ITT Inc. (ITT) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us virtually again for this year's UBS Global Industrials and Transportation Conference. I'm Damian Karas, [ and I'm part of the ] electrical equipment and multi-industry research team. We're very excited to kick off day one's afternoon session with ITT. Joining us from the ITT team, we have CEO, Luca Savi; as well as Mark Macaluso, Vice President of Investor Relations. Before we get into the Q&A session, let me first turn it over to Luca and Mark to kick things off.

Thanks, Damian. Just a quick reminder of our safe harbor statement. The presentation and Luca's comments this morning will contain forward-looking statements that are subject to certain risks and uncertainties, including, but not limited to, impacts from the COVID-19 pandemic. All such statements should be evaluated together with the safe harbor disclosures and the risks and other uncertainties that affect our business, including those discussed in our Form 10-K and other SEC filings. Actual results may vary materially from the assumptions presented today. With that, I will turn it over to Luca Savi for a quick update on Q2.

Thank you. Thank you, Mark. And thank you, Damian. On behalf of everyone at ITT, I wanted to thank you for this opportunity. And also thank our shareholders, too, for their continued investment and support of ITT. Let me give a little bit of a short background on the company. ITT is a diversified engineering and technology company and manufacturer of components for niche and, many times, harsh environment applications. We supply components for the industrial, transportation and energy market. All our components are touching directly or indirectly our lives during the day. So if you guys drove on the highway this morning and you used your brakes, chances are that those brake pads that keep you safe are ITT brake pads. And/or other applications like reducing the sole -- the problem of flaring. ITT Bornemann Twin-Screw Pumps and our multiphase pumping technologies are solving the flaring problem in the oil and gas industry. So as you can see, ITT enables, really, everyday's life in unexpected ways. And we do this providing outstanding value for our shareholders. You saw it again in Q1, where we had 17% organic revenue growth, with the Friction OE outperforming the market by 1,500 basis points; the strength in Connectors during the quarter; the adjusted segment margin expansion by 300 basis points, which was thanks to the 74% incremental margin; free cash flow margin of 16%; and our capital deployment, $50 million in share repurchases and a 30% dividend increase after 15% increase last year. That way, in Q1, we surpassed 2019 first quarter results in many facets, with revenue, segment margin, EPS and free cash flow. And the story continues as we continue to see really many opportunities for further improvement. And with that, I hand it over to you, Damian.

Terrific. Thank you for that overview, Luca. Just a note, for those of you listening in, if you have any questions, you can submit them on the webcast, on the chat screen, and I'll go ahead and ask them. Maybe I could begin by asking about how you've been spending your time, Luca? I know you're just coming off of some travel, and I'm sure everyone would just love to hear what all you've been up to and where you've been. So would you mind clueing us in?

Sure. So when you look at ITT, first, in the U.S., we are all back to work in the office since the beginning of May. And different countries are different. Europe are going back to the office right now, at this point in time, just because of the third wave. But in the U.S., we've been back in the office since the beginning of May. And I've been traveling quite a bit in the U.S., in California, which is our base for our CCT business; in Houston, with IP. And most recently, in the last 10 days, I was lucky to be in Europe. And I spent the last 10 days in several European countries, together with MT leaders. And so we are seeing the recovery across several of our markets, and we are seeing getting back to the pre-COVID level. And it's good to spend time with our people and with our customers. So that's good, Damian.

That's great color. And good to hear that you're back on the ground. I know that's something that's really important to you. So let's take the discussion to the segment level, beginning with MT, where it sounds like you've been spending your last few weeks. Thinking about Friction, now you're already widely considered best-in-class in the brake pad industry. You've been able to capture a sizable amount of market share from your competition, maintaining a high level of operating performance. So I ask you, to what extent do you still see room for improvement in the business?

There is, Damian. First of all, the improvement in the business are coming on several fronts. If you look at regions like China or North America, in these 2 countries, we have a market share in 2020, approximately of 24.5% in China and 23% in North America. So there is no reason why we cannot increase our market share to the high 30s, low 40s if we keep on performing. And therefore, there is improvement to be made just because of the scale, just because of the volume that we can put through our plans. And the investment that we will have to make in our Chinese plant or in our Silao plant in Mexico are just the lines that will make the equipment, that will make the path. The infrastructure is already there. So improvements will come through volumes in those 2 regions. And when it comes to Europe, our market share is quite high. So there are areas where we can still improve our market share. You have to be very granular to understand which kind of segment you go, maybe light commercial vehicle [ or else ]. But it can come also from operational changes. So just to give you an example, I was in Barge last week. And I was discussing with Carlo, the leader, and with the plant manager over there, in terms of changes in the layout that will improve substantially the material flow, make it leaner, reducing drastically the number of forklifts, bringing the level of automation with AGVs or others, and that will improve, again, the efficiency of the plant. So there are several opportunities even in Europe. At this moment in time, we also have some challenges, specifically for 2021, which are related, really, to the commodities. If you think about the commodities, this is going to be a headwind for 2021. And if I look at the -- sequentially, on the quarter, that is going to be probably in Q2, a challenge of roughly 100 to 150 basis points sequentially for Motion Technologies, Q2 over Q1.

