ITT Inc. Price & Performance (ITT)

The reconciliation of such measures to 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. With that, it's now my pleasure to turn the call over to Luca, who will begin on Slide Thank you, Mark, and good morning. First and foremost, I would like to sincerely thank our IT ITT for their commitment day in and day out to deliver for our customers.

No matter the challenge. 2024 was a pivotal year for ITT ITT. We grew outperforming most of our end markets. We executed delivering significant margin expansion and we are transforming our portfolio the divestiture of Walgreens and the acquisitions of Zbanioy and Qesaria. Let me get into 2024 financial highlights. We grew orders 10% or 5% organic, resulting in an ending backlog of $1,600,000,000 up 34% year over year. We grew revenue 11% or 7% organic with a strong performance in all businesses including also our Kisaria and Zvaniahoy acquisitions. We expanded margin by 80 basis points to almost 18%, We generated nearly $440,000,000 of free cash flow and delivered 12% EPS growth after over 17% growth in 2023. We did all of these while absorbing the loss of earnings from the divestiture of Walgreen and higher interest expense stemming from the acquisitions of Vanioy, and Quesaria. As you can see, a truly remarkable year. The fourth quarter was equally strong. 12% revenue growth or 6% organic driven by pump projects and short cycle and connectors. Operating margin reached 17.5% with MT surpassing 19% and IP eclipsing 21 EPS of $1.5 grew 12% and we finished with a strong cash performance to CapaF 2024.

On 2024, let me share some highlights. On revenue, All our businesses delivered outstanding growth. Connect and Control Technologies grew 9% organic, driven by continued growth in defense, [indiscernible] and also aerospace. IP grew 8% organic and high teens growth in pump projects. Moshe Technologies grew 5% organic with friction outperforming global automotive production by seven thirty basis points. [indiscernible] 20%. On profitability, strong volumes, coupled with favorable price cost actions drove 16% operating income growth which is all the more impressive considering that we overcame the loss of approximately $50,000,000 of income from the Wolverine divestiture. MT margin finished at almost 19% and AP nearly reached 21%. With this performance, two years ahead of plan.

As you can see, our above market organic growth and margin expansion is creating shareholder value. And it is here to stay. And now we're compounding this with impactful M and A. In 2024, we deployed $865,000,000 to the acquisition of Cryogenic pump manufacturers Vanhooy and the sales interconnect specialist Qesaria. And our strategy is starting to bear fruit. [indiscernible] grew 26% for the full year. And Quesaria already contributing meaningfully after just three months. These acquisitions were possible thanks to nearly $440,000,000 of free cash flow. And importantly, our M and A pipeline remains [indiscernible] On top of this, we returned more than $200,000,000 to shareholders. I'm humbled by our team's efforts to drive these results. As friction outperformed in every region and in niche powertrain. As an example, in the Internal Combustion Engine segment, we grew 1% in a market that was down 10 Our connector team in Nogales operated for more than five years with a perfect safety record. And achieved record growth record profitability in 2024 ITT. And in Saudi, Halod and team continue to drive near perfect on time performance with unmatched service to our customers. To sum it all up, we grew We executed.

And we transformed shifting our portfolio. With this performance in mind, let's turn to Slide four. To discuss the differentiation that we'll continue to feed ITT's results. Differentiation in Saudi Arabia has driven recurring wins in the region. For example, IP secured more than $30,000,000 of orders on their Rias project, part of a $12,000,000,000 investment to be the natural gas processing facility in Jubail ITT. And in 2025, we secured additional This win ITT on earlier awards in the region, such as the Amurite project we previously talked about, Because of all of these growth, we continue investing in the region and expanding our manufacturing capabilities. Last November, I was very fortunate to be there [indiscernible] and listen to Harlet and be energized by the local team sharing their vision for the new site expansion. On Friction, the outperformance continues. Our global market share surpassed 30% in 2024 for the very first time. Friction is again poised to outperform thanks to another near record number of platform awards secured in 2024, on internal combustion engines, [indiscernible] and electric vehicles alike. Conner rail to considerable market share with over 35% orders growth and high teens revenue growth. An incredible outperformance for the second straight year.

