nVent Electric Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 1, 2025

Key Takeaways

  • Positive Sentiment: In Q2, nVent delivered record sales and adjusted EPS above guidance, with organic orders up over 20% and backlog more than quadrupling year-over-year.
  • Positive Sentiment: The company raised full-year guidance, now forecasting 24%–26% reported sales growth (8%–10% organic) and adjusted EPS of $3.22–$3.30, with free cash flow conversion of 90%–95%.
  • Positive Sentiment: Infrastructure led growth, as data centers saw organic sales rise over 20%—driven by AI build-out and liquid cooling solutions—and power utilities also remained strong.
  • Positive Sentiment: Integration of the Tracte and Electrical Products Group acquisitions is outperforming expectations, unlocking growth synergies and expanding nVent’s high-growth infrastructure portfolio.
  • Positive Sentiment: Adjusted operating income grew 18% with a 20.8% return on sales and adjusted EPS up 28%, as price increases and productivity largely offset $90 million in tariff-related inflation.
AI Generated. May Contain Errors.
Earnings Conference Call
nVent Electric Q2 2025
00:00 / 00:00

Transcript Sections

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Operator

Good day, and welcome to the nVent Second Quarter twenty twenty five Earnings Conference Call. All participants will be in listen only mode. Please note this event is being recorded. I would now like to turn the conference over to Tony Ryder, Vice President of Investor Relations. Please go ahead.

Tony Riter
Tony Riter
VP-IR at nVent Electric

Thank you, and welcome to nVent's second quarter twenty twenty five earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer and Gary Karona, our Chief Financial Officer. Today, we'll provide details on our second quarter performance, an outlook for our third quarter and an update to our full year outlook. As a reminder, all results referenced throughout this presentation are on a continuing operations 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 MVMT's website. References to non GAAP financials are reconciled in the appendix of the presentation. We'll have time for questions after our prepared remarks.

Tony Riter
Tony Riter
VP-IR at nVent Electric

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

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you, Tony, and good morning, everyone. It's great to be with you today to share our outstanding second quarter results. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is delivering results and accelerating our growth. We delivered record results in the second quarter with both sales and adjusted EPS exceeding our guidance. We also had record orders and backlog in the quarter.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Organic orders accelerated, up over 20%, led by strong double digit growth in our data solutions business. In the rest of the business, organic orders grew high single digits. These orders, coupled with our acquisitions, have resulted in our backlog increasing more than fourfold what it was a year ago. In data centers, we are seeing strength across our portfolio and accelerating growth to support the AI build out. The Tracte and Electrical Products Group acquisitions performed better than expected, further strengthening our position in a high growth infrastructure vertical, including power utilities, data centers and renewables.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Our teams are doing outstanding work executing on our integration playbook and accelerating our growth synergies. Since closing the Tracte and EPG acquisitions, we have identified new growth opportunities and are making investments to deliver on this increasing backlog and higher growth outlook. Our balance sheet is strong, and our first priority for capital allocation remains the same, invest and grow. Now on to Slide four for a summary of our second quarter performance. Sales were up 309% organically, led by the infrastructure vertical.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

New products contributed over three points to sales growth, and we launched 50 new products in the first half. Adjusted operating income grew 18% year over year with return on sales of nearly 21. Adjusted EPS grew 28%. Looking at our key verticals, infrastructure led the way with organic sales up over 20%, with strength in both data centers and power utilities. Commercial resi sales were up mid single digits, industrial sales were down slightly, and energy was down mid single digits.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Turning to organic sales by geography. All key geographic regions grew. Americas grew 9%, while Europe was up 10%, and Asia Pacific was up low single digits. Looking ahead, we continue to expect infrastructure to have strong sales growth across both data centers and power utilities. We expect industrial sales to grow low to mid single digits and commercial resi to be flattish for the year.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

