Q2 2025 nVent Electric PLC Earnings Call
Operator: Good day and welcome to the nVent second quarter 2025 earnings conference call. All participants will be in listen-only mode. 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 cell phone 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.
Good day and welcome to the nvent. Second quarter 2025 earnings conference call. All participants all participants will be in listen-only mode. Should you need assistance? Please sing the little 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 1 on your telephone keypad to withdraw your question. Please press star then 2. Please note. This event is being recorded. I would now like to turn the conference over to Tony writer vice president of investor relations. Please go ahead.
Tony Riter: Thank you and welcome to nVent's second quarter 2025 earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer, and Gary Corona, our Chief Financial Officer. Today we will provide details on our second quarter performance, an outlook for our third quarter, and an update to our full-year outlook. As a reminder, all results referenced throughout this presentation are on a continuing operations basis unless otherwise stated. Before we begin, let me remind you that any statements made about the company's anticipated financial results are forward-looking statements subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's findings with the Securities and Exchange Commission. Forward-looking statements are made as of today, and the company undertakes no obligation to outdate publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.
Thank you.
Welcome to invent second quarter 2025 earnings call.
On the call with me your best visnack, our cheer and chief executive officer and Gary Corona our Chief Financial Officer.
Today, I will provide details on our second quarter performance, and I'll look for a third quarter update and an update to our full year outlook.
as a reminder all results reference throughout this presentation are on a continuing operation basis unless otherwise stated
Before we begin.
Let me remind you that any statements made about the company's anticipated Financial results. Our forward-looking statements subject to Future risks, and uncertainties.
Such as the risk outline of today's press release and investor filings with the Securities and Exchange Commission.
Or looking statements are made as of today, and the company undertakes. No obligation to update publicly such statements to reflect subsequent events or circumstances.
Tony Riter: 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 will have time for questions after our prepared remarks. With that, please turn to slide three, and I will now turn the call over to Beth.
As a result could differ material from anticipated results.
Today's webcast is a company by a presentation, which you can find in investors section of events website.
References to non-GAAP financials are reconciled in the appendix of the presentation.
Beth Wozniak: Thank you, Tony, and good morning, everyone. It is great to be with you today to share our outstanding second quarter results. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is delivering results and accelerating our growth. We delivered record results in the second quarter with both sales and adjusted EPS exceeding our guidance. We also had record orders and backlog in the quarter. Organic orders accelerated up over 20%, led by strong double-digit growth in our data solutions business. In the rest of the business, organic orders grew high single digits. These orders, coupled with our acquisitions, have resulted in our backlog increasing more than four-fold what it was a year ago. In data centers, we are seeing strength across our portfolio and accelerating growth to support the AI buildout.
We'll time for questions after a prepared. Remarks with that, please turn to slide 3 and I will now turn the call over to that.
Thank you, Tony and good morning everyone. It's great to be with you today to share our outstanding second quarter results.
Our portfolio transformation to become a more focused, higher-growth electrical connection and protection company is delivering results and accelerating our growth.
We delivered record results in the second quarter with both sales and adjusted EPS exceeding our guidance.
We also have record orders and backlog in the quarter.
Organic orders accelerated up over 20% led by strong double-digit growth in our Data Solutions business.
In the rest of the business organic orders grew High single digits.
These orders, coupled with our acquisitions, have resulted in our backlog increasing more than four-fold what it was a year ago.
Beth Wozniak: The Trachte and Avail Electrical Products Group acquisitions performed better than expected, further strengthening our position in the high-growth infrastructure vertical, including power utilities, data centers, and renewables. Our teams are doing outstanding work executing on our integration playbook and accelerating our growth synergies. Since closing the Trachte and EPG acquisitions, we have identified new growth opportunities and are making investments to deliver on this increasing backlog and higher growth outlook. Our balance sheet is strong, and our first priority for capital allocation remains the same: invest in growth. Now on to slide four for a summary of our second quarter performance. Sales were up 30% and 9% organically, led by the infrastructure vertical. New products contributed over three points to sales growth, and we launched 50 new products in the first half. Adjusted operating income grew 18% year over year, with a return on sales of nearly 21%.
In data centers. We are seeing straight across our portfolio and accelerating growth to support the AI buildout.
The tracking and electrical products group Acquisitions performed better than expected further. Strengthening our position in the high growth infrastructure, vertical, including power, utilities data, centers, and Renewables.
Our teams are doing outstanding work, executing on our integration Playbook and accelerating our growth synergies.
Since closing the track day and EPG Acquisitions, we have identified new growth opportunities and are making Investments to deliver on this increasing backlog and higher growth Outlook.
Our balance sheet is strong and our first priority for Capital allocation Remains the Same investing growth.
Now on to slide 4 for a summary of our second quarter performance.
Sales were up 30% and 9% organically led by the infrastructure. Vertical new products contributed over 3 points to sales growth and we launched 50 new products in the first half.
Beth Wozniak: Adjusted EPS grew 28%. Looking at our key verticals, infrastructure led the way with organic sales up over 20%, with strength in both data centers and power utilities. Commercial residency sales were up mid-single digits, industrial sales were down slightly, and energy was down mid-single digits. Turning to organic sales by geography, all key geographic regions grew. Americas grew 9%, while Europe was up 10%, and Asia-Pacific was up low single digits. Looking ahead, we continue to expect infrastructure to have strong sales growth across both data centers and power utilities. We expect industrial sales to grow low to mid-single digits and commercial residency to be flattish for the year. The tariff environment remains very dynamic. However, we continue to closely monitor the situation and remain agile, executing on our playbook. We are prioritizing our key growth initiatives, which include new products, high-growth verticals, and acquisitions.
Adjusted operating income, grew 18% year-over-year with return on sales of nearly 21%.
Adjusted EPS grew 208%.
Looking at our key verticals, infrastructure led the way with organic sales up over 20%, with strength in both data centers and power utilities.
Commercial resi. Sales were up, mid. Single digits, Industrial Sales were down slightly and energy was down mid single digits.
Turning to organic sales by geography. All key geographic regions group America, screw 9% while Europe was up, 10% and asia-pacific was up low single digits.
Looking ahead.
Strong sales growth across both data centers and power utilities. We expect Industrial Sales to grow low to mid single digits and Commercial resi, to be flattish for the year.
The Tariff environment remains very Dynamic. However we continue to closely monitor the situation and remain agile executing on our Playbook.
Beth Wozniak: For guidance, we are raising our full-year sales and adjusted EPS guidance to reflect our terrific second quarter results and stronger performance in data centers and power utilities. Our organic growth and recent acquisitions are expected to more than offset the EPS impact from the thermal management business we divested in the first quarter. Overall, I'm proud of the many accomplishments by our nVent team and how we continue to perform and deliver impressive results. We are on track for a strong year. I will now turn the call over to Gary for further details on our second quarter results and our updated outlook for 2025. Gary, please go ahead.
We are prioritizing our key growth initiatives which includes new products high growth verticals and acquisitions.
For guidance, we are raising our full year sales and adjusted EPS, guidance to reflect our terrific. Second quarter results and stronger performance in data, centers and power utilities.
Our organic growth and recent acquisitions are expected to more than offset, the EPS impact from the thermal management business. We divested in the first quarter
Gary Corona: Thank you, Beth. We had an excellent second quarter, exceeding guidance with record sales and adjusted EPS. Let's turn to slide five to review our results. Sales of $963 million were up 30% relative to last year. Organically, sales grew 9%, driven by both volume and price. Acquisitions added $153 million to sales, or 21 points to growth, ahead of our guidance. Foreign exchange was roughly a one-point tailwind. Second quarter segment income was $200 million, up 18%. Return on sales came in at 20.8%, better than expected. Inflation was more than $35 million, including approximately $15 million in tariff impact. Price plus productivity partially offset inflation, and we also continued to make investments for growth, particularly in our data solutions business and our recent acquisitions. Q2 adjusted EPS was $0.86, up 28%, above the high end of our guidance range. We generated robust free cash flow of $74 million.
