Good morning or good afternoon all, and welcome to ITT's 2022 third quarter conference call. Today is Thursday, November 3, 2022. Today's call is being recorded and will be available for replay beginning at 12:00 P.M. ET. At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press Star followed by one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing Star two. If you should require operator assistance, please press Star zero. We ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the floor over to Mark Macaluso, Vice President, Investor Relations. You may begin. Thank you and good morning. Welcome to ITT's third quarter 2022 earnings conference call. Joining me here this morning are Luca Savi, ITT's Chief Executive Officer and President, and Emmanuel Caprais, Chief Financial Officer. Today's call will cover ITT's financial results for the three-month period ending October 1, which we announced this morning. Today's remarks may contain forward-looking statements that are subject to certain risks and uncertainties, including comments related to company performance, strategic priorities, business mix, market conditions, and the effects of COVID-19 on ITT. These statements are not a guarantee of future performance or events and are based on management's current expectations. Actual results may vary materially due to, among other items, the factors described in our 2021 annual report on Form 10-K and other recent SEC filings. ITT is not under and expressly disclaims any obligation to update forward-looking statements, whether as a result of new information, future events or otherwise. Except where otherwise noted, the third quarter results we present this morning will be compared to the third quarter of 2021 and are based on non-GAAP financial measures. These adjusted results exclude certain non-operating and non-recurring items, including but not limited to charges related to the stated charges, and certain tax items and in 2021, asbestos-related charges. All adjustments in the quarter are detailed along with the reconciliation of such measures to the most comparable GAAP figures, in our press release and presentation, both of which are available on our website. It is now my pleasure to turn the call over to Luca, who will begin on slide number three. Thank you, Mark, and good morning. I would like to begin, as I always do, by thanking our shareholders, our customers, and our ITTers for their continued support and investment in ITT. As we continue to manage through this challenging environment, day in and day out, I am reminded about the tireless efforts of all 10,000 ITTers. These efforts, were exemplified at the beginning of Q3, with our Wuxi team rising to the challenge by voluntarily sealing off the site to continue to deliver for our customers. This is also how the quarter continued with our teams all around the world stepping up, to deliver record margins in IP and CCT and a 21% increase in EPS, the highest quarterly earnings on record for ITT. On the demand, Q3 demand for our products and services remained strong in most orders growth, with all three businesses generating over double-digit growth in orders. Let me share some highlights. 11% organic orders growth in Industrial Process driven by both pump projects and short cycle. 12% organic orders growth in CCT driven by 20% organic orders growth in commercial aerospace and defense. In MT, 26 new electrified vehicle platforms, now reaching 60 wins year to date, nearly doubling the total for all of 2021 through just nine months. Leveraging recent orders strength, we grew organic revenue by 15%, because of stepped up pricing and higher sales volumes across all our businesses. We are continuing to accelerate and expand our value-based pricing strategies across the organization with good early signs of success. The benefits of this can be seen in IP's results this quarter, and we expect this to continue in IP and to ramp up in CCT. On profitability, Motion Technologies expanded margin sequentially by 130 basis points. CCT grew margin well over 100 basis points year- over- year and sequentially. The highlight of the quarter once again was IP, our flow business. The team at IP expanded margin 550 basis points versus prior year and 430 basis points sequentially. We are encouraged by the continued progress at Industrial Process. IP's margin performance was driven by price recovery, productivity, and project execution. On top of this, the Habonim acquisition continues to exceed our expectations and was again, accretive to segment margin in just its second quarter as part of ITT. The progress on the operational fundamentals can be seen most prominently in the expansion of the one-piece flow approach in IP. We began in Seneca Falls with the smaller high-volume ANSI pump line, which I mentioned in the past, and in Q3 expanded this approach to the larger pumps category. When Emmanuel and I spent time in Seneca Falls, we were really energized to see the teams continue to drive improvements and generate new ideas. As we ramp up our lean efforts throughout IP, we anticipate further improvement in safety, quality, on-time delivery, and competitiveness. Again, in IP this quarter, we made progress on the foundry closure announced in Q1, which will further improve our cost structure at IP. We successfully negotiated a new collective bargaining agreement with the labor union for the long-term future of the Seneca Falls facility. Moving to CCT. At 18.6%, this was the second consecutive quarter of sequential margin expansion, and this time at similar revenue levels to Q2. We drove aftermarket revenue growth, cost management, and improved price recovery. In Motion Technologies, we see signs that commodity pressures are easing. However, we are still working through higher price inventory, which will continue to negatively impact MT's margin in the fourth quarter. We expect to start seeing the benefits from the lower