We expect this growth to continue with our recent validation on a new high speed train platform capable of traveling four fifty kilometers per hour. On defense, the rapid prototyping capabilities of our connectors business provides faster lead times to develop customized product for our defense This drove awards on the Columbia Class submarine the joint strike fighter, a radar surveillance system and qualification on the ITT Warrior program. Moving to differentiation through innovation. Let's discuss the embedded motor drive. Truly a game changer. Today, dollars 300,000,000,000 are spent annually on moving industrial fluid [indiscernible] And 80% of the pumps and motors operate inefficiently. Wasting energy. The EMD solved this problem and is the only industrial smart motor of this kind today. With this technology, our customer will be able to swap their existing motor with ITT's EMD. And immediately see a cost reduction as the rotating equipment will consume less energy and produce less CO2. The EMD significantly expands IP's growth profile and addressable market. Dan and I can't wait to show it to you at our Capital Markets Day in May after we ITT it commercially in Q2. Now let me turn the call over to Emmanuel to review our Q4 results close the book on 2024 and discuss our outlook for 2025.

Thank you, Luca, and good morning. We ended 2024 with a strong performance across the board. ITT orders revenue, [indiscernible] EPS and cash. Our teams delivered 6% organic revenue growth from higher volumes and price realization. IP grew 22% in pump projects and 7% in short cycle. While Vanooy, added 16 points to IP's total growth. Just to note for the year, IP projects grew 19% organically, CCT grew 9% thanks to strong defense and industrial connector delivery. Both of which were evolved 40% this quarter. While Cassaria contributed over 29 points to total growth fully offsetting the Boeing work stoppage impact. In MT, Kony grew 12% on share gains and backlog conversion, While Friction OE outperformed global automotive production, by four ten basis points. On profitability, operating income grew 16% more than double the organic sales growth rate primarily driven by higher price productivity and volume, despite the loss of earnings, from the Wolverine divestiture. NT margin exceeded 19% with two twenty basis points of margin expansion and a 120 basis points improvement sequentially to close out 2024. Notably, despite roughly $40,000,000 less in revenue due to the Wolverine divestiture, MT was able to increase operating income Once again, [indiscernible] Moving to IP.

The team drove 60 basis points of expansion to overcome two eighty basis points of dilution from the Zana Hoye acquisition. Legacy IP expanded margin three forty basis points driven by higher volume leverage. More favorable price costs and continued sourcing and supply chain productivity ITT. Finally, in CCT, excluding temporary M and A dilution, CCT margin would be up [indiscernible] basis points driven by higher pricing actions and volume. The price renegotiations in aerospace continue With the volume growth and price realization this quarter, we drove double digits earnings growth to $1.5 of EPS overcoming roughly $0.07 of earnings loss from the Wolverine divestiture and $0.08 from higher interest expense related to M and A. Lastly, on free cash flow, our performance thanks to the efforts of our team to reduce inventory and drive stronger collections. As well as contributions from our acquisitions. This resulted in a 42% increase year over year and over 20% free cash flow for the quarter. Let's turn to the full year EPS bridge on Slide six. Here you can see the main drivers of our performance which are similar to Q4. Operational performance from volume growth price cost and productivity compounded by accretion from our acquisitions, allowed us to overcome headwinds from temporary amortization the Wolverine divestiture, and higher interest expense.

Keep in mind that most of these impacts were not considered in our initial guidance for 2024. Also continued to fund strategic investments for future growth including our geopolymer brake pad formulation, our high performance brake pad business and the embedded motor drive. We delivered a strong performance with 12% EPS growth that previews the value creation potential of ITT's portfolio. With this in our rearview mirror, let's now turn to Page eight to discuss 2025. We entered 2025 with a robust backlog that is up 34% in total. Fueled by our acquisitions and growth in legacy pumps and connectors. The large pump awards from 2023 and 2024 should start shipping in a meaningful fashion in 2025. While friction rail and connectors should continue to outperform. We expect this will drive revenue to over 7 to over $3,700,000,000 with organic revenue growth of 3% to 5%. And the strongest growth expected in IP and CCT. We We expect that our ability to continually reduce costs ITT our growing revenue will drive further margin expansion of 90 basis points to 18.6% at the midpoint. Contributions from our acquisitions are expected to increase considerably in 2025, to roughly $0.2 This will be driven by ZenoHoy's growth on new fuel vessels due to a 26% order increase in 2024. [indiscernible] On Qesaria, the team continues to execute our plans with several large new orders expected in the first half of twenty twenty five that will support our growth outlook.