Overall, I'm proud of the many accomplishments by our invent team and how we continue to perform and deliver impressive results, we are on track for a strong year. I will now turn the call over to Gary for further details on our second, quarter results and our updated outlook for 2025 Gary. Please go ahead.
Thank you, Beth.
We had an excellent second quarter, exceeding guidance with record sales and adjusted EPS.
Let's turn to slide 5 to review our results.
Sales of 963 million were up 30% relative to last year.
Organically sales grew 9% driven by both volume and price.
Acquisitions added 153 million to sales for 21 points to growth.
Of our guidance.
Foreign exchange was roughly a 1 Point Tailwind.
Second quarter, segment income was $200 million of 18%.
Return on sales came in at 20.8% better than expected.
Inflation was more than $35 million, including approximately $15 million in tariff impact.
Price Plus productivity, partially offset inflation. And we also continue to make investments for growth.
Particularly in our Data Solutions business and our recent acquisitions.
Q2 adjusted EPS with 86 cents of 28%, above the high end of our guidance range,
Gary Corona: Please turn to page six for a discussion of our second quarter segment performance. Starting with systems protection, sales of $632 million increased 43%. The Trachte and Avail Electrical Products Group acquisitions contributed 32 points to sales and have performed well, with sales up strong double digits versus a year ago, and both have robust backlogs. Organically, sales grew 10% on top of a strong quarter a year ago. Infrastructure grew roughly 30%, with continued strength in data centers. Commercial residency grew mid-teens, and industrial was down low single digits. All geographies grew, led by the Americas and Europe, each up low double digits. Asia-Pacific grew low single digits. Second quarter segment income was $137 million, up 32%. Return on sales of 21.7% decreased 180 basis points year over year, impacted by inflation, acquisitions, and growth investments. Moving to electrical connections, sales of $331 million increased 11%.
We generated robust free cash flow of 74 million.
Now, please turn to page 6.
For a discussion of our second quarter segment performance.
Starting with systems protection.
Sales of 632 million, increased 43%.
The tracking and EPG Acquisitions. Contributed 32 points to sales and have performed well.
With sales up, strong double digits versus a year ago in both have robust backlogs.
Organically sales grew 10% on top of a strong quarter a year ago.
Infrastructure, grew, roughly 30%, with continued strength in data centers.
Commercial rents, he grew mid teens and Industrial was down low, single digits.
All geographies grew led by the Americas in Europe, each up, low double digits.
Asia-pacific grew low single digits.
Second quarter segment income was $137 million, up 32%.
Return on sales of 21.7% decreased 180 basis points, year-over-year impacted by inflation, Acquisitions and growth Investments.
Gary Corona: Organic sales were up 7%, reflecting strong volume. The Avail Electrical Products Group acquisition contributed four points to sales. From a vertical perspective, infrastructure led, growing high teens, industrial grew low teens, and commercial residency was up low single digits in the quarter. All geographies grew, led by the Americas and Asia-Pacific, each up high single digits. Europe grew low single digits. Segment income was $95 million, up 3% year over year. Return on sales was 28.7%, down 220 basis points, mainly due to inflation and acquisitions. That wraps up the segments for the quarter. Turning to the balance sheet and cash flow on slide seven, we ended the quarter with $126 million of cash on hand and $400 million available on our revolver. We also generated $74 million in free cash flow in the quarter. Also, we refinanced and extended our credit facility.
Moving to electrical connections sales of 331 million increased 11%.
Organic sales were up 7% reflecting strong volume.
The EPG, acquisition contributed 4 Points to sales.
From a vertical perspective infrastructure lead growing High. Teens industrial grew low, teens and commercial resi was up low. Single digits in the quarter.
All geographies grew led by the Americas and asia-pacific each at up high single digits.
Europe, grew low single digits.
Segment income was 95 million up, 3% year-over-year.
Inflation and acquisitions.
That wraps up the segments for the quarter.
Turning to the balance sheet and cash flow on slide 7.
We ended the quarter with 126 million of cash on hand and 400 million available on our revolver.
Generated 74 million in free. Cash flow on the quarter.
Gary Corona: We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy. Turning to page eight, where we outline our capital allocation priorities, we continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns. We are investing in the business via R&D and CapEx with growth and supply chain resiliency. We returned $319 million to shareholders in the first half of the year. That includes more than $250 million in share repurchases at a great value, resulting in a lower share count. We returned $66 million via dividends so far this year. We exited the quarter within our targeted leverage range. We believe we are well-positioned and have additional capacity for future capital deployment, with our first priority being to invest in growth.
also, we refinance and extended our credit facility
We believe our healthy balance sheet and strong liquidity position support are disciplined Capital allocation strategy.
turning to page 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 are investing in the business via R&D and capex for growth and supply chain resiliency.
We returned 319 million dollars to shareholders in the first half of the year.
That includes more than 250 million dollars, in share repurchases at a great value.
Resulting in a lower share count.
And we returned 66 million via dividends so far this year.
We exited the quarter within our targeted, leverage range.
we believe we are well, positioned and have additional capacity for future Capital deployment, with our first priority being to invest in growth,
Gary Corona: Moving to slide nine, as Beth Wozniak shared earlier, we are raising our full-year sales and adjusted EPS guidance to reflect our strong Q2 results and increased growth expectations in data centers and power utilities. We now forecast reported sales growth of 24% to 26%. This includes expected higher organic growth and approximately 15 points from acquisitions, with foreign exchange now approximately a one-point tailwind. For organic sales growth, we now expect to grow 8% to 10% versus our previous guidance of 5% to 7%, reflecting our Q2 beat along with increasing visibility and strength in data centers and power utilities. We are raising our full-year adjusted EPS range to $3.22 to $3.30, up 29% to 33%, versus our previous guidance of $3.03 to $3.13. This new guidance reflects the expected tariff impacts of approximately $90 million versus $120 million previously.
Moving the slide 9.
As best shared earlier, we are raising our full year sales and adjustments to reflect our strong Q2 results and increase growth, expectations and data centers, and power utilities.
We now forecast, reported sales growth of 24 to 26%.
This includes expected hierarchic growth.
And approximately 15 points from Acquisitions with foreign exchange. Now, approximately a 1 Point tail end
for organic sales growth. We now expect to grow 8 to 10% versus our previous guidance about 5 to 7%.
Reflecting our q2b along with increasing visibility and strength in data, centers and power utilities.
We are raising our full year. Adjusted EPS range to $3.22 to $3.30 cents up 29 to 33%.
Versus our previous guidance of $33 to $3.13.
Gary Corona: We expect to offset the impacts through pricing, supply chain productivity, and operational mitigating actions. For free cash flow, we now expect conversion in the range of 90% to 95%. A few modeling assumptions to note. First, we are raising our CapEx forecast to approximately $110 million versus $100 million previously. The additional CapEx is for increased capacity in our data solutions business and for our recent acquisitions. Also, corporate costs are now expected to be approximately $110 million versus $100 million previously. Looking at our third quarter outlook on slide 10, we forecast reported sales to grow 27% to 29%, with acquisitions contributing approximately 15 points to sales, and foreign exchange is now a one-point tailwind. Organic sales growth is expected to be up 11% to 13%. Price increases coupled with productivity are expected to offset inflation, including the tariff impacts in Q3.
this new guidance, reflects the expected tariff impacts of approximately $90 million versus 120 million previously,
we expect to offset the impacts through pricing supply, chain productivity and operational, mitigating actions.
For free cash flow. We now expect conversion in the range of 90 to 95%,
First, we are raising our capex forecast to approximately 110 million versus 100 million previously.
The additional capex is forced capacity in our Data Solutions business.
And for our recent acquisitions,
Also, corporate costs are now expected to be approximately 110 million versus $100 million. Previously,
Looking at our third quarter outlook on slide 10, we forecast reported sales to grow 27, to 29% with Acquisitions contributing approximately 15 points, to sales, and foreign exchange is now a 1-point Tailwind.
Organic sales growth, is expected to be up 11 to 13%.
