I think we're ready to get going with the next participants. Really excited to have ITT here with us today. We have Luca Savi, President and CEO, and Emmanuel Caprais, who's, SVP and CFO. Thank you, gentlemen, for both being here with us today. Thank you, Joe. Luca, I know that you wanted to start with some prepared comments, why don't I turn it over to you? Sure. Maybe just a couple of minutes to highlight a few things on Q1. ITT started, you know, 2023 with a good quarter. Revenue up 10%, orders up. A backlog that today is more than $1.1 billion. Improvement in segment operating margin of 150 basis points. EPS up 21% year-over-year. Also in terms of cash, $62 million better than the prior year. We were able to deploy capital, $30 million of share repurchases in Q1, as well as the acquisition of Micro-Mode in connectors. If there are a couple of things that we would like to highlight in Q1, really, as we share in our earning calls, are really growth and execution. Growth, thinks about it, market share gains in auto and in flow. 41 electrified platforms awards in Q1. China awards already in Q1 at 50% of our yearly targets. Good projects, large projects with U.S. oil companies that are benefiting from the decarbonization. All of these will feed our outperformance in the years to come. When it comes to execution, good execution across the board in terms of improvement in margins in the businesses, thanks to the way that we're running our plan. Overall, you know, good performance, and I think that what we are is we feel confident of our ability to outperform. We keep on watching in terms of the future, if there are signs of things slowing down, and we will act accordingly and speedily if that would be the case. That's great, Luca. Look, for the folks that don't know ITT as well, maybe just talk a little bit about your portfolio and why does it make sense for all of it to be under the same umbrella? Sure. When you look at ITT, we are an engineering and technology company. We make components, I stress components and not systems, for, you know, harsh environments in energy transportation. Talk about automotive, rail, the industrial sector. Now, to be honest, if you start from scratch when you put these businesses together, the answer is no. Having said that, you know, just the way that we are running these businesses, we've been able to generate a lot of value in the last, you know, 4 or 5 years. We still see in the years to come a lot of value that still could be generated. Then in the future, we will see. Yeah, we'll get into each of the businesses, and you guys have done a tremendous job with each of them, so governance has definitely played into that as well. China, you know, we spent some time recently, you'd mentioned you just did a trip to China. Market seems to be evolving very quickly. What did you learn about EV adoption in China and your position in that market? Sure. I was very lucky to go back to China, you know, a few weeks back. Listen, we all read, you know, the Chinese OEMs are winning market share, which is true. To be honest with you, until you get there, you don't get a sense of really what's happening. I lived in China for nine years, I left China at the end of 2018, 2019. When I was driving from Pudong Airport to Puxi, I couldn't recognize the vehicles on the highway. I couldn't see the Santana, I couldn't see many Volkswagen, I couldn't see many GM, GLA. You know, they were all new vehicles. Beautiful vehicles, by the way. They were all many Chinese OEMs and many EVs. Until you see that, you're driving there on the highway, you don't realize the extent of the change. Now, when it comes to EV, it's definitely, you know, accelerating in China, and the Chinese OEMs are definitely winning the market. Today, Chinese OEMs are probably more than 50% in terms of all the vehicle produced. This is good for us in terms of thinking about our China operation. 62% of all the parts that we are producing in China are for the Chinese OEMs. We had a good strategy on the EV side and a good strategy for the Chinese OEMs. What Luca means when he says that this is good for us, is because EV allows us to really play on the differentiation. An EV is heavier. It also doesn't emit any noise. Our brake pads are able to really provide the performance, not creating additional noise and being able to handle the bigger mass, the bigger vehicle mass, to really provide that braking experience. That allows us to play in that differentiation and that allows us to really stay away from the competition that is fighting with price, basically. We are and you can see it in the way we're growing in China and outside of China, where we're able to really outperform the market because we are very present in the EV. We outperform even a growing market compared to the IC vehicle. On top of that, the pricing of our EV pads, at least for the front, is higher than the regular pads. Right. That's amazing. Your dollar content per vehicle for EVs. Yes is higher than it is for That's, that is correct. That is correct. That's great. It is margin accretive. It is, I would say it's margin neutral to the, to the, to the IC business. Because