nVent Electric (NVT) 4 Aug 192019 Q2 Earnings call transcript

Good morning, my name is Jason, and I will be your conference operator today. At this time, I would like to welcome everyone to the nVent Second Quarter Earnings Conference Call. [Operator Instructions] Thank you. J.C. Weigelt, Vice President, Investor Relations, you may begin your call.

welcome, nVent’s and Earnings Quarter Jason, Call. you, everyone, Second to XXXX Thank

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

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

company reflect obligation statements materially Forward-looking publicly such events undertakes subsequent from update statements results here and no anticipated made included to could to are circumstances. as or Actual of differ results. the today

Today’s to remarks. in webcast the have a of on by presentation. prepared the questions section nVent’s time which financials found be We’ll for non-GAAP after presentation, can is appendix of accompanied our website. are References Investors the reconciled

And now, turn I to call Beth. over will the

purchase our to about release we a nVent. press agreement our issued as strategic and full quarter a Thank overview us. I updated commentary and provide with Good see for of fit the then guidance. you joining to you, to the begin our review for year morning J.C. want week, call in some and great turning the details why and this thank regarding performance second over to before provide brief Stacy I’ll earlier we Eldon third quarter

momentum well were X% was organically. and by on EFS, strategic both positive Slide initiatives. driven quarter as $XXX growing million, X% X, from growth Growth Beginning for sales Enclosures up as our the

sales our range Adjusted XX.X%, within per by was at Thermal and share. within declined basis sales XX by somewhat Return within guidance driven EPS headwinds Thermal points these were Management. to Management. on offset volume declines However, mix $X.XX

paying are includes long-term acquisition as outstanding. strategy capital through on approximately million such We second for end to shareholders. our through during quarter and This in executing of the Eldon $XXX investing growth, recently brings acquisitions shares value our creating looking in generate distributions We repurchasing shareholder announced the bolt-on allocation and which organic repurchased dividend shares. quarter, a as of value for the representing X% million, to such shares our competitive repurchases the approximately $XXX strategic

solid EFS. sales Overall, we Enclosures delivered both quarter in another growth organic of and

improving new We our continue to strategy, our make strengthening in verticals. product focused digital nVent capabilities vitality, and progress One growing with our

and Our Thermal in Management we segment declines was want in to longer detail. cycle which I discuss in vertical our commercial delays continued further also energy challenged take a by high-margin and will what seeing hearing, the moment vertical. compete. verticals has about time the where relative in we broader speak From we’re to to demand particularly, last industrial within spoke softened we the April,

indicators we indicators the more to We the point decline the have approximately of decelerate, vertical X%. growth global flat follow softness sentiment output a half year, now this industrial to seen The modest pegged we global and to continue leading weaken. markets within back in year. Earlier be to manufacturing in

rear cooling EFS our in which example continue demand networking This Thermal similar in the data strategy incorporating is for moving selling and Management initiative mid nVent first products of where great data with Energy just vertical strong our across a solutions, door selling demand off. by complete area our to Enclosures second row increase be slight and signals solutions double-digit grew paying made an has strides, to The strong, Infrastructure downstream. beyond quarter. saw our to and team saw commercial demand quarter This liquid centers of nVent, in is with One products. to great offerings. strong and a center out good particularly

taken have formulating look executing at continue and our cost on guidance, actions when growth to account to outlook, this initiatives. our we trends macro structure strategic these We while to into revised all align our

Slide We remain to and trends our our strategy. committed in titled key One approach. continue One to to Turning nVent strategy, nVent X, verticals in positive our see

Our and reach expanding vitality service liquid customers new Eldon, enhancing of launches with will to our as and accelerate score We’ve solution. capabilities product and high-density Enclosures. cooling our of the family increase acquisition announced innovative growth our by such to global continues mid-teens with which advanced flexible to ELEXANT controllers

detail our call to guidance. provide ahead. to and over please third performance quarter Stacy, full I Stacy quarter and updated go on will the second turn provide now year

XXXX Thank and weakness in you, commercial. X% Quarter nVent Beth. grew cycle and Performance. growth EFS, from Thermal begin continued longer Second Management with titled Slide Organic declines saw energy sales on solid while X within I Enclosures will

the weakness have to Management. be by U.S. finalized. XX% from Please line driven the the Our in was income strategic tax versus the during remained digits million plus expectations. $XXX that currency and rate growth quarter. X% impact proposed yet Thermal initiatives price the quarter by grew high organic with million quarter $XX within second quarter. negative note sales during Strong during year, mix adjusted at the for $X last Segment volume the inflation during The down was single million, our regulations second quarter, productivity tax offset as

