Q4 2023 nVent Electric PLC Earnings Call
Beth Wozniak: for security. Four looking statements are made as, We will have time for questions, that. Thank you, Tony, and good morning, everyone. It's great to be with you today to share our fourth quarter and full year results. 2023 was another outstanding year. Q4 was a record quarter with double-digit sales growth and adjusted EPS exceeding our guidance. This included margin expansion across every segment and robust free cash flow. For the full year, we had strong growth and execution, resulting in record sales, margins, earnings, and cash flow. I am proud of our nVent team and everything we've accomplished.
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 investor section of <unk> website.
And to non-GAAP financials are reconciled in the appendix of the presentation.
We will have time for questions. After our prepared remarks with that please turn to slide three and I'll turn the call over to that.
Thank you Tony and good morning, everyone. It's great to be with you today to share our fourth quarter and full year results.
Tony: 2023. It was another outstanding year, Q4 was a record quarter with double digit sales growth and adjusted EPS exceeding our guidance.
Speaker Change: This included margin expansion across every segment.
Speaker Change: Last free cash flow.
Speaker Change: For the full year, we had strong growth and execution, resulting in record sales margins earnings and cash flow.
Speaker Change: I am proud of our inventing and everything we've accomplished I'm very excited for 2024, but the trends of electrification sustainability and digitalization.
Beth Wozniak: I'm very excited for 2024, with the trends of electrification, sustainability, and digitalization. We are well positioned for strong sales and profit growth, driven by our focus on high-growth verticals, new products, and acquisitions. Slide 4 summarizes our Q4 and full year performance. Fourth-quarter sales were up 16%. On an organic basis, sales grew 2% on top of 15% a year ago.
Speaker Change: We're well positioned for strong sales and profit growth driven by our focus on high growth verticals new products.
Speaker Change: Sure.
Speaker Change: Slide four summarizes our Q4 and full year performance.
Speaker Change: Fourth quarter sales were up 16% on an organic basis sales grew 2% on top of 15% a year ago.
Beth Wozniak: Segment income grew an impressive 31% year-over-year with a return on sales of 260 basis points. Adjusted EPS grew 18% on top of 32% a year ago, and we generated $215 million of free cash flow, up 19%. Looking at our vertical performance in the quarter, infrastructure led up low double digits with strength in data solutions. Commercial resi grew low single digits, and industrial declined mid-single digits, impacted by channel inventory adjustments. Finally, energy was down low single digits, impacted by our exit from Russia. Turning to organic sales by geography, we saw growth across our key regions. North America grew low single digits, and Europe was up slightly. Asia-Pacific grew low double digits, with solid growth in China. Lastly, organic orders were slightly down in the quarter, reflecting the ongoing channel inventory adjustments.
Speaker Change: Segment income grew an impressive 31% year over year with return on sales of 260 basis points.
Adjusted EPS grew 18% on top of 32% a year ago.
Speaker Change: And we generated $215 million of free cash flow up 19%.
Speaker Change: Looking at our vertical performance in the quarter infrastructure led up low double digits with strength in data solutions commercial Razee grew low single digits industrial decline mid single digits impacted by channel inventory adjustments.
Speaker Change: Finally energy was down low single digits impacted by our exit from Russia.
Speaker Change: Turning to organic sales by geography, we saw growth across our key regions North America grew low single digits and Europe was up slightly.
Speaker Change: Asia Pacific grew low double digits with solid growth in China.
Speaker Change: Lastly, organic orders were slightly down in the quarter, reflecting the ongoing channel inventory adjustments importantly sell out was positive.
Beth Wozniak: Importantly, sellout was positive. For the full year, we had record sales of $3.3 billion, an increase of 12% and 3% organically, segment income grew 38% with margins expanding more than 400 basis points. Adjusted EPS was up 28% on top of 22% in 2022. For the full year, we had record free cash flow of $465 million, growing 32%. Let me share a few more highlights.
Speaker Change: For the full year, we had record sales of $3 $3 billion, an increase of 12% and 3% organically.
Speaker Change: Segment income grew 38% with margins expanding more than 400 basis points.
Speaker Change: Adjusted EPS was up 28% on top of 22% in 2020 two.
Speaker Change: For the full year, we had record free cash flow of 460 $465 million growing 32%.
Speaker Change: Let me share a few more highlights first we launched 95 new products in 2023.
Beth Wozniak: First, we launched 95 new products in 2023, and our new product vitality is now at 22 percent. New products contributed more than two points to our sales growth. We have great momentum in our innovation pipeline. Second, all of our key verticals grew organically in 2023, led by infrastructure, which includes data solutions, power utilities, and renewables, to name a few.
Speaker Change: Our new product vitality is now at 22%.
Speaker Change: New products contributed more than two points to our sales growth, we have great momentum in our innovation pipeline.
Speaker Change: Second all of our key verticals grew organically in 2023.
Speaker Change: Led by infrastructure, which includes data solutions power utilities and renewables to name a few.
Beth Wozniak: Within infrastructure, data solutions now represents greater than $450 million in sales and grew over 20% in 2023. Finally, we completed two acquisitions last year, adding over $400 million in annualized sales, that we are investing in to scale and drive growth. Looking at the macro trends, we expect electrification, sustainability, and digitalization to continue to drive demand.
Speaker Change: Within infrastructure data solutions now represents greater than $450 million in sales.
Speaker Change: Grew over 20% in 2023.
Speaker Change: Finally, we completed two acquisitions last year, adding over $400 million in annualized sales that we are investing in to scale and drive growth.
Speaker Change: Looking at the macro trends, we expect electrification sustainability and digitalization to continue to drive demand we.
Beth Wozniak: We anticipate government funding to flow this year, more so in the back half. On our key verticals, we expect all to grow. Infrastructure is forecasted to have the strongest growth, benefiting from investments in the electrification and digitalization trends.
Speaker Change: We anticipate government funding to flow this year more so in the back half.
Speaker Change: On our key verticals, we expect all to grow.
Speaker Change: Infrastructure is forecasted to have the strongest growth benefiting from investments, what the electrification and digitalization trends.
Beth Wozniak: We expect continued strong growth for data solutions, particularly for our liquid cooling solutions, given the acceleration of AI. Industrial is forecasted to grow with investments in automation and reshoring. Overall, commercial is expected to grow modestly. The need for more labor-saving solutions, as well as the increase in power and data infrastructure, are expected to drive demand for our products. Residential is expected to remain soft.
Speaker Change: We expect continued strong growth for data solutions, particularly for our liquid cooling solution given the acceleration of AI.
Speaker Change: Industrial is forecasted to grow with investments in automation and reassuring.
Speaker Change: Overall commercial is expected to grow modestly the need for more labor saving solutions as well as the increase in power in data infrastructure are expected to drive demand for our products.
Speaker Change: Residential is expected to remain soft in energy, we expect to see growth, particularly in the energy transition supported by de Carbonization trends.
Beth Wozniak: In energy, we expect to see growth, particularly in the energy transition supported by decarbonization trends. Overall, I am proud of our nVent team and the record results we delivered in 2023. We continue to change the growth profile of nVent. We believe 2024 will be another year of strong growth and value creation. I will now turn the call over to Sarah for details on our results as well as our 2024 Outlook. Sarah, please go ahead.
Speaker Change: Overall, I am proud of our event team and the record results we delivered in 2023.
Speaker Change: We continue to change the growth profile oven that we.
Speaker Change: We believe 2024 will be another year of strong growth and value creation.
Speaker Change: I will now turn the call over to Sarah for details on our results as well as our 2024 outlook. Sara. Please go ahead. Thank you Beth I am pleased to share another quarter of double digit sales and earnings growth strong margin expansion and robust free cash flow, let's begin on slide five with our fourth quarter results.
Sarah: Thank you, Beth. I am pleased to share another quarter of double-digit sales and earnings growth, strong margin expansion, and robust free cash flow. Let's begin on slide five with our fourth quarter results. Sales of $861 million were up 16% compared to last year, in line with guidance. Organic sales were up 2%, with price contributing 4 points to growth and volumes down 2 points. Acquisitions added a meaningful $99 million to sales, or 13 points to growth. Foreign exchange was a 1-point tailwind.
Sarah: $861 million were up 16% compared to last year in line with guidance organic sales were up 2% with price contributing four points to growth and volumes down two point acquisitions added a meaningful $99 million to sales or <unk>.
Speaker Change: <unk> points to growth Foreign exchange was a one point tailwind.
Sarah: Fourth quarter segment income was $189 million, up 31%, with incrementals of 37%. Return on sales was 22 percent, up 260 basis points year-over-year. Our performance was driven by positive price, cost, productivity, and accretive return on sales from the ECM acquisition. Price more than offset the impact from inflation of just over $20 million. Q4 Adjusted EPS was $0.78, up 18%, and above our guidance range. Acquisitions contributed $0.06 in the quarter.
Speaker Change: Fourth quarter segment income was $189 million up 31% with Incrementals of 37%.
Speaker Change: On sales was 22% up 260 basis points year over year.
Speaker Change: Our performance was driven by positive price cost productivity and accretive return on sales from the ECM acquisition.
Speaker Change: Price more than offset the impact from inflation of just over $20 million.
Speaker Change: Q4, adjusted EPS was <unk> 78 up 18% and above our guidance range acquisitions contributed six cents in the quarter, we generated robust free cash flow of $215 million up 19% year over year.
Sarah: We generated robust free cash flow of $215 million, up 19% year-over-year. This included higher CapEx investments for growth and capacity. Now please turn to slide six for a discussion of our fourth quarter segment performance. Starting with enclosures, sales of $402 million increased 7%. The TEXA acquisition contributed two points to sales.
