ITT : Financial Results Q1 (9c6707)

Published: 2025-05-01 06:38:26 ET ITT

Published on 05/01/2025 at 06:38

Q1 2025 Earnings

May 1, 2025

Shown: VIDAR, ITT's industrial motor

Q1 | RESILIENCY AHEAD OF STRONG Q2

$1B+ RECORD QUARTERLY ORDERS

11% IP organic growth (+14% total) driven by pump projects (+47%), incl. Svanehøj (+70%)

39% CCT total growth driven by kSARIA defense awards

1.15 book-to-bill, $1.8B backlog (+21% vs. PY, +10% sequentially)

MARGIN EXPANSION CONTINUES ON PRODUCTIVITY AND PRICE

19.8% MT (+160 bps) and offsetting (-150) bps FX impact

CCT up 170 bps excluding kSARIA acquisition

20.7% IP, up 10 bps; overcoming ~100 bps of temporary amortization from Svanehøj

ACCELERATING INNOVATION AND CAPITAL DEPLOYMENT

Entering new industrial motor market with VIDAR (ITT's embedded motor drive)

Executed ~$400M of share repurchases through April, lowering share count by 4%

Robust balance sheet capacity to execute M&A; remains key strategic priority

MAINTAINING FULL YEAR 2025 GUIDANCE

Expect strong second quarter, adjusted EPS +8% at midpoint (up DD excl. divestiture)

Strong Q1 cash generation pushing full year free cash flow to $0.5B

Focused on managing tariff impacts through price and cost actions

Organic orders growth

Total gro th

Q1'25

+2%

+7%

Adjusted operating margin

Margin expansion

17.4%

+30 bps

Adjusted EPS

$1.45

Free Cash Flow

Total gro th

$77M

+154%

All results unaudited. Comparisons to Q1 2024 unless otherwise noted. For non-GAAP reconciliations,

refer to appendix.

THE NEW INDUSTRIAL MOTOR

Revolutionary motor technology reducing energy consumption up to 50%, lowering operating cost and emissions

Designed to withstand harsh environments as proven by multiple successful customer pilots

Direct replacement for existing motors - up to 50% lower installed cost versus variable speed drives

Proprietary motor technology applicable on all rotating equipment

1:1

drop-in replacement of existing motors

$6B

new addressable market

Q1 SUMMARY RESULTS

ADJUSTED OPERATING INCOME

REVENUE

AND MARGIN

ADJUSTED EPS FREE CASH FLOW

$911M $913M

$156M $159M

$1.42 $1.45

$77M

17.4%

17.1%

2.6x

$30M

Q1 2024 Q1 2025

Flat

Organic revenue growth

Q1 2024 Q1 2025

+30 bps

Adjusted operating margin expansion

Q1 2024 Q1 2025

+2%

Adjusted EPS growth

Q1 2024 Q1 2025

Free cash flow margin

+ Defense (+13%), Rail (+15%) and

Chemical (+16%)

- Pump project shipment timing (-3%)

± Acquisitions (+630 bps), Wolverine divestiture (-430 bps), FX (-170 bps)

+ Shop floor productivity

+ Favorable price / cost

Unfavorable FX impact

Dilutive margin impact from M&A

• +7% excluding Wolverine divestiture impact

+ Operational performance

+ Lower share count

Higher interest expense, tax rate

+ Strong AR collection activity

Inventory optimization

Q1 ADJUSTED OPERATING MARGIN AND EPS BRIDGES

OPERATING MARGIN

EPS

+190 bps

(120) bps

17.4%

17.1%

(40) bps

+30 bps

($0.06)

$0.15

$0.01

($0.06)

($0.01)

+7%

Excl.

$1.42

$1.45

Divestiture

Q1 2024 Operational Performance

Acquisitions FX Q1 2025

Q1 2024 Wolverine

Q1 2024

Operational

kSARIA

Interest,

Q1 2025

Divestiture

excl.

