nVent Electric Q1 2025 Earnings Call Transcript

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Provided by Quartr
May 2, 2025
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Operator

Good morning, and welcome to the nVent Electric First Quarter twenty twenty five Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, Tony Reiter.

Operator

Please go ahead.

Tony Riter
Tony Riter
VP-IR at nVent Electric

Thank you, and welcome to nVent's first quarter twenty twenty five earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer Gary Corona, our Chief Financial Officer and Sarah Zawoyski, our President of System Protection. Dave will provide details on our first quarter performance, an outlook for the second quarter and an update to our full year outlook. As a reminder, all results referenced throughout this presentation are a continuing operation basis unless otherwise stated. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward looking statements subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission.

Tony Riter
Tony Riter
VP-IR at nVent Electric

Forward looking statements are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation, which you can find in the Investors section of nVent's website. References to non GAAP financials are reconciled in the appendix of the presentation. We will have time for your questions after our prepared remarks.

Tony Riter
Tony Riter
VP-IR at nVent Electric

With that, please turn to Slide three, and I will now turn the call over to Beth.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning, everyone. I'm pleased to share with you our strong first quarter results and cover some key business highlights. First, the way we have set up the call today is to have Sarah cover our first quarter performance and then have Gary provide our guidance and outlook. Sarah and Gary have been working closely together to ensure a smooth transition. This will be Sarah's last earnings call, and I'm grateful for her leadership and partnership.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Sarah, in her new role as president of systems protection, will be leading our largest growth opportunities from our data solutions business to our newest acquisitions, which includes Trotti and the Avel Electrical Products Group. I know she will be successful and drive our business to new levels. I'm excited to have Gary as part of our team. Gary has a strong growth and operational finance background and will continue to drive our track record of performance. With his most recent experience as acting CFO for Medtronic and over twenty five years at General Mills, he brings broad expertise to nVent.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Gary is getting up to speed very quickly. He will build upon the transformation strategy in place, and his experience will help us scale and grow to create shareholder value and strong returns. Turning to the business performance. We're off to a strong start with double digit growth across the board in order, sales, adjusted EPS and free cash flow in Q1. In addition, we continue to see our backlog grow up double digits sequentially, giving us visibility through the year.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

We continue to make great progress on our portfolio transformation to become a more focused, higher growth electrical company. We closed the Thermal Management divestiture early in the quarter and the AVAIL Electrical Products Group acquisition yesterday. Our balance sheet is strong and our disciplined capital allocation is focused on growth and returning cash to shareholders for continued value creation. We are raising our full year sales and adjusted EPS guidance to reflect the Electrical Products Group acquisition, Data Solutions and Power Utilities strength in the second half and it also includes the expected impact of tariffs. Now on to Slide four for a summary of our first quarter performance.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Sales were up 112% organically, led by the infrastructure vertical. New products contributed over two points to our sales growth and we launched 35 new products in the quarter. The Tracd acquisition performed well growing strong double digits year over year. Adjusted operating income grew four percent year over year with return on sales of 20%. Adjusted EPS grew 10% and free cash flow grew 32%.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Looking at our key verticals, infrastructure led the way with sales up mid teens with strength in both data solutions and power utilities. Commercial resi declined low single digits. Industrial and energy were each down mid single digits. Turning to organic sales by geography, The Americas grew low single digits while Europe was down slightly. Asia Pacific grew in the high teens.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Organic orders were up mid teens, including strong double digit growth in data solutions and mid single digit growth in the rest of

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

the business. Looking

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

ahead at our verticals, we expect infrastructure to have strong sales growth across both data centers and power utilities, which is now a more meaningful part of our portfolio. We expect industrial to grow low to mid single digits. We now expect commercial resi to be flattish for the year. While there remains uncertainty given the dynamic environment, we continue to prioritize our key growth initiatives, which includes new products, acquisitions, and capacity expansion for high growth verticals. With regard to tariffs, we are taking mitigating steps that include pricing, productivity, and supply chain actions.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

We continue to closely monitor the situation, scenario plan and execute our playbook. Overall, I am proud of our nVent team and how we continue to perform and deliver impressive results. We are on track for a strong year. I will now turn the call over to Sarah for further details on our first quarter results. Sarah, please go ahead.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Thank you, Beth. To begin, I am honored opportunity to lead the Systems Protection segment, and I am thrilled to have Gary part of the team. We have been working closely together to ensure a smooth transition. Now turning to the business performance. We are off to a great start to the year with double digit growth in both sales and adjusted earnings along with robust free cash flow.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Let's begin on Slide five with our first quarter results. Sales of $8.00 $9,000,000 were up 11% relative to last year. Organically, sales grew 2% driven by volume on top of six points of volume growth last year. Acquisitions added $71,000,000 to sales or 10 points to growth. Foreign exchange was roughly a one point headwind.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

