Q1 2024 nVent Electric PLC Earnings Call

Operator: Good day, and welcome to the nVent Electric First Quarter 2024 Earnings Conference Call. All participants will be in listen-only mode.

Good day and welcome to the end than electric first quarter 2024 earnings Conference call.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead. Thank you, and welcome to nVent's first quarter.

Vince will be in listen only mode should you need assistance. Please signal a conference specialist by pressing star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Tony Friday, Vice President of Investor Relations. Please go ahead.

Tony Riter: Thank you, and welcome to nVent's first quarter 2024 earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer, and Sara Zawoiski, our Chief Financial Officer.

Tony Friday: Thank you and welcome to invest first quarter 2024 earnings call.

Tony Friday: On the call with me are Beth Wozniak, our chair and Chief Executive Officer.

Tony Friday: And serves the whiskey, our chief financial Officer.

Tony Friday: They will provide details on our first quarter performance and outlook for the second quarter and an update to our full year outlook.

Tony Riter: They will provide details on our first quarter performance, and I'll look for the second quarter and an update on our full year. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission. Four look-in statements are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.

Before we begin let remind you that any statements made about the company's anticipated financial results are forward looking statements subject to future risks and uncertainties such as the risks outlined in today's press release and filings with the Securities and Exchange Commission.

Tony Friday: Forward looking statements are made as of today.

Tony Friday: And the company undertakes no obligations to update publicly such statements to reflect subsequent events or circumstances.

Tony Riter: 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 nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for questions after our prepared remarks. With that, please turn to slide three, and I'll turn the call over to Beth. Thank you, Tony.

Tony Friday: Actual results could differ materially from anticipated results.

Tony Friday: Today's webcast is accompanied by a presentation, which you can find it.

Tony Friday: Mr Section of <unk> website.

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

Speaker Change: Well have time for questions. After our prepared remarks with that please turn to slide three and I will now turn the call over to that.

Beth A. Wozniak: Thank you, Tony, and good morning, everyone. We had another great quarter. We continue to execute on our growth strategy, focused on high-growth verticals, new products, global expansion, and acquisition. We had impressive volume growth, margin expansion, and robust free cash flow. We continue to see AI accelerate demand for our data solutions offering.

Speaker Change: Thank you Tony and good morning, everyone I'm pleased to be with you today to share our first quarter results. We had another great quarter. We continued to execute on our growth strategy focused on high growth verticals, new products global expansion and acquisitions.

Speaker Change: We had impressive volume growth margin expansion and robust free cash flow.

Speaker Change: We continue to see a I accelerate demand for our data solutions offerings.

Beth A. Wozniak: We also recently published our 2023 Sustainability Report, which highlights significant progress on our ESG goals, including adding two new goals. Overall, we are pleased with the strong start to the year and are raising our full year adjusted EPS guidance. Now on to slide four for a summary of our first quarter performance.

Speaker Change: <unk> also recently published our 2023 sustainability report, which highlight significant progress on our ESG goals.

Speaker Change: Including adding two new golf.

Speaker Change: Overall, we are pleased with the strong start to the year and are raising our full year adjusted EPS guidance.

Beth A. Wozniak: First quarter sales were up 18%. On an organic basis, sales grew 5% on top of 8% growth a year ago, with growth across all geographic regions. New products contributed over three points to our sales growth, and we launched 17 new products in the quarter. Orders in the quarter grew low single digits, and sellout through our key distribution partners remained positive. We believe the distribution channel has largely completed its inventory adjustment. From a segment standpoint, enclosures had strong sales growth driven by data solutions. As expected, electrical and fastening solutions were down due to a decline in infrastructure with customer and channel inventory normalization.

Speaker Change: Now onto slide four for a summary of our first quarter performance.

Speaker Change: First quarter sales were up 18% on an organic basis sales grew 5% on top of 8% growth a year ago with growth across all geographic regions new products contributed over three points to our sales growth and we launched 17 new products in the quarter.

Orders in the corner grew low single digits and spell out through our key distribution partners remain positive.

Speaker Change: We believe the distribution channel has largely completed their inventory adjustments.

Speaker Change: From a segment standpoint enclosures had strong sales growth driven by data solutions as.

Speaker Change: Expected electrical <unk> fastening solutions was down due to decline in infrastructure with customer and channel inventory normalization.

Beth A. Wozniak: Thermal management continued to improve sequentially, and we believe it is positioned for growth the rest of the year. Looking at our key verticals, infrastructure led the way, up low teens with data solutions growing strong double digits. Industrial grew low single digits with all segments up. Commercial Resi also grew low single digits. And finally, energy was down, impacted by our exit from Russia a year ago.

Speaker Change: Thermal management continued to improve sequentially and we believe is positioned for growth the rest of the year.

Speaker Change: Looking at our key verticals infrastructure led the way up low teens with data solutions growing strong double digits.

Speaker Change: Industrial grew low single single digits with all segments up.

Speaker Change: Commercial revenue also grew low single digits, and finally energy was down impacted by our exit from Russia, a year ago.

Beth A. Wozniak: Turning to organic sales by geography, we continue to see broad-based growth led by North America, up mid-single digits. Europe grew low single digits, and Asia-Pacific grew high single digits, with solid growth in China. Lastly, segment income grew 30% year-over-year, with return on sales up an impressive 200 basis points. Adjusted EPS grew 15% on top of 34% a year ago, and free cash flow grew 41% year over year. Looking ahead, for full-year guidance, we are maintaining our sales outlook and raising our adjusted EPS range, reflecting our strong start to the year. We expect electrification, sustainability, and digitalization to continue to drive demand. We're on track for another great year.

Speaker Change: Turning to organic sales by geography, we continued to see broad based growth led by North America up mid single digits.

Speaker Change: Europe grew low single digits and Asia Pacific grew high single digits with solid growth in China.

Speaker Change: Lastly segment income grew 30% year over year with return on sales up an impressive 200 basis points.

Speaker Change: Adjusted EPS grew 15% on top of 34% a year ago and free cash flow grew 41% year over year.

Speaker Change: Looking ahead for full year guidance, we are maintaining our sales outlook and raising our adjusted EPS range, reflecting our strong start to the year.

Speaker Change: We expect electric electrification sustainability and digitalization to continue to drive demand we're on track for another great year.

Beth A. Wozniak: From a vertical perspective, we expect infrastructure to have the strongest growth, benefiting from the electrification and digitalization trends. We expect continued strong growth in data solutions, particularly our liquid cooling solutions given the acceleration of AI. In commercial, we anticipate modest growth with residential being soft. In energy, we expect growth driven by the energy transition, in particular LNG, clean fuels, carbon capture, and hydrogen.

Speaker Change: From a vertical perspective, we expect infrastructure to have the strongest growth benefiting from the electrification and digitalization trends. We expect continued strong growth in data solutions.

Speaker Change: Particularly our liquid cooling solutions, given the acceleration of AI.

Speaker Change: In commercial we anticipate modest growth with residential being soft.

Speaker Change: In energy, we expect growth driven by the energy transition in particular, LNG clean fuels carbon capture and hydrogen.

Beth A. Wozniak: Overall, I'm proud of our nVent team and how we continue to perform and deliver impressive results. I will now turn the call over to Sara for further detail on our first quarter results and our updated outlook for 2024. Sara, please go ahead.

Speaker Change: Overall, I'm proud of our inventing and how we continue to perform and deliver impressive results I will now turn the call over to Sarah for further detail on our first quarter results and our updated outlook for 2020 for Sara. Please go ahead.

Sara E. Zawoyski: Thank you, Beth. Let's begin on slide five with our first quarter results. We are off to a great start to the year. Organic sales growth and adjusted EPS exceeded guidance, and execution was strong. Sales of $875 million were up 18% relative to last year, or 5% organically. Volumes were up four points, and price added one point to growth. Acquisitions added $98 million to sales or 13 points to growth; foreign exchange was roughly flat.

Sarah: Beth let's begin on slide five with our first quarter results. We are off to a great start to the year organic sales growth and adjusted EPS exceeded guidance and execution was strong.

Sarah: Sales of $875 million were up 18% relative to last year or 5% organically volumes were up four points and price added one point to growth.

Sarah: Acquisitions added $98 million to sales or 13 points to growth.

Sarah: Foreign exchange was roughly flat.

Sara E. Zawoyski: First quarter segment income was $192 million, up 30%, with incrementals of 33%, return on sales was 22% of 200 basis points year over year. Price plus productivity more than offset investments and total inflation of roughly $20 million. As expected, the ECM acquisition was accretive to return on sales.

