Welcome to ITT's 2023 Fourth Quarter Conference Call. Today is Thursday, February 8, 2024. Today's call is being recorded, and will be available for replay beginning at 12 PM Eastern. 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. [Operator Instructions] It is now my pleasure to turn the floor over to Mark Macaluso, Vice President, Investor Relations and Global Communications. You may begin.

Thank you, Kevin, and good morning. Joining me in Stamford today are Luca Savi, ITT's Chief Executive Officer and President; and Emmanuel Caprais, Chief Financial Officer. Today's call will cover ITT's financial results for the three and 12-month period ended December 31, 2023, which we announced this morning. Please refer to Slide 2 of the presentation available on our website, 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 2023 annual report on Form 10-K and other recent SEC filings. Except where otherwise noted, the fourth quarter and full year results we present this morning will be compared to the fourth quarter and full year 2022 and include certain non-GAAP financial measures. The reconciliation of such measures to 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. Before we begin, I want to call your attention to a change in the presentation of certain measures we have previously provided in ITT's earnings materials and SEC filings. The SEC has asked ITT to no longer disclose total segment operating income or margin, and total adjusted segment operating income or margin. We are therefore transitioning to operating income and margin, and adjusted operating income and margin on a consolidated basis. This metric is comprised of our previous segment operating income and adjusted segment operating income measures, respectively, minus corporate expense, which was previously presented below the segment operating income line in our earnings materials. Please note, this is not due to any error, correction or misstatement on ITT's behalf. We will continue to present the results for each segment individually, but because of this change, they will no longer be aggregated to disclose total segment operating income or margin. We believe that previous measures are easily derivable from our reported results. With that, it's now my pleasure to turn the call over to Luca, who'll begin on Slide 3.

Thank you, Mark, and good morning. 2023 was an outstanding year for ITT. I would like to thank all ITTers for their hard work and dedication in consistently serving our customers, with quality products delivered on-time despite continued challenging supply chain conditions. And it was your efforts that allowed ITT to surpass $3 billion of revenue in 2023. Here are the highlights: 8% organic revenue growth; nearly 17% operating margin, up 100 basis points; 17% adjusted EPS growth to a new record level of earnings at $5.21; free cash flow of $430 million, up more than $250 million; and on the M&A front, we announced two strategic acquisitions in flow and connectors, while divesting two non-core businesses. On revenue growth, Industrial Process led the way with 14% organic revenue growth, including 16% in parts and service and 31% growth in projects. The projects growth was due to significant share gains driven by flawless execution. In MT, Friction OE grew 13%, outpacing global auto production by roughly 600 basis points for the year. And in CCT, our aerospace and defense components business was up 25%. On profitability, our productivity and pricing actions drove a 100-basis-point improvement in margin expansion for the full year, bolstered by the performance in Industrial Process. IP grew margin 330 basis points, eclipsing 22%, whilst we continue to invest in product redesign, key competencies and lean. We also successfully closed the Seneca Falls foundry, which will enable the business to operate with a more efficient cost structure. There was considerable progress at Motion Technologies as well. For the full year, MT delivered 16.2% operating margin, improving sequentially every quarter in 2023 and exiting Q4 with a run rate above 17%. The performance at Wolverine also significantly improved to a high-teens operating margin in December. With this performance…

Thank you, Luca, and good morning. Beginning with revenue, our teams delivered 4% organic growth, with price realization and higher sales volumes contributing equally to this quarter's growth. MT grew 7%, driven by double-digit growth in Friction OE, including 30% in China. Importantly, our independent aftermarket sales grew 9% this quarter. CCT grew 3% year-over-year, with strong aerospace shipments, despite continued challenges in the supply chain. Connectors declined in the high single-digit range, driven by continued destocking in Europe, in European distribution, despite a strong December. This was partially offset by growth in commercial aero OE in North America. We believe distribution destocking will most likely persist through the first half of 2024, as inventory levels remain elevated. Finally, IP revenue ended the fourth quarter up 2% above last year, with strong parts shipments, service activity and pricing realization, partially offset by weaker baseline pumps sales due to production and supply constraints. Importantly, orders in IP were up 5%, thanks to strong short-cycle activity, while project orders were nearly flat. On profitability, operating income grew 4%. Productivity added 90 basis points, while volume, mix and price added 10 basis points, net of other cost increases. This was partially offset by 110 basis points from corporate expenses and M&A costs, and 50 basis points from strategic investments. By segment, MT and CCT's margins were 17% and 19%, respectively, aligned to our expectations and growing sequentially for the third consecutive quarter. IP was nearly at 21% and ended the year above 22%, up 330 basis points from the year to cap an impressive 2023. Lastly, on free cash flow, our performance rebounded significantly in 2023. Our teams generated $430 million for the year. This was mainly driven by higher income and improved collections. However, we still have a sizable opportunity in inventory,…

