nVent Electric (NVT) 26 Oct 182018 Q3 Earnings call transcript

Good afternoon. My name is Devon, and I will be your conference operator today. At this time, I would like to welcome everyone to the nVent Q3 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank turn now over J.C. to I the will call Weigelt, Vice Relations. Investor President, Mr. begin may you your Weigelt, conference.

our full-year as details Financial third on and nVent's I'm On Chief welcome quarter Stacy earnings Devon, Wozniak, And XXXX you, Thank our to call, are today today's performance, glad Chief President Investor Officer; Beth could with Vice me call. third you our and join well Weigelt, us. J.C. fourth our and of Relations. quarter We're XXXX we outlook. Executive as McMahan, Officer. will provide quarter

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

now, Forward-looking after the in events made prepared statements and be to We'll Today's presentation, nVent's to references by have a Any the undertakes reconciled no of such circumstances. which to materially is the accompanied anticipated or reflect differ Actual company today statements included Section update for Appendix could from publicly financials are Investors obligation subsequent call webcast are time over questions as can to website. non-GAAP in And presentation. here turn of remarks. the results. the I found will of our Beth. results

above strong end results sales post grew sales X prior the nVent's our drive Fastening in quarter issued in third top was Slide Good for income XX on J.C. and & $XXX spin. Return midpoint earnings joining of the Electrical and expansion nVent the quarter of thank which during X% you, the was Robust Solutions organically, EPS X%. presentation, on above third on morning, our delivered guidance. with for of at Beginning Thank quarter grew expansion Enclosures was over and growing million guidance. previously all the you helped return XX.X%. quarter quarter sales the full Segment third of first midpoint approximately organically of segments and on points return basis adjusted sales year-over-year us.

and the $X.XX our a as $X.XX corporate in experienced sales by of costs, headwind expansion grew roughly prior EPS at the was excluding other was approximately segment slightly of changes midpoint return Adjusted expected guidance X%. larger However, on income from foreign currency. we than offset

to Turning X. Slide

One as align of where our company the We One strategic One business understand is and larger nVent across the strengths the nVent. up to opportunities have of strategy. components standing our we

all these rapidly to relationships working broad be with One top channel supplier, strategically of Today, to never very we manages nVent. more team met a nVent a have of across and but had have strategic strategy. under is is found of the of let Our we channel very nVent. our of are scale primarily across at working. goal to of capabilities entire In our or One is all partners channel our larger the examples this knew level these them many as the across XX our cases, Historically, is they portfolio. receptive This example with brands relationships few relationships were relationships. and part me the that that segment partners partner changing even organization, our one some I and segments. us we where provide were our

Although growth for long we see early, high-single-digits expansion. and runway year-to-date a initiative and has global sales this grown

been key on nVent's signs our showing a segments. area solutions created our Teams each of include approach selling focus is with go-to-market have early that vertical. new Another products of success for from

servers, the and the is of very no networking size given for this increased centers from CapEx perspective. attractive and from of data growth signs the increased One Things, slowing spend We demand of these data and center which hyperscale customers. both is solutions, see Internet

business in when Again, stronger example cooling Enclosures. nVent level. is by led capabilities Our solutions market-backed of unique an liquid year-to-date looking space at the grown and drive teens team this result can our at high how has this a focus

Slide to X. Turning

over other off we negatively Our per the Transactional income paying grew focus basis. as million on within third our profitability by losses, X%; XXXX. first which segment way are growth FX is trends and $X.XX quarter are is and an allocated or sales this to the year corporate other on X% which of million $X X%, and throughout grew corporate about adjusted other costs. impacted income grew as $XXX share. of approximately year-over-year best year-over-year assessing we income costs organic comparing corporate included Segment Recall, in excludes costs, believe

quarter. at target. Please note Looking that flow have free $XXX impact productivity we included in Year-to-date FX cash stronger the walk, our in historically in transactional bucket. of was segment the the income typically line fourth million cash with generation see we

