Q4 2021 nVent Electric PLC Earnings Call

Speaker 1: You

Yeah.

Speaker 2: Ladies and gentlemen, thank you for standing by and welcome to the Invent Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone.

Ladies and gentlemen, thank you for standing by and welcome to D. N V fourth quarter earnings Conference call. At this time, all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.

Speaker 2: Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chief Financial Officer Sarah Zawoski. Thank you. Please go ahead.

Please be advised that today's conference is being recorded if you require any further assistance. Please press star zero.

I would now like to hand, the conference over to your Speaker today, Chief Financial Officer, Sarah its a whiskey. Thank you. Please go ahead.

Speaker 3: Thank you, and welcome to Invent's fourth quarter earnings call. Here with me today is Beth Wozniak, our Chief Executive Officer. And I would also like to introduce Tony Reiter, our new Vice President of Investor Relations. I know many of you already know him from his time at 3M, and we are thrilled to have him join the Invent team. With that, I will turn the call over to Tony. Thank you, Sarah.

Thank you and welcome to invest fourth quarter earnings call here with me today is Beth Wozniak, our Chief Executive Officer, and I would also like to introduce Tony Reiter, Our new Vice President of Investor Relations I know many of you already know him from his time at three am and we are thrilled to have him join the inbound team.

With that I will turn the call over to Tommy.

Thank you Sarah and good morning, everyone.

Speaker 4: I'm excited to be here at NVENC. I look forward to working with all of you.

I'm excited to be here at investors look forward to working with all of you.

Speaker 4: Today we'll provide details on our fourth quarter in foliar performance and the outlook for the first quarter in foliar 20.

They will provide details on our fourth quarter and full year performance and the outlook for the first quarter and full year 2022.

Speaker 4: Before we begin, I'll remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks.

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 <unk> filings with the Securities and Exchange Commission.

Speaker 4: such as the risks outlined in today's press release and NVIN's filings with the Securities and Exchange Committee.

Speaker 4: Four looking statements are made as of today and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.100% actual results Parks and Recreation

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.

Speaker 4: Today's webcast is accompanied by a presentation which can be found on the investors section of Envyn's webcast.

Today's webcast is accompanied by a presentation, which can be found on the investors section of <unk> website.

Speaker 4: References to non-GAAP financials are reconciled in the appendix of the presentation.

References to non-GAAP financials are reconciled in the appendix of the presentation.

Speaker 4: We will have time for your questions after our prepared remarks. With that, please turn to slide 3 and I will now turn the call over to Beth.

We will have time for your questions. After our prepared remarks with that please turn to slide three and I will now turn the call over to Beth.

Speaker 3: Thank you, Tony, and good morning everyone. It's great to be with you today to share our fourth quarter and full year results.

Thank you Tony and good morning, everyone. It's great to be with you today to share our fourth quarter and full year results.

Speaker 3: 2021 was an outstanding year. We grew sales 23% and delivered 31% adjusted EPS growth.

'twenty one was an outstanding year, we grew sales, 23% and delivered 31% adjusted EPS growth.

Speaker 3: We exited the year with orders up 37% in the fourth quarter and record backlog. I could not be more proud of our InvenTeam and what we accomplished.

We exited the year with orders up 37% in the fourth quarter and record backlog I could not be more proud of our advent team and what we accomplished.

Speaker 3: We executed on our strategy, had record growth, and navigated many challenges to deliver for our customers.

We executed on our strategy had record growth and navigated many challenges to deliver for our customers.

Speaker 3: We made great progress with new products and our digital transformation. We completed two acquisitions to strengthen our portfolio and expand our offerings in high growth verticals.

We made great progress with new products and our digital transformation.

We completed two acquisitions to strengthen our portfolio and expand our offerings in high growth verticals.

Speaker 3: And we made significant progress on our ESG priorities.

And we made significant progress on our ESG priorities.

Speaker 3: We had a goal to emerge stronger and our results demonstrate we have.

We had a goal to emerge stronger and our results demonstrate we have.

Speaker 3: Slide four summarizes our two-four and full year performance.

Slide four summarizes our Q4 and full year performance.

Speaker 3: Fourth quarter sales were up 28% with broad-based growth across all segments and verticals. Adjusted EPS grew 16% year-over-year and we generated $101 million of free cash flow. Our fourth quarter results were solid.

Fourth quarter sales were up 28% with broad based growth across all segments and verticals adjusted EPS grew 16% year over year, and we generated $101 million of free cash flow our fourth quarter results were solid.

Speaker 3: Looking at some of our key verticals in the quarter, industrial continued to lead the way with particular strength in automotive, food and beverage, and material handling.

Looking at some of our key verticals in the quarter.

Industrial continued to lead the way with particular strength in automotive food and beverage and material handling.

Speaker 3: Infrastructure had strong growth in data networking solutions and power utilities.

Infrastructure had strong growth in data and networking solutions and power utilities come.

Speaker 3: Commercial and residential continued its trend of double-digit growth across all segments.

Commercial and residential continued its trend of double digit growth across all segments.

Speaker 3: And finally, in energy, we continue to see a nice recovery, particularly in MRO.

And finally in energy, we continued to see a nice recovery, particularly in MRO.

Speaker 3: Looking at our geographical sales performance, North America was exceptionally strong, led by enclosures. Europe was also up double digits with ongoing strength in electrical and fast-

Looking at our geographical sales performance North America was exceptionally strong led by enclosures. Europe was also up double digits with ongoing strength in electrical and fastening.

Speaker 3: and developing regions grew over 40% led by China with particular strengths in thermal management. For the...

And developing regions grew over 40% led by China with particular strength in thermal management.

For the full year, we had records.

Speaker 3: Two and a half billion dollars. An increase of 23% or 18% organically.

$2 $5 billion, an increase of 23% or 18% organically.

Speaker 3: Adjusted EPS was up 31% and up 10% from 2019. For the full year, we generated $334 million of free cash flow.

Adjusted EPS was up 31% and up 10% from 2019 for the full year, we generated $334 million of free cash flow.

Speaker 3: Let me share a few highlights for the year. We launched a record 58 new products, which generated a point and a half of sales growth and increased our new product fatality to 18%.

Let me share a few highlights for the year, we launched a record 58, new products, which generated a point and a half of sales growth and increased our new product vitality to 18%.

Speaker 3: Our digital efforts are supporting growth, improving the customer experience, and driving productivity in our operation.

Our digital efforts are supporting growth, improving the customer experience and driving productivity in our operations.

Speaker 3: Acquisitions are strengthening our positions in high growth verticals. Vincie and CIS Global expanded our offerings in solar and data networking solutions.

Acquisitions are strengthening our positions in high growth verticals.

And C. I S global expanded our offerings in solar and data and networking solutions.

Speaker 3: execution of our strategy to develop new products, invest in high growth verticals, and make acquisitions is accelerating in that growth trajectory.

The execution of our strategy to develop new products invest in high growth verticals and make acquisitions is accelerating and that's growth trajectory.

We recently announced a new strategy and business development role and are thrilled to have knit and Jane joined the advent team knitting.

Speaker 3: We recently announced a new strategy and business development role and are thrilled to have Nitin Jain join the InvenTeam.

Speaker 3: NITIN will be leading our efforts in strategy, M&A, partnerships and alliances and identifying new growth platforms and technologies to further enhance Invens growth.

Net and will be leading our efforts and strategy M&A partnerships and alliances and identify new growth platforms and technologies to further enhance <unk> growth.

Speaker 3: Looking at trends entering 2022, we anticipate ongoing supply chain and inflationary challenges, particularly in the first half of the year.

Looking at trends entering 2022.

We anticipate ongoing supply chain and inflationary challenges, particularly in the first half of the year.

Speaker 3: We remain confident in our ability to manage these headwinds and deliver for our customers.

We remain confident in our ability to manage these headwinds and deliver for our customers.

Speaker 3: We also expect strong demand for our products and solutions with the electrification of everything.

We also expect strong demand for our products and solutions with the electrification of everything.

Speaker 3: I am proud of our team and the results we delivered in 2021. We made strategic investments to drive future growth and execute it well.

I am proud of our team and the results. We delivered in 2021, we made strategic investments to drive future growth and executed well.