First quarter segment income was $162,000,000 up 4%. As expected, return on sales was down in the quarter at roughly 10%. Inflation was approximately $25,000,000 Productivity partially offset inflation and we also continued to make investments for growth, particularly in Data Solutions. Q1 adjusted EPS was $0.67 up 10% at the high end of our guidance range. We generated robust free cash flow of $44,000,000 up 32% compared to a year ago.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Now please turn to slide six for a discussion of our first quarter segment performance. Starting with Systems Protection, sales of $5.00 $8,000,000 increased 16% driven by the Track D acquisition. Track D has performed extremely well with sales up double digits versus a year ago and a strong backlog. Organically, sales were flat on top of 11% growth a year ago. Infrastructure grew mid teens with continued strength in Data Solutions.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

This was offset by declines in both Industrial and Commercial Resi. Geographically, Americas declined low single digits, while Europe was flat and Asia Pacific grew double digits. First quarter segment income was $104,000,000 up 10%. Return on sales of 20.5% decreased 110 basis points year over year impacted by inflation and growth investments. Moving to Electrical Connections, sales of $3.00 $1,000,000 increased 3%.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Organic sales were up 4% reflecting strong volume. Infrastructure and Industrial each grew double digits in the quarter, while Commercial Resi was down low single digits. Geographically, organic sales were up mid single digits in The Americas, while Europe and Asia Pacific declined. Segment income was $85,000,000 flat year over year. Return on sales was 28.3%, down 90 basis points mainly due to higher inflation.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

And that wraps up the quarter, and I will now hand it over to Gary.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Thanks, Sarah. I really appreciate the warm welcome from you and Beth. I'm excited to be part of nVent. I've been impressed with the strength of the broader team, the disciplined capital allocation and focus on execution. The culture of the company focused on innovation, growth and performance is a powerful combination.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

I look forward to getting to meet many of you in the investment community in the coming months. Turning to the balance sheet and cash flow on Slide seven. We ended the quarter with over $1,300,000,000 of cash on hand, including the proceeds from the Thermal Management divestiture. We also had $600,000,000 available on our revolver. In addition, we repaid $390,000,000 of term loans in the first quarter, reducing our overall debt.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Free cash flow was robust in the quarter, growing 32% year over year. We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy. Turning to Slide eight, where we outline our capital allocation priorities. We continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns. We are investing in the business via R and D and CapEx for growth and supply chain resiliency.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

In addition, we returned significant capital to shareholders already this year. We repurchased approximately $250,000,000 in shares year to date, exceeding our plan, resulting in a lower share count and we believe at a great value. As previously announced, our quarterly dividend increased 5%. We have additional capacity for capital deployment with our first priority being to invest in growth. Moving to Slide nine.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

As Beth shared earlier, we are raising our full year reported sales and adjusted EPS guidance. We now forecast reported sales growth of 19% to 21%. For organic sales growth, we now expect to grow 5% to 7% versus our prior guidance of 4% to 6%, mainly reflecting visibility and strength in Data Solutions and Power Utilities. We expect acquisitions to now contribute 14 points to sales, up from five points previously, reflecting the AVAIL EPG acquisition. We now expect foreign exchange to be approximately flat.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We are raising our full year adjusted EPS range to $3.3 to $3.13 up 22% to 26% versus our original guidance of $2.98 to $3.08 This new guidance assumes tariff impacts of approximately $120,000,000 based on what we know today. We expect to offset the impact with price, productivity and supply chain mitigating actions. It also includes approximately $05 for the AVAIL EPG acquisition. A few modeling assumptions to note. First, full year net interest expense is now expected to be approximately $75,000,000 reflecting the cash deployed to M and A, share repurchases and debt paydown year to date.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Second, we anticipate share count to be approximately 165,000,000. Lastly, we are raising our CapEx forecast to approximately $100,000,000 The increase is for additional data solutions capacity, supply chain resiliency and the expected CapEx for the AVAIL EPG acquisition. Looking at our second quarter outlook on Slide 10, we forecast reported sales to grow 22% to 24% with acquisitions contributing approximately 18 points to sales. Organic sales growth is expected to be up 4% to 6%. The additional price increases coupled with productivity are not expected to fully offset the tariff impacts in Q2.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We anticipate price plus productivity to more than offset the impacts as we get to the back half of the year. We expect adjusted EPS to be $0.77 to $0.79 in the second quarter, which at the midpoint reflects 16% growth relative to last year. Wrapping up, we are pleased with our first quarter performance. We delivered strong sales and earnings growth and are well positioned for another great year. I will now turn the call back over to Beth.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you, Gary. On Slide 11, you can see the actions we have taken in our portfolio transformation. The divestiture of the Thermal Management business and the two most recent acquisitions of Tracte and Avail's Electrical Products Group have reshaped our portfolio to increase our presence in the electrical infrastructure vertical. We believe these actions have positioned us as a more focused, higher growth connection and protection company. In addition, we have grown our data solutions business to over $600,000,000 in sales.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

