ITT - Earnings call transcript Q4 2021

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Operator

Welcome to ITT's 2021 Fourth Quarter Conference Call. Today is Thursday, February 10, 2021. [Operator Instructions] Today’s call is being recorded and will be available for replay beginning at 12 PM ET. It is now my pleasure to turn the floor over to Mark Macaluso, Vice President of Investor Relations.

You may begin.

Mark Macaluso

good and Charlie, you, morning. Thank to It's Quarter to Fourth you Earnings my and pleasure XXXX XXXX ITT's Call. welcome Outlook Conference

detailed Joining factors relating Today's mix, three call of and future materially always statements as performance These cover ITT's and is Actual Executive not to and nonrecurring any certain this charges, and in on the for Savi, begin to based now any will presentation, in year asbestos-related Caprais, non-GAAP market of on strategic and will other non-operating These here our quarter including, limited a the XX-K both results update Emmanuel to, are are certain tax is XX-month of in to otherwise. results Form cases December certain results Slide the events and were whether on release new expectations. conditions vary XXXX turn our which on statements, full All both quarter and disclaims full based and X. forward-looking are may the business our pleasure XX, items, morning exclude to and otherwise period Officer. asset XXXX present Luca, uncertainties, risks events Chief to comparable fourth President; the COVID-XX the along or website. who Officer and on are remarks may figures are and over on will are year or under statements of Financial ITT It these Chief other of my performance, the fourth forward-looking guarantee that announced GAAP contain financial to report measures. call including available due recent filings. comments press obligation but financial ending this and future management's which most effects Except the priorities, not restructuring, the the ITT's quarter for adjusted information, subject measures we and a reconciliation current me and described and to, items result yesterday to year in adjustments ITT. such expressly Luca XXXX SEC annual morning company acquisition-related items, and results evening. impairment, noted, Today's where items. among full be compared not

Luca Savi

out, their what challenging since been like Thank office all who person Thanks you, know. been At in day shareholders, accomplished Mark. working ITT, ITT-ers, our floor a in And have safely it diligently in our thank together. following have despite support I'm our day challenges humbled ITT. that continued continuously while and the by would for protocols, the our XXXX shop that investment all May to morning, good year. teams we're this I and firm health belief in work at the our in is we all customers in employees our was XXXX and suppliers to XXXX. our And team and our

the XX-months. As facilities our make XX% priority. to zero safety we model, business on for had Building integral our an incidents progress than of XXXX is number strive the ESG more in of prior part our one

XXXX We continue rate severity to this declined our improve rate both output. our injury despite injury and more safety year, to our performance frequency compared

performance safety XX% all to drive to better with just and sites and continue passion diligence not zero will incidents. We and our

the And simply over focus more sustainable operational deliver a is to do. term. all, long the Our above thing and will right performance better

environment Like by chain the been significantly we've our let disruptions. past constrained details Before supply share discussing highlights months. in few been operations from some XXXX, industrials, the me most have living about

to was I the for contacts just global mess today. plans , backup floor the center a where and end, high of shop When numbers, in our kicked Then, in the I Germany management ship set machining GM the before resilience floor in shop the into was in, ITT package Allen, new one joined the COVID on Europe team senior just QX, lacking gear went Europe. at experienced connectors were to with chip operating to far as holidays. these, idle levels. delivers EPS at is During the over North brand there you chain in deal employees record thank the heavy quarter in pre-pandemic firsthand you our [Waynes] This supply Allen year our solid there sites and was especially ITT resilience. margin year Thank all missing. [Indiscernible]. because surpassed customers semiconductor America adjusted our XXXX We Despite also and high And hit full by fourth results. and infections impacted team absenteeism is

operating overcome in productivity. with by above XX% the if material XX% and ITT strong inflation the to of new strong we Demand technologies ITT, second Moving the demand And XXX half year the the of our remarkable, and demand. products organic innovative growth year. price think growth volatility $XX record auto On basis connector is is all with broad in in all segments. end across raw to points for growth lead about hard Organic including of strength reignited million with XX% in finally, the This XX% you increase three for full chip in markets. the profitability, organic margins, orders with business. XXXX a worked outperformance. XX% ITT’s shortage revenue and drove created

Alan adjusted previous portfolio. in annual once again free our not this divestiture. the on year, in the $XXX cash industrial as on the expand strategic new which an to margin for share basis our operating from all the automotive segment segment approach hands A We the points X% and the all exceeded ITT raw flow counter XXXX We worst of two All-in, XX%. continue platforms, to we margin. dividends, repurchases from versus a over redesign offering big process $X.XX These part adjusted perspective, of fourth on our but continue has deployed and to and headwinds. expense, believe it development innovation two in Notably, of deck We earnings growth at over X% customers to best execute years. over year saw least In was been chain an like we came capital XX% to XXXX. million XXX to invest and of deliver adjusted to pump CCT, Last growth research in to per growth grew improvement actions with pricing XX% XXXX. a to sales we XXXX environment XX.X% generated deployment. our material incremental product as margin supply which versus and amounted friction and in connectors support share as quarter, times executed in we braking that