price commodities in 2023. Still in MT, I'm proud to announce the first market launch of our GALT SmartPAD on the Picasso supercar, a true performance vehicle inspired by racing prototypes. The vehicle will be equipped with four SmartPADs that will provide safer braking and real-time performance data. When I sat in this machine, and experienced the unique engineering that makes the car incredibly light and super fast, it was clear to me, that GALT is the brake partner for the future and beyond. I look forward to more announcements as the commercialization of the SmartPAD continues. This quarter, like every other quarter, I spent a lot of time on the road working together with the teams around the globe. Let me share a few takeaways. At the KONI plant in Oud-Beijerland, the Netherlands, I saw firsthand how our investments in innovation and automation are driving growth at MT. This is certainly the case for KONI's HYDRORIDE. We developed the HYDRORIDE in 2015 and designed it to be a compact, lightweight shock absorber capable of delivering a smooth ride and improved handling capability for our defense customers. Jeroen den Haan, KONI's Road and Defense Business Leader, showed many of you at our Investor Day the value and advantages of this product. This is why defense contractors like Patria have been selecting KONI as their trusted engineering partner. Still in KONI, we're expanding our patented FSD technology to the rail industry. The MK2 frequency selective damping, which first launched in 2020, reduces wear and metal runoff caused by wheel and track friction. We are now demonstrating these advantages, to rail operators and OEMs across Europe. The investments we're making do not pertain just to our products. It's about having sustainable operations as well. In both Termoli and Barge in Italy, we're expanding the use of solar energy and reducing our reliance on fossil fuels. Last month, I was fortunate to see the completed solar lake in Barge that will support approximately 30% of the innovation center's energy needs going forward. You can read about these green campus investments in our forthcoming sustainability report. Lastly, I was very happy to bring the board of directors to ITT Silao plant in Mexico this October. Our directors saw firsthand the investments we made in friction capacity, and our local team showcased their depths of knowledge and their safety and quality track record that makes the Silao plant truly exceptional. Thank you, Mateo, and thank you, Silao team. Coming back to ITT as a whole, all of these and more delivered a sequential and year-over-year increase in EPS that exceeded 20%, thanks to strong pricing recovery, volume growth coming from share gains, and productivity. While the teams delivered outstanding results, we must not forget the challenges we have had to overcome. The impact of the war in Ukraine, a stronger U.S. dollar, supply chain disruptions, including the downstream effects on our customers, especially auto OEMs, continued high-cost inflation across materials and labor, the energy crisis in Europe, and the China lockdown. Because of all of the above and the uncertainty we see, we remain agile to quickly adjust our cost structure as we did so effectively in 2020, and are taking steps today to smartly manage our spend. Let us now move to slide four to discuss the 2022 sustainability report, which we will publish tomorrow. Sustainability is a priority for everyone at ITT, and I'm proud to report the progress we have made since our last publication in 2021. As you will see in the report, we are advancing our ESG strategy through A, development of innovative products, B, investments in technology to engineer a more sustainable future. And C our social commitment to build a more diverse, inclusive, and talented workforce. Rather than issuing long-term inspirational targets, we're announcing credible and measurable near-term diversity, equity, and inclusion goals and targets for greenhouse gas emissions reduction. On emissions, after a 32% reduction in 2021 versus pre-pandemic levels in 2019, we are targeting an incremental 10% reduction by 2026. ITT's emerging sustainability profile, our sustained differentiation that we demonstrated through our stepped-up execution, and our sound capital deployment strategy, such as with the acquisition of Habonim, will continue to drive long-term growth and value creation, for all our stakeholders. Let me now turn the call over to Emmanuel to discuss the Q3 results in more detail. Thank you, Luca, and good morning. We continue to see strong demand for our products in all our businesses. This quarter, we drove 15% organic revenue growth after 10% in the second quarter, with broad-based growth across all businesses. This was driven by short cycle and pump project growth in Industrial Process, share gains in connectors, and over 30% growth in aerospace components in CCT, Friction share gains, especially in Europe and North America, and pricing recovery actions across all segments. In IP, we continue to gain share in projects, where orders grew 19% organically this quarter, contributing to an increase in backlog of nearly 50%. Orders for pumps were up 16% organically, with parts and services up 24%. In MT, friction revenue was up 22% organically, driven by nearly 40% growth in the 60 new electrified platform awards in 2022, will drive long-term profitable growth as electrification accelerates. Like others, we are impacted by the strengthening of the U.S. dollar. This quarter, the headwind to sales was close to 800 basis points, which equated to a $0.04 EPS impact. On profitability, we drove significant improvements in operating income, in addition to a sequential and year-over-year margin expansion. Operating margin was 16.9%, a 140 basis points improvement, despite over 700 basis points headwind from cost inflation. Within the margin improvement, the team drove productivity of roughly 60 