Speaker 3: We believe 2022 will be another year of strong growth and value creation.

We believe 2022 will be another year of strong growth and value creation.

Speaker 3: I will now turn the call over to Sarah for some detail on our results as well as our 2022 outlook. Sarah, please go ahead. Thank you, Beth. Let's begin on slide five with our fourth quarter results.

I will now turn the call over to Sarah for some detail on our results as well as our 2022 outlook Sara. Please go ahead.

Let's begin on slide five with our fourth quarter results.

Speaker 3: Sales of $669 million were up 28% relative to last year and grew an impressive 24% organically.

Sales of $669 million were up 28% relative to last year and grew an impressive 24% organically.

Speaker 3: Strong volume and price each added 12 points to the top line, while acquisitions added another five points of growth.

<unk> volume and price each added 12 points to the top line, while acquisitions added another five points of growth.

Speaker 3: Fourth quarter segment income was $110 million, up 14%, while return on sales of 16.5% was down 210 basis points. As you may recall, our Q4 guidance reflected a margin decline year-over-year, including growth investments and the lapping of one-time temporary cost reduction.

Fourth quarter segment income was $110 million up 14% while return on sales of 16, 5% was down 210 basis points. As you may recall, our Q4 guidance reflected our margin declined year over year, including growth investments and the lapping of onetime temporary cost reductions.

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Speaker 3: With these stronger than anticipated sales, we saw increased cost pressures related to a very tight supply chain and higher inflation. Still, price more than offset the stepped up inflation of $58 million in the quarter.

With the stronger than anticipated sales, we saw increased cost pressures related to a very tight supply chain and higher inflation.

<unk> price more than offset the stepped up inflation of $58 million in the quarter.

Speaker 3: As a reminder, we talk about these costs as total inflation, including materials, wages, and freight logistics.

As a reminder, we talk about these causes total inflation, including materials wages and freight and logistics.

Speaker 3: Q4 adjusted EPS was 50 cents, up 16 percent, and above the high end of our guidance rate.

Q4, adjusted EPS was 50 cents up.

16% above the high end of our guidance range.

Speaker 3: Free cash flow performance was also strong with conversion of 120%.

Free cash flow performance was also strong with conversion of 120%.

Speaker 3: Now please turn to slide six for discussion of our fourth quarter segment performance.

Now please turn to slide six for a discussion of our fourth quarter segment performance.

Speaker 3: Starting with enclosures, sales of $332 million increased 44% and 35% organically. Growth was broad-based across all verticals and geographies, and acquisitions continued to perform very well, adding 11 points to growth.

Starting with enclosures sales of $332 million increased 44% and 35% organically growth was broad based across all verticals and geographies and acquisitions continued to perform very well, adding 11 points to growth.

Speaker 3: Enclosure's fourth quarter income was $43 million, up 22%. Return on sales was 13%, down 240 basis points.

Enclosures fourth quarter income was $43 million up 22%.

Turn on sales was 13% down 240 basis points.

Speaker 3: As a result of this very strong growth, we saw higher than anticipated costs and overall inflation. We also made investments in the economy and the economy as a result of this very strong growth.

As a result of this very strong growth, we saw higher than anticipated costs and overall inflation. We also made investments in capacity.

Speaker 3: These impacts were partially offset by solid price realization of 11 points.

These impacts were partially offset by solid price realization of 11 points.

Speaker 3: Sequentially, we expect return on sales to improve with better price cost and productivity.

Sequentially, we expect return on sales to improve with better price cost and productivity.

Speaker 3: Electrical and fastening sales of $171 million increased 17 percent organically, with growth across all verticals and strong double digit growth in North America and Europe .

Electrical <unk> fastening sales of $171 million increased 17% organically with growth across all verticals and strong double digit growth in North America and Europe .

Speaker 3: Electrical and fastening segment income was $45 million, up 9%. Return on sales was a solid 26.3%, down 170 basis points as we lapped the one-time temporary cost actions of a year ago. Overall, return on sales was better than expected, and price offset inflation in the quarter.

Electrical <unk> fastening segment income was $45 million up 9% return on sales was a solid 26, 3% down 170 basis points as we lap the onetime temporary cost actions a year ago.

Overall return on sales was better than expected and price offset inflation in the quarter.

Speaker 3: It's worth noting that electrical and fastening expanded return on sales 120 basis points for the full year on top of solid margin expansion in 2020.

It's worth noting that electrical <unk> fastening expanded return on sales of 120 basis points for the full year on top of solid margin expansion in 2020.

Thermal management grew 16% organically with sales of $166 million driven by continued strength in industrial and commercial and residential.

Speaker 3: Thermal management grew 16% organically with sales of $166 million driven by continued strength in industrial and commercial and residential.

Speaker 3: High margin industrial MRO growth was strong for the third consecutive quarter, up 34%.

High margin industrial MRO growth was strong for the third consecutive quarter up 34% backup.

Speaker 3: Backlog grew sequentially and year-over-year, reflecting an improving trend in longer cycle projects.

Backlog grew sequentially and year over year, reflecting an improving trend in longer cycle projects.

Speaker 3: Thermal management segment income was up 30%. Return on sales expanded 290 basis points to 26.4% driven by volume and positive mixed contribution from industrial MRO.

Thermal management segment income was up 30% return on sales expanded 290 basis points to 26, 4% driven by volume and positive mix contribution from industrial MRO.

Speaker 3: Now turning to slide seven, this gives us a recap of our full year 2021 results. We ended the year with sales of $2.5 billion dollars, up 23% and 18% organically.

Now turning to slide seven this gives us a recap of our full year 2021 results.

Ended the year with sales of $2 5 billion up 23% and 18% organically.

Speaker 3: Strong volume contributed 11 points to sales growth, while price added 7 points, nearly offsetting total inflation.

Strong volume contributed 11 points to sales growth, while price added seven points nearly offsetting total inflation.

Speaker 3: Notably, we finished 12% above 2019 pre-pandemic levels.

Notably we finished 12% above 2019 pre pandemic levels.

Speaker 3: For the full year, segment income of $436 million was up 25%. We expanded return on sales by 30 basis points to 17.7%.

For the full year segment income of $436 million was up 25%. We expanded return on sales by 30 basis points to 17, 7%.

Adjusted EPS for the full year was $1 96 up 31% and I'm, particularly pleased with our free cash flow performance of $334 million.

Speaker 3: Adjusted EPS for the full year was $1.96, up 31%. And I'm particularly pleased with our free cash flow performance of $334 million, up 9% versus prior year and 100% conversion of adjusted net income.

9% versus prior year, and 100% conversion of adjusted net income.

Speaker 3: In summary, our 2021 performance puts us on a great trajectory to deliver on the long-term targets we set out in our investor day last March.

In summary, our 2021 performance puts us on a great trajectory to deliver on our long term targets, we set out in our Investor Day last March.

Speaker 3: On slide 8, titled Balance Sheet and Cash Flow, you'll find we exited the year with $50 million of cash on hand and $493 million available on our revolver. Our recent debt refinancing coupled with our strong cash generation provide ample capacity heading into 2022.

On slide eight titled balance sheet and cash flow.

You'll find we exited the year with $50 million of cash on hand, and $493 million available on our revolver. Our recent debt refinancing coupled with our strong cash generation provides ample capacity heading into 2022.

Speaker 3: Slide 9 gives us an update on our capital allocation priorities. We exited the year with a net debt to adjusted EBITDA ratio of two times, at the low end of our target range of two to two and a half.

Slide nine gives us an update on our capital allocation priorities, we exited the year with a net debt to adjusted EBITDA ratio of two times at the low end of our target range of two to two and a half.

Speaker 3: Our robust balance sheet and cash generation puts us in a great position to invest in growth and execute on our M&A strategy.

Our robust balance sheet and cash generation puts us in a great position to invest in growth and execute on our M&A strategy.

We continue to make.

Speaker 3: investments in new products and digital and plan to launch another 50 new products in 2022.

Investments in new products, and digital and plan to launch another 50, new products in 2022.

Speaker 3: We added over $100 million in annualized sales from two acquisitions, and these acquisitions are on track to generate great returns like Eldon and WBT, both of which we delivered greater than 10% returns in year two.

