ITT Inc. (ITT) Earnings Call Transcript & Summary

Welcome to the afternoon session. And I'm Andrew Obin. I'm BofA's multi-industrial analyst. And with us this afternoon, we have ITT, so we have Luca Savi, the company's CEO, and we have Alex Sherk, a member of the IR team. Thank you so much for making the trip, it's an absolute pleasure to have you here. I think Alex will have some remarks and then I think Luca has some slides, and then we'll go to fireside chat. Thanks so much.

Wonderful. Thanks, Andrew. Thanks, everyone. Just before we begin, I just want to share that our presentation and comments today may contain forward-looking statements. which are based on our best view of the world and our businesses as we see them today. These assumptions and expectations can change, and we ask that you view them in that light. We encourage you to review the latest risks and uncertainties on our Form 10-K and other SEC filings available on our website. Thank you.

Okay. So good afternoon, everybody. I will spend a few minutes just to talk a little about ITT and then we'll go into Q&A. ITT is a manufacturing and engineering company, making components for harsh environment across different sectors. So we are working in energy, in transportation, we are taking about automotive, rail or aerospace, general industrial and defense. We are a global company, geographical spread quite evenly across all the different regions. And you see there a $3.3 billion in terms of revenue, $10 billion in terms of market cap. Now when you look at 2023, it was a strong year for ITT with good growth, 8% organic growth, good improvement in terms of margin as well, more than 100 basis points of margin expansion. And this growth came from market share gains. Market share gains that were in MT business, Motion Technologies business, you're talking about automotive and rail, but also applying the MT playbook to the other businesses and starting seeing very good market share gains also in the IP in our flow business, pumps and valves with the largest award with ExxonMobil where we won $80 million of business that are going to be spread in 3 years for all their investment in brownfields in their existing plants. We continue to win, of course, in automotive as well, good outperformance of the market across all the different regions and a good win in China. Where this growth comes from is, of course, these market share gains from differentiation from the competition, differentiation through performance and we might talk a little bit more about it in detail later, but also differentiation through innovation. And then good capital deployment and acceleration of capital deployment in 2023. If we talk about capital deployment, you see here some stats where the money goes first is organic investment. This is where we got our best return. This is the least risky. So this is where the money goes first. Second, on the M&A front, this is accelerating. We made 3 acquisitions in the last couple of years, acquisitions are mainly in the flow business, pumps and valves and in the connectors. And last year, we made a couple of acquisitions, Micro-Mode RF connectors, a small one and then Svanehøj, which is a cryogenic pump manufacturer based out of Denmark for the marine industry, which is the largest acquisition that we ever made, roughly $400 million. And then, of course, return to the shareholders, roughly $150 million of shareholders -- money returned to the shareholders in 2023. So when it comes to 2024, good momentum in 2024. We get into 2024 with the largest backlog that we ever had. So we are expecting a total growth of 9% to 12%. And when you look at Q1, we were expecting Q1 to start strong, but the sides are even a little bit better, particularly when you talk about the connector side of the business. We were expecting the destocking that we saw in 2023 to continue for the first couple of quarters. As a matter of fact, the orders in January and February had been much better than expected in distribution, both in North America as well as in Europe. And as I said, M&A activity accelerating with the rich pipeline and funnel of opportunities. With that, we can move to Q&A.

Yes. And before I just sort of -- I'll just bring up, I'll ask the question. The connector business, I think you've remarked before that you sort of look at this business canary in the coal mine. And internally, it's a business you pay a lot of attention to. Can you just describe that's why it's so important because I do think you look at it internally, if I'm not mistaken, as fairly decent leading indicator internal at ITT.

Yes, sure. So we really like the connector business. Listen, if you look at in the past, in the connector business, we were not performing very well. So this is when actually I had the opportunity to get more involved into this business. In 2017, we started the journey of turning this business around. It's a small business. You're talking about roughly probably $400 million to $450 million of business, very highly profitable. Profit even if we are small, our profitability has got nothing to envy from the one of the competition. So that's good. There is a fragmentation in the market, so there are opportunities for us to make acquisitions. We like the fragmentation. We like the replay. We have differentiation that we can play with, particularly in the aero and defense industry. So we continue to grow organically, invest in new product development and also on the M&A front.