Thanks, Emmanuel. Before moving to Q&A, few key points. We executed in 2023 across all businesses with strong orders, strong revenue growth, 100 basis points of margin expansion and 17% EPS growth. Friction continued to outperform, whilst IP won considerable share, including its largest single award ever. We completed the largest acquisition to-date at ITT. We are proud of what our team accomplished all over the world, and we entered 2024 with a record backlog and our M&A pipeline remains rich and active. I look forward to sharing our progress with you throughout the year. Thank you for your continued support of ITT. It has been my pleasure speaking with you all this morning. Kevin, please open the line for Q&A.

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from Damian Karas with UBS. Your line is open.

Good morning, Damian.

Hey. Good morning, guys.

Hi, Damian.

Hey. Bonjour, Luca. Sorry, I cut out a few times, so missed some of your comments. But maybe we could start with IP margins. I know you said that -- expecting that to be slightly below 21%, but maybe you could just unpack the moving pieces there. Svanehøj dilution is a little bit more than we anticipated, but maybe you could just talk about the opportunity to work some of those costs down you said over time, Emmanuel. And then, maybe just any other things there, the closing of the foundry mix, if you could just unpack that? Appreciate it.

Absolutely, Damian. So, our IP margin will be down next year in Q1 and for the full year. And mainly what you attribute this to is the year one impact of Svanehøj. This is an impact of roughly 200 -- it will be more than 250 basis points of margin. And the reason for this is because Svanehøj adds $160 million of revenue, but zero income. And so, that has a very dilutive impact on IP's margin. Other than this, we continue to expect to grow pricing, so pricing will be a net benefit of -- a benefit of 100 -- a little bit more than 150 basis points as well as volume. Keep in mind that IP is expected to grow 9% next year, which is a large number on top of the 14% organically we achieved in 2023. And then, obviously, we'll continue -- we're going to continue to drive productivity and cost reductions.

Okay, great. And then, switching gears to MT. So, on the sales guide, you mentioned kind of expecting Friction -- auto production to be down slightly, but 400 to 500 basis points of outperformance. What's your expectation for kind of the rest of the business, thinking about Friction aftermarket and rail? And I'm just curious how you guys are thinking about the China market in particular and any potential risks there.

Sure. So, when we look at the rail market, I think we are expecting the rail market to be stronger for ITT next year. We had a very good backlog and good awards, and these across all the geography, China, Europe and North America. So, that is positive -- is going to be positive for us in 2024, the rail. Then when you look at when you specifically talk about China, I think that we are expecting the market to be flat in 2024, but we will continue to outperform the market in China next year as well. Just to give you an idea, Damian, the team performed incredibly well in 2023, outperformance of more than 1,000 basis points in China. In Q4, despite the fact that we had more than 80 PV, process validations, the team was able to deliver more than 99.9 on-time delivery. And just in Q1 this year, they have more than 30 start of productions. So, China will continue to be good for ITT.

Okay. And Friction aftermarket, are you kind of assuming that's flat or does that return to growth?

Sure. Yes. Sorry, I forgot about that. Sorry, Damian. When it comes to the China aftermarket, as you can see, the independent aftermarket grew in Q4, was an easy compare. We will see some -- as the destocking has stopped, we got that confirmation with the customer, and we will start seeing some growth in Q1 and then we will see for the rest of the year.

Terrific. Appreciate the color. Thanks a lot, guys.

Thanks, Damian.

