nVent Electric (NVT) 29 Apr 192019 Q1 Earnings call transcript

Good morning. My name is Carol and I will be your operator today. At this time, I would like to welcome everyone to the nVent Q1 Earnings Call. [Operator Instructions] At this time, I would like to turn the call over to J.C. Weigelt, Vice President of Investor Relations. Mr. ahead. go Please Weigelt,

and to Carol XXXX first earnings call. welcome you, nVent’s everyone quarter Thank

outlook. you full us. call, performance me our could Weigelt, glad Financial first Officer are We join quarter our McMahan, provide year of Wozniak, Chief quarter Chief Relations second details and Beth our Stacy Vice On I as Investor and will are as with today’s XXXX well today Officer. our and Executive we President J.C. am on

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

here webcast the the or in can of events by Today’s are reconciled materially are today presentation. update of a to obligation included differ the results. company of no accompanied Actual such as to financials statements reflect which and References publicly from section results could made statements website. to Investors the presentation, undertakes is circumstances. subsequent non-GAAP anticipated in appendix found be nVent’s Forward-looking

over time will our now, after for turn have Beth. prepared And the remarks. will We questions call to I

and you, joining thank Good Thank J.C. us. morning for you

We steady are and progress results grow pleased make business. with our continue on to to first quarter our our strategy

X%, at at midpoint the was of grew and which end the higher was organic adjusted of guidance sales EPS First our quarter our guidance.

XXXX to X% basis on Beginning organic public of sales that first X% $X.XX. remain adjusted million growing. X% million by track includes sales quarters expansion has We positive our repurchased year-to-date. a Slide delivered growth, have which Enclosures. We XX X% are shares four was our point of negative $XXX of deliver to X growth XXX on a of with impact on $X.XX. led X% that approximately strategy independent organically an results expanded segments by a executing approximately Return XX.X% and presentation, EPS original basis to We strong to the grew on a outlook points sales portfolio in currency growth as during of company. EPS each on $XXX in Adjusted our

Given repurchasing the an attractive time business, we in our during this confidence of shares thought use was capital.

how our to shareholders. for capital continue We the returns evaluate we best generate use to

Turning X, is drive shareholder velocity. capabilities digital our to to on and nVent in and working Strategy, investing we and enterprise, are titled common the productivity top help line Across Slide believe and strategy we focusing growth driving value. processes

industrial sales to growth at we guidance all fairly our impact currency Slide growth broad-based growth commercial, moderated from expected. in and line consistent expectation. during the our vertical was We across midpoint Moving saw in with organic X, infrastructure. The the $XX growth bit sales a industrial Sales saw first million our was negative quarter segments. of in and X range we X% of as

XXXX. actual consistent had for as up Inflation since the and the dynamic for last allocated Segment with Middle recall costs given discussed corporate see to this then. half rate was and corporate the of trends largely year-over-year our verticals we East. $XX line X% X%, year this regions up and the or continue quarter within Overall, in levels the U.S. what saw China with such towards year. to that comparative focus steady We in versus quarter run the had excluding costs, quarter was higher costs the other guided back million, income are our of growth corporate we and the we earlier

than price plus the that offset see in first inflation. can quarter, productivity You more

to of Electric of proposition EFS minutes as in Fastening Improvement be of Solutions like the the high is to we Turning value believe founded within & as take strong overview I segment, review EFS The XXXX to an couple our was Railway simple. proposition Electrical Slide value X more a margin Company, would what this for ERICO. known segment. to commonly

and understanding then how first quality We focused work products help and easier. are to installations solutions develop innovating and end-user by and faster make contractors

spend in contractors countless drive hours teams with how the they and to efficiencies. identifying Our field work observing ways

which the brands. electrical two solutions categories: be can solutions, brand; nVent nVent and which generally products and sold Our include grouped includes CADDY nVent into ERIFLEX fastening the under the solutions, ERICO

Solutions wall and Fastening spring as and such products innovative include brackets steel stud Our fasteners, hangers support.