Got it. So some near-term headwinds for Friction, but it sounded like, longer term, if we think about the margin for MT, it's sort of, historically, kind of peaked around the high teens. It sounds like we should be thinking there's expansion opportunity beyond that over the medium, long term?

I think that there are continuous opportunity for improvement in terms of Motion Technologies. If you think about also some of our acquisitions, we have the Axtone acquisition that is in the double digit, but can continue to improve. KONI is performing very well in terms of mid-teens, but there is no reason why they cannot improve. And then Wolverine, which we brought this year, in 2021, back to a double-digit profitability can continue to improve. So we see continuous improvement in Motion Technologies. You're absolutely right, short-term challenges because of the commodities and because of this bubble, but medium, long term, continuous expansion.

Okay. Great. And you briefly touched on this, but you're primarily focused still on the automotive OE market. So there's this potential expansion opportunity into aftermarket as well as into commercial vehicles. What's your current thinking on pursuing those alternative growth paths?

Yes. So when you look at the aftermarket, really, we are a OE prevalently. So you think about roughly 65% to 70% OE and the other 30%, 35% is coming from aftermarket. And that aftermarket is split in 2: OEs and independent aftermarket. It is roughly 50-50 between the 2. And it's mainly a European play. So at this moment in time, we have decided strategically not to play in the aftermarket in North America, also because our market share is relatively low. If you think about roughly 23% in 2020, which means that if you want to play in the aftermarket, you need to have a considerable number of parts, which means big investment in the tools, in dies because our market share is still low and, therefore, it's not the wisest investment. We are trying to do something. We are experimenting something in China, and we will see in the next couple of years. But in terms of the aftermarket, it's mainly a European play, and we've decided strategically not to play in North America for the moment. When it comes to the commercial vehicle, this is an area where we do not play, and it could be well an opportunity in the future. And in that case, it's probably -- it would be very interesting in aftermarket play just because of the dynamic of the heavy-duty segment, really.

All right. That's interesting. So thinking about the aftermarket, I'm just curious, so you have part of the play in Europe is you have a great relationship with Continental. I'm just wondering if you foresee any similar type of opportunities in China or in North America. And you said you just -- like in North America, you said you just don't have the scale there yet. I mean where do you -- where would you have to get where you think you would have that scale to want to maybe take a bite in the aftermarket?

Sure. It's not just a question of scale, Damian, it's also the question of how the market plays and what is important in the market. So in Europe, it's a question of performance. It's a question where our value proposition, really, is matching the market and the market demand. If I look at the North American market, the independent aftermarket in North America has got good, better and best, and they are not really related to the real performance of the pad. It's a marketing gain. I mean you can have best that are actually worse than good. So it's -- so you really need to look, is this the game that we want to play? And are we the best one to play in that game? So for sure, it's a question of channel, but it's also a question of investment and market share. But it's also a question of, are we the best to play in that market? So at this point -- and this is the reason why we are trying a few things first in China rather than North America, where we think that we would fit the best.

Understood. Maybe if we shift over to the other side of MT, some investors wonder about some of the acquisitions and your focus on rail. So maybe you could explain what you find so attractive about the rail market and how you [ envision ] augmenting your portfolio.

Okay. So when you look at the -- at rail, it's a very fragmented industry. So if -- particularly, if you look at Europe, it's also very geographical. And there are many small, medium-sized companies that do not necessarily perform at their best. So we -- many times, our customers are actually coming to us, say, "Why don't you buy this company? Why don't you buy the other one?" And of course, you need to go through it, and it has to be a strategic fit, in addition to a very rigorous financial process that you go through. The reason why we find it attractive, so it's fragmented, so we can play a consolidation role in that. It's a good aftermarket play. If you look at rail, it's probably 65% aftermarket, 35% OE. And it's good in terms of secular growth. So for all of the reasons, we think that we can play a good game in rail. And we've done that with the acquisition of Axtone, which has been a good success for us.