that XXXX share sales and Together, Still, strong XXXX. ahead, pricing guidance. will will As capturing persist in in XXXX. XX% and the while XX% drive These power the growth, continued of per we've our the our expansion. of been drive organic nearly actions expected earnings productivity will points to QX challenges all more growth demand businesses will midpoint revenue of support in XXX our segment I performance at growth basis look ITT’s margin

approximately increased customers. to working cash support flow strong capital Our by the be our as tempered margin adjusted requirements income will is taken free XX% generation

minutes. already mentioned, challenges in at higher I our the supply evading upper anticipate, half the is second end are XXXX, of of than which with sooner materials a raw and prices path guidance, If the of towards a chain discuss we that year. few As assumes the first least there market half us Emmanuel will conditions in guidance improved modestly the our further

Now to XXXX, highlight main ITT’s three priorities. I related want to points

respectively. that the backlog in order today. for rate in and products we backlog that And quarters These drives increase will orders in XX% was the see XX%, our beyond. past First, Organic and the in marketplace. and convert winning XX% three XXXX growth are the in XX%

opportunities pumps in the short project and second We control across Orders continues growth with our a demand offerings. with strong for aerospace and are are straight commercial in larger quarter. seeing industrial organic and cycle emerge. recovering across seeing cycle business increase in long connect our to graduate The we funnel based growth increase process

to and the EV won infrastructure Ford, to the among transition Motion ITT alongside electric built XXXX, momentum. on electrification vehicle the manufacturers XX as in grow sustainable continue In for others. pad the OEMs, and to choice in leadership out the EV as Tesla, CCT content brake our electric our year. backlog XX% world. marketplace of growth around drive platforms long-term in We This organically supplier Rivian, connectors helping Our platforms to gains the vehicle [Mio] will to position Technologies, grow we continue including with

of leasing benefits we Second, activities advancing where in well the accelerating innovation ITT, EV we are across and see IP as the our CCT, across are wings portfolio. we our VAD as

growth customer support CapEx demand globally. We are wins our are to increasing and to green investments initiatives ramping CapEx sustainability further our and

we're and cultivating term. returns Finally, initiatives the where see we over ensure the investment technologies, they and disruptive attention certain receive to out upsized these long carving need

ITT strategic and poised is M&A finally, accretive and Third, to in execute XXXX.

continues firepower of deals a of priority our a dividend. is plan increasing top We repurchases be With and our focus, and asbestos and have for the to in ready. size This team, the the team on share a of is increase and top deploy. plenty deployment we're XXXX. at M&A is the XX% solid out of revamped way, strategic number looking Capital to

couplers more grow Rail, a automotive world. and braking ITT preview and markets, rapid poised to bolster exciting vehicles, increase to sustainable by the years. most some for across in our rise supported over and X further greener demand ITT our the the in turn Let's important global will to wins slide electrified products. investments next shock the of several will as support which become absorbers of end are production more operates Similarly, even to public XXXX.

aerospace the of people who and assume a forefront is as domestically traveled Our long-term recovery business internationally. at

participating future. significant a in playing pumps role in Our energy connectors where electrification a are is greener to are a actively valves taking business digitization build And already our and and markets over. world

ITT, is Regarding market considerably up friction represented compared vehicles XXXX, future XX% growth fiction sales. of business global in OE our share our more to for Electrified platform XXXX. at than

rough handling defense and over pumps Process, asset driven these example algorithm of the capability intelligence miles will and better next internally the XXX won for customers two efficiency other ITT. issues recurring our of years. first in selected Hydroride will This vehicle that was our its simulates solution predictive US. for that terrain. than new grow of development XX,XXX This the pipeline will improve solution shim for pipeline launched XX% is In in the pump IP and a subscription, tool military KONI two i-ALERT customer groundbreaking a pumps performance. Wolverine our to over monitoring for through award offers The product as for sector. and identification the platform travels X,XXX We failures, new service vehicles centricity R&D over routes, Industrial whilst monitor repairs, customer in potential providing more of the upgrades. revenue enable great

to projects doing notable new XXX the basis semiconductor of more related in adding also We wins to plant than orders US projects IP the while growth had in XXXX. points

plan to awarded platform world. in are a you. backlog leading of XXXX. ahead. Emmanuel, accelerating deploy. multiyear actuators around with excited about driving on the the and contract strong approach we performance firepower position a And really Finally, a generated smart to businesses, we In with gains growth for XXXX is to company used Connect and a a and our And, This the beginning over the in were for agreement the AXXXneo. and share summary, Control, deployment plenty innovation in We're our strategic I'm we year capital by across across airlines provide the portfolio.

