Q2 2024 ITT Inc Earnings Call

Mark Macaluso: Join me this morning in the, Joining me this morning in Stanford are Luca Savi, Unknown Executive Office; Emmanuel Caprais, Chief Financial Officer; Today's call provides these financial results for the 3-month period ending June 29, 2021. Before we begin, please refer to slide 2 of today's presentation, for Non-Gas Funding. The recognition of such measures is the most comparable gap..., both of which are available.

Speaker Change: Thank you Amy and good morning. Joining me this morning in Sanford are Luca Savi, Chief Executive Officer and President, and Emmanuel Caprais, Chief Financial Officer.

Unknown Executive: Today's call will provide these financial results for the three-month period ending June 29th, 2024, which we announced this morning. Before we begin, we'd refer to slide two of today's presentations, where we note that today's comment, which was forward-looking statements in relation to our current expectations. Actual results may differ between when you do several risks and uncertainty, including those described in our 2020 annual report on the fourth decade, and other recent SD-Filons.

Speaker Change: Today's call provides these financial results for the three-month period ending June 29th, 2024, which we announced this morning.

Speaker Change: Before we begin, please refer to slide 2 of today's presentation where we note that today's comments include forward-looking statements that are based on our current expectations.

Speaker Change: Actual results may differ materially due to several risks and uncertainties.

Speaker Change: including those described in our 2023 Annual Report on Form 10-K .

Unknown Executive: Step, where otherwise noted, the second quarter results you present this morning will be compared to the second quarter of 2023 and include certain non-GAF financial measures. The recommendation on such measures, the most comparable gas figures, our details on pressure, and the dependence on our regulations, both of which are available on our website.

Speaker Change: and other recent STC filings. Except for otherwise noted, the second quarter results we present this morning will be compared to the second quarter of 2023 and include certain non-GAAP financial measures.

Speaker Change: The reconciliation of such measures, the most comparable gap figures, our details in our press release, and the appendix to our presentation, both of which are available on our website.

Luca Savi: With that, it's out my pleasure to celebrate, Luca, for begin on 5-3. Thank you, Mark, and good morning. I would like to begin by thanking all ITTers for an exceptional performance again in the second quarter, and our stakeholders for their ongoing support of ITT. The second quarter was a milestone for ITT, aligned with our strategic priorities of operational and financial performance, and the active capital deployment. This quarter we won significant commercial awards, continued to deliver margin expansion, utilized a strong balance sheet to return capital to shareholders, and took steps to reshape the ITT portfolio towards higher growth and higher margin businesses.

Luca Savi: With that, it's now my pleasure to turn the call over to Luca, who will begin on slide 16. Thank you, Mark, and good morning. I would like to begin by thanking all IT tiers for an exceptional performance again in the second quarter and our stakeholders for their ongoing support of IT. They utilized a strong balance sheet to return capital to shareholders and took steps to reshape the ITT portfolio towards higher growth and higher margins.

Speaker Change: With that, it's now my pleasure to turn it over to Luca who will begin on slide three.

Luca Savi: Thank you, Mark, and good morning.

Luca Savi: I would like to begin by thanking all ITTers for an exceptional performance again in the second quarter, and our stakeholders for their ongoing support of ITT.

Luca Savi: The second quarter was a milestone for ITT, aligned with our strategic priorities of operational and financial performance and effective capital deployment.

Luca Savi: This quarter we won significant commercial awards, continued to deliver margin expansion, utilized a strong balance sheet to return capital to shareholders, and took steps to reshape the ITT portfolio towards higher growth and higher margin businesses.

Luca Savi: Let's start with a few highlights on Q2. We continue to grow and expand margin in our core businesses with several record achievements. We won significant new awards in friction, corny, industrial connectors, and in Svanehoi, our latest acquisition, we expanded our backlog and further solidified our long-term growth trajectory. We generated about market top-line growth with strong performances in aerospace and defense, friction, and short cycle flow. We drove significant margin expansion at Motion Technologies and CCT, as both reached margin levels close to 19% of this quarter. Collectively, we drove 12% adjusted EPS growth to a new quarterly EPS record of $1.49, while driving a significant acceleration in free cash flow.

Luca Savi: Let's start with a few highlights from Q2. We won significant new awards in FriXion, Kony, Industrial Connectors, and in Svanehoy, our latest acquisition. We expanded our backlog and further solidified our long-term growth trajectory; we generated above market top line growth with strong performances in aerospace and defense, friction, and short cycle flow. We drove significant margin expansion at Motion Technologies and CCT, as both reached margin levels close to 19% this quarter.

Luca Savi: Let's start with few highlights on Q2.

Luca Savi: We continue to grow and expand margin in our core businesses.

Luca Savi: with several record achievements.

Luca Savi: We won significant new awards in FriXion, KONI, Industrial Connectors, and in Svanehoy, our latest acquisition, we expanded our backlog and further solidified our long-term growth trajectory.

Luca Savi: We generated above-market top-line growth with strong performances in aerospace and defense, friction, and short cycle flow.

Luca Savi: We drove significant margin expansion at Motion Technologies and CCT, as both reached margin levels close to 19% this quarter.

Luca Savi: Collectively, we drove 12% adjusted EPS growth to a new quarterly EPS record of $1.49, whilst driving a significant acceleration in free cash. Connectos grew 14% and 5% sequentially to a new record quarterly revenue. Another strong quarter for Connectos. Well done, Arthur.

Luca Savi: Collectively, we dropped 12% adjusted EPS growth to a new quarterly EPS record of $1.49, whilst driving a significant acceleration in free cash flow.

Luca Savi: Before we get into the details, I want to pause and acknowledge that at the ITT level, on a light-for-light basis, we have now surpassed a long-term margin target in aggregate two years ahead of the 2026 target date.

Luca Savi: Before we get into the details, I want to pause and acknowledge that at the ITT level, on a like-for-like basis, we have now surpassed our Long-Term Margin Targeting Aggregate two years ahead of the 2026 target date.

Luca Savi: Now let's get into the details. On revenue, we grew 9% driven by higher volumes across all segments and held by that position of Svanehoi, which contributed 4 points of growth. CCT grew double digits organically, driven by industrial connectors and air and defense components. Connectors grew 14% and 5% sequentially to a new record quarterly revenue; another strong quarter for connect.

Luca Savi: Now let's get into the details.

Luca Savi: On revenue, we grew 9%, driven by higher volumes across all segments, and helped by the acquisition of Svaneoil, which contributed 4 points of growth.

Luca Savi: CCT grew double-digit organically, driven by industrial connectors and aero and defense components.

Luca Savi: Reuters, Weldard, Arth, and Team. Motion technologies grew 6% organically. Frictionary outperformed by over 600 basis points, and in China, the outperformance was nearly 900 basis points. We expect this will continue in the future, as we execute 40 starts of production and delivered a 100 basis points expansion to 18%. IP was again above its long-term target of 20%, and it was up 20 basis points sequentially. Empty expanded margin to 180 basis points and 60 basis points sequentially. This year, we continue to drive an exceptional recovery empty margin led by friction and corny, which will put us above the 18% pressure for 2024.

Luca Savi: We expect this will continue in the future, as we executed 40 starts of production this quarter in China and nearly 100 SOPs in just the first half of Margin. We delivered a 100 basis points expansion to 18%. IP was again above its long-term target of 20%, and it was up 20 basis points sequentially. This is a testament to the relentless strive to generate productivity and value for our products and services. And finally, CCT is also rapidly approaching 19% margin, driven by volume and price.

Luca Savi: We expect this will continue in the future, as we executed 40 starts of production this quarter in China and nearly 100 SOPs in just the first half.

Luca Savi: On margin, we delivered a 100 basis points expansion to 18%.

Luca Savi: This is a testament to the relentless drive to generate productivity and value for our product and services. And finally, CCT is also rapidly approaching 19% margin, driven by volume and price. Included in this was a 300 basis point improvement in connector margin, with 42% incrementals.

Luca Savi: This is a testament to the relentless strive to generate productivity and value for our products and services.

Luca Savi: Moving to capital deployment and the ITT portfolio, today we announce the signing of an agreement to acquire inter-connect solutions provider Tissaria for approximately $475 million, while also having completed the divestiture of automotive supplier Wolverine, which closed in July. These transactions are the foundation of our portfolio-reshaping strategy. With CISARIA, ITT acquires a leading provider of customized mission-critical connectivity solutions for defense and aerospace. CISARIA will expand ITT's exposure to defense inter-connect products with sole source position on leading platforms, high customer intimacy, and expertise in harsh environment applications.

Luca Savi: Moving to Capital Deployment and the ITT Portfolio, today we announce the signing of an agreement to acquire Interconnect Solutions provider Quesaria for approximately $475 million, while also having completed the divestiture of automotive supplier Wolverine, which closed in July.

Luca Savi: These transactions are the foundation of our portfolio reshaping strategy. I'll discuss this acquisition more in a moment. This will allow us to structurally shift ITT's portfolio to higher growth, higher margin businesses, inflow, and connection. As a result of this reshaping, Automotive will only represent 30% of the total ITP portfolio.

Luca Savi: These transactions are the foundation of our portfolio reshaping strategy.

Luca Savi: I'll discuss this acquisition more in a moment. The Wolverine transaction follows two other non-core divestitures executed last year. These will allow us to structurally shift ITT's portfolio to higher growth, higher margin businesses in flow and connectors. As a result of this reshaping, automotive will only represent 30% of the total ITT portfolio, and this is friction, a highly differentiated, unique and high margin-breaking business. Back to our results, given the strong performance in Q2, we are sticking to our full-year guidance commitment despite the loss of roughly 15 cents of income from the Wolverine divestiture.

Luca Savi: I'll discuss this acquisition more in a moment.

Luca Savi: This will allow us to structurally shift ITT's portfolio to higher growth, higher margin businesses in flow and connectors.

Luca Savi: As a result of this reshaping, Automotive will only represent 30% of the total IT portfolio, and this is friction, a highly differentiated, unique, and high margin breaking business.