Sarah: First quarter segment income was $192 million up 30% with Incrementals of 33%.

Sarah: Return on sales was 22% up 200 basis points year over year.

Sarah: Price plus productivity more than offset investment and total inflation of roughly $20 million.

Sarah: As expected the ECM acquisition was accretive to return on sales.

Sara E. Zawoyski: Q1 adjusted EPS was $0.77, up 15%, and above the high end of our guidance range. Acquisitions contributed a strong six cents in the quarter. We generated robust free cash flow of $74 million, up 41% compared to a year ago, reflecting our strong operational performance. Now, please turn to slide six for a discussion of our first quarter segment performance. Starting with enclosures, the team delivered a fantastic quarter. Sales of $440 million increased 13%. The TEXA acquisition added two points to sales.

Q1, adjusted EPS was <unk> 77 up 15% and above the high end of our guidance range.

Acquisitions contributed a strong six cents in the quarter.

Sarah: We generated robust free cash flow of $74 million up 41% compared to a year ago, reflecting our strong operational performance.

Sarah: Now please turn to slide six for a discussion of our first quarter segment performance starting.

Sarah: Starting with enclosures the team delivered a fantastic quarter.

Sales of $440 million increased 13% the tax the acquisition added two points to sales.

Sara E. Zawoyski: Organically, sales increased 11% on top of 11% growth a year ago. This included high single-digit volume growth and positive price. Infrastructure Group Strong Double Digits, led by Data Solutions. Industrial and Commercial Resi each grew low single digits.

Sarah: Organically sales increased 11% on top of 11% growth a year ago.

Sarah: This included high single digit volume growth and positive price.

Sarah: Infrastructure grew strong double digits led by data solutions industrial and commercial Rasey. Each grew low single digits geographically North America led up low teens, followed by Europe up mid single digits.

Sara E. Zawoyski: Geographically, North America led, up low teens, followed by Europe, up mid-single digits. Enclosure's first quarter segment income was $95 million, up 15%. Return on sales of 21.6% increased 50 basis points year-over-year, driven by strong growth and execution, but we continue to make significant growth investments, moving to electrical and fastening.

Sarah: And closures first quarter segment income was $95 million up 15%.

Sarah: Return on sales of 21, 6% increased 50 basis points year over year, driven by strong growth and execution, while we continued to make significant growth investments.

Sara E. Zawoyski: Sales of $292 million increased 42%. The ECM acquisition contributed 44 points to sales growth. However, organic sales were down 3%, reflecting higher prices and lower volume.

Sarah: Moving to electrical <unk> fastening sales of $292 million increased 42%.

Sarah: E C M acquisition contributed 44 points to sales growth.

Sarah: Organic sales were down, 3%, reflecting positive price and lower volumes.

Sara E. Zawoyski: Industrial and Commercial Resi each grew in the quarter, but this was more than offset by a decline in infrastructure due to customer and channel inventory normalization and a strong prior year comparison. Geographically, organic sales declined in North America and Europe, while Asia-Pacific was up.

Sarah: Industrial and commercial ready each grew in the quarter.

Sarah: This was more than offset by a decline in infrastructure due to customer and channel inventory normalization and a strong prior year comparison.

Geographically organic sales declined in North America, and Europe, While Asia Pacific was up.

Sara E. Zawoyski: The electrical and fastening segment income was $85 million, up 39% year-over-year; return on sales was 29.2%, down 60 basis points mainly due to lower volumes and the impact of the ECM acquisition. Turning to Thermal Management, sales of $143 million were down 1% organically.

Sarah: Electrical and fastening segment income was $85 million.

Sarah: 39% year over year.

Return on sales was 29, 2% down 60 basis points, mainly due to lower volumes and the impact of the ECM acquisition.

Sarah: Turning to thermal management sales of $143 million were down 1% organically.

Sara E. Zawoyski: The Russia impact was approximately four points to growth; volumes were down low single digits with positive prices. Notably, commercial resi continued to improve sequentially, and industrial MRO sales remained strong. In addition, backlog grew year-over-year, and energy transition represented over a third of the project backlog. Geographically, growth was led by Asia Pacific, while North America and Europe declined.

Sarah: The Russia impact was approximately four points to growth.

Sarah: Volumes were down low single digits with positive price.

Notably commercial ready continued to improve sequentially and industrial MRO sales remains strong.

Sarah: In addition backlog grew year over year and energy transition represents over a third of the project backlog.

Sarah: Graphically growth was led by Asia Pacific North America, and Europe declined.

Sara E. Zawoyski: The thermal management segment income of $32 million was up 3%. Return on sales of 22.3% was up 80 basis points year-over-year due to strong execution and favorable mix. On slide 7, titled Balance Sheet and Cash Flow, we ended the quarter with $211 million of cash on hand and $600 million available in our revolver.

Sarah: Thermal management segment income of $32 million was up 3% return on sales of 22, 3% was up 80 basis points year over year due to strong execution and favorable mix.

Sarah: On slide seven titled balance sheet, and cash flow, we ended the quarter with $211 million of cash on hand, and $600 million available on our revolver.

Sara E. Zawoyski: We believe our healthy balance sheet provides us with ample capacity to invest in the business and execute on our growth strategy. So, turning to slide 8, where we outline our capital allocation priorities. We continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns. We had strong free cash flow in the quarter, growing 41% year-over-year. As a result, we exited Q1 with a net debt-to-adjusted EBITDA ratio of 1.9 times.

Sarah: We believe our healthy balance sheet provides us with ample capacity to invest in the business and execute on our growth strategy.

Sarah: So turning to slide eight where we outline our capital allocation priorities.

Sarah: We continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns.

Sarah: We had strong free cash flow in the quarter growing 41% year over year as a result, we exited Q1 with a net debt to adjusted EBITDA ratio of one nine times.

Sara E. Zawoyski: As previously announced, our quarterly dividend increased 9%, returning $32 million to shareholders. We believe we are well positioned for capital deployment in 2024. Moving to slide nine and our full year outlook, we continue to expect reported sales growth of 8-10%, with organic growth in the range of 3-5%. This includes positive price and strong volume growth for the year, and acquisitions are expected to contribute approximately five points to growth. We are raising our full-year adjusted EPS range to $3.22 to $3.30, up 5% to 8%, versus our original guidance of $3.17 to $3.27. We now expect segment income to grow 10-12% for the year versus 8-11% previously. This raised guidance reflects the strong start to the year. All other modeling assumptions for the full year remain unchanged.

Sarah: As previously announced our quarterly dividend increased 9% returning $32 million to shareholders.

Sarah: We believe we are well positioned for capital deployment in 2024.

Sarah: Moving to slide nine and our full year outlook. We continue to expect reported sales growth of 8% to 10% with organic growth in the range of 3% to 5%.

Sarah: This includes positive price and strong volume growth for the year.

Sarah: Acquisitions are expected to contribute approximately five points to growth.

Sarah: We are raising our full year adjusted EPS range to $3.22 to $3, 35% to 8% versus our original guidance of $3.17 to $3.27.

Sarah: We now expect segment income to grow 10% to 12% for the for the year versus 8% to 11% previously.

Sarah: This raise guidance reflects the strong start to the year.

Sarah: All other modeling assumptions for the full year remain unchanged.

Sara E. Zawoyski: Looking at our second quarter outlook on slide 10, we expect organic sales to be up 3 to 5 percent. For segment organic sales growth, we expect enclosures to lead with high single-digit growth, electrical and fastening to be similar to Q1, and thermal management to turn positive. We expect adjusted EPS to be between 81 and 83 cents, which at the midpoint reflects 6% growth relative to last year.

Sarah: Looking at our second quarter outlook on slide 10, we expect organic sales to be up 3% to 5%.

Sarah: For segment organic sales growth, we expect enclosures to lead with high single digit growth.

Sarah: Electrical <unk> fastening to be similar to Q1 and thermal management to turn positive.

Sarah: We expect adjusted EPS to be between 81, and 83 cents, which at the midpoint reflects 6% growth relative to last year.

Sara E. Zawoyski: Wrapping up, I am pleased with our first quarter performance. We delivered strong growth, margin expansion, and robust cash flow, and are well positioned for another great year. This concludes my remarks, and I will now turn the call back over to Beth. Thank you, Sara.

