nVent (NVT) Q2 2025 Earnings Call Transcript

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Date

Friday, Aug. 1, 2025, at 9 a.m. ET

Call participants

• Chair and Chief Executive Officer — Beth Wozniak
• Chief Financial Officer — Gary Corona

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Takeaways

• Organic orders growth: Organic orders grew more than 20% in the second quarter, with high single-digit organic growth in non-data solutions segments.
• Backlog: Backlog grew more than fourfold year over year in the second quarter, providing order visibility through 2026 and beyond.
• Sales: Reported sales were $963 million, up 30% compared to the same quarter last year. Organic sales were up 9%, acquisitions contributed $153 million in sales, and there was a 1% foreign exchange tailwind.
• Adjusted EPS: Adjusted earnings per share reached $0.86, up 28%, exceeding the high end of guidance.
• Segment performance — Enclosures (systems protection): Sales in this segment reached $632 million, up 43%. Acquisitions contributed 32 points to sales, and organic sales growth was 10%.
• Segment performance — Electrical connections: Electrical connections segment sales reached $331 million; organic growth accounted for 7%, and acquisitions contributed 4% to sales.
• Infrastructure vertical: Organic sales in the infrastructure vertical exceeded 20%.
• Free cash flow: Free cash flow was $74 million. Full-year free cash flow conversion is now expected in the range of 90%-95%.
• Guidance revision: Management raised full-year reported sales guidance to 24%-26% growth and organic sales growth outlook to 8%-10%.
• Acquisitions: The Trachy and EPG acquisitions added significant sales, performed better than expected, and contributed to strengthening positions in data centers and utilities.
• CapEx and corporate costs: Capital expenditures forecast increased to $110 million (from $100 million) for the full year. Corporate costs are expected to be approximately $110 million, mainly for capacity in data solutions and acquisition integration.
• Shareholder returns: Returned $319 million to shareholders in the first half of the year, with more than $250 million in share repurchases and $66 million via dividends in the first half.
• Liquidity: Ended the quarter with $126 million in cash and $400 million available on the revolver, and refinanced the credit facility.
• Geographic sales: Americas organic sales grew 9%, Europe was up 10%, and Asia Pacific grew low single digits, with all regions positive.
• Tariff impact: Management expects a $90 million tariff impact for the year, down from the prior $120 million estimate, and intends to offset this through pricing and productivity actions in the second half.

Summary

nVent Electric(NYSE:NVT) reported record quarterly sales and adjusted EPS, both above the top end of prior guidance, driven by strategic execution in high-growth infrastructure sectors including data centers and power utilities. Management emphasized that the company’s backlog now offers multi-year revenue visibility, underpinned by strong organic orders and accretive acquisitions, and is supported by continued investment in new capacity and product innovation. The infrastructure vertical has become the largest in the portfolio, expected to exceed 40% of full-year sales, while the company remains focused on flexible integration and a disciplined capital allocation approach to capture additional growth opportunities across the electrification, digitalization, and sustainability trends.

• Chair and Chief Executive Officer Wozniak stated, "We see orders and backlog carrying us through 2026 and providing visibility beyond," supporting the long-cycle growth profile emphasized in the call.
• Chief Financial Officer Corona reported, "Our updated full-year guidance reflects sufficient pricing to largely offset the tariff impacts," indicating management's confidence in margin resiliency against inflation and tariff headwinds.
• The company is preparing new data center cooling solution launches in the second half and noted increased market pull for modular and standardized products that may further enhance segment margins.
• Strategic focus on both white space and gray space in data centers, coupled with early integration progress in recent acquisitions, is accelerating revenue diversification and backlog expansion.

Industry glossary

• White space (data centers): The area within a data center dedicated to housing IT equipment, such as servers and storage.
• Gray space (data centers): The portion of a data center housing support infrastructure, including power and cooling systems, often targeted for outdoor enclosure solutions.
• Liquid cooling: Advanced cooling technology using fluids to dissipate heat from data center hardware, essential for high-density AI workloads.
• CDU (coolant distribution unit): Equipment used to deliver liquid coolant to various sections of IT or industrial infrastructure.
• Enclosures: Physical structures, often metallic or non-metallic, designed to protect electronic and electrical systems, a core element of nVent Electric's offering.