We added over $100 million in annualized sales from two acquisitions and these acquisitions are on track to generate great returns like Eldon and WB tea, both of which we delivered greater than 10% returns in year two.

We returned approximately $230 million to shareholders in 2021, including a competitive dividend and share repurchases of $112 million.

Speaker 3: We returned approximately $230 million to shareholders in 2021, including a competitive dividend and share repurchases of $112 million.

Speaker 3: We will continue to deploy capital to drive growth and attractive returns for shareholders.

We will continue to deploy capital to drive growth and attractive returns for shareholders.

Speaker 3: Now moving to slide 10 and our 2022 outlook. We expect organic sales growth in the range of 6 to 9%. This assumes higher volumes along with price realization in that 4 to 5 point range.

Now moving to slide 10, and our 2022 outlook, we expect organic sales growth in the range of 6% to 9%. This assumes higher volumes along with price realization in that four to five point range.

Speaker 3: Growth is expected to be stronger in the first half given comparisons. And from a segment perspective, we expect strong growth in enclosures and electrical and fastening with more modest growth in thermal management.

<unk> is expected to be stronger than the first half given comparisons and from a segment perspective, we expect strong growth in enclosures and electrical <unk> fastening with more modest growth in thermal management.

Speaker 3: Our outlook for full year adjusted EPS is between $2.10 and $2.20, which represents growth of 7 to 12%. A couple of important items to note. First, our outlook assumes supply chain challenges inflation persists, particularly in the first half. We anticipate margin performance to improve as we move through the year.

Our outlook for growth for full year, adjusted EPS is between $2.10 and $2 20, which.

<unk> growth of 7% to 12%.

A couple of important items to note first our outlook assumes supply chain challenges inflation persists, particularly in the first half we anticipate margin performance to improve as we move through the year.

Speaker 3: Second, we expect price plus productivity to more than offset inflation for the full year.

We expect price plus productivity to more than offset inflation for the full year.

Speaker 3: Third, we will continue to invest in new products, digital, and our supply chain. And lastly, we expect another year of strong free cash flow performance with conversion of approximately 100% as we execute on our working capital initiative.

Third we will continue to invest in new products digital and our supply chain.

Lastly, we expect another year of strong free cash flow performance with conversion of approximately 100% as we execute on our working capital initiatives.

Some 2022 below the line item assumptions, we'd like to call out include net interest expense of $30 million to $35 million a tax rate in the 17% to 18% range and shares of approximately $170 million.

Speaker 3: Some 2022 below the line item assumptions we'd like to call out include net interest expense of 30 to 35 million dollars, a tax rate in the 17 to 18% range, and shares of approximately 170 million.

Speaker 3: Additionally, we anticipate corporate costs of $75 to $80 million and cutbacks of $50 to $55 million.

Additionally, we anticipate corporate costs of $75 million to $80 million and capex of $50 million to $55 million.

Speaker 3: Now moving to our first quarter outlook on slide 11, we expect organic sales growth in the range of 10 to 12%, and adjusted EPS in the range of 42 to 44 cents.

Now moving to our first quarter outlook on slide 11, we expect organic sales growth in the range of 10% to 12% and adjusted EPS in the range of 42 to 44 cents.

Speaker 3: Several items to note for Q1. First, margin performance year-over-year is expected to be similar to that in Q4, reflecting higher costs related to supply chain challenges.

Several items to note for Q1 first margin performance year over year is expected to be similar to that in Q4, reflecting higher costs related to supply chain challenges.

Speaker 3: Second, we expect price to largely offset inflation in the quarter. Keep in mind last year we had very favorable material locks as we began the year.

Second we expect price to largely offset inflation in the quarter keep in mind last year, we had very favorable material locks as we began the year.

Speaker 3: Lastly, while we anticipate corporate costs to be similar to each of the last three quarters, they are expected to impact margins by 120 basis points due to the prior year comparison.

Lastly, while we anticipate corporate cost to be similar to each of the last three quarters. They are expected to impact margins by 120 basis points due to the prior year comparisons.

We see margin performance.

Speaker 3: We see margin performance improving sequentially through the year, easing price cost pressures and better productivity.

Improving sequentially through the year easing price cost pressures and better productivity.

Speaker 3: In closing, our team delivered outstanding results in 2021, and I'm very pleased with our cashflow performance. I believe we are well-positioned for another strong year. With that, I will turn the call back over to Beth.

In closing our team delivered outstanding results in 2021, and I'm very pleased with our cash flow performance I believe we are well positioned for another strong year with that I will turn the call back over to Beth.

Speaker 3: Thank you, Sarah. On slide 12, I'd like to provide our assumptions for our key verticals in 2022.

Thank you Sarah.

On slide 12, I'd like to provide our assumptions for our key verticals in 2022.

Speaker 3: Looking at the industrial vertical, we believe the trends in digital and automation will continue to drive investments and strong demand for our products across all subverticals.

Looking at the industrial vertical we believe the trends in digital and automation will continue to drive investments and strong demand for our products across all sub verticals in.

Speaker 3: In commercial, we anticipate another year of solid growth. The US non-residential recovery is forecasted to be up mid-single digits, and in Europe , the construction PMI remains expansionary.

In commercial we anticipate another year of solid growth. The U S. Nonresidential recovery is forecasted to be up mid single digits and in Europe . The construction PMI remains expansionary.

Speaker 3: The infrastructure vertical is expected to benefit from continued strength in the 5G rollout, data center spending, power utilities and renewables. In energy, CapEx is anticipated to increase, particularly in North America. In summary, all of the verticals where we play are expected to grow.

The infrastructure vertical is expected to benefit from continued strength in the five T rollout datacenter spending power utilities and renewables in energy Capex is anticipated to increase particularly in North America in summary, all of the verticals, where we play are expected to.

Growth.

Turning to slide 13.

Speaker 3: We have executed well in our strategy with a laser focus on growth and serving our customers. We made progress in all areas and continue to see significant runway for growth and value creation.

We have executed well on our strategy with a laser focus on growth and serving our customers. We made progress in all areas and continue to see significant runway for growth and value creation.

Speaker 3: Let me share a couple of examples of where we are well positioned and winning with the electrification of everything.

Let me share a couple of examples of where we are well positioned and winning with the electrification of everything.

Speaker 3: With our Eldon acquisition and our global IEC Enclosures portfolio, we recently won a multi-million dollar deal for protection solutions in the food and beverage industry.

With our Eldon acquisition, and our global I E. C. Enclosures portfolio. We recently won a multimillion dollar deal for protection solutions in the food and beverage industry.

Speaker 3: We were able to provide the same solution in Europe and the US, selling globally and serving locally.

We were able to provide the same solution in Europe , and the U S selling globally and serving locally.

Speaker 3: With infrastructure investments in universal broadband and fiber to home, we want a key project with one of the largest rural internet providers in the US providing outdoor protection systems.

With infrastructure investments and universal broadband and fiber to home, we want a key project with one of the largest rural internet providers in the U S providing outdoor protection systems.

Speaker 3: With increased data demands and reliability in data centers, we want a multimillion dollar project providing a highly resilient connection solution. With the move to renewables, we've won dozens of biofuel upgrade projects with our thermal management heat trace offerings. Now, to talk about the new technologies, we have a new technology, the new technology that we're working on.

With increased data demands and reliability and data centers, we want a multimillion dollar project, providing a highly resilient connection solution with the move to renewables. We've won dozens of biofuel upgrade projects with our thermal management heat trace offerings.

Now turning to slide 14.

Speaker 3: Data and networking solutions is a great example of how multiple growth elements of our strategy come together.

Data and networking solutions is a great example of how multiple growth elements of our strategy come together.

Speaker 3: At SPIN, we decided to focus on this high growth vertical and established a new commercial team.

Spin, we decided to focus on this high growth vertical and established a new commercial team.

Speaker 3: We developed new innovative products, in particular liquid cooling solutions, and expanded our offerings with acquisition.

We developed new innovative products in particular liquid cooling solutions.

And expanded our offerings with acquisitions, we built strategic alliances with technology companies to expand our capabilities today.

Speaker 3: We built strategic alliances with technology companies to expand our capability.