Speaker Change: Wrapping up I am pleased with our first quarter performance, we delivered strong growth margin expansion and robust cash flow and are well positioned for another great year.

Speaker Change: This concludes my remarks, and I will now turn the call back over to Bob.

Bob: Thank you Sarah.

Beth A. Wozniak: Turning to slide 11, I would like to provide an update on our data solutions business. The acceleration of AI, greater data consumption, rising heat densities, and growth in edge computing are all drivers of demand for our data solutions offerings. We have a broad and innovative portfolio that includes liquid cooling, smart power distribution, cable management, enclosures, racks, and cabinets, as well as leak detection and sensing solutions. We believe we are well positioned to grow with the significant data center infrastructure investments driven by the acceleration of AI.

Bob: Turning to slide 11, I would like to provide an update on our data solutions business.

Bob: The acceleration of AI greater data consumption rising heat densities and growth in edge computing are all drivers of demand for our data solutions offerings, we have a broad and innovative portfolio that includes liquid cooling smart power distribution cable management and closures racks in cash.

Bob: The minutes and leak detection and sensing solutions.

Bob: We believe we're well positioned to grow with a significant data center infrastructure investments driven by the acceleration of AI.

Beth A. Wozniak: Today, only 5% of data centers are liquid cooled. With the technology shift to new AI chips, liquid cooling is imperative. In addition, liquid cooling can provide up to 50% energy savings and reduce power consumption.

Bob: Today, only 5% of Datacenters are liquid cool with the technology shift to the new AI chips liquid cooling is an imperative. In addition, liquid cooling can provide up to 50% energy savings and reduce power consumption.

Beth A. Wozniak: We estimate liquid cooling will grow three times faster than conventional air cooling and represent roughly 25% of data center cooling by 2028. We believe we are a leader in this space and are able to provide a broad range of solutions, be it liquid-to-air, air-to-liquid, or liquid-to-liquid, for both greenfield and retrofit. We have offered liquid cooling solutions for over 15 years, starting in industrial applications. We have developed technical application expertise and manufacturing and supply chain capabilities.

Bob: We estimate liquid cooling will grow three times faster than conventional air cooling and represent roughly 25% of data center cooling by 2028.

Bob: We believe we are a leader in this space and are able to provide a broad range of solutions be it liquid to air to liquid or liquid to illiquid for both greenfield and retrofit.

Bob: We have offered liquid cooling solutions for over 15 years, starting in industrial applications, we have developed technical application expertise and manufacturing and supply chain capabilities to.

Beth A. Wozniak: Today, we are partnering with major data center players. Our innovative solutions, along with our ability to manufacture at scale, position us to win in this rapidly growing space. We are also building out a portfolio of standard products to drive broader adoption and scale through distribution channels. We view cooling and power to be the fastest growing areas, which now make up 50% of our data solution business. In the first quarter, we completed the move of our distribution center in Minnesota to a new location, freeing up that space to expand our liquid cooling capacity. We expect this new space to come online in Q3 and give us the ability to expand capacity fourfold. Lastly, we continue to expect our data solutions business to be over $500 million this year.

Bob: Today, we are partnering with major data center players, our innovative solutions, along with our ability to manufacture at scale positions us to win in this rapidly growing space.

Bob: We are also building out a portfolio of standard products to drive broader adoption and scale through distribution channels.

We view cooling and power to be the fastest growing areas, which now make up 50% of our data solution business.

Bob: In the first quarter, we completed the move of our distribution center in Minnesota to a new location freeing up that space to expand our liquid cooling capacity. We expect this new space to come online in Q3 and give us the ability to expand capacity fourfold.

Bob: Lastly, we continue to expect our data solutions business to be over $500 million this year.

Beth A. Wozniak: Please turn to slide 12, Title 2023, Sustainability Report. At nVent, we are building a more sustainable and electrified world. Our commitment to sustainability is integral to how we operate, and we took measurable steps to improve our impact in 2023. Last month, we published our latest sustainability report that highlights the significant progress we've made across our people, products, and planet pillars. Our People Pillar focuses on inclusion, diversity, employee engagement, safety, and integrity. In 2023, we increased the global representation of women in management by 4%, or 4 percentage points. Improving Diversity of Leadership

Bob: Please turn to slide 12, titled 20, twenty-three sustainability report.

And in that we are building a more sustainable and electrified world our commitment to sustainability is integral to how we operate and we took measurable steps to improve our impact in 2020 three.

Bob: Last month, we published our latest sustainability report that highlights the significant progress we've made across our people products and planet pillars.

Bob: Our people pillar focuses on inclusion diversity employee engagement safety and integrity in 2020 three we increased global representation of women in management by 4% four percentage points improving diversity of leadership.

Beth A. Wozniak: The safety of our employees is a key priority, and in 2023, we improved our total recordable incident rate by more than 20%. We believe our people and culture are a differentiator, and our efforts are focused on making Invent a great place to work. Our products pillar focuses on developing highly innovative solutions that deliver efficiency, safety, and reduced resource consumption, creating a more sustainable future. In 2023, 85% of products in our new product introduction funnel had a positive ESG impact, and we're on track to get to greater than 90% by 2025.

Safety of our employees is a key priority and in 2020 three we improved our total recordable incident rate by more than 20%.

Bob: We believe our people and culture are a differentiator and our efforts are focused on making a dent a great place to work.

Bob: Our products pillar focuses on developing highly innovative solutions that deliver efficiency safety and reduced resource consumption, creating a more sustainable future and 2023, 85% of products in our new product introductions Tuttle had a positive ESG impact and we're on track to.

Bob: Get to greater than 90% by 2025.

Beth A. Wozniak: We have set a new goal to eliminate single-use plastics from our product packaging by 2030. Through our innovative products and solutions, we are helping our customers build a more sustainable and electrified world. For example, our electrical connection solutions, which include grounding and power connections, add resiliency to critical electrical systems. Our solutions also include flexible bus bars with a bending radius much smaller than that of cable, which enables space and material savings. Alongside benefits of easier installation, these higher current density conductors allow renewable energy and utility customers to meet the demands of increasingly complex applications.

Bob: We set a new goal to eliminate single use plastics from our product packaging by 2033.

Bob: Through our innovative products and solutions, we are helping our customers build a more sustainable and electrified world. For example, our electrical connection solutions, which include grounding and bonding grounding in power connections add resiliency to critical electrical systems or.

Bob: Our solutions include flexible bus bars, with the bending radius much smaller than that of cable, which enable space and material savings alongside benefits of easy easier installation. These higher current density conductors allow renewable energy and utility customers to meet the demands of ing.

Bob: Recently complex applications.

Beth A. Wozniak: Our Planet Pillar focuses on responsible energy, waste, and water management to help protect our natural resources. In 2023, we reduced total greenhouse gas emissions by 9%, increased renewable energy consumption to 15%, and increased energy-efficient LED lighting in our facilities to 89%. These are measurable steps, and to further demonstrate our commitment to environmental stewardship, we set a new goal to reduce water consumption by 25% by 2030.

Bob: Our planet pillar focuses on responsible energy waste and water management to help protect our natural resources in 2020 three we reduce total greenhouse gas emissions by 9% increased renewable energy consumption to 15% and increased energy efficient led lighting in our facilities.

Bob: These to 289% these are measurable steps and to further demonstrate our commitment to environmental stewardship, we set a new goal to reduce water consumption by 25% by 2030.

Beth A. Wozniak: I'm very proud that we've been recognized for our efforts. We were awarded a Gold Sustainability Rating from ECOBODIS, 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. And we were named for the first time to the Fortune Best Workplaces in Manufacturing and Production list. And most recently, nVent was recognized as one of the world's most ethical companies by Ethosphere.

Bob: I'm very proud that we've been recognized for our efforts we were awarded a gold sustainability rating from igo bought us 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 we.

Bob: Were named for the first time to the Fortune best workplaces in manufacturing and production list.

Bob: And most recently and that was recognized as one of the world's most ethical companies by Ethisphere.

Bob: Our sustainability efforts are key to our strategy and how we operate I'm very proud of everything we've accomplished and the journey we are on.

Beth A. Wozniak: Our sustainability efforts are key to our strategy and how we operate. I'm very proud of everything we have accomplished and the journey we are on. Wrapping up on slide 13, we are off to a strong start to the year with record Q1 sales and adjusted EPS. We have made significant progress on our ESG goals, and we believe we are well positioned for the electrification of everything, sustainability, and digitalization trends. I am proud of our team's performance. Our future is bright. With that, I will now turn the call over to the operator to start Q&A. We will now begin with the questions.