Excellent. So let's just sort of talk about -- I'll start out from a big picture. So -- over the next 3 to 5 years, what do you think are the platforms that will drive market outgrowth for ITT? And you've highlighted the 2 that have driven the outgrowth so far and just maybe if you can talk about sort of structural trends that are positives for ITT's end markets?

Sure. So just to recap, where we see us outperforming the market, we are talking about auto in general in terms of auto production. We outperformed the market in the last 10 years. It's an average of 800 basis points. Our focus is to outperform the market 400 to 500 basis points in the next 2, 3 years. And when I'm saying that I don't want to sound arrogant, it's just that we won the awards that will start production in 2, 3 years from now. So we know which kind of platform we're going to be in. . Then rail, rail, we are outperforming the market and is another great business to be in with all the investment and the tailwinds that we'll have both in Asia Pac, in Europe and in North America with outperforming 2023, and we see that performance to continue. Then of course, in terms of IP, we were talking about the ExxonMobil, but the outperformance in IP is across regions. You're talking about the Middle East, Latin America. And the data outperformance of the market comes from a consistent performance for our customers, delivering good product, good quality product on time in a consistent manner. And also on the connector side in particular in the defense. So these are where we are planning to outperform the market. When you look at the...

Where you're not planning to outperform the market.

Well, if you think about on the Aerospace, for example, on the Aerospace, if we look at where we are in the platform that we are in, we are more exposed to Boeing than to Airbus and these days is more of a challenge. And then when you think about it is we have been lagging the recovery of aerospace so far because we are more exposed to the wide-bodies than the narrow bodies. And the wide-bodies are going to recover more towards 2025, 2026. So this is an area where we are -- where I don't think we will be able to outperform. Then when you're talking about the trends that are going to be tailwinds, what are the good aspect, it's going to rail, of course, with all the investment is happening. And then a big one will be defense, of course, for unfortunate reasons, but that will be an opportunity for ITT. And then last but not least, is the decarbonization of the oil and gas industry. If we look at the project that we won in IP, last year, 27% of all the projects orders that we won, they were green projects from recycling of the battery, carbon capture, stop flaring. So decarbonization of oil and gas is another one.

So do you feel that you are -- what would you estimate just go into just to latch on to that? What would you estimate because we've heard different numbers from different people. share of CapEx for decarbonization projects for your customers? And do you think -- do you think what you're getting represents a fair share of their budget? Or do you think you're outperforming in terms of you're better positioned to sort of grow your share on these decarbonization projects.

I would say it depends on the customer and the applications, I would say, with some customer with a specific customer that I can think of. I think that we are the only one that is talking to them when it comes to stop flaring and carbon capture. And we are working very closely with their engineering department to really tailor made and make a unique solution for them. There are others. Let's think about ExxonMobil, for instance. ExxonMobil was a great market share gain for us, only of ExxonMobil, only the 5% of the pumps that are installed worldwide are ITT. So this is where we need to do more work, and we'll start talking to them when it comes to all these green projects, but we are at a very early stage with them. So -- in that case, we just can only win.

So you highlighted a strong start to the year. I'm not going to ask, I am not going to go beyond that. But at the same time, if you look at the EPS forecast, right, I think the midpoint is a little bit below 9%. Your long-term framework is 10% plus. So how does this EPS guide for 2024 as it is, fits within sort of longer-term macro framework. What are the specific headwinds that it's incorporating.

Okay, sure. So when you look at -- when we gave these long-term targets, these are long-term targets. So we talk about 10% EPS growth plus if you think about 2023, it was 17%. And then when you look at 9%, 8.8%, 9%, which is at the midpoint guided, that is the midpoint. So that is one thing to bear in mind. . Now of course, when we started the year, we had some assumptions in terms of the short cycle, particularly on the destocking of the connector side of the business. Now January and February, as I said in the prepared remarks, are better than expected, but granted is only January and February, only 2 months of the year. So it's still very early to say.

Got you. And let me ask you questions just it does seem you are sort of in this growth outperformance mode, right? So how do you -- it's interesting. I had a dinner recently with a company and they were sort of talking about adding capacity. And it's an industry that's capacity constrained, and they said, look, we haven't grown for so long that we were late adding capacity, right? So internally, right, Luca, how do you think because you're clearly one of the best operators in my coverage. So how do you guys think about changing your view on internal capital allocation right, to support the growth that's coming. Are you thinking about it? Do you need to do things differently, to be ready for what's coming? Or just what do you just have flexible model that can accommodate. Does it make sense of what I'm saying, because the facts of what the CEO has told me, look, I mean we have not been in a growth environment, and we have multiple companies actually in coverage. They're sort of struggling with getting into the growth mode. So how do you guys think about, a, clearly, you're saying outperformance? It seems maybe macro turning a bit. So how do you think about sort of positioning for this growth with your internal capital allocation.

