nVent Electric plc Ordinary Shares 2026 Q3 Earnings Call

Please go ahead. Thank you, and welcome to nVent's Third Quarter 2026 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 third quarter performance, an outlook for the fourth quarter, and an update to our full-year outlook. All results referenced 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 are forward-looking statements, subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission. Forward-looking statements are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results.

Today's webcast is accompanied by a presentation, which you can find in the investor section of nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We will have time for questions after our prepared remarks. With that, please turn to slide 3, and I will now turn the call over to Beth.

Good morning, everyone. I am pleased to share with you our outstanding third quarter results and cover some key business highlights. We had another tremendous quarter with record sales, orders, and earnings, well ahead of our guidance. The better-than-expected sales were broad-based, with double-digit growth across all verticals and geographies. In Q3, for total nVent, we continued to have strong orders and backlog. Organic orders grew low double digits on top of 65% growth a year ago. In addition, backlog remained healthy and grew sequentially to $2.6 billion. We also closed on the Maverick Power acquisition on October 1st. Maverick brings to nVent a new power distribution platform and increases our offerings in data centers. We are raising our full-year sales and EPS guidance to reflect our outstanding third quarter performance and continued broad-based growth led by data centers. Our guidance also incorporates the Maverick Power acquisition.

Now, onto slide four for a summary of our third quarter performance. Sales were up 44%, both on a reported and organic basis, led by the infrastructure vertical. New products contributed approximately 30 points to our sales growth, and we launched 24 new products in the quarter. Adjusted operating income grew 57% year-over-year, with return on sales up 190 basis points. Adjusted EPS grew 67%, and we had robust free cash flow. Sales grew double digits across all verticals. Infrastructure led the way with organic sales up over 70%, primarily driven by outstanding growth in data centers. Industrial grew in the high teens, and commercial resi grew mid-teens. Turning to organic sales by geography, all geographies grew double digits, led by the Americas growing approximately 50%. Europe was up low double digits, and Asia Pacific grew double digits.

Infrastructure represents our largest long-term growth opportunity, driven by the powerful secular trends of electrification, sustainability, and digitalization. We expect the infrastructure vertical to deliver record double-digit organic growth this year, with data center expansion and the need for power. We also forecast continued strong growth in 2027. We have been investing in new capacity for liquid cooling, engineered building solutions, power connections, and cable management. This week, we announced a new 400,000 sq ft facility in Arizona for engineered buildings that will expand our capacity to support growing demand in data centers and power utilities, with production expected to begin in mid-2027. In our high-growth areas within infrastructure, our suppliers are working to keep pace with our growth and are also investing in capacity expansions. It is a lot of work to increase volumes with the velocity required.

We are partnering closely with our suppliers to help ensure we are scaling rapidly together. Turning to industrial and commercial resi, we expect each to grow organic sales high single digits for the year, versus mid-single digits previously. We see industrial growth as broad-based and see improving demand trends across our short-cycle portfolio. I want to thank our nVent team for focusing on our customers and achieving record performance levels. This wraps up my opening remarks. I will now turn the call over to Gary for further details on our third quarter results, as well as our updated outlook. Gary, please go ahead. Thank you, Beth.

We had another excellent quarter, exceeding our guidance with record sales and adjusted EPS. Let's turn to slide five to review our results. Sales of $1,515 million were up 44%, both on a reported and organic basis as compared to last year. This was well ahead of our guidance, driven by broad-based growth led by very strong data center sales. Adjusted operating income was $335 million, up 57%. Return on sales came in ahead of expectations at 22.1%, up 190 basis points versus last year. Price plus productivity offset inflation of nearly $60 million, including approximately $20 million in tariff impact. We also continued to make investments for growth in data centers and power utilities. We had record adjusted earnings, well ahead of the high end of our guidance, driven by exceptional sales growth and execution by the team.

Adjusted EPS grew 67% year-over-year to $1.52. We generated robust free cash flow of $268 million. Please turn to slide 6 for a discussion on the third quarter segment performance. Starting with Electrical Connections. Sales of $1,098 million increased 53%. Organic sales grew 54%. Sales growth was broad-based, with double-digit increases across all verticals and geographies. Infrastructure led the way, growing approximately 90%, driven by continued strength in data centers. Industrial and commercial resi each grew in the teens. Geographically, the Americas delivered very strong double-digit growth, while Europe grew low double digits. Asia Pacific also delivered double-digit growth in the quarter. Third quarter segment income was $253 million, up 73%. Return on sales of 23% increased 260 basis points year-over-year on strong volume, price, and productivity. Moving on to Systems Protection.

Growth exceeded expectations, reflecting continued momentum on our growth initiatives in infrastructure and industrial, and stronger demand in commercial resi. Sales of $417 million increased 23% on both a reported and organic basis. Growth was broad-based across all verticals and geographies, all growing double digits. From a vertical perspective, infrastructure and industrial each grew strong double digits. Commercial resi was up high teens. Geographically, Americas grew strong double digits, while Europe was up mid-teens. Asia Pacific also grew double digits in the quarter. Segment income was $118 million, up 16% versus last year. Return on sales of 28.2% was down 180 basis points year-over-year. The margin performance was impacted by inflation and investments for growth, partially offset by strong volume, price, and productivity. Importantly, margins improved sequentially as expected. Turning to the balance sheet and cash flow on slide 7.

In addition to our strong free cash flow in the quarter, we issued $800 million of 10-year senior notes near quarter-end to help fund the Maverick Power acquisition. As a result, we ended the quarter with more than $1.1 billion in cash on hand and total debt of $2.2 billion. We also had $600 million available on our revolver. Including the Maverick Power acquisition, we expect our leverage to be well within our target range of 2 to 2.5 times by the end of the year. Our healthy balance sheet and strong liquidity provide financial flexibility to support our disciplined capital allocation strategy. Turning to slide 8 on capital allocation, where we outline how we deploy capital to drive growth and sustain financial outperformance.

Our framework has been consistent and is centered on disciplined growth investments and rigorous execution of our M&A strategy, while maintaining the balance sheet flexibility to consistently return capital to shareholders. Our capital allocation priority is growth. This starts with reinvesting in the business by funding capacity expansion, innovation, and the capabilities required to win in high-growth verticals. This year, we expect to invest approximately $140 million in CapEx, up 50%, inclusive of the Maverick Power acquisition. We have spent $95 million year to date. Most of this increased investment is for new capacity to support growth in data centers, power utilities, and supply chain resiliency. Year to date, we returned $202 million to shareholders, including share repurchases of $100 million. We have increased our quarterly dividend by 5% compared to last year.

Overall, our disciplined capital allocation approach positions us to prioritize growth and create long-term shareholder value. Moving to slide 9. As Beth shared earlier, we are significantly raising our full-year sales and EPS guidance again. Due to our strong performance in Q3, momentum across our portfolio, and the addition of Maverick Power, we now forecast reported sales growth of 48%-49%, up from 37%-39% previously. We are increasing our organic sales growth guidance. We now expect to grow 38%-39% versus our prior guidance of 32%-34%. We are raising our full-year adjusted EPS range to $5.36-$5.39, versus our prior guidance of $5.00-$5.10. At the midpoint, adjusted EPS is expected to grow 60% versus last year. A few updated assumptions for modeling purposes. Acquisitions are expected to add approximately 10 points to sales growth, now including Maverick Power.