Bob: Wrapping up on slide 13, we are off to a strong start to the year with record Q1 sales and adjusted EPS. We have made significant progress on our ESG goals and we believe we are well positioned with the electrification of everything sustainability and digitalization trends I am proud of our.

Speaker Change: Team's performance our future is bright with that I will now turn the call over to the operator to start Q&A.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been answered and you would like to withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Deane Dray with RBC Capital. Please go ahead.

We will now begin the question and answer session to ask a question you May Press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Yeah.

Speaker Change: Our first question comes from Deane Dray with RBC capital. Please go ahead.

Deane Michael Dray: Thank you. Good morning everyone. A nice start to the year.

Deane Michael Dray: Thank you and good morning, everyone nice start to the year morning thing.

Beth A. Wozniak: Good morning, Deane.

Deane Michael Dray: Lots of new data points here on slide 11 regarding liquid cooling, positioning, and capacity. So that's the first question, is that 4X expansion in your capacity? I had been talking about and thinking it was 2X, so obviously, much bigger here, we're, so you identify you have a new plant, but the run rate by the end of this year is 4X, and how much of this capacity is already spoken for in terms of your line of sight to visibility of demand, so maybe a sense of utilization.

Deane Michael Dray: Hey.

Deane Michael Dray: Lots of new data points here on slide 11 regarding your liquid cooling positioning our capacity. So that's the first question is that Forex expansion in your capacity I had been talking about and thinking it was two X. So obviously much bigger here.

Deane Michael Dray: We're so you're down about you have a new plant, but so the run rate by the end of this year. This is the forex capacity.

Deane Michael Dray: And how much of this capacity is already spoken for in terms of your your line of sight on visibility of demand, so maybe a sense of utilization.

Beth A. Wozniak: Well, we expect some of this capacity to start to come online through the back half of the year. And I mean, that's going to continue to grow into 2025. So when we talk about 4X capacity, some of that's the space.

Speaker Change: Well, we expect some of this capacity to start to come online through the back half of the year and I mean, that's going to continue to grow into 2020 five so when we talk at Forex capacity some of that to the space. We have to continue to build out our labs for example, and some of those lines. So we believe that that capacity supports the growth.

Beth A. Wozniak: We have to continue to build on our labs, for example, and some of those lines. So we believe that that capacity supports the growth that we see this year and enables us, and we have some visibility into 2025. And certainly, we're working on testing some configurations with various customers, and that test process takes some time, but we're just anticipating that that gets us through 2025, 2026, and we'll see beyond that where it takes us.

Speaker Change: But we see this year and unable.

Speaker Change: <unk> us and we have some visibility into 2025 and certainly we're working on testing some configurations with our various.

Speaker Change: Various customers in that test process takes a while but we're just anticipating that that you know gets us through 'twenty five 'twenty six and we will see beyond that where it takes us to and I think dean to comment on the two ex recall, we've done a couple of things first we expanded capacity because we moved some lines out of our facility in Minnesota too.

Beth A. Wozniak: And I think, Deane, to comment on the 2X, recall we did a couple of things. First, we expanded capacity because we moved some lines out of our facility in Minnesota to Mexico. So that was our first expansion in the footprint that we had. Then we moved this distribution center out so that we could expand even further because that was the fastest thing that we could do to get capacity up online.

Dean: In Mexico, So that was our first expansion in the footprint that we had then we moved this distribution center out so that we could expand even further because that was the fastest thing that we could do to get capacity up online.

Beth A. Wozniak: That's great visibility, then, and I appreciate how nimble your manufacturing capacity has ramped up. And then just a second question, there's another new data point here, for us at least, the identifying liquid cooling growing three times faster than legacy air, so legacy air, in our view, has been growing roughly in the mid-teens, so that looks like a step up in the growth versus the greater than 30% you had been saying. Is that a fair assessment? We think that it

Speaker Change: That's great.

Dean: Great visibility that so and I appreciate all of nimble your manufacturing capacity has ramped up and then just a second question Theres. Another new data point here for us at least the identifying liquid cooling growing three times faster than legacy So legacy air and our views been growing roughly mid two.

Dean: So that looks like a step up in the growth versus the greater than 30% you had been saying is that a fair assessment.

Beth A. Wozniak: We think that it has increased from what we've seen previously. And so, as you recall, we had a very strong quarter with data solutions.

Speaker Change: We think that it is that it has increased from what we've seen previously and so recall, we had a very strong quarter with data solutions.

Speaker Change: Great. Thank you.

Okay.

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

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

Julian C.H. Mitchell: Hi, good morning. Good morning. Good morning.

Julian C.H. Mitchell: Hi, good morning good.

Julian C.H. Mitchell: Good morning, Good morning, maybe just wanted to start with the sort of price cost and gross margin dynamics. So I think you said inflation was a 20 million headwind in Q1, so price cost was negative maybe 14 million or so in the first quarter.

Julian C.H. Mitchell: Maybe I just wanted to start with the sort of price, cost, and gross margin dynamics. So I think you said inflation was a 20 million headwind in Q1, so price cost was negative, maybe 14 million or so in the first quarter. Just a couple of things on that. One is, is that why the gross margin declined year on year despite the volume growth? And then secondly, how should we think about that price/cost dynamic playing out in your kind of segment income bridge for the balance of the year? Thank you.

Speaker Change: Just a couple of things on that one is.

Speaker Change: Is that why the gross margin declined year on year. Despite the volume growth and then secondly, how should we think about that price cost dynamic playing out in your kind of segment income bridge for the balance of the year. Thank you.

Sara E. Zawoyski: Yeah, I'll start with, you know, coming into this year, we said it was going to be a combination, and this is consistent with how we've run the business for years, of price plus productivity, offsetting that total inflation, which includes material labor and everything else, as well as helping to fund those investments. And so we think Q1 played out exactly as we would have expected it to and how we expect the year to play out as well. And then secondly, I would say, from a price perspective, we said, look, you know, we want positive prices this year. And again, we saw that play out across all three segments in Q1.

Speaker Change: Yeah, I'll start with you know coming into this year you know we said it's got it's gonna be a combination and this is consistent with how we've run the business for years of price plus productivity you know offsetting.

Speaker Change: Offsetting that total inflation, which includes material labor and everything else as well as helping to fund those investments and so we think Q1 played out exactly how we would have expected it to them and how we expect the year to play out as well and then secondly, I would say from a price perspective, we.

Speaker Change: Look we want positive price this year and again, we saw that play out across all three segments in Q1, and importantly productivity was going to play a more meaningful role in offsetting inflation and again, helping US fund those investments and we had also said and we saw this play out really nicely here in Q Q.

Sara E. Zawoyski: And importantly, productivity was going to play a more meaningful role in offsetting inflation and again, helping us fund those investments. And we also said, and we saw this play out really nicely here in Q1, and we would expect that to continue in the course of the year, that while we were getting some productivity in material and logistics last year, we weren't really getting that core four-wall productivity, and we began to see that here in Q1.

One and we would expect that continue in the course of the year that while we were getting some productivity in material and logistics last year, we weren't really getting that core four wall productivity and we began to see that here in Q1. So as you think about you know price for the full year. You know we continue to expect that to be.

Sara E. Zawoyski: So as you think about, you know, price for the full year, you know, we continue to expect that to be positive. And when we think about that dynamic of, you know, price, you know, inflation, productivity, there's nothing really to call out specifically through the course of Q2 in the back half. The one thing that I will call out, and that is impacting, you know, margins, you know, in Q2 here in the back half, is just the increased investment.

Speaker Change: Positive price them and when we think about that dynamic of you know price you know inflation productivity, there's nothing really to call out specifically you know through the course of Q2 and the back half. The one thing that I will call out and that is impacting you know margins you know in Q2 here in the back half is just.

Sara E. Zawoyski: You know, part of that's going to be on the R&D side. You saw that in Q1. It was up 9% from where we were in Q4. But also these investments around capacity, which we believe have, you know, a great ROI as well.

Speaker Change: The increased investments you know part of that is going to be on the R&D side you saw that in Q1. It was up 9% from where we're at in Q4, but also these investments around capacity, which we believe has you know great ROI to it as well.

Speaker Change: And.

Julian C.H. Mitchell: Sarah, just on that point, the $20 million number you mentioned earlier in the call, is that investment plus inflation or just inflation?