Full Conference Call Transcript

Beth Wozniak: Thank you, Tony. And good morning, everyone. It's great to be with you today to share our outstanding second-quarter results. Our portfolio transformation to become a more focused, higher-growth electrical connection and protection company is delivering results and accelerating our growth. We delivered record results in the second quarter with both sales and adjusted EPS exceeding our guidance. We also had record orders and backlog in the quarter. Organic orders accelerated up over 20%, led by strong double-digit growth in our data solutions business. In the rest of the business, organic orders grew high single digits. These orders, coupled with our acquisitions, have resulted in our backlog increasing more than fourfold what it was a year ago.

In data centers, we are seeing strength across our portfolio and accelerating growth to support the AI build-out. The Tracte and Electrical Products Group acquisitions performed better than expected, further strengthening our position in the high-growth infrastructure vertical, including power utilities, data centers, and renewables. Our teams are doing outstanding work executing on our integration playbook and accelerating our growth synergies. Since closing the Trotti and EPG acquisitions, we have identified new growth opportunities and are making investments to deliver on this increasing backlog and higher growth outlook. Our balance sheet is strong, and our first priority for capital allocation remains the same: invest and grow. Now on to slide four for a summary of our second quarter performance.

Sales were up 309% organically, led by the infrastructure vertical. New products contributed over three points to sales growth, and we launched 50 new products in the first half. Adjusted operating income grew 18% year over year with return on sales of nearly 21%. Adjusted EPS grew 28%. Looking at our key verticals, infrastructure led the way with organic sales up over 20%, with strength in both data centers and power utilities. Commercial resi sales were up mid-single digits, industrial sales were down slightly, and energy was down mid-single digits. Turning to organic sales by geography, all key geographic regions grew. The Americas grew 9%, while Europe was up 10%, and Asia Pacific was up low single digits.

Looking ahead, we continue to expect infrastructure to have strong sales growth across both data centers and power utilities. We expect industrial sales to grow low to mid-single digits, and commercial resi to be flattish for the year. The tariff environment remains very dynamic. However, we continue to closely monitor the situation and remain agile, executing on our playbook. We are prioritizing our key growth initiatives, which include new products, high-growth verticals, and acquisitions. For guidance, we are raising our full-year sales and adjusted EPS guidance to reflect our terrific second quarter results and stronger performance in data centers and power utility.

Our organic growth and recent acquisitions are expected to more than offset the EPS impact from the thermal management business we divested in the first quarter. Overall, I'm proud of the many accomplishments by our nVent Electric plc team and how we continue to perform and deliver impressive results. We are on track for a strong year. I will now turn the call over to Gary for further details on our second quarter results and our updated outlook for 2025. Gary, please go ahead.

Gary Corona: Thank you, Beth. We had an excellent second quarter, exceeding guidance with record sales and adjusted EPS. Let's turn to Slide five to review our results. Sales of $963 million were up 30% relative to last year. Organically, sales grew 9% driven by both volume and price. Acquisitions added $153 million in sales or 21 points to growth, ahead of our guidance. Foreign exchange was roughly a one-point tailwind. Second quarter segment income was $200 million, up 18%. Return on sales came in at 20.8%, better than expected. Inflation was more than $35 million, including approximately $15 million in tariff impact.

Price plus productivity partially offset inflation, and we also continued to make investments for growth, particularly in our data solutions business and our recent acquisitions. Q2 adjusted EPS was $0.86, up 28% above the high end of our guidance range. We generated robust free cash flow of $74 million. Now please turn to page six for a discussion of our second quarter segment performance. Starting with systems protection, sales of $632 million increased 43%. The Trachy and EPG acquisitions contributed 32 points to sales and have performed well, with sales up strong double digits versus a year ago, and both have robust backlogs. Organically, sales grew 10% on top of a strong quarter a year ago.

Infrastructure grew roughly 30% with continued strength in data centers. Commercial resi grew mid-teens, and industrial was down low single digits. All geographies grew, led by The Americas and Europe, each up low double digits, Asia Pacific grew low single digits. Second quarter segment income was $137 million, up 32%. Return on sales of 21.7% decreased 180 basis points year over year, impacted by inflation, acquisitions, and growth investments. Moving to electrical connections, sales of $331 million increased 11%. Organic sales were up 7%, reflecting strong volume. The EPG acquisition contributed four points to sales. From a vertical perspective, infrastructure led, growing high teens, industrial grew low teens, and commercial resi was up low single digits in the quarter.

All geographies grew, led by The Americas and Asia Pacific, each up high single digits. Europe grew low single digits. Segment income was $95 million, up 3% year over year. Return on sales was 28.7%, down 220 basis points, mainly due to inflation and acquisitions. That wraps up the segments for the quarter. Turning to the balance sheet and cash flow on slide seven. We ended the quarter with $126 million of cash on hand and $400 million available on our revolver. We also generated $74 million in free cash flow in the quarter. Also, we refinanced and extended our credit facility. We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy.