Speaker Change: This included higher capex investments for growth and capacity.
Speaker Change: Now please turn to slide six for a discussion of our fourth quarter segment performance.
Speaker Change: Starting with enclosures sales of $402 million increased 7% the tax of acquisition contributed two points to sales.
Sarah: Organically, sales increased over 4% with solid price and positive volume; infrastructure grew more than 20 percent with continued strength in data solutions. Commercial resi grew in the quarter with strength in North America and Geographically, North America led up mid single digits. Europe and China also grew. Enclosure's fourth-quarter segment income was $85 million, up 17%. Return on sales of 21.1% increased 190 basis points year-over-year, driven by productivity and price costs. For the full year, Ross expanded by an impressive 460 basis points.
Speaker Change: Organically sales increased over 4% with solid price and positive volume.
Speaker Change: Infrastructure grew more than 20% with continued strength in data solutions commercial.
Speaker Change: Commercial <unk> grew in the quarter with strength in North America, and geographically North America led up mid single digits, Europe and China also grew.
Speaker Change: Enclosures fourth quarter segment income was $85 million up 17% return on sales of 21, 1% increased 190 basis points year over year, driven by productivity and price cost for the full year Ross expanded an impressive four.
Speaker Change: 160 basis points.
Sarah: Moving to electrical and fastening, sales of $288 million increased 49%. The ECM acquisition contributed 48 points to sales growth. However, organic sales were flat, with positive price and volumes down modestly.
Speaker Change: Moving to electrical <unk> fastening sales of $288 million increased 49%. The ECM acquisition contributed 48 points to sales growth.
Speaker Change: Organic sales were flat with positive price and volume is down modestly.
Sarah: Industrial and Commercial Resi each grew in the corner, but this was offset by a decline in infrastructure due to channel inventory adjustments that continued from Q3. Geographically, organic sales growth declined slightly in North America, while Europe was up low single digits.
Speaker Change: Industrial and commercial Razee grew each grew in the corner there.
Speaker Change: This was offset by a decline in infrastructure due to channel inventory adjustments that continued from Q3.
Speaker Change: Geographically organic sales growth declined slightly in North America, while Europe was up low single digits.
Sarah: Electrical and Fastening Segment Income was $85 million, up 60%. Return on sales was 29.6%, up 210 basis points, compared to last year, on favorable mix and productivity. Turning to thermal management, sales of $171 million were down 2% organically.
Speaker Change: Electrical <unk> fastening segment income was $85 million up 60% return on sales was 29, 6% up 210 basis points compared to last year unfavorable mix and productivity.
Speaker Change: Turning to thermal management sales of $171 million were down 2% organically.
Sarah: The Russia wind-down impact was approximately 5 points to growth. Overall, volumes were down, with price contributing five points. The decline in sales was driven by commercial resi and industrial.
Speaker Change: Russia wind down the impact was approximately five points to growth.
Overall volumes were down with price contributing five points.
Speaker Change: The decline in sales was driven by commercial ready and industrial.
Sarah: Important to note, commercial resi improved sequentially, and industrial MRO was up double digits. In addition, backlog grew year-over-year, and energy transition represents nearly a third of the project backlog. However, thermal management segment income of $44 million was flat year-over-year.
Speaker Change: Important to note commercial Randy improves sequentially and industrial MRO was up double digits.
Speaker Change: In addition backlog grew year over year and energy transition represents nearly a third of the project backlog.
Speaker Change: Thermal management segment income of $44 million was flat year over year return on sales of 25, 9% was up 20 basis points year over year due to price cost and productivity.
Sarah: Return on sales of 25.9% was up 20 basis points year-over-year due to price, cost, and productivity. Now, turn to slide 7 for a recap of our full year 2023 results. We ended the year with record sales of $3.3 billion, up 12% or 3% organically. Segment income grew 38% to $721 million.
Speaker Change: That turned to slide seven for a recap of our full year 2023 results. We ended the year with record sales of $3 $3 billion up 12% or 3% organically segment income grew 38% to $721 million all segments expanded return on.
Sarah: All segments expanded return on sales. Overall, return on sales expanded by an impressive 410 basis points to 22.1%. Adjusted EPS for the full year was $3.06, up 28%, and acquisitions contributed $0.16 to the year, exceeding our initial expectations. Free cash flow was $465 million, up 32% with 90% conversion of adjusted net income. In summary, 2023 was an outstanding year. On slide 8, titled Balance Sheet and Cash Flow, you will see we exited the year with $185 million of cash on hand and $600 million available in our revolver. Our debt stands at just under $1.8 billion, and we have paid down nearly $200 million post-acquisition.
Speaker Change: Sales.
Speaker Change: Overall return on sales expanded an impressive 410 basis points to 22, 1%.
Speaker Change: Adjusted EPS for the full year was $3.06 up 28% and acquisitions contributed 16 cents to the year exceeding our initial expectations.
Speaker Change: And free cash flow was $465 million up 32% with 90% conversion of adjusted net income.
Speaker Change: In summary, 2023 was an outstanding year.
Speaker Change: On slide eight titled balance sheet, and cash flow you will see we exited the year with $185 million of cash on hand, and $600 million available on our revolver. Our debt stands at just under $1 $8 billion and we have paid down nearly $200 million post acquisitions.
Sarah: We believe our healthy balance sheet and strong cash generation provide us with ample capacity to invest in the business and execute on our growth strategy. Turning to slide 9, where we will outline our capital allocation priorities. We continue to prioritize growth and execute a balanced, disciplined approach to capital allocation to deliver great returns. We invested $71 million in CapEx in 2023, up 55%. This includes new factories and a new distribution center, which will help unlock opportunities where we have constraints. We returned $178 million to shareholders in 2023, including share repurchases of $61 million. And we recently increased our quarterly dividend by 9%. We exited the year with a net debt-to-adjusted EBITDA ratio of 2.1 times, well within our targeted range.
We believe our healthy balance sheet and strong cash generation provides us with ample capacity to invest in the business and execute on our growth strategy.
Speaker Change: Turning to slide nine where we will outline our capital allocation priorities.
Speaker Change: We continue to prioritize growth and execute a balanced disciplined approach to capital allocation to deliver great returns we.
Speaker Change: We have invested $71 million in Capex in 2023 up 55%. This includes new factories, and a new distribution center, which will help unlock opportunities where we have constraints.
Speaker Change: We returned $178 million to shareholders in 2023, including share repurchases of $61 million and we recently increased our quarterly dividend 9%.
Speaker Change: We exited the year with a net debt to adjusted EBITDA ratio of two one times well within our targeted range.
Sarah: This is testament to our strong cash flow generation. We are well positioned for capital deployment in 2024 as we execute on our growth strategy and deliver attractive shareholder returns. Moving to slide 10 in our 2024 Outlook, we expect reported sales growth of 8 to 10%, with organic growth in the range of 3 to 5%. This assumes positive price and strong volume growth. Acquisitions are expected to contribute approximately five points to growth. We expect normal seasonality through the year. Our outlook for full-year adjusted EPS is $3.17 to $3.27, which represents growth of 4% to 7%. This includes an 11 cent or 4 percentage point negative impact on EPS related to changes in global tax standards that went into effect January 1st.
Speaker Change: This is a testament to our strong cash flow generation.
Speaker Change: We are well positioned for capital deployment in 2024, as we execute on our growth strategy and deliver attractive shareholder returns.
Speaker Change: Moving to slide 10, and our 2024 outlook, we expect reported sales growth of 8% to 10% with organic growth in the range of 3% to 5%.
Speaker Change: This is jim's positive price and strong volume growth.
Speaker Change: Acquisitions are expected to contribute approximately five points to growth.
Speaker Change: We expect normal seasonality through the year.
Speaker Change: Our outlook for full year, adjusted EPS is $3.17 to $3 27.
Speaker Change: Which represents growth of 4% to 7%.
Speaker Change: This includes an 11% or four percentage point negative impact to EPS related to changes in global tax standards that went into effect January 1st.
Sarah: A few important items to note for the year. First, we expect segment income to grow 8 to 11 percent for the year. This reflects positive price plus productivity more than offsetting inflation. In addition, we plan to invest in capacity, new products, and digital to accelerate growth and productivity. Second, we expect free cash flow conversion in the range of 95% to 100%, or over $500 million. This reflects higher CapEx investments and improvements in working capital. And third, we expect our adjusted tax rate to be approximately 23% versus 19.5% in 2023. This reflects a two-and-a-half point rate impact from the change in global tax standards.
Speaker Change: A few important Tonight and few important items to note for the year first we expect segment income to grow 8% to 11% for the year.
Speaker Change: This reflects positive price plus productivity more than offsetting inflation. In addition, we plan to invest in capacity, new products and digital to accelerate growth and productivity.
Speaker Change: Second we expect free cash flow conversion in the range of 95% to 100% or over $500 million. This reflects higher capex investments and improvements in working capital.
Speaker Change: Third we expect our adjusted tax rate to be approximately 23% versus 19, 5% in 2023.
Speaker Change: This reflects a two and a half point rate impact from the change in global tax standards. The remaining rate increase relates to our income next and includes a full year of ECM.
Sarah: The remaining rate increase relates to our income mix and includes a full year of ECM. Importantly, we expect to offset a meaningful amount of the cash tax impact of the change in global tax standards. A few additional 2024 assumptions include higher net interest expense of approximately $90 million, shares of approximately $168 million, corporate costs of approximately $95 million, and cutbacks of $85 to $90 million. Moving to slide 11 in our first quarter outlook, we expect organic sales growth in the range of 2 to 4 percent and Year-over-Year Margin Expansion. For earnings per share, we expect adjusted EPS in the range of $0.72 to $0.74, up 7% to 10% year-over-year. This includes a $0.04 negative impact from a higher tax rate, including approximately $0.03 from the change in global tax standards.
