Great. Well, we'll get underway with the next session here. It's my pleasure to have up next ITT. I think the first time you're both coming here, so it's my pleasure to have Luca Savi, President and CEO, Emmanuel Capre, CFO. So I really appreciate everyone being here, and thank you both for coming. I think you have a couple of comments prepared, and then we'll get into sort of the meat of the Q&A. Thank you.

And before that, I want to read the forward-looking statement. So our presentation and comments may contain forward-looking statements, which are based on our best view of the world and our businesses as we see them today. These assumptions and expectations can change, and we ask that you view them in that light. We encourage you to review the latest risks and uncertainties in our Form 10-K and other SEC filings available on our website. Thank you.

Okay, so I would be very brief, so we get into the Q&A straightaway. But since this is our first time here at Barclay, thank you for watching us. Thank you so much for coming. So ITT, we are an engineering company, and we engineer, design, and manufacture components and a stress component for harsh environment across different industries, from transportation, air and defense, flow in energy, chemical, energy transition, of course, and generally industrial and mining. It's a roughly $4 billion company. In the last three years, we've been able to grow organically 7%. And you see our cash flow margin from last year and our adjusted EPS growth for the last three years over there in the slide. So what we make, we are structuring three different businesses. Industrial process, this is flow. So we're making pumps and valves in this business across different industries. Motion technologies, we are making brake pads and shock absorbers. Shock absorbers for rail, high-speed trains around the world. or shock absorbers for a defense vehicle, and brake pads, brake pads for vehicles, for cars around the world. And then connected control technologies, we're making connectors and components controls mainly in aero and defense. We've generated a lot of value in the last few years organically through organic growth and organic margin expansion, and that value creation is here to stay. So there is going to be still a lot of that in the next few years. And now we are compounding with M&A. We've done successful M&A in a few small ones and a large one that we're just closing during the month of March. So this is SPX Flow, which is going to be a good addition. It changes the enterprise portfolio in a way that reduces our auto exposure to roughly 20%. It fits culturally. It fits from a product, brand, et cetera. These are our long-term targets in terms of growth, 10% total growth, 5% organic growth for the next few years until 2030, get it to more than $11 in terms of EPS, $12 if you are adjusted for M&A, and an adjusted upper margin of 23 or more than 25 EBITDA. Cash flow margin, 14%, 15%. We're already at 14 last year. Now we must keep it. And now these are the key takeaways, but why don't we get into the Q&A?

Yeah, sure. Sure. So thanks so much, Luca, for that overview. Maybe on the kind of very near-term demand side of things, there's a lot of optimism here around kind of green shoots in the U.S. industrial economy and realize that touches sort of different parts of your three segments. But any kind of perspectives around what you're seeing there the last few months on U.S. industrial demand?

Sure. So I would say there are many dots that are positive. So we saw it in Q4 in terms of the orders, the order performance across the board, across different sectors. Of course, forget about air and defense, that goes without saying, but also in the short cycle and on the project side. And I would say also when you look at January, very good orders also during the month of January. Also, when you look at automotive, it's a good stable and good growth, and we saw in the month of January, year over year. So I would say there are many positive dots that directed to that conclusion, but I would say still early to tell.

Sure. And, you know, a lot of your activity is quite short cycle in nature and book and ship, but your backlog was up, I think, high teens in 2025 overall. maybe help us understand kind of what drove that are you seeing any more of a trend to kind of longer dated orders by customers anything changing in kind of the composition or shape of that backlog?

So the backlog is a very healthy backlog not just in terms of size but also in terms of profitability so I would say there has been a trend in terms of what we in ITT tend to bring in the orders as soon as we can so you know That builds a good, healthy backlog. So what you will see, for example, in Aero and Defense, you win orders for long-term platforms. If you think about the F35, for example, let's say we were able to bring orders for a couple of years in our system, so this is good. So we have a very good visibility in terms of long-term across IP and also across Aero and Defense. The other thing, so good on that respect, visibility. I would say also the other thing which is good of this backlog is that it is healthy and profitable. So the margins of the backlog are higher and continues to increase, which tells us a little bit about our rigor in order acquisition and also value pricing that we have in the business.

