ITT INC

REVENUE

The following table illustrates the revenue derived from each of our segments.

(a)See the section titled “Key Performance Indicators and Non-GAAP Measures” for a definition and reconciliation of organic revenue.

Motion Technologies

MT revenue increased by $27.6 for the three months ended March 30, 2024, primarily driven by higher sales volume in our Friction OE and KONI businesses of 9% and 10%, respectively. The increase during the period was partially offset by unfavorable foreign currency translation of $2.3. Excluding the impact of foreign currency translation, organic revenue during the period increased by $29.9.

In March 2023, our Friction business signed a 10-year agreement, effective on January 1, 2024, for the supply of ITT aftermarket brake pads to Continental AG. The agreement is expected to generate over $1 billion in revenue over the term of the agreement.

Industrial Process

IP revenue for the three months ended March 30, 2024 increased by $67.4. primarily driven by higher sales volume due to growth in pump projects of 64%, which was primarily attributable to the energy market. In addition, the acquisition of Svanehøj, which occurred in January 2024, contributed $35.8 to total revenue growth. The increase in revenue during the period was partially offset by unfavorable foreign currency translation of $1.8. Excluding the impacts from the acquisition and foreign currency translation, organic revenue increased by $33.4.

The level of order and shipment activity at IP can vary significantly from period to period due to pump projects which are highly engineered, customized to customer needs, and have longer lead times. Total orders during the three months ended March 30, 2024 were $354.0, an increase of 8% versus the prior year. Backlog as of March 30, 2024 was $853.9, an increase of $177.1, or 26%, as compared to December 31, 2023, primarily due to large project orders and the acquisition of Svanehøj. Our backlog represents firm orders that have been received, acknowledged, and entered into our production systems.

Connect & Control Technologies

CCT revenue for the three months ended March 30, 2024 increased by $17.5 primarily driven by pricing actions and higher sales volume which drove growth in component and connector sales of 15% and 8%, respectively, particularly within the aerospace and defense markets. In addition, the acquisition of Micro-Mode, which occurred in the second quarter of 2023, contributed $5.6 to total revenue growth. The increase in revenue during the period was partially offset by unfavorable foreign currency translation of $0.1. Excluding the impacts from the acquisition and foreign currency translation, organic revenue increased by $12.0.

GROSS PROFIT

Gross profit for the three months ended March 30, 2024 and April 1, 2023 was $300.8 and $261.9, respectively, reflecting a gross margin of 33.0% and 32.8%. The increases in gross profit for both periods was primarily driven by increases in revenue, as described above, and productivity savings. The increases in gross profit and margin were partially offset by increases in material, labor and overhead costs, which were driven by inflationary pressures as discussed above. See section titled, “Macroeconomic Conditions”, for further information.

OPERATING EXPENSES

The following table summarizes our operating expenses, including by segment.

General and administrative (G&A) expenses increased $3.2 for the three months ended March 30, 2024 primarily driven by higher personnel, incentive-based compensation, and restructuring costs and the additions of Svanehøj and Micro-Mode in the first quarter of 2024 and the second quarter of 2023, respectively. The increase during the period was partially offset by favorable foreign currency impacts.

Sales and marketing expenses increased $7.2 for the three months ended March 30, 2024 primarily driven by higher personnel costs and the additions of Svanehøj and Micro-Mode.

Research and development expenses increased $3.6 for the three months ended March 30, 2024 primarily driven by higher personnel costs and continued strategic investments to support innovation and new product development.

OPERATING INCOME

The following table summarizes our operating income and margin by segment.

MT operating income for the three months ended March 30, 2024 increased $17.2 primarily due to productivity savings, higher revenue, as discussed above, and lower raw material prices. The increase during the period was partially offset by higher labor costs, strategic growth investments and unfavorable sales mix.

IP operating income for the three months ended March 30, 2024 increased $8.5 primarily driven by higher revenue, as discussed above, and productivity savings. The increase during the period was partially offset by higher labor and overhead costs.

CCT operating income for the three months ended March 30, 2024 increased $3.3 primarily driven by productivity savings and higher revenue, as discussed above. The increase during the period was partially offset by higher material, labor and overhead costs.

Other corporate costs for the three months ended March 30, 2024 increased $4.1 primarily driven by a one-time benefit of $3.7 in the prior year period related to the recovery of lease termination costs and higher personnel-related costs.

INTEREST AND NON-OPERATING EXPENSE, NET

The following table summarizes our interest and non-operating expense, net.

The increase in interest and non-operating expense, net for the three months ended March 30, 2024 was primarily driven by an increase in interest expense, which was due to higher average commercial paper borrowings and higher long-term debt in connection with our acquisition of Svanehøj.

INCOME TAX EXPENSE

The following table summarizes our income tax expense and effective tax rate.

The increase in the effective tax rate (ETR) for the three months ended March 30, 2024 was due to prior year benefits of $16.3 from valuation allowance reversals on deferred tax assets in Germany and $4.9 from filing an amended 2017 consolidated U.S. federal tax return. These benefits were partially offset by a prior year expense of $14.1 relating to an Italian tax audit settlement covering tax years 2016-2022.

In October 2021, more than 135 countries and jurisdictions agreed to participate in a “two-pillar” international tax approach developed by the Organisation for Economic Co-operation and Development (OECD), which includes establishing a global minimum corporate tax rate of 15 percent. The OECD published Tax Challenges Arising from the Digitalisation of the Economy — Global Anti-Base Erosion Model Rules (Pillar Two) in December 2021 and subsequently issued additional commentary and administrative guidance clarifying several aspects of the model rules. Since the model rules have been released, many countries have now enacted Pillar Two-related laws, some of which became effective January 1, 2024, and it is anticipated that many more will follow suit throughout 2024. As of March 31, 2024, the Company does not expect Pillar Two taxes to have a significant impact on its 2024 financial statements.

See Note 5, Income Taxes, to the Consolidated Condensed Financial Statements for further information.