Welcome to ITT's 2022 fourth quarter and 2023 outlook conference call. Today is Thursday, February 9, 2023. This 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 listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question, please press star on your touchtone phone, star one. If at any point your question has been answered, to remove your question from the queue, please press star followed by two. If you should require operator assistance, it is star followed by 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 of Investor Relations. You may now begin. Thank you, Candice, and good morning. 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 and 12-month periods ending December 31, 2022, which we announced this morning. Before we begin, please refer to slide two of today's presentation, where we note that today's comments will include forward-looking statements that are based on our current expectations. Actual results may differ materially due to a number of risks and uncertainties, including those described in our 2021 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the fourth quarter and full-year results we present this morning will be compared to the fourth quarter and full year 2021 and include non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures are detailed in our press release in the appendix of our presentation, both of which are available on our website. This morning we will begin with an overview of the results and our outlook for the year. Emmanuel will then review the fourth quarter results before we close the book on 2022. Luke will discuss some key commercial achievements and our 2023 guidance, and we'll have plenty of time for your questions at the end. Please note there is additional information on the quarter and full year results as well as planning assumptions for 2023 in the supplemental data to our presentation, which I encourage you to review. With that, it's now my pleasure to turn the call over to Luca, who will begin on slide number four. Thank you, Mark, and good morning. Before we discuss ITT's results, I would like to start by thanking our shareholders for their investment in ITT, our customers who we always keep at the center of everything we do, and our employees for their ongoing commitment to ITT. This quarter, more than ever, I was humbled by the efforts and resilience of all our ITTers. First, in Wuxi, China, our employees delivered the highest production quarter ever, despite COVID infection rates of more than 75% in December. Our China team's performance was the highlight of the quarter. Next, across all our factories, we navigated supply chain disruptions and ensured on-time delivery to our customers. In Europe, our teams worked through the energy crisis, the impacts of the war in Ukraine and unabating inflation. I am grateful for the resilience you demonstrated this quarter and throughout 2022. It was your efforts that drove the record performance we're presenting today, including 12% organic orders growth following 13% growth in Q3, over 17% organic revenue growth in all businesses, delivering double-digit growth, a record segment margin of 18.6%, 22% EPS growth after 21% in Q3, and over $130 million of free cash flow, up 58% versus prior year. In many regards, ITT's fourth quarter was another step up in performance. Now to the details. Our seventh consecutive quarter of double-digit organic orders growth resulted in an ending backlog of more than $1.1 billion, up 22% versus prior year. Higher volumes and price recovery drove the strong organic revenue growth led by Industrial Process at 27%. This year, we drove over $170 million of price recovery with MT at the forefront. Execution momentum in IP continued across projects, baseline pumps and aftermarket, resulting in 27% organic revenue growth in Q4. CCT grew sales by 16%, boosted by share gains in connectors and strong demand for aerospace components. In MT, the outperformance continues in every region. For the full year, we surpassed global automotive market growth by roughly 400 basis points. Our price recovery, volume growth and productivity led to a record segment margin in Q4, overcoming cost inflation impacts of roughly $50 million for all of ITT. A truly remarkable accomplishment indeed. On cash, after a tough few quarters, we generated strong free cash flow with 17% free cash flow margin in the quarter. By far the best performance of the year. The common thread that underpinned these achievements was our people and their commitment to deliver for our customers. I was fortunate to experience this in Saudi Arabia, where Khaled and the local IP team performed flawlessly and achieved 100% on-time performance for our customers in 2022. In the flow industry, this is a differentiator. Given this performance, we are investing in new testing capabilities to grow our presence in the region. This has already helped us win more than $20 million in incremental project orders. Or like in South Korea, which has become our new center of excellence for vertical pumps. Also here, we continue to invest in more technology, engineering resources, and lean. Speaking of lean, we're working now on our next transformation of the plant layout in Seneca Falls to optimize material flows and efficiency. We're already realizing the benefits of IP's lean efforts with more than 40% incremental margin in Q4 and for the full year. This relentless focus on excellence, continuous improvement, and commitment to quality enabled us to deliver on our original revenue and adjusted earnings per share guidance in 2022, despite numerous unanticipated macro headwinds. On capital deployment, we deployed more than $600 million in 2022 or 3.5x our adjusted free cash flow. CapEx increased 18% to support the growth of in electrified vehicles and productivity. On M&A, Habonim was a strategic acquisition and a great deal. It expanded IP's valves business by more than 50% and was accretive to ITT's earnings. With its strong performance, our effective purchase multiple is now 8-9x and dropping versus approximately 12x at the date of acquisition. This morning, we announced a dividend increase of 10% after increases of 30% and 20% in 2021 and 2022 respectively, and we repurchased over $250 million of ITT shares, lowering our share count by 3%. Finally, on our 2026 long-term targets, we are making significant progress. A few highlights. Our relentless focus on safety drove reductions in both injury frequency and severity rates, leading to a 32% decline in the number of incidents in 2022 to a much