basis points, through a combination of shop floor and sourcing actions. Further, our strategic FX hedging we put in place partially mitigated the negative impact of the stronger dollar. Working capital requirements continue to weigh heavily on our free cash flow generation. We are purposefully investing in inventory to ensure continued delivery to our customers in this difficult time. AR collection timing continues to be a drag on our free cash flow generation as well. Because of these factors, we're below our expectation for free cash flow for the year, which I will discuss more in a minute. Let's now look further at the earnings performance on slide six. As you can see, pricing recovery ramped up significantly in the quarter, with a notable step-up in IP. Further, the OE agreements secured at MT through the first nine months, will mitigate the impacts of high-cost inflation. We also continue to drive productivity to help overcome lingering inflation impacts. The direct and indirect impacts from the war in Ukraine cost us $0.04 of EPS versus prior year, and we expect this will be an impact of approximately $0.22 of earnings compared to our original full-year guidance. Finally, we continue to ramp growth investments, to fund groundbreaking technologies, analysis, value engineering, product redesigns. The impact of over $250 million of share repurchases, a higher effective tax rate, and higher interest expense, netted to a benefit of roughly $0.02. Let's turn to slide seven to review the segment results. Let me begin with Motion Technologies. Friction maintained its outstanding quality and on-time performance, effectively managing the global supply chain disruptions and auto OE production volatility to generate 22% organic growth. Aftermarket slowed to 1% growth, due to high distributor inventory in Europe and the lost revenue due to the war in Ukraine. On profitability, we faced 870 basis points of raw material inflation, which we partially offset with pricing recovery and productivity benefits. Inflation drove a segment margin decline at MT of over 160 basis points year-over-year. Nevertheless, MT's margin improved 130 basis points sequentially. Industrial Process performance this quarter was outstanding, with growth across most short-cycle product categories. On orders, we see strength in short-cycle and projects on a year-over-year basis. Our book-to-bill was an impressive 1.09, which contributed to an ending backlog of $600 million, up 49% since prior year. IP's margin improved on both a sequential and year-over-year basis by over 400 basis points. In the quarter, there was approximately 200 basis points of one-time favorable items. Excluding these amounts, IP's margin still grew to approximately 19%. Lastly, in Connect and Control, we drove another strong quarter of orders and revenue, stemming from the continued recovery in commercial aerospace, as well as in connectors distribution. Distribution sales were up 20% organically this quarter. CCT book-to-bill was 1.03, which was especially impressive order growth in previous quarters. CCT's margin expansion was driven by pricing recovery, higher sales volume, and continued shop floor productivity with an incremental margin of 32%. All in all, a really strong quarter performance in Q3. We're executing, we believe we're gaining share against competitors, especially in IP, while managing our costs effectively, and our performance is moving towards our long-term targets. Let's now turn to slide eight to discuss our updated financial guidance. Because of our solid performance to date, a backlog of over $1 billion and the pricing recovery we are executing, we're tightening our organic sales guidance, to the upper end of the previous range. However, we are at the low end of the previous segment margin range due to a few factors, persistent inflation, which is not abating at the pace we had anticipated, and unfavorable mix, mainly in CCT and in MT, given the lower aftermarket volumes. By segment for the full year, we expect that Industrial Process and CCT margin will expand to close to 18%, and MT's margin should end close to 16%. The combination of the margin drivers I mentioned and lower aftermarket volumes in friction, offset by increased price recovery in IP, results in our revised EPS range of $4.35-$4.45. This is within our original outlook established in February, prior to consideration of a number of headwinds that Luca mentioned earlier. On cash, we now expect that free cash flow will be approximately $150 million at the midpoint, given the higher inventory levels required to meet customer demand and timing of cash collections. We are clearly not performing up to expectation, and we're taking steps to address this, including weekly cash collection progress calls, deep dive in inventory, further review of customer and supplier payments, and where necessary, stopping shipments. Let me spend a minute discussing the dynamics of the fourth quarter. Organic sales growth is expected to be in the high teens, thanks to growth in IP and CCT, and to a lesser degree in MT, where revenues will grow organically but decline sequentially to lower friction aftermarket. IP will again be the standout with organic growth well above 20%. Total revenue growth in the quarter will be approximately 13%, despite an FX headwind of roughly nine points. MT margin will be approximately flat to Q3 and given the firming of our pricing benefits, offset by persistent inflation and lower aftermarket volumes, while both IP and CCT will expand sequentially in Q4 to exit the year above 20%. This will drive EPS growth in Q4 of roughly 18% at the midpoint year-over-year, a strong performance given the uncertainty we and others face today. For the quarter, we will overcome an approximate $0.12 headwind from FX. With that, let me pass it over to Luca. Thanks, Emmanuel. As we approach 2023, let me highlight a few points on the end markets that