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 for the three and six months ended June 29, 2024 increased by $15.7 and $43.3, respectively. The increases in both periods were primarily driven by higher sales volume in our Friction OE business of 5% and 7%, respectively, and in our KONI business of 18% and 15%, respectively. The increases during the three and six month periods were partially offset by unfavorable foreign currency translation of $7.6 and $9.9, respectively. Excluding the impact of foreign currency translation, organic revenue during the three and six month periods increased by $23.3 and $53.2, respectively.

In July 2024, the Company completed the sale of its Wolverine business to an unrelated third party. Wolverine generated approximately $158 of revenue in 2023.

Industrial Process

IP revenue for the three and six months ended June 29, 2024 increased by $37.1 and $104.5, respectively, primarily driven by the acquisition of Svanehøj, which occurred in January 2024 and contributed $33.4 and $69.2, respectively, to total revenue growth. In addition, both periods benefited from higher sales volume and pricing actions. The three month period saw growth in our aftermarket business of 7%, which was primarily attributable to the general industrial and energy markets. The six month period saw growth in pump projects of 26%, primarily attributable to the energy market. The increases in revenue during the three and six month periods were partially offset by unfavorable foreign currency translation of $3.9 and $5.7, respectively. Excluding the impacts from the acquisition and foreign currency translation, organic revenue for the three and six month periods increased by $7.6 and $41.0, respectively.

Connect & Control Technologies

CCT revenue for the three and six months ended June 29, 2024 increased by $19.6 and $37.1, respectively, primarily driven by higher sales volume and pricing actions. Both periods saw growth in connector sales of 16% and 12%, respectively, and component sales of 6% and 10%, respectively, particularly within the aerospace and defense markets. In addition, the acquisition of Micro-Mode, which occurred in May 2023, contributed $1.6 and $7.2, respectively, to total revenue growth. The increases in revenue during both periods were partially offset by unfavorable foreign currency translation of $1.2 and $1.3, respectively. Excluding the impacts from the acquisition and foreign currency translation, organic revenue for the three and six month periods increased by $19.2 and $31.2, respectively.

GROSS PROFIT

Gross profit for the three months ended June 29, 2024 and July 1, 2023 was $316.1 and $280.0, respectively, reflecting gross margins of 34.9% and 33.6%, respectively. Gross profit for the six months ended June 29, 2024 and July 1, 2023 was $616.9 and $541.9, respectively, reflecting gross margins of 34.0% and 33.2%, respectively. The increases in gross profit and margin for both periods were 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 $8.4 and $11.6 for the three and six months ended June 29, 2024, respectively. The increases in both periods were primarily driven by higher restructuring, personnel, and incentive-based compensation costs and the additions of Svanehøj and Micro-Mode in January 2024 and May 2023, respectively. The increases in both periods were partially offset by favorable foreign currency impacts and lower bad debt expense.

Sales and marketing expenses increased $6.7 and $13.9 for the three and six months ended June 29, 2024, respectively, primarily driven by higher personnel costs and the additions of Svanehøj and Micro-Mode.

Research and development expenses increased $4.0 and $7.6 for the three and six months ended June 29, 2024, respectively, 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 and six months ended June 29, 2024 increased $13.5 and $30.7, respectively, primarily due to higher revenue, as discussed above, productivity savings, and lower raw material costs. The increases during both periods were partially offset by unfavorable sales mix and higher labor costs.

IP operating income for the three and six months ended June 29, 2024 decreased $0.6 and increased $7.9, respectively. The decrease in the three-month period was primarily driven by higher material, labor, overhead, and restructuring costs, and M&A costs related to the acquisition of Svanehøj. This decrease was partially offset by higher revenue, as discussed above. The increase in the six-month period was primarily driven by higher revenue, as discussed above, and productivity savings. This increase was partially offset by higher material, labor, overhead, and M&A costs and unfavorable sales mix.

CCT operating income for the three and six months ended June 29, 2024 increased $7.0 and $10.3 primarily driven by higher revenue, as discussed above, and productivity savings. The increases during both periods were partially offset by a prior year gain of $7.2 from the sale of a product line, higher material costs, and unfavorable foreign currency translation impacts.

Other corporate costs for the three and six months ended June 29, 2024 increased $2.9 and $7.0, respectively. The increase in the six-month period was 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 EXPENSES, NET

The following table summarizes our interest and non-operating income and expenses.

The increase in total interest and non-operating expenses, net for the three and six months ended June 29, 2024 was primarily driven by an increase in interest expense due to higher average outstanding 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 (ETR).

The decrease in the ETR for the three months ended June 29, 2024 was due to the recognition of a U.S. federal deferred tax asset as part of a prior year acquisition. The increase in the ETR for the six months ended June 29, 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 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 June 29, 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.