And if I can just add just an example, for instance, are the green projects that we have in IP. These tend to be longer cycle, even in terms of delivery. So we booked several orders out of a decarbonization project in Australia, and we see that between the order taking and the delivery, we're looking at almost two years. So for sure on those green projects that are growing significantly because they were up 90% in 2025 versus 2024, the conversion time is a little longer.

Perfect. And I think, you know, last year overall the orders were up kind of mid-single digits, total company, kind of full year. I think you'd mentioned, Emmanuel, that kind of all the markets really should have orders growth again in 26. And maybe help us understand kind of who are some of the extremes there on the high or lower end of kind of end markets as you see it this year on border growth.

Yeah, so for sure, when you look at aerospace and defense, they're on the higher end of the range. For sure, you know, we expect the Boeing ramp up in terms of production, the Boeing repricing, the investment in the defense modernization to really play well with our portfolio. And so as a result, we'll deliver significant growth. I think probably on the low end of that is automotive. So automotive is expected to be roughly flat to slightly down. I would say that has been the case for the past two to three years, so nothing changes like this for this. But what I think we bring to the table is that outperformance of the automotive market. So we expect to outperform automotive by 400 to 500 basis points again this year in 2026. So we expect to be able to compensate a little bit that sluggishness from the auto market. And I would say from an IEP standpoint, I think middle of the fairway, we expect low to mid-single digits growth. From an IEP standpoint, I think, as Luca was saying, short cycle has been pretty strong. And we're seeing it both on the spare parts as well as on our VALS business, thanks to the GLP-1 opportunity. And then from a project standpoint, we're not going to see the growth that we've experienced from an order standpoint in 2024 and to some extent also in the first half of 2025, but we're still seeing healthy markets that are going to stabilize at a high level, at an elevated level.

And on revenue near term, you exited last year with very strong organic sales growth. You've guided for a sort of a slow down or step down, what have you, in the first quarter, you know, despite the backlog and order growth. So sort of what are the mechanics of that sales growth in the first quarter?

So as Luca was saying, you know, we booked some orders last year that are orders for several years. So you can't expect those orders to convert right away. You were mentioning, you know, some larger, longer conversion type of orders, and that's also the case. I think last year in Q4, we grew revenue by 9%, but some of it was organically, but some of it was because in the case of aerospace, for instance, there was no activity. I mean, there was complete work stoppage at Boeing, so the Q4 2024 is an easy compare. And I think that as you see Boeing has recovered and is continuing to recover, the comp will be less easy, even though there will be strong growth coming from Boeing.

And, you know, you mentioned aerospace a couple of times. Maybe the defense side of things, you know, what's the exposure there specifically in defense? And what are kind of some of the main product categories that you think should see the highest growth now?

So when you look at the fence, of course, there is the acquisition of Kesaria. So we're talking about interconnect solution, fiber cabling and cabling with a customized connector. Kesaria, which is a $200 million business, is 80% of the fence. So you're talking about the F-35, you're talking about the F-47, eventually you're talking about submarine, so many of those applications. And then there is the legacy part of the business, CCT controls and connectors. So controls, for example, if you're talking about the KC-46, the refueling plane, the valves that allow the fuel to go from the big to the small plane, that has been designed, engineered, and manufactured by ITT. Or the FLARA, the new helicopter that will substitute the Black Hawk, you know, we want roughly $6 to $7 million of NRE. That will translate in roughly $80 million of manufacturing orders eventually for the next 10 years. And then on the connector side of the business, if you're talking about the standard connector, that will not be ATT, you know. We will not be able to compete with the big players that are out there in the market. But if you want a customized connector, if you want to get rid of the drone of those standard connectors and miniaturize in a very small one with the same data, high speed, high density, then, you know, this is where we are adding value. So we are working with many companies in Europe as well as in North America in terms of drones or missiles or the connector side of the business.