Thermal turn overview value Thermal business segment. I'd to our to of for as the our let's couple review just X did Management I on a to Enclosures for call. an of July minutes Slide of Now, take Management proposition like the

of of electrical years Management innovation, the protect our invented that most With which in North applications standard segment. connect America, and with a XX maintenance to from trace provides A Thermal building. heat and electric floor heat cables protection freeze heating. thermal solution, ago, people, XX% to was the self-regulating heating Developed over sales approximately Raychem's industrial processes, our Raychem key of industry solutions from temperature originating global cable. quality tracing it by of remain pipe Our culture critical is part and segment infrastructure, outside is

new expanded cable our unique introduced heating to technology applications and nVent. have We

commercial reduces trace provide to residential and water protects systems immediate products hot to The cables. allows critical years capture Tower as For example, buildings water fire-rated the standard our which to London, the world's Eiffel of most and the smoke Management our over growing the MRO. more the than on and Shard Thermal than array tracing pipeline Burj full to such compared wiring, XX% the supply hot in equator. entire That's buildings heat in Khalifa times and installed installed by can feet lifecycle us an provide in Paris, longest XX in offers Thermal the has tracing We installed of Management project billion products heat the more design X cable. development around maintenance iconic With the the products, brand. Emirates, of our system. TRACER including heat services, of along engineering world base services just systems, under

to able providing costs are value our operating installation reduce We customers. total and for

in Flexible control integration, interface intuitive easily The communication next-generation into a smart ELEXANT data latest is incorporating systems. get and commercial, their options Our ELEXANT facility ELEXANT allowing existing advanced user to and enable controls integrate allows operators open to residential of our between application. customers industrial, controller and focused the connectivity ELEXANT monitoring real-time platform. new on control of communications feedback. that provides is family heat development tracing enhanced

As more lower operations than a cost making easier productive ever in improved field result, before. achieve operators a and and the of ownership reliability,

tracing support, ELEXANT expected a global and control usage are organization high standards. have Management strong around technical truly of solutions line Thermal Our to with the heat system, is international complete for world. safety a approvals

management our from heat benefit customers system services their needs. meet Our products, expertise, to all worldwide and

marks discussion quarter This in or segment the a to fourth This X% organic Slide quarter grew Now, high-single-digit Enclosures. row third a organically our with X please approximately quarter. third the segment with sales for Starting X% turn growth. in of performance.

to across outpace industry growth geographies. continue and the broad-based We with verticals many

America X,XXX Our alone. points more strength with an than is global in distribution channel advantage North us for

strength the X% a the range the to as is offering as at both of organic top products, to growth the product Enclosures of Previously, guidance to broad guided meet our variety X% requirements. customer standard of as we end well business Our we solutions original for full-year. engineered provide be highly

the the grow expect year-to-date, now Given for organically X% Enclosures full-year. to strength, we X% to

year-over-year on third sales Turning XX.X%. by expanded to points to margin, XX basis return quarter Enclosures

make the continue increased to our productivity call, saw with the progress July goals Consistent quarter. to We earnings during and relative we positive inflation saw price comments quarters. on previous the our on

a and growth million year sales, was up fourth we measures in year. quarter given We especially however price return in this $XXX organically. quarter realization down in vertical the this strength earlier year, expect most X% face driven the in comparison encouraged commercial taken expansion the to We're and prior this which a Management Thermal last growth that of by show year was basis, the difficult the versus reported from XXXX. to quarters this with productivity the on have Similar MRO. industrial to

relative cycle longer wins. project remains quarter-to-date energy saw strongest our the down to XXXX, with business smaller some Although we

pipeline increase are we We on business. bidding a are and of quoting strong competitively seeing an in

expect now points Overall, XXXX. our basis return We XX.X%. expect delivered sales this fourth We this of return into over Management read quarter by to on on in year. out business to increase sales this and Thermal XXX

to on EFS. Now

Third $XXX on million organic basis. quarter sales of an X% X% approximately increased or

We sales to points, CADDY continue quarter. XXX higher XX.X% the In fourth led sales as expanded productivity our basis price during we continue. to of quarter, strong this product plus inflation line. experience the Return by growth offset expect trend on

the tariffs, calls. on like two the would I Now, past we topic to move of to which discussed have

the keeps situation evolving assessing are we know, you development. As all and the

XXXX. takes to $X increase to the Now, the excludes It This including takes higher XXXX $X the indirect place tariff is from $X point-in-time We List effect million annualized. impact this update. a million of XX% a million note to million inflation. in and estimate. X see or that tariff $X direct in impact that includes Please XX%

within We locks, of steel and to other actions chain. supply continue including actions number pricing mitigating take a strategies, our

great our executing the of XXXX, As Investor we quarter Day. it growth initiatives to we is at team out laid final enter see the the February on

nVent, there over driving done, in work margin. made and organic by our is growth X% great this strides be growth we've organic still quarter standing to While top-line improving as evidenced Enclosures up

I Stacy. Now, call turn to over the will

morning, turn nVent titled you, good Fourth Quarter X, everyone. and Thank Outlook. to XXXX Beth, Slide Please