This results in EPS growth of 8% at the midpoint even while absorbing an incremental $0.09 from foreign currency given the stronger U. S. Dollar. Furthermore, if you exclude the roughly $0.17 of temporary intangible which will end by end of the year EPS growth will be over 10%. Finally, on cash, we expect to generate free cash flow of roughly $475,000,000 at the midpoint amounting to a 12% to 13% free cash flow margin for the year. Let's turn to Slide nine ITT discuss our outlook in each business. Beginning with Connect and Control Technologies. Increased global stand on defense modernization platforms coupled with a gradual Boeing ramp beginning in Q2 ITT drive strong demand in CCT. We expect QESARIA to add roughly 15 points of growth is expected to convert its record backlog of more than $900,000,000 Powered by large project awards, which should generate mid single digit organic growth. In Motion Technologies, we expect friction to outperform global automotive production. Driven by share gains in all regions, while growth in the aftermarket ITT expected to be in the low single digit range. Longer term, Friction's high performance business will be another catalyst for profitable growth. On Rail, we expect mid ITT high single digit growth on strength of share gains in Europe, [indiscernible] continued public investment mass transit in North America.

Let's turn to Slide 10 to review our EPS bridge for 2025. Once again, most of our earnings increase is expected to come from organic growth and margin expansion in our core business. This will drive 8% EPS growth for the year at the midpoint. Importantly, we're absorbing $0.3 of the loss of earnings from the Wolverine divestiture a higher effective tax rate and unfavorable effects. I'd like to briefly discuss the phasing of our 2025 outlook. EPS is expected to be flat to slightly up Q1, We anticipate a revenue decline in the low single digit range driven mostly by ITT due to the reduction in global vehicle production. While IP and CCT should be roughly flat. Operating margin should expand 90 basis points to just shy of 18%. Excluding the loss of earnings from the Wolverine divestiture, and higher interest EPS would be up approximately 6% in Q1 more in line with our full year outlook. And we expect growth to ramp throughout the rest of 2025. Before we wrap up, I wanted to share our thinking on tariffs. Our 2025 guidance does not include any anticipated impacts from tariffs. We are working diligently with our teams and supply chain organization to evaluate different scenarios and are developing granular action plans.

Are looking to mitigate any impact to commercial and operational action. Can you turn the call back to Luca to wrap up? Thanks, Emmanuel. Before moving to Q and A, let me summarize the key points from an outstanding year. We accomplished a lot in 2024. We grew We executed. We transformed, We grew orders and revenue both by double digits. We executed expanding our margin and surpassing our long term target two years ahead of plan. We transformed with two strategic acquisitions and divestiture ITT our portfolio to higher growth and higher margin businesses. Moving forward, the formula remains the same for ITT ITT. Our value creation through organic growth and margin expansion is here to stay and now we're compounding to add even greater value through M and A. Finally, it is my pleasure to invite you to our next Capital Markets Day taking place on May 15 in New York City. A lot has happened since our last event in 2022. And importantly there is much more to come. You will see our differentiation through execution, innovation, and now M and A brought to life. In addition, you will meet some of the ITTFs who differentiate us from the competition.

And who drive our results day in and day out. I look forward to speaking with you throughout the year and seeing many of you in May or before Thank you for your support of ITT It has been my pleasure Gigi, please open the line for Q and A. The floor is now open for questions. Thank you. Our first question comes the line of Joe Ritchie from Goldman Sachs. Hey, guys. Good morning. Hi Joe. Good morning Joe. [indiscernible] [indiscernible] I guess maybe where I'll start is just just the guidance for 2025. I know you guys historically have tended to guide fairly conservatively.