And so overall, when you think about defense, this is representing roughly 10% of the total portfolio of ITT. And we have some pieces that are growing significantly. For instance, like our Kony shock absorbers that we supply to the defense industry, both in the U.S. and in Europe, orders last year grew 70%. And this is mostly for ground vehicles. And so we're really looking at developing those type of products, especially now that Europe is ramping up from a production standpoint.

Got it. And when you're thinking about that defense portion, do you think that could kind of grow double-digit the next few years, revenue-wise, or it's just kind of too lumpy to predict?

So if you look at our Casaria business, certainly those orders exceeded our expectations and grew double-digit last year. So I think that does this mean that we can expect double digits in 2026? Probably. and certainly we see also a very positive picture from an order standpoint in 2026 so we expect a book to be above one now does this continue longer term? I think it's too early to say so for the moment we are around that high single digit growth that we were expecting we're confirming that but for sure the first two years were really good and the rest of our portfolio is really benefiting from defense modernization, soldier-warned equipment, whether it is radio. Luca was talking about drones also, first FPV drones. So we expect significant growth out of defense in the future.

And if you look at that kind of the CCT business, you know, I think you're guiding this year all of it up mid-high single digit. You know, how much of that is kind of A and D versus non-A and D? And when we think about that repricing, how do you think about the sort of scale of that? It's something, you know, another company mentioned this morning, repricing of commercial OE programs.

So, I mean, when you look at the repricing, it's a big component. When you look at the pricing power within the IT portfolio, I would say CCT is the business where we got the highest pricing power. But let's face it, also, we come from a period where there were fixed-price contracts, and therefore we had to change that, so there is an adjustment to what is fair and square. Now I think that when we are measuring growth in ITT, we tend to look really at volume growth and overperforming the market, and this is what we have seen across the portfolio. In the sense, we definitely look at a lot of volume growth and outperforming the market. When you look at aerospace, I think that, sure, price is a good component, but we will have a couple of tailwinds in aero. One of course is the recovery of aero in general, and second is the fact that we tend to be more exposed to the wide bodies than the narrow bodies, and those came in a little bit later. So it's fair to say that we are late as IDT in the recovery in aerospace, and this will be a tailwind in 2026 and beyond. MR.

Got it. And when you think about that, the program side of things, you know, every year there's some programs up for renewal on commercial aero OE. Is there any kind of waiting the next two years that's particularly high or low in terms of that repricing coming through?

No, I think that most of the efforts have been done, I would say. Now, having said that, it would be a continuous renegotiation on some of these countries. Now, with our larger customer, Boeing, we were able to successfully negotiate, and both parties are happy about the five-year agreement, and therefore we have a good five-year agreement with Boeing, and there's no need of further negotiation for the next five years on that front.

Got it. And, you know, within industrial process, you know, how would you scale kind of the traditional sort of petrochem energy, you know, with a downstream, upstream, you know, how much of the business comes from those markets? And then what sort of trends are you seeing on CapEx there?

Yeah. So if you look at petrochem and energy, more than 50%, that composes more than 50% of total IP portfolio. And I think that got boosted with Veneroy because Veneroy added the piece of energy transition from bunker fuels to cleaner fuels. I think that when you look at chemical, you know, chemical hasn't been great for the past few years. However, we've been able to outperform both from an order and a revenue standpoint. I think this year we see a little bit of a mixed picture, especially coming out of Europe. So we don't expect much growth out of chemical. But I think from an energy standpoint, whether it is from Sven Arroy with the energy transition, a lot of LNG investments, or with the rest of IP, for instance, in Saudi Arabia, where we are performing extremely well. Our teams are winning 90% of what is available to bid in Saudi Arabia with Saudi Aramco, among others. And then some energy decarbonization, green projects also that are really rounding up the portfolio. So I think the prospects from an energy standpoint are still very bullish.

So when Emmanuel was talking about energy, it's the entire energy. So if you look at the oil and gas, the traditional oil and gas, that exposure is roughly 10% of the IDT portfolio. And then what Emmanuel was talking about is the energy transition, So the changing of the pumps in a ship that now is not using dirty fuel, but it will go to LNG and eventually to ammonia or carbon capture. So that makes a big portion of the energy orders.