Okay. I found your comment on people asking you why don't you own these assets rather interesting. Are you finding that it's more the strategic fit why you haven't really done this yet? Or are you finding that the financial metrics, the returns aren't there?

So it's more of a strategic fit. Everything that we go and buy, it has to follow, really, 2 rigorous process. One is the typical financial process, very rigorous. We need to ensure that we are able to create value for our shareholders. But the other thing, it has to be very rigorous also strategically. It needs to be close to the core, adjacent to the core. It must make sense for us to own that business. That's the real hurdle.

Understood. All right. Well, let's steer the conversation to IP, perhaps. So today, you're being more disciplined or selective, at least, when it comes to projects than the ITT of the old days. You've also said that you're not looking to be a consolidator in pumps and valves. Maybe you could just kind of talk about what your strategic priorities, if you will, are for IP?

Okay. When we look at IP, really, the strategic priorities are: first is operational excellence in terms of continuous in our journey. If I think about when we started in 2017, and where IP was in 2017, this is really the main focus is, start performing for our customers and for our shareholders. And this means on the supply chain, on the operation, on the shop floor, in the way that we manage the project. So -- and so that our on-time delivery, it improves and all of that. Our quality improves. The customer intimacy is the second priority, to ensure that we keep the customer at the center of everything that we do. And third is innovation with new product, with the VAVE, and with some product that could really change the rules of the game as well. So those are really the 3 main priorities for IP. They are -- these remain priorities for ITT. Obviously, in each different business, you have a different maturity, in customer intimacy, centricity or in operational excellence or in innovation. So in IP, we continue to focus on running our plant efficiently, in pushing the OEE of the machines to the highest level, the labor productivity to the highest level, to ensuring that our on-time delivery for the ANSI pumps is top in the market. So this is what the focus are.

Okay. And as a follow-up to that, you mentioned point #3, innovation, maybe you could talk a little bit about which end markets or applications that you're most excited about. And I'd also be curious to hear your perspective on how the movements that are currently taking place towards cleaner energy, reducing carbon emissions, all of those climate-related movements, how you view that and what risks or opportunities they might pose for the business.

Sure. So when we look at the IP, markets like the petrochemicals, like the general industrial have been very good for us, and also the oil and gas. So specifically on the oil and gas, all the initiatives in terms of cleaner energy as well. And so I mentioned in the remarks in terms of the problem of flaring, right? And with an oil producer, we have a standardized solution with our Bornemann pumps so that actually, they are eliminating the flaring at the wells completely. And the standard solution for all of their new wells is going to solve their problem on this -- on flaring, which means that, regarding clean energy, I see more opportunities actually for IP, if it is, thanks to the multiphase pumping technology or other equipment and other technology that we're working with our customers. So that is the opportunity that we see more than a risk. But as I said, general industrial and petrochemical are the other 2 areas where we are really working well with our customers.

Okay. Great. And then, I guess, just thinking broadly about IP as well as CCT, when you think about the operating initiatives and kind of where your focus has been, what inning do you think you're in? Or I guess, more appropriately for you, Luca, maybe if you think about the Juventus match, at what minute during that match do you find yourself in, in terms of those operating initiatives for those 2 segments?

So unfortunately, Juventus didn't win the Scudetto. So they didn't win the [ Serie A ] on -- let's talk about the Inter, right, Inter Milan, so even though it's not my team. So of course, when you look at operational excellence, none of the business is at the Motion Technologies level. None of the business is at the Friction level. We started the journey in Friction many years ago and, therefore, we got the benefit of many years of operation of improvements, of mistakes, lessons learned, et cetera. But I would say that both IP and CCT are on the journey. So when I look at IP, I'm very happy today in the way that they are managing the projects business, for instance. And if you think about IP project business, it's roughly 25% of our business is IP. We have -- we put together a very diligent and rigorous process in the way that we did our project and the way that we are executing this project. So today, I don't get upset when I'm doing the project reviews because the projects are -- most of them on time. Customer is satisfied. There are risks. Sometimes things do not go exactly the way that you want them to be. But because you have this rigorous process, you get to know that early on in the process, that you can do something about it. And this has improved the profitability of the project business substantially and the profitability of the projects that we have in our backlog. This allowed us to be more cost-competitive. This allowed us -- our customers to be happier because of our delivery and, therefore, for us to win more. So that, I'm really proud of, and this is good. On the operations on the shop floor, there is still a lot of work to do. And our shop floor are not as lean as I would like them to be. They decide as the leading initiatives, that there is many, many opportunities there to improve. When it comes to CCT, CCT in aerospace, we have been spoiled, in a sense. Because historically, in aerospace, you didn't have the pressure that you had in automotive in terms of being super lean and find those efficiency every year. And therefore, when you go on the shop floor, you see many opportunities in the way that they run their machining centers or their assembly line. So we are, in a way, I wouldn't say at the beginning of the journey because we started 1 year, a couple of years ago, to be more drastic about it. But definitely, we are in the journey, but less mature than IP as well. Did I answer your question, Damian?