it's growing really fast, it is, it is providing a significant boost in terms of absorption. Okay, great. Emmanuel, since you jumped in here, we're gonna stay with you for a second. You just raised the guide after the first quarter, at least the low end of the guidance. Yeah ... EPS guidance for the year, now $4.65-$4.95. Can you talk a little bit about, like, what's implied in the low end and maybe your confidence in being at least at the midpoint or the high end of the guide for the year? I would say, just by the effect of us increasing the midpoint, tells everyone that we have a greater confidence in achieving in achieving at least the higher range of the guidance rather than the lower end. We had a really good quarter. Luca Savi mentioned all the different statistics. We think that similarly, we're gonna have a really good Q2 as well. Obviously, there's still a little bit of doubt for the second half of the year, mostly demand driven. I would say we feel good about the midpoint. In order for the low end to materialize, which hopefully we hope it's not gonna happen, we would have to see some pretty drastic change in terms of the economic outlook. Maybe seeing a significant slowing of the demand in the second half. Some FX headwind also. We are exposed, a lot of our results are coming from Europe. As a result, if the dollar was to strengthen like it was in late last year, that would be a headwind for us. I would and then commodities is also the big question mark, because we've seen a trend of commodities going down, but copper, for instance, has been stable, maybe going up a little bit. The picture on commodities is a little bit uncertain, even if we believe that the trend, at least for this year, is gonna continue to ease up. That's super helpful. You know, you guys have been very forward in your commentary around your short cycle business. It's interesting, in February, you were highlighting three areas of your business that were seeing deteriorating trends. At least one of those areas, the baseline pumps business, got better. Yeah. I think as the quarter progressed. Yeah. maybe touch on those three. Sure either Luca or Emmanuel. Sure. One thing that we saw in Q4 of last year was some signs of slowing down, right, in terms of the short cycle. What we saw in Q1 is that when you look at the connector side, the connectors and the connectors to distribution, we saw that the level of destocking is keep on happening. It's happening not at the speed that we would like it to see. This is the reason why we're saying that destocking in the distribution, when it comes to connectors, probably is gonna last for 2023. Similar conversation is actually on the aftermarket in terms of the pads in Europe. On the positive side, the short cycle in flow has been particularly strong. has been growing, you know, year-over-year and has been growing sequentially from Q4 to Q1. Granted, in the baseline, there is a lot of price. When you look at the spare parts, for example, which grew 25%, you know, 10% of that was price, but 15% of that was actually volume. Mm. That, you know, is a positive sign that we saw in Q1. Positive is really the fact that Q1 was sequentially better than Q4. Yeah. On the flow. On this specifically, I think this short cycle benefit that we're seeing is really due to our differentiation. I think that our ability to have shorter lead times, and not only that, but to be able to deliver on the shorter lead time, so on time delivery being better than the competition, where we have, for instance, we have a parts distribution center in the U.S. that is able to deliver 40% the same of the request the same day, and 80% up to 48 hours. That ability to really deliver parts or deliver pumps when customers need it allows us to gain market share. When you talk about, let's just talk about baseline pumps, what end markets is that serving? Is that mostly your oil and gas customers? Is this industrial customers? Like, where are you seeing, I guess, the inflection point from a positive perspective? I think it's the baseline pumps are mostly industrial customers. W e have a little bit in the oil and gas, but it's really minimal, and it's for shell applications. But mostly industrial customers. A little bit also of chemical also. But general industrial is the majority of it. Yeah. The flip side of that is, you've referenced the connectors business and the industrial connectors business, and I know the order rates, were down, I think. Yeah over 20% this quarter. Yeah. Right. When you have conversations with your distribution partners, like, how much visibility do you actually have as to when they're gonna get through whatever destocking they're going through today? You do have the data because when you look at the top 6 distributors or the larger distributors, you have their booking numbers. You have their point of sales, you have their level of inventory, you've got their orders to you. This allows you really to make your own assumption, your own calculation in terms of looking at the speed that they're reducing the inventory, looking at their books and say, "Okay, now I can project this is gonna happen in the next