Luca Savi: And this is friction, a highly differentiated, unique, and high-margin break. Back to our results. Given the strong performance in Q2, we are sticking to our full year guidance commitment despite a loss of roughly 15 cents of income from the Waldron divestment. I continue to be humbled by the dedication our teams show each day to deliver these results for our customers and for our shareholders. This quarter, our teams also secured several exciting commercial awards, demonstrating once again ITT's differentiation.

Luca Savi: Back to our results. Given the strong performance in Q2, we are sticking to our full-year guidance commitment despite a loss of roughly 15 cents of income from the Waldring divestiture.

Luca Savi: I continue to be humbled by the dedication our teams show each day to deliver these results for our customers and for our shareholders. This quarter, our teams also secure several exciting commercial awards, demonstrating once again ITT's differentiation. In CCT, connector distribution orders were up 13%, a second consecutive quarter of profitable growth. On the OEC side, we are in the final stages of DOD approval for Net Warrior, a critical soldier war communication. system. We already secured connector content for this application to provide critical situational awareness in combat operations. This is one more example of the growing decides modernization macro-train we're exposed to, reinforced by the acquisition of Kessaria.

Luca Savi: I continue to be humbled by the dedication our teams show each day to deliver these results for our customers and for our shareholders.

Luca Savi: In CCT, connector distribution orders were up 13%, a second consecutive quarter of profitable growth. On the OE side, we are in the final stages of DoD approval for NetWarrior, a critical soldier-worn communication. We have already secured connector content for this application to provide critical situational awareness in combat operations. This is one more example of the growing defense modernization macro trend we're exposed to. Reinforced by the Acquisition of Caesare, moving

Luca Savi: In CCT, connector distribution orders were up 13%, a second consecutive quarter of profitable growth. On the OE side, we are in the final stages of DoD approval for NetWarrior, a critical soldier-worn communications system.

Luca Savi: Moving to empty, friction is already one nearly 60% of our full year expected awards, and also in China, the team surpassed 60% of its full year target.

Luca Savi: Friction has already won nearly 60% of our full-year expected awards, and also in China, the team surpassed 60% of its full-year target. Well done, Zulai and Team China. We're also taking steps to penetrate India, where we have no manufacturing presence but recently won a third platform with a leading local OEM. In IP, orders were up slightly due to Svane Hoy, despite a tough competition from large decarbonization awards in Q2 2020. Legacy PAM project orders continue at elevated levels, and they're up 9% sequentially.

Speaker Change: Moving to empty.

Speaker Change: Friction has already won nearly 60% of our full-year expected awards and also in China the team surpassed 60% of its full-year target.

Luca Savi: Well done, Zulai and team China. We're also taking steps to penetrate India, where we have no manufacture in presence but recently won a third platform with a leading local OEM. In IP, orders were absolutely due to Zvanei, despite the tough compare from large decarbonization awards in Q2 2023. Legacy PAM project orders continue at elevated levels and are up 9% sequentially. Our project planner was up again in Q2, driven in part by green projects, which continue to be strong.

Speaker Change: In IP, orders were up slightly due to Svanehoj, despite a tough compare from large decarbonization awards in Q2 2023.

Luca Savi: Our project signer was up again in Q2, driven in part by the Green Project, and continues to be strong. In June, I was fortunate to be in Bonneman, Germany, with the.., and together we reviewed our progress on green market penetration. Decarbonization is a large opportunity for Bornemann as we deploy our multi-phase pump technology, building on previous wins with major energy costs. This is thanks in part to Svane Hoy.

Speaker Change: Our project signer was up again in Q2, driven in part by green projects.

Luca Savi: In June, I was fortunate to be in Bonneman, Germany, with the team, and together we review our progress on green market penetration. Decarbonization is a large opportunity for Bonneman as we deploy our multi-phase PAM technology, building on previous wins with major energy customers. To summarize, at the ITT level, this quarter we won over 900 million dollars of orders, and we deliver a book to be of 1.03. This is thanks in part to Zvanei.

Speaker Change: which continue to be strong.

Speaker Change: and together we review our progress on green market penetration.

Speaker Change: Decarbonization is a large opportunity for Bornemann as we deploy our multi-phase pump technology, building on previous wins with major energy customers.

Speaker Change: To summarize, at the ITT level, this quarter we won over 900 million dollars of orders and we delivered a book-to-bill of 1.03.

Luca Savi: So let's look to slide forward to talk more about Zvanei and two exciting commercial awards that further support our long-term growth trajectory. As we share previously, this Zvanei acquisition bolsters our leadership in the green energy transition. This quarter, Zvanei delivered strong growth once again, with orders up nearly 40%. Zvanei cryogenic deep-well fuel pumps were selected for eight box cars for a major European shipping company. These are the first commercial merchant vessels designed to use ammonia. Today, this type of vessel is powered by a crude oil mixture. However, Zvanei's pump will future-proof the vessels in anticipation of transitioning to lower carbon fuel.

Luca Savi: So let's move to slide four to talk more about Svane Hoy and two exciting commercial awards that further support our long-term growth trajectory. As we shared previously, the Zanio acquisition bolsters our leadership in the green energy transition because these are the first commercial merchant vessels designed to use ammonia.

Svanehoy: This quarter, Svanehoy delivers strong growth once again, with orders up nearly 40%.

Speaker Change: Svanehoy cryogenic deep-well fuel pumps were selected for eight box cargoes for a major European shipping company.

Luca Savi: Today, this type of vessel is powered by a crude oil mixture. However, Svane Oil's pump will future-proof the vessel in anticipation of transitioning to lower carbon. Vanahoy is leading the way for ammonia pumps on commercial vessels like this. Additionally, Svanehj will provide cargo pump systems for four liquefied CO2 carriers serving the Northern Lights Carbon Capture Project in Norway.

Speaker Change: Today, this type of vessel is powered by a crude oil mixture, however, Svane Oil's pump will future-proof the vessels in anticipation of transitioning to lower carbon fuels.

Luca Savi: Zvanei is leading the way for ammonia pumps on commercial vessels like this. Additionally, Zvanei will provide cargo pump systems for four liquefied CO2 carriers serving the Northern Lights Carbon Capture Project in Norway. This project is a major element of Europe's climate solution and decarbonization efforts. The carriers will transport carbon capture from industrial emitters to a terminal before the CO2 is pumped more than one mile beneath the North Sea. Zvanei has also won awards on liquefied CO2 carriers elsewhere in the world, including in China.

Speaker Change: Additionally, Svanehøj will provide cargo pump systems for four liquefied CO2 carriers serving the Northern Lights Carbon Capture Project in Norway.

Luca Savi: This project is a major element of Europe's climate solution and decarbonization effort. The carriers will transport carbon capture from industrial emitters to a terminal, before the CO2 is pumped more than one mile beneath the North. Vaneoy has also won awards on liquefied CO2 carriers elsewhere in the world, including in China. In May, I spent time with Soren and Tim in Harvard.

Speaker Change: Svane Oy has also won awards on liquefied CO2 carriers elsewhere in the world, including in China.

Luca Savi: In May, I spent time with Sora and team in the out of Denmark. After reviewing this project together, it is exciting to see how we have built such deep trust with customers through technical expertise. Flewless Execution, and Rapid Response. The team has an incredible command of the business's growth drivers and the analytics around predicting aftermarket. Vanneau is supposed to become the platform for growth we envisioned at the onset of the deal.

Luca Savi: After reviewing these projects together, it is exciting to see how we have built such deep trust with customers through technical expertise, flawless execution, and rapid response. Now, let's turn to page 5 to discuss ITT's strategic portfolio reshaping and capital allocation, higher growth, and higher margin segments, where we can deliver more value. This began in 2022 with the acquisition of Habonim, which grew our VALS portfolio by nearly 50%, in CCT to hone our focus on the core connector build.

Speaker Change: The team has an incredible command of the business's growth drivers and the analytics around predicting aftermarket.

Luca Savi: Now let's turn to page five to discuss ITT's strategic portfolio shaping and capital allocation. On the M&A front, we have been working to shift our business to higher growth and higher margin segments where we can deliver more value. This began in 2022 with the acquisition of Happening, which grew our vast portfolio by nearly 50%. The results from the acquisition exceeded our expectations from day one. In 2023, we acquired a micro-mod to expand our portfolio of our methods and RS connectors while they met into non-core business in CCT to hold our focus on the core connector business.

Speaker Change: Now let's turn to page 5 to discuss ITT's strategic portfolio reshaping and capital allocation.

Speaker Change: On the M&A front, we have been working to shift our business.

Speaker Change: This began in 2022 with the acquisition of Habonim, which grew our VALVE portfolio by nearly 50%.

Speaker Change: The results from the acquisition exceeded our expectations from day one.

Speaker Change: In 2023, we acquire Micromot to expand our portfolio of hermetics and RF connectors while divesting to non-core business systems.

Luca Savi: Finally, we acquired Roger Ray-Pamman of Factor's Vanneau at the beginning of 2024, which added a complementary portfolio of highly-engineered marine flow product for the clean energy transition.

Luca Savi: Finally, we acquired Cryogenic Pump Manufacturers Vallejo at the beginning of 2024, which added a complementary portfolio of highly engineered marine flow products for the clean energy transition. And today, we announce an agreement to acquire Quesada. Tesarius Interconnect Solution Support Applications for Avionics, sensors, communications, and networking on marquis platforms with defense prime contractors and aerospace OEMs.

Speaker Change: Finally, we acquired Cryogenic Pump Manufacturers Vaneo at the beginning of 2024, which added a complementary portfolio of highly engineered marine flow products for the clean energy transition.

Luca Savi: And today we announce an agreement to acquire Tissaria. Tissaria's interconnect solution support applications for avionics, sensors, communications, and networking on marquee platforms with defense prime contractors and aerospace OEMs. The company's capabilities in customized interconnect solutions and led to content on key platforms and long-standing relationships with blue cheap defense customers. There is a lot to like about this business. First Tissaria's growth outlook is supported by leading positions on a wide range of sold after AND programs, of which roughly 70% are sold or primary source positions. The company operates primarily in nearly $7 billion North American cable assembly the science market that is expected to grow at a high single digit CAGR to 2028.

Speaker Change: Tesarius Interconnect solutions support applications for avionics, sensors, communications and networking on marquee platforms with Defence Prime contractors and aerospace OEMs.