The tariff environment remains very dynamic. However, we continue to closely monitor the situation and remain agile, executing on our playbook. We are prioritizing our key growth initiatives, which includes new products, high growth verticals and acquisitions. For guidance, we are raising our full year sales and adjusted EPS guidance to reflect our terrific second quarter results and stronger performance in data centers and power utilities. Our organic growth and recent acquisitions are expected to more than offset the EPS impact from the thermal management business we divested in the first quarter.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Overall, I'm proud of the many accomplishments by 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 Gary for further details on our second quarter results and our updated outlook for 2025. Gary, please go ahead.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Thank you, Beth. We had an excellent second quarter exceeding guidance with record sales and adjusted EPS. Let's turn to Slide five to review our results. Sales of nine sixty three million dollars were up 30% relative to last year. Organically, grew 9% driven by both volume and price.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Acquisitions added $153,000,000 to sales or 21 points to growth, ahead of our guidance. Foreign exchange was roughly a one point tailwind. Second quarter segment income was $200,000,000 up 18%. Return on sales came in at 20.8%, better than expected. Inflation was more than $35,000,000 including approximately $15,000,000 in tariff impact.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Price plus productivity partially offset inflation and we also continued to make investments for growth, particularly in our Data Solutions business and our recent acquisitions. Q2 adjusted EPS was $0.86 up 28% above the high end of our guidance range. We generated robust free cash flow of $74,000,000 Now please turn to Page six for a discussion of our second quarter segment performance. Starting with Systems Protection, sales of $632,000,000 increased 43%. The Trachy and EPG acquisitions contributed 32 points to sales and have performed well, with sales up strong double digits versus a year ago and both have robust backlogs.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Organically, sales grew 10% on top of a strong quarter a year ago. Infrastructure grew roughly 30% with continued strength in data centers. Commercial resi grew mid teens and industrial was down low single digits. All geographies grew led by The Americas and Europe, Asia, low double digits. Asia Pacific grew low single digits.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Second quarter segment income was $137,000,000 up 32%. Return on sales of 21.7% decreased 180 basis points year over year impacted by inflation, acquisitions and growth investments. Moving to Electrical Connections, sales of $331,000,000 increased 11%. Organic sales were up 7%, reflecting strong volume. The EPG acquisition contributed four points to sales.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

From a vertical perspective, infrastructure led growing high teens, industrial grew low teens and commercial resi was up low single digits in the quarter. All geographies grew led by The Americas and Asia Pacific each at up high single digits. Europe grew low single digits. Segment income was $95,000,000 up 3% year over year. Return on sales was 28.7 percent, down two twenty basis points, mainly due to inflation and acquisitions.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

That wraps up the segments for the quarter. Turning to the balance sheet and cash flow on Slide seven. We ended the quarter with $126,000,000 of cash on hand and $400,000,000 available on our revolver. We also generated $74,000,000 in free cash flow in the quarter. Also, we refinanced and extended our credit facility.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy. Turning to Page 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. We returned $319,000,000 to shareholders in the first half of the year.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

That includes more than $250,000,000 in share repurchases at a great value, resulting in a lower share count. And we returned $66,000,000 via dividends so far this year. We exited the quarter within our targeted leverage range. We believe we are well positioned and have additional capacity for future capital deployment with our first priority being to invest in growth. Moving to Slide nine, as Beth shared earlier, we are raising our full year sales and adjusted EPS guidance to reflect our strong Q2 results and increased growth expectations in data centers and power utilities.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We now forecast reported sales growth of 24% to 26%. This includes expected higher organic growth and approximately 15 points from acquisitions with foreign exchange now approximately a one point tailwind. For organic sales growth, we now expect to grow 8% to 10% versus our previous guidance of 5% to 7%, reflecting our Q2 beat along with increasing visibility and strength in data centers and power utilities. We are raising our full year adjusted EPS range to 3.22 to $3.3 up 29% to 33% versus our previous guidance of $3.3 to $3.13 This new guidance reflects the expected tariff impacts of approximately $90,000,000 versus $120,000,000 previously. We expect to offset the impacts through pricing, supply chain productivity and operational mitigating actions.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

For free cash flow, we now expect conversion in the range of 90% to 95%. A few modeling assumptions to note. First, we are raising our CapEx forecast to approximately 110,000,000 versus $100,000,000 previously. The additional CapEx is for increased capacity in our Data Solutions business and for our recent acquisitions. Also, costs are now expected to be approximately $110,000,000 versus $100,000,000 previously.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Looking at our third quarter outlook on Slide 10, we forecast reported sales to grow 27% to 29% with acquisitions contributing approximately 15 points to sales and foreign exchange is now a one point tailwind. Organic sales growth is expected to be up 11 to 13%. Price increases coupled with productivity are expected to offset inflation including the tariff impact in Q3. We expect adjusted EPS to be between $0.86 and $0.88 which at the midpoint reflects a 38% increase relative to last year. Wrapping up, we are pleased with our excellent second quarter performance.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We delivered record sales and adjusted EPS and are well positioned for a strong second half. I will now turn the call back over to Beth.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you, Gary. Please turn to Slide 11. Last quarter, we shared this slide with you to show the actions we have taken to transform our portfolio since then to become a more focused, higher growth electrical connection and protection company. In the last year, we divested the Thermal Management business and acquired TrackV and EPG, reshaping our portfolio and increasing our exposure to the high growth infrastructure vertical. In addition, we've been investing in our data solutions business, which is growing and accelerating with the AI build out.