Speaker Change: So it was just on that point the the $20 million number you mentioned earlier in the call is that investment plus in inflation or just inflation.

Sara E. Zawoyski: That's just inflation. So that means that productivity is, you know, meaningful, you know, to help offset that product, that inflation, as well as help some funds, some funds, some of those investments like higher, higher R&D.

Speaker Change: That's just inflation so that means that productivity was you know meaningful you know to help offset that predict that inflation as well as helps them fund to fund some of those investments like the higher our higher R&D.

Julian C.H. Mitchell: Absolutely, and my follow-up would just be on the EFS division, just maybe help us understand kind of within infrastructure that de-stocking, is it around utilities or some other vertical, and how we should think about the sort of margins playing out at EFS over the balance of the year. So when you look at EF...

Speaker Change: Dissolute Lee and my follow up would just be on the E. S. S Division I'm, just maybe help us understand kind of within infrastructure that destocking is it around utilities or some of the.

Speaker Change: But to go in and how we should think about the sort of margins playing out at <unk> over the balance of the year. Please.

Beth A. Wozniak: So when you look at EFS, where we saw that infrastructure weakness was utility and telecom, and just part of this is that last year we had very high comps. I think we were up 40% in utility.

Speaker Change: So when you look at it you have us where we saw that infrastructure weakness was utility and telecom and just a part of this is our last year. We had very high comps I think we were up 40% and utility and so as lead times normalized in inventory not only at just distributors, but at the channel that's what we saw.

Beth A. Wozniak: And so as lead times normalized, and inventory, not only at distributors but at the channel, that's what we saw. And telecom, I think, is just a softer market condition. So those are the two key drivers. Thanks very much.

Speaker Change: And telecom I think its just a softer a.

Speaker Change: Market conditions. So those are the key two key drivers.

Speaker Change: Thanks, very much and for margin I'll, let Sarah just comment on that.

Sara E. Zawoyski: And for Margin, I'll let Sara just comment on that. Yeah. So from an overall margin standpoint, just remember that while ECM is accretive to overall invent, you know, it's dilutive to EFS more specifically. I think the other thing I would call out, just as you think about where we're guiding to in Q2, we do expect some margin contraction there in EFS because of that ECM dilution, at least for a half a quarter.

Sarah: Yeah. So from an overall margin standpoint, I'm, just remember that while ECM is accretive to overall invent you know, it's dilutive to them too to E. S. S. Four specifically I think the other thing I would call out just as you think about where we're guiding to in Q2, we do expect some.

Sarah: Margin contraction, there and E. S S because of that E. C. M. A dilution at least a half a quarter and you know, but also they begin to lap some pretty amazing return on sales of a year ago at 32% here in Q2, and Q3 and remember we had called out that they had some mixed benefits there that was benefiting those.

Sara E. Zawoyski: You know, but also, they begin to lap some pretty amazing return on sales of a year ago at 32% here in Q2 and Q3. And remember, we had called out that they had some mixed benefits there that were benefiting those returns on sales, but still, on an absolute basis, you know, a good, healthy return on sales.

Sarah: Return on sales, but still on an absolute basis, you know good healthy return on sales.

Speaker Change: Thanks, so much.

Nigel Edward Coe: Our next question comes from Nigel Coe with Wolf Research. Please go ahead.

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

Nigel Edward Coe: Thanks, good morning. Wanted to dig back into the price. I thought we were looking for a 2% price increase in 2024. So maybe I got that wrong, but maybe just clarify that.

Nigel Edward Coe: Thanks, Good morning.

Nigel Edward Coe: Wanted to dig back into the price.

Nigel Edward Coe: We will look at the 2% price and and torn faithful maybe I got that wrong, but maybe just clarify that and so it is 1% a good number to use through.

Sara E. Zawoyski: So is 1% a good number to use through the year? But really, on orders, can you maybe just talk about orders by segment, you know, that looks at order growth, how that looks across the three segments? And then how does April look? I know it's, you just wrapped up April, but how do the orders look for April?

Nigel Edward Coe: Through our through the year, but but really when the oldest could you maybe just talk about orders by segments. You know that most people do that.

Nigel Edward Coe: Order growth.

Nigel Edward Coe: How that looks across the across the three segments and then Howard.

Nigel Edward Coe: How does April look I know, it's you just wrapped up in April but how does this look for April.

Sara E. Zawoyski: So I'll maybe start off on the price side. So, you know, in our February call, we talked a lot about price and volume and said that we would expect positive price, but volume would be a much more significant contribution, you know, to that overall top line, which is exactly the way Q1 played out. And we also said that price plus productivity was going to help offset that total inflation, you know, as well as help and fund those investments, which is how Q1 played out. And when we look at the order trends, orders were up mid-single digits in electrical and fastening and low single digits in thermal and enclosure. And I think, you know, April looks like Q1.

Speaker Change: So maybe to start off on the price side. So you know in our February call. We talked a lot about you know price and volume and saying that we would expect positive price, but volume would be a much more significant contribution to that overall top line, which is exactly the way Q1 played out and we also said that.

That price plus productivity was gonna help help offset that total inflation, you know as well as helping fund those investments, which is how Q1 played out.

Speaker Change: And when we look at the order trends orders were up mid single digits in electrical and fastening and low single digits in thermal in enclosures and I think you know in April it looks like Q1.

Nigel Edward Coe: Okay, that's really helpful. And then on the capacity expansion and liquid cooling, which Deane covered quite well, how does the margin profile for liquid cooling look as you ramp that up? I mean, I'm guessing there's going to be a lot of stop costs and whatnot. So does that start to drag in a meaningful way or measurable way within the segment?

Speaker Change: Okay. That's definitely helpful and then on the capacity expansion and liquid cooling, which are being kept it quite well.

Speaker Change: How does the margin profile for liquid cooling.

Speaker Change: Look as you ramp that up I mean, I'm I'm I'm guessing that's going to stop them.

Speaker Change: And whatnot, so does that start to drag in a meaningful way or a measurable way within the segment.

Sara E. Zawoyski: Yeah, so that data solutions business, which mostly, you know, largely sits in enclosures, we said it was just roughly on par, you know, from a gross margin standpoint. But what we are investing in is that capacity. And as you might expect, as we bring that capacity online and make some pretty big shifts within one of our largest factories here in Q2 and Q3 to make room for that liquid cooling capacity, we are expecting some ramp-up costs to impact that here in Q2 and Q3. But that's reflected in our overall guidance here in Q2.

Speaker Change: Yeah. So the data solutions business, which mostly you know largely sits in enclosures. We said, it's just roughly on par from a gross margin standpoint, but but what we are investing in is that capacity and as you might expect as we bring that capacity online and pay make some pretty big shifts.

Speaker Change: Within one of our largest factories here in Q2, and Q3 to make room for that liquid cooling capacity. We are expecting some ramp up costs, you know to impact that here in Q2 and Q3, but that's reflected in our overall guidance here in Q2.

Nigel Edward Coe: So, does that mean, sorry, I don't want to take too much time here, but when you think about that price productivity, inflation, investment bucket together with the ramp-up costs here, do we see some potential for negativity in that balance, or do you still think you

Speaker Change: So does that mean, sorry, I don't think he was telling me, but when you think about that price productivity inflation investment buckets together with the ramp up costs here to do we do we see some potential the negativity in the bone. So do you still think neutral is that the right way knowing that the combination of price plus plus productivity.

Sara E. Zawoyski: No, in the combination of price plus productivity, we expect to offset that inflation in investments. But if you just look at that kind of net productivity bar, you know, that's where some of those investments are going to flow in, in Q2 and in Q3. Yeah. Right. Thanks, Sara.

Speaker Change: We expect to offset that inflation and investments, but if you just look at that kind of net productivity bar you know, that's where some of those investments are going to flow in.

Speaker Change: In Q2.

Speaker Change: In Q3, yeah right. Thanks, Thanks Sara.

Speaker Change: Yeah.

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

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

Joseph Alfred Ritchie: Hi, good morning, everyone. Good morning.

Joseph Alfred Ritchie: Hey, can we just talk about the first quarter growth performance, which organically turned out to be a little bit better than we expected, which is great to see. I guess how much of that was driven by just the data solutions business just continuing to be on fire versus the rest of your business. And then really kind of the reason I'm asking is that you kind of think about the second quarter, you know, and now that you've lapped some destocking, you've got no rush up, you know, tough comp in 2Q. Why wouldn't it step up in 2Q?

Hey, can we just talk about the first quarter growth performance.