Speaker Change: Importantly, we expect to offset a meaningful amount of the cash tax impact of the change in global tax standards.
Speaker Change: A few additional 2024 assumptions include higher net interest expense of approximately $90 million shares of approximately 168 million corporate costs of approximately $95 million and capex of $85 million to $90 million.
Speaker Change: Moving to slide 11, and our first quarter outlook, we expect organic sales growth in the range of 2% to 4%.
Speaker Change: And year over year margin expansion.
Speaker Change: For earnings per share, we expect adjusted EPS in the range of 72 to 74.
Speaker Change: Up 7% to 10% year over year.
Speaker Change: This includes a <unk> <unk> negative impact from a higher tax rate, including approximately <unk> <unk> from the change in global tax standard.
Beth Wozniak: Wrapping up, our team delivered an extending 2023, and I believe we are well positioned for another great year. With that, please turn to slide 12, and I will now turn the call back over to Beth. Thank you, Sarah.
Speaker Change: Wrapping up our team delivered an ex standing 2023, and I believe we are well positioned for another great year.
Speaker Change: With that please turn to slide 12, and I will now turn the call back over to Bob.
Bob: Thank you Sarah.
Beth Wozniak: Since then, we have been executing on our strategy to drive growth and differentiated performance. Our strong financial track record demonstrates that our strategy is working. High growth verticals, new products, and innovation, plus global growth and acquisitions, are key pillars of our growth strategy. As a result, we've had outstanding growth, going from $2 billion in sales to well over $3 billion last year. We have also delivered tremendous returns, with segment income and adjusted EPS more than doubling since 2020, and we have generated approximately $1.5 billion in free cash flow. At our Investor Day last year, we laid out medium-term targets and have made significant progress. In the first year, we have already achieved our margin expansion target.
Bob: Since spin we have been executing on our strategy to drive growth and differentiated performance.
Bob: Our strong financial track record demonstrates our strategy is working.
Bob: High growth verticals, new products and innovation plus global growth and acquisitions are key pillars of our growth strategy.
Bob: As a result, we've had outstanding growth going from 2 billion in sales to well over 3 billion last year.
Bob: We have also delivered tremendous returns with segment income and adjusted EPS more than doubling since 2020.
Bob: And we have generated approximately $1 $5 billion in free cash flow.
Bob: At our Investor Day last year, we laid out medium term targets and have made significant progress in the first year, we have already achieved our margin expansion target.
Beth Wozniak: We also have meaningfully exceeded our acquisition contribution and earnings per share growth, and we believe we have plenty of runway ahead of us. Please turn to slide 13. We are building a strong track record. We have industry-leading products and solutions. And we are well-positioned with strong secular tailoring.
We also have meaningfully exceeded our acquisition contribution and earnings per share growth.
Bob: And we believe we have plenty of runway ahead of us.
Bob: Please turn to slide 13.
Bob: We are building a strong track record we.
Bob: We have an industry leading products and solutions.
Bob: And we are well positioned with strong secular tailwind that.
Beth Wozniak: We expect government funding for infrastructure to flow this year and contribute to our growth over the next five-plus years. We see significant growth opportunities with the electrification of everything, in particular, the acceleration of AI and the need for liquid cooling. We expect our data solutions business to continue to grow double digits in 2024 to beyond $500 million in sales, and we are building a pipeline for future growth. In addition, we are well positioned for the energy transition from decarbonization to renewables for power utilities.
Bob: We expect the government funding for infrastructure to flow this year and contribute to our growth over the next five plus years.
Bob: We see significant growth opportunities with the electrification of everything.
Bob: In particular, the acceleration of AI and the need for liquid cooling.
Bob: We expect our data solutions business to continue to grow double digits in 2024 to beyond $500 million in sales.
Bob: And we are building a pipeline for future growth.
Bob: In addition, we are well positioned for the energy transition from de Carbonization renewables the power utilities.
Beth Wozniak: And with the acquisitions of ECM Industries and Texa Industries, we have opportunities to grow these portfolios, expanding into high-growth verticals like energy storage, as well as scaling through our channels and growing globally. And when it comes to new products, our innovation engine has never been stronger. We expect new products to add more than two points to sales growth and be margin accretive to overall revenue. Finally, we are creating value through capital allocation. We see ample opportunity to grow via acquisition. We play in a highly fragmented $90 billion Connect and Protect space.
Bob: And with the acquisitions of ECM industries, and textile industries, we have opportunities to grow these portfolios expanding into high growth verticals like energy storage as well as scaling through our channels and growing globally.
Bob: When it comes to new products, our innovation engine has never been stronger.
Bob: We expect new products to add more than two points to sales growth and be margin accretive to overall invert.
Bob: Finally, we are creating value through capital allocation.
Bob: We see ample opportunity to grow via acquisitions, we play at a highly fragmented 90 billion dollar connect and protect space.
Beth Wozniak: Our acquisition framework serves as a flywheel to accelerate growth. We have a healthy pipeline and a good track record of strong returns. In addition, we are returning cash to shareholders and recently raised the quarterly dividend by 9%. We are confident we can continue to build on our strong track record and deliver for our customers and shareholders. Moving to slide 14.
Bob: Our acquisition of framework serves as a flywheel to accelerate growth.
Bob: We have a healthy pipeline and a good track record of strong returns.
Bob: In addition, we are returning cash to shareholders and have recently raised the quarterly dividend by 9%.
Bob: We are confident we can continue to build on our strong track record and deliver for our customers and shareholders.
Bob: Moving to slide 14.
Bob: Key to our success has been our people and culture and making invent a great place to work we are focused on delivering for our customers and having a positive impact on our communities.
Beth Wozniak: The key to our success has been our people and culture and making nVent a great place to work. We are focused on delivering for our customers and having a positive impact on our community. As we build a more sustainable and electrified world, ESG has been core to our strategy.
Bob: As we build a more sustainable and electrified world ESG has been core to our strategy.
Beth Wozniak: On this slide, you can see numerous awards and recognition that we have received. I will comment on a few of them. Recently, we were awarded a Gold Sustainability Rating from EcoVetas, placing us in the top 3% of companies assessed in our industry and in the 93rd percentile of all companies assessed. We were also recognized as one of America's greenest companies by Newsweek.
Bob: On this slide you can see numerous awards and recognition that we've received.
Speaker Change: I won't comment on a few of these.
Speaker Change: Recently, we were awarded a gold sustainability rating from Eagle Veda, placing us in the top 3% of companies assessed in our industry and in the 93 percentile of all companies assessed.
We were also recognized as one of Americas greatest companies by Newsweek.
Beth Wozniak: And we were named for the first time to the Fortune Best Workplaces in Manufacturing and Production list. These are just a few of the many awards and recognitions that we have received. I'm extremely proud of our nVent team and everything we have accomplished, and there's more to do.
Speaker Change: And we were named for the first time to the Fortune best workplaces in manufacturing and production list.
Speaker Change: These are just a few of the many awards and recognitions that we've received.
Speaker Change: I'm extremely proud of our and vet team and everything we have accomplished and there's more to do.
Speaker Change: Wrapping up on slide 15.
Beth Wozniak: Wrapping up on slide 15, 2023 was another year of outstanding performance for nVent. We delivered double-digit sales and earnings growth. We are well-positioned with the electrification of everything, sustainability, and digitalization trends. And we expect 2024 to be another year of strong sales and profit growth with robust cash flow. Our future is bright. With that, I will now turn the call over to the operator to start the Q&A. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone.
Speaker Change: 2023 was another year of outstanding performance for events, we delivered double digit sales and earnings growth, we are well positioned with the electrification of everything sustainability and digitalization trends.
Speaker Change: And we expect 'twenty 'twenty four to be another year of strong sales and profit growth with robust cash flow.
Speaker Change: Our future is bright.
Speaker Change: With that I will now turn the call over to the operator to start Q&A.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: To ask a question you May Press Star then one on your Touchtone phone.
Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys if at anytime. Your question has been addressed and you would like to withdraw. Your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.
Speaker Change: And the first question will come from Joe Ritchie with Goldman Sachs. Please go ahead.
Operator: If you're using a speakerphone, please pick up your handset before pressing the... If at any time your question has been answered and you would like to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster. And the first question will come from Joe Ritchie with Goldman Sachs. Please go ahead.
Joseph Alfred Ritchie: Hey, good morning, everyone and congrats on that I've gone through the year.
Joseph Alfred Ritchie: Yeah.
Joseph Alfred Ritchie: Hey, let's just.
Joseph Alfred Ritchie: Let's just start off with the cadence it's interesting that the first quarter is expected to be up 7% and 10% from from an EPS standpoint, yet the growth rate is modestly below what you're what you're forecasting for the year. So.
Joseph Alfred Ritchie: Hey, good morning, everyone, and congratulations on a nice end to the year. Thank you. Hey, let's just let's just start off with the cadence.
Joseph Alfred Ritchie: I can't help to think that there's some conservatism baked into the guide, but just any thoughts around you know the stronger start to the year end and kind of expectations through the remainder of the year.
Speaker Change: Yeah, maybe John a couple of big things to no. One would just be Q1 does have the benefit of the carryover. The ECM acquisition, so you're seeing that in the acquisition contribution from a topline perspective 13 points and obviously that's.