Price increases coupled with productivity are expected to offset inflation including the Tariff impacts in Q3.
Gary Corona: We expect adjusted EPS to be between $0.86 and $0.88, which at the midpoint reflects a 38% increase relative to last year. Wrapping up, we are pleased with our excellent second quarter performance. We delivered record sales and adjusted EPS and are well-positioned for a strong second half. I will now turn the call back over to Beth.
We expect adjusted EPS to be between 86 and 88 cents.
Which at the midpoint reflects up 38% increase relative to last year?
Wrapping up, we are pleased with our excellent second quarter performance. We delivered record sales and adjusted eps.
And are well, positioned for a strong second half.
I will now turn the call back over to back.
Beth Wozniak: Thank you, Gary. Please turn to slide 11. Last quarter, we shared this slide with you to show the actions we have taken to transform our portfolio since then to become a more focused, higher growth electrical connection and protection company. In the last year, we divested the thermal management business and acquired Trachte and Avail Electrical Products Group, reshaping our portfolio and increasing our exposure to the high-growth infrastructure vertical. In addition, we have been investing in our data solutions business, which is growing and accelerating with the AI buildout. The infrastructure vertical, which was our smallest vertical at spin, is now the largest. We believe it has the highest growth with the trends of electrification, sustainability, and digitalization. This year, the infrastructure vertical is expected to be over 40% of our sales, with data centers and power utilities each approximately 20% of sales.
Thank you, Gary. Please turn to slide 11.
Last quarter, we shared this slide with you to show the actions. We have taken to transform our portfolio since spin to become a more focused higher growth, electrical connection and protection company.
In the last year, we divested the thermal management business and acquired track D and EPG reshaping our portfolio and increasing our exposure to the high growth infrastructure. Vertical.
In addition, we've been investing in our Data Solutions business which is growing and accelerating with the AI buildout.
The infrastructure vertical which was our smallest vertical at spin is. Now, the largest we believe it has the highest growth with the trends of electrician sustainability and digitalization.
Beth Wozniak: Our portfolio is now a balance between short cycle and long cycle business, with a growing backlog. We believe we are better positioned for growth and value creation as a result. Turning to slide 12, I would like to give an update on our position in data centers and talk about both the white space and gray space opportunities. The AI buildout is driving demand for innovative power and cooling solutions in the white space of a data center. As we have discussed previously, liquid cooling is essential for the new chips for AI. We believe liquid cooling is growing three times faster than legacy cooling. We have talked a lot about cooling distribution units and liquid-to-air solutions like rear door heat exchangers. We are also seeing growth with our expertise in the overall technology cooling system, including coolant distribution manifolds.
this year, the infrastructure vertical is expected to be over 40% of our sales with data centers and power, utilities each, approximately 20% of sales
Our portfolio is now a balance between short cycle and long cycle business with a growing backlog. We believe We Are Better positioned for growth and value creation as a result.
Turning to slide 12.
I would like to give an update on our position in data centers and talk about both the white space and gray space opportunities.
The AI buildout is driving demand for Innovative power and cooling solutions in the white space of a data center.
As we have discussed, previously, liquid cooling is essential for the new chips for AI.
We Believe liquid cooling is growing 3, times faster than Legacy Cooling.
Beth Wozniak: With the increasing CapEx investments in the buildout of AI data centers, we are seeing growth across our entire portfolio, from power distribution units to our cable management offerings, including wire basket tray. In addition, we are seeing a trend towards modular data centers using large outdoor enclosures to house all the IT hardware, including cooling. With our Trachte and Avail Electrical Products Group portfolio, we offer a range of enclosures and integration capabilities for these modular data centers. We believe we are well-positioned to win. We have partnerships with chip manufacturers and data center players, from hyperscalers to enterprise to multi-tenant customers. Our strong technical expertise, coupled with innovative designs and the ability to manufacture at scale, are strengths. This is leading to record new orders, increasing backlog, and accelerated revenue growth. To expand further, we expect to launch a whole new range of cooling solutions later this year.
We have talked a lot about cooling distribution units and liquid to Air Solutions like rear door heat, exchangers. We are also seeing growth with our expertise in the overall technology cooling system including coolant distribution. Manifolds,
With the increasing capex investments in the buildout of AI data centers. We are seeing growth across our entire portfolio from
our power distribution units to our cable management offerings including wire basket tray,
In addition, we are seeing a trend towards modular data centers, using large, outdoor enclosures to house. All the it Hardware, including cooling with our tracking and EPG portfolio, we offer a range of enclosures and integration capabilities for these modular data centers.
We believe we are well positioned to win. We have Partnerships with chip manufacturers and data center players from hyperscalers to Enterprise to multi-tenant customers.
Our strong technical expertise coupled with Innovative designs and the ability to manufacture at scale. Our strengths.
This is leading to record new orders, increasing backlog and accelerated Revenue growth.
Beth Wozniak: Please turn to slide 13. With the buildout of AI infrastructure, we also see strong demand in the gray space of data centers. We have a focused sales initiative to sell our core portfolio in the gray space, from power connections, cable management, grounding, to enclosures and cooling. A trend we are seeing is customers want to expand the white space within a data center to maximize the IC footprint. In order to accomplish this, customers are moving the gray space, which contains power and other equipment, to outside of the building. This is accelerating the need for outdoor enclosures, which we provide from our Trachte and EPG acquisitions. This enables us to provide integrative solutions and pull through our core nVent product offerings. With our focus on the gray space, we are seeing record orders and backlog leading to accelerated revenue growth in the gray space.
To expand further. We expect launched a whole new range of cooling solutions later this year.
Please turn to slide 13.
With the buildout of AI infrastructure. We also see strong demand in the gray space of data centers. We have a focused sales initiative to sell our core portfolio in the grey space from Power connections Cable Management grounding to enclosures and cooling. A trend we are seeing is customers want to extend the white space within a data center to maximize the it footprint.
In order to accomplish this, customers are moving the grey space, which contains power and other equipment to outside of the building. This is accelerating the need for outdoor enclosures which we provide from our track team and EPG Acquisitions. This enables us to provide Integrated Solutions and pull through our core and vent product offerings.
With our focus on the grace space, we are seeing record orders and backlog leading to accelerated Revenue growth in the grey space.
Beth Wozniak: Wrapping up on slide 14, we had record performance in the second quarter, including strong double-digit growth in orders, sales, and adjusted EPS. Our backlog has never been larger. Our portfolio transformation is on track, delivering accelerated growth, and we expect another year of significant growth and value creation. I am proud of our nVent team that is working tirelessly on growth, delivering for our customers and our shareholders. We believe we are well-positioned with the electrification, sustainability, and digitalization trends. Our future is bright. With that, I will now turn the call over to the operator to start Q&A.
Wrapping up on slide 14. We had record performance in the second quarter, including strong double-digit growth in orders sales and adjusted EPS. Our backlog has never been larger.
I will now turn the call over to the operator to start the Q&A.
Operator: 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 speaker phone, 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. At this time, we will pause momentarily to assemble our roster. Our first question comes from Deane Dray with RBC Capital Markets. Please go ahead.
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 speaker-phone 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 2 at this time we will pause momentarily to assemble our roster.
Our first question comes from Dean Dre, with RBC Capital markets, please go ahead.
Deane Dray: Good morning. You guys hear me okay?
Good morning guys. Hear me? Okay?
Beth Wozniak: We can.
Tony Riter: Morning, Dean.
Deane Dray: Morning, Deane. Okay, good. All right. Maybe I will start with the disclosure today that backlog is up more than four times year over year. You are noting that you also invested to increase capacity recently by also four times. Can you talk about the timing of converting this backlog and just kind of what is the duration of the backlog as it stands today?
We can morning, Dean. Morning, Dean. Okay, good. All right. Um, maybe I'll start with the disclosure today that backlogs are up more than 4 times year-over-year. And you know, noting that you also invested to increase capacity recently by also 4 times. Can you talk about the timing of converting this backlog? Um, and just kind of what's the duration of the backlog as it stands today?