Joseph Alfred Ritchie: Organically it turned out to be a little bit better than we expected, which is great to see and I guess, how much of that was driven by just the data solutions business, just continuing to be on fire versus the rest of your business.

Joseph Alfred Ritchie: And then really kind of the reason I'm asking is is as you kind of think about the second quarter and now that you've lapped some destocking you've got no rush it tough comp into Q why wouldnt it step up in Q2.

Beth A. Wozniak: Well, I'll start with Q1, and I'll let Sara refer back to guidance again, but we had very strong growth in data solutions in the quarter, and some of that is just a result of how those customer programs layered in, but that's certainly what gave us some of that significant volume growth that's coming from data solutions. And then as we think about that, Joe, from a Q2 perspective, you know, again, we expect data solutions to grow very nicely here in Q2, just not quite at the levels of Q1. And so that's why, you know, as enclosures posted a fantastic 11% organic growth in Q1,

Speaker Change: Well, let me also I'll start with Q1 and I'll, let Sarah refer back to the guidance again, but we had very strong growth in data solutions in the quarter and some of that is just a result of some of those how those customer programs.

Speaker Change: <unk> did but that's certainly what gave us some of that significant volume growth is coming from data solutions.

Sarah: And then as we think about that Joe from a Q2 perspective, you know again, we expect you know data solutions to grow very nicely here in Q2, just not quite at the levels of Q1, and so that's why you know was enclosures printed.

Speaker Change: Fantastic, 11% organic growth in Q1, we expect that to look more like high single digits here in Q2. The other thing I would point to is just we are expecting to see a bit more softer Europe Europe was up for us in Q1, and we do expect them, we're taking but more of a cautious view on Europe here in Q2.

Joseph Alfred Ritchie: Okay, yeah, that's the that makes sense. And that's super helpful. Thank you for that. I guess my follow-on question. It was great to great to see the offerings at data center world. And as I obviously, it seems like you know, folks

Speaker Change: Okay, Yes.

That makes sense and that's super helpful. Thank you for that I guess my follow up question. It was great to great to see the offerings are data center world.

Obviously.

Speaker Change: Obviously it seems like you know folks are just running as fast as they possibly can.

Speaker Change: And in that end market and I think about your own offering there are certain things that you guys do in house or certain things that you guys you know.

Speaker Change: Outsource is there any thought around potentially using some of the M&A dollars.

Speaker Change: Just to get a little bit bigger either in the CDU itself or or in other other areas that that sell into the data center.

Beth A. Wozniak: Well, as we think about our overall strategy in M&A, we always say we look at high-growth verticals first. And I think Joe, I can point to a couple of acquisitions we've done. We've done six, and you know two of them from the WBT wire basket trade contributed to our cable management offering, and the CIS Global acquisition contributed to our smart power distribution. So I think as we continue to look at M&A, we look at great products in great verticals, and certainly, I think you know there's always opportunities there for us to strengthen the portfolio and data solutions as we do in other infrastructure areas.

Speaker Change: Well as we think about our overall strategy in M&A you know, we always say, we look at high growth verticals first and I think Joe I mean, I can point to a couple of acquisitions. We've done we've done six in you know two of them from.

Speaker Change: The W. E T wire basket trade contributed to our cable management offering and the C. I S. Global acquisition contributed to our smart power distribution. So I think as we continue to look at M&A, we look at great products and great verticals and certainly I think you know theres always opportunities there for us to strength.

The portfolio and data solutions as it is in other infrastructure areas.

Speaker Change: Okay, great. Thank you.

Jeffrey David Hammond: Okay, great. Thank you. Our next question comes from Jeff Hammond with KeyBank Capital Markets. Please go ahead.

Speaker Change: Our next question comes from Jeff Hammond with Keybanc capital markets. Please go ahead.

Speaker Change: Yeah.

Jeffrey David Hammond: Hey, Jeffrey there.

Jeffrey David Hammond: Yeah.

Jeffrey David Hammond: Yeah can you hear me, yes, yeah, we can hear you now.

Jeffrey David Hammond: Okay, great. Um, just a clarification on the Capacity Expansion of the Forex, is that contemplating a new plant as well? Or is that just simply the moves you've made, you know, creating space? Yeah, that is.

Jeffrey David Hammond: Okay great.

Jeffrey David Hammond: Just a clarification on the.

Jeffrey David Hammond: The capacity expansion in the works is that all deployed our new plant as well or is that just simply.

Jeffrey David Hammond: Moves you've made.

Beth A. Wozniak: Yeah, that is not a new plant, but what we did is we moved out a distribution center that was attached to our main manufacturing facility. We moved that to a new location and then expanded, or are expanding, liquid cooling capacity within that area. So that's, you know, remember where we expanded in Mexico? That was the first step that created space. Then we moved distribution to a new location and are now expanding within that footprint.

Speaker Change: Yeah that is not a new plan, but what we did is we moved out a distribution center that was attached to our main manufacturing facility, we move that to a new location and then expanded or are expanding within that area at the liquid cooling capacity so that.

Speaker Change: You know remember we were we expanded in Mexico that was the first step that creative space, then we move distribution to a new location and now expanding within that footprint.

Jeffrey David Hammond: Okay, great. And then EFS, I think you said thermal is going to return growth the rest of the year. But how should we think about EFS in the TQ? I know the orders were better. And then just on those orders. Is that kind of clear line of sight that, you know, that destocking is? You know, it's kind of behind us from here.

Speaker Change: Okay, Great and then yes, yes, I think he said thermal is going to return to growth the rest of the year, but how should we think about.

Speaker Change: <unk> I know the orders were better and then just on those orders.

Speaker Change: Is that kind of clear line of sight that you know that destocking and as you know it was kind of behind us from here.

Beth A. Wozniak: Let me start by just saying, you know, one of the comments I made was when we look at our distribution channel, we see that we had a positive sell-through. So that's good. And we think largely the distribution channels have normalized and stabilized. However, there are some areas, and we called out for EFS areas like utilities, for example, where we know that there's inventory at the end customer and at the channel. And recall, we had a very big comp of 40% growth in utilities last year. So some of that we think plays into Q2, but in very specific, you know, areas. But overall, I'd say it's largely stabilized.

Speaker Change: Let me start by just saying you know one of the comments I made is when we look at our distribution channel. We see that we had there was.

Speaker Change: Positive sell through so that's good and we think largely the distribution channels have normalized and stabilized. However, there are some areas and we called out for E. S. S areas like utility for example, where we know that there was inventory at the end customer and at the channel and recall, we had a very big comp.

Speaker Change: A 40% growth in utilities last year. So some of that we think plays into Q2, but very specific.

Speaker Change: All areas, but overall I'd say, it's largely stabilized.

Speaker Change: Okay. Thanks, so much yeah, and Jeff I would just comment on <unk>. So you have us we'd still expect PFS to grow for the full year.

Jeffrey David Hammond: Okay, thanks so much. Yeah. And Jeff, I would just comment on EFS. So, EFS...

Speaker Change: But for Q2, we expect you know that Q2 year over year performance to look a lot like Q1, because we do expect those infrastructure dynamics that <unk> talked about to continue into the corner and as we think about the back half a couple of things there to keep in mind, one would just be on comps do get easier.

You know two would be you know, we do expect that inventory normalization to begin to kind of ease. If you will you know in the back half closer to Q4 I think the last thing I would just point out is the sales synergies for ECM as well as easier year, passing the combination thereof. You know, we think that'll begin to later layer.

Speaker Change: <unk> on and are in the back half of the year.

Speaker Change: Okay. Thank you.

Sara E. Zawoyski: Yeah, and Jeff, I would just comment on EFS. So EFS, we still expect it to grow for the full year. But for Q2, we expect, you know, that Q2 year-over-year performance to look a lot like Q1, because we do expect those infrastructure dynamics that Beth talked about to continue into the quarter. And as we think about the back half, there are a couple things there to keep in mind. One would just be that comps do get easier.

Speaker Change: Our next question comes from Jeff Sprague with vertical research partners. Please go ahead.

Sara E. Zawoyski: You know, two would be, you know, we do expect that inventory normalization to begin to kind of ease, if you will, in the back half, closer to Q4. I think the last thing I would just point out is the sales synergies for ECM, as well as EFS and the combination thereof, we think that'll begin to layer on in the back half of the year.

Jeffrey Todd Sprague: Thank you and good morning, everyone. Good morning.