go-to-provider range be Here difficult reputation reduce the repetitive among contractors fasteners the burden what job. comprehensive of has the to commercial as CADDY designed otherwise simplify high-quality of time, tasks a of strong nVent would a and earned brand save

products Our up CADDY shown recent contractors studies nVent several those on products innovative time time of their XX% particular to installation have save for applications.

effects these approach surge revenue Solutions reliable, develop America, and protect and of and The solutions. global some a in products are lightning And Electrical Our grounding bonding, include and North closely quality holistic customers electrical our applications, up. comes to high-quality sensitive from nVent and lightning the expertise solutions, engineered our power provide that in the the buildings offers protecting and facilities we from with is most from growth. processes. critical offering induce With protection and world’s and application leader protection low works most equipment current products while ERICO investing to brand of of provide surge the EFS innovative transient, facility voltage we innovative connections. ground

quarter in X expectations. our X% Slide quarter our the to sales a segment first first of turn performance. discussion this with Enclosures, please Starting line with about Now, grew in for organically segment

and to sales Segment in off moderated, remains continued and commercial. data networking our was growth broad-based and with strategy Although up solutions pay strong growth XX%. income it Enclosures is

has consecutive third the expanded sales. return For quarter, this segment on

expanded in of result This a and global execution XX.X% stronger basis site. XXX to our points factories on continued quarter sales return of our as stabilization new

key now the and from benefits the the new was Price priority actions. recall, quarter. as we a those you strong $X driver million last during in We said was approximately XXXX stabilizing we price As what sites year. seeing are our delivered also did two in of

announce the were very in opening the first we in pleased quarter. Finally, new a India factory of to

Now grew looking X% the and residential sales double-digits, of business of MRO due to to commercial grew million Thermal portion Industrial slow declined organically. Management, this the at the $XXX year. while sales a start

Industrial helped Our year-over-year energy, within MRO in down margins was backlog growth longer in however, up cycle Strong Industrial and higher. sales commercial. drive MRO

points of income X% $XXX on declined Now approximately million. XX.X% and price of EFS, by on basis sales almost Return grew organically, driven XX realization million sales to segment declined X%. $X to

improvement is to we year within should inefficiencies the was at sequential half last product new changes are levels EFS equipment EFS the and systems. to and underway address our in in back productivity in made warehousing Cleveland, spent the the capacity team driving. and new As week our management leadership in you our leadership changes and in late availability may last operational and good see readout I we Investments walking and systems My It highest shop have with reviewing floor recall, year. seen investments at team of is facility some time. the some transportation

priorities. X, like Slide review to XXXX I our would Turning to

off start evidence see are that to to XXXX. good focus we a in win continue where we and We we

GDP priority within that and plus have X business is we X growth continue demonstrated four Our or first to and organic quarters. points our first view as this

we margin priority by expansion saw Enclosures. in second a is points basis first strong the from Our XX quarter expansion where of contribution driven

for more Our our Please of third some turn priority Slide to want capital. is detail a to X strategy. allocation. this be We capital good steward on

the around We attention, from are interest always for competing investment investors world. the dollars and

have a flexible first We being allocation capital and to seen strategy independent of public an this within our us and you disciplined have put company. work year

strong high flow proven and balance sheet has business cash generation. margins, a Our

XXXX free return the repurchases. income. free highest generated flow and allocate of flow expect to grow We XXXX, with intend business to over investments, in are is M&A, capital We and a of with commitment. adjusted level that do strategy organic and grow we it consistent $XXX million In our proving share to through way in towards our net our this cash in we line cash dividends

shareholders in about We have then that over to dividend by just paying and done million our by million $XXX competitive repurchasing $XXX shares. since returning a

looking We that meeting opportunities being in proposition in greater our than of M&A average program being our capital an years. X the for also while financial accretive fit bolt-on weighted our of value criteria active cost X return have year X to and

an the highest and call attractive ahead. amount opportunities good our over cash generates outlook. second cash for business now I on our outline allocation return Our go to the will stewards produce focused full Stacy, efforts. Stacy we XXXX we are to quarter as being year turn to please of evaluate and

sheet balance you, Slide everyone. Xx I debt Thank At EBITDA. our QX, and and end flow. approximately on titled morning of the am net XX cash starting was good Beth