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 has the highest growth with the trends in electrification, sustainability and digitalization. This year, the infrastructure vertical is expected to be over 40% of our sales, with data centers and power utilities each approximately 20% of sales. Our portfolio is now a balance between short cycle and long cycle business with a growing backlog. We believe we are better positioned for growth and value creation as a result.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Turning to Slide 12. I would like to give an update on our position in data centers and talk about both the white space and gray space opportunities. The AI build out is driving demand for innovative power and cooling solutions in the white space of the data center. As we have discussed previously, liquid cooling is essential for the new chips for AI. We believe liquid cooling is growing three times faster than legacy cooling.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

We have talked a lot about cooling distribution units and liquid to air solutions like rear door heat exchangers. We are also seeing growth with our expertise in the overall technology cooling system, including coolant distribution manifolds. With the increasing CapEx investments in the build out of AI data centers, we are seeing growth across our entire portfolio from power distribution units to our cable management offerings, including wire basket tray. In addition, we are seeing a trend towards modular data centers using large outdoor enclosures to house all the IT hardware, including cooling. With our Tracking and EPG portfolio, we offer a range of enclosures and integration capabilities for these modular data centers.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

We believe we are well positioned to win. We have partnerships with chip manufacturers and data center players from hyperscalers to enterprise to multitenant customers. Our strong technical expertise, coupled with innovative design and the ability to manufacture at scale, are strengths. This is leading to record new orders, increasing backlog and accelerated revenue growth. To expand further, we expect to launch a whole new range of cooling solutions later this year.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Please turn to Slide 13. With the build out of AI infrastructure, we also see strong demand in the great space of data centers. We have a focused sales initiative to sell our core portfolio in the gray space from power connections, cable management, grounding to enclosures and cooling. A trend we are seeing is customers want to expand the white space within a data center to maximize the IT footprint. In order to accomplish this, customers are moving the gray space, which contains power and other equipment, to outside of the building.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

This is accelerating the need for outdoor enclosures, which we provide from our Trotty and EPG acquisitions. This enables us to provide integrated solutions and pull through our core nVent product offerings. With our focus on the gray space, we are seeing record orders and backlog, leading to accelerating revenue growth in the gray space. Wrapping up on Slide 14. We had record performance in the second quarter, including strong double digit growth in orders, sales and adjusted EPS.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Our backlog has never been larger. Our portfolio transformation is on track, delivering accelerated growth, and we expect another year of significant growth and value creation. I am proud of our nVent team that is working tirelessly on growth, delivering for our customers and our shareholders. We believe we are well positioned with the electrification, sustainability and digitalization trends. Our future is bright.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

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. And Our first question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Good morning. You guys hear me okay?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

We can.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning, Dean. Good morning, Dean.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Okay. Good. All right. Maybe I'll start with the disclosure today that backlog is up more than four times year over year. Noting that you've also invested to increase capacity recently by also four times.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

Can you talk about the timing of converting this backlog? And just kind of what's the duration of the backlog as it stands today?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. Thanks for the question, Dean. When we look at our backlog, it's really up because of a couple of different reasons. One is the growth that we're seeing in our data center, solutions business. And so, yes, we have increased our capacity there, and we see orders and backlog taking us through into 2026 and visibility beyond.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

The second is we've been growing our backlog in our track d business, and that is both in power utilities and data centers. And as you know, EPG just came into the portfolio, and so that is backlog that we didn't have a year ago. But as we look at across all three of those areas, the two acquisitions and our data solutions business, we're seeing orders and backlog through 2026 and and a little beyond.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