This seasonality. X% as organic fourth be quarter XX%. to sales our on takes account into between to continued normal as to guidance strength within expect for increase X% well XX% and and the We segments return sales sales

approximately As fourth a reminder, in the X% quarter XXXX. of we grew

growth to Management. in of in each segments growth expect with see Thermal our We organic accelerated

adjusted for per are quarter $X.XX $X.XX share. introducing also guidance earnings We per to the of share fourth

XX, Forma Turning Pro nVent XXXX titled Full-Year to Outlook. Slide

quarter, X% accordingly X% third performance strong annual with our performance moved X%, which sales to some is While see where guidance outlook the we there guidance. view have are growth prior X% guidance growth. year-to-date and original driven in reflect sales X% end be This to within organic the is to to consistent high of by X% to our the as for at things nVent of well organic segments, that adjusted as our we Enclosures, in

to continue XXXX. to a flat see relative We to sales on path return

adjusted full-year our our per to Given tightening earnings fourth the are outlook quarter, we $X.XX. and share for range again $X.XX

to expense, EBITDA manage we a interest down the Slide share current our to high-end track of which allocation has debt on XX, do out to the We flexibility capital and continue late in way philosophy. meet the this manage of our leverage we throughout our quarter while times debt lays to and We pay to to net original Turning paid in million also accelerated maintaining $XX within sales X beat multiple are our Growth down as times. M&A. for our year target X.X as guidance. repurchases or third

we and XXXX upon paramount our Our are to successes. to end and execution early as look focus this year build renewed

open please line questions. Devon, Thank the Now, for you.

[Operator Instructions].

KeyBanc. the line Please from of Jeffrey question comes go with ahead, Jeffrey. Hammond first Your

Your line is open.

the the tariffs. thanks good on for So, color

quantified Just on was that the $X productivity in think in you I What bucket? of bucket investment transaction. cost, million price the

sorry, -- had tariffs. had Jeff, I'm should -- me, we basically just Yes. We largely Yes, a -- that Stacy. our we about excuse excuse moment. offset million a of of by is me, third investment this $X was And the

it trying had I'm Yes. is XXXX like you what I inflation of $XX. to seems price guess to of get

been saying You've -- price

Right.

Was for productivity.

You're to trying get neutral. to

you versus trying I'm to So, you kind productivity neutral? inflation if just price out investments are strip – of and FX,

FX of about half price mid-single half million of that offset see that by the of about and investments roughly. productivity Yes, other the of of did of and to high sort we digit

Okay.

And around be price can from cetera actions -- of here neutral? helpful. are you that's price continue to inflation about Okay, et to then to you push just what and mix else you're just doing contemplating productivity talk to kind supply that able what of and drive chain, versus kind

in year On Thermal a price several have Enclosures, the action, we price through had Management. and EFS, increases

So, price and respond we have continue to forward. we'll price seen actions with across the going segments

the we the year. to just EFS In recently price fact, in announced the our occur business end of before

our standpoint, then that we in for the center From traction as successes it's in and a gaining price quarter. inflation -- business, enhance track and our continuing to third we the is we productivity new particularly to are good south then take productivity, gaining continue increases. we saw So, Enclosures inflation-driven our some and distribution efforts ended

So, we expect continue as to that well.

then, Thermal, talk quoting like about activity picking XXXX that sounds comes just about And business it the great. longer activity can Okay, just think is as and together? the order up in in that you and quarter the in you Thanks. cycle how setup ordered and

business is some Thermal it And look orders of in cycle the that at we and Yes, we third were is quarter, to that as business. where exiting longer expected be. up our high-single-digits

backlog backlog increase. set as for put in a and So, that -- would We've also we've you seen us growth us will -- as show also QX result, up seen XXXX. expect,

with Markets. ahead, Deane comes Your next of Dray Deane. line Capital RBC go from question Please the

line open. Your is

Good to see it's a results a everyone, morning, story. on and quarter nice on you. Thank congrats clean new and solid

everyone. So, congrats to

you, Deane. Thank

price Hey, tariffs from the I've that, to Is number? did $X offset what Jeff's on productivity you just this we you'll $X goal? annualized, level make be to cover then to gross that got line to that of that. using a set, million follow-up But and questions just sure, and And on that's looking the million for. really were realization

is correct, Deane. That

$X that talk at $X size stage? any million million effects the to the about indirect or is maybe But direct? And this way Terrific. can you was there qualitatively

environment to we've slightly XXXX, well expected material -- million. Yes, at higher from at inflation in XXXX experienced this be and into in it inflationary to XXXX by expect our stage, we went XXXX million where what the as we ending $XX $XX

expect we So, it continue XXXX. into to extend to

talk highlighted a from for to you nVent come ready since of about are cash you're directionally and of number then regard this give for think talk you to XXXX And maybe but in it. targets that's can free not even in an the formal up and close with meaningful anything to free outlook, some not quarter, just that has that You about Got you what you I already XXXX flow, a XXX% think Can maybe flow? broad times you cash sales XXXX strong but and perspective? sales please? did your do quarter know