Perfect. And then maybe moving to the kind of profitability side of things, you know, net productivity is always a very big kind of driver of your margins, and you break that out. The structure, I think, of the company is quite decentralized. So how do you kind of ensure that that productivity flywheel keeps spinning?

Actually, that's core to us. We honestly believe that corporate manufacturing, those worlds do not go together. So actually we believe that the decentralization and holding those plants or those regions are super accountable for their numbers is actually what drives the productivity and what drives the growth. I think that that model, I think, has had some good returns for us, and we believe we keep on giving. We really incentivize in terms of a continuous improvement and the net productivity all across the different businesses, all across the different plants. We are looking at, you know, 48 different KPIs that are the standards for every single plant, and people are incentivized of those. That has been working well. So I see actually decentralization and net productivity going together and not vice versa.

Perfect. And soon you'll bring in the SPX flow business, as you highlighted. How confident are you that you've got a good top-line growth outlook there without ITT having to put in a lot of investment? That has to tell a number of different owners down the years. That's fair.

So a couple of things. Now, let's park for the moment the revenue synergies, and we can talk about it later because those will take a little bit of time. But I believe there are a couple of components that will feed, you know, a mid-to-high single-digit growth. Now, if you look at the nutrition and health, I think that we are entering into a growth cycle in terms of if we look at some of our customers that are known of this world, you know, a 3% to 5% CAPEX growth in the next few years. So that will help, and that is pure market related. Then I think that there are two components which are the way that we are going to run the business. We were talking about decentralization. The decentralization and holding, you know, the region, if it is China or if it is another region, more accountable of the growth, rather than being centralized somewhere in Europe or somewhere in North America, will feed more local growth. We believe in making decisions. for the product and for the opportunity as close to the customer, as close to the market as possible. And then I would say a more pragmatic approach to the 80-20. I think that, you know, in SPX 80-20 has been a great tool, and don't get me wrong, it is a good tool, but we are pragmatic on it and we use it as a common sense. I believe that if you are a crusader of the 80-20, actually you will kill some growth. and, therefore, having more of a pragmatic approach to that will help us growing in the mid-to-high single digit. And those things should happen from day one.

That's great. And maybe talk us through kind of, I don't know if you have a typical integration process, but particularly with SPX flow, you know, it will close soon. How do the first sort of 100 days go? What's the plan of action there?

So SPX probably will be different from the acquisition that we made in the last couple of years because when you think about Svanhoi, Kessari, first of all, we do not talk necessarily about integration in entity. We talk about value creation. And so you bought a successful company with a strong management team. For sure, you integrate when you think about finance, when you think about cybersecurity, et cetera. But then if you've got a good machine, and this is what has happened with Svanhoi, with Kassari, with Abonim, and has created a lot of value for us in the years. SPXflow is a little bit different in terms of, you know, it's going to be a little bit more integrated within AP. So for the last couple of months and for the next month, we are working very hard every single day to ensure that we hit the ground running day one after closing, which means that a very clear idea on what are the corporate G&A synergies that will be executed and realized in day one. So there are duplications that will be eliminated in day one, of course. And then there are synergies from a purchasing point of view that we are already working on it, but that will take probably a little bit of a medium term to be realized. And then is a business G&A. Those are synergies where we need to work together with the business a little bit more and understand the business a little bit more, Those will be more towards the end of the year and in 2027. And then footprint synergies. These are the 10% of the synergies that will be realized probably in year three because we tend to take a little bit more time to ensure that we do not mess around with our customers in terms of the delivery. So we are running, you know, meetings. Emmanuel and I are participating to, you know, progress on the way that the organization is going to be designed, and the savings are going to be realized for day one every single second day.

And just a quick update. So we received all the regulatory approvals for SPX flow, so we should be on track to close during the first week of March.