Turning to Page eight, where we outline our capital allocation priorities. We continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns. We are investing in the business via R&D and CapEx for growth and supply chain resiliency. We returned $319 million to shareholders in the first half of the year. That includes more than $250 million in share repurchases, at a great value resulting in a lower share count. And we returned $66 million via dividends so far this year. We exited the quarter within our targeted leverage range.

We believe we are well positioned and have additional capacity for future capital deployment with our first priority being to invest in growth. Moving to slide nine. As Beth shared earlier, we are raising our full-year sales and adjusted EPS guidance to reflect our strong Q2 results and increased growth expectations in data centers and power utilities. We now forecast reported sales growth of 24% to 26%. This includes expected higher organic growth and approximately 15 points from acquisitions with foreign exchange now approximately a one-point tailwind.

For organic sales growth, we now expect growth of 8% to 10% versus our previous guidance of 5% to 7%, reflecting our Q2 beat along with increasing visibility and strength in data centers and power utilities. We are raising our full-year adjusted EPS range to $3.22 to $3.30, up 29% to 33% versus our previous guidance of $3.03 to $3.13. This new guidance reflects the expected tariff impact of approximately $90 million versus $120 million previously. We expect to offset the impacts through pricing, supply chain productivity, and operational mitigating actions. For free cash flow, we now expect conversion in the range of 90% to 95%. A few modeling assumptions to note.

First, we are raising our CapEx forecast to approximately $110 million versus $100 million previously. The additional CapEx is for increased capacity in our data solutions business and for our recent acquisitions. Also, corporate costs are now expected to be approximately $110 million versus $100 million previously. Looking at our third quarter outlook on Slide 10, we forecast reported sales to grow 27% to 29%, with acquisitions contributing approximately 15 points to sales and foreign exchange is now a one-point tailwind. Organic sales growth is expected to be up 11% to 13%. Price increases coupled with productivity are expected to offset inflation, including the tariff impact in Q3.

We expect adjusted EPS to be between $0.86 and $0.88, which at the midpoint reflects a 38% increase relative to last year. Wrapping up, we are pleased with our excellent second-quarter performance. We delivered record sales and adjusted EPS and are well-positioned for a strong second half. I will now turn the call back over to Beth.

Beth Wozniak: Thank you, Gary. Please turn to slide 11. Last quarter, we shared this slide with you to show the actions we have taken to transform our portfolio since spin to become a more focused, higher growth electrical connection and protection company. In the last year, we divested the thermal management business and acquired Trakti and EPG, reshaping our portfolio and increasing our exposure to the high-growth infrastructure vertical. In addition, we've been investing in our data solutions business, which is growing and accelerating with the AI build-out. The infrastructure vertical, which was our smallest vertical at spin, is now the largest. We believe it has the highest growth, with the trends in electrification, sustainability, and digitalization.

This year, the infrastructure vertical is expected to be over 40% of our sales, with data centers and power utilities each approximately 20% of sales. Our portfolio is now balanced between short-cycle and long-cycle business, with a growing backlog. We believe we are better positioned for growth and value creation as a result. Turning to slide 12. I would like to give an update on our position in data centers and talk about both the white space and gray space opportunities. The AI build-out is driving demand for innovative power and cooling solutions in the white space of a data center. As we have discussed previously, liquid cooling is essential for the new AI.

We believe liquid cooling is growing three times faster than legacy cooling. We have talked a lot about cooling distribution units and liquid-to-air solutions like rear door heat exchangers. We are also seeing growth with our expertise in the overall technology cooling system, including coolant distribution manifolds. With the increasing CapEx investments in the build-out of AI data centers, we are seeing growth across our entire portfolio, from power distribution units to our cable management offerings, including wire basket tray. In addition, we are seeing a trend towards modular data centers, using large outdoor enclosures to house all the IT hardware, including cooling.

With our Tracte and EPG portfolio, we offer a range of enclosures and integration capabilities for these modular data centers. We believe we are well-positioned to win. We have partnerships with chip manufacturers and data center players from hyperscalers to enterprise to multi-tenant customers. Our strong technical expertise, coupled with innovative design and the ability to manufacture at scale, are strengths. This is leading to record new orders, increasing backlog, and accelerated revenue growth. To expand further, we expect to launch a whole new range of cooling solutions later this year. Please turn to slide 13. With the build-out of AI infrastructure, we also see strong demand in the gray space of data centers.