will eventually help inform our 2023 outlook. We are completing our annual planning process, and there is still a lot of uncertainty due to supply chain, a potential economic slowdown, the impact of higher interest rates, and the cost of energy to name a few. These items will evolve over time and will certainly impact the fourth quarter and next year. Auto production has been very volatile due to continued supply chain disruptions. However, low inventory levels, especially in North America, should continue to drive demand. Our current thought is that North American production will show improvement, while Europe might remain at current low levels. Demand in China could still be impacted by further COVID lockdowns. We expect to continue to outperform the market in all geographies. In our industrial markets, we have seen an improvement in project activity, especially in North America, while we are seeing signs of sequential slowing in baseline pumps and industrial connectors. We continue to monitor distributor inventory levels to stay ahead of any potential slowdown. The aerospace recovery continues, notwithstanding some of the lingering supply chain challenges in the industry. This is evidenced by the continued strong order rates we are generating in CCT. Furthermore, defense demand should remain robust, which will drive orders for cone shock absorbers and for CCT connectors that support soldiers' modernization. Lastly, our rail business was hit the hardest by the loss of Russia revenues in 2022. However, global investments in rail infrastructure, including as part of the Inflation Reduction Act in the U.S., should spur more spending. Also, as Emmanuel noted, foreign currency will likely be a headwind to revenue and earnings next year, given the stronger US dollar and the expiration of the hedge protection at year-end. Now let's turn to slide 10 to recap. As I think about Q3, there is a lot to be proud of. Our pricing recovery actions are ramping, with a notable step up in industrial process which, coupled with exceptional execution, contributed to IP's margin in Q3 above 20%. We're advancing our sustainability strategy and announcing 2026 environmental and social targets, that are grounded in projects and specific action plans with dedicated teams in place to execute across the portfolio and by our team's ability to deliver for our customers while gaining share in all our businesses. However, we're seeing signs of slowing in certain shorter cycle markets, which we are watching on a daily basis. We stay cautious and ready to act in the event of a prolonged slowdown, and we will continue to work hard on what we can control and on achieving our long-term financial targets and generating value for all stakeholders in the process. As ever, it has been my pleasure speaking with you this morning, and we will happily take your questions now. Adam, please open the line for Q&A. Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star followed by one on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star followed by two. Again, we do ask that while you pose your question, please pick up your handset to provide optimal sound quality. Please limit your questions to one question and one follow-up. Our first question today comes from Joe Giordano from Cowen. Joe, please go ahead. Your line is open. Hey, guys. Good morning. I wanted to start on the industrial connectors and the commentary around that. You know, how much of that do you see as, like, real market deterioration or versus, like, it was just a buildup of inventory, and people were over-ordering previously and maybe the market's okay, but there's just too much out there. Okay. Let me start saying a couple of points, Joe. When we look at our industrial connectors including, for instance, also the EV, the electrification connectors. Industrial connectors grew. It grew actually in Q3. Then when you peel the onion, and this is why we're talking about the purely industrial connectors, we saw the softening. Now, when we look at the inventory levels, talking to our distributors, we do not see, you know, a huge level of inventory in our distribution. We still see, you know, good orders on that front. We believe that is more a kind of softening on that side. You know, those are what we call the canary in the coal mine that tells, you know, a little bit about the economy. Perfect. Just to follow up on price more broadly, is it becoming more challenging? Are customers still as willing to take price as they were, you know, a couple of months ago when things were clearly like, everything was kind of spiraling? Or are people a little bit more judicious with taking that, accepting that kind of price increases now? Well, I would say when it comes to price, Joe, it has been for ITT a very long journey, particularly from a Motion Technologies point of view. I think that you know, there has always been a lag in. I must say, I'm incredibly proud of what we've been able to achieve in Q3, because when you look at the ITT level in Q3, is the first time ever that we've been price cost neutral. We expect that actually to improve a little bit in Q4. Obviously, there are customers that are starting to see easing on the commodity side, and therefore there is some talk and some negotiation going on, particularly when you start looking at 2023. Also on the other side, as there was a lag in getting into their. We're negotiating a lag, lagging also in getting out of this. Did I answer your question, Joe? You did. Thank you very much, Luca. Thanks, Joe. The next question comes from Jeff Hammond from KeyBanc Capital Markets. Jeff, please go ahead. Your line is open. Yeah. Hi, good morning, guys. Hi, Jeff. Good morning. Just on MT, you know, it seems like the margin progression is maybe. You know, wondering, is it more kind of the mix dynamic? Is it more kinda, you know, pricing coming through slower? Just how should we think about, you