Our next question comes from Nathan Jones with Stifel. Your line is open.

Good morning, everyone.

Good morning, Nathan.

Hi, Nathan.

I wanted to follow up on the Svanehøj and the impact to the financials here. You said no income, you've got $0.20 of headwind from interest expense. Are you accounting for -- are you adding all of the charges for the inventory step-up as well as the continuing amortization on Svanehøj, and that's why it has zero income in 2024?

Yeah. That's correct, Nathan. We don't special-out backlog amortization or any other intangible amortization. And so, when you think about 2024, we are hit by this backlog amortization, probably until the beginning of 2025. And then from there on, we'll have the regular intangible amortization.

Could you then maybe talk about what that reported margin looks like in 2025 once we get rid of this non-continuing amortization from that business?

Well, I mean, it's a little early. What we want to say is what we talked about when we signed the deal. So, EBITDA is above 20% at Svanehøj. This is a very strong business with very competent management team. You remember that we said that we expect to grow low double-digit the revenue base in the next five years. So, in 2025 -- 2024, we have $160 million of sales contribution. And yeah, and importantly, we expect to generate cash in 2024 between $20 million and $30 million. So, I think this is the year one difficulties that we have to get over with, specifically with the backlog amortization. And then Svanehøj, as we discussed, will be accretive to IP over the long-term.

Yeah. Just want to make sure everyone understands, the minus $0.20 of dilution to earnings in 2024 is not really what the business is doing. My follow-up question, CCT destocking. What impact are you expecting for destocking in CCT, and if there's a destocking anywhere else to have on revenue in 2024?

So, what we've seen is a lot of destocking has happened in 2023. But when we talk to our customer, we start seeing some destocking lingering a little bit in 2024, and this is -- probably will be true in Q1, and maybe a little bit in Q2 as well. And we are talking about really the connectors side of the business.

Yeah. So, to put some numbers on that, so industrial connectors orders in 2023 were down 6%. We expect them to be down high-teens in 2024 for industrial connectors. Overall connectors will be down -- will be roughly flat, a little down in 2024 in terms of orders.

And you said industrial connectors orders are expected down high-teens in 2024?

That's correct, yes.

Great. Thanks for taking my questions, I'll pass it on.

Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Your line is open.

Good morning, Jeff.

Hi, Jeff.

Hey. Good morning, guys. Hey, just on auto, it seems like there's been this kind of shift more recently in EV momentum and maybe consumers preferring hybrids or ICE still. I'm just wondering, if that lingers, if you guys are agnostic around the shift or -- it doesn't seem to be kind of showing up in your business, but just how you think about that consumer sentiment shift around kind of your new wins, et cetera?

Hi, Jeff. Listen, it's fair, right? We all read the same newspaper, but the electrification trend is really here to stay. It might slow down little bit, but it's not going to go away. Now, what I would like to draw your attention to is the data. When you look at -- we always talk about electrified platforms. When you look at the electric vehicles and hybrid, the production of those platforms in 2023 is equivalent to more than 28 million vehicles. Now, this is twice almost the production that you have in North America. So, it's a sizable market. It might grow a little bit less, but it's still huge. So, we pay attention to it, of course, and you see how much we are growing in that -- in those electrified platforms, more than 150 platforms won in 2023. Having said that, you said it quite well, we are agnostic. We go to ICE as well. And despite the fact that the market is declining, in '23, we grew 7%, outperforming on the ICE, too.

Okay. And then just on CCT, a couple of questions. One, just maybe spike out what you think the aero defense business grows in 2024. And then just kind of the flat margins, how much of that is mix? And maybe just talk about some of the war chest items that maybe could drive some margin upside.

Sure. When we look at the CCT and you look at the two businesses, of course, we are facing some destocking on the connectors side that Emmanuel was talking about. But then when you look at the OEM awards in connectors, that being growing in Q2, in Q3, in Q4 of [2013] (ph) and we expect them to keep on growing also in 2024. And this is where we are creating the pool, that when it comes to connectors and a lot of that comes from aero and defense. On the components side of CCT, what we have is aero and defense has been a good tailwind. Now, aero has still not recovered, when we talk about OE, to the level of the pre-pandemic level, we are still probably 20% down when it comes to orders, but the aftermarket is higher than the pre-pandemic. So, that is really the dynamic that we see on the CCT front.