Speaker 3: Today, we provide some of the most innovative and energy efficient solutions in the industry on our winning new customers.

Today, we provide some of the most innovative and energy efficient solutions in the industry on our winning new customers.

Speaker 3: Recently, we were awarded a large multimillion dollar project for one of the world's largest software companies with our advanced liquid cooling solution.

Recently, we were awarded a large multi million dollar project for one of the world's largest software companies with our advanced liquid cooling solutions.

Speaker 3: Since then, we have more than doubled these sales to over $200 million annually and expect to continue to grow high double digits.

Since spin we have more than doubled these cells to over $200 million annually and expect to continue to grow high double digits.

Now turning to slide 15.

Speaker 3: I'm very pleased with the progress we are making on EST goals, which are an integrated part of our InvenSt strategy.

I'm very pleased with the progress, we're making on ESG goals, which are an integrated part of our event strategy.

Speaker 3: As a reminder, we focus on three pillars, people, products, and planet.

As a reminder, we focus on three pillars people products and planet.

Speaker 3: At Invent, we believe our culture and our people are a differentiator. Attracting and retaining talent in today's environment is critical.

And in that we believe our culture and our people are a differentiator.

Attracting and retaining talent in today's environment is critical.

Speaker 3: We have increased the representation of women in management globally and racially diverse professional employees across our US workforce. We are honored to be named to the 2022 Bloomberg Gender Equality Index, making us one of only 418 companies across 11 sectors and 45 countries to be included.

We have increased our representation of women in management globally, and racially diverse professional employees across our U S. Workforce. We are honored to be named to the 2022, Bloomberg gender equality index, making us one of only 418 companies across 11 sectors in 45 countries to be include.

Good.

Speaker 3: Around products, we integrated ESG into our new product introduction process and developed baseline metrics and long-term goals.

Around products, we integrated ESG into our new product introduction introduction process and develop baseline metrics and long term goals.

Speaker 3: And we had great results in our planet pillar, increasing our renewable energy usage and reducing our CO2 emissions.

And we had great results in our planet pillar, increasing our renewable energy usage and reducing our C O two emissions.

Speaker 3: We received a silver medal for social responsibility from EcoVedis in 2021, ranking in events in the top 13% of companies reviewed in our industry.

We received a silver medal for social responsibility from eco betas in 2020 , one ranking advent in the top 13% of companies reviewed in our industry.

Speaker 3: We look forward to publishing our 2021 ESG report this summer and are committed to driving further progress of our goals in 2022 and beyond.

We look forward to publishing our 2021 ESG report this summer and are committed to driving further progress of our goals in 2022 and beyond.

Speaker 3: Turning to slide 16, I will leave you with some key points.

Turning to slide 16, I will leave you with some key points 12.

Speaker 3: 2021 was a year of outstanding performance, and we enter this year with great momentum. The macro trends with the electrification of everything are expected to drive demand for our products and solutions.

2021 was a Europe outstanding performance and we entered this year with great momentum the macro trends with the electrification of everything are expected to drive demand for our products and solutions.

Speaker 3: We believe Invent is one of the best physician companies to grow with these secular trends.

We believe inventors one of the best positioned companies to grow with these secular trends.

Speaker 3: We are executing well in our strategy and are changing the growth trajectory of Invent. We are a stronger company today and our future is bright. With that, I will now turn the call over to the operator to start Q&A.

We are executing well on our strategy and are changing the growth trajectory of and that we are a stronger company today and our future is bright with that I will now turn the call over to the operator to start Q&A.

Speaker 2: Ladies and gentlemen, at this time, if you would like to ask a question, please press star and the number 1 on your telephone keypad. Again, that's star 1 to ask a question. To withdraw your question, press the pound key. We will pause for just a moment to compile the Q&A roster.

Ladies and gentlemen at this time, if you would like to ask a question. Please press star and the number one on your telephone keypad again that star one to ask a question to withdraw your question press the pound key.

We will pause for just a moment to compile the Q&A roster.

[noise].

Your first question is from the line of Deane Dray.

Speaker 5: Thank you. Good morning, everyone and special welcome to tony a great addition to the nven team

Thank you good morning, everyone and special welcome to Tony Great addition to the <unk> team.

Good morning.

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Speaker 5: Hey, the first question is, you know, I had to do a double take on how significantly above our expectations organic revenue growth was in the quarter. Very pleasant surprise. Can you talk about the cadence in the quarter organically, top line, you know, how did it play out and versus your expectations?

Hey.

The first question is.

I had to do a double take on how.

Significantly above our expectations organic revenue growth was in the quarter very pleasant surprise can you talk about the cadence in the quarter.

Organically top line, how did it play out versus your expectations.

Speaker 3: You know, I think coming out of Q3 where we talked about the strength in our orders, we just saw that growth, you know, consistent across all three months of the quarter, so backed up by that strong border.

You know I think coming out of Q3, where we talked about the strength in our orders. We just saw that growth you know consistent across all three months of the quarter. So backed up by that strong orders and I think we were very pleased just with as the orders came in just that it was broad based across all of our segments and all of our Vern.

Speaker 3: And I think we were very pleased just with, as the orders came in, just that it was broad-based across all of our segments and all of our verticals, which reinforced the work that we're doing around our strategy in these high-growth verticals. So just on every level, we just saw strong growth across the business.

Calls, which reinforced the the work that we're doing around our strategy in these high growth verticals. So I'm just you know on every level, we just saw strong growth across the business.

Speaker 5: Great to hear. And the second question relates to price. 2021 was really strong for you in terms of price realization. You know, expectations for 2022.

Great to hear and the second question relates to price.

2021 was really strong for you in terms of price realization.

Expectations.

For 'twenty two.

Speaker 5: How many price increases do you think you'll need? And then on the flip side, on the input costs, maybe give us some insight onto the second derivative, just real time, what's happening, steel, nickel, freight, just is, are they big, are they plateaued? You're seeing any relief there, thank you.

How many price increases do you think you'll need and then on the flip side on the input costs, maybe you give us some insight onto the second derivative just real time, what's happening steel nickel freight.

As of.

They plateaued, you're seeing any relief there. Thank you.

Speaker 3: Well, I think, you know, this was a 2021 was a year unprecedented with inflation. And so we were having price increases in different parts of our different segments or different regions continually throughout the course of 2021. And when we exited 2021, we had announced some price increases already for 2022.

Well I think you know.

This was a 2021 was a year of unprecedented with inflation and so we were having price increases in different parts of our different segments or different regions I'm continually throughout the course of 2021 and when we exited 2021, we had announced some price increases already for.

2022 so I think we will you know we will look at how inflation plays out over the course of this year and it and you know, we'll take whatever action, we need to and in terms of ensuring that we get out in front here and I'll, let Sara add some more cover on the inflation side of things Yeah, maybe a couple of things to point out here is just you know we talked about this a little bit in our <unk>.

Speaker 3: So I think we will look at how inflation plays out over the course of this year and we'll take whatever action we need to in terms of ensuring that we get out in front here. And I'll let Sarah add some more cover on the inflation side.

Speaker 3: Yeah, maybe a couple things to point out here is just, you know, we talked about this a little bit in our prepared remarks, but we do expect, you know, strong carryover pricing, you know, in that in that four to five point range. I think the second piece in terms of inflation, a couple things to note here, you know, total inflation was significant for us in 2021. No doubt it was in total roughly 145 million. As we look into 2022, we do see another year of significant inflation, I would say a bit more broad based, you know, we're seeing it, you know, across broader input costs, components, freight, logistics, you know, wages. So we're going to continue to stay in front of it, you know, I think as we've been very vigilant doing, you know, through the course of 2021, in terms of managing that price, you know, plus productivity, more than offsetting inflation for the year. I think the other thing I would point out is just kind of this first half second half dynamics, we do expect, you know, first half inflation higher, and then that easing in the second half.

Repaired remarks, but we do expect you know strong carryover pricing you know in that in that four to five point range I think the second piece in terms of inflation and a couple of things to note here you know total inflation was significant for us in 2020 one no doubt it was in total roughly $145 million as we look into 'twenty two.