Luca Savi: The company's capabilities in customized interconnect solutions have led to content on key platforms and long-standing relationships with blue-chip defense customers. There is a lot to like about this business. First, Tesario's growth outlook is supported by leading positions on a wide range of sought-after A&E programs, of which roughly 70% are sole or primary source programs. Quesaria is also a leader in harsh environment cabling applications, and will benefit from the shift to fiber.

Speaker Change: There is a lot to like about this business.

Speaker Change: The company operates primarily in nearly $7 billion North American cable assembly defense market that is expected to grow at a high single-digit CAGR through 2028.

Luca Savi: Second Tissaria is also a leader in our environment cable application and will benefit from the shift to fiber. In addition, macro tailwinds related to the rising global defense budget and rapid modernization of defense systems are expected to drive demand for Tissaria's solutions. Third, the company has grown revenue over 20% on average over the past seven years at attractive EVDA margins, which we believe you can enhance further as part of ITT. Finally, we anticipate relising commercial synergies from a combined ITT Cannon and Kessaria go to market solutions that will drive further market share gains. Beyond Kessaria, we continue to cultivate a reach actionable pipeline of targets in flow and connectors, while also putting the balance sheet to work on other capital deployment priorities.

Speaker Change: Second.

Speaker Change: In addition, macro tailwinds related to the rising global defense budget and rapid modernization of defense systems are expected to drive demand for Caesarea's solutions.

Speaker Change: Third, the company has grown revenue over 20% on average over the past 7 years at attractive EBITDA margins, which we believe you can announce further as part of ITT.

Emmanuel Caprais: Finally, we anticipate realizing commercial synergies from a combined ITT-Canon and Kisaria go-to-market solution that will drive further market share gains. Beyond Caesarea, we continue to cultivate a rich, actionable pipeline of targets in-flow and connected, while also putting the balance sheet to work on other capital deployment priorities. In summary, the organic growth and margin expansion generated in Q2 and the portfolio shift we executed will continue to enhance value for our shareholders. Now, let me turn the call over to Emmanuel to discuss this result in more detail. Thank you, Luca, and good morning.

Speaker Change: Finally, we anticipate realizing commercial synergies from a combined ITT-Canon and Kisaria go-to-market solution that will drive further market share gains.

Luca Savi: In fact, in Q2 we repurchased $79 million of ITT shares and paid down nearly 40 million dollars of debt, thanks to the strong cash. In summary, the organic growth and margin expansion generated in Q2 and the portfolio shift we executed will continue to enhance value for our shareholders.

Speaker Change: In summary, the organic growth and margin expansion generated in Q2 and the portfolio shift we executed will continue to enhance value for our shareholders.

Emmanuel Caprais: Now let me turn the call over to Emmanuel to discuss the results in more detail. Thank you, Luca, and good morning. Let's start with revenue. Volume drove most of the growth this quarter, with roughly one point of price led by CCT and IT. In CCT, industrial connectors were up nearly 40 percent, largely driven by distribution. Aerospace and defense components were up 10 percent as a CCT team drove improvements in supply chain and productivity. However, we're starting to see a slight slowdown in commercial original equipment demand from Boeing, whereas aftermarket activity continues to be very strong.

Speaker Change: Now, let me turn the call over to Emmanuel to discuss the results in more detail. Thank you, Luca. And good morning. Let's start with revenue.

Emmanuel Caprais: Volume drove most of the growth this quarter, with roughly one point of price led by the [inaudible] largely driven by [inaudible] However, we're starting. Slight slowdown in commercial original equipment demand. RealGroove 11% on ShareGrid, especially in China, and Friction OE Group 5, of Outperformance. Well, pump projects were rough.

Emmanuel Caprais: In CCT, industrial connectors were up nearly 40%, largely driven by distribution.

Speaker Change: to have improvement in supply chain and productivity.

Emmanuel Caprais: In MT, rail grew 11 percent on share gains, especially in China and Eastern Europe, while friction OE grew 5 percent with over 600 basis points of outperformance versus global auto production. Finally, friction's aftermarket was up 6 percent, building on the growth into one. In IP, short cycle revenue grew 4 percent, bolstered by strong baseline parts and service, while pump projects were roughly flat. On profitability, margin expansion was primarily driven by higher volume and productivity, particularly in MT, resulting in 86 percent incremental margin. CCT made significant progress on pricing this quarter and nearly reached 19 percent margin.

Emmanuel Caprais: Finally, Friction's aftermarket was up 6%, building on the growth in Q1.

Emmanuel Caprais: On profitability, margin expansion was primarily driven by higher volume and productivity, particularly in MT, resulting in 86%, applying a legacy IT margin above. The adjusted incremental margin for the quarter was approximately 55%. We drove points of productivity and 100 points of operating efficiency, more than offset 60 basis points of labor inflation and a 70%.. on a product line sale in the prior earnings, higher interest expense related to the acquisition of Zvanahoy and a higher adjusted effective tax rate, more than offset by volume and margin expansion.

Speaker Change: On profitability, margin expansion was primarily driven by higher volume and productivity, particularly in MT.

Speaker Change: resulting in 86% incremental margin.

Speaker Change: Thank you.

Emmanuel Caprais: Finally, IT again exceeded 20 percent margin, overcoming the 270 basis point impact from the Zenohoid acquisition, which implies a legacy IT margin above 23 percent. At ITT level, excluding the Zenohoid delusion, adjusted incremental margin for the quarter was approximately 65 percent. We drove 50 basis points of productivity and 180 basis points of operating leverage, which more than offset 60 basis points of labor inflation and a 70 basis point gain on a product line sell in the prior. On earnings, higher interest expense related to the acquisition of Zenohoid and a higher adjusted effective tax rate was more than offset by volume and margin expansion.

Speaker Change: Finally, IP again exceeded 20% margin, overcoming the 270 basis point impact on the Zennehoy acquisition, which implies a legacy IP margin above 23%.

Speaker Change: We drove 50 basis points of productivity and 180 basis points of operating leverage.

Speaker Change: On earnings, higher interest expense related to the acquisition of Zwanahoy and a higher adjusted effective tax rate was more than offset by volume and margin expansion.

Emmanuel Caprais: Finally, we grew 3 cash flow 9 percent year today, driven by higher net income and improved inventory management. Working capital was a source of cash driven by significant inventory reductions in IP and TC. We expect to continue this momentum on a path to approximately 455 million dollars for the foyer. As for the Wolverine Investiture, we're deploying the cash proceeds to pay down debt. All in, here to a strong result; there was confidence in achieving our outlook in the second half, even considering the impact of the Wolverine Investiture.

Speaker Change: Finally, we grew free cash flow 9% year-to-date, driven by higher net income and improved inventory management.

Emmanuel Caprais: Working capital was a source of capital through significant inventory reductions in IP and CCD. We expect to continue this momentum, on a path to approximately $455 million. As for the Wolverine divestiture, we're deploying the cash proceeds to pay down debts. All in, these two strong results give us confidence in achieving our outlook in the sector, considering the impact.

Speaker Change: We expect to continue this momentum on a path to approximately $455 million for the forum.

Speaker Change: As for the Wolverine divestiture, we're deploying the cash proceeds to pay down debt.

Emmanuel Caprais: I turn to the adjusted EPS bridge. I just want to make a few points on this slide: volume and price. You have an incremental 22 cents of earnings, while net productivity contributed 5 cents. This is a dynamic we have seen for several consecutive quarters and speaks to the quality of the results. We also realize a three-cent benefit from eminence. This performance allowed us to overcome three cents of delusion from temporary acquisition and authorization, and six cents for the prior gain hotel. Wrapping up the bridge, higher interest expense, foreign currency, a higher adjusted tax rate, net of a lower share count, amounted to 5 cents headwind this quarter.

Emmanuel Caprais: I just want to make a few points on the volume and price of incremental earnings while Net Productivity Contributors fight wrapping up the bridge higher on slide eight to discuss our 2024. We are sticking to our four-year revenue forecast. We expect to overcome the impact from the Wolverine development. Testament to the resilience of Idaho.

Speaker Change: I just want to make a few points on this slide.

Speaker Change: Volume and price drove an incremental $0.22 of earnings while net productivity contributed $0.05.

Speaker Change: We also realized a three-cent benefit from M&A.

Speaker Change: This performance allowed us to overcome 3 cents of dilution from temporary acquisition of authorization.

Speaker Change: and Sixth Sense for the Prior Gain Hotel.

Speaker Change: Wrapping up the bridge, higher interest expense, foreign currency, a higher adjusted tax rate, net of a lower share count amounted to 5 cents headwind this quarter.

Emmanuel Caprais: Let's move to slide 8 to discuss our 2024 guidance. We are sticking to a four-year revenue operating margin, EPS, and free cash for guidance, after a strong result in the process. We expect to overcome the impact from the Wolverine divestiture, which is a testament to the resilience of the ITT. We expect revenue growth to be driven by continued outperformance in friction OE, aftermarket, IP projects, and short cycle, and a continued recovery in industrial connected. On operating margin, we expect to continue sequential increase in NTCT or IPs expected to remain above 20%. Lastly, we expect a strong second half cash performance, many due to further improvements in working capital.

Speaker Change: We expect to overcome the impact from the Wolverine divestiture, which is a testament to the resilience of the ICT team.

Emmanuel Caprais: We expect revenue growth to be driven by continued outperformance in frictional. On Operating Margin, we expect to continue to see sequential improvement; our IP is expected to remain above 20%. It's a quickie at the four-year EPS bridge for our ongoing operation, in addition to the 10 cent raise in the first quarter. This is a test of the strength of the core portfolio and our ability. Turn the call back to Luca on slide 10. We deploy capital to grow our business and drive greater value creation, and we're reshaping IT's portfolio to higher margins and higher growth.

Speaker Change: We expect revenue growth to be driven by continued outperformance in friction OE, aftermarket, IP projects and short cycle, and a continued recovery in industrial connections.

Speaker Change: On operating margin, we expect a continued sequential increase in NT and TCT.

Speaker Change: IP is expected to remain above 20%.