Okay. It does. So it sounds like, I mean, right, you did this at MT for a number of years. So it sounds like there's still kind of like a multiyear path of getting things where you want them with the lean, the shop floors and all of that. Is that fair?

Absolutely. And also, with the innovation on the shop floor that you can do, and we will continue to improve, the Kaizen meeting that you can run together with the people on the shop floor. And these are one of -- some of the process that you need to put in place, and you need to make them robust, and you need to make them part of the DNA of the company. And it takes time to change that, particularly if the business hasn't done that historically.

Okay. Makes sense. And I know you guys have addressed this previously, but just getting some questions on it here, specifically about CCT margins. When do you -- first of all, when do you kind of get -- expect the segment to get back to kind of the 2019 earnings contribution level? And I guess, the more interesting part from my perspective is, when things do get back to normal where they were before COVID, what does the new margin profile look like for CCT?

I think that there is no reason why CCT cannot go back to the high-teen margins that we had in this business pre-COVID. It's going to take roughly 2 to 3 years in terms of time. I can tell you that within CCT, the Connector business is already at the level of profitability pre-COVID. So it's really the aerospace that is suffering the most. I think that the beauty is that, in Q1, we talked about decremental margin, but that was really the last quarter that we talked about decrementals. Starting from Q2, we will start talking about incremental margin. Incremental margin would be very good for CCT.

Okay. That makes sense. Now you touched briefly on this at the outset as well. One of the lingering effects of the pandemic are some of these supply chain issues and, obviously, kind of what's going on in auto OE is front and center. Just coming out of -- since the first quarter, are you seeing these conditions getting better or worse? And what's your kind of visibility on when you kind of foresee them easing, if you will?

It's interesting, Damian, because I'll tell you something funny, very short for a few seconds, before I'm talking about the supply chain for ITT. But one of my sons is in the tennis team of his school. And so we decided to have the end of the year party at our home with everybody. So you order in table and chairs. So you order 3 table and 40 chairs, whatever. So we ended up, after roughly 2 weeks of chasing, with 9 tables, and none of the chairs actually showed up. So the problem on the supply chain is across the board. It's not just in automotive. If you try to order something, it's 6 months down the line, whatever. It's really crazy. So now let's talk about -- specifically about our business in terms of automotive. So the challenge in terms of chips is there. Everybody is reading through and, therefore, it has an impact. And therefore, our growth has been impacted and will be impacted, like the market, by this in terms of probably several millions of vehicles less produced in 2021 than what it could have been. Having said that, we will continue to outperform the market, that the story doesn't change, the value that we are creating, the awards that we won in the last couple of years. The win rate that we had in the awards for the last few years in electric vehicles and nonelectric vehicles will feed our outperformance in the market. So we will continue to see this, Damian, in Q2 and for the full year in 2021, Damian, but definitely is a challenge. So what we have to do is to stay super close to our customers because they will change the orders probably several times during the day. The variability that we see is really a nightmare for our supply chain to work with. But if you stay close, and if you continuously match their demand with your supply, you will be able to stay ahead of the game. Having said that, this is the challenge also in the way that you run your plant in terms of either challenge from a profitability perspective because you will have more changeovers on the line because there is more changes. But our good team, our expert team, is able to handle this and handle it very well. So our on-time delivery is still on the 99% when it comes to automotive. Our customers are still happy about the service that we are providing to them at 99% on-time delivery. And so far, we haven't faced many, many issues, many challenges, but no real issues that translated to the customer.

Got it. Got it. Well, hopefully, Luca, by the fourth of July, you can get those chairs delivered and be in a position for a nice barbecue for the summer.

Exactly. Exactly. I'm not so sure they will, though.

