-growth, high-margin businesses with strong management teams - Recent acquisitions include Habony (LNG hydrogen), MicroMode (RF connectors), and Kisaria (aero and defense) [35][36][38] - **Criteria for M&A**: Must have a leading market position and align with ITT's strategic goals [36][37] Innovation and Product Development - **R&D Investment**: Over 4% of revenue allocated to R&D, focusing on continuous improvement and new product development [34] - **New Product Launch**: Introduction of Vida, an embedded motor drive technology aimed at reducing energy waste in industrial pumps, with a projected addressable market of$ 6 billion [57][61] Segment Performance Insights - Motion Technologies: - Friction OE business expected to achieve 400-500 basis points of outgrowth in 2025, with historical outperformance of 700-800 basis points [45][46] - Continuous improvement in productivity and quality is a key focus [51] - Connect and Control Technologies: - Recent acquisition of Kisaria expected to drive high single-digit growth and margin progression through synergies with ITT's existing connector business [64][66] Market Outlook - Book-to-Bill Ratio: Strong performance in the marine industry with a book-to-bill ratio of 2.0 in Q1, driven by market demand for cleaner energy solutions [54][55] - Future Growth: Confidence in double-digit growth for the Svanoy segment, supported by strong order quality and customer loyalty [55] Additional Considerations - Working Capital Management: Significant room for improvement in working capital across segments, particularly in IP and CCT, with a focus on inventory management [42][43] - Intellectual Property Protection: Strong emphasis on protecting innovations, particularly in new motor technologies, with a competitive edge expected to last several years [71]