improved incident frequency rate of 0.55. On sustainability, we're reducing our greenhouse gas emissions, increasing revenues from green products, and advancing our diversity, equity, and inclusion efforts. Our financial performance, organic revenue, and Adjusted EPS growth in 2022 were in line with our long-term growth targets. We are proud of what we accomplished in 2022, but never satisfied, and that is why we're encouraged by the opportunities we see in 2023. With that, let me turn the call over to Emmanuel to discuss our fourth quarter and full year results. Thank you, Luca. Good morning. Let's begin on slide five. Revenue growth of over 17% was driven by double-digit growth in all businesses. In IP, projects increased over 70% organically. Here, we continue to benefit from share gains in large capital CapEx spend and nearshoring activities that are ramping up. Short cycle revenue increased on a year-over-year basis across baseline pumps, parts and service, aided by pricing capture. The strength of the commercial aerospace recovery and accelerating demand for defense applications drove strong growth in CCT as well. Our aero components business grew 26%. We remain somewhat capacity constrained due to continued supply chain issues. Connectors grew 13% driven by market share gains as the benefit of new product innovations, particularly in defense, began to materialize. In MT, Friction OE share gains in all regions and price recovery drove 12% organic growth. Friction's on time performance was 99% again this quarter despite rising COVID infection rates in China, order volatility, and unplanned customer shutdowns. Our rail business grew 10% organically and orders were up 35% with strength mainly in Europe. On profitability, volume and price added 800 basis points of margin expansion, which more than offset 650 basis points of cost inflation and roughly 100 basis points of FX. We're continuing the push on shop floor improvements as demonstrated by IP's margin of 22.9%, up 700 basis points year-over-year. Even excluding roughly 120 basis points of one-time items, IP's margin was still above 21%. This is quite an improvement from what was an 8% margin business in 2016. CCT's margin grew 80 basis points to 19.2%, driven by higher volume and price recovery. For the year, CCT's margin ended at around 18%, up 270 basis points. In MT, margin declined 500 basis points to 14.7%. This was driven by a combination of higher material, labor, and energy costs, and an unfavorable mix stemming from auto aftermarket declines in Europe. We also had a tough compare this quarter given the gain on asset sale realized in Q4 2021. This margin performance was clearly below our expectations, but we expect that MT's margin will return to its previous level as cost inflation subsides and we sustain pricing benefits. On EPS this quarter, we overcame $0.48 of cost inflation, $0.15 of negative FX, $0.03 for the loss of business in Russia, and $0.03 from higher interest expense. On cash, we improved significantly in the fourth quarter, exceeding our last forecast on the strength of AR collections. We're seeing the benefits of our daily collection efforts and expect further improvements as supply chain disruptions ease. Let's move to slide six. I want to make a few additional points on this page. First, price recovery again exceeded cost inflation in Q4. This is a testament to the differentiation we provide compared to the competition. Second, foreign currency was a significant headwind given the strengthening of the US dollar. Third, with interest rate rising throughout the year, our interest expense was $3 million this quarter. We expect it will remain at this level throughout 2023. Finally, despite the long list of challenges we encountered this year, we didn't lose sight of the long term and continued to invest in new product development, redesign, and innovation. Let's turn to slide seven to discuss ITT's growth momentum. Friction continued to win content on new EV platforms. We're making progress on our 2025 EV market share target of 37%. Further, in 2022, our total electrified vehicle revenue was over $100 million. We're also beginning to see investments in rail infrastructure materialize. Even with a significant loss of business in Russia in 2022, rail orders were approximately flat for the full year. IP is seeing strong growth in project that will drive future revenue outperformance, enlarge our install base, and drive aftermarket demand. In CCT, we saw another strong quarter with commercial aerospace demand continuing to ramp. We also drove significant orders in EV connectors. This business has grown organically to almost $40 million in orders in 2022. The orders growth and our ending backlog give us good visibility into the revenue conversion through at least the first half of 2023. Let's turn to slide eight to wrap up the 2022 discussion. Here, I'd like to quickly recap ITT's 2022 performance. The headwinds on this chart for cost inflation, foreign currency, and the lost Russia business amounted to over $2.30 of impact, which was well above our expectations when we issued our guidance early last year. As Luca mentioned, execution was the differentiator. Our commercial teams sprang into action to execute pricing negotiations. We ramped our effort on productivity to address rising costs, and we completed the acquisition and integration of Habonim. While we're incredibly proud of this performance and humbled by the team's achievements, there is still much more that we can and will do. We're driving improvements in our on time performance in IP and CCT, further expanding a value-based pricing strategy, and increasing our cash generation to execute more strategic M&A, all of which will drive long-term value creation. With that, let me turn the call back to Luca on slide 10. Thanks, Emmanuel. Before we cover our 2023 outlook, I'd like to share some examples of how performance and innovation are driving customer wins and market share gains across Friction, pumps, and connectors. As we discussed during Investor Day, Motion Technologies is strengthening its leading position by taking full advantage of the EV transition. This year, we won content on 78 new electrified vehicle platforms with awards from leading global automotive OEMs, including Tesla, BYD, Rivian, Polestar, and NIO, among others. Our best-in-class quality with defects below one part per million and our performance at 99% on-time delivery helped us win the front and rear axle pads on a premium German electrified platform that will launch