Beth Wozniak: Thanks for the question, Deane. When we look at our backlog, it is really up because of a couple of different reasons. One is the growth that we are seeing in our data center solutions business. Yes, we have increased our capacity there, and we see orders and backlog taking us through into 2026 and visibility beyond. The second is we have been growing our backlog in our Trachte business, and that is both in power utilities and data centers. As you know, Avail Electrical Products Group just came into the portfolio, and so that is backlog that we did not have a year ago. As we look across all three of those areas in two acquisitions and our data solutions business, we are seeing orders and backlog through 2026 and a little beyond.
Yeah, thanks for the question, Dean. When we look at our backlog, it's really up because of a couple of different reasons. One is the growth that we're seeing in our data center solutions business. And so, yes, we have increased our capacity there, and we see orders and backlog taking us through into 2026 and visibility beyond. The second is we've been growing our backlog in our track business, and that is both in power, utilities, and data centers. And, as you know, EPG just came into the portfolio, and so that is backlog that we didn't have a year ago.
But as we look across all three of those areas, the two acquisitions and our Data Solutions business, we're seeing orders and backlog through 2026.
And, and a little Beyond.
Deane Dray: That's great to hear. Just a second question. I know you can't name names, but can you help us and give us a perspective? When we read in the news that a large hyperscaler is launching their own custom liquid cooling platform, it raises concerns about disintermediation and barriers to entry and so forth in liquid cooling. It's our understanding that a key part of your business model is to help these types of customers develop these custom systems. That, again, is an important part of your model. We just don't know what percent that is of your business, but any help in how we should interpret this trend would be appreciated.
That's great to hear and then just to uh a second question and I know you can't name names but just could you help us uh and give us a perspective and when we read in the news that a large hyperscaler is launching their own custom liquid cooling platform. You know, it raises concerns about this intermediation and and barriers to entry and so forth and liquid cooling. But it's our understanding that a key part of your business model is to help these types of customers, develop these custom systems. And that, again, that's important part of your model. We just don't know what percent that is.
It's of your business, but just any help in how we should interpret this trend would be appreciated.
Beth Wozniak: As you know, Deane, we can't comment on any of those specific relationships, but I will say this. We partner with many of the hyperscalers, in some cases providing complete system solutions around liquid cooling, or often we partner to provide a specific product. It could be a CDU, it could be a manifold. We typically are working on a part of the solution with these hyperscalers. Not all of them, or many of them, I would say, don't want to necessarily manufacture those solutions either. Those partnerships are really key as we go forward. What we're saying is just we're expanding our solutions. I mentioned some new products coming out. We're expanding our engagement with various customers globally. We just see continued runway in the development of liquid cooling solutions.
Any of those specific relationships. But I will say this, we partner with many of the hyperscalers in some cases providing complete uh system Solutions around liquid cooling or often. We partner to provide uh specific product. Could be a CDU. Could be a manifold. And so we typically are working on a part of the solution with these hyperscalers and not all of them. Uh, many of them, I would say, don't want to necessarily manufacture those Solutions either. So those Partnerships are really key as we go forward and what we're seeing is just, uh, we're expanding our Solutions. I mentioned some new products coming out, we're expanding our engagement with various customers globally, and so we just see continued runway in the development of liquid cooling solutions.
Deane Dray: That's all great to hear. Congrats on all the growth.
Beth Wozniak: Thank you, Deane.
That's all great to hear, congrats on all the growth.
Thank you, Dean.
Operator: Our next question comes from Nigel Coe with Wolf Research. Please go ahead.
Julian Mitchell: Thanks. Good morning and great quarter. Really, really quite amazing. It seems like Sara Zawoyski is doing a good job over at Systems Protection. I am not going to ask a question on data solutions, which might be a little bit surprising. I think one of the most surprising aspects of the performance was the commercial residency performance in Systems Protection. I think you called out mid-teens growth, Beth Wozniak. I think the full year you are still expecting it to be pretty flat, I think, was the guide. Just curious what you are seeing in those markets. Was there anything unusual in terms of channel that happened this quarter? I know that is not the full story here, but just curious there.
Our next question comes from Nigel. Co with Wolf Research. Please go ahead.
Thanks. Good morning and, uh, great quarter, uh, really, really quite amazing. Um,
Seems like Sarah's doing a good job over at system protection. Um,
So the you know, I'm not going to ask a question of the solutions which might be a little bit surprising. I I think 1 of the most surprising um
Uh, you know, aspects of the performance was the commercial resi performance in systems protection? I think you called out mid, teens growth Beth, um, and I think the full year, you're still expecting it to be pretty flat. I think is, was, was the guy just just curious. You know what you've seen in those. Um, in those are markets and uh, you know, was there anything unusual in terms of channel that happened this quarter? I know that's not the full story here but but just curious there.
Beth Wozniak: Yeah, when we look at our systems protection business and the enclosures that are going into that commercial residency segment, sometimes nothing unusual occurring in the quarter through our distribution channels. I would say that our sell-out there is positive and sell-in positive. I would say that in commercial residency, we are just seeing some buildout, and sometimes our enclosures end up, commercial-type enclosures end up in data centers, and sometimes they end up in other types of building applications. You know, we do not always get to see that full visibility, as you know, through our channel. But I would just say we are just seeing some healthy performance there. But again, we are very cautious on that overall commercial residency industry. That is why we are saying we expect it to be flattish for the year.
Julian Mitchell: I am guessing that if we do see these mega projects on the shift through in 2026, 2027, that would land within your commercial residency business, I am assuming. The Trachte business just seems to be on fire. I think that came in with a projection of $250 million in 2024. I would be curious, in dollar terms, where you are expecting Trachte to be in 2025. What sort of backlog have you built in at Trachte right now?
REI segment. Um, sometimes nothing unusual occurring in the quarter through our distribution channels. I'd say that, you know, our sell out there is positive and sell in positive. Um, I would say that in commercial resi, we're just seeing some buildout and sometimes our enclosures, uh, end up, uh, commercial type enclosures end up in data centers and sometimes they end up in other types of, um, building applications. You know, it's we don't always get to see that full visibility as, you know, through our Channel. Um, but I would just say we're just seeing some, um, healthy performance there. But again, we're very uh, you know, cautious on that overall commercial resi um, industry. And so that's why we're saying we expect it to be flattish for the year.
And I'm guessing that, you know, if we do see these Mega projects done the shift uh through in 2627, that would land within your commercial resi business. I'm I'm assuming but um, the track the business just seems to be, you know, on fire. I think that came in, you know, with the projection of 250 million dollars in 2024. I'd be curious you know in dollar terms where do you expect me to track you to be in um in in 25 and and what sort of backlog have we built? Have you built in to attract you right now?
Beth Wozniak: Our Trachte business is growing at double digits, and I think nicely ahead of our expectations. We are seeing a couple of things. One is we are seeing both growth from utilities as well as data centers. I mentioned the gray space. One of the great synergistic opportunities that we had as well is that our relationships with data center customers and OEMs partnering with the capabilities that we had in Trachte, we have seen some new orders to provide enclosures for gray space opportunities. Orders are strong, healthy backlog, growth of synergies, and that is part of why we raised our guidance.
Julian Mitchell: Okay, thanks, Beth.
Well our tracking business is growing at double digits and I think uh nicely ahead of our expectations and we're seeing a couple of things 1 is we're seeing um both growth from utilities as well as data centers. And uh I mentioned the grey space and 1 of the great synergistic opportunities that we had as well is that our relationships with data center customers and oems partnering with the capabilities that we had in tracky. We've seen some new orders to provide enclosures for gray space opportunities. So it's the orders are strong healthy backlog, growth of synergies. Um and and that's part of why we raised our guidance
Okay. Thanks. Beth.
Operator: Our next question comes from Julian Mitchell with Barclays. Please go ahead.
Our next question comes from Julian Mitchell with Barclays. Please go ahead.