quarter, the next two, or the next, you know, nine months." Really, this is the reason why we're saying, you know, probably is a 2023 thing, because what we have seen in Q1 is that out of six distributors, one has been able to reduce the inventory, but five of the others, actually they didn't. Mm. Therefore, we expect that to happen in the next 3 quarters. That's helpful. Look, auto is one of the, I guess, many end markets that I, that I look at. I'm curious, with SVB and bank financing concerns, how does that impact the auto business, your auto business going forward? I would say that is probably more in kind of a U.S. thing than European. I would say when you look at the demand is still relatively okay. If you look at also at the inventory level, particularly in the U.S., is still a relatively low level. In Europe, you know, customer are able to get the cars they want to see. In the U.S., it's still a little bit of a struggle. There might be an impact maybe in the years to come. Let's not forget that the market is still a low level in terms of the recovery, if you think about that. Okay. Makes sense. Maybe, focused on MT for a second. This is the one segment where your margins are still well below, you know, prior records, right? Then we know that price cost is a major component of that. Can you maybe just talk about the different businesses within MT, and what's the like where the margin profile is today, and then what's gonna allow you to get back to like-? Right ... high teens, 20% type margins in the business. The jewel in MT is Friction, and this is a business that is in the high teen type of margins. This is a business that we talk about usually because it has the best on-time delivery, 99%, the best quality. It's been really performing outstandingly. I think the despite all these performances, it's still difficult to recover 100% of the cost inflation. In fact, we haven't, even if we think that when we hear our customers, we were able to get more compensation from them than the competition. This is also the business that lives through productivity. We've been able to really get to the position we are in because we are completely automated. We produce world-class quality. All the equipment is standard, whether you are in Mexico, China, or Europe. That productivity, once you implement it in one plant, you can deploy it in all the different plants. So this business, we're very confident, especially as we win new platforms that are gonna enter in production in the next 1-3 years. Those price platforms have been priced at the right level of cost. As a result, we think we just need to get this price cost in Friction out in the next two years. The challenge has been with our Wolverine and our Axtone business, which are smaller. Together, they're around probably $300 million. In here, they've been significantly impacted by the steel inflation. This, in terms of content, the content of steel is just incredibly high. It took us a while to get that coverage from the customer, but we're working through it. Axtone because it has long-term projects, so once the project were priced, it was difficult to go back. Wolverine, and Wolverine is working through also the different steps of the negotiations with the customer. Things are improving. The reality that those businesses were mid-teen margins before the cost inflation, and today they're low single digit, mid single digit. We do expect in Q2, the margin of those businesses to double. So go from 4% maybe to 8%. We're on our way back to the double digits. This has been a significant impact on Motion Technologies. Is that mostly a function of deflation in steel prices? There's several components to that. The commodity, and so the steel prices going down is gonna help a lot. We have productivity, we've made some significant investments in terms of shrinking the footprint, in terms of also looking at the product portfolio and focusing on the products that are generating the best margin, the best return, the best use of our assets also. This is gonna play out during the year. If you look at Motion Tech, in Q1, we were a little below 15%. We expect to grow sequentially and year-over-year in Q2, and then continue to grow year-over-year in Q3 and Q4. Great. Sequential, I think. Great. maybe turning it over to the growth in MT. The last decade has been just amazing, right? 700 to 1,000 basis points of outgrowth. It is ... over that timeframe. I know that kind of like the new bar is closer to, you know, law of large numbers, 4-500. 