nVent Electric PLC Stock

Good day, and welcome to the nVent Electric Second Quarter 2016 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to nVent's Second 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'll provide details on our second quarter performance and outlook for the third quarter and update to our full year outlook. All results referenced throughout the presentation are on a continuing operation basis unless otherwise stated.

Before we begin, I'll 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 Investors section of nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for your questions after 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 second quarter results and cover some key business highlights. We had another tremendous quarter with record sales and earnings, well ahead of our guidance. The better-than-expected sales were primarily driven by the infrastructure vertical, led by data centers, along with stronger demand in our short-cycle business. This was our fourth consecutive quarter with sales of more than $1 billion, including systems protection sales of more than $1 billion for the first time.

Our data center business grew across the portfolio in both the gray and white spaces. We had outstanding growth in liquid cooling, cable management and engineered buildings. We are winning with a wide range of customers from hyperscalers to neo clouds, multi-tenants and also through our distribution partners. We have been investing in new products and our supply chain to be able to scale and respond to customer demand.

Today, we announced another new location for further capacity expansion, which I will discuss shortly. In Q2, for total invent, we continue to have strong orders and backlog. Organic orders growth was broad-based, up low double digits. In addition, backlog remained healthy at $2.5 billion, giving us visibility through the year and into 2027.

As we have previously discussed, data center orders tend to be large and lumpy impacting growth rates quarter-to-quarter. In fact, we've had strong data center orders thus far in Q3. Our free cash flow and balance sheet are strong and our disciplined capital allocation is focused on growth and returning cash to shareholders for continued value creation. We are significantly raising our full year sales and EPS guidance to reflect our outstanding second quarter and expected broad-based growth including continuing momentum in AI data centers.

Now on to Slide 4, for a summary of our second quarter performance. Sales were up 53% and 47% organically, led by the infrastructure vertical. New products contributed over 30 points to our sales growth, and we launched 14 new products in the quarter. The EPG acquisition continued to exceed expectations, growing sales strong double digits year-over-year. Adjusted operating income grew 61% year-over-year with return on sales of nearly 22%. Adjusted EPS grew 69% and free cash flow grew 125% year-over-year.

Looking at our key verticals. Sales grew across all verticals. Infrastructure led the way with organic sales more than doubling, driven by outstanding growth in data centers and double-digit growth in power utilities. Commercial resi grew high single digits and industrial was up low single digits. Turning to organic sales by geography, all geographies grew, led by the Americas, growing very strong double digits. Europe was up mid-single digits and Asia Pacific grew double digits.

Looking ahead, we believe 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 strong double-digit growth this year, supported by accelerating AI-related data center capital investment. Within infrastructure, data centers remains our most significant growth opportunity.

We also see substantial opportunity in power utilities where increasing electricity demand grid modernization and the growing power requirement of AI data centers are creating meaningful long-term tailwinds.

Turning to industrial and commercial resi, we expect each to grow mid-single digits for the year with improving demand trends in our short-cycle business. Moving to Slide 5. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is showing up in our results. We have intentionally increased our exposure to the high-growth infrastructure vertical through both organic investments and M&A. Infrastructure made up 12% of sales at spin, expanded to 45% last year and was nearly 60% in the first half of this year.

We have been significantly investing in our data center and power utilities businesses, which are rapidly growing and more capacity is needed to meet customer demand. Overall, I am proud of our event team and how hard everyone is working to deliver these results and support our customers. We are on track for another strong year. This wraps up my opening remarks. I will now turn the call over to Gary for further details on our second 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 EPS. Let's turn to Slide 6 to review our results. Sales of $1.471 billion were up 53% compared to last year. Organically, sales grew 47%, well ahead of our guidance driven by very strong data center sales. Acquisitions added $52 million to sales or 5 points to growth. Sales from EPG after May 1st became part of our organic growth. Foreign exchange was nearly a 1 point tailwind.

Adjusted operating income was $323 million, up 61%. Return on sales came in ahead of expectations at 21.9%, up 110 basis points versus last year. Price plus productivity offset inflation of more than $50 million, including more than $30 million in tariff impact. We also continued to make investments for growth in data centers and power utilities. We had record earnings well ahead of the high end of our guidance, driven by exceptional sales growth and execution by the team.

Adjusted EPS grew 69% year-over-year to $1.45. We generated very strong cash flow of $167 million, up 125% year-over-year. Now please turn to Slide 7 for a discussion on the second quarter segment performance. Starting with Systems Protection. Sales of $1.072 billion increased 70%. The EPG acquisition contributed 7 points to sales and has performed well. This was system protection's first 1 billion dollar quarter. Organically, sales grew 62%, led by the infrastructure vertical, which more than doubled due to continued strength in data centers.

Industrial and commercial resi were each flattish in the quarter. Geographically, Americas grew very strong double digits, while Europe was up mid-single digits. Asia Pacific grew double digits in the quarter. Second quarter segment income was $248 million, up 81%. Return on sales of 23.2% and increased 150 basis points year-over-year on strong volume and productivity.

Moving to Electrical Connections. Sales of $399 million increased 21%. Organic sales were up 18%, and the EPG acquisition contributed 2 points to sales. Growth was broad-based across all verticals and geographies. From a vertical perspective, infrastructure and industrial each grew strong double digits. Commercial resi was up low teens Geographically, sales were up high teens in the Americas. Europe was up low double digits and Asia Pacific grew double digits.

Segment income was $109 million, up 15% versus last year. Return on sales of 27.3% was down 140 basis points year-over-year. The margin performance was impacted by inflation and mix, partially offset by improving price and volume. Importantly, margins improved sequentially back into the high 20s.

Turning to the balance sheet and cash flow on Slide 8. We ended the quarter with $256 million of cash on hand and $600 million available on our revolver, putting us in a strong liquidity position. Our debt stands at $1.5 billion after paying down nearly $70 million of our prepayable term loan in the quarter. Our healthy balance sheet and strong liquidity position gives us financial flexibility to support our disciplined capital allocation strategy.

Turning to Slide 9 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, and that starts with reinvesting in the business by funding capacity expansion, innovation and the capabilities required to win in high-growth verticals. This year, we continue to expect to invest approximately $130 million in CapEx, up 40%. We spent nearly $60 million in the first half, up over 50% versus last year. Most of this increased investment is for new capacity to support growth in data centers, power utilities and supply chain resiliency.

Through the first half of the year, we returned $118 million to shareholders, including share repurchases of $50 million and we have increased our quarterly dividend by 5% compared to last year. We exited the quarter with net leverage of 1.2x, well below our target range of 2 to 2.5x, providing ample flexibility to invest in growth and acquisitions. Overall, our disciplined capital allocation approach positions us to prioritize growth and create long-term shareholder value.

Moving to Slide 10. As Beth shared earlier, we are significantly raising our full year sales and EPS guidance again due to our strong performance in Q2 and momentum across our portfolio. We now forecast reported sales growth of 37% to 39%, up from 26% to 28% previously. We are significantly increasing our organic sales growth guidance. We now expect to grow 32% to 34% versus our prior guidance of $21 million to 23%.

We are raising our full year adjusted EPS range to $5 to $5.10 versus our original guidance of $4.45 and to $4.55. At the midpoint, adjusted EPS is expected to grow 50% versus last year. Our tariff impact is expected to be approximately $100 million, up from $80 million previously. Largely, this is driven by our significantly higher volume growth. We continue to expect to offset the impact of inflation, including tariffs through pricing, supply chain productivity and operational mitigating actions.

For free cash flow, we still expect conversion of 90% to 95%. Looking at our third quarter outlook on Slide 11, we forecast reported and organic sales growth of 32% to 35%. Pricing is expected to offset the impact of inflation, including tariffs. We also expect to continue to invest in growth, particularly in data centers and power utilities. We expect adjusted EPS to be between $1.35 and $1.38, which at the midpoint reflects 50% growth compared to last year.