Now Enclosures, of data contributions flat center, second strong please was X organically turn to the with solutions segment X% our for networking in second offset sales performance. This and grew from our by quarter, with X% Slide Starting discussion industrial. commercial. vertical, quarter somewhat realization XX of growth points. was price declined on as saw grew to segment approximately adjusted Productivity income demand. return million. than factories lower $X slower expected within largest This basis our and a sales the Segment the

is be versus year. the which to we unfavorable trend the to continue inflation in year a addition, expect half ease In ago, of back a

comments, first to relative growth X% we industrial vertical, slowdown seeing the the within XX% Looking growth to makes which are sales of in year, organic a slowdown earlier the of the in in the second Enclosures. approximately up Beth’s Per half expected we half.

continuing outlook, execute strategic structure while We initiatives. this are our aligning to our cost revised on to growth

expect While sales we growth margin have the up, reflect for year. X% half we margins to back to moderated approximately full X%. XX expansion continue have first we of half, be by Enclosure year points continue expect expanded In to sales to our of the the to in and basis outlook

million to Thermal order longer approximately and right the June declined. the be Management, to project continue double Within including starts continue organically. sales Industrial early pushed sales longer and Moving to and MRO $XXX European cycle Thermal to Management declined momentum build backlog energy, while midstream said, grow petrochem increased. mid-single and digits, intake commercial that during project cycle quarter of X% Thermal several With order driven did increase by see uncertainties. digits in by saw July, global U.S. sequential Management energy projects.

driven volume commercial last driven Looking from were by difficult results mix and sales declining and demand. at XXX a in basis commercial year by vertical, some points, softness the sales. on headwinds negative comp declined Return

continues year. year albeit Looking do at order are Quoting the intake we the strong energy slow to longer the back and modest half start a updating organically, Taking pushing X% out guidance up a factors offset X% of the decisions our organically. and for June to Management enough the for be X% these X% be to activity to cycle not of recovery, to with sales right. to we cautiously anticipate although Thermal year, into July optimistic up to the strong, down keep are from all account,

to take be modestly outlook. and actions to align our to we continue down, margins expect to this revised to flat cost structure We

to organically driven improved year Now approximately segment on to X% income relative EFS, Return product by of million grew was million and increased almost XX.X% X%. price sales $X on flat of realization of $XXX sales availability. last and

actions margin management. are put the corrective pleased place and past operational XXXX, to year in as improvement increased half see back of in and for the improve warehouse and We the over with we year-over-year implement new the capacity performance expect systems transportation to team

organically back to we X% of year, to at expect X%. continue the half sales to Looking the grow between

Slide X. Going back Management and looking performance to Thermal at

MRO commercial XX% while segment X have nicely, Overall, past weaker expanded XXXX. years, industrial growing project by the Over margin, grown revenue. since and this has segment offset income

we demand, unfavorably a segment saw reflecting in This margin. commercial, some impacting quarter, softer and difficult comp weakness

we project business the growth we from what attractive seen some to MRO, And we expect to been years. project to have ahead, similar difficult while industrial few has forecast, recent continue over optimistic Looking wins. the with cautiously past are

focusing accelerate One on are commercial, and Regarding nVent increasing demand our channel driving initiatives. such we coverage initiatives as to

of X.Xx we’ve outstanding capacity X, titled balance half of X% the cash Turning of with At seek – bolt-on year. our targeted our our shares invest net of this and net in remains strategy the to income the Eldon the to debt sheet shareholders. retired to conversion attractive fund We second quarter, EBITDA, and remain pending flow, to acquisition. approximately we cash the our Slide in our first end XXX% to businesses, was cash and core returning maintained year, acquisitions adjusted

remainder about debt year, we deployment the plan capital to think of repayment. for look the we prioritize As will our

XXXX we thermal range EFS, industrial particularly X% to X%. account a sales X, vertical, be in nVent growth in into to Slide and to Moving down for up in third nVent slowdown titled continued reflects third strength expected This continued outlook, the quarter takes expect management organic quarter softness the Enclosures.

quarter third X point. currency a headwind expect of We the approximately in

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

Our the XX% rate takes regulations proposed and in approximately costs and into guidance of that U.S. we tax finalization taking anticipate account relatively as other year-over-year are of corporate the a quarter. tax fourth flat the

we up year between X%. called sales sales year organic XXXX to Recall, to full for prior guidance nVent growth guidance are Slide outlook, to full flat reflect titled and Turning X% updating XX, of our X%. organic