And so, when you look at our orders for 2024 for aero and defense, for CCT, we expect to be around a little bit more than 6%, so a nice growth. And then, from a revenue standpoint, this is where you're going to see all the OE share gains that Luca was talking about, with defense revenue is going to be up low double-digits. So, really nice work from the teams here to go after original equipment opportunities in aero and defense.

And then, just the margins kind of being flat...

Yeah. So, when we look at the margins, today, when you look at CCT margin in 2023 at 18.1%, the margin is a record profitability already for CCT. Now, we still have area for improvement that we're going to work on. And so, those are coming from constraining the supply chain that are still there persisting, slowly improving, and a little bit on our operations where we have to work and invest.

Yeah. And so, when you think about those constraints on the supply chain, they materialize in two ways. One is in increased pricing from our suppliers. And so, because in the aero contracts, we have some fixed price contracts, it's taking a little bit of time for us to be able to recover that cost increase with our customers, but we should be in a good position by the end of 2024 with most of our costs recovered. And then it constraints also the volume, so the volume growth, as you see, we expect the volume growth in CCT to be up, but still in the low single digits. And so, we expect to see, as the year progresses, an improvement in our ability to deliver to our customers.

Okay, great. Thanks, guys.

Thanks, Jeff.

Our next question comes from Scott Davis with Melius Research. Your line is open.

Hey. Good morning, guys.

Good morning, Scott.

Hi, Scott.

Congrats on a good and a great '23, and good luck this year. Guys, a couple of questions. I see the CapEx guidance up from kind of 3% of sales to 4% of sales, perhaps some timing of projects and such. Maybe you can clarify that a little bit, and just perhaps maybe longer-term, do you envision getting back to that 3%-ish type level, or is 4% -- is there somewhere between the 3% and 4% perhaps? I'll just leave it at that. Thanks.

Hi, Scott. Thanks. What you see in 2024 is a little bit -- a little bump up, and this is mainly related to our high-performance investment that we have in Termoli, Italy. We are going after these markets, we are building the plant, the plant is up, the machinery will be in the plant in August and up running in October to make the new brake pads. So, it's a new market we are getting in and this is really because the reason of the higher CapEx. One positive things that I can share with you Scott is that we already have the awards and we already have the pads that we need to make come October 2024.

Yeah. And then, so just to go back to the second point of your question, we absolutely expect CapEx to normalize around that lower level that we've seen in the past in the future once the infrastructure investment in Termoli are done.

Okay, that's helpful. And then when you think about your M&A pipeline, without obviously disclosing anything specific, I would guess that it leans pretty heavily towards Industrial Process. Is that a fair assumption or is there more balance to that pipeline perhaps than we would think?

I think a little bit more, I would say, Scott. You're right when you say IP because the pipeline -- the funnel is rich of pumps and valves, but the connectors is a strategic area for us as well. I know that we are a small player on the connector, but we have a very good service with our customers. Usually, they have a great customer experience working with us. And when it comes, particularly in aero and defense, connectors is a great opportunity. And I would say not large deals on connectors, but for small, medium size.

Okay, good color. Thank you. Best of luck this year, guys. Thank you very much.

Thanks, Scott.

Thanks, Scott.

Our next question comes from Michael Halloran with Baird. Your line is open.

Good morning, Mike.

Hey. Good morning, everyone.

Hi, Mike.

So, two quick ones here. First on the IP side of things, maybe just talk about the underlying demand environment, projects versus aftermarket, big win that you just announced, which I think was booked in the first quarter, I'd be curious about that. But any signs of concern in the marketplace? It feels pretty healthy. It feels like there's a lot of positive momentum there. Just wondering, how you're looking at it as you think for the year on that order side.