Wrapping up, our nVent team delivered exceptional sales and earnings performance in the first half of the year. growing sales by over 50% and adjusted EPS by over 65%. As we turn to the second half, we are well positioned for another outstanding year. I will now turn the call back over to Beth.

Thank you, Gary. Please turn to Slide 12. We have been working on liquid cooling in data centers for over a decade. Three years ago, we executed our first significant expansion for liquid cooling increasing our footprint to support the AI data center buildout. That expansion was not enough to keep up with the accelerating demand. So we added another facility at the beginning of this year in Blaine, Minnesota, effectively doubling our capacity. This new facility is near to our Anoka campus, and that proximity has allowed us to use the infrastructure, resources and expertise nearby to quickly scale. .

We opened the blame site within approximately 100 working days from when we signed the lease. This site is progressing ahead of our expectations and will continue to ramp through this year. Now as we look ahead, given the strong orders, backlog and visibility we have with our customers on liquid cooling demand, this expansion is not going to be enough. Thus today, we have announced a third facility expansion in Minnesota that is of similar size to the Blaine location and nearby, which we are calling Blaine 2. This facility is expected to open in the first half of 2027.

We expect our total data center sales to be more than $2 billion in 2026 and more than double last year's sales. Wrapping up on Slide 13, we had another tremendous quarter with record sales and EPS. Our portfolio transformation and the AI data center build-out are accelerating our growth. We expect another record year and have significantly raised our full year sales and EPS guidance. 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.

Our first question comes from Deane Dray with RBC Capital Markets.

I realize there's lots of focus on the continued hypergrowth and your data center business, but I was hoping we could start off walking through the -- your industrial short-cycle businesses and electrical connections. I mean, the 18% organic was 3x bigger than what we had been modeling for. So Beth, I was hoping you could take us through, are we seeing an inflection year? How broad-based is that? And just to make sure we're level set. Were there any kind of thing unusual that got booked this quarter, any one-timers that would have skewed that organic growth rate higher?

Deane, thank you for the question. As the quarter progressed, we saw strong orders and as I mentioned in my prepared remarks, we saw growth across every vertical and every geography. And we were -- our orders were very strong through our distribution partners, which is where we see a lot of that short-cycle industrial growth. So really, it was just a nice inflection point. And as you stated, our electrical connections business, which has a lot of short-cycle business performed very well to execute on those orders. And there was nothing unusual..

All right, go ahead -- all right. That's great to hear. And then the second question, and I know you guys hinted pretty strongly that there was more capacity expansion coming at your Analyst Day. So seeing the announcement today makes sense. A couple of questions. How do you land on -- I think it's a 60% increase in capacity, and where does this take you in terms of your current kind of order funnel, does it take you into 2028? And just -- and then Gary, how are you managing the -- as you ramp each new line just in terms of the margin impact. So there's not too much pressure on the incrementals. I know a lot of work goes into that.

Well, Deane, as we look at the demand and as we look at what our customers and the visibility that we have there and as we are launching also our modular platform in fall time frame, we knew that we needed to expand our capacity, and we're looking out. So as you know, our Blaine facility, Blaine 1 that is coming on in line right now is still ramping through this year and into 2027. So as we looked at that, we knew with the demand that we're seeing that we needed to ramp another facility because it takes time to get them online. And we do believe that, that takes us through '27 and into '28 at this time.

Deane, and just to pick up on the margins, as we have said consistently, we expect to continue to invest to support the infrastructure vertical to serve the backlog that Beth talked about. That's all embedded in our guide, which is assuming mid-20s incrementals in the second half.

Congrats to the team. .

Our next question comes from Jeff Sprague with Vertical Research.

Got to add some to my columns here that fit all this organic growth. Just thinking about the ramp here. I mean looking at systems protection, I think we have 8 or 10 quarters now of sequential revenue growth sort of this bow wave of activity has come through. It appears to guide sort of levels out here, though, but maybe even the guide is for a little bit down revenue sequentially in Q3 and more so in Q4. Isn't the seasonality of the business sort of being ironed out by this level of activity or perhaps there's something going on with how you stage new production. Could you just address that, please? .

Sure, Jeff. This is Gary. I'll start off and just mentioned, we expect a good organic growth in the second half and in the third quarter, certainly. We guided 32% to 35% in the third quarter. And keep in mind, we're going to be lapping 20% organic and 50% EPS growth in the second half. Last quarter, we talked about mid-30s 2-year stack growth and actually, in the third quarter, we're going to significantly accelerate 50% in Q3 at the midpoint versus 46% growth in the first half. So we're seeing nice acceleration. So I understand your question, but we really feel like the team is delivering and delivering nice momentum.

But is there any particular internal or external supply chain issue that might hold back kind of the sequential trajectory in Q3 versus Q2? .

I think, Jeff, this is just our planning, and we're being very prudent because as you know, as we ramp capacity, we're having to add in equipment. We're having added labor. We're having to make sure that our suppliers can respond. Certainly, in Q2, we were managing those things, and it worked out more favorable in terms of the growth that we saw. But as we look forward, we're just being prudent. And as we ramp up two new facilities, we want to ensure that we're putting the right -- doing all the right planning.

And then maybe just a follow-on. I think we talked about this a little bit before, but could you just maybe address the kind of service opportunity that is being created or should be being created on the back end of all this installed base growth that you're capturing here, kind of the opportunity set there? Are you seeing traction in that regard?

So yes, as we designed our product portfolio in liquid cooling, we always designed it with modularity in mind so that parts could be hot swappable. And as we are also investing in a service capability to support the products. And as we move and see our growth from hyperscalers to other less sophisticated customers, let's say, we have that ability to help commission, install and provide that service. So that is building as we go.

And certainly, as we launch in the fall time frame here, our new modular portfolio, that is a big element for us to support that portfolio, which we see will be very broad-based in terms of its appeal to the customer set.

Our next question comes from Nigel Coe with Wolfe Research.

So Beth, I hate to be the annoying analyst asking the question about orders, but I know they're lumpy, so we get it. But is there anything around just the cadence of product launches and the capacity ramp that pushed orders around a little bit here and made them perhaps a bit lumpier. And I'm thinking of obviously, it's about the modular product launches, et cetera. So anything around those factors driving a bit more lumpiness in orders?

No, not really. I would say we have seen this over the last several years that these orders come in at various times and usually they're large. And as I commented through Q3 year-to-date, we've seen very strong orders. So this is just normal in terms of these large orders that drop in.

I get it. No, that's good. I just wanted to just double check on that. And then, obviously, really good news on the Blaine 2 facility. Can you maybe just bring us up to speed in terms of where we are on the production ramp in Blaine 1, what's the capacity utilization? And where do you think it will be by the end of the year. And I'm just kind of amazed that you're not seeing any capacity headwinds or supply chain bottlenecks, unlike a lot of your competitors and peers in data center systems. Maybe just touch on where you are right now in your supply chain, et cetera.

Okay. Well, as you know, when you're ramping up, it's not just our capacity, it's also ensuring that our suppliers' capacity is also expanding. So as we've ramped our own facilities, we've continued to work with our supply base to ensure that they're reading and that's a lot of work. And as I think about our Blaine 1 facility, it's come online faster than we expected, but still ramping through the course of this year and into 2027. So it is starting to contribute, but we expect more -- stronger contributions from that facility as we go into '27. .

Our next question comes from Joe Ritchie with Goldman Sachs. .

So obviously, incredibly good results and demand remains really healthy. your backlog is now kind of sitting at $2.5 billion like basically kind of flattish, maybe down a little bit sequentially. And I'm just curious, like with the capacity ramp that you have coming and what you see in your pipeline, is this kind of like the right backlog level for you going forward? Do you expect backlog to continue to increase from here? I know that you have a really tough comp, obviously, in the third quarter. Just any comments around that would be helpful.

