On Wednesday, ITT (NYSE:ITT) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

ITT reported strong Q1 results with a 33% revenue growth and 25% EPS increase.

The SPX Flow acquisition has shown early positive contributions, integrating into the Flow Technologies segment.

ITT achieved significant market share gains across various segments, notably in aerospace, defense, and friction.

The company has initiated a full-year adjusted EPS guidance range of $7.70 to $8.00, expecting 37% revenue growth.

Management highlighted successful synergy capture from the SPX Flow acquisition and ongoing strategic investments.

Despite geopolitical challenges, particularly in the Middle East, the company maintains a positive outlook.

Luca Savi, CEO, expressed confidence in the company's strategic direction and seamless leadership transition plans.

Full Transcript

OPERATOR

Welcome to ITT's 2026 first quarter conference call. Today is Wednesday, May 6, 2026. Today's call is being recorded and will be available for replay beginning at 12:00pm Eastern Time. At this time all participants have been placed in a listen only mode and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1-1 on your touchtone phone. If at any point your question has been answered, you may remove yourself from the queue by pressing star 1-1 again, we ask that you please pick up your handset to allow optimal sound quality. It is now my pleasure to turn the call over to Carlene Salvage, Vice President of Investor Relations and FP&A. You may begin.

Carlene Salvage (Vice President, Investor Relations and FP&A)

Thank you Kathy and good morning. Joining me in Stanford today are Luca Savi, ITT's chief executive officer and President, and Emmanuel Caparelli, Chief Financial Officer. Today's call will cover ITT's financial results for the three month period ended April 4, 2026 which we announced this morning. Please refer to slide 2 of the presentation available on our website or where we note that today's comments will include forward looking statements that are based on our current expectations. Actual results may differ materially due to several risks and uncertainties, including those described in our 2025 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the first quarter results we present this morning will be compared to the first quarter of 2025 and include certain non GAAP financial measures. The reconciliation of such measures to the most comparable GAAP figures are detailed in our press release and in the appendix of our presentation, both of which are available on our website. As previously communicated during our fourth quarter 2025 earnings call going forward, ITT will include intangible amortization expenses related to acquisitions as a separate line item within the Consolidated Statement of Operations and in its adjustments to earnings in 2025. The impact of this reporting change on earnings per share was $0.13 in Q1 and $0.47 for the full year. All adjusted EPS figures presented going forward will be on this basis a full reconciliation of the impact of the revision to adjusted operating income and margin income from continuing operations and EPS for each quarter in 2025 and the full year can be found in the supplemental materials at the end of our presentation available on our website. With that, it is now my pleasure to turn the call over to Lucaa, who will begin on Slide three.