Julian Mitchell: Hi, good morning. Maybe just to start with a question on the top line. I think the backlog you had said was around or just under $750 million at the beginning of the year. I wondered if you could give any sense at all of where it stands at the end of June. When we think about that backlog conversion into sales for the second half, should we be expecting systems protection to grow organically far above electrical?
Hi, good morning um maybe um just to start with a question on the top line. Um so I think the backlog you'd said was around or just under 750 million at the beginning of the year.
Um, wondered if you could give any sense at all of where it stands at the end of, um, June. And when we think about that backlog, um, conversion into sales, um, for the second half. Should we be expecting systems protection to grow, organically, uh, far above, uh, electrical
Beth Wozniak: Yes, when we look at the backlog at the start of the year, it has grown. Some of that is all orders that we are winning in our new acquisitions. It is data solutions, liquid cooling. Of course, the backlog increased this quarter because of Avail Electrical Products Group joining the business. So we acquired that backlog. But it is growing very nicely. Yes, a lot of that backlog is in our systems protection business. We will see that grow ahead of our electrical connections segment.
Gary Corona: Julian, the EC business will grow nicely. They had a great quarter in Q2, and we expect it to grow in a healthy way in the second half. The visibility into that backlog is one of the strong reasons that we were able to take up our guidance into double-digit territory for organic growth in the second half.
Uh, yes, when we look at the backlog at the start of the year, it has grown and some of that is all, you know, orders that were winning in our new acquisitions, its Data Solutions, liquid cooling. Um, and of course, the backlog increased, uh, this quarter because of AVG joining the business, and so we acquired that backlog, but it is growing very nicely. And um, yes, a lot of that backlog is in our systems protection business. So we will see that grow ahead of our electrical connections segment.
And Julian the um, EC business will grow nicely. They had a great quarter in Q2 and and we expect it to grow. Um, in a healthy way in the second half and the visibility into that backlog is, is 1 of the, the, the, the, the strong reasons that we were able to take up our guidance into double-digit territory for organic growth in the second half.
Julian Mitchell: That is helpful. Thank you. On the operating margin front, I think it looks like it is maybe sort of mid-teens incremental margins being dialed in for the year at the sort of guide midpoint and maybe a touch higher than that in the second half. I realize you have that sort of 30%-ish medium-term goal from the investor day a couple of years ago. Maybe you could flesh out some of the puts and takes affecting the incrementals this year. Should we see entering next year or for next year an incremental margin more akin to the medium-term aspiration?
Gary Corona: Yeah, thanks, Julian. I will start by saying certainly we are focused on delivering fiscal year 2025, and we are not going to talk about 2026 on this call. But I think you are in the zone from an incrementals perspective. What I will say from margins, you know we did exceed our margin expectation in the quarter. We shared we were going to be down in the quarter as we got our price cost tightened up. You see that in our guide as we think about the back half, as we get our price and productivity to offset the tariff-driven inflation. So we are pleased with the direction of travel on margins, and we expect to exit the year with margin growth, excluding EPG, to be up as we exit the year. You know, look, we did not expect to be offsetting tariffs in this year.
That's helpful. Thank you. And then just on the um, uh, operating margin front. Um, so I think it's it looks like it's maybe sort of mid teens incremental margins being dialed in for the year. Um at the sort of guide midpoint and and maybe a touch higher than that in the second half, um, realize you have that sort of 30% ish medium-term goal from the investor day, A couple of years ago. Uh, so maybe you could flesh out some of the puts and takes of the incremental this year. And should we see entering next year? Uh, or for next year uh, an incremental margin more, akin to the medium-term aspiration.
Expectation in the quarter, we shared, we were going to be um, down in the quarter, uh, as we got our price cost, uh, tightened up and you see that in our guide as we think about the uh, as we think about the back half as we get our price in productivity to offset uh the Tariff driven um inflation.
Gary Corona: I think the team has done a great job to do that and to exit with the business model in a healthy place in the back half of the year. We are feeling good about the shape of the P&L.
Uh so we're pleased with the direction of travel on on margins and we expect to exit the year um with the margin growth excluding EPG to be up um as we exit uh exit the year and uh you know look we we didn't we we didn't expect to to be offsetting tariffs in this year. I think the team's done a great job to do that and to exit with the business model on a healthy place in in the back half of the Year, we're feeling good about the shape of the p&l
Julian Mitchell: On just that point, Gary Corona, on the investments, you called those out particularly Q1 and I think Q2, and it is understandable given the extent of the volume growth you are seeing in the back half. Are the investments sort of continuing to ramp up? Anything unusual with the phasing of those?
And and on just that point Gary on the Investments, um, you know, you called those out particularly first quarter and and I think Q2 and it's understandable given the extent of the volume growth. Um you know, you're seeing in the back, half the Investments sort of continuing to to ramp up at anything unusual, with the the phasing of those.
Gary Corona: No, the investments will continue to ramp as we support this acceleration in growth, and we expect that to continue. You see that both from an OpEx perspective as well as the CapEx increase that we included in the guide to support additional capacity both for our data solutions business as well as our recent acquisitions to support the growth.
No. The the the investments will continue to ramp as we support this uh, acceleration in in growth. Um and we expect that that to continue. You see that both from an Opex perspective as well as the the capex increase um that we included in the guide to support additional capacity, both for our Data Solutions business as well as our recent acquisitions to uh to support the growth.
Julian Mitchell: Great. Thank you.
Great. Thank you.
Beth Wozniak: Thank you.
Thank you.
Operator: Our next question comes from Brian Drab with William Blair. Please go ahead.
Brian Drab: Hi, good morning. Thanks for taking my questions. I am first just thinking about the final comments that you made, Beth Wozniak, around modular offering and increased focus there. Can you talk about what could the margins be relative to your existing data center business in modular? Also, how does this relate to you making a push to have a more standardized product that I believe would be incrementally higher margin? Are those two businesses and initiatives at all related to each other as well?
Our next question comes from Brian drab with William Blair please go ahead. Hi uh, good morning. Thanks for taking my questions. I'm first just um thinking about the, the final comments that you made best around modular offering and and um,
Increased focus there. Um, can you talk about?
You know what? What could the margins be relative to yours?
Uh, existing Data Center business in modular. And then also, um, you know, how does this relate to, you know, you're making a push to have a more standardized product too, that I believe uh, would be incrementally higher margin. Um and are are those 2 businesses and initiatives at all related to each other as well.
Beth Wozniak: When we look at modular data centers, we are looking to see the enclosures from Trachte and Avail that house those modular data centers to be in line with those portfolios. Then I would say there is pull-through from the core nVent product. Again, we expect those margins to be similar to what we see in those portfolios today. When it comes to the liquid cooling and more standardized offerings, those products will be, in some cases, sold through distribution as well as direct to customers. As we sell more products through distribution and as we sell more modular standardized products, they tend to have a higher margin. We are investing a lot in data solutions right now, but a lot of these new product offerings and solutions we believe will have enhanced the overall margin opportunity in that business.
Well, when we look at, um, modular data centers, you know, we're looking to see the enclosures, uh, from tracking and available, that house those modular data centers to be in line with, you know, those portfolios. Uh, and then I would say there's pull-through from the core inventory product. And again, we expect those margins to be similar to what we see in those portfolios today when it comes to the liquid cooling and more standardized offerings. Um, those products, uh, will be, um, in some cases sold through distribution as well as direct to customers. But as we sell more products through distribution, and as we sell more modular standardized products, they tend to have a higher margin. And so, um, again, we're investing a lot in Data Solutions right now, but a lot of these new product offerings and solutions we believe will have, um, you know, enhance the overall margin opportunity in that business.
Brian Drab: Okay, yeah, thank you very much. Then just one quick one on Trachte and the power utilities business. Is some of the Trachte business now being reported in data center, or is that sitting in power utilities? Is the line kind of blurred between power utilities and data center more and more?