That's great to hear. And then just a second question. I know you can't name names, but just could you help us, and give us a perspective when we read in the news that a large hyperscaler is launching their own custom liquid cooling platform, you know, it raises concerns about disintermediation and and barriers to entry and so forth in liquid cooling. But it's our understanding that a key part of your business model is to help these types of customers develop these custom systems. That, again, that's an important part of your model.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

We just don't know what percent that is of your business. But just any help in how we should interpret this trend, would would be appreciated.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

As you know, Jean, we can't comment on any of those specific relationships, but I will say this. We partner with many of the hyperscalers, in some cases, providing complete, system solutions around liquid cooling. Or often, we partner to provide a specific product, could be a CDU, could be a manifold. And so we typically are working on a part of the solution with these hyperscalers, and not all of them, or many of them, I would say, don't want to necessarily manufacture manufacture those solutions either. So those partnerships are really key as we go forward.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And what we're saying is just, we're expanding our solutions. I mentioned some new products coming out. We're expanding our engagement with various customers globally. And so we just see continued runway in the development of liquid cooling solutions.

Deane Dray
Deane Dray
Managing Director at RBC Capital Markets

That's all great to hear. Congrats on all the growth.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you, Dean.

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 and great quarter. Really, really quite amazing. It seems like Sarah has done a good job of System Protection. So the I'm not going to ask a question on Data Solutions, which might be a little bit surprising.

Nigel Coe
Managing Director at Wolfe Research, LLC

I think one the most surprising aspects of the performance was the commercial resi performance in System Protection. I think you called out mid teens growth, Beth. And I think the full year, you're still expecting it to be pretty flat. I think with the guide, just curious what you're seeing in those end markets. And was there anything unusual in terms of channel that happened this quarter?

Nigel Coe
Managing Director at Wolfe Research, LLC

I know that's not the full story here, but just curious there.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. When we look at our systems protection business and the enclosures that are going into that commercial resi segment, sometimes nothing unusual occurring in the quarter through our distribution channels. I'd say that, you know, our sellout there is positive and sell in positive. I would say that in commercial resi, we're just seeing some build out, and sometimes our enclosures end up commercial type enclosures end up in data centers, and sometimes they end up in other types of building applications. You know, it's we don't always get to see that full visibility, as you know, through our channel.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

But I would just say we're just seeing some, healthy performance there. But again, we're very, you know, cautious on that overall commercial resi industry, and so that's why we're saying we expect it to be flattish for the year.

Nigel Coe
Managing Director at Wolfe Research, LLC

And I'm guessing that if we do see these mega projects starting to shift through in 2026, '27, that would land within your commercial resi business, I'm assuming. But the Tracty business just seems to be on fire. I think that came in with a projection of $250,000,000 in 2024. I'd be curious in dollar terms, what you're expecting Trakty to be in '25? And and what sort of backlog have we built have you built in at Tracke right now?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, our Tracke business is growing at double digits, and I think, nicely ahead of our expectations. And we're seeing a couple of things. One is we're seeing, both growth from utilities as well as data centers. And, I mentioned the gray space, and one of the great synergistic opportunities that we had as well is that our relationships with data center customers and OEMs partnering with the capabilities that we had in Tracke, we've seen some new orders to provide enclosures for gray space opportunities. So it's, orders are strong, healthy backlog, growth synergies, and that's part of why we raised our guidance.

Nigel Coe
Managing Director at Wolfe Research, LLC

Okay. Thanks, Beth.

Operator

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

Julian Mitchell
Equity Research Analyst - US Industrials at Barclays Investment Bank

Hi, good morning. Maybe just to start with a question on the top line. So in the backlog you said was around or just under $750,000,000 at the beginning of the year. Wondered if you could give any sense at all of where it stands at the June. And when we think about that backlog conversion into sales, for the second half, should we be expecting the Systems Protection to grow organically far above Electrical?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. When we look at the backlog at the start of the year, it has grown. And some of that is orders that we're winning in our new acquisitions, it's data solutions, liquid cooling. And of course, the backlog increased this quarter because of avail EPG joining the business, and so we acquired that backlog. But it is growing very nicely.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And, yes, a lot of that backlog is in our systems protection business, So we will see that grow ahead of our electrical connections segment.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And and, Julian, the, EC business will grow nicely. They had a great quarter in q two, and and we expect it to grow in a healthy way in the second half. And the visibility into that backlog is one of the strong reasons that we were able to take up our guidance in the double digit territory for organic growth in the second half.