Performance

Acquisition

Share Count,

Divestiture

Tax Rate

+ Shop floor productivity

+ Pricing actions

Temporary acquisition amortization (~$7M)

Unfavorable FX

+ Higher operating income

+ Acquisition accretion

Unfavorable FX

Higher interest expense

MAINTAINING FULL YEAR 2025 OUTLOOK

CURRENT GUIDANCE

Revenue growth

+2% to +4%

+3% to +5% organic

Adjusted operating margin

18.1% to 19.0%

+40 bps to +130 bps

Adjusted EPS $6.10 to $6.50

+4% to +11% growth

Free cash flow

$450M to $500M

12% to 13% margin

ASSUMPTIONS

Friction OE outperformance ramp

Boeing shipments increasing

20% Motion Technologies operating margin

Continued margin expansion in core IP and CCT

businesses

M&A accretion improving

Expect to offset EPS impact of tariffs, assuming

current tariff structure

Largest exposure in CCT, followed by IP

Primary mitigation strategies implemented -

pricing actions and cost controls

Comparisons to 2024 unless otherwise noted. For non-GAAP reconciliations, refer to appendix 7

KEY TAKEAWAYS

Delivered Q1; maintaining guidance with good visibility to strong Q2

Organic growth and margin expansion to continue

Active capital deployment

ITT's value creation journey continues … join us on May 15 at ITT's Capital Markets Day

SUPPLEMENTAL DATA

MOTION TECHNOLOGIES

INDUSTRIAL PROCESS

CONNECT & CONTROL TECHNOLOGIES

Flat

$68M

(-1%)

$69M

+1%

$38M

19.8%

20.7%

16.2%

Q1 SEGMENT SUMMARY RESULTS

Organic Revenue

Growth

Adjusted Segment Operating Income

Adjusted Segment Operating Margin

Organic revenue driven by +15% rail, more than offsetting lower auto production in Europe and North America

+160 bps margin expansion vs PY;

+310 bps excluding FX

Wolverine divestiture impact

Organic orders growth (+11%) driven by

pump projects (+47%), short-cycle (-3%)

1.2x book-to-bill; >2.0x at Svanehøj

Organic revenue decline due to pump project shipment timing (-3%); flat short-cycle

• +10 bps margin expansion vs PY

Excluding 280 bps dilution from Svanehøj, margin +60 bps vs PY

Organic orders (-1%) driven by lower aero as expected (-15%) partially offset by Defense (+23%)

1.3x book-to bill, 1.8x at kSARIA

Organic revenue growth from defense (+12%) and general industrial connectors (+4%)

Excluding 370 bps of dilution from kSARIA, margin +170 bps vs PY

ADJUSTED OPERATING MARGIN DETAIL

Q1 2024 adjusted operating margin 17.1%

Operational leverage +150 bps

Productivity actions, net +40 bps

FX impact (-40 bps)

M&A, net (-120 bps)

Q1 2025 adjusted operating margin 17.4%

Reconciliation to reported margin (special items)

(-90 bps)

Q1 2025 operating margin 16.5%

KEY PERFORMANCE INDICATORS & NON-GAAP MEASURES

Management reviews a variety of key performance indicators including revenue, operating income and margin, earnings per share, order growth, and backlog. In addition, we consider certain measures to be useful to management and investors when evaluating our operating performance for the periods presented. These measures provide a tool for evaluating our ongoing operations and management of assets from period to period. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including, but not limited to, acquisitions, dividends, and share repurchases. Some of these metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (GAAP) and should not be considered a substitute for measures determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators for purposes of our reconciliation tables.

Organic Revenues and Organic Orders are defined, respectively, as revenue and orders, excluding the impacts of foreign currency fluctuations, acquisitions, and divestitures that may or may not qualify as discontinued operations. Current year activity from acquisitions is excluded for twelve months following the closing date of acquisition. The period-over-period change resulting from foreign currency fluctuations is estimated using a fixed exchange rate for both the current and prior periods. Prior year revenue and orders are adjusted to exclude activity during the comparable period for twelve months post-closing date for divestitures that do not qualify as discontinued operations. We believe that reporting organic revenue and organic orders provide useful information to investors by helping identify underlying trends in our business and facilitating comparisons of our revenue performance with prior and future periods and to our peers.

Adjusted Operating Income is defined as operating income adjusted to exclude special items that include, but are not limited to, restructuring, certain asset impairment charges, certain acquisition- and divestiture-related impacts, and unusual or infrequent operating items. Special items represent charges or credits that impact current results, which management views as unrelated to the Company's ongoing operations and performance. Adjusted Operating Margin is defined as adjusted operating income divided by revenue. We believe these financial measures are useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as in evaluating operating performance in relation to our competitors.