Luca Savi

Thank you Carlene and good morning. Before I begin, I want to recognize our employees across ITT for delivering a very strong start to the year. In particular our Middle east teams who delivered despite the ongoing conflict, the supply chain disruptions and the challenges this has represented to their professional and personal lives. Thank you. In Q1 we demonstrated solid momentum across the portfolio thanks to the disciplined execution and the tangible benefits of our M&A strategy. We delivered outstanding orders growth above market revenue expansion and robust earnings exemplified by our 25% EPS growth in the quarter. We are truly pumped up. Here are some highlights. We grew orders 26% at 8% organically. We grew revenue 33% and 11% organically. We expanded margin by 130 basis points and we delivered 25% adjusted EPS growth. I'm also encouraged by SPX Flow's strong start in month one. We already produced net earnings, cash accretion and promising top line growth. This is all included in our newly formed Flow Technologies segment that now combines industrial process and SPX Flow. This was an outstanding quarter. Let's dive into the details. We grew revenue 33% and 11% organically with all businesses contributing. CCT up 17%, grew industrial connector sales by 27% and aerospace and defense by nearly 20% and were already benefiting from the Boeing price negotiation closed last year. MT increased revenue by 15% and 5% organically in an automotive market down 3 as friction outperformed global vehicle production by more than 1400 basis points. And to top it off, Flow Technologies revenue was up 61% or 12% organically. The team delivered higher project sales and including from Svanehøj which were up 44%. Well done Glenn. Short cycle also grew 10% due to market share gains in all product categories on orders. ITT grew 26% and 8% organically in Q1, showing broad strength across our segments. CCT grew 10% organically on the back of strong aerospace demand and market share gains in industrial connectors. Inflow technologies we deliver 44% orders growth and 7% organically driven by share gains in show cycle including baseline pumps, aftermarket and valves. Valves up 24% continues to benefit from a GLP-1 project that keeps expanding in scope and friction. Continued to gain market share with significant platform awards including in the high performance segment. And last but not least, our book to bill was 1.09. We delivered equally strong margin expansion of 130 basis points with all businesses contributing. Flow Technologies delivered 23.7% operating margin up 100 basis points thanks to significant contributions from volume and to a lesser extent price at 21.1%. MT delivered 130 basis points margin progression as productivity and volume growth more than offset price pressure. Finally, CCT expanded margin to 19.3% as volume growth and price both contributed. Moving to capital deployment on March 2nd. We closed the SPX flow acquisition one month ahead of schedule and with a leverage ratio comfortably below 3 at 2.7. The newly created Flow Technologies segment boasts nearly $3 billion in revenue and is a global flow leader with premier brands in pumps, valves, mixers and and other process solutions. On the first day, the entire ITT leadership team actively participated in person to town hall meetings around the world with SPX Flow employees. We laid out our vision and our expectations and answered questions from highly engaged employees. I was fortunate enough to be in Delavan, Wisconsin together with Rudy, our Waukesha Cherryboro leader. I was encouraged by what I saw in the plant, by the enthusiasm of the local team, by their deep knowledge of the business and their openness to do better and to do more. I also experienced this enthusiasm with Wendy, our Mixing Solutions leader at our two other sites in Rochester, New York and Palmyra, Pennsylvania. Their team has been working hard to improve material flows and overall equipment efficiency. Bartek, Wendy, Rudy and I also share future growth plans and while still early in the year, I'm heartened by the orders and sales growth we deliver in the first quarter to achieve high single digit revenue growth for 2026. When it comes to synergies, the Flow Technologies team has been hard at work identifying and implementing actions to secure the $80 million cost synergies. We have executed the first tranche related to corporate G and A cost reductions and we're on track to deliver a third of the total synergies in year one. We're also working hard to deliver commercial synergies and last week the Waukesha Cherry-Burrell business of SPX won its first order for an ITT Bornemann Twin Screw Pump. Well done Rudy and Tim and Rodolfo. I expect more. Finally, as part of our capital allocation strategy., we continue to cultivate and be active on smaller sized M&A opportunities. In addition, in March we also deployed $100 million towards share repurchases. Moving on to Guidance Today we initiate on the new basis our full year adjusted EPS guidance with a range of $7.70 to $8, up 9% at the midpoint. We're guiding to 37% revenue growth and 5% organic growth at the midpoint with a book to bill above one and we expect SPX Flow to contribute low teens net adjusted EPS accretion. This guidance builds on the Profitable Growth ITT has Delivered over several years Let us review our top line growth trajectory since 2023 on slide 4. Over the past three years we have delivered outstanding top line growth with orders and revenue up over 9% on average every year. And we expect this strong growth trend to continue in 2026, bolstered by market share gains in our legacy businesses and the contribution of SPX Flow in cct. For example, as defence spending ramps up, we've been awarded large multi year contracts like F35 and RSS in the US and ground vehicles, radar and precision guided systems in Europe. We're well positioned to capture a significant portion of the incremental future spend out of our Weinstead facility in Germany. During my recent visit there, I sat down with our project managers who are collaborating with European contractors on the development of customized connectors for new defense applications. Well done Marco and Junaid on fostering this level of customer intimacy in MT. Our Koni business grew more than 30% over the last three years to become a $200 million platform for growth and the shock absorber leader for high speed trains in China. Moreover, our Friction business continues to conquer platforms and win market share as demonstrated by the Q1 friction OE outperformance of over 1400 basis points. the end of last year, friction reached 32% of the global auto OE market and the share gain journey continues. Flow Technologies has been growing at a 15% revenue CAGR since 2023. In addition to the 12% organic growth and the 61% total revenue growth in Q1 this year, we continue to differentiate through a flawless project execution as demonstrated by svanehoi's growth of 44% with a book to bill of a 1.2 moving to backlog. We have nearly doubled it in the last three years and it will continue to grow in 2026 as we strive towards a book to bill above one this year as well. With that, let me now turn the call over to Emmanuel to discuss Q1 results in detail on slide 5.