Yes. I mean I think it's around the right level. I mean it's hard to say because, again, when you get these lumpy orders that come in, that can increase the backlog, but we're trying to turn it as well because it is important as we have a backlog that we're responding to the demand from our customers. So we worked hard in Q2 to really execute on that backlog because we know it's important to have good lead times for our customers. So is my answer to that question that, that's around the right level?

Yes. fair enough. And look, it's great to see you guys turning the backlog and really impressive growth. I guess my second question is just around like the electrical connections margins. I know that you guys have been dealing with some like inflationary pressures as well. Growth is really good in the segment. Just -- how do we think about kind of like the trajectory of the margin going forward and whether you're going to be able to kind of expand those margins? .

Joe, I'll take this. This is Gary. The first comment I'll make is about the great growth, both on the top line and the bottom line, mid-teens profit growth for EC is a tremendous contributor to our performance. And on the margin front, we did see a significant sequential step-up and we expect margins to continue to improve as the pricing and productivity actions that we talked about last quarter take hold. And again, that's going to be in those high 20s in line with what we discussed as that segment continues to deliver really nice growth on the top and bottom line for nVent.

Our next question comes from Jacob Levinson with Melius.

I think you mentioned there was a pretty strong tailwind in the distribution channel. Can you give us a sense of maybe inventory has got a little too low over the last couple of years? And just how much of that is maybe an inventory restock versus real underlying sell-through demand?

Well, we look at both the sell-in and sell-out from our distributors, and it's actually been well balanced. So the positive note is that they're seeing strong sell-through. So we actually think it's very healthy, and it's real demand that we're seeing, and that's the short-cycle strength. .

Okay. Fair enough. And just on the utility side, I'm not sure if you mentioned how much that market grew in the quarter, but -- yes, that would be helpful to know for one. And us, how do you balance the demand in that space with data center because I know there's not a lot of overlap with some of those products, particularly with the acquisitions that you did recently.

Well, yes, power utilities grew double digits for us in the quarter. So it was very strong growth. And as we look at our whole portfolio, again, I've commented before, we intentionally have shifted to data centers and power utilities. And certainly, as we look at opportunities, we want to ensure that we're serving our core customers, and so we make rodent decisions if there has to be trade-offs.

But in some cases, we have separate facilities or depending on the product line, liquid cooling is in separate facilities from where we're doing some of our power utility business. But it's overall part of our planning to ensure that we looked far enough out talking to our customers and ensuring we can execute on all that customer demand.

Our next question comes from Jeff Hammond with KeyBanc Capital Markets.

Beth, could we count on 100 days to get Blame 2 opened? Or is that too aggressive? .

I think that's too aggressive. I mean we are like running flat out. So I don't think we can have that repeat performance.

All right. All right. It's good to talk about electrical connections again. I know you mentioned a lot about the short cycle, but I'm just wondering if this step-up in acceleration, like how sustainable do you think it is? And then just, Gary, on the mart -- you had some price cost issues, nice recovery there. Or kind of -- are we -- where we want to be? Or is there more kind of price or cost recovery into the second half? I guess how should margin look on EC as we go forward?

On electrical connections growth, one of the things that we've really focused on is ensuring that our product portfolio, which is positioned well in -- we have cable management, for example, that is used in data centers and there's a lot of construction that goes on in the gray space of data centers, so we've done a lot of work to ensure that our sales teams and our portfolio is positioned there. So we feel very good about that.

And again, the growth was broad-based across electrical connections. And like what we do overall in nVent, we continue to come out with new products that -- and we also have added capacity for some of those core lines in electrical connections as well you'd be able to really perform and execute on all that growth. So we feel good about the trajectory of that business. And I'll let Gary respond to the second part of that question.

Yes, Jeff. As I mentioned earlier, we're really pleased with the profit contribution to nVent delivering mid-teens is certainly far higher than they've contributed previously. On the margin front, we saw the progress that we expected in the quarter, and we expect to see continued progress as that pricing fully takes hold. And one of the things I would mention is, keep in mind, we've got some acquisition contribution in that business as well. We love that business in the high 20s, and that's where that's where I expect it to be this year.

And then just two quick ones on liquid cooling. One, just feedback -- early feedback on your modular product offering and uptake, and then just if you could level set us on the $2 billion revenue for 2026 data center, what you think the mix of liquid cooling versus other is.

So our modular platform is going to launch later this fall. And the interest is very high with a broad set of customers and -- so we feel very confident about our new product offering and the growth that it's going to provide us. On the $2 billion, certainly, we haven't broken that down yet, but it's a significant contribution coming from liquid cooling. .

I would just say we have not based broad-based impact on data centers from our portfolio, and it's really nice to see that growth contribution. As Beth talked about, the infrastructure vertical is a significant part of our business.

Our next question comes from Neal Burk with UBS.

I wanted to ask about customer purchasing behavior for data center. I mean it's clear that demand overall for nVent is very strong. But within your data center portfolio, can you kind of talk about how customers are purchasing your products? Like for example, are there customers for large projects who are buying just liquid cooling from nVent or would you say that it's generally more balanced for a typical customer between power and cooling.

Well, it really depends. We have customers who will buy lots that we have to offer from cooling, power, cable management to customers who might just buy a portion of a liquid cooling system as well. So we try and ensure that we understand what our customer is looking for. Are they looking for more integration? Are they looking for just a part of a solution? And we're very flexible to serve across that value chain. Because recall, we're working with hyperscalers. We're working with colos, we're working with distribution, integrators. So we're able -- that's one of the things about nVent, we're able to provide solutions across that continuum from a product all the way up through an integrated solution that you might see in an E-house. .

And as a follow-up to that, I mean, on the power utilities growth, you mentioned double-digit growth. It seems like very strong double digits. Can you just talk about like the kind of drivers there. I mean I think of this business, power utilities is typically kind of dependent on utility spending and maybe the mix is benefiting nVent particularly. But are you dealing more with like data center customers directly given the power constraints to the industry?

Yes. Certainly, power is -- the demand for power is being driven by data centers by an aging grid, et cetera. And when we think about what we do for power utilities, again, there's a lot that we're selling direct to utilities as well as through the distribution channel. But I would say there's also some integration or opportunities as we think of our engineered buildings and in that gray space. So we're trying to be able to serve all of those opportunities. But in general, demand for power is just increasing. .

Our next question comes from Varun Govindaraj with Bernstein.

Congrats. Quick question from my end. So what's next in terms of product vitality? Obviously, you have the new CDUs coming in the back half of the year. But as you think about your quantity per megawatt, where are you really looking to expand looking ahead?

Well, as we think about our overall product portfolio and new products, we're looking at how do we launch new products for these high-growth verticals in general. So whether that's our modular liquid cooling, whether it's looking at some of our PDUs and new capability there, whether it's looking at our Aeroflex legal bus that can be used for even medium voltage applications, we really are thinking about where are those opportunities, where we're going to see some differentiated growth in those high-growth verticals.

So it's right. I mean we look at we've been improving our new product fatality across the entire company. And I mean, that's been one of the core tenets behind our growth strategy and working well for us.

All right. I hear you. And then how do you look at 800 volt DC and how that really impacts your opportunity? Any concerns about potential headwinds there? Are you already working with customers and talking about what the outlook for that is going to be? Would just love any color that you could add.