Emmanuel Caprais

morning. you, and Thank good Luca,

XX% Control, Looking partnership sales grew motion tempered friction Vehicle OE in levels Price in chip I that efforts, plays the the will our pads. in task. accelerate shortage and not is we at organic saw points, as this in and North quality the basis the healthy quarter It in increase dynamic was our is team strength our strong of a America in The our points persistence the Europe. remain chip into ongoing continuing was top and Luca impact an Connect of growth on this the our growth chain MT. backlog you, customers when lowered due to connectors. industrial growth And unusually basis team improves, organically revenue and performance our that inventory of with drive continues XXXX. price We in supply In line year. to value XXXX, QX most results, easy at XX% shows disruptions historic MT the this process. quality on drove the brake tell by technologies’ by with in XXX based and what over conversion pronounced estimate XXX realization can distribution customers. as Despite in OE positive an a January, we situation lows fourth suggest and and

combination teams offset which productivity roughly partially of of sourcing in and points a points floor drove of to Our actions, the XXX quarter XXX basis shop material inflation. basis

were currency Luca mentioned As always less and X% grew XXXX impacted share earnings were margins perspective, an by X% rate. and happy by investments tax despite which foreign versus From we investments, are than more EPS growth growth counts, to and EPS earlier, do. versus higher offset lower by we revenue, XXXX X%

our chain given was previous adjusted continued delivered to requirements consciously in margin working on we supply our chain outlook. Still, working our flow capital And disruptions flow our we operating While range free generation. XX% weigh disruptions. capital the within higher the are free supply given income the of cash segment cash investing

Let’s few points a will highlight additional turn to for want impact next year. XX. which outlook QX, our to now I slide from

in to XXXX in QX schedule the chip was vehicle strong very lower This this given we of due in exiting first of QX shortage. the MT, production the a production the occurred were customer we of that saw closures wave planned First against as quarter stands ahead pandemic. yearend

Europe. start auto mainly the some new production platforms, in of in delays experienced also We of

XXX% business with delivery, was on friction exemplary disruptions. despite chain time supply Our

demand was On short chain half MT. This top supply quarter will will inflation first And year-over-year in impact expect fourth our the by Process a side, elevated in headwind, and the of Industrial above this cause prices growth sequentially we project levels to despite commodity across at increased particularly least cycle. expectations. significant line remain strong XXXX. the constrained at

orders quarter We sequential are by encouraged the given every the see demand in XXXX. increase we in

in we're we partially As ITT’s orders. of material the these orders XXXX. short expedited very Still, sale. and margin organic a Brazil offset provide are in from mix timely as significantly robust, entering savings of margin customers continued demand XX stocking not was cycle higher freight backlog. with expanded XX% to was it all This strong reporting to a The in driven XX% completed quarter, higher favorable orders XXXX aspects, for the and successfully announced to by sales optimization the continues latest our inflation, be higher distribution was growth be will the levels. had full exceeded see well points XX.X%, this result, year. above as challenge basis charges. by distribution proportion into CCT conversion up action labor strong footprint quarter with and XX%. We And

current that slide discuss end a and markets. verticals. half industrial the our to across outlook the we XXXX. long-term we most As XXXX. in chemical My CCT’s we the and With strong positioned our and big backlog, a XXXX. in as are But very major in will The first well half ITT see top should our at message result, expect impacts, mainly levels, slower in we're a full half of due is distribution for is confident On OEM you the chips organic be we turning this very on and page with second attractive, raw growth the acceleration again achieving In driver challenge first awards here. as to We shortage X, in availability. the the that performance we for rates, demand prominently XX% we winning in are trends In low the of our across instances, material marketplace. is the dynamic, see in see the MT line order auto, project our portfolio, a is some year those well be feel combination inventory funnel.

Regarding XXXX. from were below improving still aerospace, but demand levels well sales is

further inventory. market OEM expect aero in accelerate to global start coinciding and reduction second in half, travel this a We increase with the to in a

slide discuss financial Let’s to this to turn guidance dynamics. given X our

grow XXXX, we expect at sales XX% midpoint. the For roughly to organic

that MT a with similar However, unlike expect rate, and slightly XXXX, all CCT. we above grow at IP businesses

the standpoint, related the supply by of any Our assumes margin XXXX the the CCT chain. will outlook challenges for margins global followed continuation segment more than to business From IP. expand other

deliveries price first by We given from first expect in the headwinds ongoing will MT the receive to raw time expansion half materials supply half. continue will to be be margins impacted up chain constrain to only Industrial slightly customers. Process the in disruptions, margin the which recovery the and

in will margin. temper business the Additionally, IP’s growth project

still XX% lower actions, will At effective first currency expect path higher is compensate related executing steps would tax not IP to we or limiting year does raw expect improve, of worse, material for take XX% midpoint half. event in materials for the get case, the exclude a spent, there XX.X%. pricing of to incremental margin nonessential to the including and the XX% chain the headwind planning the of EPS the we be to that to However, the We're you to If approach prices. most prove if footprint $X.XX inflation unfavorable after range. the raw actions supply rate high and this importantly, raw additional and to expected further does material grow towards an disruption range, our a $X.XX higher to end not

the will quarter for the year. of In year, terms the of the cadence QX anticipate toughest we be

single will growth strength XXXX CCT. the pent-up our mainly growth in auto to stemming in low quarter of QX the range, thanks demand be XXXX, Given in from sales first digit the in the organic exiting