Emmanuel Caparelli

Thank you and good morning. As Luca highlighted, we kicked off the year with a very strong quarter in Q1. We delivered outstanding growth across the business in orders, revenue margin and EPS. Our teams delivered $1.2 billion in revenue, up 33% in total and 11% organically. CCT grew 17% organically, fueled by strength in aerospace and defense and industrial which were up approximately 20%. We're also realizing the benefit of the Boeing contract renewal flow technology grew 61% in total and 12% organically driven by strong project shipments including Svenhoy, which is up 44% and short cycle market share gains, especially in Valve which is up 19%. MT grew 5% organically, a significant achievement in a down market. Friction OE outperformed global automotive production by over 1400 basis points with all regions above 1000 basis points. NSPX Flow added 17 points of growth to ITT on profitability. Operating income grew 42% and margin expanded 130 basis points, primarily driven by strong operational performance in our legacy businesses and the SPX Flow contribution. MT operating income grew 22% for a margin of 21.1% as the team drove net productivity of 220 basis points. Flow Technologies expanded margin 100 basis points to 23.7% driven by price and volume leverage. CCT delivered 20% income growth to a margin of 19.3% driven by aerospace volume growth and Boeing contract benefits. As previously stated, intangible amortization expense related to acquisitions is now excluded from adjusted operating income including in the segment EPS of $1.98 on the new basis was up an outstanding 25% versus the prior year. You will note the immediate net accretion of the XPXflow acquisition. Lastly, free cash flow of $14 million was impacted by $71 million of one time acquisition related expenses. Excluding these impacts, free cash flow was up 10% year over year. Let's now turn to the Q1 EPS bridge on slide 6. The 25% EPS growth was primarily driven by strong operational performance delivered by all businesses compounded by the month. One net contribution of SPX Flow Included in the SPX Flow contribution is income from operations partially offset by the higher interest expense and tax rate as well as the dilution from the December equity issuance and the equity given to Lonestar as part of the acquisition consideration. There were four additional working days in Q1 versus the prior year that will be reabsorbed in Q4. Finally, we continue to invest in strategic programs such as Vidar,, flera, our Friction High Performance segment and the GeoPAD to sustain growth for the long term. Onto slide 8 to discuss our 2026 outlook. With the XPXflow acquisition closed, we are now initiating our full year outlook. We expect 37% total revenue growth and 5% organic at the midpoint driven by aerospace and defense Demand strength in both Flow projects and short cycle and continued Friction OE outperformance following an outstanding Q1 contribution from previous acquisitions continue to be ahead of expectations. We expect to deliver roughly 70 basis points of margin expansion to approximately 20% at the midpoint, fueled by top line growth, favorable price costs and productivity gains. We expect SPX Flow to deliver high single digit revenue growth in 2026 and net adjusted EPS accretion in the low teens. Cost synergies are expected to be approximately $15 million in 2026. Regarding the middle east, as a reminder, our overall exposure to the region is approximately 4% of total revenue and the conflict had minimal impact in our Q1 results. Finally, on cash, we expect to generate free cash flow of roughly $560 million at the midpoint, resulting in a free cash flow margin between 10% and 11%. Now let's move to slide 9 to finish with the EPS outlook details. As you can see, the 9% EPS growth at the midpoint, much like Q1, will come from our differentiated execution comprised of above market growth and productivity savings compounded by the SPX Flow accretion. The SPX Flow contribution is net of higher interest expense due to the $2.9 billion debt we contracted in March as well as a higher combined tax rate of 24.9%. It also includes a projected 90 million share count over the next three quarters. We will continue to invest part of the incremental profit generated to fund long term growth initiatives. I'd now like to briefly discuss our Q2 outlook. EPS is expected to be up high single digits in Q2 compared to the prior year. We anticipate organic revenue growth in the mid single digits with Flow technologies in the low double digits organically, CCT in the mid single digits and NT in the low single digits. Operating margin should extend by around 50 basis points compared to the prior year and approximately 20% interest expense is expected to increase meaningfully due to the acquisition of XPXflow. Let me now turn the call over to LUCA to wrap up on slide 10.