Hope springs eternal. But I guess, just thinking about along the supply chain lines as well, you had initiated, actually, before the pandemic, a number of product line transfers. And I think they were kind of continuing, even as the pandemic was unfolding. I'm curious if you think that sort of positions you in one way or another when some of these supply chain issues is part of emerging. And I don't know, maybe you could just kind of more generally give us an update on the status of those product line transfer.

Sure.

Okay.

So it's a 2-step approach, Damian. The first thing was really a make-and-buy strategy assessment, particularly in some of the business like the Connectors side of the business, where, maybe in the past, the decisions were more in terms of making it easier rather than making it right. So we decided first what to make and what to buy. So this has led us to insource some of the difficult activities that were outsourced many years ago. So that was the first thing. And then when you've decided what to make is really where and on -- that has been an assessment that we have been done strategically. And our strategy that we adopted in MT that we translated as well to IP and CCT is, in short, to be in the market for the market. So believe it or not, we were doing stuff in Germany that we were exporting to China. Now there was no reason that those components, those connectors shouldn't be made in Shenzhen, where we had a very nice plant. So we started the transfer of the line. The transfer of the lines have been progressing very nicely. And this is something that we will continue to evaluate as we expand maybe our product offering in areas like China, which might lead some further lines to be moved to Shenzhen, as an example. So progress nicely. No major issues. And maybe there is going to be more in the near future or in the medium term.

All right. Well, keep us posted. Sounds good. Staying on kind of the pandemic and some of the after effects here, curious if it's altered the way you think about your portfolio composition. Now are you any more or less inclined to focus investment in any particular areas? Or you basically have the same strategic focus that you had kind of entering last year?

Yes. So when you look at the portfolio, we described is a portfolio of gems, and this has not changed. Many people have asked us about the aerospace, for instance. So I really still like our aerospace portfolio. And I believe that aerospace will come back. And actually, this is an area where we are looking and where we are cultivating for potential M&A deal. So that stays. When we look at IP, IP in terms of pumps and valves, of course, it has changed the focus, I would say, in terms of the specific application. So there is more focus, as example, to the clean energy. So the solving the flaring problems, an example I gave before, or working with some of our EPC customers on some of the major contracts that they win that are more for a clean energy. That has changed a little bit, Damian. But in terms of our portfolio, I'm happy with the portfolio that we have. And there is a considerable amount of value that we can deliver with the improvement that we see we can execute.

Terrific. So let me ask you about capital allocation. I think, based on some of your more recent comments, it sounds like that kind of the financial or the valuation aspect is really the hurdle right now. But maybe you could talk a little bit more how you feel about the pipeline. And just wondering, should valuation remain an overhang, would you consider something like a special dividend as means of returning cash to shareholders should you not be able to strike some deals?

Sure. So when it comes to capital deployment, this strategy has not changed. The first way to deploy our capital is organic investment. This is where we have the best return. This is where we have the least risk. And there are plenty of opportunities there. If you talk about market share gains in Friction, if you talked about VAVE initiatives in both CCT as well as in IP, so this is where the money goes first. M&A is the second. This is why we are cultivating aggressively and at unprecedented level, and then is returned to our shareholders. And this is what you have seen us deploying roughly $50 million of share repurchases in Q1 and then dividend increase of 30%. So if I would say that we continue to create value for our shareholders from an operational point of view in getting our assets to sweat. But I think that also we need to get our cash to sweat, too. And therefore, I would say, if we do not see the right companies to be purchased, available at the right time at the right valuation, of course, we will deploy our capital in the other 2 ways, which are organic investment and also return to our shareholders. And if you think about organic investment this year, probably our CapEx will increase to roughly $100 million for the full year, which is almost like double of what it was last year.

Okay. No, that makes sense.

And the beauty, Damian, is really -- I mean we have a very strong balance sheet, and we can do it all. So that's -- I'm very fortunate.

Yes. No, it's a good position to be in. So free cash flow, you guys have seen some pretty tremendous improvement over the years in your cash generation. Do you think you can be a sustained 100% of net income converter even with that asbestos liability that's kind of still on the balance sheet? And just, I don't know, thinking about any further room for improvement from a cash flow perspective?

Yes. We do have room for improvement, Damian. If you look at the businesses, for instance, we improved in IP, substantially, our working capital. Today, our working capital in IP, probably, is roughly 20% of our sales. If you look at our competition, they are in the high 20s or in the 30%. We are at 20%, which enables us also to make some decision when it comes to inventory just to be ahead of the game, just because you want to win in the recovery, right? But there is still room for improvement on the way that we are handling our accounts receivable in our business in AP. The biggest improvement, I would say, probably will come from CCT, where our working capital is not optimized, where our accounts receivable, our accounts receivable past due is not where it's supposed to be, and also where our inventory and inventory management can be improved substantially. So yes, there are room for improvements in our cash generation, and it comes from working capital in some specific businesses.