The infrastructure vertical, which was our smallest vertical at Spin, is now the largest. We believe it is the highest growth vertical with the trends of electrification, sustainability and digitalization. This year, the infrastructure vertical is expected to be over 40% of our sales with data solutions and power utilities each approximately 20% of sales. Our portfolio is now a balance between short cycle and long cycle with a growing backlog. As a result, we believe we are better positioned for growth and value creation.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Turning to slide 12. Yesterday, we closed on our acquisition of the Avail Electrical Products Group, a leading provider of control buildings, switchgear, and bus systems. This acquisition builds on our control buildings platform acquired with the Trotti acquisition and expands our offerings and capabilities in new applications. The addition of the Electrical Products Group further strengthens our solutions in high growth verticals with approximately 85% of its sales in power utilities, data centers and renewables. This business has been growing sales strong double digits with a robust backlog giving us visibility into 2026.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Overall, the demand for electrical infrastructure products is increasing with the need to expand the overall grid, the move to more renewable energy, and the increase in data centers. Recently, NEMA, the National Electrical Manufacturers Association, released an independent grid study showing electricity demand is forecasted to grow by 50% by 2050. This study shows the electrification trend is upon us and electrical solutions and innovation will be required to meet the increasing demand. It is an exciting time for the electrical industry and nVent is well positioned to be a part of this energy transition. Please turn to Slide 13 titled 2024 Sustainability Report.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

At nVent, we are building a more sustainable and electrified world. Last month, we published our latest sustainability report that outlines our commitment to sustainability and the meaningful progress we are making. Our focus is on people, products, planet, and governance. A few highlights from the reports. In 2024, we achieved above the global benchmark for employee satisfaction.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

On products, 85% of our new product introductions funnel has a positive sustainability impact. On planet, we've reduced our normalized c o two emissions by 47 since 02/2019. Lastly, we were recognized as one of the world's most ethical companies by Ephesphere for the second consecutive year. Our sustainability efforts are key to our strategy and how we operate. I'm very proud of everything we've accomplished and the journey we are on.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Wrapping up on slide 14, we are off to a strong start to the year with double digit growth in orders, sales, adjusted EPS and free cash flow. Our portfolio transformation is on track, and we expect another year of strong growth and value creation. And we believe we are well positioned with the electrification, sustainability and digitalization trends. Our future is bright. With that, I will now turn the call over to the operator to start Q and A.

Operator

We will now begin the question and answer session. The first question comes from Deane Gray with RBC Capital Markets. Please go ahead.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Thank you. Good morning, everyone. Happy Friday.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Happy Friday, Deane.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Thanks. So first, welcome to Gary. It was great to meet you in New York a couple weeks ago, and then best of luck to Sarah. I'm not gonna say it's a new role because it's not. You've been wearing the

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

two hats. So, but now it's

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

a dedicated role, and so best of luck there. So look. I know there'll be lots of questions about tariffs. It looked very much in line with what we were expecting, but I'd rather put the spotlight first on the data solutions business. And if you could give us further color, Sarah, before you write off the pace of orders, any any pushouts, just kind of like the tone of demand there?

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

And then you said double digit growth, but how does that square with Americas being flat in for the segment? Thanks.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Yeah. I would just start, Dean, by by thank you, and excited excited to take on this new role and work with a fantastic team in systems protection. So I would just frame it up this way. You know, we exited 2024 with roughly 600,000,000 sales, and and and we expect this to grow strong double digits this year with a strengthening back half, that was alluded to in the prepared remarks. And we continue to see overall orders, strong year over year in the quarter.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

You know, backlog grew double digits sequentially, and and that's providing some very good visibility as we head into the back half. I would also point out that this is broad based growth, you know, not just in liquid cooling solutions, you know, but also in power distribution units, cable management as well. And I would say, characterize it as seeing, an acceleration, and increased demand for our solutions, you know, from our customers. Maybe a couple more quick highlights. We expect another strong year in new product, you know, launches.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

