ITT INC. Bank of America
Global Industrials
Conference 2024
March 19, 2024
Shown: A Liquefied Natural Gas (LNG) tanker anchored. ITT's recent acquisition, Svanehøj, holds a leadership position in three of the four verticals in which it operates, including LNG.
SAFE HARBOR AND NON-GAAP DISCLOSURES
Safe Harbor
This presentation contains "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. In addition, the accompanying conference call may include, and officers and representatives of ITT may from time to time make and discuss, projections, goals, assumptions, and statements that may constitute "forward-looking statements". These forward-looking statements are not historical facts, but rather represent only a belief regarding future events based on current expectations, estimates, assumptions and projections about our business, future financial results, the industry in which we operate, and other legal, regulatory and economic developments. These forward-looking statements include, but are not limited to, future strategic plans and other statements that describe the company's business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future events and future operating or financial performance.
We use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "future," "may," "will," "could," "should," "potential," "continue," "guidance," and other similar expressions to identify such forward-looking statements. Forward-looking statements are uncertain, and, by their nature, many are inherently unpredictable and outside of ITT's control, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed or implied in, or reasonably inferred from, such forward-looking statements.
Where in any forward-looking statement we express an expectation or belief as to future results or events, such expectation or belief is based on current plans and expectations of our management, expressed in good faith and believed to have a reasonable basis. However, we cannot provide any assurance that the expectation or belief will occur or that anticipated results will be achieved or accomplished. More information on factors that could cause actual results or events to differ materially from those anticipated is included in the Risk Factors section of the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other documents filed from time to time with the Securities and Exchange Commission.
The forward-looking statements included in this presentation speak only as of the date hereof. We undertake no obligation (and expressly disclaim any obligation) to update any forward-looking statements, whether written or oral, as a result of new information, future events or otherwise.
Non-GAAP Disclosures
This presentation and the discussion on the accompanying conference call contain certain financial measures that are not prepared under U.S. GAAP. These non-GAAP financial measures supplement our GAAP disclosures and are not meant to be considered in isolation or as a substitute for the most directly comparable measures that are prepared in accordance with GAAP. These measures may not be comparable to similarly titled measures disclosed by other companies. For a reconciliation of these non-GAAP financial measures to the most directly comparable measures disclosed under GAAP, refer to the supplemental data to this presentation or investors.itt.com.
2
ITT AT A GLANCE
Diversified, leading manufacturer of highly engineered critical components and customized technology solutions
51 MANUFACTURING LOCATIONS
1,280+ ENGINEERS
1,700+ ACTIVE GLOBAL PATENTS
BUSINESSES | END MARKETS | GEOGRAPHY | ||||||||||||
22% | 44% | 27% | ||||||||||||
Motion | ||||||||||||||
Connect & Control | 43% | Chemical and | 42% | |||||||||||
Technologies | 32% | |||||||||||||
Technologies | Industrial | |||||||||||||
Automotive | North | Europe | ||||||||||||
Pumps | ||||||||||||||
and Rail | America | |||||||||||||
30% | 39% | |||||||||||||
$3.3B | ||||||||||||||
REVENUE | AFTERMARKET | EMERGING | ||||||||||||
12% | MARKETS | |||||||||||||
34% | ||||||||||||||
Aerospace | ||||||||||||||