We have a focused sales initiative to sell our core portfolio in the gray space, from power connections, cable management, grounding to enclosures and cooling. A trend we are seeing is customers want to expand the white space within a data center to maximize the IT footprint. In order to accomplish this, customers are moving the gray space, which contains power and other equipment, to outside of the building. This is accelerating the need for outdoor enclosures, which we provide from our Tracte and EPG acquisitions. This enables us to provide integrated solutions and pull through our core nVent Electric plc product offerings.

Our focus on the gray space is seeing record orders and backlog, leading to accelerated revenue growth in the gray space. Wrapping up on Slide 14. We had record performance in the second quarter, including strong double-digit growth in orders, sales, and adjusted EPS. Our backlog has never been larger. Our portfolio transformation is on track, delivering accelerated growth, and we expect another year of significant growth and value creation. I am proud of our nVent Electric plc team that is working tirelessly on growth, delivering for our customers, and our shareholders. We believe we are well-positioned with the electrification, sustainability, and digitalization trends. Our future is bright.

With that, I will now turn the call over to the operator to start Q&A. We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, at this time, we will pause momentarily to assemble our roster. Our first question comes from Deane Dray with RBC Capital Markets. Please go ahead.

Deane Dray: Good morning. You guys hear me okay?

Beth Wozniak: We can. Morning, Deane.

Deane Dray: Okay. Good. All right. Maybe I'll start with the disclosure today that backlog's up more than four times year over year. And, you know, noting that you've also invested to increase capacity recently by also four times. Can you talk about the timing of converting this backlog and just kinda what's the duration of the backlog as it stands today?

Beth Wozniak: Yes. Thanks for the question, Deane. When we look at our backlog, it's really up because of a couple of different reasons. One is the growth that we're seeing in our data center solutions business. And so, yes, we have increased our capacity there, and we see orders and backlog taking us through into 2026 and visibility beyond. The second is we've been growing our backlog in our Tracte business, and that is both in power utilities and data centers. And as you know, EPG just came into the portfolio. And so that is backlog that we didn't have a year ago.

But as we look at across all three of those areas in two acquisitions and our data solutions business, we're seeing orders and backlog through 2026 and a little beyond.

Deane Dray: That's great to hear. And then just a second question. I know you can't name names, but just could you help us and give us a perspective when we read in the news that a large hyperscaler is launching their own custom liquid cooling platform, you know, it raises concerns about disintermediation and barriers to entry and so forth in liquid cooling. But it's our understanding that a key part of your business model is to help these types of customers develop these custom systems. That again, that's an important part of your model. We just don't know what percent that is of your business. But just any help in how we should interpret this trend would be appreciated.

Beth Wozniak: As you know, Deane, we can't comment on any of those specific relationships, but I will say this. We partner with many of the hyperscalers, in some cases, providing complete system solutions around liquid cooling. Or often we partner to provide specific products, could be a CDU, could be a manifold. And so we typically are working on a part of the solution with these hyperscalers. And not all of them, or many of them, I would say, don't want to necessarily own those solutions either. So those partnerships are really key as we go forward. And what we're saying is just we're expanding our solutions. I mentioned some new products coming out.

We're expanding our engagement with various customers globally. And so we just see continued runway in the development of liquid cooling solutions.

Deane Dray: That's all great to hear. Congrats on all the growth.

Beth Wozniak: Thank you, Deane.

Operator: Our next question comes from Nigel Coe with Wolfe Research. Please go ahead.

Nigel Coe: Thanks. Good morning and great quarter. Really, really quite amazing. Seems like Sara's doing a good job of our system protection.

I'm not gonna ask a question on data solutions, which might be a little bit surprising. I think one of the most surprising aspects of the performance was the commercial resi performance in I think you called out mid-teens growth, Beth. And I think the full year, you're still expecting it to be pretty flat. I think it was with the guide. Just curious what you're seeing in those end markets. And, you know, was there anything unusual in terms of channel that happened this quarter? I know that's not the full story here, but just curious there.

Beth Wozniak: Yeah. When we look at our systems protection business and the enclosures that are going into that commercial resi segment, sometimes nothing unusual occurring in the quarter through our distribution channels. I'd say that our sell-out there is positive and sell-in positive. I would say that in commercial resi, just seeing some build-out, and sometimes our enclosures end up in commercial-type enclosures end up in data centers. And sometimes they end up in other types of building applications. We don't always get to see that full visibility, as you know, through our channel. But I would just say we're just seeing some healthy performance there. But, again, we're very, you know, cautious on that overall commercial resi industry.