I think the team is making some very good progress there, building on our strengths of performance, reliability, serviceability, and that's both across liquid cooling and power distribution units. So stay tuned there. I think the other thing we're seeing is that we're beginning to see the growth really extend from hyperscalers, into, the multi tenants and enterprise space and also growth outside of The US. So you saw a little bit of that in that geographical commentary as well. I would say largely excited about what we're seeing, but but but also, suggest that that growth is still largely in front of us because it's early in that investment cycle.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

And, of course, we continue to make, investments this year really focusing on r and d and building out our lab capabilities.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

That's a a great recap there. And just as a follow-up, can you talk about the latest deals, Avail and Track E, just the contribution? Are there any synergies between those businesses? And did I hear Gary correctly, Avail's contribution, a nickel and 25?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. You did. I'll so I'll start. Recall when we when we acquired TrackDew, we said this is a new platform for us. It's a different type of enclosure if you like with more enclosures in it.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

But we saw that there were opportunities both on the cost synergy size because we buy a lot of steel, but our ability to transform through lean manufacturing and to drive integration. And we saw the opportunity for these type of buildings are growing not just for utilities and the grid build out, but even for data centers. So with Avail, it is now building on that platform and giving us further integration capabilities from switchgear and from bus systems, etcetera. So we believe that it's going to be very synergistic building a more scaled platform here. And maybe I'll just have Sarah talk about some of the early things that we're seeing with tracking in terms of our wins because I think it's a very exciting space for us.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Yeah. Thanks, Beth. I mean, may be just an another commentary on that end market. The other thing we're seeing is a a trend of data centers really freeing up that computing space, moving that IT equipment, IT gear backup power into control building. So we're seeing a nice kind of white space application as well in addition to the power utilities.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

So maybe a couple things on track because I think it helps frame up, you know, how we're thinking about avail EPG. A quick reminder, while we don't put sales synergies in our deal models, it is a top area of focus for us by way of value creation. And for Tracfi, we're already seeing opportunity here specifically in data centers where we're able to provide control building solutions to our customers. In addition, some exciting things happening in the battery energy storage system space as well. And then as it relates to cost synergies, we had talked about a five year or or a $5,000,000 run rate cost synergy in sort of that two, three year time frame.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

And I would suggest here that we're well on track. Sourcing team has done an excellent job here executing on the procurement savings, really ahead of plan with the focus on the metals, for, for example. And another, quick area of focus here for us has been lean, and I'm really proud of the team. I was just visiting one of our plants here last week from Tracfi, and a quick data point there. Since July when we acquired Tracfi and as of today, that team has more than doubled the output of buildings per month in a particular value stream.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

And this is driving capacity, productivity, ultimately better, customer experience. So it's just giving you a flavor for the sales synergies and cost synergies that we would love to apply as we welcome, the AVAIL EPG team members, here with our day one celebrations yesterday.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And, Dean, just to jump in on financial impact, as as Beth said, we love the growth. It's been growing double digits, and it'll contribute nine of the 14 points of incremental acquisition growth. Know, EPG will be accretive in the first year. It drops an additional $05 to our EPS, and that's net of the interest benefit coming out. You know, as Sarah mentioned, strong cost synergies, and we also expect a nice cash tax benefit of approximately 15,000,000 a year.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

You know? And and, you know, from a from a margin perspective, it it's a bit lower. But like Trakti, we expect it to improve over time.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Great. Thank you.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Thanks, Deane.

Operator

Our next question comes from Julian Mitchell with Barclays. Please go ahead.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

Hi, good morning. And I'll echo the congratulations to Sarah and welcome Gary to this call. Maybe just my first question would be around the organic sales outlook. So I think you're guiding the first half organic sales up sort of low single digits year on year. The second half implied is up high single digits year on year.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

So just sort of in the context of this macro backdrop, kind of help us understand confidence in that second half acceleration. I see the orders the last six months very good. I'm not sure how much lead time there is from those into your 2H revenue though. And maybe any clarification around what drives the acceleration in terms of price step up or a specific end market or segment?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, let me start on this. So as we look forward, so yes, we had strong orders growth, and we also talked about our backlog building. As we look at data solutions and power utilities in particular, here's where we see that growth accelerating. And I would make a comment, Trachti, which is performing very well, we closed on that deal last July. So that turns into organic growth starting, you know, the back half, you know, into August.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