Okay. So listen, in terms of the growth, we have outperformed the market in many markets. And in some others, we had our own challenges as well, right? So now each business has got a different challenge, a different way of approaching it. So if you don't mind, let's take one at a time. And if you look at Motion Technologies and the automotive market, this is where we have been used to outgrow the market. And when you look about CapEx in here, I really love the way that it works because, listen, when you never -- you don't add capacity unless you know you want the job and you need it. Let me give you an example. You have the capacity today and you win an award today, the award will have an SOP, start of production in 2, 3 years from now. So when you win the award today, you realize, okay, I need capacity, then I'm going to buy the extra line, which has got a lead time of 12 months so that you install it and you got time for the SOP. And you have this visibility. This is the way it's worked. This is the beauty of this business. You never overinvest. You've got this visibility, which is perfect, which we love. So that is in Motion Technologies. And we have been used to outgrow the market. We have been in this growth mode now for the last 8, 10 years. We put a plant in China and we went from single-digit market share in China to 29% market share last year. And by the way, more than 60% of the parts that we are making, we are making for the Chinese OEMs. So we are winning with the winners. And similar in the U.S., we opened a plant in Silao, Mexico in 2018 from single-digit market share last year was 27% market share. So that works in its own way. When you look at IP, I don't think that we have any capacity constraint at all. As a matter of fact, when you look at our plants, most of them are working 1 to 1.5 shifts. So I don't think that when it comes to growth, I need huge investment in terms of machinery or et cetera. Now what it is and that you will see probably -- I mean, the news will come probably in the next couple of days. We are making investment in terms of India, in Saudi and in Germany with our twin screw pumps in terms of better test, more space just to keep on feeding the growth ahead of all the projects that we're going to win. So we are planning ahead of the game. Now on the other side, on the aerospace, we had some issue in the recovery, some of the challenges in the growth of the aerospace in the last couple of years. which were more related to constraint in terms of labor that we face. One of our site is in California, and we have some constraint in finding the right label, like many people in Aerospace had in the last couple of years. Did it answer that question.

Yes, no, this is great. And just a couple of sort of big picture questions before we dive into the segments. So I think you've highlighted Motion Tech, very strong in Asia, specifically in China. What are the plans to sort of scale the IP and CCI Connect and Control businesses there to sort of match the record of Motion Tech?

So one thing is that when we're running Asia Pacific, we have a value center person, a person that is running Asia Pacific and who will make decisions specific for all the 3 different businesses. So when you look at Asia Pacific business, 65% of the Asia Pacific business is Motion Technologies. When you look at China, 80% is motion technology in China. So we have a very good plant in Korea, in South Korea for the IP for the pumps. And this is one of our best-performing plants, making vertical pumps and typical pumps and is expanding, it's growing. It's supplying both the Middle East as well as North America and Asia Pacific. So there is good growth opportunities there. And I think in CCT in the connector side of the business, we do have a plant based in Shenzhen, and that has been not used strategically as we should. So we're investing more in engineering resources and R&D to ensure that we are also developing products in the region, for the region, and that will help growing in that market faster.

Another question sort of were fans, but there is one pushback as cash flow generation. And you had 100% conversion in '23, now historically, I mean, part of it is the payments. But what do you think to sort of become this more consistent cash flow generator going forward?

Yes, sure. So we -- our long-term target is 12% to 13% free cash flow margin. I think it was 13% last year. I think that we are planning to be 12% to 13% in 2024. And I would say there are opportunities there. And when you look at opportunities, they mainly are on the working capital side and specifically on inventory. So inventory has been an area where we invested, I would say, in the last 2, 3 years because of the state of the supply chain. Now in 2023, we had a very good improvement and reduction of inventory in Motion Technologies. But when it comes to IP, CCT, there is still a lot of room for improvement. So that would be an opportunity from a cash flow.

I'll just add one thing. For the long-term target, it's 11% to 13% free cash flow.

And on inventory, do you feel that you're going to carry sort of permanently higher level of inventory relative to pre-COVID or what do you think inventory settles over the next couple of years relative to pre-COVID levels.