Okay.

how continuing year, this growth going maybe see as we So, look XXXX, slower things macroeconomic at a go. overall to trends slightly the into and there strong we'll see

challenge, the election an the as expected look we up, we our rate as et at coming business, segment tariffs we're that continued to Management and when have into price business side, the cycle expansion. cetera. some still discussed see The lock Thermal Certainly, we strategy. Thermal We on growth our expected will I and with Enclosures that earlier, run order longer We trends see get as managing and ensuring continuing margin good our and accelerate.

course. will income year. we think We're give another adjusted in yet, cash. I XXX% solid flow, our we -- as that will due to but our cash same, the XXXX in see our of not is on it color of When net goal be what free expect specific to terms So, we'll ready comes

helpful. that's Okay,

arguably if now you're can one your below any I sheet, but show of you I you've balance range. a -- could. grow Just holding I target off think, through the know XXXX M&A you you own, last on to had that question get what balance your

So, that's in shape. good

markets? of gets is there started network If these and where rates verticals, deployed data about about some centers M&A, in kind the you those in equipment in -- of presence because bolt-on that growth given that the your well-positioned. think talking some off Are where there you Enclosures opportunities growth would and

Yes.

M&A, with about As starts strategy course. think of we it

is at we're in of customers. in And look so, it our terms of we for value mission-critical that solutions, on focused what terms creating

play, data and then with we supporting So, would be areas there verticals business, particular there's there's space just think all across even we we at expand that – start market, the where segments that center the portfolio board. the and and at our across if opportunity core think how in where business can where the a of look we we given three certainly our consideration. of fragmented there's is we opportunities But given looking

line question Julian. Julian comes of go with the Barclays. ahead, next from Mitchell Your Please

is line open. Your

morning, for everyone. good Ronnie Julian. is This Hey, on

morning. Good

Hi, Ronnie.

Good the I on could morning. scale Back size you the business, guess energy is the that and Thermal kind business? profile longer of cycle of that of for us what business margin

business you that look a we of we've but MRO, And Thermal third project focused that is our of less characterize that commercial there's projects in that, as we'd of MRO our third side, high-product then is the when certainly the one content into And project it you which that more strategy. both we focused in of expect energy. there that to it there's margin work roughly that a and industrial changes a MRO. or at on at So, space. way is, residential there. look industrial There's as We're is and a third really looked business at that to pull-through. balance business, ensure lower made as the We we and

last margin shifted that So, see you base. of get where we've projects we the and over in those profitable that installed years more established mix our projects two profile the to can

margin forward, years as two the So, we I levels in think some our still business, expansion go we'll last over we've seen not the certainly. but Thermal see to

be Is tough less bit Enclosures, function fourth about? thinking QX the of I a quarter? there guess the Got slowdown a And guide a should the of Is of it. anything there. in or that one-off over comp just then switching implies to we kind more

No, that's exactly right.

and year in quarter. fourth mentioned, we've very business, four Our strong that as last quarters had Enclosures started I

just So, year-over-year a it's comparison. really

pricing, EFS higher fair the with QX on last this price the is Okay. be from that in guess should X% tailwind I in that the push-up, from on And QX? bit quarter. top-line then assume to one one than a it pricing

I that's think Ronnie. a fair assumption,

line comes Your the Joe next of Ritchie go question with Joe. Sachs. from ahead, Please Goldman

open. line Your is

This Chow for good Evelyn on is Hi, morning. Joe.

morning Good Evelyn.

end just data Maybe to Enclosures a sold just like your been and exciting first this there and growth market? actually we segment you the about us, the thinking is there's it is sounds data scope expand in in start, opportunity centers for business the of of how right-size Could can little. leverage some Obviously, that impressive has center. much very into to participation

Yes.