So the growth that we're seeing in those particular that infrastructure is strong. Our backlog is strong. Our orders are strong. And then, of course, from a reported standpoint, it's, the addition of of EDG.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And I would just add, in addition to the confidence that we have in the, in the orders backlog and in underlying growth, the comps as you look at it, were much stronger last year in the first half versus the second half. We were up mid single digits last year in the first half and flattish in the second half.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

That's helpful. Thank you. And then my second question just around the operating margins. So I think those were about 20% in the first quarter. It looks like the guide is embedding maybe 20% in Q2 and in the second half.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

So I just wanted to double check if that math is roughly right and how we should think about the tariffs affecting the margins, in those quarters and the balance of the year?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Sure. I'll take that and, I'll paint the picture for the year first and then I'll talk about Q2. On the base business, we are expecting first half margins to be down a bit on price cost timing from tariffs and as well as the investments that we're putting into the business to support the second half strong growth. On the base business, we expect margins to flip positive in the second half as pricing, and the other mitigating productivity and supply chain actions fully take hold and we have a really, really strong growth contribution. When we layer in AVAIL EPG, we are expecting margin dilution, for both the Q2 and the year.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Again, as we talked about, with a path on improving over time, We love the growth and it's delivering accretive top and bottom line to overall nVent, but it will impact our reported margins. On the Q2 front, we expect Q2 to be up modestly on a sequential basis, but it will be down versus year ago, as I mentioned, primarily driven by the timing of price cost with tariffs. But the most important thing we want you to take away is, the actions that we're taking will put us in place to grow our base margins in the second half.

Julian Mitchell
Equity Research Analyst at Barclays Investment Bank

That's great. Thank you.

Operator

Our next question comes from Brian Drab with William Blair. Please go ahead.

Brian Drab
Co-Group Head–Industrials at William Blair

Hey, good morning. Thanks for taking my questions. First one, just on the tariff situation, if you see if we see a reversal or the trade war died down with China, sort of impact did that have to the upside, for your 2025 and and your estimate of that hundred and twenty million in tariff headwind?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

You know, it's really so uncertain to be able to make a comment on that. You know, I think part of our offsets with the tariff, it's pricing productivity and supply chain actions. So I would say this, you know, we're managing our price as we see these additional cost impacts. I think it takes longer for us in terms of any supply chain, you know, reconfiguration that we do. So I wouldn't I'd like to say it it you know, we're just neutral.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And that that has been our goal as we go forward is just to manage to offset the impact of tariffs through numerous actions.

Brian Drab
Co-Group Head–Industrials at William Blair

Okay. Okay. And and then can you just put a finer point on the order growth, you know, good good double digit order growth, but, you know, is that organic? And, you know, where which, segment is contributing the most to that order growth? If you could just kinda peel that back a little bit, that would be great.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. So as I said in my prepared remarks, organic orders were up mid teens and strong double digits in data solutions with, you know, the rest of the business growing, mid single digits. And I would characterize it this way, where we see infrastructure, which of of course is data centers and power utilities and renewables, that's where we're seeing the strongest growth, and that's also where we have that backlog.

Brian Drab
Co-Group Head–Industrials at William Blair

Okay. Thanks very much.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you.

Operator

The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Hey, guys. Good morning.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Sarah, thanks so much for all the help throughout the years. Wish you the best in your your in your kind of new role, but, and then and Gary, welcome on board. So I guess just, my first question is if if you think about just just let's just start with Avail. It's kind of surprising to me that the contribution is only 5¢. It just seems like the margins are a little bit lower.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

I'm calculating to, let's just call it, like, roughly a 10% EBITDA margin for the rest of the year. So help me just kinda understand, what the what's going on there, what the expectation is for that business?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yeah. Joe, I'll I'll take that. I'll take that one. And and, you know, please keep in mind that the nickel that we talked about to EPS is net of the, interest that we assumed in our guide coming out. You know, we're expecting on a gross basis, the EPS impact to be much much higher than that nickel and the margins that we're seeing, are are higher than what you, what you suggested as as well.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

So while the AVAIL EPG margins are a bit lower than, than the overall nVent margins, we love the top and bottom line growth. And as Sarah talked about with Trachty, we've got a nice plan to, to improve them over time.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Okay. Great. I can walk through kind of the math, I guess, offline. But then then the following question is, look, the the guidance range, that you've now reset and, increased, it it's interesting because it seems like a lot of that is being driven by, you know, the the extra point in volumes. But clearly, with the tariffs, there's gonna be some incremental pricing as well.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