But maybe Emmanuel, if you can just kind of step me through, how are we thinking about cadence for this year from an earnings standpoint. Are there any things that we need to be aware of, particularly like in the first quarter just that could potentially impact Q1 and maybe gets better as the year progresses. Yes. So as I mentioned, Joe, the cadence is a little tilted towards the second half of the year. So [indiscernible] soft Q1 And so let's think about a little bit what the puts and takes here. So we expect you want to be from an EPS standpoint to be roughly flat to 2024. We have to keep in mind that the main impact here is the Wolverine divestiture. Which results in less revenue and income and that's about $0.06 of EPS. We also expect organic revenue declines of mainly 1% to 2% driven by ITT, which is expected to outperform original equipment production but overall, we'll still decline due to lower auto demand. IP and CCT sales should be flat to slightly up. And it's overall Q1 will be ITT terms of sales would be the lowest quarter by quite a bit. However, all businesses are expected to excess CTT will be up 150 basis points if it wasn't for the QESARIA margin dilution, which is around 400 basis We will be impacted by higher interest expense and this is due to the Quesaria acquisition that happened last September in 2024 ITT.

And then in Q1, Zenohore and Casaria do not contribute meaningfully to EPS. This is due to the temporary intangible amortization. And that will disappear in Q2 for Zenhoi and ITT for Casaria. So overall, we expect Q1 to start a little weak, but a nice recovery than in Q2 and Q3 and Q4, with continued margin expansion and also organic revenue growth.

Super helpful and detailed. Thank you, Emmanuel. And then maybe the longer term [indiscernible] And I'm sure we'll get a lot more at the Investor Day in May. Look, you guys have done a great job on the margin expansion piece getting to your targets. A couple of years in advance. The commentary around the price renegotiations on CCT is interesting. I'd be curious if you can maybe talk a little bit more about what's going on there, and ultimately the opportunity potentially within that segment. Sure. Hi, Joe. This is Luca.

So I think that price is definitely a good lever in CCT. It has been a good lever in 2024. And we're going to see more of that also in 2025. [indiscernible] we talked about our some big contracts have been renegotiating right now. And we are still in that process and the signs are ITT. I would say the price cost equation overall has been positive for the entire ITT in 2024. And it will be the same as well in 2025.

Okay, great. Thank you, guys. [indiscernible] Thank you. Our next question comes from the line of Mike Halloran from Baird. Hey, good morning, everyone.

Hi, Michael. Could you just talk about what you're seeing from an order pattern on the IP side of things, both from the short cycle side as well as project activity. Obviously, strong backlog coming into the year. How is that backlog feeling? I know you commented on robust short cycle there. What are you seeing kind of sequential dynamics and anything worth noting in some of the end markets?

Thanks, Mike. Orders were good in Q4. So let's leave the acquisition on the side for second. If we look on an organic perspective, the orders grew 12% in the quarter. Projects were up 25% and short cycle, Mike, was up 2% was price, 6% was volume.

And particularly good in Q4 was service parts and valves. Now ITT we look at Q4, our weekly run rate of orders was this second highest on record. Q4 was actually the best ever. So Q4 has been really good on the show cycle. On a full year basis, our organic orders were up 5% projects were 13% up. Year over year and these on a tough compare last year was a very good year and up 20%. Show cycle, like you asked, was 2% for the full year, one price and one volume. If you add to that and that will be my last comment on Zvenoy, Zvonne Roy had a book to bill of 1.3 for the full year. And their orders grew 26%. So a very good performance from another perspective on Savanna as well.

And I suppose how are you expecting that to roll through this year?

From a trend perspective? I mean is that front log as opportunity ITT still really strong? And what are the customers are saying? And so maybe just kind of roll through the momentum and how you think answering your question, Mike. So in terms of the funnel and the opportunities, it stays rich.

I have to say with the book to bill considerably higher with this performing orders. Our funnel came down a little bit at the January probably down 8% or 10% year over year, but it's still very high. And good opportunities are across different regions. Particularly when it comes to The Middle East. The funnel in Latin America is even higher than last year. And of course, there are customers talking about further Great. Thanks.

Thank you.

One moment for our next question. Our next question comes from the line of Jeff Hammond from KeyBanc Capital Markets Inc.

Hey, good morning guys.