Julian Mitchell
Equity Research Analyst - US Industrials at Barclays Investment Bank

That's helpful. Thank you. And then just on the operating margin front. So I think it's it looks like it's maybe sort of mid teens incremental margins being dialed in for the year at the sort of guide midpoint and maybe a touch higher than that in the second half. Realize you have that sort of 30% -ish medium term goal from the Investor Day a couple of years ago.

Julian Mitchell
Equity Research Analyst - US Industrials at Barclays Investment Bank

So maybe you could flesh out some of the puts and takes affecting the incrementals this year? And should we see entering next year or for next year an incremental margin more akin to the medium term aspiration?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yes. Thanks, Julian. And I'll start by saying, certainly, we're focused on delivering fiscal year 2025, and we're not going to talk about 2026 on this call. But I think you're in the zone from an incrementals perspective. And what I will say from margins, we did exceed our margin expectation in the quarter.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

We shared we were going to be down in the quarter as we got our price cost tightened up, and you see that in our guide as we think about the back half as we get our price and productivity to offset the tariff driven inflation. So we're pleased with the direction of travel on margins, and we expect to exit the year with margin growth, excluding EPG, to be up as we exit the year. And look, we didn't expect to be offsetting tariffs in this year. I think the team has done a great job to do that and to exit with the business model on a healthy place in the back half of the year. We're feeling good about the shape of the P and L.

Julian Mitchell
Equity Research Analyst - US Industrials at Barclays Investment Bank

And on just that point, Gary, on the investments, you called those out, particularly first quarter and I think Q2, and it's understandable given the extent of the volume growth you're seeing in the back half. Are the investments sort of continuing to ramp up? Anything unusual with the phasing of those?

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

No. The investments will continue to ramp as we support this acceleration in growth, and we expect that to continue. You see that both from an OpEx perspective as well as the CapEx increase, that we included in the guide to support additional capacity both for our Data Solutions business as well as our recent acquisitions to support the growth.

Julian Mitchell
Equity Research Analyst - US Industrials at Barclays Investment Bank

Great. Thank you.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

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

Hi, good morning. Thanks for taking my questions. I'm first just thinking about the final comments that you made, Beth, around modular offering and and increased focus there. Can you talk about, you know, what what could the margins be relative to your existing data center business in modular? And then also, you know, how does this relate to you you know, you're making a push to have a more standardized product too that I believe would be incrementally higher margin.

Brian Drab
Co-Group Head - Industrials at William Blair

And are are those two businesses and initiatives at all related to each other as well?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, when we look at, modular data centers, you know, we're looking to see the enclosures, from Tracking and Avail that house those modular data centers to be in line with, you know, the those portfolios. And then I would say there's pull through from the core Invent product. And, again, we expect those margins to be similar to what we see in those portfolios today. When it comes to the liquid cooling and more standardized offerings, those products, will be, in in some cases, through distribution as well as direct to customers. But as we sell more products through distribution and as we sell more modular standardized products, they tend to have a higher margin.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And so, again, we're investing a lot in data solutions right now, but a lot of these new product offerings and solutions we believe will have, you know, enhanced the overall margin opportunity in that business.

Brian Drab
Co-Group Head - Industrials at William Blair

Okay. Yeah. Thank you very much. And then just one one quick one. On, Tracke and the, you know, power utilities business, is Tracke is some of the Tracke business now being recorded in in data center, or or is that sitting in in power utilities?

Brian Drab
Co-Group Head - Industrials at William Blair

But is there is there some is is the line kind of blurred, between power utilities and data center more and more?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, I would say this. You know, when we look at Trackey, and we've been clear to say that it it sells through to utilities, but it's also seeing this growing data center, gray space opportunity. And, you know, as we look at that, you know, we just can we're continuing just to track where those opportunities are. But, certainly, one of the growth synergies for us has been the relationships that we have in data centers that is and this this moved more grace space, us to buy new growth opportunities.

Brian Drab
Co-Group Head - Industrials at William Blair

I I guess I'm just trying to I'm thinking about what percentage of your business is actually really driven overall by data centers. I know, you know, you give us you size the data solutions piece for us, but, you know, if if you take into account everything that's being driven by data centers, is there any way to give us a a better idea of how much of your overall business is being driven by the data center industry?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. I mean, on that chart that I have in there showing our portfolio portfolio transformation, we point to our data center business being 20%, and that is inclusive of what we're doing, in our attractive and avail EPG acquisitions.