No, I would say Motion Technology is already at a pre-COVID level, I would say. Motion Technology is already at that level, IP, CCT, no. So I have work to do, but there is no reason why we should not get there in 1 or 2 years. But Motion Technology is already there.

So maybe talk about industrial process. Can you talk about the self-help opportunities in IP, particularly in the SFO facility? What sort of productivity investments have you been making recently to get to the 20% long-term margin targets?

Sure. So IP has actually been a very great story, both in terms of growth for the last 5 years because despite COVID, despite all the challenges, the last 5 years has been able to continue to grow, but also is the EBIT performance, right? We went from a 7% EBIT, which was in 2017 to 22%, that was last year, whereas the competition is staying at the level that we were roughly 5 or 6 years ago. So how did we get there is a lot of productivity on the shop floor in terms of changing the production from a messy state to a one piece flow. So actually, today, you can go on the shop floor and actually -- even if you're not a pump guy, I'm not a pump guy, now I can really understand how the pump is made and assembled, which is good. Then another investment has been the VAVE, value analysis, value engineering. So what this means is that you take all your products, one family of pumps at a time and then you'll reengineer them in terms of, okay, how can I improve the hydraulic performance of the pump, try to make them more cheaper and also with less metal, for example, or getting the casting machine out of India, as an example, so that you come out with a product better performing at a lower cost, lower price and better margin for ITT for our shareholders. All of these activities and leaning the factories have enabled us to get to 22% EBIT that was in 2023. Now there are still plenty of opportunities when you work the shuffler. You visit the shuffler and you end up the visit halfway angry because of still the waste that you see and halfway smiling to say, well, if we're making 22% with all these opportunities, think about what we can do when all of this is sorted out. Give you an example is you go to Seneca Falls and you go to the painting line where you're painting all the different components of the pumps, and believe it or not, in 2024 is still a manual painting line. So you've got the 4 operators with their own paint gun and manually paint all these components. And each of these operators think that they are Picasso, and they want their own gun specifically for that, okay? Now what you can envision is that this will all go away, and you will automate a painting line like we have done with the buffers, like we have done with shock absorbers in KONI, and in Axtone, and the quality will be better. It will be more productive and the velocity would be higher. So plenty of opportunities still there.

And how should we think about sort of closing the foundry of this, does it move the needle on profitability? Can we sort of size the margin impact?

We haven't communicated the size margin impact. But I think that if you look at IP, excluding the Svanehøj acquisition, the margin on a like-for-like basis will move from 22.1 to 23.1. So it's 100 basis points improvement on a like-for-like basis. So part of the 100 basis points improvement is lean and part is the closing of the foundry. The closing of the foundry was a process -- listen, it lasted 2 years. So it's definitely going to improve our productivity, our quality and our margin.

And its embedded in your outlook?

Yes.

So you have sort of plus mid-single-digit target for energy end market and industrial process. Given the recent trends of energy independence, LNG coming back, how do you think about sort of the growth rates there? And what are the opportunities to outperform the target.

Yes. I'm not so sure that we are giving specific targets for the different markets within IP. But I would say we -- I think that we will be able to outperform both on the traditional oil and gas, think about what we've been able to do with Exxon. Our demand facility in Saudi Arabia. Just to give you a couple of stats, in 2023, our on-time delivery was 95%, in 2022 was 100%. If you are in the flow market, making pumps, these stats are unique. And here, you're dealing with customers like Saudi Aramco, ADNOC, et cetera, which are not necessarily easy customer to deal with. So the performance is there. The quality is there, the technology is there to continue to outperform in the traditional oil and gas as well as in the decarbonization.

Yes. Just a question on -- maybe on the mining end market. I think we have heard some concerns about mining into '24 and '25. What are your customers saying? And what are you guys seeing.

So listen, I mean we like mining because, of course, of the spare parts and the aftermarket it generates, but if you think about mining, it's roughly 10%, 11% of the IP business. So I think that we are not a big player in mining, which means that it's unfortunate because we're not a big player, but not being a big player, you still have plenty of opportunities anyhow.

But as an end market? Do you have any concerns about mining?

Well, we have seen that there are some investment that probably didn't take off in the way that they were supposed to. But for us, as I said, it's only 10%, 11%. So it doesn't affect our outlook for 2024 or in the near medium term. .