Margins to due roughly XXXX. increase quarter QX in to raw elevated every stemming will two on will around decline sequential in then We basis headwind expect XX% the prices. from other businesses will likely the first half flat. Margin material be in a

EPS the result, expected is high to a As quarter the in decline single digit first in range.

all to and EPS for QX, in a sequential quarters XXXX. year-over-year on is basis Following expected grow remaining

reduction deployment capacity further of and expect the drive weighted shares we average Given in capital been continue this pullback, count a our repurchasing XXXX. have ITT, X% we a will market will share and in

in of see approximately inflation, to each remains impact by to XXXX of million $XX $X.XX smart ability quarter additional raw that on operationally well of favorable as we slide of half the nonrecurring driven in also want in XXXX up. of pass year. And was that Luca I things and no will can quarters conversion, There combination means to discretionary million XXXX, active quarter highlighted One material XXXX headwinds out preference inflation point a acquisitions. confident first of higher occurred in With investments, XXXX. headwind the the share the first material expect of from just the and to capital execute of wrap let This I our costs. to in XX, as growth offset highlight, point second essentially continued $XX of the to However, me will two it backlog the currency year-over-year to see back of and which tax. our we growth through you impact to $X.XX given $X.XX through which generate few will partially remain a we be net in pipeline. items, growing acquisitions inflation On deploy $X.XX and gains, productivity. price of we to

Luca Savi

to our both XXXX pandemic, been Thanks will performed which the the Emmanuel. segment have were and reached adjusted this above possible not of EPS, ITT-ers. adjusted We throughout records resilience extremely ITT prior margin without for XXXX. well comfortably new

to candidates. focus And order while And deploying in still and seeing these increase. with and repurchases. of to pipeline intense the throughout saw to do place on times run backlog capital active year to XXXX, more very deals. cultivating of across based And are We the are a we We in rates XXXX. we healthy flow to these XXXX much exiting adjusted M&A, continue There is our entering share our dividends orders demand portfolio the building with heightened acquisition have we deployment to in execute two free cash and we are a asbestos team and right an divestiture, convert.

in announce since it. to ITT’s to happy for will I'm investors you Capital XX And XXXX. June ITT miss finally, that is Markets first Lastly, Day New want York on this This don't the event City. host like

you open has ever, been pleasure Q&A. As my for questions happily this with the all we will speaking morning, line your take please it and Charlie, now.

Operator

comes America. first [Operator from of of Instructions] Andrew Bank Obin Our question

Andrew Obin

and Oh, future you board particularly to kudos Mark. like R&D given should think second talk raising yes. next team, Good the costs prior ITT by CapEx can highlight several do performance the you. CapEx, how and Thank are The made said, how as Luca in Pretty world you Luca, Emmanuel, and increases did what board, And are cycle? of you as the the have operational everybody. sustainable different I at the specifically the impressive and do? to morning, else question the you over looking the volume you R&D look I point we the you and how think will headwinds, versus growth investments, these sort years

Luca Savi

Thank Okay. Andrew. you,

have review the of days, every which September, the board, event strategy is strategic have plan early reviewing with different And the we're businesses. the this a on with one October. we a the that conversation is actually that meeting had board, in So regularly we then we

on So regular this basis. is a discussion a happens that

business are business most and the cycle. have, of in, beginning actually that positive, we're as very So when at the a at look we we growth we business that feel of the our

were probably seen really there that will you and are internally, board we're in starting the you've good also biggest the managing that we of conversation innovation. our the to give of have focus going venturing that having probably specific doing have the innovation, of lot venture our center, proper business. in are attention. feed a the with in are presentation, ITT this investment And our growth, on investment and that to And we So is the in rightly that conversation seen there external detaching we these investments is one proper companies. we is we order And from use the

this the And So external is board a looking discussing. This geopolitical we add are also of that speaker for coming to that, regular with environment. I we're also lot China and on is us. the that is attention to conversation, will a and talking something

Emmanuel Caprais

And Andrew, just finer point to saying. Luca on a what put was

So of than up XXXX is million around maintain because with competition, a CapEx our $XXX to it's roughly and assumptions the a really growth, and lot our step the us include of able competitive in CapEx $XX we R&D million more dedicated to advantages. that from to important to in to for and to gap some have be of that maintain

we're we initiatives said in And to R&D like China. many be also products. have Italy, really invest going expanding in in Luca innovative So in to

Andrew Obin

And question. follow you. a Thank up just

industrial specifically as pumps on a the outlook exactly What the as Specifically the chemical and I'm industrial versus some conservative half? slide color And energy? chain you supply seems Just just happening it first chain. pumps for outlook disruption simple And is just what's you. and X, more the Thank your supply as side, to energy in difference on difference? provide on on energy. connectors comparing the industrial are as versus process. you chemical it highlighted in facing Because