know, margin progression into 2023? I know you said, you know, kind of flattish sequentially into Q4. Yeah. Hi, Jeff. We're seeing a significant pressure, continued pressure from commodities. We had expected that the commodity pricing pressure would abate a little bit in the second half. Because we had secured and booked a lot of materials to protect our customers ahead, we're not seeing that impact yet. We expect to see an improved benefit from commodity pricing in 2023. You also hit the nail on the head in terms of there was a negative impact on the mix in Q3, and we will see the negative impact on the mix also in Q4, as Emmanuel said in the prepared remarks. Okay. Great. Just on IP, you know, margins just exceptional. I think you said there were some one-timers. Just maybe talk about, you know, sustainability of that. I think you mentioned, you know, CCT to follow. You know, should we expect kind of, you know, more accelerating momentum in CCT along the same lines as IP? Thanks. Yes. As I said, IP is definitely the highlight. I mean, if you think about growth of 15% and growth of OI by 59%, outstanding. Now, one-off. If you look at the sustainability of the margin, it's probably something around, you know, today, around 18%. It's between 18% and 19%. I would say I'm extremely proud of the results that IP is delivering, because when you look at that margin, it is really solid. It's based on strong pillars, you know, the pricing, the pricing discipline in projects, the project execution, the throughput, the velocity out of the plant, being Seneca Falls or other plants in Germany. If you think about the journey, Jeff, that we had in IP since 2017 when we were mid-single-digit margins, and since then, we are posting 21% growing year after year. COVID, no COVID, it didn't matter. It has been an incredible journey, and it's solid. I hope that now you and many of you guys have even more confidence in our ability to achieve our long-term target of 20% operating margin. Yeah, it's been a great story to follow. Thanks. Thanks, Jeff. The next question is from Mike Halloran from Baird. Mike, your line is open. Please go ahead. Hey, good morning, everyone. On the pump side of things, hey, Luca. On the pump side of things, why don't we just start with the kind of a twofold question here. One, the market share side remains a really nice story for you. You know, maybe just talk a little bit more about, you know, why the energy piece is yellow. Is it literally just things are getting pushed a little bit, and I guess I would like a little color on why they're getting pushed at this point. And then any other kind of sequential concerns you're seeing on the pump side on the order base. When we look at the pumps, I would say on the short cycle is definitely a great story. If you look at the Q3, we have another quarter of more than $200 million of orders. Growth year- over- year, sequentially, the growth in terms of parts and service at 24%, which was roughly half volume and half price. That's incredibly good. When you look at the project side of the business, the projects have recovered. If you look at year-to-date, our orders on the projects are up more than roughly 36%. We see the projects funnel getting stronger, in geographies like North America, Middle East. The only geography where actually we see both the orders on the projects as well as the funnels going down, is actually Europe. This is where we are starting to see some weakness. I don't know, Emmanuel, if you wanna add anything to that. Yeah. Specifically in terms of energy, I think what we're seeing is that some projects that were discussed with customers are taking longer to materialize and to come to the budgetary phase. You know, we are very well positioned with LNG, and so we're ready to capture a lot of business, including the fact that we're getting engineering-only orders, while the customers is waiting to finalize their budget for their projects. That should help us with the project acquisition when the project comes to the market. In general, energy, we believe, is strong. There's secular growth there. It's gonna take a little longer, especially on the project side. Your point, Mike, that you were talking about some concern on the pump side is probably on the short cycle. If you look at the baseline is softening. This is what we said in Q2 last quarter, and also what we have seen also in Q3. Appreciate that detail there. That was great. On the motion side of things, obviously appreciate the prepared remarks on the friction side of things and the underlying demand you're seeing regionally. Were those thoughts kind of your initial trajectory into next year, or were those more Q oriented? Luca, you always give some really good color on your view versus what the kind of consensus production numbers look like from an environment perspective. Any deviation that you see there would be great as well. Sure. Thanks, Mike. When you look at 2022, it's been an interesting year because it panned out to be quite different from what we thought at the beginning. Look at Europe. We thought that Europe was gonna grow double-digit. It ended the first half at -11%. It's recovering in Q3, it's gonna recover in H2, but overall, Europe will probably end up to negative low single digits for 2022. China, we thought was gonna be flat or -1%, something like that. As a matter of fact, China recovered strongly. Finished the half +1% and strong Q3, will have a strong Q4, will end the year 2022 probably at positive mid-single digit. North America was the one that was closest in their prediction to the reality, and they will finish the year to positive double-digit. Overall, probably 82 million vehicles produced, for 2022. Now looking at 2023, what we're thinking right now, even though it's too early to tell, Mike, is low single-digit growth for Europe. China probably stays flat to low single digits, and North America mid-single digit