Hi, John. ITT just wanted to understand the temporary intangible amortization So last quarter you called out $0.21 going away, maybe that ITT, but yet a footnote with $0.17 intangible. So just trying to understand the delta because I guess I look at your $5.86 this year plus that $0.21 is kind of your starting point and that would imply just kind of limited earnings growth in the guide? No. So in 2024, we had $0.17 of intangible amortization temporary. And we expect that number to be roughly the same in 2025, around $0.16 So we don't really get any ITT from intangible amortization disappearing We will start getting a benefit for ITT Roy, in Q2, but that is compensated by the Qasaria intangibles that will run the amortization will run until end of Q4.

Okay.

Maybe give us a sense of core these acquisition moving pieces is ITT makes it messy, but core incremental margins, in the fourth quarter for IP CCT, it looks like underlying margins were really good, but again masked by the deal. And then just on '25, I think the midpoint is 90 basis points of margin expansion. Just I don't know ITT order magnitude where you see the segments lining up again, I know there's noise segment by segment. Given the deals.

Yes. So on the incrementals in ITT, we had a really good performance. 64% in Q4 and then 4445% for the full year. That's excluding the impact of acquisitions. And for CCT, for the full year, we were around 20%. And then if we look at 2025, We expect really good incremental ITT continue in ITT. At around 60 between 5060% and also CCT ITT good incremental Motion Technologies, obviously, the incrementals don't really work. Because we are increasing the OI and reducing the revenue. And that's why Motion Technologies is expected to be at 20% in 2025.

Okay.

Appreciate it guys. Thank you, Jack. Thanks, Jack.

Thank you. One moment for our next question. Our next question comes from the line of Scott Davis from Melius Research.

Hey, good morning, guys. Congrats on a great year. Hey, Slide 18, you guys just referenced the M and A muscle and I think you said ITT a couple couple times in the prepared remarks. But what does that really mean functionally? Is that diligence and integration? Is it more that you beefed up the diligence side Kind of walk us through the changes you've made at least and what that really that means to you guys?

Okay. Hi, Scott. I think that when when you see it in the results of 2024, right? And you see in the capital deployment that happened in the last couple in the last five years, where roughly $1,200,000,000 is through M and A. Now when you look at right now what it means, there is a lot of cultivation. So there is a lot of cultivation going on ITT the between the businesses and also the enterprise ITT with our target. So ITT you think about both value and Kisaria, and Habonim the last three acquisitions, those were cultivated and in a couple of those we were able to get to an exclusive deal. Now I'm not saying that this is going to happen always, ITT today, we are busy in a cultivating and developing a relationship as well as some due diligence in some of the deals. Obviously, you hear only the one that we are executing. But in the last few months also we walked away from some opportunities where we had the due diligence.

Thank you. One moment for our next question. Our next question comes from the line of Damian Karus from UBS.

Hi, Damian.

So I wanted to ask you about your guidance for Motion Technologies, kind of up low single digits for the segment.

Could you maybe spell out a little bit more what you're baking in in terms of global auto production [indiscernible] how much you're expecting friction to outperform as well as Kony and the rails business? Sure. So when you look at 2020, obviously auto production had a tough year in 2024.

North America and Europe were down China showed the resilience and went up. [indiscernible] it comes to end the picture deteriorated in the second half compared to the first half, Q4 probably being the worst. So when it comes to 2025, on the positive side ITT we see that the inventories are down. Worldwide as well as in Europe and in China. But we project the production to come down to roughly vehicles produced So it's a little bit of a decline worldwide. And we have China flat our assumption. And Europe and North America down with Europe probably being worse. When it comes to the we continue to think that we will over outperform the markets. And we're thinking roughly 400 basis points of outperform market. And this is for auto. When it comes to rail, we have a good backlog. And we had two years of outperformance in rail with Connie and Akesson. So think that we will continue to outperform that as well.

And if I could slip one point on profitability. So as I mentioned, we 20% in 2025. And a lot of it is going to be driven by productivity. Motion Technologies is an engine for productivity and we expect around 150 to 200 basis points of margin impact coming from productivity.

We will also be we'll have a positive impact on price because we continue to be able to offset The cost inflation that we received in 'twenty two and 'twenty three, by not giving it back entirely in 2024 and in 2025. So we are very attentive ITT this because it's important for us, as we said many times, to overall over several years ITT recover the entire cost inflation that we suffered from starting in 2022.