And so that's why we're saying we expect it to be flattish for the year.

Nigel Coe: I'm guessing that, you know, if we do see these mega projects done the shift through in 2026-2027, that would land within your commercial resi business, I'm assuming. But the Tracte business just seems to be, you know, on fire. I think that came in, you know, with a projection of $250 million in 2024. I'd be curious, you know, in dollar terms, what you're expecting Tracte to be in '25? And what sort of backlog have we built have you built in at Tracte right now?

Beth Wozniak: Well, our Tracte business is growing at double digits, and I think nicely ahead of our expectations. And we're seeing a couple of things. One is we're seeing both growth from utilities as well as data centers. And I mentioned the gray space, and one of the great synergistic opportunities that we had as well is that our relationships with data center customers and OEMs partnering with the capabilities that we had in Tracte we've seen some new orders to provide enclosures for gray space opportunities. So it's orders are strong, healthy backlog, growth synergies, and that's part of why we raised our guidance.

Nigel Coe: Okay. Thanks, Beth.

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

Julian Mitchell: Hi, good morning. Maybe just to start with a question on the line. So in the backlog, you'd said, was around or just under $750 million at the beginning of the year. Wondered if you could give any sense at all of where it stands at the end of June. And when we think about that backlog conversion into sales, for the second half, should we be expecting the systems protection to grow organically, far above, electrical?

Beth Wozniak: Yes. When we look at the backlog, at the start of the year, it has grown. And some of that is all orders that we're winning in our new acquisitions. It's data solutions, liquid cooling. And, of course, the backlog increased this quarter because of Avail EPG joining the business. And so we acquired that backlog. But it is growing very nicely. And, yes, a lot of that backlog is in our systems protection business. So we will see that grow ahead of our electrical connections segment.

And, Julian, the EC business will grow nicely. They had a great quarter in Q2, and we expect it to grow in a healthy way in the second half. And the visibility into that backlog is one of the strong reasons that we were able to take up our guidance into double-digit territory for organic growth in the second half.

Julian Mitchell: That's helpful. And then just on the operating margin front. So I think it looks like it's maybe sort of mid-teens incremental margins being dialed in for the year. At the sort of guide midpoint and maybe a touch higher than that in the second half. I realize you have that sort of 30%-ish medium-term goal from the Investor Day a couple of years ago. So maybe you could flesh out some of the puts and takes affecting the incrementals this year. And should we see entering next year or for next year an incremental margin more akin to the medium-term aspiration?

Gary Corona: Yes. Thanks, Julian. And I'll start by saying, certainly, we're focused on delivering fiscal year '25, and we're not going to talk about 2026 on this call. But I think you're in the zone from an incrementals perspective. And what I will say from margins we did exceed our margin expectation in the quarter. We shared we were going to be down in the quarter as we got our price cost tightened up. And you see that in our guide as we think about the back half. As we get our price and productivity to offset the tariff-driven inflation. So we're pleased with the direction of travel on margins.

And we expect to exit the year with margin growth, excluding EPG, to be up as we exit the year. And, you know, look, we didn't expect to be offsetting tariffs this year. I think the team's done a great job to do that. And to exit with the business model in a healthy place in the back half of the year, we're feeling good about the shape of the P&L.

Julian Mitchell: And on just that point, Gary, on the investments, you know, you called those out, particularly first quarter and I think Q2, and it's understandable given the extent of the volume growth you're seeing in the back half. Are the investments sort of continuing to ramp up? Unusual with the phasing of those?

Gary Corona: No. The investments will continue to ramp as we support this acceleration in growth. And we expect that to continue to see that both from an OpEx perspective as well as the CapEx increase that we included in the guide. To support additional capacity, both for our data solutions business as well as our recent acquisitions to support the growth.

Julian Mitchell: Great. Thank you.

Operator: Our next question comes from Brian Drab with William Blair. Please go ahead.

Brian Drab: Hi, good morning. Thanks for taking my questions. First, just thinking about the final comments that you made, Beth, around modular offering and increased focus there. Can you talk about what could the margins be relative to your existing data center business in Modular? And then also, you know, how does this relate to, you know, you're making a push to have a more standardized product too that I believe would be incrementally higher margin. And are those two businesses and initiatives at all related to each other as well?