Beth Wozniak: It's interesting that the first quarter is expected to be up seven to 10% from an EPS standpoint, yet it's a growth rate modestly below what you're forecasting for the year. So, you know, it can't help but think that there's some conservatism baked into the guide, but just any thoughts around, you know, the stronger start to the year and kind of expectations through the remainder of the year. Yeah, maybe, Joe. There are a couple of big things to note.
Dropping down from an earnings per share standpoint, I think the other things you know maybe touch to factor in as we guide to that 2% to 4% organic growth in Q1 versus that full year of 3% to 5% is that we are going to be lapping.
Speaker Change: Some of that channel inventory.
Speaker Change: Inventory level adjustments, beginning in Q2 and beyond and I think the other piece too. If you look at that from a segment standpoint, yes, I just had some strong double digit flaps here in Q1 and Q2.
Beth Wozniak: One would just be Q1. Q1 does have the benefit of the carryover of the ACM acquisition. So you're seeing that in the acquisition, contribution from a top line perspective, 13 points, and obviously that's dropping down from an earnings per share standpoint. I think the other things, you know, maybe to factor in is that we guide to that 2 to 4% organic growth in Q1 versus that full year of 3 to 5% is that, you know, we are going to be, you know, lapping some of that channel inventory level adjustments beginning in Q2 and beyond. And I think the other piece, too, if you look at that from a segment standpoint, EFS has some strong double-digit growth here in Q1 and Q2.
Speaker Change: Early start to the year, but we feel good about you know our 2% to 4% growth here in Q1, and I think one other thing Joe I would point out is that Q1 is our last lap. If you will of the impact of that Russia. I said it was roughly five points to thermal management in Q4, we expect that to be roughly four points.
Speaker Change: Thermal here in Q1.
Joseph Alfred Ritchie: Got it that's that's clear and helpful. But I guess, maybe it's a good segue also to what you're seeing from an inventory perspective to your point I think we.
Speaker Change: We've been 10 months into this.
Speaker Change: Destocking phase in your volume still liked it of the year.
Speaker Change: Negative and so just just expectations for volumes ultimately you know turning positive in 'twenty four and then if you could.
Speaker Change: Can you provide any color on what price is embedded into that organic guide for 'twenty four that'd be helpful too.
Speaker Change: Yeah. So let me start you know when we ended Q4.
Speaker Change: We saw there was some continued inventory adjustments, but importantly sell through was positive and as we enter 2024, we expect the build on inventory to be slow as we go forward in it in the year and remember as Sarah pointed out in Q2, that's when we really saw.
Beth Wozniak: So, an early start to the year, but we feel good about, you know, our two to four percent growth here in Q1. And I think one other thing, Joe, I would point out is that Q1 is our last laugh, if you will, on the impact of that Russia exit. It was roughly five points to thermal management in Q4. We expect that to be roughly four points to thermal here in Q1. Okay.
Speaker Change: Start to lap some of those inventory adjustments.
Speaker Change: And our view. This here is with all the secular tailwind. We believe will have a strong volume growth and I'll, let derrick comment on pricing.
Derrick: Yeah, so from a price volume perspective, we do expect positive price in 2024, and it will just contribute to a smaller piece of that overall growth because volume will be a bigger contributor of that.
Beth Wozniak: That's clear and helpful. I guess maybe it's a good segue also to what you're seeing from an inventory perspective. To your point, I think we've been 10 months into this destocking phase, and volume still exited the year negative. And so just expectations for volumes ultimately turning positive in 24. And then if you could provide any color on what price is embedded into that organic guide for 24, that'd be helpful too.
Derrick: I think that's in the backdrop of inflation, we still expect it to be another inflationary year here in 2024, particularly as it relates to wage and labor rates and maybe one other point I would just say that guidance of positive price and it does take into account some carryover for them as well as realization from pricing actions that we have.
Derrick: Already communicated.
Speaker Change: Helpful. Thank you very much.
Speaker Change: The next question will come from Nigel Coe with Wolfe Research. Please go ahead.
Beth Wozniak: Yeah, so let me start. You know, when we ended Q4, we saw there were some continued inventory adjustments, but importantly, sell-through was positive. And as we enter 2024, we expect the build on inventory to be slow as we go forward in the year. And remember, as Sarah pointed out, in Q2, that's when we really start to make some of those inventory adjustments. And our view this year is, with all the secular tailwinds, we believe we'll have strong volume growth. And I'll let Sarah comment on price.
Nigel Edward Coe: Thanks, Good morning, everyone. Good morning.
Good morning, I'm, Don I was hoping we could maybe get a bit more granular on the theater solutions, maybe you know kind of how that track during the fourth quarter and I know, it's double digits strong double digits, but.
Nigel Edward Coe: More importantly, I'd look to 'twenty four.
Nigel Edward Coe: Meet you double digits obviously.
Nigel Edward Coe: Very wide range, but just curious if it's closer to 20% and 10% any kind of the maybe just quarterly you know what you see in the liquid cooling.
Nigel Edward Coe: Is that becoming a more material tailwind as we go forward.
Speaker Change: Yeah. So on our data solutions business, you know I think when we say you know strong double digits. It's you know at the higher end of those double digits in the lower end of those double digits. As you commented and really that is the traction that we have I would just say with them not only liquid calling some of our W. E T acquisition as well.
Sarah: Yes, so from a price and volume perspective, we do expect positive prices in 2024. It will just contribute to a smaller piece of that overall growth because volume will be a bigger contributor to that. I think that's in the backdrop of inflation. We still expect it to be another inflationary year here in 2024, particularly as it relates to wage and labor rates. And maybe one other point I would just say is that guidance of positive price, it does take into account some carryover as well as realization from pricing actions that we've already communicated. Thank you very much.
Speaker Change: And the key thing as we've talked about as the acceleration of AI and so we're continuing to work with several hyperscale customers on accelerating liquid cooling solutions as well as through some of our standard product offerings with our cooling distribution unit and some of our rare.
Speaker Change: The door heat exchangers, having those products served through our distribution channels and all of that effort is ramping and so you know we see a funnel of activity that takes us into you know 2025. So you know our view is as you start to see those more powerful.
Paul GPU chips, and it's not only in Datacenters eventually as we look at edge computing, you're going to see this proliferation of these type of components that need to be liquid cooled and so we feel that liquid cooling has applications even beyond data solutions, but we're very positive on you know are what they are.
Joseph Alfred Ritchie: The next question will come from Nigel Coe with Wolf Research. Please go ahead. Thanks. Good morning, everyone.
Nigel Edward Coe: Thanks for the question. Good morning. Good morning.
Nigel Edward Coe: I was hoping we could maybe get a bit more granular on the data solutions. Maybe, you know, kind of how that tracked during the fourth quarter. I know it's double digits, strong double digits, but more importantly, that looked at 24.
Speaker Change: Okay for this year and going you know going several years into the future.
Speaker Change: Okay. So so strong double digits implies you know obviously because of the same sense okay.
Speaker Change: And then just obviously the the the plan has flattish margins.
Speaker Change: And so I'm just wondering maybe if there's anything we need to consider from a first half second half and how does that outlook look you know across the segments.
Beth Wozniak: I mean, you know, double digits is obviously a very wide range, but just curious if it's closer to 20 percent and 10 percent, any kind of that. And maybe, qualitatively, what you're seeing in liquid cooling, you know, is that becoming a more material tailwind as we go forward? Yes, so on our data solutions business, you know, I think when we say, you know, strong double digits, it's, you know, at the higher end of those double digits and the lower end of those double digits, as you've commented. And really, that is the traction that we have, I would just say, with not only liquid cooling but some of our WBT acquisition as well. And the key thing, as we've talked about, is the acceleration of AI. And so we're continuing to work with several hyperscale customers on accelerating liquid cooling solutions, as well as through some of our standard product offerings with our cooling distribution unit and some of our rear door heat exchangers, having those products served through our distribution channels. And all of that effort is ramping up.
Speaker Change: Yeah, I would say that there's let me let me start here from a first half second half. It does include.
Speaker Change: Include a bit more muted you know margin expansion here in the second half and a couple of things we've even talked about in the context of our last quarter earnings. One is just the phasing of investments you know, we're going to continue to invest behind the great growth that we see in data solutions and particularly.
Speaker Change: In our liquid cooling and and also in new products and you see that providing great returns from a topline perspective, so that will phase in over the course of the year I think one specific thing I would call out as we've talked about bringing online some additional capacity in liquid cooling them, specifically and that gets sort of commissioned if you will.
Speaker Change: The midpoint of the year. So there's some ramp up costs associated with that that we'll see here in the back half I think the last point I would just say you know we are beginning to lap some of those mix benefits that we've talked about the last couple of quarters and E F. As in ECM and so are those all included our if you look at it it's still saying you know.
Speaker Change: Good organic growth good profit growth, but we are going to see a bit more of a muted margin expansion in the back half of the year versus the first half and.
Speaker Change: Maybe I would just end by its still early in the year. So it reflects that our perspective as well.
Speaker Change: Alright, thank you.
Speaker Change: The next question will come from Julian Mitchell with Barclays. Please go ahead.
Beth Wozniak: And so, you know, we see a funnel of activity that takes us into, you know, 2025. So our view is, as you start to see those more powerful GPU chips, and it's not only in data centers, eventually, as we look at edge computing, you're going to see this proliferation of these types of components that need to be liquid cooled. And so we feel that liquid cooling has applications even beyond data solutions.
Julian Mitchell: Hi, good morning.
Julian Mitchell: So I just wanted to explore a perhaps a sort of price volume element a little bit more on the top line.