Industrial | and Defense | |||||||||||||
Process | 9% | 9% | 9% | 17% | ||||||||||
General | ROW | Asia Pacific | ||||||||||||
Energy | ||||||||||||||
Industrial | ||||||||||||||
Represents composition of revenue for 2023
FY 2023 PERFORMANCE
All figures versus FY 2022
+8% | +17% | +17% | 13.1% |
Organic revenue growth | Adjusted operating | Adjusted EPS growth | Free Cash Flow Margin |
income growth |
All results unaudited, except revenue. | 3 |
STRONG 2023
Driving profitable growth
• | Orders +7% organic | • | Revenue +8% organic |
• | Adj. margin expansion | • | Free cash flow margin |
+100 bps | ~13% |
Share gains
• ~$80M ExxonMobil award • OE share +100 bps to 29%
- China Friction OE +23% • Green project awards ~$85M
Innovation
- Disruptive technology investments: EMD, Smart Pad®
- Technologies for energy transition, decarbonization and electrification
Strategic capital deployment
- >$750M of capital deployed across all priorities
- Completed two acquisitions(1), two strategic divestitures
(1) Including acquisition of Svanehøj, which closed in Jan. 2024. | 4 |
EFFECTIVE CAPITAL DEPLOYMENT | $2.5B+ SINCE 2019
#1 | ORGANIC GROWTH AT | #2 STRATEGIC ACQUISITIONS |
ATTRACTIVE RETURNS |
Purchase price
#3 STRONG SHAREHOLDER RETURN
$104M $108M
$88M
$64M
2020 2021 2022 2023
Capital Expenditures
- Friction capacity expansion and R&D
- Shop floor automation and productivity
$410M | |||
$80M | |||
$140M | |||
$398M | |||
Asbestos | |||
Liability Sale | |||
- Focused and disciplined approach
- Close to core acquisitions in pumps, valves and connectors
42%
Dividends
$0.9B
2019 to 2023
58%
Share
Repurchases
- 16% CAGR dividend per share
(including 10% increase in 2024)
• ~7% reduction in weighted average share |
• | Expanding pump testing capabilities | ||
globally | • | High-quality, actionable pipeline | |
• | Funding innovation and technology to drive | • | Up to $2.5B of capacity still to deploy |
long-term outperformance |
count |
• $1B share repurchase program authorized |
in October 2023 |
5
STRONG 2023 . . .
Driving profitable growth
• | Orders +7% organic | • | Revenue +8% organic |
• | Adj. margin expansion | • | Free cash flow margin |
+100 bps | ~13% |
Share gains
• ~$80M ExxonMobil award • OE share +100 bps to 29%
- China Friction OE +23% • Green project awards ~$85M
Innovation
- Disruptive technology investments: EMD, Smart Pad®
- Technologies for energy transition, decarbonization and electrification
Strategic capital deployment
- >$750M of capital deployed across all priorities
- Completed two acquisitions(1), two strategic divestitures
. . . MOMENTUM INTO 2024
Entered 2024 with largest backlog ever
- Targeting 9% to 12% total FY revenue growth
- Expecting ~110 bps of margin expansion (excl. Svanehøj)
Q1 2024 on track
- Strong orders and revenue growth to start Q1
- Industrial connector orders better than anticipated
- Friction OE outperforming all markets
M&A activity accelerating
- M&A targets progressing through the funnel
- Over $2B of capacity to deploy
(1) Including acquisition of Svanehøj, which closed in Jan. 2024. | 6 |
7
KEY PERFORMANCE INDICATORS & NON-GAAP MEASURES
Management reviews a variety of key performance indicators including revenue, segment operating income and margins, earnings per share, order growth, and backlog, some of which are calculated on a non-GAAP basis. 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 and acquisitions. The period-over-period change resulting from foreign currency fluctuations is estimated using a fixed exchange rate for both the current and prior periods. We believe that reporting organic revenue and organic orders provides 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, divestiture-related costs, certain asset impairment charges, certain acquisition-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, divestiture-related costs, certain asset impairment charges, certain acquisition-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. 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 provides 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.
