nVent Electric PLC Q4 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : So maybe why don't we just start off with just the organic growth expectations? So a little bit of a slower start to the year on that 0% to 2% but then ultimately accelerating as the year progresses. I know the comps certainly get easier. But Beth, maybe you can just kind of walk us through your expectations? And I'm particularly interested in looking at slide 6 on the industrial and commercial businesses and what you're seeing in those businesses today that gives you confidence that you will see organic growth accelerate as the year progresses.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's helpful. I should have clarified also, just in terms of pricing for the year as well, what's embedded in your assumption?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay, great. And then just one last one. Slide 8, love the breakout of the core technology platforms. Also great that you're in a position now to be very front-footed with capital deployment. So as you're thinking about M&A, is it logical to think that these are kind of like the areas that you would potentially invest in? Or are you looking at potentially other platforms, other ways to maybe just increase the breadth of your portfolio?

Question: Julian Mitchell - Barclays Capital Inc. - Analyst : Maybe just to start with the operating margin guidance. So it looks maybe as if operating margins are down in the first quarter and then sort of flattish for the year as a whole. Wanted to check if that was roughly correct. And any main divergences between the margin performance year-on-year of the two segments that we should be aware of?

Question: Julian Mitchell - Barclays Capital Inc. - Analyst : That's helpful. And then maybe just one follow-up on the revenue side. You've given a lot of very good color on revenue. But just to understand what's embedded for the non-infrastructure pieces, I can see slide 6, the sort of full year laid out there. Just wondered, that improvement because it looks as if the non-infrastructure pieces are down year-on-year in Q1, partly comps and then they're expected to move higher through the year. Just wondered when you're thinking about that, how much of that improvement is comps year-on-year and normal seasonality versus some fundamental improvement? And tied to that, I guess, is whether any of that order strength in Q4 was in non-infrastructure verticals.

Question: Deane Dray - RBC Capital Markets Wealth Management - Analyst : I have a question broadly about potential implications from DeepSeek and just any feedback you've heard from your customers and partners. And really specifically, what might be the impact on liquid cooling if they can use older generation AI chips? Do the thermal loads and thermal load assumptions change? Or is it binary that once you're using AI chips, you just have to use liquid cooling and the differences in thermal loads don't really matter? But there's a lot to unpack there, but any color there would be helpful.

Question: Deane Dray - RBC Capital Markets Wealth Management - Analyst : That's great to hear. That's exactly what I was looking for, especially the feedback from your customers and partners. And just a related follow-up question. So you've gone through this process to quadruple capacity in liquid cooling last year, finishing that. Do you still need to add test capacity? Because there was some question that you hadn't quadrupled it there. And could you give us any sense directionally what your utilization rates entering '25 are on your liquid cooling capacity?

Question: Nicole DeBlase - Deutsche Bank Securities Inc. - Analyst : Maybe just starting with a little bit more color around what you saw with respect to channel inventory. You mentioned that, that was a factor in 4Q relative to your initial expectations. How do you feel current channel inventory stands today relative to what's needed for next year?

Question: Nicole DeBlase - Deutsche Bank Securities Inc. - Analyst : Okay, got it. And then with respect to tariffs, I know a lot up in the air right now, but could you help us a little bit by maybe sizing your exposure from a COGS perspective to Mexico, Canada, and China? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, NVT.N - Q4 2024 nVent Electric PLC Earnings Call

Question: Jeffrey Sprague - Vertical Research Partners LLC - Analyst : I was wondering if we could dig a little bit more into the order commentary up low 10s, I think, in Q4 is nothing to sneeze at. And then Beth, you said that this continued into January. I think the comps were relatively easy, but can you sort of unpack that a little bit what the comp was? And anything in particular in terms of the sub verticals that stand out driving that growth?

Question: Jeffrey Sprague - Vertical Research Partners LLC - Analyst : And then just thinking about maybe a little bit of a follow-up to Nicole's question, is there a way to kind of quantify the top line headwind in Q4

Question: Jeffrey Sprague - Vertical Research Partners LLC - Analyst : Okay. And then just maybe one last one for me on price. So a little bit negative again here in Q4 but you're expecting it to go positive. Just wondering if the Q4 weakness or I don't know if you call it weakness but slightly negative is still kind of in Enclosures. And what drives it positive in 2025? Is it just sort of blanket beginning of the year sort of price increases or how are you managing price in the current environment?

