ITT Inc. 2026 Q2 Earnings Call

You may begin. Thank you, Liz, and good morning.

Joining me in Stamford today are Luca Savi, ITT's Chief Executive Officer and President, and Mike Savinelli, Interim Chief Financial Officer. Today's call will cover ITT's financial results for the three-month period ended July 4, 2026, which we announced this morning. Please refer to slide two of the presentation available on our website, 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 several risks and uncertainties, including those described in our 2025 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the second quarter results we present this morning will be compared to the second quarter of 2025 and include certain non-GAAP financial measures.

The reconciliation of such measures to the most comparable GAAP figures are detailed in our press release and in the appendix of our presentation, both of which are available on our website. Today's earnings call includes year-over-year commentary on the performance of SPX FLOW that reflects financial information before the acquisition date of March 2, 2026. With that, it is now my pleasure to turn the call over to Luca, who will begin on slide three.

Thank you, Carlene, and good morning. Before I begin, I would like to welcome our new Aerospace Contacts colleagues to the ITT family. I look forward to working with you to grow CCT more and faster. We would also like to recognize our ITTers all around the world for an outstanding performance in Q2 once again. A particular thank you to our employees in Flow Technologies for their hard work that has enabled us to make significant progress on the integration of SPX FLOW whilst continuing to deliver strong operational and financial performance. In the second quarter, we accelerated the Q1 momentum. Our ITTers delivered strong performance across the portfolio through flawless execution and the realization of benefits from our acquisitions, building a solid foundation for the remainder of 2026 and beyond. Now to the momentum. We grew orders 53%, 13% organically.

We grew revenue 51%, 13% organically, reflecting a book-to-bill of 1.1 for the quarter. We expanded operating margin 40 basis points. We delivered adjusted EPS of $2.08, up 18% year-over-year, and we generated $176 million of free cash flow year-to-date. A truly record quarter. Let's dive now into the details. On orders, CCT was the highlight of our Q2 performance, growing 59% organically. CCT's growth was fueled by large defense orders in our KSARIA business, which posted significant multi-year bookings across mission-critical platforms such as advanced night vision applications and fighter jet programs. KSARIA grew orders 168%. It didn't end there. We continue to see strength in early Q3 with record order bookings in July. The connectors business also posted record orders, increasing 38%, fueled by growth in North America, Europe, and Asia.

Motion Technologies continued to win platform and conquer new awards in friction, feeding future market share gains. KONI orders were also strong, with 9% growth, thanks mainly to China Rail and defense. Lastly, in Flow Technologies, we delivered 91% orders growth. Organic orders declined 3% year-over-year due to the impact of deferred orders in the Middle East and the strong prior year performance that included very large oil and gas orders. SPX FLOW grew orders 9% in Q2 versus their prior year numbers, 23% growth in mixers across North America and China, 10% growth in Waukesha Cherry-Burrell, and 8% growth in Nutrition and Health, supported by strong systems orders in Europe. On revenue, this quarter's performance was fueled by organic growth across all our segments. CCT grew 17% organically, driven by strength across the portfolio. Commercial aerospace grew 14% from increased volume coupled with pricing benefits.

Defense grew 16%, driven by strong performance in KSARIA, which grew 28% versus the prior year. We also grew industrial connectors 24%, led mainly by Europe and Asia. Motion Technologies revenue increased 6%, 2% organic, led by friction aftermarket, and outperformance of global vehicle production by more than 300 basis points, led by Europe and China, in addition to strength in China Rail. Finally, Flow Technologies' revenue was up 21% organically, or 123% in total. The teams continues to deliver higher pump project sales up 45%, driven by shipments in marine energy transition and oil and gas markets. We also continue to grow our valves business up 19% as we keep on winning in biopharma. Well done, Kasturi and the Lancaster team. SPX FLOW revenue grew 5% in Q2 and 9% year-to-date, in line with our full year guidance of high single-digit growth.