All right. As we think about 800-volt DC and again, for us, there are others who are more power players, so to speak. For us, we think about in terms of cooling and what is that going to mean at the rack level and what is that going to mean for rising heat densities and what does our offering need to support we think about it in terms of our rates. A lot of our portfolio, by the way, whether it's just in some of our power connection is already rated to support higher surge capacity or load capacity. So -- we look at it as the industry is evolving, 800-volt DC is going to have some application in data centers, but you'll still have lower voltage requirements. And we just make sure we understand what it means for our road maps as we look at next-generation products and what they need to be capable of meeting. So I think it's an opportunity for us to continue to extend what we do. .

Our next question comes from Vlad Bystricky with Citigroup.

Beth and Gary, congrats on a nice quarter. I just want to -- yes. I just wanted to ask, in terms of order patterns from customers, particularly on the utilities and data center side, are you seeing any change in sort of timing of how orders are coming in? Are customers ordering with sort of longer lead times trying to lock lock-in capacity, if you will.

Yes. I would say this, that not necessary for the -- in the product portfolios that we play we certainly are getting visibility from our customers what their future demand is so that we understand that when we're planning out our capacity. But we're not -- for the portfolios that we have and keep in mind, there's different programs. So some programs are rolling off and new ones are coming in. We're typically just getting -- we're having those discussions on what's next. is what I would say. .

And Vlad, as we think about the backlog, we've said previously and continue to say that the backlog is mostly 12 months or less, and that hasn't extended out. .

And then -- can you just talk about in terms of data center opportunities and potential that you see outside of North America how you're seeing those markets develop and evolve and how you're thinking about nVent's ability to meet demand overseas as a data center investment ramps in other regions?

Well, we certainly see that trend that data centers are expanding in both Europe and Asia. And what we've been ensuring is that we're both investing in our commercial capabilities in those regions as well as setting up our manufacturing. We do have a footprint that is global. And some of our products today for our data centers are we do manufacture in Europe. And so we're thinking about what we have plans, I would say, just to continue to extend what we've done here in North America to be able to capture that opportunity around the world. .

Our next question comes from Nicole DeBlase with Deutsche Bank.

Maybe just a backlog question. Backlog did tick down a little bit sequentially, which is a high-quality problem because you were able to get so much out the door this quarter. But I guess if you look across the full year and considering customer pipeline and your production plans, as we exit 2026, do you think backlog kind of grows from these levels?

Well, as we indicated, right, part of -- and you're exactly right. I mean we had a strong quarter because we were executing on some of that backlog. And as Gary just commented, our backlog is typically within 12 months. So we keep adding capacity. So we want to see that we're in balance that we're able to respond to that demand to support our customers because that's really important to have very good lead times. So it's hard to say. And in any -- as I mentioned, we get these lumpy orders. So at some point in a quarter, backlog could go up, but we want to work it down. So it's hard to say, but we're probably around the right level that we think we should be. .

And I just reiterate what Beth mentioned in her prepared comments, is we're off to a really strong start here in Q3 on the order front.

Got it. Thanks, Gary. And maybe just a follow-up on that. off to a strong start. I'm sorry to ask this annoying question, but does that mean that orders are actually -- order growth is actually accelerating from what you saw in the second quarter? Any comment on that? And then no one's asked the question about the M&A pipeline yet. So I'll throw that in there too what you're seeing and the level of activity.

Well, two things I would say on orders one. We're seeing that short-cycle strength. And the other would be some of those lumpy type of orders. We're seeing some of those come in, in the start of this quarter. And on M&A, we have a very good pipeline. And I think we continue to be disciplined, and we continue to look at opportunities that are going to help position us further in that infrastructure space. And our balance sheet is in a very healthy position. .

Our next question comes from Luke Junk with Baird.

To start with, just curious to the extent you think we're seeing any company-specific elements, especially on nVent contributing to the short-cycle strength beyond just end market and market improvement?

Can you clarify that question? Are we seeing -- I'm sorry, are we seeing...

Yes. Just in terms of the cycle strength, especially into distribution and a lot of discussion at Investor Day about improving channel to market coverage, those types of things. It seems like we're seeing that show up in the short-cycle strength. To some extent, just how you would attribute kind of what is nVent's specific growth versus market tailwinds in the short cycle? .

Yes. So in terms of just that short cycle growth and through distribution, and you're right, it's been a key strategy for us is to ensure that we've got strong partnerships to ensure we're doing integrated marketing plan to ensure that we're driving our vertical growth strategies. So I do think -- and introduce new products, also very important. So I think it's a combination of those actions that is strongly positioning us across those distribution partners, and we just -- we see strength there. And again, that sell-out and sell-in is well balanced. .

And then in terms of the capacity increase in the good cooling, just a couple of facets to that, I'd be part to hear your thoughts on. First, in terms of the order book, does it enable you to open up the order book anymore. I don't know to what extent there any constraint in terms of taking orders in the near term before you get this capacity scheduled to come online. And then as you step into these three large facilities now, just curious how you think about there being any inherent flexibility in that, especially as you're bringing modular online and theoretically ramping multiple customer programs as part of this as well.

Well, certainly, extending capacity as a result of us looking into getting visibility into what our customers' demands are as well as our orders backlog and also because we are launching a new platform coming up here. So it's all of those factors. And I think the flexibility that we have, and I made this comment is the fact that we have opened up these facilities very close to our core Anoka center allows us to flex our resources, our infrastructure, our labor.

And certainly, already, we've mentioned that certain programs with hyperscalers have come online and moved to the next revision. So flexibility is really key for us. And so there's been a lot of thought into that as we expand this capacity kind of all in a larger extended campus here in Minnesota.

Our next question comes from Scott Graham with Seaport.

Beth, Gary, Tony, Congratulations on the quarter. I wanted to ask about third quarter organic guidance, which is obviously slower than what we just saw but it's on about a 10-point more difficult comp. And then the orders this past quarter were in your growth business liquid cooling seemed like a little lower, and I understand the lumpiness of course. But then you also said that you're trying to be prudent with some guidance areas. Could you kind of wrap all that together for third quarter still looks pretty good organically. Is there upside to that organic number? And is that being maybe more driven by shipments from the backlog in liquid cooling?

Yes. I'll take that one. And look, we're really pleased with the guide that we laid out, 32% to 35% in the third quarter. I think I mentioned it earlier, the 2-year stack because as you mentioned, the comps get tougher. So we're being very mindful of that. The 2-year stack in the third quarter is 50% growth at the midpoint, and that's acceleration from what we saw in the first half.

Certainly, as Beth talked about as we went into the second quarter, there's a lot going on there's a lot going on, and the teams did a great job to deliver against it. So it's important that we're prudent in our guidance, and we'll continue to be that way to give ourselves the flexibility to execute as well as invest to support the growth in the second half and in the future.

The other question was the mid-20s incremental margin in the second half of the year. In the past, and this was before the sale of thermal, the 30% number was sort of bandied a back. I was wondering if that's still maybe a stretch target for you.

Yes. As we said at Investor Day, our midterm target was mid-2s for incrementals. And that's to ensure that we can invest to support the growth. And that's what we'll see in the second half. You know, it's worth mentioning, we feel really good about the growth and returns that we're delivering. At the midpoint of our guidance, our EPS this fiscal year will be more than double what we delivered in 2024. And the team is doing a great job delivering not just growth, but returns as well. .

Our next question comes from Brian Drab with William Blair.

I want to ask a bigger picture question. I think a lot of the concerns around companies that have similar exposure to invent concerns lately just been around the longer term and it's really nothing new, but like the question is like is '26 and '27 going to be great and what happens in the out years. So I'm wondering over the last few months, how your conversations and with hyperscaler and large customers have developed? What kind of visibility you're getting, are there -- your broader pipeline and longer-term pipeline, are you -- how far out do you have visibility on some of these projects at this point?

Well, look, we've got a visibility several years out. But I will also tell you because we are in liquid cooling, we're working with NVIDIA and others on their road maps out through and trying to future-proof our projects. And keep in mind, liquid cooling is maybe it's now 10% to 15% of cooling in data centers. And as we see these high-performance AI chips that we see these higher heat densities, liquid cooling is going to have a very long runway in terms of just the replacement cycle and being able to match these next-generation chips.

