ITT

ITT Inc. Q1 2026 10-Q Summary

Business Context and Reporting Period

This is a Quarterly Report on Form 10-Q for ITT Inc. for the period ended April 4, 2026. ITT is a diversified manufacturer of critical components for transportation, industrial, and energy markets. The quarter was defined by the completion of the acquisition of SPX FLOW, Inc. on March 2, 2026, for a preliminary purchase price of $4.31 billion. SPX FLOW results are reported within the Flow Technologies (FT) segment. The company operates three segments: Flow Technologies, Motion Technologies (MT), and Connect & Control Technologies (CCT).

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Revenue increased 32.7% year-over-year. This includes $151.4 million from the SPX FLOW acquisition and $47.8 million from favorable foreign currency translation. Organic revenue grew 10.9% ($99.7 million), driven by pump projects in FT, aerospace strength in CCT, and friction OEM outperformance in MT.
• Profitability Decline: GAAP Operating Income decreased 6.4% to $141.2 million, and Net Income dropped 28.0%. This decline is primarily due to $67.5 million in acquisition-related costs and an additional $12.7 million in intangible amortization from the SPX FLOW deal.
• Non-GAAP Performance: Adjusted Operating Income increased 41.7% to $245.6 million, and Adjusted EPS rose 25.3% to $1.98, reflecting strong underlying operational performance.
• Balance Sheet Expansion: Total assets increased from $6.31 billion to $11.13 billion, and total debt rose significantly to $3.85 billion to finance the acquisition. Cash balances decreased from $1.74 billion (Dec 31, 2025) to $600.8 million due to the cash portion of the acquisition.
• Segment Margins: Flow Technologies margin decreased to 15.3% (from 19.1%) due to acquisition integration costs and amortization. Motion Technologies margin improved to 21.0%, and CCT margin improved to 17.7%.

Guidance, Outlook, and Risks

• Outlook: Management expects demand to remain firm for the remainder of 2026 but anticipates variation between industrial end markets. The company is monitoring geopolitical tensions, specifically the conflict involving the U.S., Israel, and Iran, which has increased energy prices and supply chain volatility.
• Capital Allocation: The company declared a quarterly dividend of $0.386 per share (a 10% increase). It spent approximately $100 million on share repurchases, with $355 million remaining under the 2023 repurchase plan.
• Key Risks:
  • Integration Risk: Ability to successfully integrate SPX FLOW operations and realize projected synergies.
  • Geopolitical & Trade: Conflicts in the Middle East, potential tariffs, and trade disputes could disrupt supply chains and increase costs.
  • Financial Leverage: Significant increase in debt load; the company must maintain leverage ratios within covenants (currently compliant).
  • Tax Rate Volatility: The effective tax rate increased to 38.3% due to undistributed foreign earnings and transaction costs; future rates may fluctuate based on global tax laws (e.g., OECD Pillar Two).

Investor Verification Checklist

• Acquisition Integration: Verify the timeline and progress of SPX FLOW integration and the realization of the projected $67.5 million in one-time costs.
• Debt Covenants: Confirm continued compliance with the 3.50x leverage ratio covenant under the 2025 Revolving Credit Agreement and 2026 DDTL Credit Agreement.
• Organic Growth Sustainability: Assess whether the 10.9% organic revenue growth is sustainable given the macroeconomic headwinds and geopolitical risks cited.
• Intangible Amortization: Review the long-term impact of the $26.7 million quarterly intangible amortization on future operating margins.
• Backlog Visibility: Note the $2.51 billion backlog, with 70-75% expected to be recognized in the next nine months, as a leading indicator for future revenue.