Julian Mitchell: Is it sort of fair to say that the.
Julian Mitchell: The overall organic growth guide total company is sort of split 50 50 price versus volume.
Julian Mitchell: And then you know is it fair to say that you'll guide is sort of embedding volumes outside of data solutions are kind of flattish in 2024.
Beth Wozniak: But we're very positive about what the outlook is for this year and going, you know, going several years into the future. Okay, so strong double digits implies, you know, obviously, closer to 20%. Okay.
Julian Mitchell: So we would expect Julien more volume than price. This year. So we would expect volume to be more than half versus where prices and again, we're going to continue to manage that price plus productivity more than offsetting inflation and investments to be sure and then from a volume perspective outside of data solution.
Sarah: And then just, you know, obviously, the plan has flattish margins. And so I'm just wondering, Sarah, maybe if there's anything we need to consider from the first half to the second half, and how does that sort of flat-out look, you know, across the segment? Yeah, I would say that there's, let me start here. From a first half to a second half, it does include a bit more muted, you know, margin expansion in the second half.
Julian Mitchell: As you know I think we talked a bit about this in our prepared remarks, but we do anticipate industrial growing with some of those positive reassuring in automation, you know trends as well as commercial Wrathy commercial rescue has been strong for us in enclosures and also a bit more muted on the ESI side, but overall I see growth in energy.
Julian Mitchell: With the energy transition plus commercial ramzi and some of the industrial as well. So we do expect volume to be a stronger contributor to that overall organic top line of 3% to 5%.
Sarah: And a couple of things we've even talked about in the context of our last quarter earnings. One is just the phase-in and investments. You know, we're going to continue to invest behind the great growth that we see in data solutions, and particularly in liquid cooling, and also in new products, and you see that providing great returns from a top-line perspective. So that will phase in over the course of the year. I think one specific thing I would call out is we've talked about bringing, you know, online some additional capacity in liquid cooling, specifically, and that gets sort of commissioned, if you will, kind of at the midpoint of the year. So there's some ramp-up costs associated with that that we'll see here in the back half.
Speaker Change: That's great. Thank you and then just a follow up.
Speaker Change: Round, the segment sort of organic growth expectations for the year.
Speaker Change: When you sort of thinking but enclosures kind of leads the growth for the year as a whole as it did exiting 2023.
Speaker Change: And for thermal management, where you're kind of assuming that can turn positive for the rest of the year.
Speaker Change: After Q1, because you get through that last sort of Russia headwind.
Speaker Change: Yes, that's exactly right. So we expect the strongest growth to be in and closures, but we expect E. S. S and thermal both to have positive growth and volume growth in 2024.
Speaker Change: Perfect. Thank you.
Speaker Change: The next question will come from Deane Dray with RBC capital markets. Please go ahead.
Deane Michael Dray: Good morning, everyone. Good morning morning, Hey, can we just circle back on the data solutions business and particularly the capacity expansion.
Sarah: And I think the last point I would just say, you know, we are beginning to lapse in those mixed benefits that we've talked about the last couple quarters in EFS and ECM. And so with those all included, if you look at it, it's still saying, you know, good organic growth, good profit growth, but we are going to see a bit more of a muted margin expansion in the back half of the year versus the first half. Maybe I would just end by saying it's still early in the year, so it reflects that perspective as well.
Deane Michael Dray: In liquid cooling.
Deane Michael Dray: Can you size for us how much capacity you will have put in place you said it would be commissioned mid year.
Deane Michael Dray: But size for us and it sounds like most of that is rear door heat exchangers, that's really where the industry is has the most immediate need and it's the fastest of retrofit but is that fair that most of that is rear door heat exchangers.
Speaker Change: Well, then I want to start with your question of the capacity as you know we opened up a new factory in Mexico, and and as well as we opened a new distribution center here in Minnesota, and what that did is it allowed us to expand capacity at our noga facility and effectively we will have.
Julian Mitchell: Great, thank you. The next question will come from Julian Mitchell with Barclays, please go ahead. Hi, good morning. So I just wanted to explore perhaps the sort of price-volume element a little bit more on the top line. So is it sort of fair to say that the overall Organic Growth Guide total company is sort of split 50-50 price versus volume? And then, you know, is it fair to say that your guide is sort of an embedding volume?
Speaker Change: Double the capacity that we have we're also using some of our other plants globally around the world to increase our content on liquid calling overall, so I would say, we've got strong growth with some of our hyper scaler and some of those solutions and I would see that say that we're also seeing <unk>.
Speaker Change: Our cooling distribution unit grow as well as the rear door heat exchanger. So we've got multiple fronts of where we're driving an expanded portfolio and growth.
Sarah: Outside of data solutions, prices are kind of flattish in 2024. So, we would expect, Julian, more volume, you know, than price this year. So, we would expect volume to be more than half versus where price is. And again, we're going to continue to manage that price plus productivity, more than offsetting inflationary investments to be sure. And then from a volume perspective outside of data solutions, you know, I think we talked a bit about this in our prepared remarks, but we do anticipate industrial growth with some of those positive reshoring and automation trends, you know, as well as commercial resi. Commercial resi has been strong for us in enclosures, you know, and also a bit more muted on the EFS side.
Speaker Change: Alright, that's a great opportunity and then just second question I guess, you can take a victory lap on the new product introductions, because that's almost double what your typical 50, new products goal. Each year is this a new standard.
Speaker Change: Hmm.
Speaker Change: And just where does that take your vitality index.
Speaker Change: Well I want. Thank you, we're really excited about new products, that's really important and.
Speaker Change: It's probably not so much the number as it is just the impact right in terms of and we measure that with revenue as well as vitality. We're on track to get to that 25%, which is what we set out as our midterm target at our Investor day.
Speaker Change: And you know one of the things I would say as you know, we've got more and more focus on velocity through our whole process and that's one of the reasons that you're seeing us launch more products and faster and also our focus on the platforms that allows us to configure off platforms and those are a couple of the things that are really help.
Sarah: But overall, I see growth in energy with the energy transition, you know, plus commercial resi and some of the industrial as well. So, we do expect volume to be a stronger contributor to that overall organic top line of 3 to 5%. That's great.
Speaker Change: US drive our growth, but it's really important and we focus on new products in these high growth verticals like liquid cooling and you know we focus on margin accretion as well.
Sarah: And just to follow up on the segment, sort of organic growth expectations for the year, and the rest of the country. Yes, that's exactly right. So we expect the strongest growth to be in enclosures, but we expect EFS and thermal both to have positive growth and volume growth in 2024.
Speaker Change: Thank you.
Speaker Change: The next question will come from Jeff Sprog with vertical research. Please go ahead.
Jeffrey Todd Sprague: Hey, good morning, everyone.
Jeffrey Todd Sprague: Morning.
Jeffrey Todd Sprague: Good morning, Hey, I Wonder if we could just come back to the tax.
Jeffrey Todd Sprague: You know we've seen a lot of companies talking about the friction from the global minimum tax movements in some of these things going around but.
Deane Michael Dray: Thank you. The next question will come from Deane Dray with RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone.
Jeffrey Todd Sprague: This uptick is a lot more significant than we're seeing at others.
Jeffrey Todd Sprague: Maybe just a little more color on.
Deane Michael Dray: Good morning. Hey, can we just circle back on the data solutions business and, particularly, the capacity expansion in liquid cooling? Can you size for us how much capacity you will have put in place?
Jeffrey Todd Sprague: And of the what the why and the how on you know where we've moved to hear them.
Jeffrey Todd Sprague: Do you think we're kind of sticky at this right now.
Jeffrey Todd Sprague: So Jeff I would say that 23% really captures where we are at today, you know, but no doubt we continue to work our tax planning as we always do and that 23% tax rate really is two things one it does encompass enroll and the impacts of that global tax standard change effect.
Beth Wozniak: You said it would be commissioned mid-year, but size is important for us. And it sounds like most of that is rear door heat exchangers. That's really where the industry has the most immediate need, and it's the fastest to retrofit. But is that fair that most of that is rear door heat exchangers?
Beth Wozniak: Well, Deane, I would, so to start with your question about capacity, as you know, we opened up a new factory in Mexico and, as well as, we opened a new distribution center here in Minnesota. And what that did is it allowed us to expand capacity in our NOCA facility, and effectively, we will have doubled the capacity that we have. We're also using some of our other plants globally around the world to increase our content on liquid cooling overall.
Jeffrey Todd Sprague: Jan one and that was really two and a half point rate increase I mean, that's about 11 cents. The other roughly a point really relates to two things you know higher North American income and really rolling in that impact of ECM. When we expected some of that and as well to kind of carry over into 'twenty two.
Jeffrey Todd Sprague: <unk> four here I think there's a couple of things I said in my prepared remarks here, but I think it's worthy of just noting again is we expect to meaningfully offset the cash tax impact.
Beth Wozniak: So I would say we've got strong growth with some of our hyperscalers and some of those solutions. And I would say that we're also seeing our cooling distribution unit grow as well as the rear door heat exchanger. So we've got multiple fronts where we're driving an expanded portfolio and growth. That's a great opportunity. And then just a second question, I guess you can take a victory lap on the new product introductions because that's almost double what your typical 50 new products goal each year. Is this a new standard? And just where does that take your vitality?
Jeffrey Todd Sprague: This higher rate related to that global tax standard and as we were working kind of the final elements of our tax planning and we really prioritized yeah. The cash flow element of things. So the cash taxes, which is adding a bit you know to our overall tax rate, but all in all in 2024.
Jeffrey Todd Sprague: We expect those cash taxes to be meaningful lower meaningfully lower than the overall tax rate.