However, Management lower demand warrant half in a sales Thermal for the vertical of industrial back within the and outlook signals XXXX. softer

outlook, to results expand year our to also $X.XX are to the With outlook. sales revised our to first XX expectations points. on return This basis for adjusted be updating account is half We into full and current year XX expected this takes EPS $X.XX.

the approximately and half actions in $XX million targeting productivity are the cost second We through of year.

the excludes from pending Eldon impact acquisition. any Our guidance

the accretive our returns be within average expect years. weighted acquisition capital within to We months to and cost X exceeding generate XX Eldon X to of

third expect EPS not we impact do quarter in close the cost, late financing Given and material anticipated XXXX. to

Beth. to call over And I This concludes my on comments the turn will back guidance.

you, Stacy. Thank

changed. the Slide priorities allocation, priorities acquisition. not are through drive would first the these our that to with long-term like our so Turning build growth goal. have shareholder why value plans and deal, our to walk and XX, Eldon we committed to are We consistent for capital remain executing excited to On XXXX believe over I

business range is solutions products. of positions global growth. million that had XXXX. our Enclosures accelerated we to this portfolio is a the IEC have Turning deal and and Eldon strategic to which complement great a Enclosures primarily Slide They global of privately-held a is is segment a broad to in Together, diverse can complementary to have NEMA-based products, for a a offering to electrical $XX add revenue approximately global world. serve customers XX, global of opportunity around our standard us

deal enables end is quarter. serving modular customers platform. our When advanced diversification towards approximately expect and In has the solutions. the a And third price which invested the us addition, Eldon our portfolio. of $XXX industrial respond configurators Eldon to has offering, combined quickly the with to to adds commercial million. The flexible a to and in digital provide capabilities, broad we vertical, purchase strong in close

time can we our to see that expand today. these conviction strong be over similar segment you in to margins have Enclosures what We

be a we plan and strategic Eldon to integration and experienced of the place, are many deal excited We’ve part it’s team in great nVent. with a for to fit. This employees a talented dedicated for an robust is met terrific a We them at have acquisition. us

summary our priorities have changed. to not Slide on Turning our XX,

to value. strategy We to our on continue execute drive long-term

of half delivering and growth, on focused the productivity integrating acquisition. driving and on back we’re and our the cash actions, the cost year, at Eldon closing Looking executing pending

start over the to Q&A. With that, now turn call the operator to I will

[Operator comes from Instructions] from Capital Dray Markets. RBC of question line Your the Deane first

open. Your line is

everyone. morning Good you. Thank

Deane. Morning,

MRO encouraged And said but just about doing peers. there. color it can has here industrials we we assumptions short though June facing and And changed the we’ve the on industrial start orders, second it maybe distinction of which with have actually were maybe macro a number really cycle market the You from seen the can looks the quarter so reconcile, you start just half? industrials because your Hey, as about kind some then with make Enclosures headwinds, your of and specifically, July markets are in how they better, Thermal addressing? worsened in

Dean. Okay,

So in orders let was we’ve through me go what we Management. seen stated increasing Thermal

it as typically a space see in quotation the that we –that’s been energy Thermal has –are just and strong. activity at been we with when that very plays for you what the business It’s we’ve been sharing delayed. we that’s so longer us. And cycle at And look is

energy So industrial On our in optimistic strong Thermal to be area just that continued MRO, business is is going the pick we’re up. cautiously us. to for very

the whether business on industrial that you our good. the seen. our is industrial, energy side this see have what whether plays. cycle side short in And Thermal for been that’s in on And that’s so peers has Where it’s Enclosures as or we softness and said, Deane, Management where

be would that automotive example, it’s So industry been has know down. an we

quarters, markets the industrial is the we see back on the half that is for Enclosures the the year. of quarter from in we a in think during why saw lower sales for we say end we from distributors coming softness which progressed what our just and and forecast So

On Commercial can improved the EFS taken be start in good we’ve for we our seems outlook, product for revenue the to year. as our actions availability as hold in it a the forecast our held of at we expect commercial our and that we place still guidance side, the we do softening, EFS. we’ve put but to business while

some you we’re of I hope provide to that seeing. color So what

delays seeing push-outs too. what And Yes. does. It consistent has that’s your Emerson about really some then all on comment Thermal been with saying project and

about in some with And there productivity Will just the these flesh the be give it? the for So second initiatives there, associated restructuring? the of you half? these out please? Are right themes comments some Can now. are us actual charges market maybe thoughts

of half in year, million back the actions. of the productivity $XX in so there’s Yes, cost

realigning with some respect in and our we’re getting factories So that to demand. cost some will and of just see but change a EFS you distribution, of is structure our it and includes restructuring and our business momentum within logistics in that also some

us So look we as the economy cost for align. what’s on, be to have at able to signals the going in we playbook our of ensure structures a

you. Thank

Thanks. Deane.

line Your Jeff next the question from from Capital. KeyBanc Hammond of comes

Hi, good morning.