different. The are bolt-on shareholders. first continue to our no acquisitions commitments usage heaviest cash to return quarter We for attractive look was flow typically core look is and to believe our this year and and invest cash on we well deliver our in year businesses, quarter to cash positioned this

an This are of tax a of XXXX. Turning In news tax fully to rate an Slide year partial to rate. from XXX-basis that regulations. our beginning impact to point provide mitigation. year the good guided in to is timing a full XX%. we guidance wanted Remember expect XX, on we update proposed January, the the reflects XX% headwind of regulations identified rate retroactive on to XX% offset basis to and we proposed we in potential a annualized our The XXXX, updating tax and

of approximately estimate the turn an second headwind second guidance XXXX $X.XX for quarter nVent are which tax EPS Slide outlook. approximate translates into the quarter effective $X.XX maintaining year be We to rate adjusted Please We quarter. to to our in $X.XX. titled XX%, XX, our

second for X% quarter growth to organic We to expect nVent be X%. sales

track contribute and strategy to line. continue should growth growth on top remains Our our to organic

headwind in quarter to We second expect the of points. continue X a grow to approximately currency

guidance EPS $X.XX. the quarter is adjusted for Our $X.XX second to

comparison. quarter remind to everyone, this pre-spin our Just be last will for

lapped slightly well from in spin. and adjustment prior from onetime $X.XX second to as last other costs quarter. headwind guidance proposed the takes catch-up higher year into allocated Our the higher the range the costs related corporate expected as expense also This interest regulations as account reflects and we tax some the

repurchases. You Slide will XXX a XX also recent of reflecting share share million see assumption shares count on

unchanged organically, titled you XX XX remains expanding full basis of XXXX return sales growing to $X.XX. gave what outlook, points X% to outlook on in EPS Slide January, our year with to to to XX adjusted relative Turning we and sales $X.XX X%

this equates in modeling get XX% to to EPS us an to For first a third new tax rate and our compared this and to the assumption rate expect growth to $X.XX rate for approximately holding appropriate range and a adjusted share modeling and range XX% the for of $X.XX year midpoint was headwind to lower second are a X% This guidance for rate represents Using XX.X% XX% for $X.XX pro tax This our forma XX%. quarter and we at quarter our should tax effective the for relative of approximate the the and XXXX. in XX% estimate an and slightly the EPS $X.XX as quarters. view purposes, tax purposes. when we full count, XXXX fourth for year, X% between of

capital We opportunities the optimize continue and the look below we share value. Q&A. per the own bolt-on to for allocation will shares this items. our and share call to and are M&A, we With line on and to managing start based to may that, repurchasing Carol our summary, as same over the change In turn I remains price now M&A evaluate outlook bolt-on

Jeffrey Please Partners. Instructions] Sprague [Operator from from Vertical you. question go Research Our Thank today first ahead. comes

you. Thank morning, everyone. Good

Good morning.

we the out, more example, laid seems last the Good what was guide easy. there is EFS, could you but fairly particularly comparisons, kind in volume of – clearly but little wondering growth I at a through comparisons in looking year, had early year, pressure for kind the in apparent all outlook, in focus part of just morning. the this last on the if here just your bit you of

quarter, wonder that just year color progresses? little little the if to more you I on the of and will, of versus maybe give bottlenecks a there, uncorking, accelerate So how price in the you do the volumes bit ability the the you if business bit as actually could a anticipate volumes potential played

we Okay. knew line with And we growth was in going can we well. share tracking year, entered expected. what Well, initiatives this was growth first our are moderate. I this quarter as that really to

set against So still with our we that with in line those pleased strategies. we objectives our are very performance all

we shared, as particular, we had For had EFS, in some inefficiencies.

see of operating to So, year. in some coming for the customers started bottlenecks to order equipment. level we momentum weren’t availability had some have in and service us we terms this We at into the

cautious to X% some is calling out they the it with to being or was distributors, in online or whether to because shared of Some that throughout But the it so going capital putting still on even X%, of are better until I tariffs think that’s growth are have there investments and mention execute challenges weather whether aren’t year, do trade we ability at was going there will much back our productivity those position. as are we that, that Not quarter readout. we on the look there. we were see think that impacts. we were when place we half moderation various our said a fully start in Having be to to they us,

momentum I the we as year. will through EFS progress So do we get in think

just in growth, price? – Maybe volumes year-over-year against did actually that you growth just more volumes. all have at had little EFS, negative are might like you Yes. specifically, comping a X% It organic been grow looks a

price. That right. was growth are You

coming we And shift, to on capacity flat that were we expect online. So, right, got availability as do or less we’ve volume. more and

Okay thank you.

next ahead. go from from Jeff Please Capital Our KeyBanc question comes Markets. Hammond

good Hi morning.