Emmanuel Caprais: It's a quickly at the four-year EPS bridge. As you can see, we are sticking to a four-year commitment. Our EPS excluding the Wolverine divestiture is improving given the strong for sub-performance and our expectation for a strong back-off. In essence, for our ongoing operations, we are raising our EPS report. This is in addition to the Tencent raise in the first quarter. This is a testament to the strength of the core portfolio and our ability to execute.

Speaker Change: It's a quickie at the four-year EPS bridge.

Speaker Change: As you can see, we are sticking to our four-year commitments. Our EPS, excluding the Wolverine divestiture, is improving, given the strong first-half performance and our expectation for a strong back-off.

Speaker Change: In essence,

Speaker Change: for our ongoing operations.

Speaker Change: We are raising our EPS midpoint.

Speaker Change: This is in addition to the $0.10 raise in the first quarter. This is a testament to the strength of the core portfolio and our ability to execute.

Emmanuel Caprais: Before I hand it back to Luca, I wanted to briefly discuss our outlook for the third quarter. We expect organic revenue growth will be in the mid-single-digit range across all segments, and margin should be roughly in line with YouTube. As a result, we expect EPS growth to be in the low-single-digit range, including the impact of the Wolverine divestiture. This does not include the impact of the Kessaria acquisition, which is expected to close later in Q2.

Speaker Change: We expect organic revenue growth will be in the mid-single-digit range across all segments.

Speaker Change: As a result, we expect EPS growth to be in the low single-digit range, including the impact of the world grain divestiture.

Speaker Change: This does not include the impact of the Caesarea acquisition, which is expected to close later in Q3.

Luca Savi: Let me turn the call back to Luca on flight 10 to Rapa. Thank you, Manuel. As you can see, it was a very busy and exciting time at IDT. Up until Tuesday night, when we signed Kessaria.

Speaker Change: Let me turn the call back to Luca on slide 10 to wrap up.

Luca Savi: Now, before moving to Q&A, a few points. In Q2, we grew our core and continued to upperform in many markets. We achieved a long-term David. We deploy capital to grow our business and drive great value creation. And we're reshaping ITS for you to hire margin and higher growth businesses.

Luca Savi: Now, before moving to Q&A, a few points. In Q2, we grew our core and continue to outperform in many markets.

Speaker Change: We achieved a long-term ITT margin target, with MT and CCT approaching 19% and IP above 20% two years ahead of the target date.

Speaker Change: We deploy capital to grow our business and drive greater value creation.

Luca Savi: As always, I would like to thank each of you for joining today's call. We appreciate your continued support and interest.

Emmanuel Caprais: As always, I would like to thank each of you for joining today's call. We appreciate your continued support and interest. Amy, please open the line for Q&A. Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 11 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 11.

Unknown Executive: Amy, please open the line for Q&A. Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 11 on your touch-tone phone. If at any point your question has been answered, you may remove yourself from the Q by pressing Star 11. Again, we do ask that while you pose your questions. You pick up your handset to provide optimal sound quality. Please limit yourself to one question and one follow-up. Thank you.

Speaker Change: Thank you. The floor is now open for questions. At this time, if you have a question or comment, please press star 11 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 11. Again, we do ask that while you pose your questions.

Operator: Again, we do ask that while you pose your questions, you pick up your handset to provide optimal sound quality. Please limit yourself to one question and one follow-up. Thank you. And our first question comes from the line of Damian Karas at UBS. Your line is open.

Damian Karas: And our first question comes from the line of Damian Karas at UBS. Your line is open. Hey, good morning, everyone. Congratulations. Good morning. Congrats on the transactions. Thank you. Yeah, so maybe we can open up with the Queseria deal. We'd love to hear, Luca, you know, kind of how you see that fitting in with the existing A&D and their connection of business.

Speaker Change: Thank you. And our first question comes from the line of Damian Karas at UBS. Your line is open.

Damian Karas: Thank you. Would love to hear, Luca, kind of how you see that fitting in with the existing A&E interconnection of business. And, you know, are they already up to..., up to your standards, or is there going to require some conversion to the ITT way? And maybe just Emmanuel, if you wouldn't mind just helping kind of unpack the financial impacts on an annualized basis. I know you kind of gave the 15 cents dilution from the Wolverine sale this year, but like, what's a good way to think about on a kind of full year basis, you know, top line down to the EPS impact from the two transactions. Okay, thanks, Damian.

Damian Karez: Thank you.

Damian Karez: We'd love to hear, Luca, you know, kind of how you see that fitting in with the existing A&E Interconnection of Business and, you know, are they already up to...

Luca Savi: And you know, are they already up to your standards, or are going to require some conversion to the ITT way?

Speaker Change: Up to your standards, or is there going to require some conversion to the ITT way?

Emmanuel Caprais: And maybe just a manual, if you wouldn't mind just helping to kind of unpack the financial impacts on an annualized basis. I know you're going to give the $0.15 solution from the Wolverine Sale this year. But what's a good way to think about, on a kind of full year, you know, top line down to the EPS impact from the two transactions? Okay. Thanks, Damian. So when we look at the Russian A&D area, so deathly is aligned with the growing the claims trends. You know, Queseria is a leader in the fiber cable application with the same prime contractors.

Speaker Change: And maybe just Emmanuel, if you wouldn't mind just helping kind of unpack the financial impacts on an annualized basis. I know you kind of gave the 15 cents dilution from the Wolverine sale this year, but...

Speaker Change: Like, what's a good way to think about on a kind of full year, you know, top line down to the EPS impact from the two transactions?

Luca Savi: So when we look at the rationale of Kisaria, it definitely is aligned with the growing defense trends. You know, Kisaria is a leader in the fiber cable application with defense prime contractors. We really like the sole source position that they've gained through the intimacy that they have with the customer. Intimacy comes from flawless execution, as well as the fact that they can develop solutions with the customers. When it comes to the upstander standard, the plants are very well run.

Emmanuel Caprais: Okay, thanks Damian. So, when we look at the rationale of this area, so definitely it's aligned with the growing defense trends.

Speaker Change: you know

Speaker Change: Kesara is a leader in the fiber cable application.

Luca Savi: We really like the source, source position that they gain through the intimacy that they've got with the customer and the company that comes from it. Flowless execution as well as the fact that they could develop solution with the customers. There is a lot of complementarity between the Canon product and Queseria. You go to their plants, you see the Queseria, you know, fiber cabling and the cabling and connectors at the end. Our connectors and the competitors' connectors. And in many cases also Damian, we receive, we have opportunity to bid for a cable assembly operation. And not always, we are able to follow through.

Damian Karez: with Defense Prime Contractors.

Speaker Change: that they've gained through the intimacy that they've got with the customer. Intimacy comes from a flawless execution, as well as the fact that they co-develop solutions with the customers.

Speaker Change: And in many cases also, Damian, we have opportunity to bid for cable assembly operation and not always we are able to follow through. So Kisaria together with Canon, ITCanon, will be very synergistic.

Luca Savi: So Queseria, together with Canon, it will be very synergistic. It's really a great strategic fit when you look at the M&A priorities and the shifting of the portfolio for iron growth, iron market businesses. When it comes to the upstanders, standards, the plants are very well run. I was able to visit the two of their plants, meet a very competent management team, and Tony, Mike, and Mike have been able to run those plants and the business very well indeed. Damian. So this is a business that since 2017 has grown on average 27% in terms of top line.

Speaker Change: When it comes to the AppStandard, the plans are very well run. I was able to visit two of their plans, meet a very competent management team, and Tony, Mike, and Mike have been able to run those plans and the business very well indeed.

Luca Savi: I was able to visit two of their plants and meet a very competent management team. Tony, Mike, and Mike have been able to run those plants and the business very well indeed. And then from a financial standpoint, just to give a little bit of context, business that in 2017 has grown on average 27% in terms of top, bill largely above one. And so for 2024, the expectation in terms of revenue is around $190 million. Then if you look at four of what's happening, the financial impact right now in our guidance. We have to close the deal.

Speaker Change: And from a financial standpoint, just to give a little bit of context, Damian, so this is a business that since 2017 has grown on average 27% in terms of top line.

Luca Savi: They expect to have a 2024 year to be also really strong. They expect a book to build largely above one. And so for 2024, the expectation terms of revenue is around $199 million. With an EBITDA of around 18%. So this will be from a financial standpoint, something that is similar to the profile of Venezuela with a large growth and an EBITDA around 20%.

Speaker Change: They expect to have a 2024 year to be also really strong, they expect a book to bill largely above 1.

Damian Karez: And so for 2024, the expectation in terms of revenue is around $190 million.

Speaker Change: with an EBITDA of around 18%.

Emmanuel Caprais: Then, if you look at what's happening in the year with all those transactions, so obviously the first case area, there's no financial impact right now in our guidance. We have to close the deal and deal because by the end of September. Second, if you think about Wolverine, so we talked about the $0.15 EPS impact for the second half. And that's, you can analyze that; that's pretty much the impact that you're going to get. And then what it means for us, so if you look at our 2024 guidance, so mostly driven by volume, price, and productivity.

Speaker Change: Then, if you look at what's happening in the year with all those transactions, so obviously, the first, Qatari, there's no financial impact right now in our guidance. We have to close the deal, and the deal will be closed by the end of September .

Speaker Change: And that's, you can analyze that, that's pretty much the impact that you're going to get. And then the, what it means for us, so if you look at our 2024 guidance, right? So,

Damian Karas: And so because we were able to really drive those items and aid it a little bit by lower commodity cost, we are able to maintain the four year guidance for 2024 despite the negative impact that we're having in the second half. Okay, that's really helpful. Thanks for all of that.

Luca Savi: [inaudible] So because we were able to really drive those items, a little bit by lower commodity costs, we are able to maintain. Okay, that's really helpful.

Speaker Change: And so, because we were able to really drive those items and aid it a little bit by lower commodity costs, we are able to maintain the four-year guidance for 2024, despite that negative impact that we're going to have in the second half.

Damian Karas: And maybe to just ask you guys about MP and friction, seem to be seeing good growth momentum there. What is up 5% and that's on a tougher compromise year. So you know, fucking kind of, I think some of the broader auto market trends.