Two we do see another year of significant inflation I would say a bit more broad based we're seeing it across a broader input cost components I'm afraid logistics wages. So we're going to continue to stay in front of it you know I think as we've been very vigilant doing you know through the course of 2012.

One in terms of managing that price plus productivity more than offsetting inflation for the year I think the other thing I would point out is just kind of this first half second half dynamics. We do expect you know first half inflation hire them and they're not easing in the second half.

Speaker 5: That's real helpful. Thank you.

That's real helpful. Thank you.

Your next question is on the line of Julian Mitchell.

Speaker 6: Hi, good morning. Good morning. Maybe just wanted to circle back on that sort of price volume aspect because you know, you're a sort of relatively rare multi-industry company in that you're guiding for higher growth in Q1 than you are for the year, which is a sort of welcome.

Hi, good morning.

Good morning, maybe.

Just wanted to circle back on that sort of price volume aspect because.

Sort of a relatively rare multi industry company, but you're guiding for higher growth in Q1 than you all for the year.

Which is a sort of welcome.

Speaker 6: linearity but if we think about sort of the price versus volume within that number is there anything to sort of call out as you go through 2022 or it's a similar development whereby price and volume both start the year stronger than than in the....

Linearity, but if we think about sort of the price versus volume within that number.

Is there anything to sort of call out as you go through 2022, or just similar development whereby price and volume.

To start the year.

Stronger than that in the second half.

Speaker 3: Yeah, well, I mean, maybe a couple things to point out there. I think, one, you know, that organic growth rate of 10 to 12% Q1 outlook really reflects...

Yeah, well I mean, maybe a couple of things to point out there I think one you know that organic growth rate of 10% to 12%. Our Q1 outlook really reflects the strong momentum that we're seeing so I'd point that out first number two it does include both price and volume are more skewed towards price I mean simply the math.

Speaker 3: you know, the strong momentum that we're seeing. So I'd point that out first. Number two, it does include both price, you know, and volume, more skewed towards price. I mean, simply the math is, is we, you know, exit the year at 11%, and that carries over into Q1 of next year. We would expect a lot of that price carryover to benefit, mostly in that Q1 timeframe.

As we exit the year at 11% and that carries over into Q1 of next year. We would accept expect a lot of that pricing carryover to benefit them, mostly in that Q1 time frame.

Speaker 6: Got it, but if we look at the volume piece of the guide, is that expected to be steady year on year? Say first half and second half?

Got it but if we look at and say that the volume piece of the guide is that expected to be kind of steady year on year.

Say first half and second half.

Speaker 3: Well, the volume is going to be stronger in the first half than the second half simply because of our comparisons, right? So if you look at our growth rate as we proceeded through the year, I mean obviously Q2 of this year because that was the lowest quarter a year before, but you look at Q3 and Q4, we had really strong growth. So some of that is just the comparisons that we have in the back half.

Well the volume is going to be stronger than the first half than the second half simply because of our comparisons right. So if you look at our growth rate in <unk>.

We proceeded through the year. It you know I mean, obviously Q2 of this year because that was the lowest quarter of year before but you look at Q3 and Q4, we had really strong growth. So some of that is just the comparisons that we have in the back half.

Speaker 6: That makes sense, thank you. And then just a quick follow up around the sort of margin progression for 2022. I think you mentioned on revenues that thermals growth rate would lag the other two divisions. Just wondering if there was any sort of margin colour year on year for 2022 as a whole across the three sectors.

That makes sense. Thank you and then just a quick follow up.

Around the sort of margin progression for 2022, I think you'd mentioned on revenues that that's a modest growth rate would lag the other two divisions.

Just wondering if there was any sort of margin color you know year on year for 2022 as a whole across the three segments.

Speaker 3: Yeah, so from a full year perspective, you know, we do expect again another year of margin expansion. You know, despite, you know, that inflationary pressures and some of the supply chain challenges that we're seeing in the first half, we would expect margin expansion across all three segments, albeit a bit higher in enclosures.

Yeah. So from a full year perspective, we do expect again another year of margin expansion you know despite that inflationary pressures in some of the supply chain challenges that we're seeing in the first half and we would expect margin expansion across all three segments, albeit a bit higher and enclosures thermal we expect to continue to.

Speaker 3: Thermal we expect to continue to benefit from that recovery as well as that industrial MRO, you know, strength continuing. And I think electrical and fasting is where we're seeing, expecting to see maybe a bit more of a muted margin performance there kind of year over year. But keep in mind, you know, that business has expanded across 180 basis points over the last, you know, two years. So good growth on the top and bottom line there in electrical and fasting, just more modest on the margin side. That's great.

To benefit from that recovery as well as that industrial MRO strength, continuing and I think E. Electrical <unk> fastening is where we're seeing I expect to see maybe a bit more of a muted margin performance. They were kind of year over year, but keep in mind, you know that business has expanded brought us 180 basis points over the long.

Last two years, so I'm good growth on the top and Bottomline there in electrical and SaaS thing I'm, just more modest on the margin side.

That's great. Thank you.

Yeah.

Speaker 7: Your next question is on the line of Joe Ricci. Hi, good morning everyone and.

Your next question is from the line of Joe Ritchie.

Hi, good morning, everyone and welcome Tony.

Good morning, Joe Good morning, good morning.

Speaker 7: So I wanted to pick up on that last point you just made around EFS. I historically kind of thought about the EFS segment as still being where the opportunity exists from a margin perspective, you know, longer term. So maybe just expand on that. Is that changing at all where you kind of see kind of longer term entitlements across the different businesses just based on the trends that you've seen in the last few quarters?

So I wanted to pick up.

On that last point, you just made around yes.

Yes, I can.

Historically kind of thought about the GFS segment is still being.

Where the opportunity exists from a margin perspective.

Longer term so maybe just expand on that is that changing at all.

Where are you kind of see kind of longer term entitlements across the different businesses.

Just based on the trends that you've seen in the last couple of last few quarters.

Speaker 3: Yeah, I would say nothing's changed in terms of us continuing to see margin expansion in the longer term in electrical and fasting. We've talked about that in terms of bringing more lean enterprise within electrical and fasting, bringing more automation as well as digital factoring some of the investments we're making on the...

Yeah, I would say nothing's changed in terms of us continuing to see margin compression in our margin expansion in the longer term and electrical <unk> fastening, we've talked about that in terms of them, bringing more lean enterprise within electrical <unk> fastening, bringing more automation as well as our digital factory and some of the investments.

We're making on the on the in the factory automation side of things. So nothing has changed there I think it's simply two things one reflective of this 180 basis point expansion since 2019, but I think the other piece is just price cost you know, we're not that back yet to what I would say you know more.

Speaker 3: on the factory automation side of things. So nothing's changed there. I think it's simply two things. One, reflective of this 180 basis point expansion since 2019. But I think the other piece is just price cost. We're not back yet to what I would say more normalized historical incrementals are in that 30% plus range. Electrical and fasting is definitely part of that, given their strong margins. And so I think we're just seeing that in the context of another year of significant inflation, even as we offset that with price and productivity, that is having an impact on incrementals as well as just absolute raw.

Normalized historical Incrementals are in that 30% plus range electrical and fasting is definitely you know part of that given their strong margins and so I think we're just seeing that in the context of you know another year of significant inflation, even as we offset that with price and productivity that is having an impact on incrementals.

As well as just absolute Ross.

Speaker 7: Got it. That makes a lot of sense. And maybe I'm sorry if I missed this earlier, but the pricing this quarter was tremendous. I'm just thinking through kind of the environment that we're in right now with some steel cost curves are coming down. I'm just curious, if we get into some of your raw materials actually deflating as the year goes on, how does that impact?

Got it that makes a lot of sense and maybe I'm sorry, if I missed this earlier.

The pricing this quarter.

This was tremendous.

I'm, just thinking through kind of the environment that we're in right now with some steel cost curves are coming down I'm. Just curious like if we get into some of your raw materials actually deflating as the year goes on how does that impact.

Speaker 7: the price cost of Clear region for you guys? Do you have to give back price in certain businesses? How do you think that will play out for you guys?

The price cost equation for you guys.

You have to give back pricing in certain in.

Certain businesses like how do you think that will kind of play out.