Good morning.

business what the terms Thermal talk just through see some as what the in forming we just of XQ? on year? cycle in one, kind move long activity seeing in slow how just order touch commercial do of and then here, of and the Can into visibility start that you about you And you’re drove

Okay.

we So we tariffs we expressed as saw impacts more thermal saw of weather that I distributors commercial with again, distribution. of commercial trade, of for the momentum Thermal, through in being the our saw, with and far, some side on our out We business going came a as cautious lot well. business. as our business quarter definitely EFS, saw We

just But slow the longer increase. quoting business, did our When backlog as all our said is given just dynamics. those very orders and So, control, previously within it’s completely start energy to translate a XQ it that to but it comes strong. and turn activity expect we was expecting cycle we’ve haven’t this We that, XQ our do not seen we’re to that year. through

think for would and XQ quantify EFS these Okay, the impact great. segment And had the way then inefficiencies impact a be on is you to there from in income XQ? what you

Yes.

so are to the saying You return margin from are a improved, sales still that EFS to will more get in QX investments we factory. those the back pickup year-on-year period basically QX online come and readout of expect just roughly capacity sequentially of it’s on essentially more productivity. the but unfavorable, in year, in seeing half that us QX do And but in we efficiencies time in the help the

in sneak just then items. And of Okay. a couple housekeeping

the reflect guidance, buybacks year-to-date rate tax in just some XX% be buybacks? to buyback, into it that clear, XX%, is additional so you or to think back Just can and get you just

account and buybacks of sort forward. year-to-date into going anticipated taken the dilution have We

And the believe today, as as know yes, we regulations rate, in with will we so that XX% aren’t mitigation know we but rate. actions on as finalized, because tax be it have we line we that tax it

Okay thanks.

Our go next from Deane Capital ahead. RBC from Dray Please question Markets. comes

everyone. Thank morning Good you.

morning. Good

are the helpful year. in The your how Enclosures. that. and offset with all have and the strength so specifics I of Appreciate doing to when in stabilization about trust gets just I appreciate all improvement, it, that around margins given I the margin how us interested sustainable? the going really could for just and you is And reflected exactly maybe the guidance this talk you you talked with starts That’s tax was better I stabilization? the the that new you’re there the question share What sites. about you

Yes.

new sites you’re when about you’re labor in capacity those of in think of of recall you was just if terms new the inefficient, one a So, bringing effort, online, facility. terms distribution right,

have So, lanes as needed efficient be. to they our routes our we as didn’t and

seen all believe at very it’s And to sustained said progress, So, point level bring through you and we’re several a quarters it’s really as optimization. we’ve When new things. those capability, this position that in performance and is it a in and on getting sustainable. XXXX, we solid

a a couldn’t company prospects but M&A maybe coming not you is And you what with more us now – as to looks the notice priority. does to to just but I portfolio M&A at? you’re And grow candidate, established on and share And be the little the Good it spotlight to own both you products what as as priority, prime with is of consistent show new like. in pipeline way of a seems then that to M&A started help, remarks bit hear. to what back leverage remarks you into is more having your want so public terrific kind on that, a well looking as And capacity. seems a that a can dropping additional your maybe off having us that in also Stacy’s EFS platform, maybe

Okay.

so Deane, for X-year that you’re priority were as we M&A most company. very company, for right? on So, there execute the that to and ready anniversary next a was we correct. And approached are in we’re clear was feel And that new so us if where correct, a public position saying the execute, first as that it opportunities. We team in week, leadership our are you’re could a in and we our we show we important year

space. we characterize very space in replay $XX businesses as a large in are electrical you the As for know, We billion.