growth. Overall, for the full 2023 worldwide, low single-digit growth. Your share gains would be on top of that, right? Absolutely, Mike. Well said. Awesome. Really appreciate it. Thanks, everyone. Thanks, Mike. The next question comes from Damian Karas from UBS. Damian, your line is open. Please go ahead. Hey. Good morning, everyone. Morning, Damian. Ciao, Damian. Buongiorno. Just a follow-up question on friction. Appreciate the color you've already provided. Curious, so normally you'll have kind of this fourth quarter ramp up in capital investment. I think that's what you had kinda previously baked into the guidance. Are you still expecting that investment ramp as we exit the year? On these EV wars, you're winning a boatload of them. Just curious if there's any risks that you could see some of these new platforms, you know, ultimately get delayed or even dropped. Yeah. On CapEx, yeah, we expect a relatively stronger Q4, than what we've seen so far. I would say that we are trying to be balanced, with the fact that we need to drive productivity. We certainly need to support the growth of all the awards, especially in friction that we've won. At the same time, we know that there is a looming recession in the future. We wanna make sure that we don't settle ourselves with really, higher fixed costs when comes the moment of lower volumes due to the recession. We're gonna focus on productivity. We're gonna focus on really driving capacity where we have won the business while staying mindful of the fact that 2023 could start the year of maybe a recession, a worldwide recession. Well, first of all, let me share what has happened in 2022. When we look, we do the SOP analysis on a quarterly basis, and for 2022, there has been practically zero delay worldwide. The picture is a little bit different in different regions. We look at Europe, there has been delays in the SOP. There has been lower SOP in terms of volume at the start of production, but this has been more than compensated in China, where actually the SOP accelerated and they were larger, so overall neutral. When we look at the EV, we don't see that happening. If it happens, it's gonna be, we believe, immaterial. Also because you look at the adoption, you look at how many EV get bought or produced in the quarter. Last Q3, North America, you know, was exceptionally high, so we don't see that happening. Electrification for us will be good. One thing that was notable this quarter also, Damian, is which is really the leading EV manufacturer in China. As we discussed in the past, we have a really strong position and growing position with Tesla and the same is happening with BYD. The next question comes from Nathan Jones from Stifel. Nathan, please go ahead. Your line is open. Hey, good morning. This is Matt on for Nathan Jones. I just had a quick- Good morning. Follow-up question. I think I might have missed it in the earlier remarks. What was the impact of price cost on the incremental margins in MT? So, I would say that as Luca mentioned, price cost for the quarter at ITT level was neutral, and this is the first quarter that we've seen this since the high cost inflation we've been facing since mid-2021. The results obviously by business are a little bit different. For MT, we're not yet at a point where the price cost impact is neutral. It has a negative impact in dollars, and a negative impact obviously from a margin standpoint. The margin impact for Q3 from negative price cost was something empty. Okay. Thank you. Back on MT again. When do you guys expect to reach neutrality on a dollar to margin basis? Is it sometime late 2023? Any color you could provide there? You mean for MT, specifically, correct? Correct. For MT, I think that we could be really close to a neutrality in Q4, as we will be having the benefit of incremental price recovery from our customers, as well as a little bit of slowdown from a commodity price standpoint from a sequential basis. Okay, great. Thank you. Thank you. The next question comes from Vlad Bystricky from Citi. Vlad, your line is open. Please go ahead. Morning, guys. Morning, Vlad. Thanks for taking my call. Hi, Vlad. Just looking at the longer cycle project orders in Industrial Process, you've had, you know, several quarters now of really nice growth on the order side there. Can you just talk a little about the expected time deliveries on these longer cycle project orders, and how much visibility these orders gives you into 2023 IP demand? As we discussed, we have a really strong backlog in IP, $600 million or close to $600 million up, I think something like 50%. Of that backlog, a little less than 50% is from project. This is the result of really a lot of share gains, we have had from a project standpoint. Typically, for us, a project between the time we take the order and the time we deliver can be between 10 months to 24 months. Things that we're facing and that our customers also are facing. I think that could be. We could be on the longer side of the conversion timing, but I think that remains probably between a little bit more than a year to two years. Vlad, if I may add some color to that, in addition to the timing, I would like to add some color on the margin. Because the project backlog margins are at historic high. We and you know that the profitable growth really start on the pricing discipline on these projects. You will not be able to deliver this kind of margin if you really don't have that. Okay? No, that's great color. Thanks for that. Maybe just, you know, if I look at your market outlook slide on page nine, you know, there's more yellow and red versus green. Just given what you're seeing in the macro, and in your various end markets, can you just talk about how you're thinking about the potential for growth or, you know, a more significant slowdown in 2023 and sort of how you're balancing planning for, you know, what seems like a potentially wide range of scenarios