Good for you guys.

Speaker 3: You know, one of the things is, as we think about pricing and we continue to drive differentiation and value in our solutions and offerings, so we like to be able to hold that price. And I also would say that we're seeing a very highly inflationary environment, so even if...

You know what are the things is as we think about pricing and we continue to drive differentiation and value in our solutions and offerings. So we like to be able to hold that price and I also would say that we're seeing a very highly inflationary environment. So even if we see raw materials going down we still expect there to be inflation in elektron.

Speaker 3: see raw materials going down, we still expect there to be inflation in electronics. There's still going to be inflation in wages, in freight, in energy costs. There's multiple dynamics here. So I believe as we go through the year, we're going to continue to hold that price. And I'll let Sarah just comment a little bit more on the margin side.

Antics, theres still going to be inflation in wages and freight and energy costs and there's multiple dynamics here. So I believe as we go through the year you know, we're going to continue to manage to hold that price and I'll, let Sarah just comment a little bit more on the margin side.

Speaker 3: Yeah, I think your question was more around the steel. And maybe I'd offer up a couple things. One is material costs in total are roughly 30% of sales and metals accounts.

Yeah I think your question was more around the steel and maybe I would offer up a couple of things. One is material costs. In total are roughly 30% of sales and metals account for more than 40% of this but that what that means is there other input costs right in relation to the overall Cogs as Beth just commented upon I think the other piece I would say is key.

Speaker 3: for more than 40% of this. But what that means is there are other input costs, right, in relation to the overall COGS, as Beth just commented upon. I think the other piece I would say is clearly, if costs go down, that will help. But that's not something that we're counting on. And again, we're going to stay very vigilant on managing that price plus productivity offsetting inflation for the year.

Really you know if if costs go down that will help but that's not something that we're counting on them and again, we're going to stay very vigilant on managing that price plus productivity offsetting inflation for the year.

Speaker 7: Got it. That's super helpful. Maybe if I could just sneak one more in. Just on the thermal margins this quarter, can you maybe just kind of parse out, you know, really, really good margins this quarter? You know, is that margin kind of sustainable going forward? Like, you know, any color on like, you know, parsing out which drove that really strong margin in port 2?

Got it that's super helpful. Maybe if I could just sneak one more in.

The thermal margins. This quarter can you, maybe just kind of parse out really really good margins. This quarter is that margin.

Sustainable going forward.

Any color on like parsing out what drove that really strong margin in <unk>.

Speaker 3: Well, maybe I would say a couple things. The biggest drivers of that margin performance in the corridor was first, the tremendous growth that thermal management had. I mean, they're still working back in terms of recovery to the 2019 levels. So that was helping. I think the other piece is just the strength on the industrial moreau. That sort of had an outside impact on Ross performance last year. And we're seeing that come back strongly this year. And I think the other piece I would call out is just that team continues to do a really nice job with price costs. They don't necessarily see the magnitude of the material inflation as the other two businesses, but they've been very good on managing that price cost equation. And we see that improving as we go into this year.

Well, maybe I would say a couple of things the the biggest drivers of that margin performance in the quarter was first you know the the tremendous growth right that thermal management had I mean, theyre still working back in terms of you know recovery to those 2019 levels. So that was helping I think the other piece is just the strength on the industrial morale.

You know that that's sort of and it had an outsized impact on ross' performance last year, and we're seeing that come back strongly this.

This year and I think the other piece I would call out is just that team continues to do a really nice job with price cost they don't necessarily see the magnitude of the material inflation is the other two businesses you know, but they've been very good on managing that price cost equation, and we see that improving as we go into this year.

Speaker 2: Great, thank you. Your next question is on the line of Jeff Sprague.

Great. Thank you.

Yeah.

Your next question is from the line of Jeff Sprague.

Thank you and good morning, everyone. Good morning, Jeff.

Hey, a couple of questions that I'm, sorry, I got on late.

Speaker 5: Hey, a couple questions and I'm sorry I got on late. How much price is embedded in the six to 9% on organic growth guidance for 2022?

How much price is embedded in the 6% to 9% organic growth guidance for 2022.

Speaker 3: Yeah, so we talked about that carryover pricing in that four to five point range.

Yeah, So we talked about that carryover pricing in that four to five point range.

Speaker 5: So what's interesting, and maybe you could address this, although your price, I think, surprised all of us here in the quarter, when I actually look at it, it's quote, unquote, only two or 300 basis points above what I forecast. What sort of is jumping out actually is the volume.

So.

What's interesting and maybe you could address this right. Although your price I think surprised all of us here in the quarter.

When I actually look at it is quote unquote, only two or 300 basis points above what I forecast, what sort of jumping out actually as the volumes right.

Speaker 5: Right. Everybody's dealing with inflation, but in a lot of these calls, we're hearing. Inflation and supply constraints, and therefore we can't deliver and sales are came in light, et cetera from a volume standpoint. You actually didn't experience any meaningful from my vantage point. Anyhow volume constraint. I'm sure there were some, but the question really is.

He is dealing with inflation, but in a lot of these calls we're hearing inflation and supply constraints and therefore, we can't deliver in sales or.

Came in light et cetera from a volume standpoint, you actually didn't experience.

Any meaningful from my vantage point anyhow volume constraints.

I'm sure there were some but the question really is.

Speaker 5: Are you now at some kind of capacity constraint that it's going to be difficult to, you know, to drive volumes much higher than here? I mean, if there's literally four or five points of price in 2022, I would think you've got the prospect of some decent volume upside this year from what's embedded in that guy.

Or are you now with some kind of capacity constraints that it's going to be difficult to you know to drive volumes much higher than here I mean, if there's if there's literally four or five points of price in 2022.

I would think you've got the prospect of some decent volume upside this year, so whats embedded in that guide.

So from a volume standpoint, you know one of the things we're very pleased with it's just how our supply chain has performed and as you look at Q4, there was a cost to that because you know certainly in our enclosures business, having you know 30 over 30% organic growth with constraint of labor.

Speaker 3: So from a volume standpoint, one of the things we're very pleased with is just how our supply chain has performed.

Speaker 3: And as you look at Q4, there was a cost to that because, you know, certainly in our enclosures business having, you know, 30 over 30% organic growth with constraints of labor and, you know, just even having to go get materials on the spot market, etc. All of that, we were, you know, you're inefficient. But I think as we go forward, what we've been doing and we started even

And you know just even having to go get materials on the spot market et cetera. All of that we were you know you're inefficient, but I think as we go forward what we've been doing and we started even throughout the year is investing in capacity, we do think labor's still going to be a constraint and we think there's still some constraints around electronics, we think.

Speaker 3: throughout the years investing in capacity. We do think labor is still going to be a constraint. We think there's still some constraints around electronics.

Speaker 3: you know, we're managing through the commodity materials and getting access there. So it's not, so there's inefficiencies there. And I would say as we started this year with Omicron, I mean, that created some labor issues for us.

You know, we're managing through the commodity materials and getting access there. So it's not so there's inefficiencies there and I would say as we started this year with omicron I mean that created some labor issues for us, but we feel good about the orders and so we exited the year with 37% orders growth and so we you know.

Speaker 3: But we feel good about the orders. And so we exited the year with 37% orders growth. And so when I talk about the momentum going into 2022, we would expect that we're going to have some nice volume growth. Now, as we look at the back half of the year, remember with some of these.

When I talk about the momentum going into 2022.

We would expect that we're going to have some nice volume growth now as we look at the back half of the year remember with some of these strong organic growth rates the comparisons get a lot harder right. You know this quarter being 20 over 20% organic growth, but it gets harder to get some of that volume on that but we do feel very good where we're <unk>.

Speaker 8: organic growth rates the comparisons get a lot harder right you know this quarter being

Speaker 8: 20 over 20 percent organic growth, you know it gets harder to get some of you know that volume on that but we do feel very good where we're positioned and we believe our strategy and what we're seeing with the focus on high growth verticals and all the other things we're doing is positioning us well.

<unk> and we believe our strategy and what we're saying with the focus on high growth verticals and all the other things we're doing is positioning us well.