Brian Drab
Co-Group Head - Industrials at William Blair

Okay. I just wanted to clarify that. Thanks.

Operator

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

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Hey, good morning, everyone.

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

Yes. So look, great to see the growth acceleration. It seems like we're at an inflection point. We've had a lot of discussion around backlog and the kind of secularly growing pieces of your businesses. But maybe, Beth, you can provide a little bit more color on just short cycle, what you're seeing within like the industrial footprint? And yeah, any expectations for the back half of the year would be helpful.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Okay. You know, we've said that we expect industrial to be, you know, low to mid single digits growth. And so I would say that we have seen, some nice growth through our distribution channel. Both sell in and sell out, I commented earlier, are positive. So, you know, we think that, I mean, there's more growth in infrastructure, but, certainly, we're we're seeing some nice wins on the industrial side.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Okay. Great. Look. And then I guess, you know, we we we touched on the the Amazon announcement earlier, and I know it's, you know, it's, know, difficult to talk specifically about one hyperscaler. But I guess, look, the the right now have been incredibly good.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

You're increasing capacity. How do you just kind of foresee the next, like, twelve to twenty four months playing out? With the capacity additions that you are making, do you anticipate being set, at least from a capacity standpoint on liquid cooling, for the next couple of years? I'm just trying to understand, you know, how far out you're looking at this point.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. You know, as you know, we have investments and are continuing to make investments, and we do do believe there will be further investments in cap capital, and, you know, capacity extension as we go into 2026 and beyond. And so in part, this is as the portfolio expands, as we're seeing more customers. So, we're just continuing to see this accelerate and the adoption accelerate.

Joe Ritchie
Joe Ritchie
Managing Director at Goldman Sachs

Okay. Thank you.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Thanks, Joe.

Operator

Our next question comes from Jeff Sprague with Vertical Research. Please go ahead.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Hey, thanks. Good morning, everyone.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Good morning. Can we just come around the price? I just kind of want to understand a little bit better sort of where you're at in recovering tariff pressure and kind of other inflation. Obviously, we see the net productivity bar on the slide. But really the nature of my question is kind of given the demand pulse that you're seeing, do you see the ability to fully recover tariff costs with price as opposed to leaning on productivity?

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

And therefore, actually can drop more through to the margin rate. And can you unpack at all how much kind of tariff related price you might be working on versus is there kind of base price on top of that? If you could unpack that to some degree, that would be helpful.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Yes. A few in there, Jeff, and I'll try to chip away at them. I'll start with your question just more specifically on the waterfall and on that productivity. Keep in mind that the price that we're taking is captured in that growth and and acquisition bar. And, you know, we'll continue to be diligent in in managing price, cost, and productivity.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And and this team has really demonstrated that over past few years. Our updated guidance reflects enough price to largely offset the tariff impacts. But it's important to say, we came into the year with a volume driven plan, and volume is going to drive our growth here in the second half. We work with our distributor partners as well as our direct customers to manage price with appropriate and adequate notification, And you'll start to see that flow through more significantly in Q3 and in Q4. And that's really embedded in what we have pointed to from a margin perspective, which is to have price and productivity offset the tariffs and exit the year with margins in a healthy place.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

And then just back to the modular theme, if we call it a box, Right? You aspire to provide more in in the box, so to speak. But I also wonder, are you being called upon to, you know, deliver a totally complete box, so to speak, you know, that's just ready to plug in to the data center, and therefore, you're pulling through other people's products and systems and also, therefore, then have, you know, kind of responsibility for the way things operate. Just trying to think, are you are you taking on kind of scope that leads to pass through revenues or, you know, responsibility for a, you know, systems performance that goes beyond your own products and systems?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. As we look at, you know, both data centers or even in that gray space where maybe we're enclosing power, often, we're integrating other OEMs equipment in there. And I think for modular data centers, we will see that over time, that ability to integrate more. So, we're at various stages of integration, and that's one of the things that we can do very flexibly. But I think over time, there'll be more integration capability for us.

Jeffrey Sprague
Founder & Managing Partner at Vertical Research Partners

Understood. Thank you.