That's very helpful. And sticking on the Motion Technologies business, could you possibly give us an update on how friction is doing in the high performance market any trends that you're seeing there?

As well as are there any possible strategic changes this year know in the past you've talked about exploring maybe opening up into some of the aftermarkets in Asia ITT. China specifically, or maybe moving a little bit into the light vehicle trucking side of the friction market. We appreciate any [indiscernible] Hi, Damian. So ITT me start effect the address the second question first. So as of today, no. We keep on exploring and we keep on talking strategically, but there are no strong action put in place that will change the strategic direction of motion technology and friction. When it comes to the high performance, the project is progressing well. As a matter of fact, two weeks ago, Daniel and the team sent me a video of all the automation in actions in the plant. And the photo of the first brake pads for our customers being produced. So we are ramping up production. We will be able to launch the program, the platform that we're supposed to launch in Q1 and in Q2 perfectly on time. And then we also took our Board of Directors there in October to monitor, to witness the investment that they authorized and to monitor the progress and the level of automation that we have on the plan.

So very good progress. Now what you will see in 2025 we are ramping up these programs We are winning what we had in the plans. So the business case stands and probably is also a little bit better. You will not necessarily see a lot in 2025 because of course we are launching. You will start seeing more sizable impact in 2026 and 2027. But remember, you will see probably more on the profitability side than on the growth side because of the business that High Performance is.

Appreciate the update. Good luck with everything.

Thank you, Damian.

Thank you. One moment for our next question. Our next question comes from the line of Nathan Jones from Stifel.

I guess I'll start on the tariff side of this because you guys have some fairly material operations in Mexico. So obviously there aren't any tariffs yet, but there may be. So a couple of questions around those. Firstly, I would imagine the Motion Technologies business, the brake pad business in Mexico primarily sells to OEMs in Mexico. So any tariffs on those brake pads would actually be on the OEM rather than on you. Is that the correct way to think about ITT least the brake pad business?

Okay. So Nathan, you are on the right track. [indiscernible] and in terms of you really need to look at case by case. So if you take specifically our Silao plant in Mexico, you really need to be surgically super granular. Let me give you an example. If you take one platform, where we are on the front and the rear, The front axle brake pad that gets delivered to a Tier one in Mexico ITT. So that's that ITT not going to be impacted by the tariffs. Now ITT you look at the rear axle, rear axle brake pad comes to The U. S. To a Tier one plant in The U. S. But then after it has been assembled, For the majority of it goes back to Mexico to the OEM assembly plant where they assemble the vehicle and ITT small portion stays in The U. S. So you really need to go to be surgical go contract by contract, platform by platform, front and rear axle and even within the rear axle, as example, U. S. M split. So you really need to do this work And what I can tell you that our business, our supply chain leader are already working on this front and we have our action plans to be ready to be executed And so ITT that's the case for Motion Technologies.

So well, let me ask it this way. You guys obviously had some issues with with auto OEMs passing through inflation. During COVID and are still recovering that now. But you have commented that some of those contracts have been changed so that inflation passes through on a bit more of a real time basis to the OEMs. Would that be the case if you saw a tariffs or would you need to pursue pricing? And then I guess seeing as it's part of my follow-up question, I'll ask you to talk about the potential impact of tariffs on the CCT business as well.

Thanks.

Sure. So when it comes to the OEMs and Tier 1s, you really need to have a look at the case by case, Nathan. And so we are working both and we have actions here both on the operational side as well as the commercial side and we've already started talking to our customers on that front.

Yes. And then Nathan, if we talk about [indiscernible] So you know that we have a large foot plant there. And this is Nogales is one of our best performing You heard ITT the earlier that this is a plant that has five years without any safety incidents. And achieved the record profitability and growth in Q4. So we'll need to address the eventual tariff impacts both commercially, that means through price and also up So I think that in CCT, one thing that is important to note is that similar to IP, There is a lot of the business that goes through distribution. And so for those customers, we've already started sending letters to inform them of the situation. So that would be pretty straightforward.

The other piece is we have defense contracts also and we'll need to to talk it with our customers. So I would say Also here a very complex subject.