in 2024. Electrification is also good for our connectors business. We developed and are investing in an EV connectors portfolio catering to regional charging infrastructures, and we are seeing orders surge. Customers are choosing our connectors because of our engineering capabilities and responsiveness. In Industrial Process, we are capturing share in a market that's rebounding from two years of supply chain disruptions and component shortages. Over the next two years, we'll deliver pump systems to an independent oil company in Nigeria using our Bornemann twin-screw technology. This unique offering will stop flaring at the site and eliminate roughly 1,000 tons of CO2 per day. Orders for green projects increased 50% in 2022 compared to prior year. We're winning on near shoring opportunities, including a hazardous waste treatment system for a new semiconductor plant in Arizona and for a commercial EV battery recycling facility in Upstate New York. Finally, we are making progress on the Embedded Motor Drive technology or EMD that we displayed at Investor Day. Initial testing showed that our Gen 2 prototypes exceeded expectations in energy efficiency, operating temperature, and vibration. We are currently in initial discussion and field trials with 10 customers across various industries to demonstrate EMD's capabilities. In Connect and Control Technologies, we are qualifying new vibration isolation technology that reduces motor-induced vibration for military applications with leading helicopter OEMs. We custom design and co-develop our Cannon connectors together with our customers to withstand the most harsh environments. This quarter, we are launching a new family of soldier-worn connectors. We're also qualifying ruggedized connectors for the Nett Warrior Wearable Mission Command System. Clearly a lot of exciting innovations that you will hear more about throughout 2023. Let's now turn to slide 11 to discuss the growth outlook in each business in 2023. Starting with Motion Technologies, we expect Friction to outperform the market as global production continues to recover to pre-pandemic levels. We foresee auto production to be flat to up low single digits in 2023, are planning for a slowdown in demand, particularly in Europe in the second half. On the auto aftermarket, we think the weakness we saw in 2022 will persist through Q1 and then begin to improve from there. On the rail portion of MT, after a long year of declines stemming from the war in Ukraine, we exited Q4 with strong orders in both KONI and Axtone. Passenger rail is ramping up and with our 2022 awards, we think 2023 will be a strong year, despite a potential slowdown in freight activity in the second half. Longer term, this market will be strengthened further by the public investments in rail infrastructure in the U.S. and in Europe. Moving to Industrial Process, we are entering 2023 with a healthy backlog. The project activity in this segment should continue to ramp with investments to support infrastructure, nearshoring, and clean energy. Parts and service demand, the aftermarket in IP, has been strong, and this trend continued into January. On the other hand, baseline pumps activity slowed in Q3 and Q4, so we are monitoring industrial orders closely. Moving to Connect and Control Technologies. In the industrial components segment, the outlook is mixed. In Q4, we saw sequential slowing in the short cycle industrial connectors business, but encouraging demand in the EV and medical connectors space is providing a partial offset. In aerospace, there is no change to our positive outlook. Bid rates are improving. Air travel is accelerating amidst a commercial aerospace recovery. In defense, demand remains robust given the current geopolitical conflicts and heightened level of military preparedness around the globe. Let's now talk about our 2023 guidance. We expect organic revenue growth of 7% at the midpoint. This is due to a combination of share gains and conversion of our backlog, tempered by slowing short cycle demand, primarily in the industrial markets. In 2023, we will drive further value-based pricing actions with a notable step-up in IP and CCT, following an absolutely stellar performance in MT in 2022. To put this guidance into perspective, we expect to deliver approximately $3.2 billion in sales in 2023. On profitability, our productivity journey continues. We still see many opportunities to improve our supply chain effectiveness. Our assumption is that supply chain and material constraints will continue to ease and higher raw material costs will subside in the second half. I do want to stress, however, that we are still largely in an inflationary environment, even though it may be at a lower rate than last year. Our productivity actions, net of inflation, will drive adjusted segment margin expansion of 50 basis points at the midpoint to 17.7%. With the progress at IP and CCT and easing inflation at Motion Technologies, we are well on our way to the long-term margin target of 20%. The strong top-line growth and margin expansion will drive Adjusted EPS growth of 7% at the midpoint. On cash, improving our working capital will be a key priority in 2023. We expect to more than double our cash flow generation and drive free cash flow margin of 11%-12%. On slide 13, as you can see, our strong operational performance and pricing actions will outweigh cost inflation this year. We expect that other non-operational headwinds related to foreign currency and interest will impact our results. We anticipate a solid 7% growth in Adjusted EPS. For the first quarter, we expect to deliver mid to high single-digit organic growth led by Industrial Process followed by CCT. More than 100 basis points of margin expansion at the midpoint led by IP and CCT, with MT approximately in line with its Q4 2022 margin rate. Adjusted EPS growth of over 15% year-over-year. We expect EPS growth in the first half of 2023 to be stronger than in the second half. We're prudently taking a cautious approach to Q3 and Q4 until we have more clarity on the economic situation. Now, before we move to Q&A, please let me share a few final points. First, all year we executed for our customers, gained market share, and grew orders across all our businesses. The result is a strong, profitable backlog on which to execute and outgrow the competition in 2023. Second, we see positive signs in several markets and we expect to perform well. The foundation for this performance has been laid over the past five years, and once again, we are executing. Still, there are signs that growth will slow in the second half in some end markets, and so we're staying laser focused on what we can control. Third, as I said in June at our Investor Day, electrification is good for ITT. Friction's flawless performance and many competitive advantages are amplified as the industry transitions to EVs. We are well on our way to achieve our EV market share targets. Lastly, once again, in 2023 execution will be the differentiator. That is ITT's strength. I would like to thank all our stakeholders for their continued support of ITT. As always, it has been my pleasure speaking with you all this morning. Candice, please open the line for questions. Thank you. The floor is now open for your questions. At this time, if you have a question or comment, please press star followed by one on your touch tone phone. 