400-500. Yeah, 400-500 basis points. I will sign it today here. You're good? You're good? You're gonna sign up? Yes, yes. For how many years? Years to come. Years to come. Okay. For those that aren't as familiar with the journey, maybe just talk through what's allowed you to grow as much above market- Sure ... as you have, and what's gonna allow you to continue to grow at 4-500 basis points above market going forward? Sure. The model is really, as Emmanuel was saying, we're able to differentiate there in the market. Think about it, how. First of all is our cost base. If you look at our competition to make the same number of brake pads, they have 15 plants in the world. We have 5. Think about the deficiency you have if you're you have to run only 5 plants versus 15. Cost advantage, that is 1 component. Performance in terms of quality. Why? All our processes are the same around the world. Every single plant has got the same process and highly automated, which means that the level of quality you're delivering is less than 1 PPM. Less than 1 part per million that we deliver to the customer has got a defect. It's not a functional defect. It might be that the white bar in the barcode is not perfectly white, okay? All of this enables us to differentiate from the competition, and has allowed us to gain share. We expanded, we started up a plant in China in, you know, We opened it in 2014, and we went from low single-digit market share to almost 28% market share in 2022. In North America, we opened a plant in Silao, in the state of Guanajuato in 2018, and we went from low single digit to almost 25% market share in 2022. Now, the way that it works in the automotive is that we win an award today for a platform that will have the SOP, the start of production, 2 or 3 years from now. When we're saying we see this outperformance staying for 400, 500 basis points in the years to come, is because we know the awards that we won. We know when they're starting, and we know the ramp up of production, which means that, you know, we can easily simulate what our market share will be in the next 4 or 5 years. That makes a lot of sense. I'll turn it over to the audience in a minute. I do wanna touch on the... At the quarter, you mentioned that you signed an agreement, you know, 10-year agreement with Continental for, you know, the aftermarket business in Europe. I think there was some confusion on the call regarding what that agreement potentially meant for trying to grow your aftermarket, either in the US or in China. Yeah. maybe just. Clarify that? Clarify that for us. Sure. Thank you. The agreement that we have with Continental is a 10 years agreement. It would be roughly $1 billion for the 10 years, and is for Europe, only Europe. We specify that because the agreement that we had before was covering also China, and we want China to be out of the way because we want the flexibility in China. We do not know how the China aftermarket will play, if it's gonna be more the European style, more the North American way, and therefore, we wanna try different things. This is the reason why we wanted to have flexibility in China to play in the way that we see fit. When it comes to agreement with Continental, is the team has been able to negotiate a better agreement than we've done in the past. For example, instead of a price efficiency year-over-year, we have volume incentives. This means that Continental is incentivized to sell more, and on top of that, you're not touching the price of the pad. Overall, a very good achievement that Vincenzo and the team have achieved. Yeah. Look, it's been a great relationship for you. Indeed ...in Europe. I'm curious, at what point do you make the investment, and what kind of investment would you have to make to really grow out your distribution, let's say, in China? First of all, you think about every year, we strategically discuss why we do not enter North America or what do we have to do to enter North America now, because we do not play the aftermarket in North America. This is something that strategically we discuss every year. When it comes to China, think about it, first of all, it's good that we are winning market share, today it's 28%, because when you have the market share, means that you have your SKU, you have the tools, the dies to make those parts. If your market share is very low, you will have a huge investment to make. When we are in the 30%-35% market share, then you have a very good base to start with, and the investment that you will have to make is not that huge. I would say that will be, I would say, a gate item. Interesting. Okay, great. I'll turn it over to any questions from the audience, or I'm happy to keep going. All right. Got a sad bunch. No, go. We do have a question here. Oh, we do have one. we do have one. Okay, right here up front. Yeah. I mean, it's been an exceptional period for the profitability for the automakers globally, for all sorts of different reasons. Maybe your thoughts on, longer term, what that means for pricing for you, in the EV space and in traditional areas as well? Sure. When you look at the... There's probably gonna be pressure from, you're talking about on the OEM side. Having said that, I'm not so sure that the pressure that you will see is gonna be substantially different than the pressure that you've seen before in the IC. There was a level of high competitiveness in also the internal combustion engine and that, you know, we experienced, we were able to win in that game. When it comes to the EV, I would expect that the competitive pressure will increase, absolutely. Not so sure it's gonna be substantially different than what it was in the past. When it comes to the EV, for the reason that Emmanuel Caprais was talking before, we're still able to differentiate from the