And so, you know, I I I know you're not breaking out the pricing anymore, but like I'm just curious, like if the $120,000,000 that kind of equates to like roughly four points on top line. So are you expecting to offset most of it with price? And if that's the case, then ultimately, the tariffs are in place throughout the year, would we expect the organic growth number to go up commensurately?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, here's the thing. There's as we said in our in our remarks, there's a lot of uncertainty. And so as we looked at, you know, going forward, yes, we have backlog and infrastructure is growing. We, you know, and as we looked at our quarter and how we performed in industrial and commercial resi, we think there's just an uncertain background there. And so we believe there's a balance of, yes, we'll likely get more price, but maybe there is some volume impact as a result.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And so that's how we thought of it going forward. And I'll I'll let Gary add some more color to that.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yeah. You know, coming into the year, you know, our guidance assumed really primarily a volume driven year. And based on the environment changing and the uncertainty, as Beth said, we'll have more price. And that I think that syncs up with with your comments. You know, as I think about the pluses and minuses on on the EPS, you know, you you we mentioned the AVAIL EPG nickel, and we mentioned the strength in in data solutions and in power utilities in the back half.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

You know, in addition, we've got we have fewer shares, outstanding than our initial initial guide. You know, it is worth mentioning, we talked about the softness in the prepared remarks in commercial resi. And as Beth said, we're managing the tariffs with our playbook, which is pricing, supply chain productivity and some mitigating actions. So that's the construct, of the guide for the balance of the year.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Okay. Helpful guys. Thank you.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you.

Operator

We have our next question from Jeff Sproj with Vertical Research. Please go ahead.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Hey, thank you. Good morning, everyone. Good Good morning. Hey, just coming back to sort of the commercial resi, like all the stuff that implicitly didn't grow or declined, right, in The Americas. I think the comment was that you did have mid single digit growth in those kind of recently sluggish markets.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Can you just speak though a little bit to, you know, that side of the portfolio, what you're seeing from a demand standpoint? Do you think inventories are now in the right place? You know, kind of a set of questions around sort of the shorter cycle, you know, elements of the portfolio.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. You know, as we came into this year, you know, we said for, we expected industrial to grow, and we still do. And we said commercial resi would be low would be low single digits growth. And I and I just, you know, updated that and said, now we think that's flattish because we think this may have more of an impact coming from the tariffs in in terms of just the demand side. But I would say this, as we look, a lot of our short cycle business goes through distribution.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Our sell out is positive there. Sell in has been positive as well. So we think that inventories are, you know, in alignment there. But we just you know, with the uncertainty, we just think commercial resi is going is going to be softer and some short cycle maybe a little bit softer.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Understood. And then just back on on tariffs. Is this number you're sharing all China? Or we've got some other countries. We got steel and aluminum.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

May can you put a little bit finer point on this kind of, the origination of the tariff number?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yep. As we, looked at this, this is everything that we know as of today. So, of course, things may change. But the biggest impact one of the biggest impacts for us is the February on steel and aluminum. And as you know, we make a lot of enclosures and other products.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Then China and not, you know, China, just the magnitude of that tariff has an impact. Then we look at all other countries and the impact there. Of course, we have a lot of things where we have coverage through USMCA could change, but what we know today. And then we also thought about some of the, secondary or third level tariffs through our supply base. So that that was how we constructed that number as best as we could determine it at this point in time.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Yeah. Okay. But steel and aluminum is number one, not China. Okay. And then, yeah, just maybe a little bit more color on what you are seeing on the power utility side.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

I think we you've probably given us about all you wanna say on data solutions. Appreciate that. But maybe just how the portfolio is coming together there, you know, kind of trajectory of orders in that business and, you know, how you see the year playing out a little bit more specifically.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. I think the exciting thing for us is where we are today now with the most recent acquisition, we believe power utilities is about 20% of our overall sales. So that's significant for us from where we started. And it's not just the Trocty and Avail acquisition. I mean, certainly, that gives us scale.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And and what we like about those businesses is that on avail, we it's grown at double digits. It has a nice backlog into 2026. Similarly, we've shared with you the results on track d, which was very strong growth and backlog building. But within our electrical connections segment, we also have some of the products, aimed at utility space as well, and they have also been growing in that double digit range. So we think overall, just with that infrastructure build out, that is going to be a strong growth driver just like data solutions has been for us.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

So the two of them together, really 40% of our portfolio now.

Jeffrey Sprague
Founder and Managing Partner at Vertical Research Partners

Great. Thank you. Good luck, Sarah. I hope we'll still see you around. I'm sure we will.

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Thanks, Jeff.