Okay, yeah. Thank you very much and then just 1 1 quick 1 on, uh, Tracy and the, you know, power utilities business is, is Tracy. Some of the, the Tracy business now are being reported in in data center, or or is that sitting in, in power utilities? But, um, is there, is there some is, is a line, kind of blurred, uh, between power utilities and data center more and more
Beth Wozniak: I would say this, when we look at Trachte, and we have been clear to say that it sells through to utilities, but it is also seeing this growing data center gray space opportunity. As we look at that, we are continuing to track where those opportunities are. Certainly, one of the growth synergies for us has been the relationships that we have in data centers that is, and this move to more gray space allowing us to find new growth opportunities.
Well, I would say this, you know, when we look at Rocky, uh, and we've been clear to say that it it sells through to utilities, but it's also seeing this growing data center gray space opportunity, um and uh, you know, as we look at that, you know, we just we're continuing just to track where those opportunities are. But certainly 1 of the gross synergies for us has been the relationships that we have in data centers that is and is is moved more gray space, allowing us to find new growth opportunities.
Brian Drab: I guess I'm just trying to, I'm thinking about what percentage of your business is actually really driven overall by data centers. I know, you know, you give us, you size the data solutions piece for us, but you know, if you take into account everything that is being driven by data centers, is there any way to give us a better idea of how much of your overall business is being driven by the data center industry?
I, I guess I, I'm just trying to
Beth Wozniak: Yeah, on that chart that I have in there showing our portfolio transformation, we point to our data center business being 20%. That is inclusive of what we are doing in our Trachte and Avail Electrical Products Group acquisitions.
Brian Drab: Okay, I just wanted to clarify that. Thanks.
Business being 20% and that is inclusive of what we're doing, uh, in our attracting and Avail EPG acquisitions.
Okay, I just wanted to clarify that. Thanks.
Operator: Our next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.
Our next question comes from Joe Richie. With Goldman Sachs, please go ahead.
Tony Riter: Good morning, everyone.
Hey, good morning, everyone.
Beth Wozniak: Good morning.
Gary Corona: Morning.
Good morning. Good morning.
Tony Riter: Yeah, so look, great to see the growth acceleration. It seems like we're at a two-point. I know we've had a lot of discussions around backlog and kind of secularly growing pieces of your businesses. Maybe, Beth Wozniak, you can provide a little bit more color on just short cycle, what you're seeing within like the industrial footprint. Any expectations for the back half of the year would be helpful.
Yes, it look great to see the, uh, the growth acceleration. Seems like we're running. What's 2.0, discussion around backlog, and kind of, you know, secularly growing pieces of your business.
Maybe um Beth you can provide a little bit more color on just short cycle what you're seeing within like the industrial footprint. And um yeah any expectations for the back half of the year would be helpful.
Beth Wozniak: Okay. You know, we have said that we expect industrial to be, you know, low to mid-single digits growth. I would say that we have seen some nice growth through our distribution channel, both sell-in and sell-out. I commented earlier are positive. You know, we think that there is more growth in infrastructure, but certainly we are seeing some nice wins on the industrial side.
Okay. Um, you know, we've said that we expect industrial to be, um, you know, low to mid single digits growth. And so, I would say that we have seen um some nice growth through our distribution channel; those selling and sell out, I commented earlier, are positive. Uh, so, you know, we think that, um, I mean there's more growth in infrastructure. But certainly we're seeing some nice wins on the industrial side.
Tony Riter: Okay, great. Look, I guess you know we touched on the Amazon announcement earlier, and I know it is difficult to talk specifically about one hyperscaler. I guess look, the trends right now have been incredibly good. You are increasing capacity. How do you just kind of foresee the next 12 to 24 months playing out? With the capacity additions that you are making, do you anticipate being set at least from a capacity standpoint on liquid cooling for the next couple of years? I am just trying to understand how far out you are looking at this point.
Okay, great look. And then I guess, um, you know, we we, we touched on the, the Amazon announcement, um, earlier. And I know it's, you know, it's it's, it's, uh, you know, difficult to talk specifically about 1 hyperscaler but I guess, look, the, the trends right now have been, um, incredibly good. You're increasing capacity. Um, how do you just kind of perceive the next like 12 to 24 months playing out and with the capacity additions that you are making? Um, you know, do you anticipate um, you know, being set at least from a capacity standpoint on liquid cooling, uh, for the next couple years? I'm just trying to understand um, you know, how far out you're looking at this point.
Beth Wozniak: Yes, as you know, we have made investments and are continuing to make investments, and we do believe there will be further investments in capital and capacity expansion as we go into 2026 and beyond. In part, this is as the portfolio expands, as we are seeing more customers. We are just continuing to see this accelerate and the adoption accelerate.
Yes. You know as you know, we have made Investments and are continuing to make investments and we do do believe there will be further investments in capital capital uh and you know capacity extension as we go into 2026 and Beyond. And so in part, this is as the portfolio expands as we're seeing more customers. So uh, we're just continuing to see this accelerate and the adoption accelerates.
Tony Riter: Okay, thank you.
Okay, thank you.
Gary Corona: Thanks, Joe.
Operator: Our next question comes from Jeffrey Sprague with Vertical Research. Please go ahead.
Thanks Joe. Our our next question comes from Jeff, Spragga. With vertical research. Please go ahead.
Gary Corona: Hey, thanks. Good morning, everyone.
Beth Wozniak: Morning.
Hey thanks. Good morning, everyone.
Tony Riter: Morning.
Gary Corona: Morning. Can we just come around the price? I just kind of want to understand a little bit better sort of where you are at in recovering tariff pressure and kind of, you know, other and, you know, inflation. Obviously, we see the net productivity bar on the slide. But really, the nature of my question is kind of given the demand pulse that, you know, that you are seeing, do you see the ability to fully recover tariff costs with price as opposed to leaning on productivity? Therefore, productivity actually, you know, can drop more through to the margin rate. Can you unpack at all, you know, how much kind of tariff-related price you might be, you know, working on versus, you know, is there kind of base price on top of that? If you could unpack that to some degree, that would be helpful.
Um, morning morning.
Morning. Can we just come around uh the the price. So just kind of want to understand a little bit better uh sort of where you're at and recovering tariff pressure and kind of, you know, other in, you know, inflation obviously we see the net productivity bar on on the slide but believe that nature my question is kind of given the demand pulse that, you know, that you're seeing. Do you see the ability to fully recover tariff costs with price as opposed to leaning on productivity? Uh, and therefore, you know, productivity actually, you know, can drop more through to the margin rate and, and can you unpack it all? Um, you know, how much kind of tariff related price? You might be, you know, working on versus, you know, is their kind of base price on top of that. Um, if you could unpack that, uh, to some degree, that would be helpful.
Gary Corona: Yeah, a few in there, Jeff, and I will try to chip away at them. I will start with your question just more specifically on the waterfall and on net productivity. Keep in mind that the price that we are taking is captured in that growth and acquisition bar. We will continue to be diligent in managing price, cost, and productivity. This team has really demonstrated that over the past few years. Our updated guidance reflects enough price to largely offset the tariff impacts. But it is important to say we came into the year with a volume-driven plan, and volume is going to drive our growth here in the second half. We work with our distributor partners as well as our direct customers to manage price with appropriate and adequate notification. You will start to see that flow through more significantly in Q3 and in Q4.
Yeah. Uh a few in there Jeff and I'll, I'll try to chip away at them. You know, I'll start with your question, just the more specifically on on the waterfall and on that productivity, you know, keep in mind that uh the the price that we're taking is captured in that growth and in acquisition by um and uh, you know, we'll continue to be diligent in in man.
Gary Corona: That is really embedded in, you know, what we have pointed to from a margin perspective, which is to have price and productivity offset the tariffs and exit the year with margins in a healthy place.
Copy place.
Deane Dray: I am just back to the modular theme. You know, if we call it a box, you aspire to provide more in the box, so to speak. I also wonder, are you being called upon to deliver a totally complete box, so to speak, that is just ready to plug into the data center? Therefore, you are pulling through other people's products and systems and also therefore then have responsibility for the way things operate. I am just trying to think, are you taking on scope that leads to pass-through revenues or responsibility for a systems performance that goes beyond your own products and systems?
And then just back to the, to the modular theme.