into next year? Let me walk through the different end markets. In terms of automotive, Luca already talked about what we expect for 2023, between 84-85 million vehicles, low single-digit growth versus 2022. We obviously expect to continue to outperform like we've done in the past. I think that while auto won't recover to pre-pandemic level before 2024, 2025, we expect that we'll be able to continue to grow, and outperform the market. I would say from an aerospace standpoint, the production of airframers is still very much below what it was pre-pandemic. We think that there's gonna be a continuum of production increase from those customers into 2023, and we expect by the end of 2024, commercial aerospace production to be at the level of pre-pandemic. From an energy standpoint, I would say that there's a lot of, concern around energy security and energy availability. We feel that, given that the transition still needs to happen because there's not enough renewable production capacity for the moment, that should lead to further investment in oil and gas, and we'll be ready to support that. As I mentioned, there's some concern about project timing, but I would say overall, the energy market is still gonna be on a positive track. For rail and general industrial in general, I would say steady in line with GDP growth. I think a little bit more upside in the U.S. than in Europe. That's great color. Thanks, Emmanuel. Thanks, Vlad. The next question comes from Bryan Blair of Oppenheimer. Bryan, your line is open. Please go ahead. Morning, Bryan. Thank you. Good morning, everyone. Morning. Morning. Morning. I guess to level set a little bit more on your outlook and friction. You've walked through the market growth expectations. You said that, you know, outperformance should be, you know, in line with historical experience. I'm just curious if there's any nuance to that across regions based on, you know, tailwinds, the EV platforms that should be ramping. You know, thinking about Europe, China, North America. I would say we had an exceptional outperformance in Europe, I would say. The outperformance is across the board, I would say, Bryan. No substantial difference. I would say, when you talk about the dynamic behind it, let me give you a couple of examples on that front. One, of course, are the continuous awards, conquest awards that we do have, and electrification on that front is key. Because we won last year many electrified platforms. We are winning many electrified platforms this year, which, and our win rate is considerably higher than our market share today. That will keep on feeding the outperformance. I'll give you more color, is an example that has happened, you know, last month really, where Friction, you know, Alessandro Inglese and Luca Martinotto, the head of R&D and the head of Friction, won an award that we lost two years ago. Two years ago, we lost this award. What the team did, they kept on working on the product. At our own cost, they kept on developing the product, performing the product, knowing perfectly well that might have been just, you know, an investment and nothing came out of that. As a matter of fact, last month, the customer, Tier one and OEM came back. The current supplier is facing some issues, and they're looking to accelerate our qualification. Here we go, we won another award. Very good judgment call from Alessandro and Luca. This is how you win, conquer, and outperform the market. Very helpful color, as always. Emmanuel, wondering if you could walk us through price cost progressions in Motion Tech for the year. You mentioned a little under 200 basis points impact Q3, moving toward neutrality Q4. What was the hit in Q1, Q2, you know, moving into the back half? With, you know, progression toward neutrality in Q4, I think you said that, you know, top line should be relatively similar. Why would there not be sequential margin expansion along the lines of that, you know, price cost improvements next quarter or this quarter? As I mentioned, Bryan, the price cost equation is improving in Q4 versus Q3. This is not a massive improvement. This is more incremental improvement, and that's where we're gonna be neutral in Q4 from a dollar standpoint. We have seen a significant improvement in the second half compared to the first half. In fact, in Q1 we had made a lot of progress versus 2021. We were still largely negative from a price cost standpoint. In Q1 we got $20 million, more or less, from our customers, and that was the same amount that we got for the entire year 2021. Significant progress, but compared to our cost inflation, nowhere near to cover it. We made incremental progress in Q2 of 2022, sorry, Q2 of 2022, where we were around $25 million of price recovery. In Q3, we went all the way up to close to $40 million. We're gonna continue to build that up in Q4 a little bit, and then have the positive impact of commodities. This is kind of the timeline from a price cost standpoint. When you look at Q4, there's a couple of things that are happening in MT, and this is why we're not expecting to have a significant margin progression from a sequential standpoint. The first one is volume. We have less volume in Q4 than what we had in Q3. The reason for this is because we have less volume, mostly coming from aftermarket. Aftermarket has a double impact, obviously. The first one is the fact that we have lower volume to absorb our fixed costs. The second one is that aftermarket has a better margin than OE, and as a result, this is a headwind to MT's margin expansion. Obviously, as we look to 2023, we expect that this will improve. The lower aftermarket demand is really due to, you know, that our aftermarket is mainly in Europe. The lower aftermarket demand is mainly due to higher inventory, and I think that's a function of the incoming recession, especially in Europe. The Russia business. Our customers were exporting indirectly to Russia, and