And we are obviously driving a lot of the actions right now in order to be ready when tariffs take effect.

And if I may add, Nathan, in your note, you were out [indiscernible] As a matter of fact, when you look at the ITT and the connector business, and you move across the board, you will see the footprint, the connector footprint of ITT for sure. As you said, but of many of our competitors too. So it's an industry issue that need to be tackled.

Great. That's awesome. Thanks very much for the color.

Thank you. One moment for our next question. Our next question comes from the line of Joe Giordano from TD Cowen.

Hey, how are you?

Just going back to the IP side, you think about your guidance mid single digits, it feels it feels fairly conservative just given the level of orders that you've won. I'm just curious how when you build that out, is it are you kind of layering in potential elongation of project timelines due to like geopolitical type stuff. Just curious how you came up with that. It just feels like maybe there's upside to that number where the orders are?

Yes. So when you think about the sales guidance for ITT, I mean, we are we are in the mid single digits. So you're talking 5% to 6%.

Which is really strong in addition to the 8% we grew in 2024. So I just want to state the record ITT set the record here because I think those are pretty strong numbers. And definitely, the market is not growing by those percentages. I think one thing to keep in mind is that you're right, our orders have been up and our project orders have been up. ITT keep in mind that a project takes around twelve ITT eighteen months before it converts. And those are for like the small to medium sized project. If you talk about some of those d car projects that we got, it's more like twenty four months. So we will start seeing some of those projects convert in 2025, but it will be towards the latter part of the year. And as a result, we won't get as much growth as the level of orders could imply. And if I may build on what Emmanuel said, Joe, is that what you may remember a couple of years ago, the our backlog was made 60% of short cycle and 40% of projects. If you look at today, our backlog is at 57% project and 43% show cycle it's been shifting.

This is one point. Which makes the improvement in terms of the profitability of IP even more outstanding because you know that projects are generally not as profitable as the short cycle.

Okay.

Yes, that's all fair. I'm still probably going to take the overrun your growth there. But I appreciate appreciate the comments. Luca, Just given what's going on politically now, does it ITT like you've done so well some of these international deals. Does it change your Does it change your strategy on acquiring businesses that are based outside The U. S. Just given what's going on with tariffs and and all those all the rhetoric there?

Well, if you look at the last three acquisitions that we have made There have been very successful and they will be successful in the foreseeable future also with the geopolitical situation that we have.

Now think about Bannavoy, Bannoy is a global business. Absolutely, but it plays an incredible role in the energy transition. So we're talking about what the new administration is doing with the LNG that plays in our field. What is happening with LPG, that's plays in our field. So it's very high success. If you look at Quesaria, Quesaria is the connectors we focus particularly on the air and defense, this automatic in mainly in North America, so this is good. The only thing that we say we might have been impacted geopolitically ITT that happening because it's our valves business great global business, and with our factory in Israel. So now the team has been incredibly resilient. The results have been good. Even with extra costs that we put in the business just to protect our people.

Now so our focus on flow on connectors and when it comes to connectors mainly aero and defense I think it's not really changing. And on top, I would say, bear in mind that our strategy is always to be in the region for the region and therefore trying to reduce some of the challenges that we could have. And think about also the divestiture, on the other side, I would say that now we are in a better position than we were in 2018 regarding tariffs because we divested Wolverine, which was the ITT that was most impacted Thanks for the color guys. Thanks, Joe.

Thank you. One moment for our next question. Our next question comes from the line of Brad Hewitt from Wolfe Research.

So maybe sticking with IP, just curious within the mid single digit organic growth outlook there for 2025, How does that break down between projects and short cycle? And then from a margin perspective, it looks like you're implying about 100 basis points of margin expansion ex San Jose. So just curious ITT you could kind of break down drivers about 100 basis points kind of on the legacy IP [indiscernible] So ITT me address the improvement in terms of margin in a ITT you look at we expect our legacy business activity to continue to improve the margin.

Absolutely right. And this is even more outstanding. You're seeing that project will be will play a bigger role. Now some of it will come by with price. We will have a price cost equation that is going to be positive. Some of it will be on the supply chain think there is a lot of work that we can do on the purchasing side to to gain profitability on that front. And then there is also a lot on the productivity side in our operations. I was in Seneca Falls together with with Hamdi and with Bartek and we know that we have productivity in the way that we can bring home in the way that we run our machine. And I would say that on a legacy point of view, And then we also have an improvement with the acquisition.