Damian Karas: Thanks for all of that. And then maybe I could just ask you guys about MT and friction. They seem to be seeing good growth momentum there, orders up 5%, and that's on a tougher comp from last year. So, you know, bucking kind of, I think some of the broader.

Luca Savi: Automarket Trends. Could you maybe take us on a little bit of a walk around the globe, what you're seeing there, you know, how you're feeling about the rest of the year and what that business looks like heading into 2025? Thanks. Sure. Damian, let me talk about 2024. As you can see, the market in 2024 is probably going to be a little bit worse than what people were projecting one month ago, one quarter ago. The production will probably be around 89 million vehicles, although people were forecasting 90 million vehicles last quarter. That difference is mainly because of Europe.

Luca Savi: Could you just maybe like take up a little bit of a walk around the globe, what you're seeing there, you know, how you're feeling about the rest of the year and what that business looks like heading into 2025. Thanks. Sure, Demia, let me talk about 2024. As you can see, the market in 2024 probably is going to be a little bit worse than what that people were projecting one month ago, one quarter ago. You know, the production would probably be around 89 million vehicles. People were forecasting right 90 million vehicles last quarter. That the difference is mainly because of Europe.

Speaker Change: Sure, Damian, let me talk about 2024. As you can see,

Speaker Change: The market in 2024 probably is going to be a little bit worse than what people were projecting one month ago, one quarter ago. You know, the production will probably be around 89 million vehicles. People were forecasting, right, 90 million vehicles last quarter.

Luca Savi: Europe production is down, probably more. Having said that, we continue to outperform. And it's fair to say that probably our outperformance for the year is going to be better than what we forecasted one quarter ago. So our focus for friction performance has not changed. Look at the performance here to date. They spent the fact that Europe declined here to date 3.5%. We grew and we outperform by 550 basis points. In China, the performance was more here today than 1,600 basis points. And so also outperformance in North America. So why the market probably is it to be worse?

Luca Savi: Europe's production is probably down more. Having said that, it's fair to say that probably our outperformance for the year is going to be better than what we forecasted one quarter ago. Our focus on friction performance has not changed.

Speaker Change: That the difference is mainly because of Europe . Europe production is down probably more. Having said that, we continue to outperform. And it's fair to say that probably our outperformance for the year is going to be better than what we forecasted one quarter ago. So our focus for future performance has not changed.

Luca Savi: Look at the performance year-to-date. Despite the fact that Europe declined by 3.5% year-to-date, we grew, and we outperformed by 550 basis points. In China, their performance was more year-to-date than 1,600 basis points.

Speaker Change: Look at the performance year-to-date. Despite the fact that Europe declined year-to-date 3.5%, we grew and we outperformed by 550 basis points.

Luca Savi: Also, outperformance in North America. While the market probably is going to be worse, friction performance, we are sticking with that, and our performance will be higher than expected. In addition to this, Damian, if I can add, production levels, as Luca was saying, are going down. The inventory levels, at least in Europe and North America, are under control.

Speaker Change: In China, their performance was more here today than 1,600 basis points, and so also our performance in North America. So while the market probably is a little bit worse, friction performance, we are sticking with that, and our performance will be higher than expected.

Damian Karas: Friction performance; we are sticking with that, and our performance will be higher than expected. In addition to this Damian II ad, so production levels, as Luca was saying, are going down; inventory levels, at least in Europe and North America, are under check. And so this is positive because that these, you know, are customers are not building inventory and bell dealership. Very thanks, guys.

Damian Karas: Great. Thanks, guys. I'll pass it along. Thanks, Damian. All right, good morning, everyone. Luca, Emmanuel, Mark.

Damian Karas: I'll pass it along. Thanks, Damian.

Scott Davis: Our next question comes from the line of Scott Davis at Millius. Your line is open. All right. Good, good, good morning, everyone.

Damian Karez: Thanks, Damian.

Speaker Change: Our next question comes from the line of Scott Davis at Milius. Your line is open.

Scott Davis: Luca, Emmanuel, Mark, congrats on finding this, Cassaria, and getting that inked. I wanted to follow up on that a little bit. You know, I don't know the business all that well, but the purchase price looks really attractive for the financial profile. And I was wondering, is this something that was kind of sourced that you guys have been working on for some time? Is there, is there any color you can share around kind of why you were chosen as the buyer? I have to imagine there were other folks out there who would be interested in this asset.

Operator: Congratulations, Scott. Another congratulations on finding this Quesaria and getting that.

Speaker Change: Congrats on finding this Quesaria and getting that.

Operator: I wanted to follow up on that a little bit. I don't know the business all that well, but the purchase price looks really attractive for the financial profile. And I was wondering, was this something that was kind of sourced?

Scott Davis: I wanted to follow up on that a little bit. I don't know the business all that well, but the purchase price looks really attractive.

Luca Savi: What you guys have been working on for some time, was there... Is there any color you can share around? Why you were chosen as the buyer? I have to imagine there were other folks out there who would be interested. Anything we should be looking for this year? This is something that we are debating between me and Emmanuel and Mark, and you know, so I think that either towards the end of this year or beginning of next year is when we are going to issue our new targets. Our next question comes from the line of Joe Giordano with TD Cowen. Your line is open.

Scott Davis: that you guys have been working on for some time. Was there, is there any color you can share around kind of why you were chosen as the buyer? I have to imagine there were other folks out there who would be interested in this asset.

Luca Savi: Sure, Scott, well, we were able to work with Cassaria in the past, you know, and we have been known Cassaria for a while. You know, there have been a customer of ours. You know, we have been able to meet with Cassaria for quite a long time, and we follow through during this process. I think there has been established a very good relationship together with the team. And they think that the team, the Cassaria team together with us, so the benefit of putting ICT canon and Cassaria together. So all of that enabled us to get in a good position and fast in dealing with Cassaria.

Luca Savi: And this has enabled us to get to the $475 million of price, which represents roughly a 13.4 EBDA multiple. And we're going to keep working closely with the team because there are a lot of synergies that we can get out of this deal: revenue synergies.

Scott Davis: Revenue, okay, interesting.

Scott Davis: And then just following up, I know, Luca, you mentioned you've already exceeded your 2026 targets. Will you be issuing new targets? Is there something we should be looking for this year? This is something that is that we are debating between me and Manuel and Mark. So I've seen that either towards the end of this year or the beginning of next year is when we are going to issue our new target. Well, best of luck. I'll pass it on. Thank you.

Speaker Change: Well best of best of luck I'll pass it on thank you.

Speaker Change: Thank you.

Joe Giordano: Our next question comes from the line of Joe Giordano with TD Cowan. Your line is open. Hi, guys. Good morning.

Scott Davis: Our next question comes from the line of Joe Giordano with TD Cowen Your line is open.

Luca Savi: Hey guys, good morning, start of the negotiation. So we are locked in this long-term contract, which is very customary for aerospace supply. And so now we have the opposite, a good performer, and to extract the value that that brings, If you want 2025, we'll be able to close. I'm going to ask you two questions in this question. One is probably a very quick answer. So the real question is, what is going on in connectors?

Joe Giordano: Hey, guys good morning.

Joe Giordano: I know you're not going to get into specific discussions with our customers, but I know that there's your Boeing contract expires soon and you're negotiating a new one. So, like any update on timing of when that might be kind of wrapping up and when we would start seeing kind of results of new economics. Jo, so you're right. We are in the start of the negotiations with Boeing. This is a renegotiation that is really important for us because we haven't been able to increase our prices since 2017. So we were locked in this long-term contract, which is very customary for aerospace suppliers.

Speaker Change: Uh huh.

Speaker Change: I know youre not going to get into specific discussions with customers, but I know that there is.

Luca Savi: And so now we have the opportunity to go back to Boeing, being also a good performer, and to extract the value that we supply with our product. And so we'll be in the four things of the negotiations right now. We'll continue in 2025. And probably in 2021-2025, we'll be able to close those negotiations. Those are pretty lengthy negotiations.

Joe Giordano: And so, as a result, we should see the impact after that. Perfect.

Joe Giordano: And then I'm going to ask two in this question. One is probably a very quick answer. So the real question is, what is going on in connectors? I mean, plus 39 in industrial connectors is like nowhere even close to what we're seeing elsewhere. That's just significantly better. So I'd love to know where you're seeing that strength.

Luca Savi: I mean, plus 39 in industrial connectors is nowhere even close to what we're seeing elsewhere. That's just significantly better. So I'd love to know where you're seeing that strength.

Luca Savi: And then I have to ask, I'm obliged to ask the question now that you're getting the M&A going more consistently, what are your updated thoughts on how you're going to present earnings with amortization? Thanks. So, on connectors, you're right; we are very encouraged by the growth we're seeing in industrial connectors, but also in connectors overall. If you distribution, So, and we're driving growth, and Errol DeFantis. General Industrial, but also, so the picture is really good.

Luca Savi: And then I have to ask; I'm obliged to ask the question now that you're getting the M&A going more consistently. What are your updated thoughts on how you're going to present earnings with memorization? Thanks. So, on connectors, you're right. We are very encouraged by the growth we're seeing in industrial connectors, but also in connectors overall. If you distribution, for instance, was up distribution orders were up 13% this quarter, which is really strong, especially given the growth we've seen in the first quarter. So, and we're driving growth, you know, in aerial defense, general industrial, but also medical friends.

Speaker Change: And then I have to ask I'm obliged to ask the question now that youre getting the M&A.

Speaker Change: Going growing more consistently what are your updated thoughts on how you're going to present earnings with amortization. Thanks.

Speaker Change: So so.

Speaker Change: So on the on connectors and you're right. We are we are very encouraged by the growth we're seeing in industrial connectors, but also in connectors overall.

Speaker Change: If you distribution for instance was up distribution orders were up 13% this quarter, which is really strong, especially given the.

Speaker Change: The growth we've seen in the first quarter.

Speaker Change: So.

Speaker Change: And we're driving growth.

Speaker Change: Aero defense.

Speaker Change: General industrial but also medical offerings.