Luca Savi

Thanks EmM&Anuel. A few points before Q and A as you can see we are pumped up for 2026. Our legacy business is firing on all cylinders in Q1 we delivered 13% orders growth, 16% revenue growth and continued M&Argin expansion. SPX Flow provided a boost with 5% orders growth in Q1, 14% revenue growth and a fast start in Synergy Capture. This is our strategy in action. Organic value creation through M&Arket share gains and relentless execution driving sustained M&Argin expansion compounded by M&A. This is the commitment we M&Ade during our Capital Markets day and it reM&Ains our commitment today. We do what we say and Q1 proves it. This is itt before opening the line for Q and A, there is one more thing that we'd like to share is M&Ade even more bittersweet by the great results that we share with you all today. EmM&Anuel, our CFO for the last six years and my partner here at ITT for almost 14 years, has told me that he's ready to take a break and will be leaving the company. Dear EmM&Anuel, thank you for everything you've done. As I told you, in the last 14 years, I probably spent more time with you than with my wife. I do not know if this tells more about our partnership or about my M&Arriage. It has been a fantastic ride, full of challenges and achievements. I have so M&Any memories from the very first day we met. You have always been there. My side in the perform and in the transformation journey. And we transformed this company. Indeed, in these 14 years, you M&Ade us better. I always knew I could count on you. You have been a real thought partner, a co pilot to discuss with, to work with, to debate, agree, disagree with. A real partner to bond with. In these 14 years, you M&Ade me much, much better. I'm so grateful as I was very fortunate to have found you that day in Milan and work with you side by side for 14 years. Grazie di cuore. EmM&Anuel will stick around in an advisory role until the end of June, helping to ensure a seamless transition for us. Mike Savinelli, Vice President, Treasurer, Chief Tax Officer and Assistant Secretary, has been appointed to serve as interim cfo. Thanks, Mike, to the people connected to our call. Thank you for joining us today. As always, I appreciate your time and continued interest in itt. Cathy, please open the line for Q and A.

OPERATOR

Thank you. The floor is now open for questions at this time. If you do have a question or a comment, please press star 1-1 on your touchtone phone. If a question has been answered, you may remove yourself by again pressing 1-1. Again, we do ask that while you pose your question, you pick up your handset to provide optimal sound quality. Please limit your questions to one question and one follow up. Thank you. Our first question comes to the line of Joe Giorgione with T. Line is now open.

Luca Savi

Hey, guys. Good morning. Hi, Joe.

Joe Giorgione

Good morning. Yeah, Emmanuel, I know you don't like the spotlight, but, you know, you've been a great partner for all these years. So I think we're all set to see you go. So best of luck to you in the next. Thank you, Joe. Luca. You never know everything about a deal, I guess, until you own it. So as SPX came into the portfolio, what was like a pleasant surprise to you versus what your initial views were and was there anything there that you kind of realized, all right, maybe we have a little bit more work to do, maybe this was a little different than what we thought.

Luca Savi

Is very true, Joe. I think that we don't forget that we cultivated the SPX flow for three years. So we visited all the plants, we went deep dive on the due diligence. So we really have met many people and therefore we were able to find many things before the acquisition. I would say one thing that surprised me even more positively as I've been able to walk the plant to talk to the people on the shop floor, for example, in Delavan, is to see the commitment and engagement of our workforce in the Delavan plant, in the Rochester plant, in the Palmyra plant, in Pennsylvania. So the engagement of the workforce on the shop floor is something that I was able to experience and that definitely surprised me positively. I also was positively surprised by the growth potential that we have on the revenue synergies. We work hard on those. It's going to take more time because those are revenue synergies. But definitely there are there and more. And these are opportunities same on the cost side. So I think that all of those is good and you start seeing good in the Results. Good orders Growth 5 Revenue Growth 15 Accretive to APS, good pipeline visibility, and moving fast on the synergies. I think that from a cultural point of view, similar, but there are aspects that they do differently that both of us, we will have to adjust. And then maybe

Joe Giorgione

your defense business has been doing great for a while now. If we have a larger trend here over the next several months towards like an ending of global hostilities, does that create any sort of potential challenges for you anywhere? No, we don't see that, Joe. I think that we have a portfolio that is broad in defense and so we are on a lot of different applications. And so there's a lot of defense modernization. There's a large defense modernization trend that is happening both in the US and in Europe. And we think that this is here to stay and this is a long term trend. Thanks guys. Thank you, Joe.