Morning Jeff.

talk you comp, here. I just been guys channel seems how understand just demand want tough of of recall much piece about you commercial about versus can labor to constraints kind kind Thermal. creeping that And up don’t that talking of weakness? is weather to kind our and hearing just of So we’ve be a through real I and that

to So – but back had And had had and strong we were that tough first we that. have a our in in weather slow do Thermal just in as were XXXX. commercial XXXX that with will we fire-rated half strong Management And business business, as jobs QX, is we had seen large were where commercial We just we we’re comps wiring products see recall. and jobs start really really also to had – in comping improve, in that are from didn’t delays, expect the to we etcetera. you heat we institutional some tracing some recall XXXX you that a it our half, lapping really we a

continue some in of half, the drive a As our of and Thermal at we to the some Thermal to how position strategies drive initiatives we’re one the regards look That’s place programs. that and channel. on with good at have digital in our in contractors continuing to that positioning been marketing product channels we’re looking build at we our of didn’t we demand put back distribution

a commercial we lot a on Thermal that to got are in business and executing ensure funnel robust there’s that. we that of effort So that,

how Eldon, profile the the I about if was you auction? margin know make deal? the just paid and missed privately is what kind Was buyback talk this, of today? I a did pause Maybe this negotiated you about on that on multiple or of don’t What kind does spend given think it?

for And going time, we Eldon more not at did that QX. of deal expect company to we This a company. And that a Jeff a in share able held got at The very one they’ve we we’re to going being close to privately be for is excited that And known long you. we’re because great the that. we digital details when great So this opportunities. a capabilities. end share do time. is with really business we’re synergy invested product And this portfolio. complementary we’ve it look They’ve about thing ours, think we at have

opportunities we just got we just at a broader on the hundreds as only that improvement on look Enclosures can range growth the into but of different commercial, the side, And opportunity. we’ve margin we like so basis verticals globally think not of make points and

just And buyback?

Regarding the we our post retire attractive with we paying taking prepared that, in buyback, a And to priorities down are Jeff, valuation. shares as very on I of and ability remarks, debt. acquisition to our X% a at very putting said pleased are pause

Okay, great. Thanks.

of Vertical Your comes from the next Jeff Sprague from Research. line question

Your line open. is

Brett It’s Linzey for Jeff. in jumping morning. good Hi

quarter? the segment, the Just wanted but just of easy inefficiencies back year tick to bit margin on the arguably The Enclosures some pressure come bit the of start a down a more little color here on comp saw little the last in a you year. you margins, there. of good just QX. relatively to color progression me give to on was Could in real with Maybe the

expand and Yes, demand a for Enclosures the is through in progress going that full really of still matter industrial we in saw the quarter. this expect we’re margins year, continue to we to and softening started

basis expect just was those in that had through margins And XX making half time points we expanded a demand of expand to to and the manufacturing in our first doing structure adjustments. so, had and the some it margins Remember, ensuring year cost And as we plants. and that our structure to continue largest in our adjust in in half we going we’re in our of industrial. is we the see that softening factories aligned Enclosures, the back cost lag

they now you’re those And some are place saying rate in and start of here that in half? so, second run actions the to

correct. That’s Yes.

I then of is more outs? this seeing just of cancellations to Thermal, orders just backlog, Okay. maybe you are Great. the think here, color shifting these, let QX, here seeing long-dated, stability would And digits then, are you’re these And half? Or second kind or mid-single timing in the push kind the any about in it of of actually near you said is out talk get great? term be there do just that back any

Okay.

we’ve So, seen not orders. of any cancellation

shared in to One I’ve is we’re dynamics finish. commissioning, the the orders are finding start to and the of that we the of also phases, we’re the that’s our releasing some project dynamics seen get in and customers that project also we is a seeing might released that and in from so this so the have previously awarded design past engineering And in that product one it’s that phases. installation effort effort of different getting

of Now, phase project, if that probability is you the first XX% a the project. win it the you awarded get

When we to that see that see of second different we So, projects, on optimistic project of phases of many of the we’re projects. confident cautiously do are But going growth. very as we there. longer-term are we’re the look execute these year, at half some the we them the

along. Thanks a will I it past great. lot. Okay

Thank you.