Speaker 5: Great. And I just wonder if I could sneak one more in. You know, if we think about the segment income bridges that you gave us for Q4 and for 2021, I just wonder if you could give us a little more color on kind of the, I mean, you spoke to inflation, but kind of the productivity and investment buckets that underpin, you know, what the headwinds might be in 2022 relative to the price and volume coming in on the other side.

Great and I, just wonder if I could sneak one more in.

If we think about the.

Segment income bridges that you gave us for Q4 and for 2021.

I just wonder if you could give us a little more color on kind of the.

Spoke to inflation, but kind of the productivity and investment buckets under underpin what the headwinds might be in 2022.

Relative to the price and volume coming in on the other side.

Yeah, maybe I'll give it a couple of points here I mean, we talked about kind of that price carryover in that four to five points on that net productivity bucket I mean, obviously it was a.

Speaker 3: Yeah, maybe I'll give it a couple points here. I mean, we talked about kind of that price carryover and that four to five points. On that net productivity bucket, I mean, obviously it was a net negative this year of 155 million for the full year, 145 million of that being inflation, and 10 net headwind on productivity investments. We would expect that productivity to turn positive.

Net negative this year of 155 million for the full year of $145 million of that being inflation.

10, net headwind on productivity investments, we would expect that productivity to turn positive you know really as a supply chain challenges.

Speaker 3: really is as supply chain challenges ease in the back half. And importantly, as we also drive that underlying productivity, I mean, we're doing a lot around automation, bringing digital into factories, and optimizing on the logistics side. So we would expect that productivity to bar to turn positive. And I think the other piece is on the growth side. I mean, clearly that growth bar was...

Challenges ease in the back half and importantly, you know as we also drive that underlying productivity I mean, we're doing a lot around automation, bringing digital in the factories and optimizing on the logistics side. So we would expect that productivity to bar to turn positive and I think the other piece.

This is on the growth side, I mean, clearly that gross bar was.

Speaker 3: a solid green for us as we lapped the year of COVID there in 2020. And we would expect it to be green again here in 2021, just not to that magnitude. But I think I would end by just saying we expect another strong growth on top of the 18% organic growth that we saw here in 2021, along with margin expansion driving to that EPS growth. Great. I'll leave it there. Thank you.

Solid green for us as we lapped the year of Covid there in 2020, and we would expect it to be Green again, you know here in 2020 . One you know just not to that magnitude, but I think I would just I would end by just saying can we expect another another strong growth on top of the 18% organic growth that we saw here.

In 2021, along with the margin expansion driving to that EPS growth.

Great I'll leave it there thank you.

Yes.

Your next question is from the line of Nigel Coe.

Speaker 9: Thanks, good morning and congrats to Tony on the new role. I think this is the first time I've talked to one person on two companies in a quarter. So that's some kind of record. I wouldn't normally start off with corporate expenses, but it is quite a bit above my number and it's been trending higher. So just wondering, is that just comp or is there something else driving corporate expenses higher and are we at a good run rate here going forward?

Oh, Thanks, good morning.

Congrats to Tony on the new role.

I think this is the fifth time I talk to.

One person or two companies in the quarter.

[laughter] slim kind of record.

I Wouldnt know, we still have to cope expenses, but it is.

Quite a bit above my number and has been trending higher so I'm just wondering.

Is that just comfortable was there something else driving corporate spend is higher than we had a good run rate here going forward.

Speaker 3: Yes, I would say two things in Q4 there. One, and we talked about this even going into the year, is we are going to make some digital investments, including migration to the cloud. And so that's been included in those corporate costs. I think the other piece I would just call out in Q4, in terms of that sequential bump, that did include some conflict rules.

Yes, I would say to you know two things in Q4, there one and we talked about this even going into the year as we are going to make some digital investments, including migration to the cloud and so that's been included in those corporate costs I think the other piece I would just call out in Q4 in terms of that sequential bump you know that it did include some you know some comp accruals.

Speaker 3: And so as we look at that in the context of 2021, in that $75 to $80 million range, that really just simply reflects kind of that underlying run rate in that Q2 to Q4 range of the prior year.

And so as we look at that in the context of 2021 and that $75 million to $80 million range that really just simply reflects kind of the underlying run rate in that Q2 to Q4 range you know of our of the prior year.

Speaker 9: Okay, and then maybe a follow-on to that would be, you know, the R&D, you know, obviously a big theme at your idea this year was, you know, investing in products, etc., R&D increases. So just curious where R&D finished this year and what's baked in for 2022.

Okay, and then maybe a follow on to that would be.

The R&D, obviously, a big theme at your idea this year was.

Investing in product et cetera, R&D increase and so just curious where R&D finished this year and what's baked into our 2022 .

Speaker 8: Well, you know, with R&D, I would say this. We're one of the things we continue to increase our investment there as we go forward. But the one thing I would say I'm very pleased with is just the effectiveness of our R&D.

Well, you know with R&D I would say, that's where one of the things we continue to.

Increase our investment there as we go for it but the one thing I want to say I'm very pleased with is just the effectiveness of our R&D. So you know we look at our investments between digital and R&D and sometimes they go hand in hand, but when I step back and look at we're launching more new products our cycle times are going down and we're having.

Speaker 8: So, you know, we look at our investments between digital and R&D and sometimes they go hand in hand.

Speaker 8: But when I step back and look at we're launching more new products, our cycle times are going down and we're having more of an impact. And some of that's just our approach with agile and just better.

More of an impact in some of that is just our approach with agile and just better marketing and understanding customer needs. So the output that we're getting on the R&D side is better than the goals that we set for ourselves. So we still have runway to continue to invest there we somewhat prioritize a little bit more on the digital investment side, then we have R&D.

Speaker 8: marketing and understanding customer needs. So the output that we're getting on the R&D side is better than the goals that we set for ourselves. So we still have one way to continue to invest there. We somewhat prioritize a little bit more on the digital investment side than we have R&D.

<unk>.

Speaker 9: Quick follow up if I can, you called out Omicron as a factor behind the productivity headwinds. Are we now moving beyond that impact on the labor side, either from your perspective or from your supply chain?

And a quick follow up if I can call that Amazon is the fact beyond productivity.

Headwinds.

Now moving beyond that impacts on the labor side.

Either from your perspective or from your supply chain.

Speaker 8: Well, I think January was very tough. You know, you just need to look at caseloads and look at the news around the world. So January was tough with absences.

Well I think January was very tough I, you know you just need to let the caseload and look at the news around the World. So January was tough with absence is and Ah I don't like to think that we're going you know, we're getting better but who knows right. There you know we've always said, there's no playbook for a pandemic, but I think.

Speaker 8: I like to think that we're going, you know, we're getting better, but who knows, right? There, you know, we've always said there's no playbook for a pandemic. But I think, you know, with the volumes that we've seen, labor is going to be, it's inflationary, and I think it's going to continue to be a challenge for a while. Now, having said that, you know, we've done everything that we can to serve our customers. It's been a big theme of ours, and you've seen that in our volume growth. But I think we're just going to see some inflationary pressures there as we go forward. Great, thank you very much.

The volumes that we've seen labor is going to be it's inflationary and I think it's going to continue to be a challenge for a while now having said that you know we've done everything that we can to serve our customers. It's been a big theme of ours and you've seen that in our volume growth.

But I think we're just going to see some inflationary pressures there as we go forward.

Great. Thank you very much.

Your next question is from the line of Jeff Hammond.

Yeah.

Speaker 10: Hey, good morning. Thanks for putting me in here.

Hey, good morning, Thanks for fitting me in here.

Yes.

Good morning.

Speaker 10: We covered a lot on price cost, etc. Just a clarification on price. Does that 4-5 carryover or does that include your Jan 1 pricing as well?

Hmm.

We covered a lot on price cost et cetera, just a clarification on price is that four to five carryover or does that include kind of your gen one pricing as well.

Speaker 3: That carryover basically includes these pricing actions that we had in the context of Q4.

That carryover basically includes.

Pricing actions that we had in the context of Q4.

Speaker 10: Okay, okay, great. And then just on, you made the comment that you can outgrew a point and a half on the new products. I want to understand better, one, how you're measuring that and two, maybe differentiating the new product outgrowth versus just your outgrowth from maybe being able to supply better than some of your comps in this environment.

