ITT INC

ITT Inc. is a diversified manufacturer of highly engineered critical components and customized technology solutions for the transportation, industrial, and energy markets. We manufacture components that are integral to the operation of systems and manufacturing processes in these key markets. Our products enable functionality for applications where reliability and performance are critically important to our customers and the users of their products.

Our businesses share a common, repeatable operating model centered on our engineering capabilities. Each business applies its technology and engineering expertise to solve our customers’ most pressing challenges. Our applied engineering provides a valuable business relationship with our customers given the critical nature of their applications. This in turn provides us with unique insight to our customers’ requirements and enables us to develop solutions to assist our customers in achieving their business goals. Our technology and customer intimacy produce opportunities to capture recurring revenue streams, aftermarket opportunities and long-lived platforms from original equipment manufacturers (OEMs).

Our product and service offerings are organized into three reportable segments: Motion Technologies (MT), Industrial Process (IP), and Connect & Control Technologies (CCT). See Note 3, Segment Information, to the Consolidated Condensed Financial Statements for a summary description of each segment. Additional information is also available in our 2023 Annual Report within Part I, Item 1, “Description of Business.”

All comparisons included within Management’s Discussion and Analysis of Financial Condition and Results of Operations refer to the comparable three and six months ended July 1, 2023, unless stated otherwise.

Macroeconomic Conditions

During the second quarter of 2024, there has been continued uncertainty in the global economy, which has been, and will continue to be, influenced by a number of external factors, which are described below.

Israel-Hamas Conflict

Throughout 2024, the Israel-Hamas conflict, which escalated in October 2023, has been ongoing. Our operations in Israel are limited to Habonim Industrial Valves and Actuators Ltd. (Habonim), which we acquired in April 2022 and is part of our IP segment. While there has been no material impact on our business to date, further escalation of this conflict, or an escalation of the conflict between Israel and Hezbollah in southern Lebanon, could result in supply chain disruptions, inflation, workforce disruptions, demand fluctuations, or the inability to fulfill customer requests in the region. We are closely monitoring this developing situation, and are unable to reasonably estimate any future impacts on our business and financial results at this time.

Inflationary Pressures

Since 2020, the cost of energy and of raw materials we use in our production processes, including commodities such as steel, oil, copper, and tin, have significantly increased. The rising prices are mainly a result of supply chain disruptions primarily caused by the COVID-19 pandemic and the ongoing Russia-Ukraine and Israel-Hamas conflicts.

In 2022 and 2023, central banks around the world raised interest rates to counter inflation. Higher interest rates have increased our cost of debt and could adversely impact consumer behavior, including demand for our products.

The manufacturing industry continues to experience a skilled labor shortage, which has created difficulties in attracting and retaining factory employees and has resulted in higher labor costs.

Global macroeconomic conditions have led and may continue to lead to decreased demand for our products, increased costs, and reduced operating margins. We have been able to offset most of these negative impacts through pricing actions and productivity savings, which we continue to pursue. Future impacts on our business and financial results as a result of these conditions are not estimable at this time, and depend, in part, on the extent to which these conditions improve or worsen, which remains uncertain. For additional discussion of the risks related to global macroeconomic conditions, see Part I, Item IA, “Risk Factors” in our 2023 Annual Report.

EXECUTIVE SUMMARY

The following table provides a summary of key performance indicators for the second quarter of 2024 as compared to the second quarter of 2023.

*Represents a non-GAAP financial measure

Further details related to these results are contained elsewhere in the Discussion of Financial Results section. Refer to the section titled “Key Performance Indicators and Non-GAAP Measures” for definitions and reconciliations between GAAP and non-GAAP metrics, including organic revenue, adjusted operating income, adjusted operating margin, and adjusted EPS.

Our second quarter 2024 results are summarized below:

•Revenue of $905.9 increased by $72.0 due to higher sales volume, particularly within MT’s Friction original equipment (OE) and KONI businesses, CCT’s connectors and components businesses, and IP’s aftermarket business. In addition, the acquisitions of Svanehøj and Micro-Mode contributed $35.0 to total revenue growth. The increase in revenue during the period was partially offset by unfavorable foreign currency translation of $12.6.

•Operating income of $159.0 increased by $17.0 due to higher sales volume and productivity savings. The increase in operating income was partially offset by higher material, labor and overhead costs, stemming from continued supply chain challenges and cost inflation, higher strategic growth investments, and one-time prior period benefits of $7.2 and $3.7, respectively, related to the sale of a product line and the recovery of lease termination costs.

•Income from continuing operations was $1.45 per diluted share, an increase of $0.14 as compared to the prior year, primarily due to higher operating income, as discussed above. Adjusted income from continuing operations was $1.49 per diluted share, an increase of $0.16 as compared to the prior year.