On operating margin, CCT's margin expanded 100 basis points over the prior year and 240 basis points sequentially to 21.7%, primarily from higher volume and pricing. Motion Technologies' margin of 21.1 grew 90 basis points as a result of net productivity. Flow Technologies, excluding SPX FLOW, expanded margin 70 basis points, fueled by market share gains and pricing. Total Flow margin of 21.4% was diluted by the full quarter contribution of SPX FLOW. Nevertheless, cost synergies from the integration, together with other productivity actions in the second half of the year, are expected to expand margin throughout the remainder of 2026. As a result of our outstanding operational execution, we deliver adjusted EPS of $2.08, up 18% versus the prior year. Turning now to capital allocation.

As previously shared, we're prioritizing debt repayment, and in Q2, we paid down $124 million, bringing our leverage ratio to 2.5 times, six months ahead of our original commitment. In July, we also deployed capital to acquire Aerospace Contacts. Though small, this acquisition is highly strategic to enhance our supply chain resilience, secure supply of critical high-precision contacts, and in doing so, support continued growth with our connectors defense and aerospace customers. As you see, our legacy businesses are firing on all cylinders and now are also taking advantage of some market tailwinds. As we shared during our Capital Markets Day, we are compounding and creating more value with our recent acquisitions. Let's turn to slide four to discuss these contributions. During the last few years, we worked hard to cultivate and execute the right acquisitions. We focus on high-quality companies with strong management teams and solid fundamentals.

These acquisitions do more than add scale. They strengthen ITT's portfolio by increasing our exposure to higher growth, higher margin businesses, where we can drive additional value through differentiation in execution and innovation. This is exactly the playbook with Svanehøj. We enter the marine energy transition market, a market that has a lot of growth potential today with LNG and in the future with ammonia. Svanehøj's products and team are leaders in their market, and the results speak for themselves. Since acquisition through the end of 2026, Svanehøj is expected to grow revenue 32% on average each year with a book-to-bill of 1.2. Our projected backlog at the end of 2026 will be up 40% since the acquisition. As a result, the acquisition multiple of 13 is projected to be just six at the end of 2026. Thank you, Søren, Morten, and Johnny, for this excellent performance.

The marine energy transition end market expected to remain strong. Svanehøj is well-positioned for future profitable growth. KSARIA, another bolt-on acquisition, is also a success story. The defense market, which represents roughly 80% of KSARIA, provides a powerful market tailwind. KSARIA's leadership and flawless execution enable us to win larger portions of the prime programs we participate in. By the end of 2026, we're projecting to grow backlog 180% since acquisition and orders 60% on average each year. This positions us incredibly well for the future. KSARIA's acquisition multiple of 13 is expected to be 11 by the end of 2026, and we still have plenty of opportunities to expand margins with pricing actions and productivity initiatives. Thanks, Madi Porta and team, for the quarter results.

On SPX, we are in the early innings, but we are encouraged by how we started, the progress we have made, and the future potential. On the start, we are ahead of our plan, and the team is working hard to accelerate. We're the path to our high single-digit growth commitment with orders in the first half of the year growing 7% and revenue growing 9% year-to-date resulted in a book-to-bill of 1.05. We are progressing well and cost synergies are ahead of plan whilst we're working hard to build a strong foundation for future revenue synergies. On future potential, we have plenty of growth prospects in each business, be it Nutrition and Health, Waukesha Cherry-Burrell, Mixers, or Pumps, and the funnel of opportunities keeps on growing.

I'm encouraged by what I experienced at Ceitab, a small factory and business in Italy that is part of Nutrition and Health. I was fortunate to spend time with the local management, learn from their deep knowledge of the commercial and engineering teams, and observe the 5S of the well-run plant. This is a team that is ready to win and conquer more. Another site with great potential is our Shidu factory in China. We spent time with Bruce Wang and the local team exploring how we can grow faster and more profitably in APAC and China by adopting a more entrepreneurial mindset, an undeterred continuous improvement approach, and continuing to invest in innovation. As you can see, our acquisition playbook is indeed working.