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 while you pose your questions, you pick up your handset to provide optimal sound quality. Please limit your questions to one question and one follow-up only. Our first question comes from the line of Nathan Jones of Stifel. Your line is now open. Please go ahead. Good morning, everyone. Hi, Nathan. Good morning. Congratulations on 2022. I think that's a pretty phenomenal execution effort given all the incremental headwinds you had to deal with. A few questions on the guidance I'm going to go with. Just looking at the, you know, the price versus cost inflation buckets in your 2023 bridge. I'm a bit surprised that, you know, they're largely offsetting. You had about $0.38 I think of headwind from price versus inflation in 2022, but you were positive in the second half, and I would have thought that would carry over, and you would make some of that back up in 2023. Maybe you can just give us some more color on price versus cost and why that's not reading through as more positive in 2023. Okay. I would say when we look at the 2023, we are getting roughly half the price that we got in 2022. But those are going to be incremental, right? Those are incremental to the price that we got in 2022. The other element that I would like to stress before maybe passing it over to you, Emmanuel, is that when you look at 2023, we are going to be slightly price positive across all the value centers, something that we could not say in 2022. It is a substantial improvement and is a continuation of what we have achieved in Q3 and Q4. Yeah. Nathan, regarding the we were price cost positive in Q3 and Q4. You know, this wasn't like a large beat. We were slightly price positive, and I think that we maintained that in 2023. Keep in mind in 2023 that there is some headwinds from a commodity standpoint, notably, chemicals in Motion Tech and also, energy. We are going back to our customers for additional price increases to cover and compensate this commodity increase. Lastly, I would say in the second half of 2023, we expect things to slow down also. We want to be mindful of that economic slowdown when we ask for price increase to our customers. Okay, thanks for that. Then maybe the operational performance bucket that's $52-$60. I think that implies an incremental margin of right about 30%, which is kind of what I'd expect from the businesses in the absence of additional productivity, which you guys clearly over-delivered on in 2022. Maybe talk about the expectations for productivity in 2023 and the potential for you to deliver better incrementals on that growth. I think that, on the other side of that, Nathan, is that, the all day investment in strategic initiatives that we do have, that we're working on. Let me give you a couple of examples. Is investment in products like the EMD that we talked in the prepared remarks, the Smart Pad in Motion Technologies, or also the DAC, the Digital Automatic Coupler that we are developing for Axtone. The SFO next lean transformation. We are going through a complete re-layout of SFO to take that plant to the next level. Also the lean activities that we started in CCT in places like Valencia, California. That's on top of all the initiatives to sustain our growth. That is something that you take into consideration when you look at the, at the incremental margin. Okay, thanks for taking my questions. Thanks, Nathan. Thank you. Our next question comes from the line of Andrew Obin. Your line is now open. Please go ahead. Hey, guys. Good morning. Can you hear me? Morning, Andrew. Hi, Andrew. Hey, how are you? I'm gonna ask, like, a bit of a convoluted two-part question. Apologies. The first, you sort of highlight that IP projects were up 70%, citing reshoring, would love specific examples. You know, a couple of slides later, you sort of talk about the fact that in the connectors business, you're seeing some weakness in short cycle, which I thought was sort of this lead indicator for potential weakness. A, maybe specific examples of reshoring, B, how do you square the circle, you know, with IP projects bookings so strong, which indicate very solid underlying activity at the same time, right? Your short cycle canary in the mine, maybe I'm wrong about that, is sort of flashing yellow. Thank you. Yeah, I think that when we talk about connectors slowing down, we're talking about orders ourselves as still very much growing very fast. I think that our connector business, industrial connector business is mostly is majorly U.S. What we're seeing is a decline in, I think, a, you know, slowdown in U.S. activity. I think on the other hand, in terms of IP projects, we're seeing, I would say, specific growth in U.S. We talked about the semiconductor opportunity or award. We talked about the battery recycling, also a lot of international growth. We're seeing, as we mentioned, we gained some really good orders in energy. You know, we talked about Nigeria, but we also won in Angola. We won also in Malaysia, obviously in Saudi Arabia. I think that the project growth, there is some in the US, but also a lot internationally. Oh, great answer. I appreciate it. Another question, sort of more of a big picture question. Effectively, if I look at your top line growth, the midpoint is 7%, EPS's midpoint is 7%, by the way, one of the best numbers in coverage. I'm not saying it, but you know, we look at Eaton, sort of not dissimilar dynamic. We look at Honeywell, where, you know, in a normal environment, you would sort of expect more operating leverage from the sector. The question I have, is this sort of the new reality, just less operating leverage as we sort of shift into this high growth, high inflation mode, or does this