Okay. Great. So I have some more questions seem mostly focused on the MT side. One is, basically, as you continue to gain share in the automotive OE market, the question is whether you've seen any change in your ability to exercise some pricing power. Or if you've seen kind of the same level of competitiveness in the auto OE market.

Okay. I would say these are quite 2 different answers. When it comes about pricing power, I wish I could tell you that I have a lot of pricing power, I don't. If you are a very good supplier, if you got a perfect record, perfect quality record, on-time delivery, et cetera, the best product, you might get some premium. But in the automotive, maybe the premium is going to be roughly 3%, 4%, if you're like, 5%, that's all. So that is as much as you can get in terms of pricing power in automotive. But you're absolutely right in the second part of the question, is our competitiveness. And our competitiveness is there today, and we are taking advantage and improve it year after year. What does it mean? It means, in terms of the level of investment in automation, to ensure that our quality is still the top, the best among our competitors, that our cost structure is the lowest. Our manufacturing footprint is still the best, very concentrated 5 plants to make all our brake pads around the world. Our competition to make the same number probably got something like 15 plants. So all of those investments in CapEx that you see in Motion Technologies are sure for growth, but also to keep on feeding our competitiveness. And the investment that we have also in R&D, roughly between 4% and 5% of sales, is another way to differentiate ourself from the competition. And this, actually, you see it also in the electric vehicles. Because our win rate on electric vehicles is higher than our market share that we have. So this will feed our continuous outperformance of the market.

That makes a lot of sense. I'll ask a follow-up to that. Just thinking about your profitability and how that compares between Europe, where you're more established, have been longer; and China and North America, where you've been growing very fast, but you're still not at the same level. So what's your -- where are your kind of margins, if you think about those 3 different regions for MT -- for Friction.

Okay. So I would say that probably China is that, today, still the most profitable business in Friction. But I would say Mexico is really catching up at some point in time. In 1 specific quarter, Mexico was actually the best-performing plant. And I will expect probably Mexico to gain ground and to be, in the near future, the top-performing for 2 main reasons. One is that is already at the very good level now, and our plant still is not full of lines making brake pads. So just the sheer volume that we will put there, when we will win the award and we will start in terms of the SOP, will just feed the profitability. And second is, also, because the Mexican plant, we created from scratch. We just bought a piece of desert. We built the plant the way that we wanted to build it from the lesson learned from all the different plants, an opportunity that we never had. And therefore, the other plants, you will see the layout is a little bit more complex within the plant. If you go into Mexico, and it's just beautiful. The material flow is simple and that facilitate the competitiveness, the handling and the cost structure of the plant. So Mexico will be the most profitable plant soon.

Very interesting. Very interesting. Okay. So another question here, I guess, maybe nitpicking a little bit, I mean, because obviously, right, you're outgrowing the auto OE market by about 1,500 basis points or, at least, last quarter, and several hundred basis points a year. And as you just mentioned, Luca, on a lot of the EV platforms, you're pushing above your 25% kind of global market share. You're winning above that rate. But the question is sort of what are you finding on platforms that you're bidding, but you're not winning them? Like what's the primary driver why you might not be winning some of these awards?

Okay. Well, in some case -- for different -- there is no real 1 reason. I can tell you that in some cases, we were not as intimate with the customers we wanted to be and, therefore, we might have read the needs in the wrong way and, therefore, we were not able to develop the right product for them in time. That is 1 reason. And in some cases, the competition might have developed for that application, for that vehicle, for that corner of the car a product that works better. I would say that those are cases were probably the reason why sometimes we lose an award. But I would say, our level of customer intimacy, our closeness with the customer, our speed in developing the product is something that has always differentiated us from the competition. And this is why our win rate is very good.

Got it. That makes sense. Yes, I think, obviously, the track record in Friction speaks for itself. And I think your competitors are rather envious of what you've been able to accomplish in taking a larger portion of the pie, if you will. So I think we have to leave it at that. Unfortunately, we're out of time. I feel like we could ask you questions for many more hours. But Luca and Mark, I want to thank you again for talking with us today. And I also extend my thanks to all those who tuned into the meeting. Have a great rest of your day, everybody.

Thank you, Damian.

Damian, I appreciate it.

Take care. Thanks a lot.

Bye.