So we've always said that maybe the build-out of data centers at some point down the road slows, but that white space and that refresh cycle, liquid cooling capabilities are going to continue to expand.

Appreciate that. Okay. And then I know this is obvious, but maybe you could just comment LTM orders, I think, is probably a much more relevant in my mind, indicator of how things are going. I mean obviously, data center revenue up 100% tells us how it's going. But are LTM orders that growth rate much higher than the low double digit that you mentioned for this quarter?

Yes. Brian, they are.

This concludes our question-and-answer session. I would like to turn the conference back over to Beth Wozniak, Chair and Chief Executive Officer, for any closing remarks.

Thank you for joining us today. We are confident in our strategy, which has remained consistent in our ability to execute. We have many growth opportunities and multiple levers to expand margins I'm proud of our performance in the second quarter. We will continue to focus on delivering for our customers, employees and shareholders. nVent 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.

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

Good morning, everyone. Thank you for joining us today. We've got two exciting new product launches to come for the ERICO brand today. Real quick before we get into it. If you have any questions or additional information after the webinar, please put so into the chat. Either myself or Corey will follow up with you after the webinar to go through anything else you guys might have questions on or need.

So today, we're discussing two of our new launches. But before we get into it all the way, I'd like to just look at our ERICO Six Point Plan of Protection, right, which basically involves: one, capturing that lightning strike; two, conveying that energy to the ground; three, dissipating that into the earth through the grounding system; four, bonding all those different connections into the grid; five, protecting those AC feeders; and then six, protecting the low voltage and data telecom circuits.

Today, for our two products, we'll be looking at Section 3 and Section 5 of our Six Point Plan. So the first product that we have up is our global earth pit new product launch. You might ask yourself, what is an earth pit? So earth pits also have a variety of different names. They're also known as grounding pits, inspection housings, inspection pits, inspection wells or inspection enclosures. And their purpose really is they are designed to be a designated enclosure built around an earthing electrode, most commonly a ground rod, copper plate or copper electrode which is then buried deep into the earth.

And what it does is it provides an easy access point to the ground grid for either doing any resistivity measurements or maintenance to the grid post construction. So you've got to come back every year and take resistivity tests to ensure your grounding grid is intact. This is your means to get into there.

So really, there's four key components to the earth pit system. One is the earthing electrode right here, as you can see. Number one, in this case, it is the ground rod into the earth. Number two is the backfilling of ground enhancement material. In our case, we would recommend GEM25A or our QF25 quickfill. And these compounds help to reduce the resistivity of the ground, right? And third is the earth pit itself, which is, like I said before, a designated enclosure with a surface mount pit with a removable cover to access the grid. And fourth is the wire connection from the grounding conductor onto the grounding electrode.

So to accommodate, there's a wide variety of different earth pits used basically depending on your load class, different variety. So ERICO offers a variety of different earth pits in different material types, different sizes, different load ratings.

And really, it's broken down into two classes. On the left, we've got our light-duty inspection housings. On the right, we've got -- we offer a series of different, more heavy-duty, with our highest rating being up to 22,500 pounds. And really, when it comes down to it, the type of earth that's going to be used on a project is typically selected to meet codes and standards of that municipality or it will be specified by the specifying engineer on the project.

So looking at our offering now, we identify that we're only maxing out at 22,500 pounds. So we need something a little beefier, a little more robust to service these markets. And with this, we have our new ERICO PIP400 series FRP earth pits.

So we offer them in two different designs, one with the through-hole version on top, as you can see, and the chamber or enclosed version on the bottom. But these have a load rating -- a Class C load rating of 33,000 pounds with the inspection with the FRP lid. And we offer two Class D ratings with up to 53,000 pounds with an FRP lid and now a metal lid. So the metal lid is kind of something unique, and it's something we haven't had in the ERICO offering, and we're really excited that we've got this ability to sell this now.

Some key features to look at on our new inspection housing. There's the locking mechanism. Typically, a lot of inspection housings don't, so you can get feeds going in there, cutting the copper out, cutting wires, right? We don't want to leave ourselves susceptible to that and having an ungrounded grounding grid.

So you see there's two points of contact here with this in a visual indication, whether it's locked or unlocked. So very easy to use and visually noticeable, right? Also with our -- with this new inspection housing, we have these T rod lifting handles. So a lot of times, other inspection housings, you'll pry it up with a pry bar and stick your fingers on the lid and try and pull it off, which -- that's not safe, right?

So with this system, you take these T bars, as you can see in the middle, insert them into the slots in the top, if you look to the right. And then you can easily lift that lid off and place it to the side without damaging it, without hurting yourself, hurting the property around you. So it's a very easy, simple design to ensure safety, right? And then we've also got the side knockout walls, as you can see at the bottom left. These are there for -- when you're putting your conductor into the inspection housing, these have the impression already into the housing, so you're able to drill up to a 3.5-inch diameter if needed.

And I mentioned the metal lids. So we offer FRP lids, you can see on the left in Class C and Class D ratings, and then our metal lid and Class D -- just the Class D rating. But the lids are -- they're a 1-piece design, they resist bowing. They're very -- they're a low-profile lid, so they're not sticking up out of the ground. So there's no tripping hazard.

They have the rubber gasket built into the top, as you can see in the middle picture. So it's going to be waterproof and dustproof with that. Anti-slip patterns on the lid as well. Last thing you want to do is have someone walking across the top of the lid and slip and fall, right? So these groups here, these bumps in the left bottom here provide that traction that we're looking for. And everything on the lid is marked with our nVent logo, our part number and size and all the applicable codes and standards that the product meets.

We also now have the option of risers. So if you're on a site where maybe the grade has changed, after you've done your grid and you need to add the riser, you can just buy the individual riser and stack it on to the existing inspection housing that you have on the site. So nothing special, but it does give you that flexibility. And these are waterproof, chemical-proof, UV-resistant. So a really good design, and they meet the standards that we need for these industries.

So just take a second to look at a quick install for anybody that hasn't seen how these go into the earth. And there's the backfill. Then in this case, it's the [ GEM material ] that will be installing the earth pit there, connecting the grounding electrodes to the ground rod. And there's those T lids I mentioned. And there's the locking mechanisms. So in all, a fairly easy installation to make.

So really, why the PIP400 series? Well, it's got those high load ratings that the industry has been asking for. FRP construction is very durable and corrosion-resistant. Tamper-proof locking systems, they're very easy to install and maintain. And you've got that flexible lid riser options. So you have the interchangeability on a site if something changes, really just one platform for multiple site requirements.

And with that, I will turn it over to Corey Johnson to speak about the next exciting launch.

Thank you, Dan. I am going to be talking this morning about the new whole-home surge device that we're announcing this morning for ERICO. Many of you may be aware that in 2020, NEC changed the code for surge to include residential dwellings, residential service units for single- and multi-dwelling homes. And the real key here is that with the NEC 2020, now surge is a requirement in the residential space. And you can see Type 1, Type 2, but you can see the requirements down below.

And so to take advantage of that, we wanted to bring to market a low-price surge device. And so we're going to be talking a little bit more specifically about the product. But before we do, let's just take a look at where the NEC code 2020 and later is in effect.

And so you can see in blue, states that are already using NEC 2020, and then states who have already then, of course, moved up to 2023. Any of the residential requirements in these states would require surge for new installations, but also for upgrades. So any additions to the service panel or any changes to the service panel would require surge be added in order to satisfy the code. So you can see the states.

And so to that, we are announcing this morning the new Surge Tracker, the newest addition to our Surge Tracker line. The part number will be ST1 or Surge Tracker 1, so ST1251S1 Alpha. You can see the codes, all of the specifications on the screen.