Luca Savi: So the picture is really good. I think there's still a question mark in terms of the talking at the distribution. We don't know if really this has ended. But, you know, we're focusing on what we can control, which is delivering on time to our customers and making sure that we provide the differentiation that Luca has been talking about for a really long time. So very positive; we stay alert to understand the market dynamics. If I can add to that one, Joe, I think that Arthur and Dan, the head of engineering, have done a tremendous job in terms of developing new products, in being very fast, working with the customer, and developing the prototype.

Luca Savi: I think there's still a question mark. But, you know, we're focusing on what we can control, which is delivering on time to our customers. So, very positive; we stay alert. If I can add to that one, Joe, I think that Arthur and Dan, the heads of engineering, have done a tremendous job in terms of developing new products, and being very fast in working with the customer and developing the prototype. And that has led to new awards and new orders because of that. And on the second question, so... a matter that we have not come to a conclusion on yet.

Luca Savi: And that has led to new awards and new orders because of that.

Luca Savi: Yeah, and thank you so much. And on the second question, so this is a matter that we have not come to a conclusion yet. I think what we want to do is we want to show that we're able to really step up in terms of an M&A standpoint. And then we need to act up. and this is a very difficult thing to do because in M&A, I bet you control 50% of the outcome. And so we are very happy with the progress we've done with Van Hoij. We deployed 400 million dollars of cash. And so really it's about executing the strategy.

Luca Savi: I think what we want to... because in M&A, at best, you control 50% of the output. And so we are very happy with the progress we've made with Van Hoyt. $475 million.

Luca Savi: And then the accounting treatment will follow that. Thanks, guys.

Mike Halloran: Thank you, Joe. Our next question comes from the line of Mike Halloran for At Bear. Your line is open.

Luca Savi: So really, it's about, and then the accounting treatment will follow that. Thanks guys. Thank you, Joe. Our next question comes from the line of Mike Halloran for AtBeard. Your line is open. So on the IP side of things, you know, maybe just some thoughts of what the underlying demand trends are looking like from an order perspective, specifically any changes in the conversion cycle between front log to backlog, any signs of change in how you're thinking about the underlying markets. Doesn't really sound like it, but we'd love any context on what you're seeing underneath the hood there.

Mike Halloran: Say good morning, everyone. On the IP side of things, you know, maybe just some thoughts with the underlying demand trends are looking like from an older perspective, specifically on any changes in the conversion cycle between front log to back log. And inside the change in how you're thinking about the underlying markets, definitely sound like it, but we love any context on what you're seeing on anything out there. Sure. Thanks, Mike. First of all, when you look at IP, IP orders were up at 2%. And this is mainly thanks to Van Hoij that more than cover a tough compare versus prior year when we had a big decarbonization project.

Luca Savi: Sure. Thanks, Mike. First of all, when you look at IP, IP orders were up 2%, and this is mainly thanks to Svane Hoy that more than covers a tough compare versus the prior year when we had, you know, the big decarbonization project, the legacy project for IP. They were up sequentially 9% year over year. Now, having said that, what we saw, Mike, is that some of these projects shifted to the second half. No major concern about that.

Emmanuel Caprais: When you look at the short cycle, the short cycle, say that elevated level. And when you look at the rate in Q2, it is exactly the same rate that we had for the full year of 2023. Now project, the legacy project for IP, they were up sequentially 9% year of area. Now, having said that, what we saw, Mike, is that some of these projects shifted to the second half. No major concern of that is just a negotiation is taking a little bit longer. And as a matter of fact, what we see in July is a very strong July or the performance.

Speaker Change: In Q2 is exactly the same rate that we had for the full year of 2023.

Speaker Change: No projects that the legacy project for IP, they were up sequentially, 9% year over year now having said that what we saw my case that some of these projects shifted to the second Alpha no major concern of that is just the negotiation is taking a little bit longer and as a matter of.

Luca Savi: It's just the negotiation is taking a little bit longer. And as a matter of fact, what we saw in July was a very strong July order performance, both on the project, where we saw the closing of some of the projects from Q2 that shifted to Q3, as well as on the short cycle. We expect for the full year to have legacy orders up a single digit.

Speaker Change: What we see in July is a very strong July or the performance both on the project, where we saw the closing of some of the project from from Q2, the shifted to Q3 as well as on the short cycle, we expected for the full year to have the legacy orders that offer.

Emmanuel Caprais: Both on the project where we saw the closing of some of the project from Q2, the shifted to Q3 as well as on the short cycle. We expect for the full year to have the legacy orders up a single digit. And the funnel that we see is still very healthy. The funnel, I think, is up if a non mistaken roughly 14% year of area and 4% since January 2024. I think that what we see that we're on time delivery is a continue to improve and these help differ in sharing from the competition. And also the supply chain is improving, and these help in reducing the lead time.

Luca Savi: And the funnel that we see is still very healthy. The funnel, I think, is up, if I'm not mistaken, roughly 14% year over year, and 4% since January 2024. I think that what we see is that our on-time delivery continues to improve, and this helps differentiate us from the competition. And also, the supply chain is improving, and this helps in reducing delivery times. They have a very strong leadership team. As you remember, that was one of the reasons why we acquired them. And, you know, the Svanehoy team, and the Habanoi team, they're intact practically today.

Speaker Change: Single digits.

Mike Halloran: Great, helpful. Appreciate that.

Mike Halloran: And then second question on where the portfolio side of things. Two part or one, what was the revenue base for Wolverine that we should use? And then secondarily, and at the risk of sounding greedy since you just did a lot of transactions, love to understand how you're thinking about the ability to continue to lean in the short horizon. Certainly have the capacity from a bouncy perspective. So thinking about it from a personal perspective as well as what the pipeline looks like and then any thoughts on whether there are other Wolverine type things in the portfolio.

Luca Savi: Okay, so let me start addressing the latter, and then Emmanuel, you go for the first. Well, let me start saying, Mike, that we will never bite off more than we can chew. Okay, now regarding our capacity to do more deals, we have an immense value; both acquisition largely operate on a standalone basis. They have a very strong leadership team. As you remember, there was one of the reasons why we acquired them. And, you know, the vanity team, having an own team, they're intact practically today, and the deeds are off to a great start. So we stay close to this business that we acquired; we visit the facilities that we work with, the leadership team, but I would say the amount of time and resource that we spend to operate them is manageable.

Speaker Change: So why we acquired them.

Speaker Change: And.

Speaker Change: The only team <unk> team Inc.

Speaker Change: In fact practically today and these are off to a great start. So we stay close to this business that we acquired we visit the facilities that we work with the leadership team that I.

Luca Savi: And the deals are off to a great start. So we stay close to this business that we acquired. We visit the facilities, and we work with the leadership team.

Luca Savi: But I would say the amount of time and resources that we spend to operate them is manageable. They were a very good business when we acquired them and continue to be as such today. So from a financial standpoint, we certainly have the capacity to do more M&A. And with this in mind, I don't think that there are really limitations for further acquisitions to be made. But as I said, we will never bite off more than we can chew. The Wolverine's revenue is around $100,000.

Speaker Change: I'd say the amount of time and resources that we spend to operate them east manageable, they're a very good business. When we acquired them and continues as such today. So from a financial standpoint, we certainly have the capacity to do more M&A.

Emmanuel Caprais: They're very good business when we acquire them and continue as such today. So, for my financial standpoint, we certainly have the capacity to do more M&A, and with these in mind, so I don't think that there are real limitations for further acquisition to be made. But, as I said, we will never bite off more than we can chew. Yeah, and from a financial standpoint, the Wolverine brother knew he's around 160 million on a yearly basis. And then you said also, in terms of further day vestiture, you know, I don't see any other large day vestiture imminent today, Mike. Just to follow up on your final question.

Speaker Change: And with that but we did that in a in mind. So I don't see that that are really limitation for further acquisition to be made but as I said, we would never bite off more than we can chew.

Speaker Change: And from a financial standpoint.

Speaker Change: The Wolverine, rather news around $160 million on a yearly basis.

Speaker Change: Great and then you use your and then you said also that in terms of the divestiture you know I don't see any.

Emmanuel Caprais: Thanks, I appreciate it. Thanks, Samuel. Thanks, Mark. Thanks, right?

Luca Savi: Thanks, Luca. Appreciate it. Thanks, Emmanuel. Thanks, Mark. Thanks, Mike. Our next question comes from the line of Nathan Jones at Stiefel. Your line is open. I'm going to ask a couple follow-up questions on Kassaria. You talked about the seven-year growth rate at 27%. Is there any expectation you can lay out for what the forward growth rate would be?

Nathan Jones: Our next question comes from the line of Nathan Jones at Stiefel.

Nathan Jones: Your line is open.

Nathan Jones: Good morning, everyone. I'm going to ask a couple follow-ups on Cassaria. You talked about the seven-year growth rate at 27%. Is there any expectation you can lay out for what the forward growth rate would be? I'll start there. Yeah, so we reviewed what the process we went through is that we reviewed every platform there on. And in addition to this, we reviewed the platform we are on in order to identify potential commercial synergies. So we expect for the next three to four years, the top line growth for Cassaria, in the high single-digit range. So less than what they've seen since 2017. I think some of it is due to the fact that we want to be realistic and prudent.

Luca Savi: I'll start there. Yeah, so we so we review the process we went through, that we reviewed every platform there is, the platform we are on, in order to identify potential. So less than what they've seen since 2017. I think some of it is due to the fact that we want to be realistic and prudent.

Nathan Jones: And then also, I mean, there's been a significant increase in defense budget, and I think it's fair to say that it's probably not going to change like this forever. And then maybe some more color on where you see the revenue synergy opportunities. I mean, it seems like maybe you could replace competitors with Canon, but that's also fairly difficult to get approved when you're talking about the fence platform. So maybe those kinds of synergies are a bit longer dated. Just any color you could give us on expected revenue. Sure, thanks Nathan. So really a couple of things, and that they are on both sides.

Luca Savi: And then also, I mean, there's been a significant increase in the defense budget, and I think it's fair to say that it's probably not going to stay like this. And then maybe some more color on where you see the revenue synergy opportunities. Sure. Thanks, Nathan. So really, a couple of things and that they're on both sides.

Speaker Change: So fairly difficult to get approved when you're talking about defense platforms said, maybe that those kinds of synergies are a bit longer dated just any color you could give us on.