Sure. First of all, Mike, when it comes to the award that we shared in the remarks, we didn't book, it's an award. So, this is -- we are going to work together with ExxonMobil in all the quotation for all those different size. You're talking about $80 million in the last three years and probably something around in the first year, something like probably $15 million, $20 million that will be booked in 2024. When it comes to the general market, I want just to give you some stats. When you look at 2023, the revenue in IP was up 14%, but the book-to-bill, despite that growth in revenue, was more than 1. And despite these orders that grew tremendously, 10% for IP, 20% for the projects in IP, our funnel today is still the highest ever. It's up 23% year-over-year and up 16% sequentially versus Q3. So, this tells you the strength. Last data, and then I shut up, is that also when you look at all the different geographies around the world, North American orders have been growing every year for the last three years. And the same was for Asia Pacific, Latin America and the Middle East. The only area that has a little bit of a mixed picture is actually Europe.

And Mike, let me throw a little bit more data in there. So, as we discussed our backlog is up 16% year-over-year, so obviously that's going to feed a lot of the growth in 2024. And if you look the backlog coverage also, we are around 50% of our expected revenue. So, if you see some of the stuff, backlog is for 2025, so it doesn't all apply. But this is comparing to a little bit more than 40% historically. So, we're also in a good position here as we continue to gain market share.

Really appreciate that color. And then, for Emmanuel, a follow-up here, could you just clarify the Motion margin guidance for me? I think on one side, it's approaching 18% this year. I think I heard you say 100% -- 100 basis point expansion year-over-year. So, can you just think that and clarify for me?

Yeah. So, you're correct, Mike. We expect to be able to reach 18% margin sometime in 2024, hopefully more in the first half than in the second half. We saw some really good already numbers in January and we expect good numbers in February also. So, the team is really doing a fantastic job. And then, so for 2024, we expect margins, not to be quite -- for the full year, not to be quite at the level of 18%, but to be up at least 100 basis points compared to 2023.

Okay, great. That makes a lot of sense. Appreciate, everyone. Thanks.

Thanks, Mike.

Our next question comes from Joe Ritchie with Goldman Sachs. Your line is open.

Good morning, Joe.

Hi, Joe.

Thanks. Hey. Good morning, guys. Hey, first, maybe a theoretical question since balance sheet is in a great position, it seems like you're going to be doing a bunch more deals going forward. Have you thought about considering reporting a cash EPS number, maybe kind of eliminating some of the noise associated with the backlog amortization? Any thoughts around that?

So, you're right, Joe. We decided not to special-out any intangible amortization. And this is what we've been doing in the past. Now, it's true that we're getting more and more acquisitive, at least that's what we want to do, obviously, keeping our rigor and our discipline, so that we do good deals and we secure returns. For the moment, we haven't really thought about disclosing cash EPS, but I think that we provide visibility by really highlighting the impacts of those acquisitions, and especially in terms of Svanehøj the year one impact. So, for Svanehøj, for instance, I think we can get to the same result by disclosing those data points. And then so if you think about IP, it's 260 basis points of dilution from a margin standpoint in 2024. And for overall ITT, it's 80 basis points of impact. So, it's a significant impact. For the moment, we'll continue like this. And if cash EPS is warranted, then maybe we'll look at it. Thank you, Joe.

Yeah. No, that's helpful, and do appreciate all the details that you do provide. Maybe my other question just talking through IP, obviously, great story there. You did mention the baseline pump business. It sounded like there were still some kind of supply chain issues that you're seeing in that business. Can you maybe just elaborate on that a little bit more? And, like, what the expectation is for that business in 2024?

Sure. When you look at the short cycle, the short cycle orders in Q4 were up 7%. And also for the full year, they were up something between 7% and 8%, so it's been the strongest year ever when it comes, not just the orders of IP, their highest ever, but also the highest ever for the short cycle. Now, when you look at that 7% growth for the full year, Joe, I would say half-and-half price and volume, 3% was volume, 4% was price. So, now, we expect that to remain robust for 2024. When we look at the orders in January, they stayed strong and they were particularly strong in valves and baseline when it comes to January, but it's only a month.

So, when you look at our revenue, to add further details, so our short cycle, despite the constraints that we were facing, our short cycle in IP was up -- revenue was up 2%. And we expect that short cycle revenue in 2024 to be up 8%. So, we're working through the supply chain constraints we have mainly with casting and logistics. And those are clearly impacting our ability to ship, as expected, but we're working through those issues. And that's why we are confident that we can deliver the growth in 2024.