competition. Why? Because some of the challenges from a braking perspective you have on the EV are difficult to solve, are different what you had in the past. Noise. If you drive an EV, you want your braking noise to be 0. If your disc is gonna be more rusted because you're not using the brake all the time, which means that, you know, you need to find a way with the material side to clean it. Because of those specific problem, hard problem to solve, you might have a chance to solve them faster, and with that, be able to differentiate yourself from the competition and get maybe some premium. Thank you. Any other questions from the audience? All right. Let's turn to IP. It's been- Thank you. What a great story, this has been, right? Yeah. From a margin perspective over time. Yeah. I mean, it's, it's really incredible. You've posted 21% margins each of the last 3 quarters. Just talk through the evolution of this business and why, you know, you've been able to achieve what many of your competitors have not come close to achieving from a margin perspective on this business. Is 20+% now the kind of the new standard for this business going forward? Sure. There is no singular bullet, but many, many things that have been done. I've been lucky to work with Emmanuel Caprais and the team in this journey. It has been a transformation of the business starting in, you know, discipline. Discipline in the way that you price, discipline in the way that you're pricing for the projects, discipline in the way they're executing the project. We went from a situation in 2016 where our project business, you're talking about projects that go from $2 million to $30 million - $40 million project the last two years, they were losing money or break-even. Today, it's a very profitable business. Granted, not as profitable as short cycle, but it's a double-digit profitability. That is one part. Is the lean transformation on the shop floor. I mean, you are gonna get down in 2017, you will go down on the shop floor where we're making pumps. You will not be able to understand how they make the pumps. Now, you know, I don't necessarily think that we are Albert Einstein, but we're not that stupid either. I think that today you go down on the shop floor and you see these pumps made in one single piece flow, the standard pump, the ANSI pumps. You will be able to see exactly if there is a problem or not. If the problem is on the side, you go tackle and then back in. The lean transformation. VAVE, value analysis, value engineering, that is something that, you know, Emmanuel Capra sponsor from the very beginning to transform many of the portfolio pumps that we have to make them more competitive, to reduce the metals, but improve the hydraulic performance of the pumps. The footprint, the closing of a plant in Brazil or a plant in UK, you know, flawless execution of those closures. The closing of the foundry that we have in upstate New York. That closing, we announced it a couple of years ago, is gonna be done by March 2024. You might argue, "God, why it takes so long?" Well, if you don't want to mess around with your customer, you need to develop your supply chain properly. It takes time. All of these has really helped in generating, you know, the level of performance that we're able to post. You know, we are really proud of that, and there is no really finish line here. Yeah. Go ahead, Emmanuel. Because we've been able to deliver to improve the customer experience that through quality, through delivery, that has allowed us to really drive up price also, which has been a big part of the story, especially in 2022, probably in the second half of 2022 where we started seeing major headway in terms of increasing prices on our standard pumps, on our spare parts. We saw that realization really starting at the end of second quarter, which now is carrying over into 2024. We are going after now different type of pricing. While in 2022, we were more focused on getting offsets for the cost inflation in 2023 now we're going after value-based pricing. We're identifying what are the areas where we're still not capturing the entire value. We have an entire team that's dedicated to this, and we're making some great progress. What's somewhat amazing to me is that your project business has been really growing as well, and the order growth... Yeah. Yeah. -is up tremendously, and you're still seeing this type of expansion. Typically, you know, historically, the project business, not necessarily just for ITT, but across the industry, was more kind of like a break-even. Mm-hmm. Yeah. -type business. It sounds to me that even on the go forward with the mix changing in your business. Sure. -that it seems like you're expected to get leverage. Absolutely. I mean, the project is a headwind in terms of profitability, but absolutely is, you know, it's something which we completely strongly disagree with, and today the entire ITT disagree with. The project business is profitable, should be profitable, and today the backlog that we have in projects is the highest profitability that we've ever seen. That's great. LNG is a big opportunity that folks have been, you know. Yeah. that