the from Barclays. Julian comes Mitchell of line question next Your from

line open. is Your

good for on Julian is This McKeeshy morning. Jason

Keeshy. morning Good

guidance. Thermal the the X% I still sales about back noticed for demand at Management half the of kept range of talking Just sort you year.

the pretty realization this primary everything in and drivers stable? growth be in in relatively the So, the visibility good project you saying swing that Thermal, I to have primary of else correct is should and here terms factor am

Yes.

correct. You’re

it. Got

businesses. the the a as talk worse, that progressively a factors a Okay. about some something quarter? lot demand extraneous quarter, Did of demand also throughout little and pickup normalized? softness you industrial got about I And that commercial see July bit June there’s talk the been worse cadence know throughout those you of and got in just on Was

to we business, had service very EFS saw We and our capacity, by so And anything, to service we from our ability have demand in actually also EFS to if consistent commercial our constrained business our and improved. what improved been QX. our availability demand that that the our in ability

as being dynamic some that very only QX. we and Thermal, And that did Thermal commercial So, business change consistent look we at as more held we us. to the as look we very our think we we forward, still will was not QX look guidance called jobs the as it. think is for specific which We lapped we there. and And tied range commercial EFS, we forward, out grow,

deliver that able So, expect there. be continue to we to to commercial going we’re

Understood thank it pass will on. you I

you. Thank

our next Barry Research. from the [Operator Instructions] of and question line from comes Robert Buckingham

Your line is open.

morning. good Hi

morning. Good

up to wanted mean, growth decent about on quarter and you the follow actions. Enclosures I you in margin the cost I So, taking had question. talked

those will Were, So, the I margin. things help think restructuring costs? of both include does XX.X% that

No.

and As see cost and overall I we margins of margin productivity we adjusting our and taking to we’re for in demand soften businesses, to both all see as managing time And expansion to for at the we In actions across that looking half, factories, run our started is alignment drive stated second cost just we get inventory us a structure. to rate those our we some why expect didn’t as look expansions. that our nVent. in expand as of largest lag before,

it. Got

the I things the of well in things indicating a you mean, just on I Enclosures in half. at that think were margin the the really and So, would lead middle charge year. deteriorated were guess, I severely in expansion they this quarter, even back conference going

and of And nVent. and in for first saw our of saw has all and their example, through quarter as We trade lead the the just being on on industrial started year XX it very by we the segment. basis just Enclosures uncertainty half, think But usual cautious still with in our destocking the was we margin purchases level expanded our distributors Enclosures, tariff some doing points. will business do expansions what the is full charge remember, for margin Enclosures

So that’s what changed.

the What’s for it. Got in half? price the assumption second

to Yes, we at continue expect see we’re range. around price to that going that X%

price So, to And But bit. X%. of through still definitely we to in it’s above may second that moderate X%. half. half, little continue realized first going be it’s going expect close It we’ve a to X%, the

question I that is, achievable mean the I Yes. markets how if end softening. just are

as been Well, the we half lot expect the done over you of we’ve year. part, of recall, go holding. a increases have and of beginning to year. year for as last And those we back of this And the prices most price some that to continue the

Got of maybe Will is other the or equation picture look it. just back even tailwinds I side? like the like How the don’t some, start like the looks side half? guess headwinds inflation the does is look? equation lastly, cost the cost see know, I in what side the on that to what we steel smaller half, back in of price/cost

in better, lot of little bit the of more to deferred in that back sorry, going sort of realize to half, lock be a will stock not million and off quarter about the start we’ll in impact. just getting that the modestly we start our impact over do inflation quarter, Stacy. it’s of of $XX the better modestly lead bit. to that because inflation rate half. It’s locks roll expect first had really million a material price But improving Rob, $XX about do in as we see that better, a price by unrolling. We We realize

would in hold, So, early next the more year? then benefit come significant prices maybe if these

Perhaps, macro the if way. continue factors same

you. thank Alright

you. Thank

now over call turning your CEO, comments. for Beth I’m back final to the Wozniak,

joining Well, and us interest morning this thank in you for your nVent.

are ultimately drive We which our growth we can expand value. margin, shareholder drive areas appropriate in believe continue to believe to and strategy with progress the make focused we and

We diversify and business are complements for your may support. growth a thank our excited portfolio other accelerate verticals. now it’s global current great to I into strategic our help fit you, again, operator, about Eldon and the you Enclosures conclude call. because And believe it

conference This concludes today’s call.

disconnect. now may You