8
ITT Inc. Non-GAAP Reconciliation Statements
(In millions; all amounts unaudited)
Reconciliation of Revenue to Organic Revenue
Fourth Quarter 2023 | Full Year 2023 | ||||||||||||||||||||
MT | IP | CCT | Elim | Total | MT | IP | CCT | Elim | Total | ||||||||||||
Revenue | $ | 364.7 | $ | 289.7 | $ | 175.6 | $ | (0.9) | $ | 829.1 | $ | 1,457.8 | $ | 1,129.6 | $ | 699.4 | $ | (3.8) | $ | 3,283.0 | |
Less: Acquisitions | - | - | 5.6 | - | 5.6 | - | 15.0 | 15.5 | - | 30.5 | |||||||||||
Less: FX | 10.0 | 3.0 | 1.3 | - | 14.3 | 17.0 | 4.7 | 1.4 | - | 23.1 | |||||||||||
CY Organic Revenue | 354.7 | 286.7 | 168.7 | (0.9) | 809.2 | 1,440.8 | 1,109.9 | 682.5 | (3.8) | 3,229.4 | |||||||||||
Less: PY Revenue | 330.4 | 280.7 | 164.6 | (1.1) | 774.6 | 1,374.0 | 971.0 | 645.6 | (2.9) | 2,987.7 | |||||||||||
Organic Revenue Growth - $ | $ | 24.3 | $ | 6.0 | $ | 4.1 | $ | 34.6 | $ | 66.8 | $ | 138.9 | $ | 36.9 | $ | 241.7 | |||||
Organic Revenue Growth - % | 7.4% | 2.1% | 2.5% | 4.5% | 4.9% | 14.3% | 5.7% | 8.1% | |||||||||||||
Reported Revenue Growth - $ | $ | 34.3 | $ | 9.0 | $ | 11.0 | $ | 54.5 | $ | 83.8 | $ | 158.6 | $ | 53.8 | $ | 295.3 | |||||
Reported Revenue Growth - % | 10.4% | 3.2% | 6.7% | 7.0% | 6.1% | 16.3% | 8.3% | 9.9% |
Reconciliation of Orders to Organic Orders
Fourth Quarter 2023 | Full Year 2023 | ||||||||||||||||||||
MT | IP | CCT | Elim | Total | MT | IP | CCT | Elim | Total | ||||||||||||
Orders | $ | 373.0 | $ | 285.9 | $ | 183.1 | $ | (0.9) | $ | 841.1 | $ | 1,487.5 | $ | 1,227.0 | $ | 738.3 | $ | (3.3) | $ | 3,449.5 | |
Less: Acquisitions | - | - | 6.8 | - | 6.8 | - | 13.8 | 16.4 | - | 30.2 | |||||||||||
Less: FX | 10.8 | 2.4 | 0.8 | - | 14.0 | 18.6 | 2.2 | 0.4 | - | 21.2 | |||||||||||
CY Organic Orders | 362.2 | 283.5 | 175.5 | (0.9) | 820.3 | 1,468.9 | 1,211.0 | 721.5 | (3.3) | 3,398.1 | |||||||||||
Less: PY Orders | 337.4 | 271.1 | 168.6 | (0.9) | 776.2 | 1,376.6 | 1,101.9 | 701.3 | (3.5) | 3,176.3 | |||||||||||
Organic Orders Growth - $ | $ | 24.8 | $ | 12.4 | $ | 6.9 | $ | 44.1 | $ | 92.3 | $ | 109.1 | $ | 20.2 | $ | 221.8 | |||||
Organic Orders Growth - % | 7.4% | 4.6% | 4.1% | 5.7% | 6.7% | 9.9% | 2.9% | 7.0% | |||||||||||||
Reported Orders Growth - $ | $ | 35.6 | $ | 14.8 | $ | 14.5 | $ | 64.9 | $ | 110.9 | $ | 125.1 | $ | 37.0 | $ | 273.2 | |||||
Reported Orders Growth - % | 10.6% | 5.5% | 8.6% | 8.4% | 8.1% | 11.4% | 5.3% | 8.6% |
Note: Immaterial differences due to rounding.
9
ITT Inc. Non-GAAP Reconciliation Statements
(In millions; all amounts unaudited)
Reconciliations of Operating Income/Margin to Adjusted Operating Income/Margin
Fourth Quarter 2023 | ||||||||||
MT | IP | CCT | Corporate | ITT | ||||||
Reported Operating Income | $ | 60.3 | $ | 57.2 | $ | 16.5 | $ | (15.2) | $ | 118.8 |
Loss on sale of business | - | - | 15.3 | - | 15.3 | |||||
Restructuring costs | 2.5 | 3.7 | 0.9 | - | 7.1 | |||||
Acquisition and divestiture related costs | - | - | 0.8 | - | 0.8 | |||||
(Gain) on sale of long-lived assets | - | - | - | - | - | |||||
Impacts related to Russia-Ukraine war | (0.6) | (0.6) | - | - | (1.2) | |||||
Other [a] | 0.1 | 0.1 | (0.1) | - | 0.1 | |||||
Adjusted Operating Income | $ | 62.3 | $ | 60.4 | $ | 33.4 | $ | (15.2) | $ | 140.9 |