Operator

Next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Yes. Good morning, thanks, and congrats to both Sarah and Gary. I guess maybe just starting with a follow-up question on the comments you made, Gary, around margins for the business for the rest of the year. Does that commentary hold for both businesses and maybe that kind of dovetails with the question of is the tariff and price cost impact kind of spread relatively similarly across the businesses or is there one versus the other that's more impacted?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yeah, Nicole. It's, There's nothing unique to to call out. You know, both of the businesses are juggling, a a pretty dynamic environment. And, you know, both of the businesses are deploying the the playbook that I, you know, that I mentioned. You know, we, from a growth perspective, we will see differential growth from from system protection in the second half.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And a lot of that, you know, lot of that, Beth, and and and Sarah talked about. You know, in the first half, I also mentioned impacting our margins in in in, with the investments that we're making in data solutions. And that'll that'll be an entire entire year, but that first half investment really was to support the the growth that we'll

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

see in that business in the second half.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Okay. Perfect. Thank you. And then just a clarification question on what you guys are doing from a pricing perspective. Is this via list price increases or surcharges or some combination of the two?

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

And have those price increases already been fully implemented, and was that, like, an April 1 sort of

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

date? Thanks.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. Well, as you know, know, over 60% of our portfolio goes through distribution. And so, we typically will increase our prices there as long as we give them notification.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And, you know, our playbook and as we've seen through other inflationary times is that often you're doing multiple price increases just as you're adjusting over the course of the year. So, we've done some price increases, and we'll monitor the situation. If if, there's more impact, you know, we can certainly, manage price effectively there. And then, we also ensure with, some of our more direct business that we, you know, manage price with those customers on a project by project basis. So we're actively managing pricing right now.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Thanks, Beth.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

I'll pass it on. Thank you.

Operator

Our next question comes from Nigel Coe with Wolfe Research. Please go ahead.

Nigel Coe
Managing Director at Wolfe Research, LLC

Thanks. Good morning, everyone. And Sarah, congrats. And Gary, look forward to seeing you soon. So the yes, look, maybe a couple of follow ons here.

Nigel Coe
Managing Director at Wolfe Research, LLC

So as I understand that the organic uplift is basically the price associated with the tariff kind of measures, volume unchanged. But if I put an extra point of price, I'm getting about $30,000,000 of extra price versus $120,000,000 of the tariff impact. So I'd like to understand a little bit better the kind of the offsets against that 120.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, I I I just wanna start by saying, it's it's not you know, we assumed that it shifts between price and volume, but really what we what we drove the uplift with was just stronger orders in backlog. That was the number one reason for updating our organic guidance.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yeah. And I just just to to clarify again, you know, we came into the year with a very strong volume, plan. And as Beth mentioned, we have now, more price into the market, and our assumption is a bit less volume as we as we've taken our organic guidance up a point.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. So there's more than a point of price, but it doesn't seem like there's four points of price to offset the 120. So I'm just curious if you could maybe provide a bit more color there. But maybe moving on to the Avel acquisition. I have to agree with Joe, I'm getting more than $05 as well.

Nigel Coe
Managing Director at Wolfe Research, LLC

So I'm curious on the assumption that we've got like a high teens EBITDA margin, which maybe you can clarify that. Are there any integration expenses or investment spending, against that $05 Yeah.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

So just, yeah, just to to reiterate, the nickel was a a net impact to nVent, which is the the profitability of of the business coming in. But now our assumption that we'll no longer be gaining, the interest benefit on the, you know, on the investment. So it's a it's a net number mid teens, you know, mid teens margins. And keep in mind, we closed the business, yesterday, and, we're just getting under the hood. And we've got a good playbook from Tracktie to improve margins, and we'll plan to do that and and update, this group as we as we have more share.

Nigel Coe
Managing Director at Wolfe Research, LLC

Yeah. Yeah. We're we're still getting high numbers, but, we will follow-up offline. And then just maybe just a quick one on Data Solutions. I mean, if you just back into the mid teens kind of all in core and then five mid single digits ex Data Solutions, we're getting to like 50% type numbers for data solutions.

Nigel Coe
Managing Director at Wolfe Research, LLC

Is that in the right zone of order growth there?

Sara Zawoyski
Sara Zawoyski
President - Systems Protection at nVent Electric

Yes. Nigel, they were very strong in Q1, top of strong growth in Q1 of a year ago.

Nigel Coe
Managing Director at Wolfe Research, LLC

Right. Okay. Thanks guys.

Operator

Next question comes from Vlad Bastryki with Citigroup. Please go ahead.

