nVent Electric PLC at Goldman Sachs Industrials Conference Transcript

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

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Thank you for coming. So why don't we kick it off? Sara, I just spent some time with you at Super Compute a few weeks ago. Look, it was clear you guys were really excited about the different innovations that you had for the next-generation NVIDIA chips. Just maybe just talk a little bit about what you're excited about nVent business, tell us what you're doing to try to differentiate from other liquid cooling players.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's super helpful. Look, I -- space is fascinating, right? And there's been a lot of movement in the space as well. I mean you had Vertiv bought Cutera, (inaudible) bought Motiver. You now have electronics, just bought Jet cooling. It's like Jet cool. Like there's a lot of partnerships or acquisitions REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 3:40PM, NVT.N - nVent Electric PLC at Goldman Sachs Industrials Conference that are occurring in the space. As you think about your own scale, I mean, do you have the right scale to compete with those players or even like private players that are very well funded. How do you think about your own business relative to the competition and how that's emerging?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : That's great. Are there -- so it's great to hear that you're -- you've already ramped your capacity. Are you seeing any constraints right now within the supply chain in terms of being able to deliver products faster?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. Last question on liquid cooling for now, but -- or maybe the data center business. So a lot of folks that we spoke to at Super Compute we're expecting their data center business to be a better or faster growing business in 2025 versus 2024. We know that you're targeting like roughly $575 million plus. I know there's a plus in there. So good growth this year. How are things setting up for 2025? Are you still -- are you expecting 2025 to be a faster growing year than this year?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : So let's talk about the other parts of the business that haven't been growing, which has been a lot of like the short-cycle industrial businesses. You talked about, I think on the most recent call, how distributor inventories were folks were managing inventory still like fairly cautiously. I know we're only a month removed from the election, but are you starting to see any changes in activity because we've gotten through the election, there's some certainty now. Are you seeing any pickup on the short cycle side?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Great. We'll double click on that in a second. But just staying on the election, a lot of discussion around tariffs. I don't recall it having a meaningful impact to your business last time around. At the same time, you guys were spinning off last time around that this occurred. So like, what's your expectation on any tariff implications? And then if tariffs are inherently inflationary, is that potentially a positive to your business?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : So manageable.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Okay. The -- maybe a longer-term question. So you talked about the data solutions business being or the infrastructure business being a very fast-growing business, your best growing business in the last several years. Recall at the Investor Day, there was a lot of discussion also around the grid modernization opportunity. I think you called out a potential $250 million to $500 million incremental benefit from that. Maybe just get us up to date, how has that -- have you progressed along that initiative? Have you started to see some benefit from that and here where are we today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 3:40PM, NVT.N - nVent Electric PLC at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : So that takes us into 2025, right? Because we've talked about the mega project activity here in the U.S. It's been substantial. There's been a lot of projects that have broken ground, also fully recognized in the way that you sell your enclosures typically are later cycle. It's like once you've gotten the guts of the facilities built like you're about to start investing on the factory floor, and that's typically when you see your orders start inflecting. So as you start -- as -- since sitting on the EVA 2025, how do you think about that opportunity and whether you will start to actually see a meaningful benefit from that in '25? And then also, as you kind of think about an initial framework for '25, how does your initial framework for '25 compare to what 'you've laid out from a long-term perspective?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : It all sounds good. So I mean, look, in the context of the long-term framework is 4% to 6% organic. It sounds like you at least -- you think you can at least do that type of growth next year?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : I'm just trying to understand what strong means. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 3:40PM, NVT.N - nVent Electric PLC at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Yes, pricing has been a hot topic this year. I saw pricing turn positive this quarter. And I know that the way you guys look at your pricing algo is maybe slightly different than others. Maybe first discuss that for folks that aren't as familiar with it. And then is there a way to think about pricing into next year?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Helpful. You kind of think about the margins. Like there's a lot of stuff going on in enclosures, right? And so we can talk through some of the key points. And I'm talking about start-up costs. You've got investments in liquid cooling. You've got to track the acquisition coming through. Just help kind of frame what the key margin levers are going to be for both the Enclosures business and the EFS business going forward?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : I'll turn it to the audience in a second for questions. But maybe just following that point around the investment you're making into Data Solutions or liquid cooling. What is the kind of like R&D as a percentage of sales look like relative to the whole portfolio? And then I think I recall like some -- you were getting some customer funded R&D as well for testing. Is that still happening or you guys -- are you guys spending most of your own capital to improve your testing?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Yes. No. So just relative to the rest of the portfolio, like how high is like the R&D?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Turning to the audience to see if there's any questions, or I can keep going? Okay. I'll keep going. So can we talk about Trachte? So Trachte, I think you guys had strong double-digit growth, if I recall correctly, this past quarter. Tell us a little bit about how that acquisition is going and whether this is a potential opportunity for any type of platform that you can build out off of tracked stage? Just any thoughts around that would be helpful.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Good natural question. Well actually on track to specifically. You mentioned it was dilutive today to the portfolio margins. Is there an opportunity to get those margins to be more like the broader enclosures portfolio?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : And is there a time frame that you're expecting to achieve that?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : So you're in the process of divesting the thermal business with an expectation, I think, that's supposed to be done next quarter, early 2025. About $2 billion in net proceeds, seems to be a nice enviable position to have right now. What are you thinking in terms of how you're going to deploy that capital?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : You didn't say buyback, right? So a lot of companies, whenever they do big divestitures like this will immediately try to offset some of the dilution via an ASR or a buyback, et cetera. It sounds like you guys are certainly looking a little bit further out on the longer-term growth opportunities. Am I characterizing that correctly? And at what point would you maybe get more opportunistic on a share buyback? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 3:40PM, NVT.N - nVent Electric PLC at Goldman Sachs Industrials Conference

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Yes. So we talked about Trachte and that being potentially a platform to build off of. A couple of questions. Is it fair to say that when you're looking at M&A, it all kind of has to fall within this electrification of everything strategy that you guys have across the portfolio? And then secondly, outside of Trachte, are there other areas within the portfolio that make a lot of sense to build off of based on what you currently how you're currently going to market today?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Got it. I want to go back to just some of the conversation, and I think you did a good job already just kind of framing out the initial thoughts into 2025 from an end market standpoint. Just tell you in a lot of the conversations that we have, particularly around the EFS segment. There's some concern around the commercial trends this year and how starts data have been coming down all throughout 2024, ultimately, what that means for 2025. As you think about this business specifically, is this from an end market standpoint, is this the biggest risk heading into next year? Or how do you think about your own portfolio itself to that end market?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Sure. One last question for me. So you talked about some of the higher-growth verticals or higher growth opportunities within your own business today being Data Solutions, this Trachte acquisition that you just did, which also tends to be longer cycle, more of a backlog-centric business. Is REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 3:40PM, NVT.N - nVent Electric PLC at Goldman Sachs Industrials Conference that -- is this where the portfolio is moving, do you think? If we looked at nVent 3 to 5 years from now, we're going to have a longer cycle more resilient portfolio? Or is it just very specific to those -- that piece of the business today?

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Great. Sara, unless there's any other -- if you want to leave us with any comments, happy to kind of give the floor back to you.

Question: Joseph Ritchie - Goldman Sachs & Company, Inc. - Analyst : Thank you, Sara. Thanks, Tony.