Change in Operating Income | 26.2% | (28.5%) | (47.8%) | 78.8% | (21.3%) | |||||
Change in Adjusted Operating Income | 28.5% | (5.9%) | 5.7% | 83.1% | 3.6% | |||||
Reported Operating Margin | 16.5% | 19.7% | 9.4% | 14.3% | ||||||
Impact of special item adjustments | 60 bps | 110 bps | 960 bps | 270 bps | ||||||
Adjusted Operating Margin | 17.1% | 20.8% | 19.0% | 17.0% | ||||||
Change in Operating Margin | 200 bps | -880 bps | -980 bps | -520 bps | ||||||
Change in Adjusted Operating Margin | 240 bps | -210 bps | -20 bps | -60 bps | ||||||
Full Year 2023 | ||||||||||
MT | IP | CCT | Corporate | ITT | ||||||
Reported Operating Income | $ | 230.8 | $ | 243.6 | $ | 107.5 | $ | (53.7) | $ | 528.2 |
Loss on sale of business | - | - | 15.3 | - | 15.3 | |||||
Restructuring costs | 4.0 | 4.6 | 1.3 | - | 9.9 | |||||
Impacts related to Russia-Ukraine war | 1.3 | 1.2 | - | - | 2.5 | |||||
Acquisition and divestiture related costs | - | - | 2.4 | - | 2.4 | |||||
(Gain) on sale of long-lived assets | - | - | - | - | - | |||||
Asset impairment charges | - | - | - | - | - | |||||
Other [a] | 0.1 | - | (0.1) | (3.7) | (3.7) | |||||
Adjusted Operating Income | $ | 236.2 | $ | 249.4 | $ | 126.4 | $ | (57.4) | $ | 554.6 |
Change in Operating Income | 10.7% | 29.9% | (7.2%) | 22.3% | 12.9% | |||||
Change in Adjusted Operating Income | 9.6% | 36.6% | 9.2% | 42.8% | 17.1% | |||||
Reported Operating Margin | 15.8% | 21.6% | 15.4% | 16.1% | ||||||
Impact of special item adjustments | 40 bps | 50 bps | 270 bps | 80 bps | ||||||
Adjusted Operating Margin | 16.2% | 22.1% | 18.1% | 16.9% | ||||||
Change in Operating Margin | 60 bps | 230 bps | -250 bps | 40 bps | ||||||
Change in Adjusted Operating Margin | 50 bps | 330 bps | 20 bps | 100 bps |
Note: Immaterial differences due to rounding.
Fourth Quarter 2022 | |||||||||
MT | IP | CCT | Corporate | ITT | |||||
$ | 47.8 | $ | 80.0 | $ | 31.6 | $ | (8.5) | $ | 150.9 |
- | - | - | - | - | |||||
0.5 | (0.1) | - | (0.1) | 0.3 | |||||
- | 0.2 | - | - | 0.2 | |||||
- | (15.5) | - | - | (15.5) | |||||
(0.1) | (0.2) | - | - | (0.3) | |||||
0.3 | (0.2) | - | 0.3 | 0.4 | |||||
$ | 48.5 | $ | 64.2 | $ | 31.6 | $ | (8.3) | $ | 136.0 |
14.5% | 28.5% | 19.2% | 19.5% |
20 bps | -560 bps | 0 bps | -190 bps |
14.7% | 22.9% | 19.2% | 17.6% |
Full Year 2022 | |||||||||
MT | IP | CCT | Corporate | ITT | |||||
$ | 208.5 | $ | 187.6 | $ | 115.8 | $ | (43.9) | $ | 468.0 |
- | - | - | - | - | |||||
2.7 | 1.3 | - | (0.2) | 3.8 | |||||
3.1 | 4.8 | - | - | 7.9 | |||||
- | 3.2 | - | 0.5 | 3.7 | |||||
- | (15.5) | - | - | (15.5) | |||||
- | - | - | 1.7 | 1.7 | |||||
1.3 | 1.2 | - | 1.7 | 4.2 | |||||
$ | 215.6 | $ | 182.6 | $ | 115.8 | $ | (40.2) | $ | 473.8 |
15.2% | 19.3% | 17.9% | 15.7% |
50 bps | -50 bps | 0 bps | 20 bps |
15.7% | 18.8% | 17.9% | 15.9% |
[a] 2023 includes income from a recovery of costs associated with the 2020 lease termination of a legacy site. 2022 primarily includes severance charges and accelerated amortization | 10 |
of an intangible asset. |
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Disclaimer
ITT Inc. published this content on 18 March 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 19 March 2024 11:38:05 UTC.