Operator

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

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Yes. Thanks. Good morning.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Maybe just starting with a follow-up on the earlier question on Comresi. You said best that non data center orders were up high single digits in the quarter. Was Comresi also up in that range? Just getting a trying to get a sense of if there could be upside to that full year outlook.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

It is positive, I would say that. But I think we're just we're cautious there. I think especially on the resi side, we still are cautious about impact of tariffs and other things over the course of the year. So that's why we're saying that it's flattish full year.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Okay. Understood. And yes, I agree that it's probably better to be cautious on those businesses. I guess maybe secondly, could you just refresh us on your service offering, particularly within liquid cooling? We're hearing more from the channel that service is becoming increasingly important and there might be more demand for service from the OEM with liquid cooling systems.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

So just remind us how you approach that offering with customers.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yep. We have been building out our service offering capability. I mean, since we've been providing liquid cooling solutions, we've always had engineering support. But I would say we've been working to more formalize that service offering opportunity, and we recognize that as we expand beyond to all different types of customers that we need to have a service and support team. So that's something that we're building out and are and are providing it, and I think we'll grow over time.

Nicole Deblase
Nicole Deblase
Lead Analyst at Deutsche Bank

Thank you. I'll pass it on.

Operator

Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Please go ahead.

Jeffrey Hammond
Jeffrey Hammond
Managing Director at KeyBanc Capital Markets

Hey, good morning.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning, Jeff.

Jeffrey Hammond
Jeffrey Hammond
Managing Director at KeyBanc Capital Markets

Maybe just to start with Avel, just kinda early integration thoughts. I know with with Trackey, you found some some immediate kind of throughput improvements and wondering if there's similar opportunities there. And then just I think Avail comes in kind of mostly utility and and maybe back to Brian's question. Is it pretty fungible if if there's a lot more demand on the data center side to kind of shift, you know, that that focus, you know, more to data center versus versus power, not to diminish power, but, you know, just a little more color there.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yeah. So it's been sixty to sixty days with AVAIL EPG. And, both with Trackey and AVAIL, you know, that core business was more focused on utility. But what we see growing significantly is the data center opportunity and some of that being gray space. So, again, we still may be, integrating Switchgear and Power, for example.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

I would say this, you know, we have an opportunity to, know, invest in and increase capacity, applying some of our integration playbook, lean sourcing capability, things like that. And, I would say this, there is some flexibility in terms of just how we apply our resources and labor to support that growth. And some of that is just by even looking at the combined Avail and Trackd acquisitions and thinking through how we can execute best on some of these new new programs. So there's some good collaboration going on already. But I think, you know, as we've said, the reason that we acquired Tracd and then, Avail was we're building a platform here.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And so we're integrating those business with the idea that we can support the overall infrastructure growth, be it data centers or utilities or renewables.

Jeffrey Hammond
Jeffrey Hammond
Managing Director at KeyBanc Capital Markets

Okay. Great. And then just back to the the capacity needs, I think you bumped CapEx this year for 10,000,000, but, by 10,000,000. But just, you know, where is the greater need to add capacity near term? Is it more on the building control solutions, more on the liquid cooling, both?

Jeffrey Hammond
Jeffrey Hammond
Managing Director at KeyBanc Capital Markets

It just seems like as we hear about this space kind of exploding, just a lot of push for, you know, we need it now, we need it faster, and and just how you're thinking about, you know, how you need to add capacity to kinda manage all that.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, it's both. And so we're expanding, as you know, our liquid cooling, and we've talked about that for a while, and we have to further that capacity and capability. And at the same time, as we acquired Trackey and Avail, we're having to expand capacity in some of our plants there. And, again, we're looking at the footprint and seeing how best we do that. And so it's it's within our own four walls, but it's also, making sure that our supply base is also ready to scale with us.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

And so, we're we're pretty busy working on capacity expansion across the engineered building solutions, those two acquisitions, as well as data centers.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And Jeff, I just build to say that the teams are disciplined. And on this CapEx investment, we've taken that up now a couple of times in both Q1 and Q2, but are very disciplined about ensuring the returns. And I will tell you the payback on this incremental investment is quite good for us. And as we get to capital allocation, we've talked about focusing on growth and this is the place for us to invest here, both in the short and intermediate term.

Jeffrey Hammond
Jeffrey Hammond
Managing Director at KeyBanc Capital Markets

Okay, great. Thanks so much for the color.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thanks.