Luca Savi

facing, say disruptions across chain So in IP the the board. we're supply I'd

than was worse impact If happened you QX, what happened the what QX. look unfortunately, in at has in

to line basis had labor unfortunately, points was And lot QX, QX, top due And in it XXX a due points than in was -- a worsen. of mostly that availability supply due to top situation to of we XXX more that remember line and You chain impact impact. had IP, that we was IP. basis

of million million and XXXX. improve So until it's in unfortunately, to of going we the half the not end And revenue to XX going this think, was first missed not that abate to $XX is roughly IP. situation of

are disruptions a impacting chain end lot market. supply those of So our

Emmanuel Caprais

the If one QX one the project IP, was brief I may if the revenue add look for point, revenue. just impacted at we most Andrew,

projects last was revenue short the in the that of Our because the years. in was of had highest your probably lowest years supply last Also chain. short of that the more for couple in QX the the in had revenue we was on control we cycle cycle you're couple

that the that difference So is more difficult are you probably big be projects to will to biggest able see, manage.

Operator

comes from Joe Your Cowen. question of Giordano next

Unidentified Analyst

for Joe. Great. two This parter. This is a Good morning. on [Indiscernible] is Michael

MT for at looking the the related can asset to? margins quantify an sale that that exactly what help was mentioned So that quarter and it's sale

Luca Savi

you should at what and from had roughly to QX, was and Yes, as our sale there added results. million added regular are refer highlight budgets look every QX. to margin lot also Michael, that in our was basis. the $X on so versus our, margins that expecting affect in items segment a roughly XX to forecast time beginning. basis This million in $X one there the items those And our above was MT, this MT our we of forecasts. this quarter And the we in time we In were one we there a of included including this points -- land benefit

net the basis year, the let's full immaterial. of items is around benefits non-operational points really the the XX and say minimal For all so

Unidentified Analyst

And you thank there. are mentioned the do areas Great, what you market for poised time? the is time of one in color And see this at most you. that you multiples Thank organic you for such? terms finding company What favorable growth. and more the

Luca Savi

Emmanuel you want follow Yes, question asbestos started we first the with on the I part we are up. ready to of and out of M&A. addressing maybe the can Sure, way if really focus

And flow a about CCT When the good on the about good We're in and mature different strategic funnel deals team. at the have with talented all we connector’s opportunities. good and and a pipeline in the a opportunities in side businesses, three of different Michael, also look have we're talking the We experienced at stages talking you business. rail. areas

So we we will areas. that now, those create strategically to always follow are rigorous but and ensure process the value, both our financially,

Operator

of from The next Research. Melius Davis comes question Scott

Scott Davis

i-ALERT an go. because get about a Good morning, that of can product to broad ask guys. just of sense how I trying to wanted

talk you standard pipelines data usage, a is for what electricity standard stuff, You and vibration, pretty it? paid aggregating you are but kind how it and that are measuring of and temperature, about is getting

Luca Savi

these for excited sure. Scott. the Thanks because I'm proud question and Okay, asking win, about very

install As AP is to they six centric traction a ago the to the i-ALERT took few on to to also that have ITT-ers that award but job. customer take customer. at a our this And won and behind time data you took team data, able take side years see look that be this read value it, of ITT analysts your time a the fact, the and analyze traction. vibration because and team in fantastic XXXX, able for It some matter need launched deal, it create in be work reason when than the customer maintenance at them need did what interpret to is you why you maintenance the data

are a So it equipment, fact, but of even all get as rotating good analyzing is right, customer. and analyst it data vibration bit can look this of based took pro more wrong i-ALERT shop on a the pumps, so little not going nicer, report and -- looking time have these what matter engineer a the the I gain to the works pumps in to that makes data, would say traction, Houston is our every we which to provide at

the the based can And on temperature. on northeast. really You're more anything. is we working company compressor vibration said, it than a measuring rotating with partnership And I as right a on the have on work that routes really XX,XXX is and and every a

Scott Davis

big digital a custom or in already helpful. that that's that future? envision you are send sending pomp? project sending add? out twin and when you're with out And doing Is digital a something you then out Are Okay, that you something you doing twins the

Luca Savi

the by the almost Yes, project, of really default. most has a in is actually most -- got by that position is it's of frame in position shaped And default our the exact our pump -- that. default on i-ALERT way

Emmanuel Caprais

are And offer they our requested whether or not. this we so customers, to

necessarily been every putting every on we shortage, as this that few turn to pump. I think because pump we i-ALERT we the that soon where that But for able one over as abate, past the to of months, do ship. chip haven't

Operator

The next Hammond from of KeyBanc. comes Jeff question

Jeff Hammond

good Hey, morning, guys.

hearing to for better on I given of even margins, adjust of really nice the in kind the you're chain, better how pieces, then terms what if chain, why the just seeing And MT And friction So you're thinking and trying of on get of better. OEMs kind to back supply moving think optimism get and game, just in pessimism kind from really maybe out and I'm sequentially. of OEMs. sense from we're sequential starting guess margins you all MT it improvement, you some just there a supply just about gets auto some