normalize eventually? Thank you. Well, we certainly haven't given up on driving incremental margin. I would say 2023 is a little bit peculiar because we continue, as Luca mentioned, to have significant cost inflation. Also at the same time, we want to solidify the growth and the performance that we have executed on so far. This comes with investments, both in resources, we're investing in supply chain, but also in products. I think that that kinda limits a little bit our, our margin, and EPS growth. But I think that we are also very focused on productivity. I think that in the future, especially when we think about our long-term targets, we are really driving for better than average in terms of incremental margin. Yeah. Certainly didn't want to take anything away from the strong performance in the quarter. Thank you very much. Thanks, Andrew. Thank you. Our next question comes from Mike Halloran of Baird. Your line is now open. Please go ahead. Hey, good morning, everyone. Hi, Mike. Hey, Mike. A couple questions. Hey there. A couple questions, just making sure I understand the guide here. First, on the motion guidance, you know, Luca, I think you said flattish, slightly positive overall, kinda global stars type number. You guys typically have a level of outperformance that kinda puts you above what that mid-single digit guide would look like. Seems like the rail commentary is at least directionally favorable. What kinda sinks that all to get to the mid-single digit guidance? Is it some negative price downs, kinda normal contract stuff? It doesn't seem like that's the case, but maybe just help sync everything together for me. When you look at Motion Technologies, we think that the market will be, as you said, zero-two points of growth worldwide. We tend to outperform the market on the OE side. Absolutely correct. One thing that you need to take into consideration, if you look at the outperformance this year, has been 400 basis points. As we continue to win market share and get higher market share, the outperformance, you know, cannot be in the 900 points like it has been in the past. That is something to take into account. Second, I would say, is the aftermarket. In the aftermarket, we see that the Q1 probably will still suffer like we have seen it suffering at the end of 2022, and it will improve in the second half when it took probably the aftermarket. I would say that is everything that needs to be taken into consideration for Motion Technologies. The other aspect that you might wanna think about it is also the potential slowdown in the second half, particularly in Europe. Thank you for that. That's actually a good bridge to the next question. You've been pretty clear that there's some conservatism embedded in the second half of the year because you have concerns over the pace of global economic growth, which makes a ton of sense. You know, if I think about those points of conservatism, it's the European OE that you just mentioned. It's the shorter cycle IP pieces. Are there any other areas we should be thinking about? I mean, is this being reflected in how you're thinking about you know, incremental margins as you move to the back half of the year? Is it being reflected in any of the other areas that you touch? Okay. You're talking from a margin point of view, Mike, I understand. I understood the question is really we keep on working on our war chest of opportunities, right? Pricing is still a big component across the board, and we need to really step it up, particularly in IP and CCT. We have the lean, you know, the lean transformation that we're gonna go through Seneca Falls is a complete re-layout, as well as the lean transformation of the Valencia site in CCT. The other aspect to take into account is we talked in the past, is the make and buy. We really are focused on having the proper make and buy strategy. If you think about it, once again, in Seneca Falls is the closing of the foundry. This is something we announced last year, is a process that takes two years and will be completed by the end of 2023. As well as the insourcing of the contacts on the connector side. All of those are the stuff that will help, you know, on the, on the margin side. Yeah. I would say also in 2023, many regards will be different from 2022. You have seen in 2022 that we had a ramp really in margin and in revenue also in the second half. This is not what we think is gonna happen in 2023. We think that the first half of 2023 is gonna be pretty strong and in terms of EPS growth and similar in so many regards to Q3 and Q4. We think that the global economy is gonna significantly decelerate in the second half. Thanks for that. I was actually a really good answer, and I wish I would've probably asked the margin question now, but I was more focusing on just the revenue decel expectations. Any comments that you could maybe layer onto what you just were talking about, Emmanuel, on the revenue side, where those conservatism is embedded anywhere else beyond the European OE and the short cycle IP, or is that about it? Yeah. No. I think that if you think about industrial components, industrial connectors, we think that they're gonna decelerate in the second half. We also think that industrial and chemical pumps are gonna decelerate in the second half. Then energy also. Keep in mind that energy as being really going on all cylinders. I think that I think the second half, we're bound to see something a little, a little weaker. It's a deceleration across the board. Yeah. It's not just auto. Yeah. It's across the board. Yeah. Okay. Well, really appreciate the thoughtful answers. Thank you. Thank you. Thanks, Mike. Thank you. Our next question comes from the line of Joe Ritchie of Goldman Sachs. Your line is now open. Please go ahead. Thanks. Morning, guys. Morning, Joe. Not to, not to pile on to the, to the guidance questions, maybe I'll just tackle this a little bit differently. In taking a look at the range, right? I don't think that there we were surprised at all by the high end of the range, but the low end of the range came in a little lower than expected. Maybe one way to address this is what percentage of your business do you expect to see declines, not just decelerate, but actually decline in the back half of the year? Are you already seeing that in your kind of like leading indicators? Are you seeing it in your business today, or is it more around just an expectation on the broader economy? Okay. Let me say, is definitely an expectation on the broader economy, Joe. That's number one. As you