And again, I just want to stress that this device or this product is really positioned to help take advantage of really satisfying the NEC 2020 code and later. So anywhere that code is in effect, this is going to be a low-cost opportunity for us to get and take advantage of that requirement.

And so you say, well, what's low-cost? Low-cost is $35 in the stock price. A couple of requirements. You do have to buy 4 of these at a time or in multiples of 4, not to get into the weeds too much. But again, it is a product that I think is well positioned from a cost perspective to really help us take advantage of satisfying the NEC 2020 and later codes.

Just while we're here, I wanted to spend a little bit of time talking about our full residential offering. So as I mentioned, we've got and are announcing today the ST1251S1A, which is going to be at the entry level of our residential options. And then moving to the right on your screen, you would be getting either more protection, more features. And of course, as you go to the right on the screen, you're going to get not only more protection, but also, the in-stock price is going to go up a little bit. So $35 on the left up to around $200, I think, on the right.

I will note just one thing. As you get past the SES40P, all of these, so the ST2, the ST3 and the ST4s and the Surge Tracker line and then the SES160 all do give you some additional protection as it relates to lightning because there's filtration in those devices which the ST1 and the SES40P do not have.

And so again, I'm just really excited to bring the Surge Tracker 1 into the portfolio of our residential surge options. Again, really, the key here is we're targeting the NEC 2020 and later codes and just the ability to have an entry-level option for places where they need to satisfy that requirement.

And with that, I am going to say thank you. And I don't know if there are any questions in the chat, but let me stop sharing. All right. No questions in the chat that I can see. If there are any, feel free to put them in. If you do have any questions specifically about anything we shared today, feel free to reach out, and we're happy to answer any questions. Again, this morning, we targeted mainly our Areas 3 and 5 in the ERICO Plan of Protection.

And with that, I'm going to say thank you and sign off. So thank you for your time, and look forward to any questions you might have in the future.

Thank you all very much.

Okay. We'll go ahead and get started. Thank you all for coming to the nVent presentation. I'm Brian Drab, the industrial technology analyst at William Blair and the analyst covering nVent. Before we get started, I, of course, have to remind you that you can find a full list of disclosures on our website, williamblair.com.

Today, we're very happy to have with us CEO, Beth Wozniak, and Vice President of Investor Relations, Tony Riter. Thank you both for being here. I've covered nVent for a few years. And before that Pentair with -- where a lot of these businesses originated. When I covered Pentair, the electrical or electronics business, as they termed it, it was kind of like a 3% to 4% growth business in most years and not super exciting. If you fast forward to today, that was my opinion, right? I mean 3% to 4%, just -- it's all relative, right?

Because today, we just finished the first quarter where the company reported 34% organic revenue growth. There's exposure to data center, of course. They're providing critical electrical infrastructure, critical cooling technologies for data center. There's a lot going on in the utility industry as well. And they have an array of businesses that we probably don't talk about enough across industrial, infrastructure in general, commercial that are also great businesses. So we're very happy to have with us Beth Wozniak. I'll turn it over to you. Thank you.

All right. Good morning. I'm going to flip through these first couple of slides and start here. So it has been quite a journey for nVent. And as I think through the last couple of years, we've really gone through a portfolio transformation. And I say that because as we spun out of another company, we had to work to drive growth strategies and reposition the portfolio into higher growth verticals. And the big change that we made in the last year was one of our segments, our Thermal Management segment, we knew that it was not going to have the growth potential like the rest of our portfolio. So we sold off that piece of our segment and acquired 2 other companies that created this engineered building solutions platform.

And with that, we repositioned our portfolio into higher-growth areas, along with making organic investments in our liquid cooling and our other data center capabilities, and that really showed through our results. And over the course of the last several years, we have demonstrated very strong growth performance and value creation. And what is really great to see is we very intentionally, said we wanted to focus nVent on the high-growth infrastructure vertical. And infrastructure for us is data centers, it's power utilities, it's other electrical infrastructure, as you might imagine.

And I'll show you in this presentation that that's where we see the highest growth. And our exposure to that infrastructure vertical has grown significantly. So this year, we had a Capital Markets Day in which we shared updated targets, and I'll go through those again. But it is a meaningful step-up in those targets. And we're very confident in the growth levers that we have and our opportunities for margin expansion. So I'll go through the presentation and share with you our story.

So for those of you who don't know nVent, when we spun 8 years ago, we were about a $2 billion company. Last year, we finished at just under $4 billion, and that was about 30% growth. And we've always had nice margins and there's more room for expansion. We're a very strong cash generator. And the way we like to describe nVent is we focus on connection and protection. And those are very critical when it comes to what we do in the overall electrical industry. Our products are essential for the build-out of electrical infrastructure.

We have 2 segments, and we renamed those segments last year to Systems Protection and Electrical Connections. And the reason we did that is when we first spun, we talked a lot about our Enclosures business, but we are so much more than just an enclosure. So that's why we renamed it because today, we provide protection for data centers with liquid cooling. We provide protection for electrical substations for utilities. And it's not just the building. We have switch gear, we do relay control panels. So there's a lot of capability.

And our other segment is called Electrical Connections, where we have power connections, grounding, bonding, all critical elements. And as you see here, last year, infrastructure was about 45% of our portfolio. In Q1, it was over half the revenue coming from infrastructure. So the bet that we made to say we want to position the company there is really showing that growth potential. And while we have a strategy to be more global, we've done a lot of acquisitions that have been in North America and our growth in data centers and empower utilities keeps outperforming the growth that we're seeing in the rest of the world. But as we think about that, data center growth is going to take off around the world, and we're positioned to go after it. So that's who we are.

And when you look at our value propositions, the first value proposition for us is that we provide mission-critical solutions. We have innovated, which is how we came up with a word nVent when we first started, for decades to find solutions to support our customers' problems. We can meet all global and regulatory standards around the world. And I'll use the example here if you think about liquid cooling and what it does in a data center, it is ensuring that it's driving performance, but it also is providing energy efficiency.

And our liquid cooling solutions can provide a 45% improvement in this term called power usage efficiency, which is really how much power is being used to power the IT compute versus HVAC and all the other things that are in a data center. When it comes to resiliency and safety. That is our second value proposition. We have products that may be a low cost on the bill of material, but they provide outsized value. And if you think about an enclosure that is protecting an automation system that is driving millions upon millions of output in a factory, our enclosure is safeguarding those electronics from the environment from shock for safety reasons, and I can go on.

And it's that resiliency and safety that our customers depend upon us. And lastly, it's around customer productivity. Our electrical connections portfolio has innovated products for years following contractors around a job site to understand how to take labor out of the installation process. And this is really critical because if you think of the trends today, we have more electrical contractors that are retiring from the industry that are entering it. And time is money.

And these days, whether it's a data center or it's new industrial construction, ensuring that you can get on and up the job site in a safe and effective way, that is where our products come into play. So to step back about when we first spun, we are now 8 years old. We were, at that time, about a $2 billion revenue company, and we ended last year just under $4 billion. And that's with Thermal Management coming out and some other things coming in.

What I'm really proud of and our team are really proud of is the value creation. Our market cap when we started was around $4 billion, and we sit here today with our market cap around $28 billion. And we're not done. We are on a journey.

I mentioned that more of our growth is coming from infrastructure. I'll show you that how we see that growth outperforming other areas. New products have always been key to our strategy. And when we started as a company, our new product vitality, which is the measure of revenue from products that we generated in the last 5 years, it was low teens. It is 27% and new products are an engine for us to drive growth.