Speaker Change: On expected revenue synergies.

Speaker Change: Sure. Thanks, Nathan so really.

Speaker Change: Couple of things I know that on both side.

Nathan Jones: First is when sometimes we are receiving, you know, requests for quotation of system, of interconnect system made of our connectors and fiber cable. Today, fiber cable is very, very small; it's very little. And now, with Cassaria among our company, our capabilities, we will be able to address all those opportunities sometimes we just pass by. Okay, so that is one. Second, as you walk around the Cassaria's plans, I mean, you see the opportunities of having more of our connectors in the system, but it will take time, of course. But that is on the product side. And then there is the customers.

Speaker Change: First is that when the sometimes and we are receiving a request for quotation.

Speaker Change: The system of the interconnect system made of our connectors and fiber cable today, where fiber cable is very very small is that it's.

Speaker Change: Very little and now we'd casady among our company's network capabilities, we will be able to address all those opportunities. Sometimes we just passed by okay. So that is that is one second as you walk around the Qataris plans I mean, you see the opportunities of having more of our connectors into.

Nathan Jones: They're very good; they're very strong with some customers, where we can expand our penetration and vice versa. So very similar to what has been also with Mike from old. Great.

Luca Savi: Great. Thanks for taking my question. Our next question comes from the line of Vlad Bystricky at Citi. Your line is open.

Nathan Jones: Thanks for taking my questions. Thanks, Nathan.

Vlad Bostricki: Our next question comes from the line of Vlad Bostricki at City. Your line is open. Morning, Vlad. Hi, Vlad. Hey, good morning. Hey, good morning, guys. Thanks for taking my call. Maybe for my first question, I'll just start with MT. And you mentioned, obviously, the 86% incremental margin in that business in 2Q. And I think you're somewhere up to 60% in 1Q.

Emmanuel Caprais: So can you just talk more about, you know, what's really driving those elevated increments in the first half here? You know, whether it's additional pricing coming through. And just how you're thinking about incremental margins in that business in the back half and into 2025. Thanks, Vlad.

Vladimir Benjamin Bystricky: Yep, thanks for that. So the core competence of MT is to drive, and is really driving a lot of the margin expansion. The price has been very good, maintained, for the most part, our price, from our cut. But for us, it was always a matter of being able to get that compensation on the side, all the new equipment and instruction. You know, Svanahoy, you know, obviously seems to be performing very well with the 40% orders growth you highlighted.

Emmanuel Caprais: So the core competence of MT is to drive productivity. And so when you think about the margin expansion that we're seeing, the significant portion of it is driven by our internal productivity. Our ability to use our asset base, our ability to convert the audio to the awards and the growth, the share gains that we've had into a timely production and revenue. So this is really driving a lot of the margin expansion. Price has been very good as well. And the reason for this is because, while commodity prices have gone down, we have been able to maintain, for the most part, our prices with customs. And this is executing on the playbook that we discussed several times in the past, which is that we may not have been able to get the compensation from a cost and from a cost inflation standpoint from our customers in 22 and 23.

Emmanuel Caprais: But for us, it was always a matter of being able to get that compensation over the cycle. And so right now what we're seeing is that we're getting the compensation. for a prior year when we were not able to get it. And then, in addition to this, you see all the new platforms that are starting production. You know, Luca mentioned the start of production in China, but there are many starts of productions also in the other regions. And then structurally, the profitability of the portfolio is improving as all platforms where we didn't get as much compensation or exiting new platforms that fully reflect the newly the new cost base with increased prices from a commodity standpoint are kicking in.

Vlad Bostricki: Okay, that's that's a very helpful color, Emmanuel appreciate it. And then maybe just one other one from me. You know, Svana Hoi, you know, obviously seems to be performing very well. 40% orders growth you highlighted. We just talk about, you know, their menu, where they are in terms of factor utilization and their manufacturing capacity, and whether you see the need for, you know, meaningful incremental investment to deliver on the future growth that's embedded in these orders they're booking.

Vlad Bostricki: Hi Vlad, when you look at the site, whereas Vane Hoi is the main site, is really Albert in in Denmark, Jacqueline in Denmark, and then we have a site also in in Singapore and the very small site in in the north of France. Now, when you look at the main pump site as really in Asia, because Singapore and in Albert Denmark, now there is no need for further investment in terms of many of these operations are actually operating as roughly between 1 and 1.5 shifts. So, these growths don't really require a footprint investments. Okay, a helpful look.

Speaker Change: Patients are actually operating at roughly between one and one five shifts so.

Speaker Change: These growth it doesn't really require a footprint investments.

Speaker Change: Okay.

Vlad Bostricki: I appreciate it. Thank you. Thank you, Brad.

Speaker Change: That's helpful. Luke I appreciate it I'll get back in queue.

Jeffrey Hammond: Our next question comes from the line of Jeff Hammond at Key Bank Capital Markets. Your line is open. Hey, good morning, guys. I love the love the friction business, but good to see the auto piece, you know, getting to that 30%.

Brad: Thank you Brad.

Speaker Change: Our next question comes from the line of Jeff Hammond at Keybanc capital markets. Your line is open.

Jeff Hammond: Hey, good morning, guys.

Joe Giordano: Hi, Joe.

Jeff Hammond: Love the friction business, but good to see the auto piece, you know getting getting to that 30%.

Jeffrey Hammond: Just a couple follow-ups on the deal, you know, the deals just because sorry, I think you mentioned 27% top line, but it looks like they were, they've done three deals, I think under private equity ownership, just maybe talk about the organic and then, you know, if it comes with a pipeline of some of these bold times that they've been doing and then just on Wolverine, maybe level set us on, you know, kind of the margin run rate. You know, of that business, I know it's bounced around a bit. So, yeah, Jeff, you're right. So, I think that if you strip out the acquisitions that they've done over the years, they're still growing at more than 15% in terms of cater year on year.

Jeff Hammond: Just to just a couple follow ups on that on the deal the deals just because sorry, I think you mentioned, 27% topline, but it looks like they were.

Speaker Change: We've done three deals I think under private equity ownership, just maybe talk about the organic and then.

Speaker Change: If if it comes with a pipeline of some of these bolt ons that they've been doing and then.

Speaker Change: Just on Wolverine, maybe level set us on.

Speaker Change: Kind of the margin run rate.

Speaker Change: Of that business I know, it's it's bounced around a bit.

Jeff Hammond: Okay.

Luca Savi: So, really definitely strong growth, benefiting from obviously market growth, but also Shaggy. and we've seen all these sharegames when we looked at the platforms that I was talking to, their presence on the marquee platforms that I was talking about earlier.

Luca Savi: So I think this area is Poise for Growth, as Zenoly was Poise for Growth, and we're very confident that we're going to be able to complement them and add our connector expertise to their cable assembly ability. On the, on the Wolverine, on the Wolverine side, I think that what we improved the margin substantially, you know, and that these was really in terms of time in the best timing to really sculpt the portfolio, I would say. So it was the right thing to do. It is something that, you know, we share in terms of strategy, in terms of shaping the portfolio, focusing on really high growth and high margin businesses. So this was the right time to do it.

Vladimir Benjamin Bystricky: Can you just talk about, Okay, that's helpful. Luca, I appreciate it. I'll get back to you. We've seen all these share gains when we looked at the platforms that I was talking about. This is Keith Harriot. You've been listening to The Real Housewives of New York.

Luca Savi: I'm your host, John O'Hara. And I'm your host, Sabrina Abrams, and I'm very confident that we're going to be able to compliment the production issues that some OEMs have had, and so it wasn't..., and keep in mind that we have not hit the pandemic level from a cut wide body platform. Our next question comes from the line of Joe Ritchie at Goldman Sachs

Emmanuel Caprais: Okay, great, and then I think, I think Emmanuel, you mentioned commercial arrow OE slowing, if I heard that right. Maybe just, you know, unpack what you're seeing there. It seems like more a supply chain and maybe the, the OE's, you know, not, not able to ramp, but maybe just expand on that comment. Yeah, so, so let me start by saying that from a revenue standpoint, commercial OE is still growing pretty strong. We were up 6% this quarter after market was up in the double, so aerospace overall as a business is doing is doing well. But what we're seeing is the only horizon; we're seeing a slow down in the growth.

Jeff Hammond: I think Emmanuel you mentioned commercial Aero OE slowing if I heard that right.

Jeff Hammond: Maybe just.

Emmanuel Caprais: Unpack, what you're seeing there it seems like more a supply chain and it maybe that the oes not.

Emmanuel Caprais: Not able to ramp, but maybe just expand on that comment.

Jeff Hammond: Yes.

Jeff Hammond: No.

Speaker Change: So let me start by saying that.

Jeff Hammond: From a revenue standpoint, commercial who you're still growing pretty strong we were up 6%.

Jeff Hammond: This quarter aftermarket was up double.

Jeff Hammond: So aerospace overall as a business is doing he's doing well what we're seeing is on the horizon that we're seeing a slowdown in the growth.

Emmanuel Caprais: And if you think about it, that makes sense because, you know, we know of the production issues that some OEMs have had. And so it wasn't realistic to expect that orders were going to continue to grow and that we were going to see that growth forever. So, nothing really concerning, especially because we have the after market, which continues to be really, really strong for us. On the four-year basis, we still expect commercial arrow OEM to grow. And keep in mind that we have not hit the pre-pandemic levels from a customer standpoint, from an industry standpoint.

Jeff Hammond: And if you think about it that makes sense because.

Jeff Hammond: We know <unk>.

Jeff Hammond: Production issue that some Oems.

Jeff Hammond: And so it wasn't realistic to expect that.

Jeff Hammond: Orders were going to continue to grow and that's.

Jeff Hammond: And that's where we're going to see that growth forever.

Jeff Hammond: So nothing really concerning especially because we.

Jeff Hammond: We had the aftermarket, which which continue to be to be really really strong for us on a full year basis, we still expect our commercial Aero OEM.

Jeff Hammond: OEM to to grow.

Jeff Hammond:

Jeffrey Hammond: And in addition to this, as you know, we are more oriented towards the wide body platforms, and these, from a volume standpoint, have really not recovered compared to the pre-pandemic level. Okay, thank you.