Luca Savi

can and supply the let so addressing you margins. start Emanuel, me then chain, Okay, the take

because or added of were and also, was So, chain of But December saw supply that than prepared supply the I lines some remarks. fact, the worse absenteeism, in January. in as I of in massive what tell we the seen I've gave you either because you Omicron a QX matter in some can chain, in in QX. stopped, the impact budget, example as completely that

haven't seen January. situation in in improving necessarily So QX, that not I and the

all to that on made was our considering results deliver friction delivery time XXX% team even more the remarkable. the able Now of that fact

that the QX, much that end improve and in chain second the QX situation and on better the We of probably second supply Jeff. in expect half to towards the half, at

Emmanuel Caprais

think you about if And XXXX.

level MT. margins QX obviously, So the step of a be there's QX a on for to in and sequential going from QX, down basis

are, And you drive MT help we you're to level to margins really too with secure customers to see That's pricing. as the as then teen along really recovery. year, of up a We and we have the going at impact go going that probably to compounding productivity our working are high levels. further price seen

Jeff Hammond

of Okay, this just blip? IP just is Thanks. if issues Omicron I'm that's in retention or issue excellent. you something kind absenteeism it labor And people an it if or mentioned, there's adding is wondering then just broader, the and Omicron or

Luca Savi

of has more Omicron we don't impact operational cases, impact wise, it's I as been good. No, in The an see really serious have been which the said QX January massive. view. Omicron, challenged point Jeff, from is of And

probably December add week. than new end Just cases and had you're an another more of entire we you to going -XXX XXX To give people to January, week. that, quarantining a are every example, XXX that

that of So operation you have you in have the when you amount disruption people imagine can that missing.

all So on inefficiency. the work to going is which you're time,

to worker, reschedule in to customer shipments. an which the going the in is case have some have temporary You're like efficiency or you IP, to of order talk

it So was Omicron.

Jeff Hammond

and change on color Thanks. thanks, guys. capital the Okay, deployment. term Appreciate

Operator

Bystricky Vlad next of Citigroup. comes question from The

Vlad Bystricky

the thanks guys, morning, for call. Good taking

you and a Omicron. what just last January. absenteeism So and around maybe on up understanding saw what Have Omicron now? seeing about evolve you're how you're seeing you through can Omicron at But and maybe talk bit some about disruption seen the peak, things following of regions little question just you're from of And impacting XQ? you labor how domestically? is thinking And least other sort here

Luca Savi

Sure.

would just was new last new week, every was you, the has than month that week the the of to be XXX say I less still And than because in I through so about So week, say said peak week. the gone is XXX high. you cases sure it XXX cannot what cases very in as more but January people XXX with during is new honest cases

most have really the much And there, probably the Omicron that perspective very came see are that true the and there. it's still is in and the And the peak an in America. from So fast. but news North been impacted operational paper region Europe you is

Emmanuel Caprais

expect QX. really from then a in what that for see standpoint, you And result we

of QX, the lack impacting lack result And see as for of also and this it's QX you well. be of in absorption, XX% will terms around in factories, lowest our a impacting So our is as terms in but lower the dollars. will volume and quarter lower of result, customers. EPS margins growth, And the of revenue obviously,

Vlad Bystricky

maybe capital typical a Obviously, Okay, inventory than sort that's to – bit or with exiting of the shipping of ‘XX And is on what just you're higher shifting to from here. you're helpful working sort color. seeing then for you.

highlighted driven And there's some you how versus can quite the get working out you able a working you about, increase by reflects that much in can't strategic some the of as product, parse products the challenges. that talk process around you're or to way challenges decision. securing But inventory out I of to think you've is logistical door because strategically supply, of other

Emmanuel Caprais

a so Luka chain Yes, really as supply mess. mentioned, is

has that And I we've in a higher so increase take customers. specifically in going and shipments XXXX. inventory taken is working increased inventory to XXXX, the of our due capital, this that continue to the would been big to say reason have in why we're And secure to we the our to majority order XXXX, in our the

a in In also from addition, capital significant I increase going ‘XX, a in have to working think to standpoint is the challenge activity. going we're see we're

in our us years growth $XXX XXXX are investments in revenue make customers to would to obviously. obviously The we've finally, to those planning during million. mechanically customers. I So continue XX% had from past impacting that And will And to have increase that especially and in CapEx we're that from working midpoint. this invest and in few wins have mind in expecting cash our the the is will we keep level then And the to a at we cash we add around standpoint, invest, to capital auto. support

Operator

of Joe The Ritchie Sachs. next comes Goldman from question

Joe Ritchie

morning, Good you. Thank everyone.

about of And do think visibility the curious that So of start sale of I'm the to shortages your then you how what's as products? second. for best chip you I amount growth XX% focus the year, curious, a on call shortages number I'm want you have growth Luca, to guess your just ease? much that it these actually chips on on need to if ship like, well, when some for