Um, you know, if we if we call it a box right? Um You aspire to provide more in in the box so to speak. But I also wonder um are you being called upon to you know deliver a totally complete box? So to speak, you know, that's just ready to plug in to the data center and therefore you're pulling through other people's products and systems.
And also, therefore, then have you know, kind of responsibility for the way things operate? Just trying to figure: Are you taking on kind of scope that leads to pass-through revenues or, you know, responsibility for a, you know, systems performance that goes beyond your own products and systems?
Beth Wozniak: Yes, as we look at both data centers, we are even in that gray space where maybe we are enclosing power. Often, we are integrating other OEMs' equipment in there. I think for modular data centers, we will see that over time, that ability to integrate more. We are at various stages of integration, and that is one of the things that we can do very flexibly. But I think over time, there will be more integration capability for us.
Yes, as we look at, you know, both data centers or even in that gray space, where maybe we're enclosing power often, we're integrating other OEMs' equipment in there. I think for modular data centers, we will see that over time that ability to integrate more. So, um, we're at various stages of integration, and that's one of the things that we can do very flexibly. But I think over time, there'll be more integration capability for us.
Deane Dray: Understood. Thank you.
Understood, thank you.
Operator: Our next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead.
Nicole DeBlase: Yeah, thanks. Good morning.
Our next question comes from Nicole delos with Deutsche Bank, please go ahead.
Yeah, thanks. Good morning.
Beth Wozniak: Morning.
Tony Riter: Morning.
Nicole DeBlase: Maybe just starting with a follow-up on the earlier question on com resi. You said, Beth, that non-data center orders were up high single digits in the quarter. Was com resi also up in that range? Just trying to get a sense of if there could be upside to that full-year outlook.
Morning, morning. Maybe just starting with a follow-up on the earlier question on CAM Resy. Um, you said that non-data center orders were up high single digits in the quarter. Was CAM Resy also up in that range? Just trying to get a sense of, you know, if there could be upside to that full-year outlook.
Beth Wozniak: It is positive. I would say that, but I think we are just cautious there. I think especially on the resi side, we still are cautious about impact of tariffs and other things over the course of the year. So that is why we are saying that it is flattish full year.
it is positive.
Nicole DeBlase: Okay, understood. I agree that it is probably better to be cautious on those businesses. Secondly, could you just refresh us on your service offering, particularly within liquid cooling? We are hearing more from the channel that service is becoming increasingly important, and there might be more demand for service from the OEM with liquid cooling systems. Just remind us how you approach that offering with customers.
No, I think, especially on the resi side, we we still are cautious about, you know, impact of tariffs and other things over the course of the year. So that's why we're saying that. It's flattish full year.
Beth Wozniak: Yep. We have been building out our service offering capability. Since we've been providing liquid cooling solutions, we've always had engineering support. I would say we've been working to more formalize that service offering opportunity. We recognize that as we expand beyond to all different types of customers, that we need to have a service and support team. That's something that we're building out and are providing it, and I think will grow over time.
Okay, understood. And, yeah, I agree that it's probably better to be cautious on those businesses. Um, I guess maybe, secondly, could you just refresh us on your service offering particularly within liquid cooling? We we we're hearing more from the channel That service is becoming increasingly important and there might be more demand for service from the OEM with you know, liquid cooling systems. So just remind us, you know, how you approach that offering with customers?
Yep. Um we have been building out our service offering capability. I mean since we've been um
Providing liquid cooling solutions. We've always had engineering support but I would say we've been working to formalize that service offering opportunity and we recognize that as we expand Beyond to all different types of customers that we need to have a service and support team. So that's something that we're building out and, and our providing it and I think will grow over time.
Nicole DeBlase: Thank you. I'll pass it on.
Thank you. I'll pass it on.
Operator: Our next question comes from Jeffrey Hammond with KeyBank Capital Markets. Please go ahead.
Gary Corona: Hey, good morning.
Our next question comes from Jeff Hammond with KeyBanc Capital Markets. Please go ahead.
Beth Wozniak: Morning.
Hey, good morning.
Gary Corona: Morning, Jeff. Maybe just to start with Avail, just kind of early integration thoughts. I know with Trachte, you found some immediate kind of throughput improvements. I am wondering if there is similar opportunity there. Then, I think Avail comes in kind of mostly utility and maybe back to Brian's question. Is it pretty fungible if there is a lot more demand on the data center side to kind of shift that focus more to data center versus power, not to diminish power, but just a little more color there?
Morning morning, good.
um,
maybe just to start with a veil just kind of early integration thoughts. I know with, with track the you found some, some immediate kind of throughput improvements and wondering if there's some more opportunities there. Um, and then just, I think a veil comes in kind of mostly utility and and maybe back to Brian's question, is it pretty fun? If if there's a lot more Demand on the data center side to kind of shift, you know, that that Focus uh, you know, more to Data Center versus versus Power, not to diminish power, but uh, you know, just a little more color there.
Beth Wozniak: Yeah, so it has been 60 days with Avail Electrical Products Group. With Trachte and Avail, that core business was more focused on utility. What we see growing significantly is that data center opportunity and some of that being gray space. Again, we still may be integrating switchgear and power, for example. I would say this, we have an opportunity to invest in and increase capacity, applying some of our integration playbook, lean sourcing capability, things like that. I would say this, there is some flexibility in terms of just how we apply our resources and labor to support that growth. Some of that is just by even looking at the combined Avail and Trachte acquisitions and thinking through how we can execute best on some of these new programs.
Beth Wozniak: There is some good collaboration going on already. As we have said, the reason that we acquired Trachte and then Avail Electrical Products Group was we are building a platform here. We are integrating those businesses with the idea that we can support the overall infrastructure growth, be it data centers or utilities or renewables.
Through how we can execute best on some of these new new programs. So there's some good collaboration going on already but I think, you know, as we've said, the reason that we acquired tracking and then uh, Avail was we're building a platform here and so we're integrating those business with the idea that we can support the overall infrastructure growth, be it data centers or utilities or Renewables.
Amy: Okay, great. Then just back to the capacity needs, I think you bumped CapEx this year for $10 million, but about $10 million. Just, where is the greater need to add capacity near term? Is it more on the control buildings solutions, more on the liquid cooling, both? It just seems like as we hear about this space kind of exploding, just a lot of push for, we need it now, we need it faster. Just how you are thinking about how you need to add capacity to kind of manage all that.
Okay, great. And then, just back to the
The capacity needs, I think you bumped.
You know, capex issue for 10 million but uh by 10 million but just you know where is the greater need at capacity nearer term, you know? Is it is it more on the
The building control Solutions, more on the liquid cooling. Both it it just seems like as we hear about this space kind of exploding. Um, just a lot of a lot of push for, you know, we need it. Now, we need it faster and and just how you're thinking about, you know, how you need to add capacity to kind of manage all that.
Beth Wozniak: It is both. We are expanding, as you know, our liquid cooling, and we have talked about that for a while, and we have to further expand that capacity and capability. At the same time, as we acquired Trachte and Avail Electrical Products Group, we are having to expand capacity in some of our plants there. We are looking at the footprint and seeing how best we do that. It is within our own four walls, but it is also making sure that our supply base is also ready to scale with us. We are pretty busy working on capacity expansion across that engineered building solutions, those two acquisitions, as well as data centers.
Well it's both and so we're expanding as you know, our liquid.
And that capacity and capability. And at the same time, um, as we acquired track the unavailable, uh, we're having to expand capacity in some of our plants there. Um, and again, we're looking at the footprint and seeing how best we do that. And so, uh, it's it's within our own 4 Walls, but it's also, um, making sure
Rachel Smith: Jeff, I just want to say that the teams are disciplined on this CapEx investment. We have taken that up now a couple of times in both Q1 and Q2. We are very disciplined about ensuring the returns. I will tell you that the payback on this incremental investment is quite good for us. As we get to capital allocation, we have talked about focusing on growth. This is the place for us to invest here, both in the short and intermediate term.