Vlad Bystricky
Vlad Bystricky
Analyst at Citigroup

Hey, good morning team and congrats to both Gary and Sarah. Thanks for taking my questions here. I guess just a quick clarification on the increased CapEx outlook. Can you kind of dissect how much of that is related to Avail coming into the portfolio versus sort of core investments, in legacy nVent, if you will?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yeah. Vlad, you, as you noticed, we did take our CapEx assumptions up. And and the majority of the increase is really related, to the core business, and and supporting growth not just in the second half but beyond. But we did layer in, you know, CapEx associated with the EPG, acquisition, in the guide as well.

Vlad Bystricky
Vlad Bystricky
Analyst at Citigroup

Got it. That's helpful, Gary. Appreciate it. And then, maybe just one follow-up. So when look at the segments, I guess, can you just talk a little about the divergence between declining America sales and systems protection versus, you know, the robust America's sales growth you saw in electrical connections and sort of what you think is some of the driving factors behind the that that divergence and, you know, how we should think about either as potentially a leading indicator going forward.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. I think some of that is really just the comp of a year ago because we had really strong growth a year ago out of systems protection, and we were a little weaker on the electrical connection side. So that's really one of the primary reasons.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

So I wouldn't I I wouldn't extrapolate that, Vlad, going forward.

Vlad Bystricky
Vlad Bystricky
Analyst at Citigroup

Alright. That's helpful. Appreciate it.

Operator

Next question comes from Scott Graham with Seaport Research. Please go ahead.

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

Hey, thanks for taking my question and welcome aboard, Gary. Great to meet you couple of weeks back. And Sarah, best of luck to you. You've been truly excellent. I wanted to ask a couple of questions, and I'll just ask them both and let you go at it.

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

So the incremental margin in the quarter was sort of below what we've been seeing. Is that all inflation and investments? And or was there maybe something else there? And does that improve in the second half of the year? And then on acquisitions, how is the pipeline?

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

And is pricing better?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

So I'll take the margin question in the quarter. And as you mentioned, Q1 margins were That net productivity bar was down $17,000,000 And as you mentioned, it reflects both the inflation offset somewhat by positive productivity, but also net of investments that are ramping for the back half. Going forward, as we mentioned, gross productivity will ramp, tariffs will ramp, and then the pricing in our playbook will flow throughout the year. As I mentioned, excluding the EPG deal, we did expect margins to grow in the second half modestly you know, as we get our playbook in place, as we layer in the deal. As we said, it comes comes in with a bit of a nice top and bottom line contribution, but it but it it will impact margins a bit.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

But we feel good about our margin game plan in the back half that will that will be put into place.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And on the acquisition, M and A pipeline question, I would like to say that, you know, where we play in this connect and protect space, you know, it's about a hundred billion dollar opportunity. And remember, at 3 plus billion, we're one of the larger players. So it's very fragmented, and I think there's a lot of opportunities. And you've seen, you know, the last couple of deals that we've had, and I think we've been very disciplined. You know, this is our eighth deal, and, we always, you know, want our deals to cross the weighted average cost of capital in two to three years, and Avail will do that.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And I think for us, as we go forward, it's just looking to see that there is the right deal and the right timing and our capacity to to be able to execute on it as well. But, we do have more capital to allocate and feel, you know, we're in a good position if there's the right opportunity for us to continue to to do deals in the, in the near term, I would say.

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

Thank you.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Thanks, Scott.

Operator

Well, thank Sorry. Go ahead.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

No. Go ahead.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak for any closing remarks.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, thank you for joining us today. I am proud of our performance in the first quarter. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe nVent is a top tier high performance electrical company, well positioned for the electrification, sustainability and digitalization trends. Thanks again for joining us.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

This concludes the call.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • nVent delivered strong Q1 results with 11% organic sales growth, 10% adjusted EPS growth, 32% free cash flow increase, and a double-digit order backlog across its infrastructure vertical.
  • The company completed the divestiture of its Thermal Management business and acquired TracD and Avel Electrical Products Group, reshaping the portfolio toward higher-growth electrical infrastructure, now ~40% of sales.
  • Full-year guidance was raised to 19–21% reported sales growth (5–7% organic) and $3.30–$3.50 adjusted EPS (up 22–26%), reflecting the Avel acquisition, strength in Data Solutions and Power Utilities, and tariff-mitigating actions.
  • nVent is managing an estimated ~$120 million tariff headwind through a playbook of pricing increases, productivity gains, and supply-chain actions to preserve margins, with margin improvement expected in H2.
  • Leadership updates include Sarah Zawoyski moving to President of Systems Protection to drive growth in Data Solutions and acquisitions, and Gary Corona joining as CFO to enhance financial operations and capital allocation.
AI Generated. May Contain Errors.
Earnings Conference Call
nVent Electric Q1 2025
00:00 / 00:00

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