Adjusted Income from Continuing Operations is defined as income from continuing operations attributable to ITT Inc. adjusted to exclude special items that include, but are not limited to, restructuring, certain asset impairment charges, certain acquisition- and divestiture-related impacts, income tax settlements or adjustments, and unusual or infrequent items. Special items represent charges or credits, on an after-tax basis, that impact current results, which management views as unrelated to the Company's ongoing operations and performance. The after-tax basis of each special item is determined using the jurisdictional tax rate of where the expense or benefit occurred and the tax deductibility under local tax rules. Adjusted Income from Continuing Operations per Diluted Share (Adjusted EPS) is defined as adjusted income from continuing operations divided by diluted weighted average common shares outstanding. We believe that adjusted income from continuing operations and adjusted EPS are useful to investors and other users of our financial statements in evaluating ongoing operating profitability, as well as in evaluating operating performance in relation to our competitors.

Free Cash Flow is defined as net cash provided by operating activities less capital expenditures. Free Cash Flow Margin is defined as free cash flow divided by revenue. We believe that free cash flow and free cash flow margin provide useful information to investors as it provides insight into a primary cash flow metric used by management to monitor and evaluate cash flows generated by our operations.

ITT Inc. Non-GAAP Reconciliation Statements

(In millions; all amounts unaudited)

Reconciliation of Revenue to Organic Revenue

First Quarter 2025

MT IP CCT Elim Total

2025 Revenue

$ 346.1

$ 333.3

$ 234.7

$ (1.1)

$ 913.0

Less: Acquisitions

9.4

48.1

57.5

Less: FX

(8.4)

(6.5)

(1.1)

(16.0)

2025 Organic revenue

$ 354.5

$ 330.4

$ 187.7

$ (1.1)

$ 871.5

2024 Revenue

$ 392.4

$ 333.9

$ 185.1

$ (0.8)

$ 910.6

Less: Divestitures

39.5

2024 Organic revenue

$ 352.9

$ 333.9

$ 185.1

$ (0.8)

$ 871.1

Organic Revenue Growth - $

$ 1.6

$ (3.5)

$ 2.6

$ 0.4

Organic Revenue Growth - %

0.5%

(1.0%)

1.4%

0.0%

Reported Revenue Growth - $

$ (46.3)

$ (0.6)

$ 49.6

$ 2.4

Reported Revenue Growth - %

(11.8%)

(0.2%)

26.8%

0.3%

Reconciliation of Orders to Organic Orders

First Quarter 2025

MT IP CCT Elim Total

2025 Orders

$ 347.9

$ 404.6

$ 295.5

$ (1.5)

$ 1,046.5

Less: Acquisitions

17.6

85.5

103.1

Less: FX

(9.1)

(6.1)

(1.1)

(16.3)

2025 Organic orders

357.0

393.1

211.1

(1.5)

959.7

2024 Orders

410.5

354.0

212.8

(1.1)

976.2

Less: Divestitures

39.5

2024 Organic orders

$ 371.0

$ 354.0

$ 212.8

$ (1.1)

$ 936.7

Organic Orders Growth - $

$ (14.0)

$ 39.1

$ (1.7)

$ 23.0

Organic Orders Growth - %

(3.8%)

11.0%

(0.8%)

2.5%

Reported Orders Growth - $

$ (62.6)

$ 50.6

$ 82.7

$ 70.3

Reported Orders Growth - %

(15.2%)

14.3%

38.9%

7.2%

Note: Immaterial differences due to rounding.

(In millions; all amounts unaudited)

Reconciliations of Operating Income/Margin to Adjusted Operating Income/Margin

First Quarter 2025 First Quarter 2024 [a]

MT IP CCT Corporate ITT MT IP CCT Corporate ITT

Reported Operating Income

$ 67.6

$ 63.5

$ 36.0

$ (16.2)

$ 150.9

$ 70.6

$ 64.5

$ 32.7

$ (17.9)

$ 149.9

Restructuring costs

0.2

4.2

2.1

6.5

0.5

0.9

1.9

Acquisition-related costs

0.4

(0.1)

0.3

3.7

Other special items

0.7

0.9

1.6

0.2

Adjusted Operating Income

$ 68.5

$ 69.0

$ 38.0

$ (16.2)

$ 159.3

$ 71.3 $ 68.7 $ 33.6 $ (17.9) $ 155.7

Change in Operating Income

(4.2%)