OPERATOR

Thank you. Your next question comes from the line of Julie and Mitchell with Barclays. Your line is now open.

Julie Mitchell

Oh yes. Hi, good morning and thanks very much and wish you all the best. Emmanuel, if we think about the first question really around the selling days dynamics. Sorry for the fiddly question, but maybe help us understand, you know, how much of a contribution that was to sales or EPS in the first quarter and how we should think about the seasonality of EPS over the balance of the year as that selling days tailwind goes into reverse.

Emmanuel Caparelli

Yeah, Julian. So the contribution of the additional four selling days was around 5 points of growth in the quarter from a revenue standpoint and then a little less than $0.10 from an EPS standpoint in Q1. When we think about the cadence of EPS, I would say that the next few quarters are going to be around the $1.90 to $1.95 EPS for Q2, Q3 and Q4.

Julie Mitchell

That's really helpful, thank you. And then my follow up would just be around if we're thinking about operating margins kind of, you know, moving around a lot year on year. I think you guided up 50bps in Q2, they were up over 100 in Q1 and you've got a pretty wide margin guide range for the year as a whole. So maybe any sort of. Is there any phasing of investment spend to be aware of in the year and what are you assuming for the flow acquired operating margin for the year as a whole, including those synergies you mentioned, please?

Emmanuel Caparelli

Yeah, I would say that from an operating margin standpoint we expect continued progression during, during the year and this is because of obviously the productivity improvements that we're driving in all the businesses as well as some of the price actions that we're taking and that will have a full impact starting in Q2. So as you come to expect of ITT, we drive margin progression year over year. That is really key to our success. And then from an SPX Flow standpoint, we expect. So we had a really strong margin in Q1 and the reason for that is that we only had the month of March in there and March had five weeks, which is unusually large. So disproportionate impact in the quarter. We don't expect that margin to be the same in Q2, Q3 and Q4. However, we do expect that margin will continuously improve as we roll out our productivity plan as well as our growth, our growth initiatives. That's great.

Julie Mitchell

Thank you. Thank you.

OPERATOR

yes, your next question comes in line of Jeff Hammond with KeyBanc Capital Markets. Your line is now open.

Jeff Hammond

Hey, good morning everyone and best of luck to Emmanuel. We're sad to hear you're leaving as it sounds like Luca, you are too. Just staying on SPX flow. Can you dig in a little more on, you know, the order trends in that business just from a market standpoint and then it just, it seems like, you know, shorter term you may be getting some, some early revenue synergies but you know, just the opportunities around, you know, leaning in on commercial excellence and starting to drive out growth. Because I think, you know, one of the early concerns with the acquisition was the, was the legacy growth rate and how do you accelerate that?

Luca Savi

Sure. Thanks, Jeff. So when you look at the orders, growth was a good order growth of 5%. Now that is overall for SPX Flow in the quarter, when you look at the different businesses, you have Waukesha Cherry-Burrell, our Genie Pumps, their orders, were up double digit nutrition and health solutions, their orders, were up 3%, mixers up 7 and the pumps up 2. So all the different businesses were up actually in terms of orders. And all of the four businesses were up also in revenue with the nutrition and health and Waukesha double digit and mixer and pump in the low single digit. So. But overall 15%. Okay. We expect also the book to be for the full year to be above 1 for SPX Flow. Now this is very similar to what we said at the very beginning, because during the due diligence, we saw that pipeline and we believe in this growth. Now this, to be honest, has got nothing to do with itt. This is the good work that the SPX Flow employees have done since nothing really has changed during the month of March. Now, if you top this off together with our approach, you know, going after the 100%, not the 80 20, be more granular and be more decentralized, I will expect that performance to continually improve.