Great. Thanks, guys.

Thanks, Joe.

Our next question comes from Joe Giordano with TD Cowen. Your line is open.

Good morning, Joe.

Hey. Good morning, guys. How are you?

Hi, Joe. Good.

Can I start on MT? Can you talk about it? All the Friction wins in EV is great to see. Obviously, some of these platforms are small and small-ish and just kind of starting, so they don't have the scale. So, can you talk to what margins on EV versus ICE looks like now? And maybe how much of your 2023 Friction was EV related?

Okay. So, maybe if I start and you, Emmanuel, can give the color. So, it's true. When you talk about 150 platforms, some of those are relatively small. If you think about 30 SoP in China in Q1, some of those are small. But let's not forget that also during 2023, some of the awards were the largest ever, like with the German premium OEMs. We won almost 100% of all their future EV platforms that we make around the world in China and in other parts, the Tesla Cybertruck where we won the front axle. So, there are several awards, small and medium. Our market share with Tesla now is more than 20% and we'll keep on ramping up with the awards. Our market share with BYD in 2023 is roughly now 10% and will double in the next couple of years. Those are when it comes to the awards. Emmanuel?

Yeah. So, if you look at our EV, the share of the EV out of our original equipment revenue, it's been growing really fast. So, you may remember for -- during our Investor Day, we said that 21% of our OE revenue was EVs. And that number for 2023 has jumped to 35%. So, we're really excited by the share gains in EV. Our market share in electrified vehicle is higher than our global market share. And as Luca was saying, we are agnostic. So, we like to win in EV and we like to win in ICE as well.

And then just a follow-up, switching over to the connectors business. I mean, you gave some commentary about orders in industrial connectors down high-teens in 2024. I'm just curious how much of that -- I know we talked through 2023 that you guys were kind of benefiting in '23 by pushing new products like first time ever into the distribution chain. So, like, how much of that is just impossible comps because last year was the first year you ever put some of this stuff in?

So, for industrial connectors, when we talk about like the wins in OE, this is more for aerospace and defense. Industrial connectors is more distribution. So, what you're seeing here is that we get -- we continue to get slammed by destocking on our industrial connectors through the distribution channel and we're trying to offset that with aerospace and defense connector on the original equipment space. So, I think when you look at 2023, we were successful in doing that in original equipment in North America and we're going to try to do that especially for defense in Europe and then some other OE applications such as battery charging for OE applications in China as well.

Thanks, guys.

Thanks, Joe.

Thanks, Joe.

Our next question comes from Matt Summerville with D.A. Davidson. Your line is open.

Good morning, Matt.

Hi, Matt.

Good morning. In the prepared remarks, you mentioned some supply chain constraints in the baseline pump business. I was hoping you could elaborate on that a little bit and whether or not that's going to continue to impact volume in '24. And then I have a follow-up.

Yeah. So, we expect this to continue a little bit maybe in Q1, a little bit in Q2, mainly driven by casting and also logistics, a lot of the supply chain routes were blocked, as you know. So, we expect things to improve, especially as also we ramp up some of our casting suppliers in North America, we've been able to find, especially in Mexico, some really good suppliers. And so, that's -- we think that this is going to help in absorbing that capacity that we need.

Got it. And then just with respect to Svanehøj, it would be helpful I think if you're able to parse out with respect to the dilutive impact to IP margins. How much of that is being driven, ideally in dollars, by the temporary inventory step up cost and then what is the level of ongoing intangibles amortization? Thank you.

Yeah. So, what we said, Matt, is that the impact of Svanehøj on IP's margin, the dilution is a little bit more than 250 basis points. Obviously, we have a large number -- this is a business that has a long-tail backlog because it's a long-cycle business, which is much different from what we've seen in Habonim. So, that backlog spreads until early 2025. And so, I think that what you should expect is to see that dilution all the way in 2024, also a little bit in 2025. And then when it comes to 2025, we will be able to provide you with a better view of the impact without this backlog amortization.

Thank you.

Thanks, Matt.