Luca Savi

also the going the shortage is better XXXX the what to we similar tale of is the at be really our reasons for get get second ,HX is talking where from Okay, in halves, of MT to of of one XXXX. see this that to year. right, HX so more look what And and two half is when the we is also chip customers is on going to

delivery flat, supply that when forecast China's QX, market, considering same second practically we in IHS that look that same half But XXXX, growth. for With the the the done an done the years. and are to as probably Now, be but mainly so there coming bit for less, is And growing, problems at America despite have counting January. the going market growth deliver is XX expert in XXX% little we year. outperform of the we the and last is we a North chips, assume to we time in Europe we like that in exactly and chain the of the all have on X.X%

delivery learned it. the to have we So do that issue, I how think

Joe Ritchie

Okay, across how that's the question volumes follow helpful. up health expected is the about your productivity to related. expectations businesses? And think versus my you're the to improvements you is your of that make I guess When that coming self- year, dependent through much for margin on and

Luca Savi

challenge you value look this the correct all an with talking XXXX, weeks the closer two main performance that think continuous if Joe. main some, should have me operation pricing, you focus, is have is that XXXX why? of the not that biggest but perspective is when have the even Okay, at and discuss improvement, look this so improvement actually to this every I if that think at but with in is recover wrong, I'm have the Emmanuel, And the I a and to what we from Because basis. And center, you monthly what year we XXXX, topic the received. we we margin

side February. good February, still is on XX% of comes in report already because discussion I'm there we to comes are to the have friction, when closed already to which Now in secured. to that we roughly XX% it And when that pleased coin the we're our of business, the other be it XXXX. are is that need

a challenge from XXXX, would of your I view margin that the is is point question? answer So I biggest in say probably Did Joe.

Operator

comes of Mike question next from Baird. The Halloran

Mike Halloran

morning, Good everyone.

go through IP the we buckets product side maybe to from the you on as short business year year. revenue the the on oriented cycle but into versus some two those kind of for business thoughts secondarily of how just orders progress expect two So cadence perspectives. One the

Luca Savi

you short cycle the I Emmanuel then the strong. can maybe for orders product you in good are they very a very Okay, good XX% QX and performance and orders, I increase was start the and tell very can jump, and the side on quarter

you second the was strongest what seen strongest was in QX in if you seen have indicator we quarters. January So offshore which with look And always have XXXX that continued, January orders the reflecting indicator an trend we two has continued the of the has at QX. the very cycle trend look same strong is at that so in short this cycle leading that in is

big add, project We the and come rich the in Emmanuel? because also funnel strong Anything the have expecting in is seen are coming. to funnel year projects also orders we in to

Emmanuel Caprais

on standpoint. a we first going be the much IP, from ramp well. was impact standpoint, a be the I to achieved think is be that going Yes, orders up an a going to quarter, should to and momentum, things lower going as we so improve orders extent, then as we're up the in the in what able margin are we progression which in volume to is strong, strong hopefully and to second from is obviously, I into say, mentioning margin and this a ramp be is we to the see even then And And to productivity really roughly to in low think better on challenge be to going because the be first you're revenue. is a of probably place, quarter, And if think which than those XXXX. top quarter, single converting pretty we as also in to up ramp XXXX top real by going some good going And digit. for has as Luca at we expect grow in XXXX as The line QX QX. I challenge, orders this

Mike Halloran

for that. Thanks

guidance, up, your from levels just looks regular related perspective? about I more backlog the normalization than broader how the follow to curve but of IP, normalizes what like, backlog Or does Some think should through your assume year?

Emmanuel Caprais

going continuously backlog really CCT. we I am two grow here general, expect we're the work sorry, and years. we we specific year. And to really in business expect the What the the to ship the we the for we aerospace, we expect able have, important, next to orders two is that also participates over And and for CCT four where to expect, CCT is aerospace and probably so in three item IP IP, that backlog IP be is to the book

immediate so continuously revenue. on probably going not going we're to in And building grow go backlog -- the backlog But doesn't to to that anyway translate aero long is term

Operator

The Jones next question of comes Nathan Stifel. from

Nathan Jones

more little on is expect Are to these where stuff are sales. you next level? CapEx the and I a the us everyone. projects, CapEx CapEx that should up morning, CapEx can this Good it old lasts some any Can the long where year, is one year asset bit give you around talk just than these detail wanted base follow more we greater going X% is that's growth at refreshing is going? about just of investments, happening, there elevated how color

Emmanuel Caprais

those majority Nathan, so R&D. growth $XXX Sure, CapEx going of are to XXXX, in in million for the be CapEx of

to continue both platform we're demand from invest then also, wins in Italy the here we to expansion because R&D. projects specific our R&D, specific for growth of So customers facing China, plans, of had a of roughly And Mexico in be and where we've increased have those XX% business. to And friction China. we're in with are going CapEx in and in going lot in in

the for rapid then That up is in as investing the what the we're to the we're well And in R&D product TCC. we're serve TCC, to in with products, so our winning, our future those projects keep and as important redesign final testing is customers. our to working invest in are capabilities, increasing where VA/VE, in increase aspects all range. with better and IP the So also growth of prototyping centers, on really

