ITT Inc. (NYSE:ITT) Q2 2020 Earnings Conference Call - Final Transcript

Jul 31, 2020 • 09:00 am ET

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ITT Inc. (NYSE:ITT) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Welcome to ITT's 2020 Second Quarter Conference Call. Today is Friday, July 31, 2020. [Operator Instructions] And will be available for replay beginning at 12:00 p.m. Eastern. [Operator Instructions]

It is now my pleasure to turn the floor over to Emmanuel Caprais, Group Chief Financial Officer. You may begin.

Executive
Emmanuel Caprais

Good morning, and thank you, Maria. Welcome to ITT's Second Quarter 2020 Earnings Call. This is Emmanuel Caprais. And on the line this morning are Luca Savi, Chief Executive Officer and President; and Tom Scalera, Chief Financial Officer. Today's presentation, press release and reconciliation of non-GAAP financial measures to the most comparable GAAP measure can be found on our website at itt.com/investors. Our adjusted non-GAAP results exclude certain nonoperating and nonrecurring items, including, but not limited to, asbestos, restructuring, asset impairment, acquisition-related items, and certain tax items. All adjustments in the quarter are detailed in the reconciliations. Before we begin, I'd like to provide a brief overview of our Q2 GAAP results compared to prior year. Q2 total revenue decreased 29% to $515 million. Segment operating income decreased 65% to $37 million and EPS of $0.53 decreased 29%. Free cash flow increased 205% to $169 million. Please note that our remaining discussion will primarily focus on non-GAAP or adjusted measures unless otherwise indicated. Lastly, today's call will contain forward-looking statements that are subject to risks and uncertainties, including impacts from the COVID-19 pandemic. Actual results may vary materially. All such statements should be evaluated together with the safe harbor disclosures and the other risks and uncertainties that affect our business, including those disclosed in our SEC filings.

Now let's turn to slide three, where Luca will take us through the key highlights.

Executive
Luca Savi

Thank you, Emmanuel, and thank you all for being with us this morning despite the many challenges and unique circumstances that you're dealing with at this time. I truly hope that everyone stays safe as we continue to adjust to the widespread repercussions of the COVID-19 pandemic. Before we start this call, I'd like to thank our customers and suppliers who have worked with us to ensure that we deliver our products safely and in a timely manner. I'm also very grateful to our shareholders for their support. And I want to give a heartfelt thank you to all our ITTs across the globe, who continue to work relentlessly to serve our customers and shareholders in the most dedicated fashion and to take care of each other in challenging conditions. On our Q1 call, we highlighted our 2020 focus to strengthen ITT's resilience and to drive aggressive cost actions while playing offense for the future. And this is exactly what we did in Q2. We delivered a 25% segment decremental margin. We accelerated and increased our cost and spend reduction actions to $160 million. We generated record free cash flow of $169 million. We bolstered our liquidity to $1.4 billion, and we signed an LOI to acquire a niche European rail company. Building on this strong foundation, we will continue