Jeff Hammond

Okay, great. And then just from a modeling standpoint, Emmanuel, you gave kind of the organic Trends in the 2Q by segment, but how should we think about that within the four to six and then just on the tax rate, is there an opportunity to bring that down over time? That was a little bit of a surprise that the tax rate's going up.

Emmanuel Caparelli

Thanks. Yeah. So for the four year, Jeff, we expect both ITT and CCT to lead the charge from an organic growth standpoint in the high single digit. And then motion technology is in the low single digits for the full year because obviously there's a decline in the automotive production. And so friction is really outperforming very, very nicely as we saw in Q1. But nonetheless, there's a global production that is down. And then from a tax rate standpoint, so today we stand at almost 25% at 24.9. This is the impact, this is direct the impact of SPX law. And so Mike and the team will work on tax opportunities in order to bring that tax rate down. But I think with limited impact in 2026 and more to come in the years after. Okay, thank you.

Jeff Hammond

Thanks, Jeff.

OPERATOR

Thank you. Your next question comes to the line of Nathan Jones with Stifel. Your line is now open.

Nathan Jones

Good morning everyone. I'll add my best wishes to Emmanuel. First question here on CCT margins. It seems over the, you know, the last few years you guys have done done the work on improving the value proposition to customers there even. I mean, I'm talking outside of the aerospace stuff, improving the productivity, improving the on time delivery. So I guess my question is about value based pricing in CCT and where you are in that process outside of the commercial OEM stuff and how much you think that could contribute to margins over the next two or three years.

Luca Savi

Thanks, Nathan. This is fair. And I think that price has been also a good tailwind when you look at CCT in the last couple of years. Exactly for the reason that you said. The price negotiation with Boeing, that we closed last year is an actual proof of what you just said. Having said that, I think that there is more to do on the pricing on the CCT front and this is what the team is working on. I would say the largest opportunity to be fair. Nathan is probably in Casoria. So I think that Casoria is providing a great service to our customers and they think that there is more to be done specifically in that part of cct, I guess. Follow up question.

Nathan Jones

I'm always interested in revenue synergies out of this kind of deal and I'm sure there is a lot of plans going on there. I know they take longer to generate, so I'm not going to ask you what they contribute to 2026, but maybe if you could just provide a little bit more color on the things that you're working on where you see the opportunities to generate revenue synergies and kind of if you have any target over time of what that could add to the overall growth for itt.

Luca Savi

Thanks. Sure. Let's try to be specific. So when I was in Delavan together with Rudy and we were on the shop floor, on the shop floor, going around, we know that the Waukesha Cherry-Burrell doesn't have the twin screw pumps. As a matter of fact, we were spending money in Waukesha to really develop a new twin screw pumps. We did the assessment Bornemann Twin Screw Pumps are super good, very well recognized in the market and therefore, you know, Waukesha will sell Bornemann Twin Screw Pumps. That was just a small order that we had. But it's a start. And not only that, we Start selling. But then we will also localize our production of the twin screw in our plant in Delavan. That is a specific activity that I'm sure will deliver quite a bit of synergies Latin America. On the mixing front, Nico,, who's our leader in Latin America is working hard together with the leaders of the different units from SPX Flow. And I'm sure that as we localize more the decision making, we speeded up the decision and the action in the region Latin America and we get more intimate with the customers. Just the fact that we are there, that will provide good revenue synergies. The Middle east is another area where we are working on. But as you can imagine that probably at this point in time is more planning and discussion and then there are potential synergies happening just because now we have a base in Shanghai where we never had a plant before in the legacy Flow technologies in the legacy IP and a plant in Poland where we never had in Europe a low cost based manufacturing. So we are working hard on all those fronts.

Nathan Jones

Nathan, thanks for taking the questions. Thank you.

OPERATOR

Thank you. Your next question, come to the line of Vlad Bistricki with Citigroup. Your line is now open.

Vlad Bistricki

Good morning guys. Thanks for taking my call. And I echo the sentiment. Congratulations, Emmanuel. We'll miss working with you tremendously, obviously.

Emmanuel Caparelli

Thank you.