Jeffrey Todd Sprague: Our next question comes from Jeff Sprague with Vertical Research Partners. Please go ahead.

Jeffrey Todd Sprague: Good morning, I'm, just coming back to the capacity addition, I know youre not going to tell us exactly what your liquid cooling sales are but I, just kind of want to understand what forex means.

Jeffrey Todd Sprague: I mean doesn't literally mean, if you had.

Jeffrey Todd Sprague: $50 million of revenue and liquid cooling in 2023, you believe you have 200 million in 2025 is it is it directly correlated to kind of a revenue run rate well no not not not precisely I would say this when we look at the footprint space. This is what where were.

Jeffrey Todd Sprague: <unk> two and so it will take us some time to build out some of the lines as well as we're expanding our lab capability because one of the things with these solutions is that goes under extensive testing within our labs as well as our customers you know in CIT you. So we.

Jeffrey Todd Sprague: We'll have the footprint and eventually that will expand our capacity from a volume or unit volume.

Jeffrey Todd Sprague: Understood.

Jeffrey Todd Sprague: And then just back to the thermal.

Jeffrey Todd Sprague: Yeah, clearly with the Russia headwind behind US, we would expect it to return to growth, but can you be a little bit more specific on what you're seeing there you know kind of been the.

Jeffrey Todd Sprague: In the served end markets and thermal that would underpin kind of returned to growth and how are you.

Jeffrey Todd Sprague: You see that playing out you know, maybe even kind of into next year given that I'm sure. There's some project activity going on there yeah. So as we are in our prepared remarks, you know we talked about we're seeing our backlog up we're seeing new wins on an energy transition. That's an area that we've really focused on and we see investment flowing.

Jeffrey Todd Sprague: There, we certainly had some strong growth in Asia Pacific as we see industrial and chemical you know opportunities.

Jeffrey Todd Sprague: And we've continued to sequentially see commercial RASM improve and that thermal business. So it was as we are this is a Q2 was the last quarter that we lap the Russia exit we see an increase backlog, we see increased orders and.

Jeffrey Todd Sprague: And generally you know a lot of quote activity. So we feel confident that the thermal business is poised for growth the remainder of the year.

Speaker Change: Great. Thank you I'll leave it there.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Nicole to place with Deutsche Bank. Please go ahead.

Jeffrey Todd Sprague: Thank you. Good morning everyone. Good morning, morning.

Nicole: Yeah. Thanks, good morning, everyone. Good morning.

Nicole: Maybe we could continue with thermo them from a margin perspective pretty impressive performance up year on year with down sales in the quarter I guess, how should we think through the rest of the areas that is that sustainable and then I know you guys have put work into you know doing some restructuring in that business as sales have been weak what can incrementals look like once organic growth does turn.

Nicole: Positive.

Jeffrey Todd Sprague: Just coming back to the capacity addition. I know you're not going to tell us exactly what your liquid cooling sales are, but I just kind of want to understand what 4X means. I mean, does it literally mean if you had, you know, $50 million in revenue and liquid cooling in 2023, you believe you will have $200 million in 2025? Is it directly correlated to kind of a revenue run rate?

Speaker Change: I'll, maybe start with just the overall incremental question. So you know we were pleased with the Incrementals in Q1 at 33% and overall you know we continue to believe that you know our business with the strong growth profile value proposition and margins you know that in a more normal environment you know.

Speaker Change: Those incrementals will look like you know plus 30%.

And then I think your question was on thermal management in terms from a return on sales perspective, I would just start by saying where I think the team has done an excellent job of.

Speaker Change: Managing that cost structure, you know managing the price cost equation and really pleased with that overall Q1 return on sales performance. We wouldn't expect that same level of year over year Ross expansion, you know here in Q2 and the back half in part because of the projects that I've talked about I mean, you know we.

Speaker Change: We pointed out in Q1, they were benefiting from some favorable mix on the product side, but as that top line returns to growth and some of that is gonna be projects, but still comes at good margins, but not quite as good as the product side, you know that's going to impact that year over year return on sales perspective.

Speaker Change: Got it very clear and then maybe on Europe I'm you guys spoke about how you're kind of anticipating maybe some Europe weakness coming through in the second quarter is that something that you guys actually saw in your order trends or are you just being a little bit cautious based on what you're hearing.

Speaker Change: Yeah, we did see that in our order trend is through Q1 that Europe was definitely softer than North America and Asia Pacific.

Speaker Change: Thank you I'll pass it on.

Beth A. Wozniak: Well, not precisely. I would say this: when we look at the footprint space, this is what we're referring to, and so it will take us some time to build out some of the lines as well as to expand our lab capability because one of the things with these solutions is that they go under extensive testing within our labs as well as with our customers, you know, in situ. So we will have the footprint, and eventually, that will expand our capacity from a volume to a unit volume.

Citi: Our next question comes from what my sticky with Citi. Please go ahead.

Jeffrey Todd Sprague: Unknown Speaker And then just back to the thermal, clearly, with the rush ahead and the wind behind us, we would expect it to return to growth. But can you be a little bit more specific on what you're seeing there, you know, kind of in the... You know, in the served end markets and thermal that would underpin kind of the return to growth and how you see that playing out, you know, maybe even kind of in the next year, given that I'm sure there's some project activity going on there? Yes,

Matt: Hey, good morning, Thanks for taking my call good morning.

Beth A. Wozniak: Yeah, so as we talked about in our prepared remarks, you know, we talked about, we're seeing our backlog grow, we're seeing new wins on energy transition, that's an area that we've really focused on, and we see investment flowing there. We certainly had some strong growth in Asia Pacific as we see industrial and chemical opportunities, and we continue to sequentially see commercial resi improve in that thermal business. So as we, this is, Q2 is the last quarter that we lapped the Russia exit. We see an increased backlog, we see increased orders, and generally, you know, a lot of quotation activities, so we feel confident that the thermal business is poised for growth the remainder of the year.

Matt:

Jeffrey Todd Sprague: Great. Thank you. I'll leave it there.

Matt: So.

Citi: I just wanted to follow up on that last question and common.

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

Citi: Cool.

Citi: Can you just give us more color on.

Citi: You know what.

Citi: What's contemplated in guidance for the rest of the year in terms of potential for incremental weakening in Europe going forward.

Nicole Sheree DeBlase: Yeah, thanks. Good morning, everyone.

Citi: Well, here's what I would say is that you know we were pleased with the Q1 performance, where we actually grew Europe overall in Q1 and so what we're what we're suggesting here is in that Q2 guide them, we're not expecting a growth here in Europe and I think it really reflects some of the order trends you know that.

Citi: Jeff alluded to.

Nicole Sheree DeBlase: Maybe we could continue with Thermal. From a margin perspective, pretty impressive performance up year on year with down sales in the quarter. I guess, how should we think through the rest of the year? Is that sustainable? And then I know you guys have put work into doing some restructuring in that business as sales have been weak. What can incrementals look like once organic growth does turn positive?

Citi: Okay.

Speaker Change: Helpful. Thanks, and then.

Speaker Change: Can you.

Sara E. Zawoyski: I'll maybe start with just the overall incremental question. So, you know, we were pleased with the incrementals in Q1 at 33%. And overall, you know, we continue to believe that, you know, our business with the strong growth profile, value proposition, and margins, you know, that in a more normal environment, those incrementals will look like, you know, plus 30%. And then I think your question was about thermal management in terms of a return on sales.

Speaker Change: Can you just give us an update on what you're seeing in terms of underlying growth at E. P M and how your.

Speaker Change: Pressing on.

Speaker Change: Synergy capture there versus your expectations.

Speaker Change: Yeah, when we look at ACM that business had a you know a several different channels and I would say E. C. M has performed very similar to what we've seen our E. S. S business I wouldn't say they have a stronger retail channel and so that's retail razee, that's been a little softer and that was our comments about we expect that to continue.

Speaker Change: New to be soft, but I think as we've been working on a lot of our sales synergies in our Sarah commented on we expect to see that start to layer in in the back half of the year and so that is everything from bringing some of that product through our rap and distribution network as well as into.

Taking some of those products and bringing them you know, making sure that they're certified so we can bring them into Europe. So all of that activity is underway and I will say this you know one of the things when we acquired that business. They certainly had supply chain challenges and availability challenges and we worked very hard to improve that situation.

Speaker Change: Asian, and what's been encouraging is that we've seen and heard from our customers. We see some of that those orders are pick up where we've improved the delivery situation, but overall ECM is a great acquisition for us and we and we think it just extends our portfolio in a power connection solution.