(1.6%)

10.1%

(9.5%)

0.7%

Change in Adjusted Operating Income

(3.9%)

0.4%

13.1%

(9.5%)

2.3%

Reported Operating Margin

19.5%

19.1%

15.3%

16.5%

18.0%

19.3%

17.7%

16.5%

Impact of special item adjustments

30 bps

160 bps

90 bps

20 bps 130 bps 50 bps 60 bps

Adjusted Operating Margin

19.8%

20.7%

16.2%

17.4%

18.2% 20.6% 18.2% 17.1%

Change in Operating Margin

Change in Adjusted Operating Margin

150 bps

160 bps

-20 bps

10 bps

-240 bps

-200 bps

0 bps

30 bps

Note: Immaterial differences due to rounding.

[a] The first quarter 2024 includes a change in accounting principle adjustment increasing the previously reported and adjusted operating income for IP and ITT by $0.7 and by 10 basis points. Refer to the ITT Quarterly Form 10-Q for additional information pertaining to the change in accounting principle.

(In millions, except earnings per share; all amounts unaudited)

Reconciliation of Reported vs. Adjusted Income from Continuing Operating and Diluted EPS

Income from Continuing Operations Diluted Earnings per Share

Q1 2025 Q1 2024 [a]

% Change

Q1 2025 Q1 2024 [a]

% Change

Reported

$ 108.4 $ 111.5

(2.8%)

$ 1.33 $ 1.35

(1.5%)

Special Items Expense / (Income):

Restructuring costs

6.5 1.9

0.08 0.03

Acquisition related costs

0.3 3.7

- 0.05

Other pre-tax special items

1.6 0.2

0.02 -

Net tax benefit of pre-tax special items

(1.5) (1.3)

(0.02) (0.03)

Other tax-related special items [b]

3.4 1.7

0.04 0.02

Adjusted

$ 118.7 $ 117.7

0.8%

$ 1.45 $ 1.42

2.1%

Note: Amounts may not calculate due to rounding.

Per share amounts are based on diluted weighted average common shares outstanding.

The first quarter 2024 includes a change in accounting principle adjustment increasing the previously reported and adjusted income from continuing operations by $0.5M and reported diluted earnings per share by $0.01. Refer to the ITT Quarterly Report on Form 10-Q for additional information pertaining to the change in accounting principle.

Q1 2025 includes tax on undistributed foreign earnings ($2.5M) and other tax special items ($0.9M). Q1 2024 includes tax on undistributed foreign earnings.

(In millions, except earnings per share; all amounts unaudited)

Reconciliation of GAAP vs Adjusted EPS Guidance - Full Year 2025

2025 Full-Year Guidance

Low High

EPS from Continuing Operations - GAAP

$ 5.80

$ 6.20

Estimated restructuring

0.29

Other special items

0.03

Net tax benefit on pre-tax special items

(0.07)

Other tax-related special items

0.05

EPS from Continuing Operations - Adjusted

$ 6.10

$ 6.50

Note: The Company has provided forward-looking non-GAAP financial measures for organic revenue growth and adjusted operating margin. It is not possible, without unreasonable efforts, to estimate the impacts of foreign currency fluctuations, acquisitions, divestitures and certain other special items that may occur in 2025 as these items are inherently uncertain and difficult to predict. As a result, the Company is unable to quantify certain amounts that would be included in a reconciliation of organic revenue growth and adjusted operating margin to the most directly comparable GAAP financial measures without unreasonable efforts and accordingly has not provided reconciliations for these forward looking non-GAAP financial measures.

(In millions, except earnings per share; all amounts unaudited)

Three Months Ended FY 2025 Guidance

3/29/2025

3/30/2024

Low High

Net Cash - Operating Activities

$ 113.4

$ 57.8

$ 575 $ 625

Less: Capital expenditures

36.8

27.7

$ 125 $ 125

Free Cash Flow

$ 76.6

$ 30.1

$ 450 $ 500

Revenue

913.0

910.6

3,720

3,720 [a]

Operating Cash Flow Margin

12.4%

6.3%

15%

17%

Free Cash Flow Margin

8.4%

3.3%

12%

13%

[a] Revenue included in the full year 2025 free cash flow margin guidance represents the expected revenue growth mid-point.

Disclaimer

ITT Inc. published this content on April 30, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 01, 2025 at 10:36 UTC.