That our supply base is also ready to scale with us. And so, we're pretty busy working on capacity expansion across, um, that Engineered Building Solutions, those two acquisitions as well as data centers.
And and Jeff, I just build to say that the teams are are, are disciplined. And, uh, on this on this capex investment. We've taken that up now, um, a couple of times in both q1 and Q2 but are very disciplined about ensuring the returns and I will tell you, the, the payback on this incremental investment is, is, is quite good for us. And as we get to Capital, allocation, we've talked about focusing on growth and you know, this is, you know, this is the place for us to to invest here uh, both in the short and intermediate term.
Amy: Okay, great. Thanks so much for the call.
Okay, great. Thanks so much for the call.
Beth Wozniak: Thanks.
Thanks.
Operator: Our next question comes from Vladimir Bystricky with Citigroup. Please go ahead.
Our next question comes from Vlad.
West tricky with Citi group, please go ahead.
Tony Riter: Morning, Beth and Gary. Thanks for taking my call this morning.
Beth Wozniak: Good morning.
Beth Wozniak: Morning.
Good morning, Beth and Gary. Thanks for taking my call this morning. Good morning. Good morning.
Tony Riter: Just a couple of quick questions for me. I guess, the positive organic growth outside the U.S. seems pretty interesting just given the kind of sluggish market trends, it seems like, in areas like Europe and China. Can you talk about specifically what you are seeing outside of the U.S. and what is driving what appears to be your outperformance versus the growth in those markets?
So, uh, just a couple quick questions for me, I guess. Um,
You know, the positive organic growth, um, outside the U.S., um, you know, seems pretty interesting just given.
They'll kind of sluggish um market trends. It seems like in areas like Europe and China. So can you talk about?
Specifically what you're seeing outside of the US and what's driving. Um, you know what appears to be your outperformance versus the growth in those markets.
Beth Wozniak: I would say this, you know, it is our strategy to focus on high growth verticals, and it is our strategy to focus on our commercial go-to-market, including our distribution partnerships. We continue to drive new products as well, and I think it is really all of those things where we are increasing our position and being more successful.
Well, I would say this, you know, it's our strategy to focus on high growth verticals, and it's our strategy to focus on, um, our commercial go to market including our distribution Partnerships. And so, um, we continue to drive new products as well. And I think it's really all of those things where we're um, increasing our position and being more successful.
Tony Riter: Great. That's helpful, Beth. It looks like good progress there. Just one other one from me. As you've transformed the portfolio and grown the long cycle exposure here, can you talk about contract terms in the longer term backlog and more specifically, I guess, your ability to protect margins given uncertainty around tariffs and commodity inflation and so forth?
Uh, great. That's helpful, and it looks like good progress there. And then just one other one for me, you know, as you've...
Transformed the portfolio and grown the long cycle exposure here. Can you talk about,
On track terms.
In the longer-term backlog, and more specifically, I guess your ability to protect margins given the uncertainty around tariffs and commodity inflation and so forth.
Beth Wozniak: Yes. As we look at our contracts, we typically are ensuring that we have that ability if we see some material changes due to tariffs or other reasons to make those adjustments on the material side. Those are discussions that we are having with customers, and they understand, they also are subject to tariffs and other things as well. We have been able to manage that pricing through our longer-term contracts.
Yes. As we look at our contracts, uh, we typically, um, are ensuring that we have that ability. If we see some material changes due to tariffs or other reasons to, um, make those adjustments on the material side. And so, and then, and those are discussions that we're having with customers and they understand, uh, you know, they're also in other. They also are subject to tariffs and other things as well. So, um, we've been able to manage that pricing through our longer term contracts.
Tony Riter: Great. That's great to hear. I'll get back to you. Thanks, Beth.
Beth Wozniak: Thank you.
Great. Uh, that's great to hear. I'll get back in you. Thanks, Beth.
Thank you.
Operator: Our next question comes from Scott Graham with Seaport Research Partners. Please go ahead.
Research Partners, please go ahead.
Beth Wozniak: Hey, good morning. Congratulations. Thanks for taking my call. I wanted to talk about acquisitions a little bit more. I think specifically on an earlier question, are some of the targets that are in the pipeline there because you need to kind of fill out the box? Secondarily, if you kind of do the math on your EBITDA, your leverage targets, my back of the envelope says you probably have about $500 million in capacity over the next 12 months. Is that about right? Would you use stock for deals?
Hey um, good morning, congratulations. Thanks for taking my call.
I wanted to talk about acquisitions a little bit more and think. I think specifically on an earlier question.
Are some of the targets that are in the pipeline.
Uh, there because you need to kind of fill out the box.
and then,
Secondary, you know if you kind of do the math on your EBITDA, you know your leverage targets.
My back of the envelope says you probably have about $500 million in capacity.
Over the next called 12 months. Is that about right? And would you use stock for deals?
Beth Wozniak: Let me start with the first part of the question. I will let Gary talk about the latter part. As you know, we have had this acquisition flywheel where it starts with us looking at high growth verticals and products that we see are differentiated where we could extend our capabilities and invest to scale. That is how our last two acquisitions came about. It is not necessarily, you know, how do we look at filling the box, so to speak? It is just where in these data centers, utilities, infrastructure, and what are great products that allow us to build on capabilities that we have. In some cases, that could be complementary products. I think we have a great pipeline. I think we have been very disciplined in what we have gone after. You see us, growing these portfolios, and that is part of our flywheel.
Well, let me start with the first part of the question. I don't like Gary talking about our, uh, the latter part. As you know, we've had this acquisition flywheel where it starts with us looking at high-growth verticals and products that we see as differentiated, where we could extend our capabilities and invest at scale. And so that's how our last two acquisitions came about. And, uh, so it's not necessarily.
Beth Wozniak: The pipeline is robust, and I think there are lots of opportunities as we go forward.
Rachel Smith: has got all, I will just comment on capacity. As we mentioned in our prepared remarks, we are right within our leverage range and expect to be well below that, especially as we will have a strong second half in cash flow generation. For us, we are going to continue to be disciplined on the deals, and these chunky type deals that we have done like Avail Electrical Products Group and Trachte certainly can be managed without any additional equity. So we have a nice bit of capacity, and we expect to continue this flywheel going forward.
You know how how do we look at filling the box so to speak. It's just where in these data centers utilities infrastructure and what are great products that allow us to build on capabilities that we have? And so in some cases that could be complimentary products and I think we have a, a great pipeline, I think we've been very disciplined in what we've gone after and you see us, uh, growing these portfolios and that is part of our flywheel. So, um, you know, the pipeline is robust and I think there's lots of opportunities as we go forward.
Tony Riter: Very good. Thank you both.
It's got all. Uh, I'll just comment on on capacity. Um, as we mentioned, in our prepared remarks. We're uh, right within our, our leverage range and uh, expect to be a well below that, um, especially as we will have a, a strong second half in in cash flow Generation. Um, you know, for us we're going to continue to be disciplined on the, on the deals and and these chunky type deals that we've done like EPG and uh and track. The certainly can be managed with without any um, you know, additional, uh, additional Equity. So I uh, we have a nice bit of capacity and um, you know, we expect to continue this uh, this flywheel going forward.
Beth Wozniak: Thank you.
Very good. Thank you both.
Thank you.
Operator: This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak, Chair and CEO, for any closing remarks.
This concludes our question and answer session. I would like to turn the conference back over to Beth wnj chair and CEO for any closing, remarks.
Beth Wozniak: Thank you for joining us today. I am extremely proud of our performance in the second quarter. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe in nVent as a top-tier, high-performance electrical company, well positioned for the electrification, sustainability, and digitalization trends. Thanks again for joining us. This concludes the call.
Thank you for joining us today. I'm extremely proud of our performance. In the second quarter. We will continue to focus on, delivering, for our customers employees and shareholders. By executing on our growth strategy. We Believe instead is a top tier high performance Electrical Company. Well, positioned for the Alexa as sustainability and digitalization Trends. Thanks again for joining us, this concludes the call.
Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
The conference is now concluded.
Thank you for attending.