Nathan Jones

a expect normal your CapEx CapEx? long mean, goes of there percentage change I to projects in we step term, are into single level? year Is function so, should return a And and that to these revenue

Emmanuel Caprais

platforms. -- think I have we is, won easy of we've lot a this

North but I is we lot step capacity, function change. say new have that obviously, America, a especially in of wouldn't So this to a put

CapEx we I think much very usually in in friction. invest that

in And necessarily activity. is out that so that needle I making a several moves investment end be that's stands I say Wolverine, normal the going normal we're food -- capacity for one but example of is investments, over that would the – capital. of to it’s don't terms the think large investment And years, which

Nathan Jones

expand M&A? for about Can Can development talk give product that and around then target accelerate color can you the products? areas I things all adding priority portfolio. us ask Are you Okay, you you wanted can these the CCT about to that Any that? with to internally? do product the

Luca Savi

both. Okay, is it little thanks, Nathan, bit a of

an our you of example, the is business, can practically that innovation invented the but connector, something connector in give to connector just the and side on that ITT business. we reignite are So to

an that do come we good to up with needed that with So organically et and team reinforced very that they resources, order and the our the investment we new testing, the team are cetera, engineering we've give products, in some we're and looking a that with part complementary investment done we And at so which in made acquisition. did California, also is to some of a company also we ours. in in this potential an organically investment, venturing,

of bit So both. it's little a

Operator

of Bryan question Blair The next Oppenheimer. comes from

Bryan Blair

your friction, guide, second, for North least baked for to capacity me on how and morning. CapEx Circling China America? recent in spending given into back in much are your Thanks a you in of squeezing XXXX at here. Good terms what's and adding capital planned

Luca Savi

Bryan, the the this only investment, would so won business. the after we we're that That's awards. I of of Okay, is capacity beauty beauty say investing the

so in can tell five that at our maybe could Mexico today, when plant another lines. probably eventually probably XX%. in to looking a four, plant in in to put got seven And get share can five lines So five I is we now goal it installed the has to the you're you in North market years years that right we in get of five, America

is while a a to still quite go. So there

Bryan Blair

to willing margin related going up XX%, back lower good half, back versus the pre-pandemic half schedule. sure but getting color XXXX. And rate you're follow been has ahead the at in I'm guy Yes, appreciate CCT the you're back of run sales answer at, we margin would look any you're be great. not a be there, directly to Obviously, color question to XX%, if

So look higher fine self-help XXXX, at available their forward et platforms? maybe growth it's the a we we for ‘XX of good margin momentum and years in a a entitlement respective prospects CCD? cetera given there. couple timeframe, tuning, looking or If Are MC

Emmanuel Caprais

that that that want we Day, properly. Investors don't answer miss I'm keeps improvement. for exactly because going. the be why to room improvement will So was reason there we the in is in improvement with to happy just Ryan said opportunity results Bryan, in we improve. one Having thing, together journey. in I XXth we're have that, very a CCT able the the urban to you sure have about journey financial of continuous and we June And question Valencia, of But continuous are on California and

stop to not we're going So there.

Operator

The next Karas of Damian from comes UBS. question

Damian Karas

morning, -- Good going to late another I'm everyone. Guys, call. I'm joining form

there kind of the and on I if missed versus for kind in what's any you of sorry, guidance color the volume on embedded the could wondering the this, if maybe out just statement So sales as impact year, level price, at that is well. spell

Emmanuel Caprais

Sure, Damian.

price be a recovery chunk a quarter. million. see in XXXX for MT. we recovery the recovery mostly also. over a from this planned to that task large is we're going But impact. is MT, it's so going that is And quarter probably is coming is decent after build coming from a of $XXX large XX% that already Obviously, like This And price considering have to we QX. something So

we're have that secured the but now expected is in which mentioned As XX% to price good XXXX, have also of XX% have negotiating, we increases means friction a as need recovery recover. for we that right we January, we start Luca that we thing

the So and it ahead And categories compensate and as other for but materials, in that is we cost labor, see to inflation how general task really tall shows is overhead. also in such all the energy us. of the is this

Operator

comes Matt Summerville D.A. The from of last question Davidson.

Will Jellison

any that downward facing Jellison supply Good seeing And To I regarding offering a that is the today. the multiple do potentially you a you that on for This had that and they material companies are Will for to inflation? in you're see any from and exerting quick M&A. question them pipeline you cultivating, the morning. impacts on pressure are price? better extent extent current your chain you maybe Matt

Emmanuel Caprais

facing. and So a we in absolutely, we're standpoint, companies same is the this the companies, America, from and they're and seeing same chain Europe supply look impacts North the at situation

the looking are able to for think they how I what difference we're recover pricing. is

And so about an that pricing because that gives idea us their power.

And think good of companies seen really value driving retain pricing. so examples that I able we've being some to by

day. This So to your we're attentive this pretty And have teleconference. and this. a this at time broad today's lines disconnect very conclude does Please wonderful unfortunately, based. is

Luca Savi

you, Thank Charlie.

ITT (ITT) 10 Feb 222021 Q4 Earnings call transcript