Speaker Change: Alright understood and then.
Beth Wozniak: Well, I want one. Thank you. We're really excited about new products. It's really important.
Speaker Change: Just on the data solutions vertical it sounds like it.
Beth Wozniak: And, It's probably not so much the number as it is just the impact, right, in terms of revenue as well as vitality. We're on track to get to that 25%, which is what we set out as our midterm target at our investor day. And, you know, one of the things I would say is that we've got more and more focus on velocity through our whole process, and that's one of the reasons that you're seeing us launch more products and faster. And also our focus on platforms that allows us to configure off platforms. And those are a couple of the things that are really helping us drive our growth. But it's really important.
Speaker Change: Came in at roughly 500, given your kind of $5 50 comment for 2024, but but can you just kind of confirm that where are we where we finished and any other color.
Speaker Change: Power versus cooling inside that number.
So Jeff we finished the year over $450 million and we said, we're well on our way to ought to be over $500 million. This year and I think as we see our growth certainly call. It liquid cooling is increasing in terms of the percentage of that overall revenue as we just see that can.
Speaker Change: To accelerate and you know, we're going to see liquid cooling solutions proliferate into other areas like energy storage are edge devices and industrial over time as well so we see a nice trajectory in and future growth there.
Beth Wozniak: And we focus on new products in these high-growth verticals like liquid cooling. And, you know, we focus on margin accretion as well. Thank you. The next question will come from Jeff Sprague with Vertical Research. Please go ahead. Hey, good morning, everyone.
Jeffrey Todd Sprague: Okay, Great I thought you said 550 for 2020 for my Bad Thank you Paul.
Jeff Sprog: Yes.
Jeff Sprog: The next question will come from Jeff Hammond with Keybanc capital markets. Please go ahead.
Jeffrey Todd Sprague: Hey, good morning, everyone.
Jeffrey Todd Sprague: Morning. Good morning. Hey, I wonder if we could just come back to the tax. You know, we've seen a lot of companies talking about the friction from, you know, the global minimum tax movement and some of these things going around. But this uptick is a lot more significant than we're seeing at others. Maybe just a little more color on kind of the why and the how on, you know, where we've moved to here and how I think we're kind of stuck right now. So Jeff, I would say that 23% really captures, you know, where we are at today, but no doubt we will continue to work out our tax planning as we always do. And that 23% tax rate really is two things.
Jeffrey Todd Sprague: Morning, Jeff.
Jeffrey Todd Sprague: Just just on the order rates I think you sit down slightly I don't know what were kind of the trends through the quarter or if there are any segments that they grew or or maybe more of an outlier within that.
Jeffrey Todd Sprague: Okay.
Jeffrey Todd Sprague: You know the Q4 always is when you get through the end of the year in it and distributors are looking at their inventory position I mean, I I don't know that there's any trend there I would just comment that we actually did see E. S. S orders are positive in the quarter.
Speaker Change: Okay, and then would you expect those orders to kind of Reaccelerate. Once you get through this destocking. It sounds like you think it's done.
Speaker Change: You know I don't know I don't I think the word I would say is that there are slowly going to adjust and build so I made the comment that we saw positive sell through and so what we do expect is that over time, we're going to see inventory levels build but I wouldn't call that an acceleration I would say that you know the.
Sarah: One, it does encompass and roll in the impacts of that global tax standard change, effective from Gen 1, and that was really a two and a half point rate increase, and that's at 11 cents. The other roughly a point really relates to two things, you know, higher North American income and really rolling in that impact of ECM, and we expected some of that as well to kind of carry over into 2024 here. I think there are a couple of things I said in my prepared remarks here, but I think it's worth noting again is that we expect to meaningfully offset the cash tax impact of this higher rate related to that global tax standard. And as we were working kind of the final elements of our tax planning, you know, we really prioritized, you know, the cash flow element of things, so the cash taxes, which is adding a bit, you know, to our Right, I understand.
Speaker Change: Will slowly improve.
Speaker Change: Okay, and then you see on my head came in a little bit light.
Speaker Change: My model I didn't know if that was some slowness or seasonality of the business or any other timing issues.
Speaker Change: Yeah, Jeff I think that's basically just seasonality was right, where we had expected it to be we talked a little bit about this last quarter that well. It is seeing some of the residential headwinds the distribution part of that business continues to grow and it did so in Q4 as well. So you can think about that ECM business.
Speaker Change: Nowadays standpoint, Ive to look a lot like the ESI business.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Yeah.
Speaker Change: The next question will come from Brian Drab with William Blair. Please go ahead.
Brian Drab: Hi, good morning, Thanks for taking my questions.
Brian Drab: I was wondering first in the thermal business did you see any impact from warmer weather, especially in some of the industrial applications and Encana.
Brian Drab: In Canada.
Jeffrey Todd Sprague: And then just on the data solutions vertical, it sounds like it came in at roughly 500, given your kind of 550 comment for 2024. But can you just kind of confirm that where we finished and any other color kind of power versus cooling inside that number? So, Jeff, we finished the year over $450 million, and we said we were well on our way, you know, to be over $500 million this year. And I think as we see our growth, certainly liquid cooling is increasing in terms of the percentage of that overall revenue, as we just see that continue to accelerate. And you know, we're going to see liquid cooling solutions proliferate into other areas like energy storage or edge devices and industrial applications over time as well. So we see a nice trajectory and future growth there. Okay, great. I thought you said $5.50 for 2024. My bad. Thank you. Your next question will come from Jeff Hammond with KeyBank Capital Markets. Please go ahead. Hey, good morning, everyone. Good morning. Morning, Jeff.
Brian Drab: Oh, I I would say, we actually saw our product sales in the quarter you know in proven inquiries. So you know and some of that is just inventory levels were down in the channels and when there were pockets of cold weather, we saw product sales increase.
Brian Drab: So you know nothing to call out or note there really.
Brian Drab: Okay.
Not affecting your outlook really for the thermal business in terms of like the MRO and those colder regions.
Speaker Change: C C.
Speaker Change: Or weather isn't really a trend that youre seeing thats a concern in the near term.
Speaker Change: Yes.
Speaker Change: Not not in the not in the near term and I think one of the things as we talk about the energy transition. It actually takes more content more controlling elements and because you're trying to maintain a temperature and so remember our thermal business isn't just about heating.
Speaker Change: Ah freeze protection, it's also about maintaining process temperature and so we actually see that the energy transition with de carbonization in LNG and clean fuels and Biofuels.
There's a great opportunity in front of us.
Speaker Change: Okay, Yes, sorry.
Was dwelling on that point a little bit.
Speaker Change: One of your main competitors talked a lot about that.
Beth Wozniak: Pete, just on the order rates, I think you said down slightly. I don't know what kind of trends there were through the quarter or if there were any segments that grew or maybe more of an outlier within that. You know, Q4 always, as we get through the end of the year and distributors are looking at their inventory position, I mean, I don't know that there's any trend there. I would just comment that we actually did see EFS orders positive in the quarter. Okay, and then would you expect those orders to kind of re-accelerate once you get through this, you know, D-stock? It sounds like you think it's done.
Speaker Change: Recently, so I just wanted to get a sense for if that was impacting you and then the last question for me is could you comment at all on the gross margin trajectory for.
Speaker Change: The year and whether any of the capacity additions that you're putting in place right.
Speaker Change: Does it have any put any ups and downs into the forecast for gross margin 24. Thank you.
Speaker Change: Yes.
Speaker Change: Yeah, So we talked about that a bit earlier, meaning from a margin perspective, we believe it's going to be stronger than the first half versus the second half in part you know youre going to have E. C. M. Rolling in here incrementally and that is accretive to the overall you know invent margins, but in the back half, we expect that to be a bit more muted.
Speaker Change: With those phased in investments you know R&D new products.
Beth Wozniak: You know, I don't think the word I would say is that they're slowly going to adjust and build. So I made the comment that we saw positive sell-through, and so what we do expect is that over time, we're going to see inventory levels build, but I wouldn't call that an acceleration. I'd say that, you know, they'll slowly improve. Okay, and then the ECM I had came in a little bit light versus my model.
Speaker Change: As well as in our high growth verticals, including as you just alluded to some of those ramp up costs as we put you know.
Speaker Change: Some of our new capacity lines into commission. If you will I think the other thing just to keep in mind and again. This is consistent with what we called out the last quarter or two we did have some mixed benefits and the F. As in ECM businesses that we'll be getting to laugh, but you know all in you know expect you know good topline growth as well as good profit growth.
Beth Wozniak: I didn't know if that was some slowness or, you know, seasonality of the business or any other timing issues. Yeah, Jeff, I think that's basically just seasonality. It was right where we had expected it to be.
Speaker Change: Understood. Okay. Thanks for taking my questions.
Bath sticky: The next question will come from blood Bath sticky with Citigroup. Please go ahead.
Speaker Change: Hey, good morning.
Speaker Change: For taking my call.
Speaker Change: Good morning.
Citigroup: So I just wanted to ask I think you mentioned in your comments that you saw eat pack up low double digits with solid growth in China.
Sarah: We talked a little bit about this last quarter that, well, it is seeing some residential headwinds. But the distribution part of that business continues to grow, and it did so in Q4 as well. So you can think about that ECM business from a seasonality standpoint to look a lot like the EFS business. Okay, thanks a lot. The next question will come from Brian Drab.
Blood Bath: So and obviously, we've seen sort of growing concerns around the China macro outlook can you just talk about.
Blood Bath: What was really behind that strength that you saw and how you're thinking about the outlook for China going forward.
Blood Bath: Well first of all remember you know China represents.