Okay, perfect. And then the – okay, I see. And then once that's folded in, you know, will you update the financial guidance at the following earnings? That's the way to think about that.

So this is why, you know, there were many pieces moving, right? So when we come out with the earnings call for the Q4, we decide to give guidance for Q1 so that at least our investors know the solidity and the health of the legacy business. And, of course, in March when we're closing with the SPX flow, we will be able to bundle everything together and come out with the guidance for the full year at the earnings call in May.

And, you know, there's been, you know, a very successful acquisition history at the company. There's also a lot of companies here, you know, for example, this morning who are doing large or have done large divestments. So how do you kind of think about what to keep, you know, maybe what to divest while at the same time kind of adding more exposure?

I think that, you know, we need always to be active on the portfolio management. I would say, and this is exactly what we have done, you know, in the last couple of years, for example, with the divestiture of Wolverine. I think that that was very timely because also Wolverine was the business that was most exposed to the tariff world because we were buying steel from Europe, manufacturing only in North America, and then exporting. So you can imagine we would have beaten it twice, so we got lucky there. And so we reduced our automotive exposure. Now, with the SPX acquisition, we're going to reduce our automotive exposure to roughly 20% of the portfolio, which is good. I would say that part of the business is still very profitable. There is growth opportunity there, both in terms of revenue growth and margin expansion. So at this moment in time, I see that all those parts of the portfolio are still fitting well within ITT because we can still create tons of growth and tons of margin expansion. So we'll be part of the value story for the next few years.

And within automotive, you mentioned, it's an industry with very tough competition. You've managed to take share consistently there for some time. Maybe help us understand how does that strategy differ, say, OE versus aftermarket? And more broadly in ITT, do you kind of feel comfortable about passing on higher costs in price?

Sure. So two things there. So first of all, we tend to be more OE than aftermarket. So 75% of our business is reduced. So when you look at ITT, it's mainly OE, NOE player. And we've been able to outgrow, and you see our profitability in terms of more than 20% EBIT, which is quite rare in the automotive market, and keep on growing revenue and keep on growing our profitability. There is no one single reason for that. It's a recipe of many things that we're very differentiated when it comes to manufacturing, when it comes to the speed we're operating, when it comes to R&D, and therefore that differentiation, quality. We measure quality in PPBs, part per billion. No competitor is able to match that level of performance. So every single time an OEM wants to launch flawlessly, a platform, you know, they really rely on ITT. So that is definitely good. I think that when it comes to the price and cost equation, I would say, you know, you do not have a lot of price in power in automotive. You've got none, as a matter of fact. Even if you are the only one that's able to solve the problem, you are lucky if you're able to get one, two, or maximum three percent of premium. So you don't get that. But the trick here is to ensure that you've got a price-cost equation that is favorable. And this is what we've been able to do in Motion Technologies. Our price-cost equation has been good in 2024, in 2025, and will be positive in tailwind also when it comes to 2026.

Perfect. Good. Well, with that, I think we'll turn now to the audience response survey questions. The first one is you currently own shares in ITT.

Shame on you. very polarized

it's a lot of opportunity yeah exactly and then second question is around sort of aside from ownership general bias to the stock right now so generally positive disposition the third question is around EPS growth expectation versus kind of multi industry average so generally above average EPS growth profile the next question is on the balance sheet and and what should the cash usage be and post SPX flow closing it's also debt reduction for

yeah the focus will be to reduce the debt of course we will close probably around 2.7 in terms of that ratio yeah and now you you can expect some small bolt-ons, right, in terms of, because we, you know, if there is a strategic acquisition, you want to add it down, but I would say no large acquisitions, of course, but the focus would be execute on SPX, get the synergies done, pay down the debt, and you may have some small bolt-ons.

Perfect. The next question is around valuation. you know, what PE on year one should ITT trade at?

Around sort of 20 times.

And then the last question is around kind of what's the main anchor on that valuation multiple today? Core growth and execution on the transaction. Great. Well, with that, thank you so much, Luca and Emmanuel, for being here. Thank you. Thank you.

Thanks so much. Thank you.