New products in the first quarter of this year were -- had an impact of about 20 points to our growth. It's those new products and those new liquid cooling solutions, for example, that are really propelling us. And then we've done about $1.5 billion in sales from acquisitions. And we've really gotten effective at being able to identify companies that align to our strategic view and integrate them and invest to scale them and grow. So it's been a good story for us, and we're excited about there's so much more to come.

This is the chart that shows the acquisitions that we've done over the course of our history. And I'll go through all the way to the right, where you see that we acquired Trachte that got us into -- we really wanted to get more into the utility space. And so we acquired Trachte to create this platform of engineered buildings. We then sold off our Thermal Management business and acquired EPG. And when we did this, we're very disciplined. So we've always acquired companies and had a very attractive multiple.

Well, what we didn't know is that when we replaced Thermal with Trachte and Electrical Products Group, that we would more than offset the EPS that we lost in selling off that segment. And that just speaks to our ability to drive the growth and execute.

So in 2025, you can see infrastructure became a larger part of our revenue. And I think one other important point for us is as we change the portfolio, our exposure between short cycle and long cycle became more balanced because we traditionally had been seen as a short-cycle business. And I think that's really important for us to have that balance. And so now we're sitting here with a record backlog of $2.6 billion, which is significant for us as a company.

I always like to go back to our strategy. And if you looked at any of our presentations in the early days, you would see it's remained fairly consistent. We have taken a portfolio of products and really said that we want to scale everything we do across the company, our go-to-market approach with our channel partners and our customers that we really unify those things.

We've grown with high-growth verticals, new products, M&A, and we've grown globally just not as much as those other areas. And what we're transforming is how do we drive a more unified employee experience, customer experience, and doing that through business process transformation with digital, data and AI.

And as we think about it, it's scaling what we do so we can go even faster. And a big focus for us is operational excellence and how do we accelerate that. What drives us are macro trends, and I know you're very familiar with these macro trends.

The first is AI infrastructure. As you know, there is $7 trillion of CapEx that's being invested in data centers. And it seems every day, we're hearing some of that increase. Where we play with liquid cooling, we see that growing faster than some of the other technologies in a data center. And so we've invested over the last couple of years in a whole new suite of modular scalable platforms, including CDUs, many of those products released this year.

And that will enable us not just to serve hyperscalers but other customers from enterprise and colo. When it comes to electrification, when we think about the grid and the need for power, not just for data centers, but everything electrifying. What has taken us 100 years to build out in terms of our grid today, we have to double that in the next 25. So that is a lot of electrical content. It's upgrading the grid, it's providing more capability. It's not just one-way flow, it's bidirectional with different energy sources. And creating that engineered building solutions platform for us really gave us a stronger position in utilities.

When it comes to industrialization, there's a lot around automation. There's a lot around manufacturing, and construction spend and our products play there very well. We've always been a strong performer in industrial and sustainability with all new energy sources all required, there is a conversion from those sources to electricity and our products play there as well. So we feel very well positioned with these macro trends. And this chart kind of puts that into light. You see across the bottom, those trends and where they play across the infrastructure vertical, and we've broken a couple of things out there as well as in industrial and commercial.

And I'll point out that we say our total opportunity at nVent is $130 billion. That's the space we play in. Of course, the electrical industry is well over $400 billion. But that is more than 2x our exposure to where we were when we started and you can see where we view the high growth being in data centers and in power utilities and other infrastructure. And we have migrated our portfolio so that we're more leaning towards higher growth in those areas.

So just to share how we think about the trends and how that's translated to the moves that we've made. When it comes to data centers, we play in both the white space and the gray space. Last year, our data center sales were $1 billion. When we started, we had less than $100 million of revenue. Most of our growth here has been organic.

We've invested in our capabilities in liquid cooling that even proceeded when we spun. One of the questions we would always be asked and we shared this fact here, which is the takeaway is that we see our opportunity to be about $1 million per megawatt opportunity.

And it's not just liquid cooling. It's with our smart power, our wire basket tray, it's with our power connections. And then we look at that gray space and see more opportunity there as well. White space is going to grow faster than gray space. And we believe liquid cooling has more longevity even once all the data center build-out is done because that IT compute hardware is going to continue to be refreshed. And the penetration of liquid cooling and data centers today is really low.

But on the gray space, as everyone is trying to maximize the compute area, they're moving power and other things outside. While our engineered building solutions are perfect for housing that switchgear or that other equipment, and we found that working with contractors, we're able to pull through a lot of our nVent portfolio. So we really see opportunity across this landscape.

When it comes to power utilities, this was a smaller area for us before we did these acquisitions, but it is growing significantly. We're well positioned in transmission and distribution and in particular, around substations. One of the opportunities that we have is to pull through all of our nVent portfolio in a substation, whether that's Enclosures, wire basket trays, power connections. The need for power is only increasing. And so our ability to provide safe solutions, and we have good positions with utility customers that are decades in the making, highly regulated. And we see this as long-term steady growth for us.

So we're very excited about the opportunity here for further penetration and long-term growth. I'll speak to industrial and commercial. In Industrial, we've always had a strong position here. And I'll share with you something interesting. Just like we think about liquid cooling and data centers, you need to cool the electronics inside an enclosure. And that's where we really started our capability.

This year, we're launching a whole new modernized energy efficient platform for cooling. Electronics just keep getting hotter and hotter. But when it comes to industrial, we have products that can meet any specification, outdoors, indoors, caustic environments, chemical manufacturing, and we're seeing nice growth there this year.

When it comes to commercial, that's an area where I'd say the macro is more challenging, but the content in a building is all becoming more electrical. You only have to stay in a new hotel these days and you see all the electrical connections that didn't exist.

It's frustrating when you go somewhere and you don't -- can't find a place to plug in all your devices. And our ability, again, to provide labor-saving solutions and innovate here has always allowed us to see growth in that commercial space. So both of these areas play to our core. When it comes to global growth, what was new for us last year is that we created our organization to focus on Europe and APAC. And that team are driving commercial excellence, customer market-backed capabilities.

We've expanded our sales team to go after data center growth, for example, and we have a great manufacturing footprint and our manufacturing products to serve some of those trends and those customers around data centers and power utilities. Along with that, I might add, we've really established capabilities in India as a center of excellence for us, whether it's engineering and simulation and modeling or digital capabilities and as we see data centers also grow in India, building off that capability and our manufacturing footprint is key for us.

So as I've said, we have grown nicely in those regions, just not as strong as we've seen that North America growth, but it is still a big opportunity for us.

When it comes to acquisitions, we have a very strong capability here. We have this framework, and it has played us well as we're very thoughtful about where we want to grow and why. And it starts with great products in high-growth verticals, but we have to understand how we differentiate and how we can invest and scale to grow. And we've done a great job because our deal models are based on cost synergies, but we drive those revenue synergies and that has allowed us to outperform.

Some of these businesses that we have acquired, we have 2x'd or 3x'd the revenue growth, and we have more that we can do here. When it comes to operational excellence, we recently added a new supply chain leader, and this is really critical. As we acquire new businesses, they may not have the same capability that we've had in our core business. We need to have safety first. We want to drive lean capabilities and then we can drive automation in digital, but there's a lot of opportunity here in terms of our margin levers.

We can get a lot better in terms of ensuring that we are more productive. I will say this, we focused a lot on our supply chain. You have to in order to ensure that you can deliver for whether it's utilities or data center customers.

And the last point I will make here is capacity expansion. We've expanded our liquid cooling capacity. We're in the second factory that we're expanding. We're expanding our engineered building solutions, manufacturing capability as well, and we're doing line expansion. So we're making investments for our growth. And it all comes together in what we call our Spark management system.

People. As we grow, we need to have people growing the company with us. And I'd like to say our culture is around performance, but people really matter. And so we want people to grow with nVent and grow their careers with us as we grow. Our engagement scores have shown continued improvements. When it comes to growth, there's a lot we're driving around customer and sales and a best-in-class customer experience.