Speaker Change: You know less than 5% of our sales so it's not significant.
Speaker Change: And over the last several years, we've really focused our.
Brian Drab: Hi, good morning. Thanks for taking my questions. I was wondering, first, in the thermal business, did you see any impact from warmer weather, especially in some of the industrial applications and, in Canada? I would say we actually saw our product sales in the quarter improve and increase. So, you know, and some of that was just inventory levels were down in the channels, and when there were pockets of cold weather, we saw product sales increase. So, you know, nothing to call out or note there, really.
Speaker Change: On the high growth verticals in China, and so therefore, that's where where you know where we think we can win and be competitive and so we saw some growth in both our enclosures segment, where we focus on areas like transportation or data solutions and we saw some growth in our thermal management business with some of our.
Speaker Change: Our focus on key projects in particular chemical so I think for US, it's really been knowing where the growth is and ensuring that you know we are very focused on those key high growth verticals, but overall, it's not a significant portion of our portfolio.
Beth Wozniak: Okay, and so that's not really affecting your outlook for the thermal business in terms of the MRO in those colder regions. So, warmer weather isn't really a trend that you're seeing that's a concern in the near term for that business? Not in the near term, and I think one of the things is that we talk about the energy transition. It actually takes more content, more controlling elements, and because you're trying to maintain a temperature.
Speaker Change: Understood and that's helpful color and then just on the on the capital allocation front.
Speaker Change: With net leverage announced group back down towards the lower end of your target range.
Speaker Change: Can you just talk about how you're thinking about the potential core.
Speaker Change: Sizable incremental M&A in sort of your capacity from a management perspective, as you're still integrating ECM and tech so to do that.
Beth Wozniak: And so, remember, our thermal business isn't just about heating, you know, freeze protection. It's also about maintaining process temperatures. And so, we actually see that the energy transition with decarbonization and LNG and clean fuels and biofuels is that there's a great opportunity in front of us. Okay, yeah, sorry if I was dwelling on that point a little bit. It's just one of your main competitors talked a lot about that recently, so I just wanted to get a sense for if that was impacting you. And then the last question for me is, could you comment at all on the gross margin trajectory for the year and whether any of the capacity additions that you're putting in place might have any, you know, put any ups and downs into the forecast for gross margin 24. Thank you.
Speaker Change: The larger M&A.
Speaker Change: So I think from a standpoint of we've now done six deals as a company and you know I think we've got a good track record of driving both growth and returns and we have a framework that we've shared at our Investor day about how we think about great portfolios.
Speaker Change: And our view is where we think about our ability to execute as well, but over the course of the year. We would expect that we're going to have the opportunity to pursue some M&A and you never quite control the timing of when M&A happens, but as we always think.
Speaker Change: [noise] about it we want to make sure that they're the right strategic deals that we have the ability to execute and the ability to scale those opportunities and generate the returns.
Speaker Change: Great. Thanks for the color.
Speaker Change: The next question will come from Scott Graham with Loeb. Please go ahead.
Sarah: Yeah, so we talked about that a bit earlier, meaning from a margin perspective, we believe it's going to be stronger in the first half versus the second half. In part, you know, you're going to have ECM rolling in here incrementally, and that is accretive to the overall, you know, operating margins. But in the back half, we expect that to be a bit more muted with those phased-in investments, you know, R&D, new products, as well as in our high-growth verticals, including, as you just alluded to, some of those ramp-up costs as we put, you know, some of our new capacity lines into commission. And I think the other thing, just to keep in mind, and again, this is consistent with what But, you know, all in all, expect, you know, good top-line growth as well as good profit growth. Understandable, okay?
Scott Graham: Yes, hi, good morning.
Scott Graham: So.
Scott Graham: First of all congratulations on another terrific quarter great execution.
Scott Graham: I wanted to take the last question, maybe the next step.
Scott Graham: If we go to the high end of your target.
Scott Graham: Target leverage it seems like you will have this year.
Scott Graham: Another billion dollars to be able to deploy again at the high end and I'm just yes.
Scott Graham: And that does not include what you get back an EBITDA right. So that's just the one pass.
Scott Graham: I'm just wondering is your pipeline.
Scott Graham: What does it look like.
Scott Graham: Which of the areas maybe of the company, maybe you could share with us where it's a little bit stronger than you.
Scott Graham: You know a $1 billion in capacity would mean that you can kind of do this year, which you did last year is that possible.
Speaker Change: Well, here's what I would say our pipeline is very strong.
Speaker Change: And you know, we and as you know you'll have to cultivate relationships because sometimes we're doing deals where we know no. If those companies. Sometimes there is an auction process. So we feel very good in terms of our pipeline and the opportunity to pursue a deal or two like we did last year.
Vlad Bystricky: Thanks for taking my question. The next question will come from Vlad Bystricky with Citigroup. Please go ahead.
Beth Wozniak: Good morning, thanks for taking my call. So, I just wanted to ask you what you mentioned in your comments that you saw a pack of low double digits with solid growth in China. So, and obviously, we've seen, you know, sort of growing concerns around the Chinese macro outlook. Can you just talk about what was really behind that strength that you saw and how you think about the outlook for China going forward? Well, first of all, remember that China represents less than 5% of our sales. So it's not significant.
Speaker Change: And you know one of the things that we've said is it has to be a great product portfolio and our high growth vertical so what you've seen us do in the last couple of years. Our we've done some deals that are focused around data solutions. We've done some deals that have given us a portfolio around cooling that we can expand into areas.
Speaker Change: Like industrial and energy storage. So overall you know, we just think high growth vertical focus great product portfolio that we can scale and that we have the ability to execute so again acquisitions have been a key part of our growth strategy.
Speaker Change: Understood.
Speaker Change: It was also wondering within that.
Speaker Change: Sara does ECM pose any restrictions on that segment.
Sara: Sure M&A.
Beth Wozniak: And over the last several years, we've really focused on the high-growth verticals in China. And so, therefore, that's where we are, you know, where we think we can win and be competitive. And so we saw some growth in both our enclosure segment, where we focus on areas like transportation or data solutions, and we saw some growth in our thermal management business with some of our focus on key projects, in particular chemical. So I think for us, it's really been knowing where the growth is and ensuring that, you know, we are very focused on those key high-growth verticals. But overall, it's not a significant portion of our portfolio, understood, and that's helpful color, and then just on the capital allocation front with net leverage now sort of back down toward the lower end of your target range.
Sara: So I'll answer that so I think from the standpoint of whenever we do a deal we think about our ability to execute and we think about that by segment, we think about that by geography. So.
Sara: You know will you know at the time, you know windows opportunity does arise that'll be part of our consideration.
Speaker Change: Got it. Thank you my last question is.
Sara: On the organic in.
Sara: This is just sort of a question by vertical I know you were super fast by segment earlier.
Sara: I'm, assuming that infrastructure will lead again with data center in there I was just wondering if you might be able to rank the other three verticals and what you're thinking is for organic this year.
Speaker Change: Yeah, so within that 3% to 5% organic growth infrastructure by far really you know we continue to see that you know growing.
Speaker Change: Strong double digits in industrial we also expect to see growth in the industrial really fueled by re shoring and some of these stronger secular trends.
Speaker Change: In commercial we expect to see more modest growth in commercial whereas he being you know soft you can kind of look at that is roughly flat and then energy growing and importantly, with the energy transition and we see some strong backlog do we see that as a strong backlog of thermal management.
Beth Wozniak: Can you just talk about how you're thinking about the potential for sizable incremental M&A and sort of your capacity from a management perspective as you're still integrating ECM and Texa to do larger M&A? So I think from a standpoint of having now done six deals as a company, and, you know, I think we've got a good track record of driving both growth and return, and we have a framework that we shared at our investor day about how we think about great portfolios. And our view is we think about our ability to execute as well, but over the course of the year, we would expect that we're going to have the opportunity to pursue some M&A. And you can never quite control the timing of when M&A happens, but as we always think about it, we want to make sure that they're the right strategic deals, that we have the ability to execute, and the ability to scale those opportunities and generate the return. Great Thanks for the call. The next question will come from Scott Graham with Loop. Please go ahead. Hi, good morning.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: The next question will come from David Silver with C. L. King. Please go ahead.
Speaker Change: Okay.
David Silver: Yeah, Hi, good morning, Thank you.
David Silver: Good morning.
David Silver: Good morning, a couple of questions and I hope I Didnt Miss this earlier.
David Silver: Earlier, but I was hoping you did make several comments about the ECM acquisition I'm not really sure I may have missed this but did you provide kind of an accretion.
David Silver: Total for.
David Silver: The time that it was part of your portfolio in 2023 or maybe for the fourth quarter I recall, you talked about the sales the revenue growth impact, but wondering about about that and then maybe in terms of the synergy capture I mean would it be reasonable to expect the first half of 'twenty four.
Scott Graham: So, first of all, congratulations on another terrific quarter, great execution. Um, I wanted to take the last question, maybe the next step, you know, if we go to the high end of your, you know, target leverage, it seems like you will have this year another billion dollars to be able to deploy, again, at the high end. And I'm just, and that does not include, you know, what you get back in EBITDA, right? So that's just the one pass. I'm just wondering what your pipeline looks like. You know, which areas of the company maybe you can share with us where it's a little bit stronger and, you know, a billion dollars in capacity would mean that you could kind of do this year what you did last year. Is that possible?
You know to have incremental accretion above and beyond what we saw in 2023. Thank you.
Speaker Change: Yeah, So David when completed and you see them acquisition mid May and that's contributed 16 cents to EPS in 2023, so well above our initial estimations of that being eight to 10 cents. So strong contribution there and obviously, we expect some carryover benefit in 2020.