Beth Wozniak: Well, when we look at modular data centers, you know, we're looking to see the enclosures from Tracte and Avail that house those modular data centers to be in line with, you know, those portfolios. And then I would say there is pull-through from the core nVent Electric plc product. And, again, we expect those margins to be similar to what we see in those portfolios today. When it comes to the liquid cooling and more standardized offerings, those products will be, in some cases, sold through distribution as well as direct to customers. But as we sell more products through distribution, and as we sell more modular standardized products, they tend to have a higher margin.

And so again, we're investing a lot in data solutions right now. But a lot of these new product offerings and solutions, we believe, will have, you know, enhanced the overall margin opportunity in that business.

Brian Drab: Okay. Yeah. Thank you very much. And then just one quick one. On Tracte and the, you know, power utilities business, is Tracte is some of the Tracte business now being reported in data center, or is that sitting in power utilities? But, is there is there some is the line kinda blurred between power utilities and data center more and more?

Beth Wozniak: Well, I would say this. You know, when we look at Tracte, and we've been clear to say that it sells through to utilities, but it's also seeing this growing data center, gray space, opportunity. And, you know, as we look at that, you know, we just 're continuing just to track where those opportunities are. But certainly, of the growth for us has been the relationships that we have in data centers that is and this move to more gray space, allowing us to find new growth opportunities.

Brian Drab: I guess I'm just trying to I'm thinking about what percentage of your business is actually really driven overall by centers. I know, you know, you give us you size the data solutions piece for us, but you know, if you take into account everything that's being driven by data centers, is there any way to give us a better idea of how much of your overall business is being driven by the data center industry?

Beth Wozniak: Yeah. I mean, on that chart that I have in there showing our portfolio transformation, we point to our data center business being 20%, and that is inclusive of what we're doing in our Tracte and Avail EPG acquisitions.

Brian Drab: Okay. I just wanted to clarify that. Thanks.

Operator: Our next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Joe Ritchie: Hey, good morning, everyone.

Beth Wozniak: Good morning. Morning.

Joe Ritchie: Yeah. So, look, great to see the growth acceleration. It seems like we're at an inflection point. I know we've had a lot of discussion around backlog and the kind of, you know, secularly growing pieces of your businesses. But maybe, Beth, you can provide a little bit more color on just short cycle, what you're seeing within, like, the industrial footprint and yeah, any expectations for the back half of the year would be helpful.

Beth Wozniak: Okay. We've said that we expect industrial to be low to mid-single digits growth. And so I would say that we have seen some nice growth through our distribution channel, both sell-in and sell-out. I commented earlier, are positive. So, you know, we think that mean, there's more growth in infrastructure, but certainly, we're seeing some nice wins on the industrial side.

Joe Ritchie: Okay. Great. Look. And then, I guess, you know, we touched on the Amazon earlier, and I know it's, you know, it's difficult to talk specifically about one hyperscaler. But I guess look, the trends right now have been incredibly good. You're increasing capacity. How do you just kind of foresee the next, like, twelve to twenty-four months playing out? And with the capacity additions that you are making, do you anticipate, you know, being set at least from a capacity standpoint on liquid cooling for the next couple of years? I'm just trying to understand, you know, how far out you're looking at this point.

Beth Wozniak: Yes. You know, as you know, we have made investments and are continuing to make investments, and we do believe there will be further investments in capital and, you know, capacity extension as we go into 2026 and beyond. And so in part, this is as the portfolio expands, as we're seeing more customers, so we're just continuing to see this accelerate. And the adoption accelerates.

Joe Ritchie: Okay. Thank you.

Beth Wozniak: Thanks, Joe.

Operator: Our next question comes from Jeff Sprague with Vertical Research. Please go ahead.

Jeff Sprague: Hey. Thanks. Good morning, everyone.

Beth Wozniak: Morning. Morning.

Gary Corona: Morning.

Jeff Sprague: Can we just come around the price? I just kind of want to understand a little bit better sort of where you're at in recovering tariff pressure and kind of other inflation. Obviously, we see the net productivity bar on the slide. But the nature of my question is, given the demand pulse that you're seeing, do you see the ability to fully recover tariff costs with price as opposed to leaning on productivity? And therefore, you know, productivity actually can drop more through to the margin rate. Can you unpack at all how much kind of tariff-related price you might be working on versus, you know, is there kind of base price on top of that?

If you could unpack that. To some degree, that would be helpful.