Question: Nigel Coe - Wolfe Research, LLC - Analyst : I just want to go back to maybe a question that was asked earlier on and really just try and delineate between infrastructure and the rest of the portfolio because it feels like infrastructure is driving all the growth. And I just want to make sure that when we look at the industrial, residential, and commercial verticals, it feels like your plan is flat to maybe low single-digit growth. I just want to make sure that's how to think about it.

Question: Nigel Coe - Wolfe Research, LLC - Analyst : Okay. And I'm guessing residential, which is obviously very small for you guys, will be down probably mid-single digits, okay. That's really helpful. And then maybe just double clicking to Trachte because it feels like -- well, certainly, the contribution to 4Q from acquisitions was a bit better. So I'm just wondering, I know Trachte isn't organic until the second half of the year, but maybe just double click into what you're seeing in Trachte in terms of growth for 2025, and perhaps just talk about some of the verticals where you're seeing that growth.

Question: Jeffrey Hammond - KeyBanc Capital Markets Inc. - Analyst : Just on the liquid cooling business, a lot of dynamic movement there and a lot of new entrants. So I'm just wondering, as you look near term, what are you seeing in terms of win rates, pricing in the backlog? And any kind of early traction from this NVIDIA collaboration you announced?

Question: Jeffrey Hammond - KeyBanc Capital Markets Inc. - Analyst : Okay. That's helpful, Beth. Just maybe back to capital allocation, just talk about actionability of the pipeline. And I don't know, what do you have baked in for buybacks? And what's kind of the thought of flexing that if deals don't come through?

Question: Brian Drab - William Blair & Company, L.L.C. (Research) - Analyst : I think that you said for power solutions, the expectation is for double-digit growth in 2025. I wonder if you could be any more specific on that and remind us what was the growth for power solutions for the full year '24.

Question: Brian Drab - William Blair & Company, L.L.C. (Research) - Analyst : Okay. I guess, for data -- I guess, I should call it data solutions, that 20% of sales was up how much in '24? And I'm just wondering, like can you say that double digit? Or I assume you're not thinking like 10% or 11% there. How will that proceed?

Question: Brian Drab - William Blair & Company, L.L.C. (Research) - Analyst : Okay. I'm trying to get you -- get a sense of if we're going to continue better than 20% or not but I won't press you further, I guess, on that. And on Trachte, just to put a finer point on the contribution from growth and potential contribution. I mean, this is probably, what, about a $300 million revenue business now that's growing very strong double digits. It seems like this is a business that could contribute even, I don't know, 150 basis points or 2 points to the organic revenue growth in the second half of the year. Am I on the right track thinking of it that way?

Question: Brian Drab - William Blair & Company, L.L.C. (Research) - Analyst : Yes, this seems like a great -- I mean, obviously, it's a great acquisition that you made. And if it's 10% of revenue and growing even 15%, it's 150 bps of growth in the second half of the year. And it seems like it could be even more than that if that business is growing that quickly. So as people are just trying to reconcile the acceleration of organic revenue growth feels material. So I'll follow up more later though. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, NVT.N - Q4 2024 nVent Electric PLC Earnings Call

Question: Vladimir Bystricky - Citi Investment Research (US) - Analyst : So maybe just a couple of quick questions from me, one on the capital deployment front. I think the slide you shared, slide 8, on the core technology platforms is helpful and very interesting. I guess as I think about incremental capital deployment versus those six core technology platforms, are there particular areas that stand out where you see more potential for M&A or more actionability to layer on to those core platforms through M&A?

Question: Vladimir Bystricky - Citi Investment Research (US) - Analyst : Got it. That's helpful, Beth. And then I guess, just obviously, a lot of focus on liquid cooling and what you're seeing there. Can we just talk about your visibility to the timing of deliveries and whether you're seeing any material movements from customers in terms of when they want liquid cooling product as they continue to refine their designs and approaches to thermal management?

Question: Scott Graham - Seaport Global Securities LLC - Analyst : I wanted to maybe understand sort of your calculation of the EPS impact from Trachte in the first quarter and maybe what's embedded in the '25 guide. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. FEBRUARY 06, 2025 / 3:00PM, NVT.N - Q4 2024 nVent Electric PLC Earnings Call

Question: Scott Graham - Seaport Global Securities LLC - Analyst : Okay. The second question I had for you was on inflation. Is the fourth quarter inflation number that you provided a decent run rate for '25 quarters?

Question: Scott Graham - Seaport Global Securities LLC - Analyst : Appreciate that. Last question. So you talked about the orders maybe starting to spread out vertical-wise in January. And I know that your organic projections, your ramp in organic is based on, you went through that, thank you. What I was wondering was, how much of that ramp includes some of these projects that you referred to, and whether you think there might be some timing risk around those projects?