Operator

Our next question comes from Vlad Vostrichi with Citigroup. Please go ahead.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

Morning, Beth and Gary. Thanks for taking my call this morning.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Good morning.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

Good morning.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

So just a couple of quick questions for me. I guess, the positive organic growth, outside The U. S. Seems pretty interesting just given the kind of sluggish market trends, it seems like, in areas like Europe and China. So can you talk about specifically what you're seeing outside of The U.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

S. And what's driving, what appears to be your outperformance versus the growth in those markets?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, I would say this. It's our strategy to focus on high growth verticals, and it's our strategy to focus on, our commercial go to market, including our distribution partnerships. And so, we continue to drive new products as well. And I think it's really all of those things where we're, increasing our position and being more successful.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

Great. That's helpful, Beth. And it looks like good progress there. And then just one other one for me. You know, as you've transformed, the portfolio and and grown the long cycle exposure here.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

Can you talk about on track terms in the longer term backlog? And more specifically, I guess, your ability to protect margins given, you know, uncertainty around tariffs and commodity inflation and so forth?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Yes. As we look at our contracts, we typically are ensuring that we have that ability if we see some material changes due to tariffs or other reasons to, make those adjustments on the material side. And so and the and those are discussions that we're having with customers, and they understand. You know, they're also in other they also are subject to tariffs and other things as well. So, we've been able to manage that pricing through our longer term contracts.

Vlad Bystricky
Vlad Bystricky
VP - Equity Research Analyst at Citigroup

Great. That's great to hear. I'll get back in queue. Thanks, Beth.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you.

Operator

Our next question comes from Scott Graham with Seaport Research Partners. Please go ahead.

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

Hey, good morning. Congratulations. Thanks for taking my call. I wanted to talk about acquisitions a little bit more and I think specifically on earlier question. Are some of the targets that are in the pipeline there because you need to kind of fill out the box?

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

And then secondarily, if you kind of do the math on your EBITDA, your leverage targets, my back of the envelope says you probably have about 500,000,000 in capacity over the next, call it, twelve months. Is that about right? And would you use stock for deals?

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Well, let me start with the first part of the question. I'll let Gary talk about our, the latter part. As you know, we've had this acquisition flywheel where it starts with us looking at high growth verticals and products that we see are differentiated where we could extend our capabilities and invest to scale. And so that's how our last two acquisitions came about. And, so it's not necessarily, you know, how how do we look at filling the box, so to speak.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

It's just where are these data centers, utilities, infrastructure, and what are great products that allow us to build on capabilities that we have. And so in some cases, that could be complementary products. And I think we have a a great pipeline. I think we've been very disciplined in, what we've gone after, and you see us, growing these portfolios, and that is part of our flywheel. So, you know, the pipeline is robust, and I think there's lots of opportunities as we go forward.

Gary Corona
Gary Corona
EVP & CFO at nVent Electric

And Scott, I'll just comment on capacity. As we mentioned in our prepared remarks, we're right within our leverage range and expect to be well below that, especially as we will have a strong second half in cash flow generation. For us, we're going to continue to be disciplined on the deals. And these chunky type deals that we've done like EPG and Tracktie certainly can be managed without any additional equity. So we have a nice bit of capacity, and we expect to continue this flywheel going forward.

Scott Graham
Senior Equity Research Analyst at Seaport Research Partners

Very good. Thank you both.

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you.

Operator

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

Beth Wozniak
Beth Wozniak
Chair & CEO at nVent Electric

Thank you for joining us today. I'm extremely proud of our performance in the second 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. This concludes the call.

Operator

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

Executives
Analysts
    • Deane Dray
      Managing Director at RBC Capital Markets
    • Nigel Coe
      Managing Director at Wolfe Research, LLC
    • Julian Mitchell
      Equity Research Analyst - US Industrials at Barclays Investment Bank
    • Brian Drab
      Co-Group Head - Industrials at William Blair
    • Joe Ritchie
      Managing Director at Goldman Sachs
    • Jeffrey Sprague
      Founder & Managing Partner at Vertical Research Partners
    • Nicole Deblase
      Lead Analyst at Deutsche Bank
    • Jeffrey Hammond
      Managing Director at KeyBanc Capital Markets
    • Vlad Bystricky
      VP - Equity Research Analyst at Citigroup
    • Scott Graham
      Senior Equity Research Analyst at Seaport Research Partners
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