Vlad Bistricki

I guess my first question, just when I look at the organic growth outlook for the year, the plus four to six, it seems very consistent with what you were thinking coming into the year. But can you talk about whether there's been any sort of moving pieces underneath that businesses or regions that are trending better or worse versus three months ago and I guess specifically whether you're baking in any incremental headwinds in the Middle

Luca Savi

east associated with conflict, there sure, no major change from what we were expecting. Vlad,. And now as a matter of fact, sure, the Middle east is something to watch. But now just to give you a perspective of the Middle East, which is 4% of total year revenue, we have an impact in Q2, but the impact in Q2 is probably less than 1% of the IT revenue. It's probably zero point between 0.5 and 0.67 of the sales. When it comes to the Middle East, I think that there is a very strong performance in the short cycle. When you look at the spare parts, the baseline and I want to tell that growth is not nominal growth. That is real growth. This is volume growth. There was a little bit of price, but that was minimum. And then also the connectors, industrial Sales both with the OEM and distribution. And those Vlad, those are market share gains in flow and also on the connector side.

Vlad Bistricki

That's really helpful Luca, and I guess just following up on that one on the industrial connectors, can you, when you talk about market share gains there, can you give us any more color on what specific end markets or verticals you're seeing share gains and any notable regional differences to call out there?

Luca Savi

I think there is a very good performance in Asia-Pacific where the team has worked really hard on the medical side and medical has been growing incredibly hard and then also on the HVAC. So Asia-Pacific and China has been definitely a good tailwind. Whereas I will say when you look at Europe on the others front is really working hard on the defence because of the defense ramp up that is happening in Europe and in North America you have really the distribution is wider so it would be difficult really to really pointing out to any specific market.

Vlad Bistricki

Got it, thanks. I'll hop back in queue. Thanks Vlad.

OPERATOR

Thank you.

Brad Hewitt

Your next question comes to the line of Brad Hewitt with Wolff Research. Your line is now open.

Luca Savi

Hey, good morning, thanks for taking my questions. Hi Brad.

Brad Hewitt

Good morning.

Luca Savi

So you mentioned that your friction business outgrew auto bills by 1400 basis points during the quarter. Curious if you expect that outgrowth versus builds to compress through the rest of the year or could there perhaps be upside this year to the typical algorithm of 400 to 500 basis points of outgrowth?

Brad Hewitt

I would say listen is an exceptional performance and allowed us in a market that was down 3.4 in the quarter actually to grow, show the resilience of the team, the resilience of the business. I would say for the time being this is only 1/4. So I would say we stick to our usually forecast of an outperformance between 500 and 700 basis points for the full year. What I really like about this outperformance was that it was spread, was in every region, was in China, it was in Europe where we already had a high market share and was also in North America. And last but not least is we won 39 platforms, electrified platforms in the quarter which will feed future market share gains. And whilst production will be down this year to 91 million vehicles, the production of hybrid and the production of EV will actually grow double digit. And this is where we are particularly strong.

Luca Savi

Okay, great. And then as we think about at the total company level, can you walk through your assumptions for the year in terms of the net price cost equation as well as some of the moving pieces related to tariffs and material inflation.

Brad Hewitt

Thank you.

OPERATOR

Sure. On the price cost, you really have the usual dynamic in terms of you have a very good price cost equation when it comes to IP and CCT because we've got more pricing power, less so in motion technology where we feel the price pressure. But overall, for the full year at itt, the price cost is going to be positive. Now when you look at the tariff, the situation is very fluid. I'm pretty sure the next few weeks it's going to be different what it is today. Now we are actively pursuing any opportunity to recover any tariffs that we already paid. But we think that process will be long and who knows how it's going to pan out. And then what I would like to highlight is that as we demonstrated in 2025, we were able to offset all the tariffs with commercial and productivity actions. So we think that that would be a similar scenario in 2026.

Luca Savi

Thanks, Luca.

Matt Somerville

Thanks Brad.

Emmanuel Caparelli

Thank you. Your next question at Somerville with DA Davidson. Your line is now open.

Matt Somerville

Thanks. Echo similar sentiment. Emanuel, just two quick ones for me. Can you talk about the core sort of industrial process funnel as you look ahead relative to maybe what you were seeing 90 days ago or a year ago, whatever makes sense to drive the most informed sort of comparison as to how that's evolving and then I'll follow up.