Speaker Change: For and think about that in that kind of seven to eight range here benefiting mostly Q1, but some into Q2 as well.
Speaker Change: Yes.
David Silver: Okay, Great I have a question about your Capex budget.
Beth Wozniak: Well, here's what I would say. Our pipeline is very strong, and as you know, you have to cultivate relationships because sometimes we're doing deals where we know of those companies. Sometimes it's an auction process.
Speaker Change: Who you know your company had had a.
Speaker Change: Trend line Capex with a I don't know $40 million to $45 million for several years before 2023.
Speaker Change: And you're guiding to a number basically double that next year.
Beth Wozniak: So we feel very good in terms of our pipeline and the opportunity to pursue a deal or two like we did last year. And one of the things that we've said is that it has to be a great product portfolio and a high growth vertical. So what you've seen us do in the last couple of years, we've done some deals that are focused around data solutions.
Speaker Change: And I'm, mostly interested in the discretionary portion of that budget, but beyond I guess, some liquid cooling, although I think a lot of the spend has been done already but where should where should we think that the highest priorities for your discretionary portion of your 2020 for capex.
Beth Wozniak: We've done some deals that have given us a portfolio around cooling that we can expand into areas like industrial and energy storage. So overall, you know, we just think high growth, vertical focus, great product portfolios that we can scale and that we have the ability to execute. So again, acquisitions have been a key part of our growth strategy. I just was also wondering within that, Sarah; does ECM pose any restrictions on that?
Speaker Change: Spend is going to be directed thank you.
Speaker Change: Yeah.
Speaker Change: Well, maybe I would start by saying you know that higher cut backs really started in the context of 2023, yeah. So that cut backs grew over 40% or over 50% year on year really reflecting some fold in our bcm, but really mostly investments in our capacity and capacity.
Speaker Change: You're ahead of the great demand and visibility that we see in data solutions.
But also new products as well as just underlying growth and productivity. So we go through a.
Speaker Change: Rigorous kind of capital a prioritization process and look at them prioritizing growth and ensuring that we've got the right productivity and more so you know if you look at kind of allocation of that capital this year versus where it's been in the past more and more of that capital is being allocated towards <unk>.
Scott Graham: for M&A. So I'll answer that. So, you know, from the standpoint of whenever we do a deal, we think about our ability to execute, and we think about that by segment, and we think about that by geography. So, you know, we'll, you know, as a time, when those opportunities arise, that'll be part of our consideration. God, thank you.
Speaker Change: And we have you know strict.
Returns I'm very focused on that return on invested capital in order to help us prioritize that overall. So you can think of that elevated capex really in the context of burst capacity and second being the products are really third probably being new digital platforms really helping to enable.
Scott Graham: My last question is on organic. And this is just sort of a question by vertical. I know you were sort of asked by segment earlier. I'm assuming that infrastructure will lead again with data center in there. We're just wondering if you might be able to rank the other three verticals and what you're thinking about organic this year.
Speaker Change: That growth in productivity and then from there you know, we rack and stack based on returns.
Speaker Change: Okay.
Speaker Change: Okay very helpful I'm going to sneak in one more and I will stipulate that this question is probably impossible to answer.
Beth Wozniak: Yeah, so within that 3% to 5% organic growth, infrastructure will by far lead. You know, we continue to see that, you know, growing strongly double digits. Industrial, we also expect to see growth in the industrial sector really fueled by reshoring and some of these stronger secular trends. And commercial, we expect to see more modest, you know, growth in commercial. Resi being, you know, soft, you can kind of look at that as roughly flat.
Speaker Change: Precisely.
Speaker Change: But you know.
Speaker Change: It's been mentioned it has to do with tax policies and what we should think about when we're modeling maybe the out years for your company.
Speaker Change: So you know you are kind of indicating there is going to be a step up in kind of your permanent tax rate going forward and again I'm I'm fudging, the cash tax versus nominal rate, but you know the tax regime is getting a little tighter here.
Beth Wozniak: And then energy growing, importantly, with the energy transition. And we see some strong backlog. We see that in the strong backlog of thermal management. Thank you. The next question will come from David Silver with C.L. King.
Speaker Change: As you look out you know on the various issues some of which you touched on here.
Speaker Change: What do you think that there's going to be further incremental you know <unk>.
David Silver: Please go ahead. Yeah, hi, good morning. Thank you. Good morning. Good morning.
Speaker Change: Next Asian issues to deal with.
Speaker Change: Let's say beyond 2024 in other words should we.
David Silver: A couple of questions, and I hope I didn't miss this earlier, but I was hoping you made several comments about the ECM acquisition. I'm not really sure, I may have missed this, but did you provide kind of an accretion total for the time that it was part of your portfolio in 2023 or maybe for the fourth quarter. I recall you talked about the sales, the revenue growth impact, but I was wondering about that. And then maybe, in terms of synergy capture, would it be reasonable to expect the first half of 24, you know, to have incremental accretion above and beyond what we saw in 2023. Yeah, David, we've completed the ECM acquisition in mid-May, and that's contributed $0.16 to EPS in 2023, so well above our initial estimations of that being $0.08 to $0.10, so a strong contribution there. And obviously, we expect some carryover benefit in 2024. And think about that in that kind of $0.07 to $0.08 range here, benefiting mostly Q1, but some into Q2 as well. Okay, great.
Speaker Change: Pencil and a somewhat higher tax rate for 2025 and beyond thank you.
Speaker Change: Yeah. So I wouldn't begin to speculate on what future tax regulations may or may not come to fruition I would just come back to kind of our tax planning now that change in global tax standards was one of the bigger tax changes that we've seen in quite some time, we did a rigorous tax planning there.
Speaker Change: Really prioritizing that cash flow aspect of things and we're going to continue to work with her evolving regulations and work that effective tax planning accordingly.
Speaker Change: Okay very good I appreciate the help thank you.
Speaker Change: Okay.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to MS. Beth Wozniak for any closing remarks. Please go ahead.
Beth Wozniak: Thank you for joining us. This morning, we are proud of our strong 2023 and believe the electrification of everything sustainability and digitalization are driving demand for our products and solutions.
Beth Wozniak: We are excited for 2024.
Beth Wozniak: I am grateful for the outstanding work of our team to support our customers and execute on our growth strategy. Thanks again for joining US. This concludes the call.
Sarah: I have a question about your CapEx budget. So, you know, your company had a trend line capex of I don't know 40 to 45 million for several years before 2023, and you know you're guiding to a number basically double that next year. And I'm mostly interested in the discretionary portion of that budget, but, you know, beyond, I guess, some liquid cooling, although I think a lot of the spend has been done already, but where should we think that the highest priorities for your discretionary portion of your 2024 CAPEX spend are going to be directed? Thank you.
Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Speaker Change: [music].
David Silver: Well, maybe I would start by saying, you know, that higher CapEx really started in the context of 2023, so that CapEx grew over 40% or over 50% year on year, really reflecting, you know, some growth in that VCM, but really mostly investments in our capacity and capacity ahead of the great demand and visibility that we see in data solutions, but also new products, as well as just underlying growth and productivity. So we go through a rigorous kind of capital prioritization process and look at prioritizing growth and ensuring that we've got the right productivity, and more so, you know, if you look at the kind of allocation of that capital this year versus where it's been in the past, more and more of that capital is being allocated to growth, and we have, you know, strict returns, very focused on that return on invested capital.
David Silver: In order to help us, you know, prioritize that overall, so you can think of that elevated CapEx really in the context of first, you know, capacity, and second being new products, and third probably being new digital platforms really helping to enable that growth and productivity, and then from there, you know, we rack and stack based on returns. Okay, very helpful. I'm going to sneak in one more, and I will stipulate that this question is probably impossible to answer precisely.
Speaker Change: Hum.
Speaker Change: [music].
David Silver: But, you know, it's been mentioned, it has to do with tax policies and what we should think about when we're modeling maybe the future years for your company. So, you are kind of indicating there is going to be a step up in kind of your permanent tax rate going forward. And again, I'm fudging the cash tax versus nominal tax rate.
Speaker Change: Yeah.
Speaker Change: [music].
Sarah: But, you know, the tax regime is getting a little tighter here. As you look out, you know, on the various issues, some of which you touched on here. Would you think that there are going to be further incremental taxation issues to deal with, let's say, beyond 2024? In other words, should we, you know, pencil in a somewhat higher tax rate for 2025 and beyond? Yeah, so I wouldn't begin to speculate on what future tax regulations may or may not come to fruition.
David Silver: I would just come back to kind of our tax planning. That change in global tax standards was one of the bigger tax changes that we've seen in quite some time. We did a lot of rigorous tax planning there, really prioritizing that cash flow aspect of things. And we're going to continue to work with, you know, evolving regulations and work on that effective tax planning accordingly.
Sarah: Okay, very good. I appreciate the help. Thank you. This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Beth Wozniak for any closing remarks. Please go ahead.
Beth Wozniak: Thank you for joining us this morning. We are proud of our strong 2023 and believe the electrification of everything, sustainability, and digitalization are driving demand for our products and solutions. We are excited for 2024.
Operator: I am grateful for the outstanding work of our team to support our customers and execute on our growth strategy. Thanks again for joining us; this concludes the call. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Nigel Coe, Jeffrey Sprague, Nigel Coe, Michael Halloran. Thank you for watching! BF-WATCH TV 2021, nVent Electric PLC BF-WATCH TV 2021, transcript Emily Beynon nVent Electric PLC
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Speaker Change: [music].