this business has disappeared. Okay. Appreciate the detail. Thanks again, guys. Thanks, Bryan. The next question comes from Andrew Obin from Bank of America. Andrew, your line is open. Please go ahead. Hi, guys. Good morning. Morning. Hi, Andrew. You know, I think you guys are like some of the smartest operators out there. I'm gonna make you answer questions that I think other people just won't answer or probably won't know the answers to. Sorry for that. The first question, with interest rates going up, right, a lot of companies use floor plan financing or, you know, sort of they finance their working capital. What are you guys thinking about your strategy for working capital? And what do you see your channel and your suppliers do in this high interest rate environment? And what does it do to the ecosystem? Thanks. I think you're pointing out a real issue for us, in terms of our free cash flow generation and the impact it has on our interest expense and for a lot of other companies as well. What we're doing is we're really driving a recovery in the cash performance. We are disappointed with the cash per cash in. We have more or less $100 million of AR past due with our customers. 75%, roughly a little bit more than 75% long-term issue. This is just customers adjusting their cash generation for quarter end. We're gonna really drive the fact that they need to pay us on time. As mentioned before, we are ready to take action from a stop ship standpoint, in order to get paid on time. There's a lot of work that needs to happen also from an inventory standpoint, where we need to work on material planning effectiveness. We need to work on excess inventory reviews and making sure that we lower that inventory, and we're doing that. The reality is that this is gonna bring benefits in 2023, not so much in 2022. In terms of the pricing agreements that we've had, we also have a timing delay between the actual agreement, the formal agreement, and the fact that the customer pricing recovery that we need to collect. I would say for us, we are really focused on getting the cash in, so that we don't have to really use financing like we're doing today. Oh, wow. This is a great answer. Appreciate it. Glad I asked. Second question is also on M&A. How has M&A environment, you know, because, you know, maybe you don't generate as much cash as you would like to these days, but, you know, you still have a nice balance sheet and, you are generating cash. How does the, you know, what do you see in the M&A environment? What do you see in terms of availability? What do you see in terms of competition from private equity? What you're seeing, does it make it more likely or less likely to sort of see a deal from ITT in the next twelve to eighteen months? Thank you. Thanks. Thanks, Andrew. The deal is, I wouldn't say more likely, but it's like, let's say, you know, the competition from PE probably, has more challenges today because of the environment. You might see more strategic, really, competition on that front. We know that M&A is strategic for our, for what we need to do, the deployment of the capital. I would say when you look at this environment, in terms of capital deployment, we will keep on investing organically in the business, maybe focusing more on productivity, you know, than if you look at the balance. On the M&A, we will continue. Probably the only thing that you would say is maybe with more of a prudent approach. We are really looking at the space in flow. We are looking at the space in CCT on the connector side of the business. Our funnel of opportunities is rich of opportunities that fit our strategy and that both for IP and CCT. Great answer. Thanks so much. Thank you, Andrew. Thank you. Our final question today comes from Matt Summerville from D.A. Davidson. Matt, your line is open. Please go ahead. Thanks. Just two quick ones. Just to put a finer point on pricing. When you look across the three segments, each one grew organically at about 15%. We can back into what price realization was in percentage terms in MT, based on the $40 million figure Emmanuel gave. Can you provide, you know, what was price realization in IP? What was price realization in CCT as a percent of, you know, the 15% organic you posted in each segment? I have a quick follow-up. Yeah. Thanks, Matt. If we look at pricing realization out of the 15%, as you noted, 15% across the board, that's easy to remember. 50% of that was price, 50% was volume, overall. I would say that the pricing recovery was the strongest in IP, followed by MT and then CCT. Got it. Maybe if you just comment a little bit on the incoming order cadence you saw in the third quarter, and what you maybe experienced in October. Does that sort of inform you that the slowdown you're seeing from the general industrial side of things, is it getting worse? Is it, you know, sort of flattish? I guess I'm trying to get a sense for, you know, whether or not there's real momentum behind that slowdown that's building. Sure, Matt. So when we look at the, there was no really big seasonality when you look at Q3. Of course, Q3 in Europe, you got the August, so there is a little bit of that, but no really big seasonality you will see different month from another. I would say when you look at the dynamic within the quarter in Q3, we see that, you know, that trend continues. It really didn't deteriorate. Parts and service in IP stayed strong across the quarter and, you know, the baseline was softening. So that has been happening regularly in Q3. And I would say when you look at October orders for ITT are a nice growth year-over-year and are confirming the trends that we saw in Q3. Not really a deterioration and not really any change, but more of the same. Understood. Thank you, guys. Thanks, Matt. Thank you. This concludes today's Q&A session and thus concludes today's teleconference. Please disconnect your lines at this time and have a wonderful day.