Jake Davis

Matt. The funnel is very healthy, is elevated and is actually up year over year. Matt, it's also up sequentially too. Now what is interesting is that then if you want to go a little bit more granular and you look at the region, I would say the region where the final is up the most is North America, which is interesting because this is where we had our largest orders growth in North America. And despite that, the funnel is up tremendously, which tells us something about the replenishment speed of the opportunity in North America. The funnel is down when you look at Europe and the Middle east for obvious reasons because all the commercial conversation, the investment that we had with Saudi Aramco, for example, all of those are frozen. But we expect those to start quickly if the situation normalize.

Luca Savi

Thank you. And then I was wondering if you could help sort of cadence out the flow accretion you expect for the year. If we were at $0.04 in Q1, obviously you're assuming something more conservative on the look ahead out three quarters. So maybe help me understand kind of the logic behind that. Maybe it's just conservatism, but ultimately how we should be thinking about that cadence.

Jake Davis

Yeah. So when you think about Q1, you know, as I mentioned in Q1, you have an outsized contribution from SPX Flow. And the reason for this is because basically March is so disproportionate compared to the rest of the quarter. And then you also have less interest expense as well as a smaller share count. So as you ramp that in Q2, Q3 and Q4, you get your interest that increases roughly by $30 million a quarter. You get your share count that goes to 90 million shares. And then so as a result, XPX Flow continues to deliver really strong performance, but is kind of impacted by these variables and the normalizing of the fact that we don't have just one month with Fibrik. So I would say the continued progression of the performance of SPX Flow from a growth standpoint, as Luca said, but also from a margin standpoint and so preparing the ground for further productivity as we hit 2027, including cost synergies. Thank you.

OPERATOR

Thank you, Matt.

B

Thank you. Your last question comes to the line of Scott Davis with Milius Research. Your line is now open.

F

Hey, good morning. It's Jake on for Scott. Congrats on getting the SPX across the goal line and congrats Emanuel as well. We appreciate all your help over the years and you'll be on the beach in a few months with a nice Cabernet or actually, I don't know what your drink is, but just on the Middle East, I know you touched on, you made a few comments on that. But I'd have to imagine when you start turning on some of this production that's been shut in, you're going to have a lot of valves and pumps and other products that probably won't work as they should and to say nothing of some of the infrastructure that's been destroyed. So I guess is there a way to think about what the upside might be on the other side of this conflict?

D

Yeah, what you said is absolutely true. So I think that we expect the investment that was supposed to happen, the conversation to start super quick and then there should be some good service work that comes out of it. And this is where our team headed by Kalim, by Khaleed and by Hamdi to be able to perform because the service business is actually very, very good and the Saudi expansion that we made will be perfect at that time. One thing also I want to remind is the incredible performance also that we had of our harboring valves in Israel. As despite what's going on and the war, this business has been able actually to grow orders despite the war to grow revenue despite the war. And sure we had the pressure on the margin because the cost of the containers, because of the transportation, etc. And the disruption on the operations as you can imagine. But a great performance from the Harbonim team over there in the Middle east as well.

F

Okay, that's good color. And just a different topic. I was surprised to hear you mention small bolt on deals on the call just given all you have on your plate with SPX and seemed like a very deliberate comment. But I'm not sure if that's an indication that maybe there's some, some deals in your pipeline that you feel are actionable. So do you feel like you have the organizational capacity to be able to take on some more from here?

D

Yes Jake, yes we do. Because when you think about the SPX flow it involves our business units that are self standing. The pumps of SPX flow of course will be integrated with our pumps business. But there are area where the business and the business leader are running very well. They got the capacity to really add to it. Think about Svanaoi. Svanoi is performing incredibly well. 44% revenue growth book to bill of 1.2. The fundamentals are strong. They've been practically untouched by the SPX flow acquisition. So their management team, that business have the capacity to really to do a little bit more. And this is also why we kept our debt ratio to 2.7, to really have that flexibility. So we got the financial capacity to do small bolt ons and also the management capacity. Obviously they're going to be small in size. Right? You know, nothing large.

F

Okay, I appreciate it Luca, thank you. I'll pass it on.

D

Thank you, Jake.

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