And so you know, we we see great potential for the synergies to play you know to play out over the next several years.

Speaker Change: And maybe just a quick add on the cost synergy side. So I would just say, we're well on track and you know as we acquire D. C. N. A we were really excited about it from the growth side, but we also did see some cost synergies there in that $10 million to $15 million Mark by year, three and I would say that we're well on track to deliver that we're seeing material procure them.

Speaker Change: Then synergies logistics, you know indirect I'm I think to on the cash tax synergies, we now expect closer to $10 million per year versus the $6 million to $8 million mm previously that we have discussed them and then lastly, you know we talked about in 'twenty 'twenty, four with acquisitions being accretive to EPS in that sense.

Speaker Change: To aid sense and so we saw a strong six then you know contribution here in Q1. So contributed contributing overall you know very nicely.

Speaker Change: Great that's really helpful. Thanks.

Speaker Change: Thank you.

Speaker Change: Our last question comes from Brian Drab with William Blair. Please go ahead.

Brian Paul Drab: Hi, just a couple of small clarifications at this point, but.

Brian Paul Drab: I think you said that sell into the channel was up low single digits. The sell through is positive can you just put a finer point on that what is positive.

Brian Paul Drab: When exactly does that mean.

Speaker Change: Sell throughs up slightly year over year.

Speaker Change: Well our comment was more around all of them that right that we just saw positive sell through you know so low single digits.

Speaker Change: Alright.

Speaker Change: So positive means low single digits.

Speaker Change: Yes.

Speaker Change: Okay got it okay.

Speaker Change: And then in the commercial business you mentioned that things are looking better and Oh, sorry on the thermal business that you mentioned things are looking better commercial and ROTC is is that back to growth in the first quarter.

Or was it just improving sequentially and then.

Speaker Change: Also I was curious you know you said the energy end market was the only one that was.

Speaker Change: The trouble point in the first quarter does that mean that entered energy was the only end market that you saw decline.

Speaker Change: Year over year in the first quarter with a thermal thanks.

Speaker Change: So I'm just going to add just for clarification. So overall for invent commercial resi was positive and overall for them that energy was down and that was primarily due to the Russia impact for thermal specifically, we've seen commercial resin improving so not quite get back to.

Speaker Change: Growth, but it's improved for the last several quarters and certainly thermo has been impacted by energy the most because of the Russia impact and we have one more quarter that will lap here in Q2 with Russia, Russia exit.

Speaker Change: Okay that helps thank you very much.

Speaker Change: This concludes our question and answer session.

Speaker Change: I would like to turn the conference back over to Beth Wozniak Chair and Chief Executive Officer Officer for any closing remarks.

Beth A. Wozniak: Thank you for joining us today.

Sara E. Zawoyski: I would just start by saying I think the team's done an excellent job of, you know, managing that cost structure, you know, managing the price-cost equation, and really pleased with that overall Q1 return on sales performance. We wouldn't expect that same level of year-over-year ROS expansion here in Q2, in the back half, in part because of the projects that Beth talked about. I mean, you know, we pointed out in Q1 that they were benefiting from some favorable mix on the product side, but as that top line returns to growth, and some of that's going to be projects, which still come at good margins, but not quite as good as the product side, that's going to impact that year-over-year return on sales.

Nicole Sheree DeBlase: Got it, very clear. And then maybe on Europe, you guys spoke about how you're kind of anticipating maybe some European weakness coming through in the second quarter. Is that something that you guys actually saw in your order trends, or are you just being a little bit cautious based on what you're hearing? Thank you. Yeah, we did see that in our order trend through Q1, that Europe was definitely softer than North America and Asia Pacific. Thank you. I'll pass it on.

Beth A. Wozniak: I'm very proud of the performance we delivered in the first quarter.

Vladimir Benjamin Bystricky: Our next question comes from Vlad Bystricky with Citi. Please go ahead.

Beth A. Wozniak: We will continue to focus on delivering for our customers employees and shareholders by executing on our growth strategy. We believe inventors of top tier high performance electrical company well positioned for the electrification of everything sustainability and digitalization trends.

Vladimir Benjamin Bystricky: Hey, good morning. Thanks for taking my call. Good morning. So I just wanted to follow up on that last question and comment from Nicole about Europe. Can you just give us more color on that? What's contemplated in guidance for the rest of the year in terms of the potential for incremental weakening in Europe going forward?

Sara E. Zawoyski: Well, here's what I would say is that, you know, we were pleased with the Q1 performance where we actually grew Europe overall in Q1. And so what we're suggesting here is in that Q2 guide, we're not expecting growth here in Europe. And I think it really reflects some of the order trends that Beth alluded to.

Vladimir Benjamin Bystricky: Okay, that's helpful. Thanks. And then, can you just give us an update on what you're seeing in terms of underlying growth at ECM and how you're progressing on synergy capture there versus your expectations?

Beth A. Wozniak: When we look at ECM, that business has several different channels, and I would say ECM has performed very similarly to what we've seen in our EFS business. I would say they have a stronger retail channel, and so retail resi, that's been a little softer, and that was our comment, so we expect that to continue to be soft. But I think we've been working on a lot of our sales synergies, and as Sara commented on, we expect to see that start to pay off in the back half of the year.

Beth A. Wozniak: And so that includes everything from bringing some of that product through our rep and distribution network as well as taking some of those products and bringing them, you know, making sure that they're certified so we can bring them into Europe.

Sara E. Zawoyski: So all of that activity is underway, and I will say this, you know, one of the things when we acquired that business, they certainly had supply chain challenges and availability challenges, and we worked very hard to improve that situation, and what's been encouraging is that we've seen and heard from our customers that some of that, those, you know, orders pick up where we've improved the delivery situation. But overall, ECM is a great acquisition for us, and we think it just extends our portfolio of power connection solutions, and so, you know, we see great potential for the synergies to play out over the next several years.

Sara E. Zawoyski: And maybe just a quick add on the cost synergy side. So I would just say we're well on track. You know, as we acquired ECM, we were really excited about it from the growth side, but we also did see some cost synergies there in that 10 to $15 million mark by year three. And I would say that we're well on track to deliver that we're seeing material procurement synergies, logistics, you know, indirect. I think, too, on the cash tax synergies, we now expect closer to $10 million per year versus the six to $8 million previously that we had discussed.

Sara E. Zawoyski: And then lastly, you know, we talked about in 2024, with acquisitions being a creative to EPS and that 78 cents, and so we saw a strong six cent contribution here in Q1. So, you know, contributing overall very nicely.

Vladimir Benjamin Bystricky: Great, that's really helpful. Thanks.

Brian Paul Drab: Our last question comes from Brian Drab with William Blair. Please go ahead.

Brian Paul Drab: Hi, just a couple small clarifications at this point, but in EFS, I think that you said that the cell into the channel was up low single digits, and the cell through is positive. Can you just put a finer point on that? What does positive mean exactly? Does that mean cell through is up slightly year over year?

Beth A. Wozniak: Well, our comment was more around all of nVent, right? That we just saw positive sell-through, you know, so low single digits.

Brian Paul Drab: All right, so positive means low single digits. Yes. Okay, got it. Okay.

Beth A. Wozniak: And then in the commercial business, you mentioned that things are looking better, or sorry, in the thermal business that you mentioned things are looking better commercial and residential. Is that back to growth in the first quarter? Or was it just improving sequentially? And then also, I was curious, you said the energy and market was the only one that was, you know, a trouble point in the first quarter. Does that mean that energy was the only end market that you saw decline year over year in the first quarter within thermal? Thanks.

Beth A. Wozniak: Thank you for joining us today. I'm very proud of the performance we delivered in the first quarter. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe nVent is a top-tier, high-performance electrical company well-positioned for the electrification of everything, sustainability, and digitalization trends. Thanks again for joining us. This concludes the call.

Brian Paul Drab: So, I'm just going to, just for clarification, so overall for nVent, commercial resi was positive, and overall for nVent, energy was down, and that was primarily due to the Russian impact. For thermal specifically, we've seen commercial resi improve, so not quite yet back to growth, but it's improved for the last several quarters, and certainly thermal has been impacted by energy the most because of the Russian impact, and we have one more quarter that will lap here in Q2 with Russia, the Russian exit.

Beth A. Wozniak: Okay, that helps. Thank you very much.

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

Speaker Change: Thanks again for joining us this concludes the call.

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

Speaker Change: The Congress does now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: Yeah.