Gary Corona: Yeah. A few in there, Jeff, and I'll try to chip away at them. You know, I'll start with your question just more specifically on the water and on that productivity. You know, keep in mind that the price that we're taking is captured in that growth and acquisition bar. And we'll continue to be diligent in managing price, cost, and productivity. And this team has really demonstrated that over the past few years. Our updated guidance reflects enough price to largely offset the tariff impacts. But it's important to say we came into the year with a volume-driven plan, and volume is gonna drive our growth here in the second half.

We work with our distributor partners as well as our direct customers to manage price with it. Appropriate and adequate notification you'll start to see that flow through more significantly in Q3 and in Q4. And that's really embedded in what we have pointed to from a margin perspective, which is to have price and productivity offset the tariffs and exit the year with margins in a healthy place.

Jeff Sprague: And then just back to the modular theme. If we call it a box, right, you aspire to provide more in the box, so to speak. But I also wonder, are you being called upon to deliver a totally complete box, so to speak, you know, that's just ready to plug into the data center and therefore, you're pulling through other people's products and systems and also, therefore, then have, you know, kind of responsibility for the way things operate. Just trying to think, are you taking on kind of scope that leads to pass-through revenues or, you know, responsibility for a, you know, systems that goes beyond your own products and systems.

Beth Wozniak: Yes. As we look at, you know, both data centers or even in that gray space where maybe we're enclosing power, often, we're integrating other OEMs' equipment in there. And I think for modular data centers, we will see that over time, that ability to integrate more. So we're at various stages of integration, and that's one of the things that we can do very flexibly. But I think over time, there'll be more integration capability for us.

Jeff Sprague: Understood. Thank you.

Operator: Our next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead.

Nicole DeBlase: Yeah. Thanks. Good morning.

Beth Wozniak: Morning.

Gary Corona: Good morning.

Nicole DeBlase: Maybe just starting with a follow-up on the earlier question on Comresi. You said, Beth, that non-data center orders were up high single digits in the quarter. Was Comresi also up in that range? Just getting a trying to get a sense of if there could be upside to that full-year outlook.

Beth Wozniak: You know, it is positive. I would say that. I think we're just we're cautious there. You know? I think especially on the resi side, we still are cautious about, you know, impact of tariffs and other things over the course of the year. So that's why we're saying that it's flattish. Full year.

Nicole DeBlase: Okay. Understood. And, yeah, I agree that it's probably better to be cautious on those businesses. I guess maybe secondly, could you just refresh us on your service offering, particularly within liquid cooling? We're hearing more from the channel that service is becoming increasingly and there might be more demand for service from the OEM with, you know, liquid cooling systems. So just remind us, you know, how you approach that offering with customers.

Beth Wozniak: Yep. We have been building out our service offering capability. I mean, since we've been providing liquid cooling solutions, we've always had engineering support. I would say we've been working to more formalize that service offering opportunity. And we recognize that as we expand beyond to all different types of customers, that we need to have a service and support team. So that's something that we're building out and our it, and I think will grow over time.

Nicole DeBlase: Thank you. I'll pass it on.

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

Jeff Hammond: Hey. Good morning.

Beth Wozniak: Morning.

Gary Corona: Morning, Jeff.

Jeff Hammond: Maybe just to start with Avail, just kind of early integration thoughts. I know with Tracte, you found some immediate kind of throughput improvements and wondering if there's similar opportunities there. And then just I think Avail comes in kind of mostly utility and maybe back to Brian's question. Is it pretty fungible if there's a lot more demand on the data center side to kind of shift, you know, that focus, you know, more to data center versus power, not to diminish power, but, you know, just a little more color there.

Beth Wozniak: Yeah. So it's been sixty to sixty days with Avail EPG. And both with Tracte and Avail, you know, that core business was more focused on utility. But what we see growing significantly is the data center opportunity. And some of that being gray space. So, again, we still may be integrating switchgear and power, for example. I would say this. You know, we have an opportunity to invest in and increase capacity, applying some of our integration playbook, lean sourcing capability, things like that. And I would say this. There is some flexibility in terms of just how we apply our resources and labor to support that growth.

And some of that is just by even looking at the combined Avail and Tracte acquisition and thinking through how we can execute best on some of these new programs. So there's some good collaboration going on already. But I think, you know, as we've said, here. And so Or renewables.

Jeff Hammond: Okay. Great. And then just back to the capacity needs, I think you bumped CapEx this year for $10 million but by $10 million but just where is the greater need to add capacity near term? Is more on the building control solutions, more on the liquid cooling, both? It just seems like as we hear about this space kind of exploding, just a lot of a lot of push for, you know, we need it now. We need it faster, and just how you're thinking about, you know, how you need to add capacity to kind of manage all that.