Joseph Ritchie: Thanks, Jeff. Our next question comes from the line of Joe Richie at Goldman Sachs. Your line is open. Hey, good morning, guys. Hi, Joe.

Sabrina Abrams: Hey, Emanuel, can you maybe elaborate on your answer to Blad earlier around the steel, or you said, you know, cost and cost inflation, basically coming through results on empty. Obviously, steel prices have been down a lot so far this year. So just, can you maybe just give us a little bit more color? Like, how far did you advance to you guys purchasing your commodities? Should we expect, you know, these above average incremental to continue into the second half of the year? Defending any help around that would be helpful. Sure. So, in terms of the way we manage commodities, we book roughly six months in advance.

Joseph Alfred Ritchie: So right now, we are essentially, largely above, a little bit less incremental in the second half, being in Q2 at 8. That's great to hear, Emmanuel. And then my follow-up question, and my apologies if I've missed this, but on the friction side, first of all, it was great to visit with the team in Barza in June. One of the things that really stood out to me was just how much visibility you have into the platforms over the next couple of years based on what you've already won. And I'm just curious, Luca, about the order trajectory for friction; just help me level set.

Emmanuel Caprais: So right now we are, we are essentially booked until the end of the year for everything that's still copper and tin. So, so we're very secure. And the good thing about this is that we communicate very openly with our customers. So we're very transparent in the price we buy at. And so that solidifies the negotiation we have with them from a price, from a price compensation sample. In terms of the incremental. So thank you for reminding me. So we were very happy with the incremental thing Q2, 86%. This followed 63% in the first quarter. For the four year, we expect empty to deliver incremental above, largely above.

Emmanuel Caprais: 50%. So a little bit less incremental in the second half of the year. And so, you know, this is the result of everything that we were talking about, which is productivity, recovery from a price and points, and the volume growth as well. Now, you know, I don't think it's a long term; it's long term; it's sustainable to have this type of incremental. But there are largely the fact of the fact that, you know, we have been recovering from a margin standpoint. Being in Q2 at 18.8% is really a strong achievement by the entity, something that we were not expecting at the beginning of the year to be for them to be able to do it as quickly.

Emmanuel Caprais: So they've over delivered.

Emmanuel Caprais: And so, we're going to continue to drive productivity; we're going to continue to drive recovery in order to continue to improve margins.

Joe Giordano: That's, that's, that's great to hear a manual, and then my follow-up question, and my apologies if I missed this, but on the friction side. First of all, it was great to visit with the team in Barza in June. It was one of the things that really stood out to me was just how much visibility you have into the platforms over the next couple of years based on what you've already won. And I'm just curious, Luca, just around the order trajectory for friction, just help me help me at a level set, like how did the quarter go, what's the visibility into the rest of the year, and how do you feel about the potential for increasing your share gains from here?

Speaker Change: We feel about the potential for increasing your share gains from here.

Luca Savi: Sure, first of all, Joe, thanks for taking the time and visiting the team, and the team was very excited, excited as well. I think from an awards perspective, the team is performing incredibly well. Here today, we have already more than 60% awards, the target awards for the full year. This is worldwide; this is also in China. We are well positioned for new platforms coming out also in the next six months. So, I think that these awards, as well as the incredible amount of number of start-up production that the team is performing right now, we keep on feeding the market share gain.

Luca Savi: How did the quarter go? What's the visibility into the rest of the year? And how do you feel about the potential for increasing your share gains from here? Sure. First of all, Joe, thanks for taking the time and visiting the team. And the team was very excited, excited as well. I think from an awards perspective, the team is performing incredibly well. Year to date, we have already won more than 60 percent of the target awards for the full year. This is worldwide, and it is also in China.

Jeff Hammond: Sure first of all Joe Thanks for taking the time and visiting the team and the team was very excited it cited as well.

Speaker Change: I think from a from an awards perspective, the team is performing incredibly well.

Speaker Change: Year to date, we have already more than 60% that was the target awards for the full year. These award why this is also in China.

Luca Savi: We are well positioned for new platforms coming out also in the next six months. So I think that these awards, as well as the incredible number of start of production that the team is performing right now, will keep on feeding market share gains. And we project it to probably be above 30 percent market share in 2024 for the very first time. Our final question comes from the line of Andrew Obin at Bank of America. Your line is open.

Jeff Hammond: We are well positioned for new platforms coming out also in the in the next six months. So I think that that these awards as well as the incredible amount of number of start of production that the team is performing right now.

Jeff Hammond: Keep on feeding the market share gain and we project.

Joe Giordano: And we project to be probably above 30% market share in 2024 for the very first time. I can share with you both on the EV side. The last thing that we talked about, the leading Indian OEM, it was in an electric vehicle platform and they came to us because of our expertise there. But we're really market share on the hybrid, and we're winning market share also on the internal combustion combustion engine. So it is across the board. Great to hear. Thank you, Luca. Thanks, Joe.

Jeff Hammond: To be probably above 30% market share in 2024 for the very first time.

Jeff Hammond: So this is good and we are winning market share I can share with you both on the EV side.

Jeff Hammond: The last thing that we told you about a leading Indian OEM. It was and it is an electric vehicle platform.

Jeff Hammond: And they came to us because of our expertise there, but we are winning market share on the hybrid and we are winning market share also in the internal combustion engine. So it is across the board.

Speaker Change: Great to hear thank you Luca.

Joe Giordano: Thanks, Joe.

Sabrina Abrams: Our final question comes from the line of Andrew Obin at Bank of America. Your line is open. Hey, good morning.

Speaker Change: Our final question comes from the line of Andrew Open at Bank of America. Your line is open.

Luca Savi: You have Sabrina Abrams on for Andrew. Morning, Sabrina. So thinking about the portfolio changes you have going forward, so motion gets a little bit smaller. CCT and the defense portion of the business gets a bit larger, and Stenhoi also shifted the portfolio a little more towards back log longer cycle businesses. How does that impact how you think about the business when the portfolio is more skewed to a long cycle than has been historically? Clearly, you guys are taught to your performer and very hands-on management team, but just want to understand if and how it changes, you know, the algorithm for the business as you become longer cycle and have better visibility.

Andrew Open: Hey, good morning.

Speaker Change: <unk> on for Andrew.

Andrew Open: Good morning.

Jeff Hammond: However.

Jeff Hammond: Yeah.

Speaker Change: So thinking about the portfolio changes you have going forward, so moshe and gets a little bit smaller.

Jeff Hammond: He he T and the defense portion of the business gets larger and Shanghai also shifted the portfolio, a little more towards backlog and longer cycle businesses.

Luca Savi: So a couple of things. First of all, we really like these long term, these long term businesses. Think about it when you win a platform in a rail with an OEM. You have the visibility for the next 30 to 40 years, the same in all to the same in aerospace, and when you look about these projects, you know, is a long cycle. So we like, we definitely like like that. Now, when it comes to the shift of the portfolio, it is really towards, you know, higher growth and higher margin businesses. So these are the second dimension and the last one is the ability to outperform in the market.

Luca Savi: So when we look at these acquisition, for example, Vanneau, Vanneau are the leaders in the markets where they play in terms of the LPG, the LNG. When you look at Kessaria, they are the leader in cyber cable applications. And all of these will enable us to feed the outperformers, and that's the third dimension.

Jeff Hammond: Cable applications and all of these will keep will enable us to feed the outperformance and that's the third dimension.

Luca Savi: Thank you. And then just to follow up on one of the earlier aerospace questions, can you talk a little bit about arrow supply chain? I think you mentioned that there were improvements. We've heard mixed feedback from other suppliers. Just want to understand what's still a constraint and what's getting better. Yeah, so I think we're finally seeing a little bit of improvement from a supplier side. As I mentioned, we've been able to reduce inventory, and this is a result of the fact that our teams have managed our suppliers more effectively. We'll be able also to increase our on-time delivery to our customers.

Luca Savi: Thank you. And then just to follow up on one of the earlier aerospace questions, can you talk a little bit about the aero supply chain? I think you mentioned that there were improvements. However, we've heard mixed feedback from other suppliers. Just want to understand what's still a constraint and what's getting better. We're finally seeing a little bit of improvement from a supplier. And this is a result of the fact that our teams have managed our suppliers more effectively, the range of well, very volatile, trying to do the best we can for.

Speaker Change: Thank you.

Speaker Change: Just a follow up on one of the earlier aerospace questions can you talk a little bit about Aero supply chain. I think you mentioned that there were improvements we've heard mixed feedback from other suppliers just want to understand what is still a constraint and what's getting better.

Speaker Change: Yeah. So.

Speaker Change: I think where we're seeing finally seeing a little bit of improvement from a supplier side.

Speaker Change: As I mentioned, we've been able to.

Speaker Change: Reduced inventory.

Speaker Change: And this is a result of the fact that our teams have manage our suppliers.

Speaker Change: More effectively we've been able also to increase our on time delivery to our customers.

Luca Savi: And this is very good because this is falling in the range of... and that further differentiates IPT compared to the composition. I think that when we made it still very difficult and customer demand, order patterns are very volatile, and so our team is focused on trying to do the best we can for our customers, and we're improving slowly, but you know this is an industry, this is a market that has a lot of challenges.

Speaker Change: This is very good because this is a fall in the range of what we can control.

Speaker Change: And that's furthers further differentiate itt's compared to the competition.

Speaker Change: I think thats, what remains still very difficult.

Speaker Change: And customer demand.

Speaker Change: Order order patterns are very.

Speaker Change: Very volatile and so our team is focused on trying to do the best we can for customers.

Speaker Change: And we're improving slowly.

Speaker Change: But you know this is an industry. This is an end market that there's a lot of challenges.

Unknown Executive: Thank you. Thank you, and this does conclude today's teleconference.

Speaker Change: Thank you.

Speaker Change: Uh huh.

Operator: Thank you. And this does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day. [inaudible] David Blanford, Michael Halloran, David Blanford, Michael Halloran,

Speaker Change: Thank you and this does conclude today's teleconference. Please disconnect your lines at this time and have a wonderful day.

Unknown Executive: Please disconnect your lines at this time and have a wonderful day.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].