know, we have some short cycle businesses in the portfolio. That means the industrial connectors. It means also the short cycle in IP. When you look at the short cycle in IP, even though we see still good numbers, when you look at also Q4, is still good for service and good for parts. We saw baseline actually declining. Now, service is growing both in, because of price, but also volume. Parts is growing mainly because of pricing Q4. We start seeing some weaknesses there. When you look at the industrial connectors business, these, I would say, even though they are still growing year-over-year, which is good, I would say if you look at the distribution in detail, you see that sequentially, the distribution orders have declined, you know, Q4 over Q3. You start seeing these signs. Did I answer your question, Joe? Yeah. You did. I guess maybe just to kinda contextualize it, we're talking about maybe about a quarter of your business that you're seeing- Yeah. This potential weakness? Let me take you through the breakdown. In IP, we're probably talking about something like 40% of the business. In CCT, it's probably around 30% of the business. This is industrial connectors. This is industrial components. MT is mostly driven by auto. Okay. All right. That's super helpful. My follow-on question is just around the IP margins. clearly a great, you know, story over the last several years. I mean, even adjusting for the one-time items above 20% is pretty incredible. As the business starts to shift more into projects, you know, what's your expectation for the margin trajectory of this business moving forward? The trajectory doesn't change, Joe. The trajectory for this business is up. We have been very rigorous, very disciplined. Everybody understands in IP that the rigor and the discipline in pricing is fundamental for us to deliver the performance that we are delivering. Just to give you another data point, if we look at the backlog that we do have today, also the project's backlog is at a record high of profitability. Everybody understand it. We have the proper processes, and we are executing that way. That's incredible. thanks, guys. Thank you, Joe. Thank you. Our next question comes from the line of Damian Karas of UBS. Your line is now open. Please go ahead. Hi. Good morning, everyone. Morning, Damian. Hi, Damian. Wanted to start off asking you about the Friction. I know you mentioned, you know, with respect to EV, still targeting getting to that 30% global market share by 2026, and, you know, share gains, continued to be expected this year. There have been some headlines out recently, you know, about the global market leader in EVs, you know, losing some market share to some other Chinese manufacturers. In general, it seems that EV space is getting more competitive. Just curious, to hear you guys' thoughts on what it means, you know, for ITT Friction, your market positioning and profitability. Well, that's very true, Damian. I think that the dynamic probably is changing. It's getting more competitive out there. A couple of things. I think that the market will keep on growing very fast, that has not changed. When it comes to competition, we are still able to differentiate ourselves when we're playing against the competition. You're still facing challenges when you are designing the braking system for EVs that are still relatively new. And therefore, the speed to solve those problems is something that really helps you to differentiate. This has really helped us so far, and we believe it's gonna help us for the years to come. We haven't... This is demonstrated by the number of electric vehicle platforms that we have been winning in 2022 with, you know, 78 for the full year. Damian, I would say that the greatness of Friction is that we play with everyone. Whether it is a Chinese electric vehicle OEM or a more traditional OEM also, continuing to develop ICE platforms, we make a point to apply the same focus and to defend our existing business and go after the competition. I would say that even if there's a transition that changes a little bit or slows down, this does not impact our business. Understood. Thank you. As it relates to capital deployment, it doesn't seem like you're planning for much buyback this year. You know, are you maybe expecting some acquisitions to hit or, you know, why is that, you know, if not on the deal front, you know, would it possibly make sense to repurchase more shares or off at some of the higher interest expense? Really appreciate just any thoughts around that. Sure. As you mentioned, Damian, we're really focused on growing this business through M&A and adding complementary businesses to really strengthen ITT. You know, we mentioned several times that we have a very healthy pipeline. We're going after great opportunities. And when we travel around to see all these opportunities, you know, it's really refreshing to see that the team can relate immediately to the business opportunity or even the customers. We feel pretty good about our M&A activity in 2023, and that's why it's gonna take precedence above repurchases. If that doesn't materialize for whatever reason, then we'll continue to be aggressive in repurchases as we've been in 2022. Great. Thanks a lot, guys. Best of luck. Thanks, Damian. Thanks, Damian. Thank you. Our next question goes to Joe Giordano of Cowen. Your line is open. Please go ahead. Hey, guys. Good morning. Morning, Joe. Hey, I just wanted to start on the cost side for expectations into 23. The cost inflation, I know it's less than... you're guiding to less inflation than what you had in 22, but it's incremental inflation off a high number. You know, you, Emmanuel, I think you called out chemicals, you called out energy, I'm sure there's some labor in there. I just want to understand the lags here, because if it's like chemicals and energy and things levered to, you know, oil prices and gas prices, I mean, in the U.S. they're down, and in Europe, gas prices are down like 85% versus the peak, and they're, you know, at late 21 levels now. Just curious as to like how hot those exposures are and what. It seems like there has to be some giveback on the energy side pretty soon. No, no, I, we agree, Joe. I think that for the moment, we're still in a period where we have high costs. One thing that we have to keep in mind is that even if, you know, the markets show a significant decline, whether it is in energy or for the price of steel or those type of things, there's still a lag before we can experience it. I think that what you're seeing here