business, represents, about things selling the we business. more pulling of Enclosures direct that's really Enclosures because our then on whether from and XX% that through say, a a have, and we've got or it forward, we're selling go-to-market there's For overall organization doing. other as partners it, couple of go that And what and segments. through two channel products doing of and It's we globally, focused our

of So, management fastening Thermal leak our example, our capability segment, some and from detection EFS from or business. solutions for our Management cable

growth. continue we strong the established growth year. lot to see have we had as this put So, really yes, really a to this It's go of expect year, we that. team it opportunities in because that forward in expand really to we got This driving strong just place

So, momentum. I go as on a going that capitalize we there's we're And think to lot of forward.

a wanted cost just And Makes return for I moment. to sense. then, price to

I price in think noted inflation. once you that, offset again EFS,

most portfolio acute? inflationary are So, in your where pressures else then the

of which we steel prices, them an those locking where of say has out the roll QX number, inflation million. the And And pursued off, a the in prices driving adjustment as strategy experienced that segment three, $XX was hard. steel in locks six, get and for some nine Enclosures inflationary would we essentially, we I hit inflationary had months. in

stress nVent. that have material Now, reported, the the by inflation across covered we I of to price inflation piece XXX% want

that that more try So, programs is we're we've what material productivity freight the offset. seen price in able strategies that's execute the working to really lot to to and side, inflation. Where on and a cover we're our inflation of labor

maybe you like quarter. It of then sense. bit debt looks one capital down And on of just Makes a last a ton paid one deployment. this

the clear. How may buyback, intentions of I now? are be your especially an that think market the M&A opportunity right a should with about your noting pretty we framework think there in for bit

Yes, to execute. lot when factors we so and that assess by capital. do very think ready currently our recall how stand buy repurchase certainly, to a we look deploy of we But, a have the authorization, $XXX is we good stock at million a

Your the Capital from BMO Scott Scott. of go next line question with Markets. comes ahead, Graham Please

Your line open. is

Hey, good morning. quarter. Nice

Scott. Thanks,

questions just just wanted as kind have I which I even of wanted follow-ups. to to my -- partial answered. to answer are of most been

On in some of I'm economy. as of that's talked of that, your maybe the fourth we've a about, is really quarter thinking. the baked in kind kind if quarter, into there's industrial right Enclosures the wondering just business wheelhouse improving that, fourth conservatism

in look again, at mid- the strong when for growth saw quarters last it we we was to four the and one high-single-digit QX. Well, Enclosures, very started comment

of nice we've So, and top-line. is see robust market for still expect actions just and QX, we Enclosures. very do accelerate our it part taking the overlapping then because for as that it all is the into productivity we the quarter going Enclosures been margin And on expansion

at I think for a will us performance segment. So, as look solid the we be that of quarter it

Got you.

it really mean, start SG&A sales more to growth X%, see level, I you organic question maybe line? there a call is where Another on XX,XXX the X%, is foot. leverage

that question Good on front.

that Let you. for me answer

we settling the have is more launched settling normal we're Our into SG&A company rhythm. new a out and as

corporate build once cost, XXXX level a standalone you're see to we leverage. start the between going cost to so, And allocated sort from think of to we anniversary I difference corporate where

have place G&A down able of definitive in innovation to pull investing goal some in into our be and and also investment a that We then leverage to very growth.

to structure start when comparables anniversary the our of part were to we we as and Pentair. leverage see to stabilize start you'll think I So, cost

of on Can leverage? margin do the of there? me X% Does And you well. sort a gross as the number line Got cost it. sales on give same maybe it for kind question on of you

us leverage a -- with in Yes, getting productivity. for be of number and to work terms nice X% a would very

with is planned I know And some quarters had the kind of the thing. Got running we several this last issues consolidation, question you.

quarter. Your is now peep that that Can that assume we about this behind us?

a where is see we start that we took actions in QX the of Well, through lot come benefit place. really from to

-- So

Right.

We The logistics southern our was that distribution piece and higher talked we just last about were our saying freight. optimizing inflationary center.

into think quarter, have those we optimization some in of fourth we get we will measures place. as So,

are There turn I'll to no questions. further now back presenters. the the call

for Well, joining this and nVent. interest We've thank morning, tremendous public you're as our progress you first a months company. us in six during made

Third metrics of over return quarter on performance are X% organic sales growth and sales of. proud XX% we're

I still work earlier, there's plenty of As and opportunity us. noted for

energized, Our strategy and they're interest executing and for teams shareholders. may conclude our you made the we to and financial sound are a you your call. again support. Thank focused the deliver now growth Operator, to commitments

This concludes call. today's conference

now You disconnect. may