ITT INC. Q1 FY2025 earnings call

• Orders exceeded $1 billion, the most in ITT history, with 7% growth (2% organic) and book-to-bill of 1.15, ending backlog at $1.8 billion, up 21% YOY and 10% sequentially.
• Margin expanded 30 basis points to 17.4% on flat sales. Adjusted EPS was $1.45, up 7% without Wolverine divestiture loss. Record Q1 free cash flow of $77 million, up over 150%, and $100 million of shares repurchased in Q1.
• Industrial Process orders grew 14% and 11% organic, with Svanehøj orders up nearly 70%. Connect & Control grew nearly 40% due to kSARIA’s large platform award. Motion Technologies saw double digit growth from Kony share gains. Friction OE had strength in China and independent aftermarket.
• Launched VIDAR, a game-changing industrial motor aiming to address wasted energy in the flow industry, with customer pilots showing significant energy savings and cost reductions.

Industrial Process grew 14% and 11% organic, driven by new large palm project awards including Svanehøj where orders were up nearly 70%. Connect & Control grew nearly 40% driven by kSARIA’s large platform award. Motion Technologies had double digit growth from Kony share gains. Friction OE saw strength in China and continued growth in the independent aftermarket. Revenue was flat to prior year on total and organic basis, mainly driven by acquisitions and pricing actions offsetting lower volumes. Operating income grew 2% on flat sales or 7% excluding Wolverine divestiture.

• Maintained full year adjusted guidance. Expect mid-single digit organic revenue growth, with IP expected to lead, CCT closely behind, and MT roughly flat.
• Margin expansion expected from productivity and price, overcoming lower volume and higher cost inflation. Adjusted EPS midpoint at $6.30, including $0.17 unfavorable impact from intangible amortization.
• Q2 revenue growth mid-single digit total and low-single digit organic, led by Industrial Process project shipments. MT to surpass 20% margin, IP over 21%, CCT margin to improve sequentially but down year-over-year due to kSARIA amortization.
• Tariff cost estimate for 2025 balance is $50 million to $60 million, with actions taken to offset impact through pricing and cost control.

• Tariff exposure of approximately $50 million to $60 million for the balance of 2025, primarily impacting IP and CCT. Need for mitigation strategies including pricing adjustments and cost control to offset the impact.

Q: Can you give color on why orders picked up so much?

A: Partly due to market share gains in several sectors, including IP project orders up 47% and strong performance from acquisitions like kSARIA and Svanehøj.

Q: Helpful. And then just to clarify, the big buyback that you did. But was that because of market weakness or because you see perhaps a lull in M&A?

A: Not related to M&A. Reaffirms confidence in ITT and medium/long-term outlook, pipeline for M&A remains healthy with target to deploy $500 million to $700 million this year on M&A.

Q: Can we just bridge the previous guidance to the current guidance?

A: Positive impact from FX and share count, but offset by increased tax rate, more cost inflation, and slower second half economic activity. Acquisitions expected to deliver better than originally, EPS aligned with prior guidance if tariffs resolved.

Q: How’s it going guys? So just want to hit the good color on the tariff exposure. Can you just talk about how much of the $50 million to $60 million you cover with price, where specifically you’re announcing price increases? And then just any changes you’re implementing around sourcing or otherwise to kind of further mitigate the headwinds?

A: Majority of impact in IP and CCT. Act on cost and sourcing, using supply chain flexibility to reduce impact, and passing on costs through pricing, especially on non-USMCA compliant products.

Q: Have you guys said how much of the $50 million to $60 million in tariff cost impact is coming from each segment?

A: Majority in IP and CCT, with Motion Technologies and Friction having minimal impact due to USMCA compliance and region-based sourcing.

Q: VIDAR seems really interesting. I'm just curious, as you think about the opportunity in getting after this opportunity, Luca. Is it the same like sales force? Are you able to kind of cross-sell this with your pumps business as well?

A: Run as a separate business under Ventures, with its own sales force, though potential synergies exist with pumps business but it's completely separated currently.