is that Q1 is really very much in line with what we've seen in the second half of 2022, and we're gonna start seeing progressive benefits in Q2 and later in the year. I think that a lot of the incremental inflation that you're seeing is on the chemical, the other raw materials. You know, we buy aramid fiber, for instance, and that has shot up through the roof. Tin is not easing up either. On the commodities that are going to go down, we're going to experience that decline later in the year. If I could just follow up on MT specifically on the margin. Obviously that's, you know, there's a lot of upside to where you used to be there. How much of this is like specific COVID-related costs in China, just for like, you know, having to keep people on site and all the other extra stuff you had to do during shutdowns? If we get back to China just living with the virus like we do here now, how much does that give you back like almost immediately if you can take some of those precautions away? I would say when it comes to... That is a known issue, Joe. As I think that the China has been able to go through all of that performance. Those costs have been fully compensated by productivity and the volume. Not at all. That's the short answer. Okay. Thanks, guys. Thank you, Joe. Thanks, Joe. Thank you. Our next question comes from the line of Vlad Bystricky from Citigroup. Your line is open. Please go ahead. Morning, Vlad. Hi, Vlad. Morning, guys. Thanks for taking my call. Maybe just following up on Joe's question there. I'll ask it in a different way. When I think about the progression of MT profitability going forward, can you talk about, you know, the path back to high teens margins in that business. Sort of given what you know today, how you're thinking about the timeline to get back to those, you know, prior peak-ish ranges? Okay. When we think about MT, the long-term target that we shared in Investor Day have not changed. We think that MT can reach the 20% operating margin long term. That's for sure. When we think in terms of timeline, just because of what has happened, probably they're gonna get there a little bit later than CCT and IP, but that 20% is there, can be achieved. We just have to get a little bit of these things that got through the snake out of the snake. We have a clear visibility to get there. I would say Vlad, that when you think about the path, obviously, maintaining pricing is important for us, while commodities are slowly declining. I think productivity, you know, has been MT has been a war machine in terms of productivity, and obviously we continue to count on that. When you think about the other businesses out of Friction, they've been also quite impacted by commodities inflation. A business like Axtone buys a lot of steel, for instance, Wolverine as well. We're really driving the recovery in those businesses to help us get back to that 20% margin target that, as Luca was saying, may not be around that three-year horizon, but more around the five-year horizon. Vlad, if you think about Axtone, I mean, 25% of Axtone business disappeared overnight, and that was a very good profitable Russia business. Despite all of that, Axtone was profitable in the mid-single digit, but as you see now, they have to recover, and they have to rebuild with a different footprint, with a different market. That's, that's all really helpful color, guys. Appreciate it. maybe just, you know, as a, as a follow-up, wanted to ask you a little about Habonim, actually. you know, that business seems to be performing quite well versus, you know, your expectations. You, you highlighted how the business expanded IP's valves portfolio. So could you talk about sort of your opportunity in valves and how you're thinking about the potential, you know, to continue expanding your presence there, either with Habonim or through incremental capital deployment in that end market? Thanks for your question, Vlad. It's spot on. I think the valve is a, is an area where we are investing and growing organically and inorganically. We have some very differentiated product with IP, with intellectual property, that can be used in pharma and biopharma that help us win with some key accounts, and we keep on investing on that front. On inorganic point of view, we have, you know, opportunities in the pipeline, so we will keep on investing also inorganically. As well as leverage the Habonim acquisition to expand more with the Habonim products in North America. All of that is happening and there are some key markets where Habonim is strong. It might be, you know, cryogenic, pharma, hydrogen, that we're penetrating more and more. That is terms of investment, in terms of opportunity for the future, M&A, et cetera. When it comes to the results, has been a great acquisition, has been a very well-executed integration that was not so focused on the integration as much as the value creation. If you think about the multiples related up to today, is between eight and nine. It was, as I said, a great deal and very well executed by Ilan and by Kasturi, by the entire team. I would add to this that as we had previewed when we acquired Habonim, it is also helping that acquisition is also helping us see things differently in the way we manage our existing Engineered Valves business. We've been driving a lot of the margin up at, in that business, which has participated in the margin expansion story also of IP. I would say on that business, Engineered Valves, which was the legacy business of ITT, we are seeing significant opportunities from a biopharm standpoint. Also in that regard, the Habonim as well as our existing business are expected to grow significantly in 2023. Great. Appreciate all the information, guys. Thanks, Vlad. Thanks, Vlad. Thank you. Our next question comes from the line of Jeff Hammond of KeyBanc Capital Markets. Your line is now open. Please go ahead. Hey, good morning, everyone. Morning, Jeff. Jeff. Hey, morning, Jeff. Good morning. I think you gave some good color on the segment guidance for 1Q, but I'm just wondering, like, if you can rank order kind of confidence and the level of margin expansion for each of the segments or where you see the most and least. When I look at the three different businesses, they're facing a little bit of a different challenges, Jeff. In terms of IP, we have a very good momentum there. We'll take it to the next level. We need to invest. We need to invest there and keep on investing in this business. We need also to keep a very close eye because you have a short cycle biz that is slowing