Yes. So a few things to keep in mind. So you're right, Brad, the margin is expected to in ITT is expected to increase by a little bit more than 100 basis points that is including the Zenroy dilution, but given the fact that Venhoi started mid January, the dilution is pretty low. Right? So we expect strong, as Luca was saying, strong volume, strong price and very positive price cost. Now ITT you think about as Venooy, as it compares to 2024, we're going to continue to see margin expansion and super strong growth. Right? We're expecting as Benoit to grow in the double digits from a revenue standpoint. And EBITDA to also expand and we're going to be closer to the 20% mark, a little bit below the 20% mark. So we are we're doing well. The team is performing well. And we are we're making sure that we at ITT, we can add value to their business model.

Okay. That's helpful. Appreciate that. And then maybe as we think about CCT margins, it sounds like margins for twenty twenty five ex Casaria should be around 20.5% So just trying to think about as the Castaria amortization winds down at year end '25, do you still think the 22% margin target in 2026 could be in play for CCT?

That's correct, Brad. You nailed it. 2025 without Casaria will be above 20%. For the full year. Casaria will be around 300 basis points of dilution impact. And so that sets us well given the fact that we'll be between 2020 and 2021 ITT, probably closer to 2021, that sets us well for us achieve achieving that 2020 that 2022% margin target in 2025 excluding Qasare. Great. Thanks guys. Thanks, Brad.

Thank you. One moment for our next question. Our last question comes from the line of Vlad Bostricchi from Citigroup ITT.

Good morning, Vlad. Vlad.

Good morning, guys. Thanks for taking my call and squeezing me in here. So just following up and digging in on some of the questions around backlog and visibility. I guess just going into the year ITT $1,600,000,000 of backlog, can you give any color on how you're thinking about how much of that converts actually within the year versus the portion that might be longer dated tied to some of those longer projects? [indiscernible] the order performance has been fantastic. You see it in the book to bill of Zana, you see it in the legacy business of IP. You see it with Conner Rail that orders that went up 37%. Now when you look at all these businesses, they tend to be more long term. Think about the ITT rail you win an award, you win a platform and you might win that platform for the next twenty years. We talked about the project backlog in AP. Two years ago, 60% was short cycle and 40 projects. Now it's the reverse. Almost 60% is project that and 40% short cycle. And those projects in AP tend to have an execution of two to three years. In the prepared remarks, when we talk about the Rias project or the Amira project, those projects are project that we lost two years.

And some also of the green project that we won [indiscernible] those are projects that have lasted two, three years and we're going to close in 2020 Now another data point that we say when we look at IP, probably today our sales coverage is above 40%. For 2025.

Thank you.

Okay. Thank Thanks, Luca. That was helpful color. I guess just one last follow-up for me. Just on the CCT mid single digit organic growth, I know you mentioned in the slides Boeing expected ramp beginning in 2Q.

I guess can you talk about how material that Boeing ramp is to your outlook and how you're thinking about or how we should think about any potential risks to that growth if there are operational challenges there linger more than what's baked into your outlook?

Yes. So ITT you look at our Aerospace expected revenue, we're still expecting this to be down in the low single digits in 2025 compared to 2024. So I think that with what we know that has been communicated by the customer, we think that our forecast appropriate. As we mentioned in the past, Boeing represents roughly $10,000,000 in terms of revenue per quarter. So ITT is meaningful, but I think that given what's happening in defense, [indiscernible] and what's happening in medical in our connectors business, we expect that we're still going to be able to deliver with roughly 4% to 5% in terms of growth for CCT in 2025. Great. Thanks, Emmanuel.

And Vlad, just want to make sure you and everyone else saw the mention of the Capital Markets Day on May 15. So you'll be able to see lot of the stuff we talk about sort of come to life and hope you and everyone else can join us then. Looking forward to it.

Thanks, Thank you.

Thank you. This does conclude today's conference. Please disconnect your lines at this time and have a wonderful day.