it’s ensure each global stronger us or opportunities, believe right, to opportunities, us I also players, there execute. also segments that very it allow across is to extend have a certainly share, are that of our are position. so, we are help And large to EFS, able there to capability one will but fragmented. we’re some there And while We want

when also ensure we weighs at into and on look that the where the that executing do where so, And so business, profile M&A of we want current are, to those we we to first. are we opportunities delivering think want and

Thank Good hear. you. to

Thank you.

question from Our Mitchell Julian ahead. Please Barclays. next go from comes

throughout Lee the is in in in midpoint the This Julian. Margins guide. for morning. year. better XX cost were good price QX Hi bps on line the gets with Presumably, year up full Sandquist

gets So, worse? what

Lee. mean, I Julian,

Lee, Sorry. continues XX full for second it’s of be XX currency heavy quarter. headwind we as the Also, expecting guide, in are a that inflation year points to basis to about headwinds.

So as that we Management, is back margin coming expected which somewhat. well essentially as go Thermal projects the the will where revenue moderate mix into for

Got to the company segment? for expectations we it. just the about think should And expansion total how guide then relative margin XXXX, by

I most expansion’s Thermal say some in be and will that the modest going Well, of EFS. would to margin flat in to very Enclosures. be

lot. Got it. a Thanks

from comes go question Robert next ahead. Buckingham from Barry Our Please Research.

Hi everyone good morning.

Good morning.

Did orders you say Thermal, the were could the what you or in order growth?

comment really energy it you in converted is our when yet. to with projects. don’t provide is so that hasn’t down share was the the backlog, that did side business, that we look up, and longer activity The cycle of all necessarily you quote detail. we Well, were orders What but at the those

in grow be tends We our shorter commercial also did business, business. backlog which to cycle see our

the very actually year Got activity that of mean, order got back one-off the they half it. maybe in last strong. but were impression I I was comments,

to just that Or start weak the year? was particularly still short is cycle So, the to come?

orders, timing. some is as it yes, entered the backlog But orders worked QX, we, and that some was years, business. but just of the see we it in a that we we’ve to said it back of cycle again, and in were was in half just it’s of just, through of strong Well, of the particularly slower lot converts longer start, it, timing when activity, a

Got it, got it.

assumed versus question positive Following your on be XQ? earlier up guide? in you do productivity cost, of Is on price the kind price again will plus that in think inflation

Yes.

little you on when just was the off think for start room I better think, just, looks I like easy, pretty Enclosures, could maybe for know through it there And thought phrase margin here. we’re looked it. strong about room expansion I here go but just of is is outlook, and margin to talked a we and progress clearly, thought? margin like tracking a than year were you was Got it anything there originally very the kind than as looking comp the is you sounded Just a you months you there particularly be to a better like picture the of couple ago? margin more lot the

from continued yes. expect improvement from our price Yes. we say productivity do still improvement be inflation equation I and room has were left pleased for would year-on-year just There that covered is QX. that and and so Enclosures, will contribution nice margin a absolutely, that there in sequential we QX

inflation we So, Enclosures. that in first though seeing are is the impact heavy half

So need a to QX heavy inflation. overcome will

it. Got

the Europe, on lastly, in particularly Enclosures? in business more Just you’re on business the seeing comment industrial could like at in you what the of portions of the kind

slow. It’s

moderated. definitely and market been has we in Europe characterized So, we certainly stronger the U.S. has industrial

Thank Alright. you.

Thank to morning your you. for With in this I interest say joining nVent. Alright. that, you thank and want us

as first of have celebrate week, our high year shareholder XXXX expansion, the flow may right and organic we’ve at to strategy to we for you At drive in your Next a And focused our I focus We now our laser very Day. on conversion to so. again the we call. our people delivered strategy, commitments we you portfolio operator, cash growth, our year. February accomplished the and and shared allocation nVent, believe public conclude flexible our strategy. capital and everything value first do proud thank balanced first support. continue an in first We company. I’m remain Investor independent we anniversary through margin on is

today’s you may conference. now concludes disconnect. And This