folks are excited about and excited about for good reason. Are you starting to see some of those awards materialize for you at this point? Absolutely. We had a great relationship with some of the most strategic and best EPC in the world. We have seen some very nice order in LNG. Some of those orders were actually orders that we won as engineering only during COVID. During COVID, when all these investments was frozen, we adopt the strategy to go to the customer. We win engineering on the orders. Instead of committing about $20 million of order, is a few $100,000 of doing all engineering. It's not just LNG. It's all the decarbonization project that we're gonna have. We share the capital that we won for an American oil company. One is in Africa to stop flaring, and one is in Australia to really on carbon capture. What we have here is the differentiation from a product point of view. Our Bornemann pumps, Twin Screw Pumps, are able to do multiphase pumping. You're able to pump water and liquid and gas together. The Australian job that we won, what you have is the production of gas offshore together with CO2. They go to a separator, where they separated the CO2 from the gas, and then our pumps take the CO2, mix it with water, and push it down two kilometers underground. We're working with this oil company to really standardize the solution with our technology. There are only two or three companies in the world that we have the technology would be able to do that in this way. That's, that all sounds great. Look, I just gave you a lot of props for how your margins stack in IP relative to peers. The connectors business in CCT has really transformed as well, but your margins are still below some of the peers out there. Not connectors. At the CCT level. Oh, at the CCT level. Okay, good. Talk about the. Yeah the margin runway on the CCT business. Sure. Yeah. I think when the CCT is composed of connectors and components. The connector business is doing great. In fact, you know, it's in line with the margins of GD and LMT, which are much bigger than us. Here, the great thing is that not only we saw a significant improvement compared to where we were in 2015, 2016, but also there's still more runway to go after. We see a lot of manual operations that we have to automate, across the board in all our plants. We are filling right now product portfolio gaps with either new applications or trying to catch up to the competition because in the past we haven't invested as much as we should have. Also here there's a pricing component where we're able to really identify being sole sourced on a lot of defense platforms. We're able to identify where we have opportunities. Connectors is doing great. We are facing right now a destocking situation with our distributor customers, mostly for the industrial markets. We think it's gonna play out until probably the end of the year, and we'll be fine. On the controls business, this is a business that is mostly aerospace and defense, and this is a business that has that is facing the same difficulties than a lot of our peers, which is a lot of supply chain issues. An accelerating demand from the part of our aerospace customers. We are doing everything that we can to make sure that we stabilize this business from a delivery standpoint. We continue to work on and invest on improving the fundamentals, safety, quality, delivery, cost. We think there's a lot of good runway for this business as well. That was great clarification. I appreciate that. Yeah. I didn't fully appreciate the connectors was all the way there. Yeah. Is the just wanna understand the supply chain commentary. Is the controls business, the aerospace controls business, does that margin, does that have the same entitlement as the connectors business? I think yes. Yeah. I think, I think over the medium term, absolutely. Yeah. Yeah. Yeah. What we're seeing in terms of the supply chain difficulties is that our customer base is struggling like a lot of the customers in aerospace. Also, ourselves, we're struggling to get labor for machining and labor for assembly also. That's penalizing us in our ability to ship the expected demand. We're gonna work. This year, we're working to solve this issue. Last question from me. Balance sheet has really never been in a better position than it is today. You've earned the right, I think, across your portfolio to invest if you want to, and organically, what are you looking at today? What's the pipeline look like? We made a very good acquisition in 2022 of Habonim Valves. You know, we purchased at 12x multiple, and looking at the actual is less than 8. That's very good. We made an acquisition of Micro-Mode in the connector, defense and space. We are looking at the funnel opportunity, which is larger today than it's ever been. Thanks also to the business development M&A department we put in place. We are really looking at flow, pumps, valves, and the connector side of the business. I think that we're working, and we hope to add more and more Habonim and Micro-Mode in the family. Great. Luca, Emmanuel, thanks so much for spending time with us today. Thank you. Thank you. Great to see you. Thanks.