Beth Wozniak: Well, it's both. And so we're expanding, as you know, our liquid cooling, and we've talked about that for a while. And we have to further expand that capacity and capability. And at the same time, as we acquire Tracte and Avail, we're having to expand capacity in some of our plants there. And, again, we're looking at the footprint and seeing how best we do that. And so it's within our own four walls, but it's also making sure that our supply base is also ready to scale with us. And so we're pretty busy working on capacity expansion across that engineered building solutions, those two acquisitions, as well as data centers.

Gary Corona: And, Jeff, I just build to say that the teams are disciplined and on this CapEx investment. We've taken that up now a couple of times in both Q1 and Q2. But are very disciplined about ensuring the returns. And I will tell you the payback on this incremental investment is quite good for us. And as we get to capital allocation, we've talked about focusing on growth and this is the place for us to invest here. Both in the short and intermediate term.

Jeff Hammond: Okay. Great. Thanks so much for the color.

Operator: Our next question comes from Vlad Vostriky with Citigroup. Please go ahead.

Vladimir Bystricky: Morning, Beth and Gary. Thanks for taking my call this morning.

Beth Wozniak: Good morning.

Gary Corona: Good morning.

Vladimir Bystricky: So just a couple quick questions for me. I guess, you know, the positive organic growth outside The US, you know, seems pretty interesting just given the kind of sluggish market trends, it seems like, in areas like Europe and China. So can you talk about specifically what you're seeing outside of The U.S.? And what's driving what appears to be your outperformance versus the growth in those markets?

Beth Wozniak: Well, I would say this. It's our strategy to focus on high-growth verticals, and it's our strategy to focus on our commercial go-to-market, including our distribution partnerships. And so we continue to drive new products as well. And I it's really all of those things where we're increasing our position and being more successful.

Vladimir Bystricky: Great. That's helpful, Beth. And it looks like good progress there. And then just one other one for me. Transformed the portfolio and grown the long cycle exposure here. Can you talk about on track terms protect margins given uncertainty around tariffs and commodity inflation and so forth?

Beth Wozniak: Yes. As we look at our contracts, we typically are ensuring that we have that ability if we see some material changes due to tariffs or other reasons to make those adjustments on the material side. And so and those are discussions that we're having with customers, and they understand. They're also in other they also are subject to tariffs and other things as well. So, we've been able to manage that pricing through our longer-term contracts.

Vladimir Bystricky: Great. That's great to hear. I'll get back in queue. Thanks, Beth.

Operator: Our next question comes from Scott Graham with Seaport Research Partners. Please go ahead.

Scott Graham: Hey. Good morning. Congratulations. Thanks for taking my call. I wanted to talk about acquisitions a little bit more and thank specifically on earlier question. Are some of the targets that are in the pipeline there because you need to kinda fill out the box secondarily, you know, if you kind of do the math on your EBITDA, your leverage targets, my back of the envelope says you probably have about $500 million in capacity over the next call twelve months. Is that about right? And would you use stock for deals?

Beth Wozniak: Well, let me start with the first part of the question. I'll let Gary talk about the latter part. As you know, we've had this acquisition flywheel where it starts with us looking at high-growth verticals and products that we are differentiated where we could extend our capabilities and invest to scale. And so that's how our last two acquisitions came about. And, so it's not necessarily, you know, how do we look at filling the box, so to speak. It's just where in these data centers, utilities, infrastructure, and what are great products that allow us to build on capabilities that we have. And so in some cases, that could be complementary products.

And I think we have a great pipeline. I think we've been very disciplined in what we've gone after. And you see us growing these portfolios, and that is part of our flywheel. So, you know, the pipeline is robust, and I think there's lots of opportunities as we go forward.

Gary Corona: And, Scott, I'll just comment on capacity. As we mentioned in our prepared remarks, we're right within our leverage range and expect to be well below that, especially as we will have a strong second half in cash flow generation. For us, we're going to continue to be disciplined on the deals. And these chunky type deals that we've done, like EPG and Tracte, certainly can be managed without any additional equity. So we have a nice bit of capacity, and we expect to continue this flywheel going forward.

Scott Graham: Very good. Thank you both.

Operator: Thank you. This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak, Chair and CEO, for any closing remarks.

Beth Wozniak: Thank you for joining us today. I'm extremely proud of our performance in the second quarter. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe nVent Electric plc is a top-tier high-performance electrical company well positioned for the electrification, sustainability, and digitalization trends. Thanks again for joining us. This concludes the call.

Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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