Got you. So maybe switching to Motion Tech. I think -- I believe you have over -- very robust over 50% market share in Europe. Like how do you continue to grow that -- and yes, I mean, what -- a, what drives it, how sustainable it is and other opportunities to continue to expand it.

Yes. So listen, let me give you -- I shared with some of you during the previous meetings in 2014 or in 2015, my boss asked a famous consulting company to come to Motion Technologies and analyze and study MT and this consulting company came in and said, "Well, listen, you are already at 35%, 37% market share in Europe. There is no way that you can grow this market share in automotive. Your profitability is already too high, so the profit can go only down." 9 years later, 8 years later, we have more than 50% market share and the profitability is up. So now the past is not necessarily what is going to happen in the future, true, but let me tell you that also in Europe in the next couple of years, we will be able to increase our market share. And I'm saying that because we know the SOP that we will start in the next couple of years. One other opportunity to increase our market share in Europe is the high-performance investment that we are making. And when we're talking about high performance, I'm talking about high-performance cars. In the Motion Technologies, our model in friction has always been we supply all the cars, but we stayed away from the high-performance cars, the top range of the Porsche, the BMW, the Daimler, all these spaces. Why? Because we were going for the high volume, low mix. Now talking to our customers, we saw that now in this sector, where we have 0% market share, there was an opportunity, an opening for us to get in and to capture and to conquer market share from the competition that is not performing very well. So we are investing in a new plant close by to an existing one in the southern part of Italy. The equipment is going to be exactly the same that we're using. We have a technical solution that is able to use even in low volume, high mix, same level of efficiency, and we are building the plant. The plant has been built. It's going to be finished in August. The line will be installed in September. And it will be running in October, and we already have the orders that are filled in the plant. So the customer has already given us the awards with the SOP for Q4 and for 2025. That is an example, specific example is going to happen in Q4 in 2025 of market share gain in Europe.

Okay. That seems to me a good message. What about your target for, I think, $500 million in EV revenue by '25. How is that tracking?

Okay. So when we're talking about electrified platforms, in ITT, if you go back the last 3, 4 years, we always talk about electrified vehicles. So we're talking about EV and hybrid, all of those together because we saw that as a big transition. So when you look to answer right to the question, we are tracking very well, and we are ahead of the target year-to-date because the win rate of electric and hybrid that we had so far has been much higher than what we expected. So this is good. Now let me take also the opportunity to tell a little bit about electrification because you read a lot in the newspaper, electrification is slowing down and all this kind of stuff, which is, by the way, is true that a lot of OEM is slowing down the investment, by the way, it's true. Now I just want to give a couple of numbers. If you look at electrified vehicles, you are talking about roughly 24 million, 25 million vehicles produced in 2023. This is twice the amount, almost twice the amount of vehicle produced in North America. So is something that should not be underestimated. And by the way, even if the growth is slowing down, the growth is still going to be there for hybrid as well as for EVs, and we are going to win in that one. We are agnostic, so also the internal combustion engine is good for us, give you a couple of stats. In 2023, the internal combustion engine production vehicle, internal combustion energy production went down between 1% and 2%, our production of pads for internal combustion engine went up by 7%. So an outperformance of 800 basis points for IC. So we love IC too.

And I would imagine your exposure in China would help.

The exposure in China -- I mean, in China, where China is the biggest automotive market. It's the biggest electric vehicle market. So we are winning there on the EV side, with the BYD, with the SIC, with the Great Wall, with the NEO, with the Li Auto, all of those are customer of ours. .

Excellent. And maybe the playbook to reach, I think roughly 20% margins in Motion Tech. Can we walk through what are the key levers?

Sure. So Motion Technologies is going to hit 18% EBIT for pretty sometime in the first half of this year. So we have a long-term target of 20% to be hit by 2026. So we are good on target there. The levers, you've got pricing, you've got productivity on the shop floor, and then you also have other business in Motion Technologies that can improve the profitability like KONI, Axtone and Wolverine, and so we are on track to hit 20% by 2026.

Excellent. And is there any sort of restructuring or footprint, so this will include...

No.

Okay. Excellent. And can we just talk about...

No, material. I mean you might have...

What's the attachment rate for the aftermarket? Are you in line with the industry? And how should we think about aftermarket and OEM Motion Tech.