Okay, Okay, Great and then just on.

You you made the comment that you.

You cannot outgrew a point and a half on the new products just wanted to understand better how you're measuring that too maybe differentiating the new product outgrowth versus just your outgrowth from maybe being able to supply better than than some of your comps in this environment.

Speaker 8: When we look at, I give them a number of 18% new product fatalities. So that's those products we've released. You know, what's the revenue of these new products over the last five years? And so then we look at those new products and we look at what percentage of our revenue was generated in the course of a year. That's where we came up a point and a half.

When we look at I gave that number of 18% new product vitality. So that's those products. We've released you know what's the revenue of these new products over the last five years and so then we look at those new products. When we look at what percentage of our revenue was generated in the course of the year and that's where we came up a point and a half.

Speaker 8: And I think that, I mean, new products are fundamental. As we look at how we're driving growth, where we're going with liquid cooling solutions, for example, when we're looking at some of these trends around the electrification of everything, are we driving more resilient, labor-saving, connection systems that's positioning as well for some of these new growth...

And I think that I mean, new products are fundamental as we look at how we're driving growth, where we're going with liquid cooling solutions. For example, when we're looking at some of these trends around the electrification of everything and are we driving more resilient labor saving connection systems, that's positioning us well for some of these new growth vertical.

Speaker 8: So we have a really good way of measuring the value that we're creating, and any time we launch new products, we look at margins, and if they're differentiated, they should launch with higher margins. So I think we have a really robust process there, and it's very important to our growth as we go forward.

So we have a really good way of measuring the value that we're creating and any time, we launch new products, we look at margins and if they are differentiated they they should launch with higher margin. So I think we have a really robust process there and it's very important to our growth as we go forward.

Speaker 10: And do you see that point and a half as kind of a stable number as you can kind of continue to improve? Or is that something that you think can move up over time?

And do you see that the point and a half.

Kind of a stable number as you can kind of continue to improve or is that something that you.

Do you think can move up or move up overtime.

Well you know we target to get over a point of growth and I think in a strong year like we saw this year a point and a half certainly if we had you know this year is another good year. So I'd say you know what we'd expect to get above a point again, so that's kind of our general target.

Speaker 8: Well, you know, we target to get over a point of growth. And I think in a strong year, like we saw this year, a point and a half certainly, if we had, you know, this year is another good year. So I'd say, you know, we'd expect to get above a point again. So that's kind of our general target.

Okay. Thanks, so much.

Your final question is from the line of David Silver.

Speaker 2: Your final question is on the line of the David Silder.

Speaker 11: Yeah, hi, thank you. Hi, good morning. So my question, I think, would be on the financing activity that was undertaken this quarter. And I was kind of looking at your debt structure with a and I noticed that this quarter you paid, I think, a $15 million pre-payment issue. There was maybe an increase in the amount of debt that you paid and that was a $10 million pre-payment issue. So I was wondering if you could talk about that. Yeah, I think that was a big deal.

Yeah, Hi, thank you.

Hi, good morning.

My question I think would be.

On the financing activity that was undertaken this quarter.

And you know I.

I was kind of looking at your debt structure with the.

And I noticed that this quarter you paid I think a $15 million prepayment issue there was maybe.

Speaker 11: 3 million of costs. And I was just kind of scratching my head, but this kind of has the feel of restructuring your debt, sorry, reworking your debt structure in service of...

<unk> 3 million of costs and I was just kind of scratching my head but.

This is kind of has the feel of.

Restructuring your debt.

Sorry, reworking your debt structure and services.

Speaker 11: you know, a broader corporate strategy. But could you discuss, you know, maybe you're thinking about why you chose to do, you know, significant refinancing here?

Our broader corporate strategy, but could could you discuss maybe you're thinking about.

Why you chose to do significant.

Significant refinancing here and what what that.

Speaker 11: and what that, I'll just say 18 million, but the prepayment and the issuance costs, what does that buy you either in terms of lower interest expense or covenant relief? I mean, what maybe if you could provide some background on that decision, that would be great.

I'll, just say 18 million, but the prepayment and the issuance costs.

What does that buy you either in terms of lower interest expense for covenant relief.

Maybe if you could provide some background on on that decision that would be great. Thank you.

Speaker 3: Yeah, so I mean I would start off by saying we feel really good about the way we find it.

Yeah. So I mean, I would start off by saying, we feel really good about the way you.

Speaker 3: did in the context of 2021, both on the revolver, you know, as well as that $300 million bond tranche. And it really was in advance of the maturities that were slated for April of 2023, so kind of right within that window. It really did two things for us. One, it gave us an opportunity, given sort of the favorable, you know, backdrop in market conditions to take advantage of the

We did them in the context of 2021 both on a revolver as well as at 30 mm $300 million bond tranche and it really was in advance of the maturities that were slated for April of 2023, so kind of right within that window and it really did two things for US one it gave us an opportunity given sort of the phase.

Verbal backdrop, given market conditions to take advantage.

Speaker 3: of some of those lower rates. And I think the other thing too is it really set us up well from a balance sheet maturity perspective. So it took that $300 billion.

Some of those lower rates and I think the other thing too is it really set us up well from a balance sheet and maturity perspective. So it took that $300 million mm bond tranche and put it out you know 10 years. So as you look at our maturity ladder and we feel really good about where that stands from a cash perspective, we had an in and out there.

Speaker 3: um... you know bond tranche and uh... put it out in ten years as you look at our maturity ladder uh... we feel really good about where that and

Clearly, we had the the $15 million kind of take out premium if you will on those bonds, but we also had roughly a 10 million dollar benefit on that treasury rate lock. So so net it was closer to that 3 million dollar Mark, but importantly, we feel really good about that refinancing and we believe it just puts us in a great position.

Speaker 11: million mark. But importantly, we feel really good about that refinancing and we believe it just puts us in a great position on the maturity ladders as we look forward and taking advantage of some of the favorable interest rate conditions here in 2022 or here in 2021. And just to follow up, but I think that particular notes issue that was taken out dates back to when your company was first set up independently. So I'm just............

On the maturity ladders as we look forward and taking taking advantage of some of the favorable interest rate conditions here in 2022 art here in 2021.

Speaker 11: Yeah, and I think, and just to follow up, but I mean, I think that particular notes issue that was taken out, you know, dates back to when your company was first set up independently. So I'm just wondering if there's any meaningful, you know, covenant relief or any kind of flexibility that you think is, that was gained that you think.

Yeah, and I think and just to follow up but I mean, I think that particular notes issue that was taken out.

Dates back to when your company was first set up independent independently. So I'm just.

Wondering if there's any meaningful covenant relief or any kind of flexibility that you think is that was gained that you think is noteworthy. Thank you.

Speaker 3: Yeah, I would say nothing really to note. I mean we launched and spun as a company with I think some very good elements around both the revolver as well as on the bond issuance side and those we see continuing with our debt refinancing.

Yeah, I would say nothing really to note I mean, we we we launched and spun as a company with I think some very good.

Elements around you know both the revolver as well as a on the bond issue inside and those those we see continuing with our debt refinancing.

Okay, great. Thank you very much.

Yes.

Speaker 2: There are no further questions. I will turn the call back over for any closing remarks.

There are no further questions I will turn the call back over for any closing remarks.

Well, thank you and thank you for joining us. This morning, we are incredibly proud of our strong fourth quarter and full year 2021 performance and believe we are well positioned for continued growth and success going into 2022.

Speaker 8: Well, thank you and thank you for joining us this morning. We are incredibly proud of our strong fourth quarter and full year 2021 performance and believe we are well positioned for continued growth and success going into 2022.

Speaker 8: I'm grateful for the outstanding work our global employees put forth during the year to help us continue to meet customer demand and execute on our growth strategy. Thanks again for joining us. This concludes the call.

I'm grateful for the outstanding work, our global global employees put forth during the year to help us continue to meet customer demand and execute on our growth strategy. Thanks again for joining US. This concludes the call.

This concludes the <unk> fourth quarter earnings conference call. Thank you for your participation you may now disconnect.

Speaker 2: This concludes the Inven Fourth Quarter Earnings Conference call. Thank you for your participation. You may now disconnect.

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