and a long cycle with big projects that is really hot. You really need to wait and decide properly where to invest. Good momentum, keep an eye on what is going out there on the industrial. When you look at Motion Technologies, is working like crazy on the operational efficiency while sticking on the pricing and negotiate as well as you can on the pricing. That there is still quite a lot of work to do, and it's quite difficult because you're dealing in the automotive with a very difficult market scenario. When it comes to CCT has got plenty of opportunities and in terms of because of the aerospace that is growing. At the same time, what we experienced in CCT in Q4 was challenges on the supply chain that were higher than expected. If we look at Q4, probably we were not able to deliver roughly $10 million-$20 million of revenue just because of supply chain issues and labor shortages. CCT is probably where we need to pay more attention because of those kind of issues. Jeff, in terms of margin trajectory, I think that if you think about IP and CCT, as Luca mentioning, they're on a different dynamic than MT, where, if you think about IP, we probably closed from a sustainable margin performance in IP at around 18% in 2022. We're gonna drive roughly 100 basis points higher in 2023 than that. CCT is also gonna drive significant margin expansion, a little less than 100 basis points, compared to the roughly 18% in 2022. Really good momentum there. In MT, we're clawing back our way back into the high teens. I think you're gonna see a nice improvement, but still very much affected, as we mentioned, by material cost inflation that still remains pretty big. Okay. That's, that's very good color. You know, maybe a brief, I guess within MT and maybe broader, just you talked about particular, I think aftermarket weakness in Europe in the front half, you know, production slowdown and auto in the back half in Europe. Maybe just dial in a little more on, you know, how you're thinking about North America and China and just more broadly, you know, what's your expectation for kinda rate of recovery here? You know, we hear a lot of different things on China in general, and just wanna understand what's kinda built into your guidance? Thanks. When we look at the market for 2023, Jeff, we said 0%-2%, the market, a 2% growth, we will outperform that. Europe probably, we estimate it flat, also China and a low single-digit growth for North America. That is our expectation, and we expect our forecast, and we expect to outperform that, as I said. When it comes to the second point in terms of China, I'm from economy point of view, I think China is gonna do fine. If I think about it, the difficulties that we had in Q4 in December, 75% of all our people got COVID. Never heard of. Guess what? They're all back in right now, and they're all working. My view on China is actually a positive one. In terms of outperformance versus all the different regions, we expect that we're gonna have, first, overall global, an outperformance in the market in 2023 that's gonna be a little higher than what we've seen in 2022. All the different markets are gonna be we're gonna outperform all the different markets with the highest outperformance probably in China, and then equal outperformance in both Europe and North America. All right. Appreciate it, guys. Thanks, Jeff. Thanks, Jeff. Thank you. Our last question comes from the line of Brian Blair of Oppenheimer. Your line is now open. Please go ahead. Morning, Brian. Morning, Brian. Thank you. Thanks, good morning. I guess following up on the Friction OE outperformance question, sounds like step up a little bit relative to the 400 basis point run rate, at least globally. That's certainly below the 900 that we've grown accustomed to over the years, but it makes sense given the share gain trajectory that you've been on for so long. If we think about, you know, the next few years, is mid-single digits outgrowth, you know, the right place to kind of hang our hat in modeling Friction OE, and how should we think about that? You know, by region, we've also gotten accustomed to, you know, strong outgrowth in China, you know, really significant, you know, outperformance in North America, and then, you know, more modest just based on your, you know, elevated share in Europe. Spot on, Brian. I think it would be different geography, and what you said is exactly correct. Probably lower in Europe and more in North America and in China. I would say even higher in China because also the performance in terms of award has been outstanding also in 2022, thanks to Tsulai and our sales team over there. One positive tailwind that might be on top of that, on top of what we said is the EV. The reason why I'm saying that is because our win rate in electrified platforms is much higher than our market share. That might feed, you know, a larger outperformance in the years to come. We don't see that yet because, you know, the start of production is gonna be in the next two, three years. With that materializing, that could be a tailwind to a lower outperformance. I appreciate the detail. Following up on Habonim, that seems to be a win all around. Could you offer some finer points on exactly how it's pacing relative to your initial deal model? If there is a figure you can speak to, how much your, you know, new energy project funnel has expanded, you know, since acquiring the asset. Yeah. I think that what we're seeing is that hydrogen, the hydrogen opportunity is definitely there, and we're expanding really very much on that end market. Habonim is gaining share. It's taking share from everyone. I would say from an order standpoint, we're seeing some really nice number clearly outperforming the model from a revenue standpoint also, and from a margin. Really across the board, including cash. We've seen some nice improvement in the fourth quarter in terms of working capital reduction also. What we the next opportunity that we have with Habonim is to really drive the productivity in there. They are producing, let me give you an example. They're still producing in batch there, that's limiting their production capacity. Very constructively, we're gonna implement lean, and so free up a lot of capacity, which gonna allow us to support future growth without making CapEx investment, but just reorganizing the line. We should see, in addition to volume, really the margin taking off. Yeah. Appreciate the color. Thanks again, guys. Thanks. Bye. Thank you. This does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.