Our next question comes from Vlad Bystricky with Citigroup. Your line is open.

Good morning, Vlad.

Hi, Vlad.

Hey. Good morning, guys. Thanks for getting me in here. I wanted to ask you guys about the Exxon award that you announced and you've talked about today. Obviously, a little different than what we've seen in the past and it looks like a really interesting opportunity. Can you talk a little more about how that opportunity just evolved? You mentioned that you displaced some competitors. So, was that Exxon coming to market with a tender or just how did that come about? And then do you see any other opportunities out in the marketplace for similar larger scale awards like that?

Sure. Thanks, Vlad. So, I think that ExxonMobil was looking at a framework agreement, a framework agreement that will make many of their projects in the brownfield, all their facilities faster and they were looking for a partner. And what we were able to work was work for a long time together with them to ensure that our offerings, what we were putting together, was going to reduce the total cost of ownership that they had, improving the pump uptime, the reliability, all of that are key aspects in running those facilities. And the team has really worked closely with the customer for probably nine months, 12 months to ensure that we were really offering what they were looking at. So, that is a great award that is going to feed us growth in the next three years. I remind you that also when we look at our market share of the pumps installed in ExxonMobil for ITT, when we talk to them, is that was really a small percentage. So, this is a market share gain story. When we look at some of the others customers, there're other big oil producers, where we had some special agreements. Like, for instance, we talk about the Bornemann pumps, another oil producer is really standardizing their carbon capture and their stop flaring with our technology. So, we do not have an agreement in place like this one, but I will not exclude it for the future.

Great. That's helpful color, Luca. Appreciate that. And then, I just wanted to ask you also -- so you talked several times on the call about the Termoli plant and the ramp there. I think you said you're starting production in October. So, I would imagine it's pretty small impact on '24. But given the awards that you have and sort of the visibility you have there, is there a way to think about what kind of tailwind or revenue contribution you expect heading into '25 as that facility ramps production and begins to hit its stride?

I would say, 2025, obviously, would be a bigger impact than 2024. I want just to remind you, Vlad, that when you're talking about these facilities are the high performance. So, by definition, you do not have a high volume of brake pads, but the price of those brake pads is going to be higher. So, it's not huge volume, but it's going to be healthy margins. So, you will expect more benefits on that front definitely in 2025.

Great. Thanks, Luca.

Thanks, Vlad.

Our last question comes from Andrew Obin with Bank of America. Your line is open.

Hey, good morning. You have Sabrina Abrams on for Andrew.

Good morning, Sabrina.

Hi, Sabrina.

Hi, guys. Just a question about maybe seasonality and moving through the year about the comment you made about mid-teens growth in 1Q, but 9% for the full year. Does that imply less visibility in the second half? And how should we think about the cadence of earnings through 2024?

So, Sabrina, the first part of your question is referring to revenue?

I thought that you made a comment about EPS growth being mid-teens in 1Q.

Yeah, that's correct. So, when you -- so let's start with 2023. You saw in 2023 that we had a significant ramp in EPS throughout the year. And then so it's only normal, given our exit rate of 2023 in Q4 that our year-over-year Q1 performance will be much higher. So, we expect mid-teens EPS growth in Q1. We expect low single-digit growth in Q2. So, overall, for the first half, low double-digits. And then to temp that down in the second half to a mid-single-digit growth year-over-year. So, you're right, there is the continued ramp from Q4 that is really providing nice year-over-year increases in the first half and then a little bit more -- a little bit less aggressive in the second half, given our performance in 2023.

Great, thank you so much. And then, I guess, thinking about price and inflation, I know you mentioned still seeing some significant price increases on the aero side. But what are your expectations for inflation in 2024? Are you seeing it normalize? And then maybe if you could give some color on price contribution that's implied in the guide for next year?

So, on the price cost, I would say price cost in 2024 will be slightly positive, Sabrina. Now, we are moving towards a normalization. So, we will see inflation abating. We will continue to see that. Think about Motion Technologies, in the last two quarters, we have seen that really contributing in a positive way. And now with that, with the inflation abating, then obviously the pricing will adjust accordingly, but 2024 will be price cost slightly positive.

Thank you.

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

Thank you.