Sure, so when you look at Motion Technology, the friction business, you have 70% is OE and 30% is aftermarket. And when you look at the aftermarket, we tend to play mainly in Europe. Strategically, we decided not to play in North America, is a decision that we review every year. We look strategically, and we decided not to. And then we are playing a little bit, we're trying a few things in China. So the 30% is only Europe. And when you look at 30%, it's split half and half. Half is OES, original equipment replacement, the brake pads that you buy at the dealers of your vehicle manufacturer and 50% of that is independent aftermarket. So when you look at the OES, the attachment rate is very high. So let me give you an example. The largest award ever the Friction One is with the German OEM last year. So we will provide brake pads for 80% of all of their vehicle from 2025 to 2035 and all of the OES of that vehicle until 2045. So this is just to give you an example of very good visibility, very good attachment rate on the OES side. The independent aftermarket, we just play on -- is segmented in very parts, and we play only at the very top of the -- with Continental, with their own brand ATE and they are positioning ATE as equivalent to the OES. And this is the only place where we play. We don't play in the medium value or in the value base.

So maybe just in the remaining time, just focus on Connect and Control. I think it's one of the areas that you have sort of telegraphed. So I guess, we've updated that. So -- and -- but what is it, does it mean anything, well, I guess I can't ask that, so I will not ask that. So if we talk about sort of electrification business, right? And you have a solid CAGR there, sort of 20% from '21 through '25. How is this trending to your end, have expectations been pushed to the right? What are you seeing there?

I would say it's fair to say that the expectation has been put a little bit to the right. And also when we look at the electrification in there, we are playing only in some parts where there is differentiation and where there are some specific requirement. If you think about the electrification, the connectors that will be in the market that would be almost like your pump at the gas station. Those would be commoditized, so we're not going to play in that one. So I would say we're going to stick to our model, which is really where you really work closely with the customer, the customers specific requirements, the customers specific specs and therefore, we're able to design and therefore, to be expected. In that case, we will play. And therefore, the growth has been slowing down in terms of expectation for that specific segment.

And maybe just in the remaining couple of minutes, just sort of go back to capital allocation. What are you guys seeing in the market? As you're getting bigger, how you're thinking about pivoting your M&A strategy?

Sure. So as I said in the prepared remarks, is accelerating. So why is that? When you look at the last 5 years, the first thing that we had to do is to ensure that our balance sheet was pristine. So what we did in 2020, we eliminated our U.S. pension liability. In 2021, we eliminated our Damocles sword, which was all the ITT legacy asbestos liability, which was sold to Warburg Pincus, to Delticus, part of Warburg Pincus and then after that, we were free to go. And so we structured a new M&A and business development department. We bought in Makowiecki, who's the Head of M&A and Business Development, is an experienced M&A leader. And therefore, we started cultivating in the area of flow pumps and valves and connectors. So you've seen the acquisition of Habonim, is valves business, working on hydrogen and also new energy. And this is a business that was bought at 12 EBITDA multiple. You look at the actual is a 7-point something, it's outperforming -- they outperformed in terms of orders, revenue, OI, operating margin, cash, very good performance. That was 2022. 2023, we purchased -- we made a small acquisition on the connector side. These are RF connectors. These are connectors that we don't have, that we buy from the competition. So it was a nice synergy. They had good exposure to defense customers that we do not have and vice versa. So a lot of commercial synergies, so good acquisition there. And then Svanehøj, which are cryogenic pumps in marine for LNG, LPG. So once again, energy transition and cryogenic pumps, pumps we do not have the experience of. So all of this is good, happened in the last year, 1.5 years, a couple of years. Now if you look at the funnel, once again, rich and active where connectors, pumps and valves, and this is where you will expect the acquisition to be made. Now, I will talk about M&A, you're not in control completely. You need to ensure that your strategic process is rigorous. You need to understand that the financial are rigorous and that it makes sense strategically and financially, so if that doesn't work, we still have one -- the board gave us the approval for $1 billion of share repurchases that give us the flexibility in the future if M&A doesn't materialize.

And how is the sort of the environment with private equity? How is that changing because for a while -- these folks have been out, are they back in? What are you hearing?

Yes. I think that they've been out, and you can see a little bit more of activity, there you can see more interest from them in the recent months. That's fair.

I think with that, we started a little bit late. I think with that, we're just right on time. Thank you so much. It's a pleasure.

Thank you, Andrew. Thank you for having ITT here. Thank you.