We think about our sales and marketing organizations from the customer or market back with solutions, not just promoting a product. Through distribution, which is a big channel for us, our sales last year grew 14%. So it's a key focus area for us. I spoke about Lean. It's allowing us to increase our throughput. Digital is very key for us. We're using AI across the company in various phases to learn, but to allow us to be more productive because we're very busy. And then velocity. And this is key. We want to reduce our cycle times, we want to deliver faster. What took us years to launch a new product when we first started, the average new product at nVent is less than a year. And that's really important.

So these were our new -- our new midterm targets that we shared at our Investor Day. Some of them have doubled from the targets that we set a couple of years ago. And it's a reflection of the confidence that we have in our strategy and our ability to execute and the transformation that we've done. Our sales growth targets are 10% to 13%. That's up 6.5 points from the previous target. Acquisitions as we have the capability we've been doing larger acquisitions, so we think that can contribute 3 points of growth a year.

Margins at around 22%. Adjusted EPS, up significantly, 17% to 20%, and our free cash flow around 95%, and we are a really strong generator of cash, but right now, we're investing for growth. So significantly increased targets from where we were a couple of years ago, and our first quarter performance, we're certainly well on track.

So I want to close with the next 2 charts.

nVent. We like to say we're inventing the electrified future. We're positioned well with the core macro trends of sustainability, digitalization, electrification. We've transformed our portfolio. We have great products and brands. They are well known in our space. Our track record of performance has been good, and we know how to execute and are going to continue to drive all those levers.

There are tremendous growth opportunities for us, but we will remain very disciplined on knowing where we can go and execute and how we're positioned to win. And I think we're very disciplined and made smart decisions around our capital allocation, and we will continue to do so. So we're confident in our plans. We're confident in our ability to deliver shareholder value.

So I'll end on this as a summary. Our portfolio transformation to a more focused, higher growth electrical company is really driving our success. We're well positioned with the key macro trends. And we focus on that to ensure that we know where the opportunities are. Growth in infrastructure, data centers, power utilities, that is a priority for us, and we're going to continue to invest in new products and capitalize on our strengths there. And accelerating operational excellence is a key focus across the company because we need to be able to scale, grow, move with velocity and that will also allow us to improve our margin capability.

So I want to end on that and say thank you for your interest in nVent. We're excited for our future, and we always like to say our future is bright.

Thank you so much, Beth. That was great. We do have 3 minutes left in this room. So I thought maybe I'd start with one question for us. There's a lot of different directions we could go. But could you just talk about a little bit further about the data center product portfolio that you have and how you're winning there. It's, of course, becoming a more competitive space. But can you just talk about the need to have the capacity, the quality, the reputation, the relationships [indiscernible] that enable you to win.

Sure. Okay. So we do a lot in data centers from engineered buildings, power connection, power management, but I will talk about liquid cooling because it seems that's what everyone likes to talk about. We started doing liquid cooling in industrial and medical applications, and a hyperscaler found us well before we spun. And we started working on product capability, controls logic, systems and have over 2 megawatts of cooling deployed in the field, and we think that's significant compared to others.

And we've been launching a platform of modular products so that our CDUs can cover a wide range of power requirements at a rack level, at a row level, we provide manifolds. We have great lab capabilities. So one of the things that we're known for is that we're able to model and test how our products will work under different operating environments. We've designed our products to be hot swappable. So you don't need to pull down a data center that you can replace a pump or heat exchanger while it's still running.

And it's the experience that we have and the fact that we've invested to scale our capability and are doing that with velocity that has allowed our partners and customers to trust us and why we believe that we're winning. Our most recent facility, which is about 10 miles from where our main campus is. We opened that facility from signing the lease to production in about 100 working days. We have never moved that fast before, but our ability to build on that team and those core capabilities and then be up and running, that is how we are approaching the growth here. And I believe it's really that full suite of capabilities. And the fact that we know how to manufacture and manage our supply chain well because you do not want leaks in the data center, is one of the reasons we're well positioned to win and see continued growth here in this space.

Thanks very much. We're out of time in this room. Thanks, Beth. Thanks, Tony. We do have a breakout session in the Adler room if you want to continue the discussion there. Thank you very much.

Great. So we're going to get rolling in with nVent. Great pleasure to welcome back to the conference, Gary Corona, CFO of nVent. And we also have Tony Riter, Head of IR on stage as well. So Gary, thank you very much for being here. And I'll hand over to you for some opening remarks.

Yes. Thanks, Nigel. Thrilled to be here, actually, my second conference with you and the team. It's been an exciting year for nVent, tremendous growth acceleration that we've had as a company. Just for those of you who don't know nVent, we finished last year with a little over $4 billion in revenue and really finished the year with great growth. Organic growth over 10% and both sales, EPS and cash flow at 30% or higher. We finished up a great Q1 with revenue over 40% and organic over 30%, EPS at $0.60 and $1 of adjusted EPS for the quarter, which is the first time that we were able to do that.

Our strategy has been very consistent, which is about gaining exposure to more high-growth verticals, particularly the infrastructure vertical of data centers and power utilities. And we finished Q1 with over 55% exposure to that vertical. We've made a lot of progress reshaping the portfolio since our spin, where we were about $2 billion in revenue and industrial was by far our largest vertical and actually infrastructure, our smallest. That's completely flipped to where we were in the first quarter where we had infrastructure, like I said, over 55%.

We had an Investor Day where we essentially doubled our targets from an intermediate growth perspective after doing a great job of overdelivering what we said we were going to do in our last Capital Markets Day. So thrilled to be here. It's thrilled to have your interest in nVent, and I'll turn it over to Nigel for the Q&A.

Gary. So I think you just joined nVent last -- this time last year, you had just over a year in the job. So not a bad year to be CFO of, quite a year.

Yes, it's exciting. And when I joined, the team had visibility to this significant acceleration that was about to occur in the infrastructure vertical. And with our new exposure, we had divested our thermal management business and then acquired Trachte and Avail EPG have really reshaped the portfolio and got us more exposure to growth. So very exciting. We continue to invest to support that growth, not just for the short term, but also in the intermediate term. So thrilled to be part of the team and excited to have a chance to talk about it.

So when you think about the sustainability of this extraordinary growth, I mean, 20% -- more than 20% this year. You just put up a couple of 30% organic growth numbers. When you look at the pipelines or the negotiations or however you want to frame it, I mean, what gives you confidence that this sustains not just for this year but beyond?

Yes. So I'll start with the portfolio and the exposure. Exposure to the infrastructure vertical has given us more long-cycle exposure. But -- so now we're really balanced between the long and the short cycle, and we really like that. We finished the quarter with a $2.6 billion backlog. So we have nice visibility to the next 12 months. And as I think about the long term, we feel like a lot of these verticals have really nice long-term growth exposure.

Starting with power utilities, which we really got into with Trachte and Avail EPG, we see a multi-decade growth exposure there. In the data centers, we just keep seeing upward revisions. And it's also worth mentioning the mix that we have between the white space and the gray space in data centers where we really feel like that white space, which is approximately 80% of our portfolio has a long-term growth as not only we build new data centers, but we turn over the tech inside them, and that certainly leverages a lot of our portfolio. We supply both, but really feel good about that exposure.

You mentioned backlog of $2.6 billion. The Q says majority of that converts in the next 12 months. I mean, are we talking here about the vast majority of that nVent?

Yes. I would say the vast majority converts in the next 12 months. And that's -- we have some that's north of 12 months, primarily with our power utility customers. But -- but yes, we've got nice visibility to both the short and intermediate term. It's worth mentioning both in power utilities and data centers, we have nice discussions with all of our customers, not just about what's on the books, but what's to come.

And we talked at our -- at the Supercompute conference about our liquid cooling technology being future-proofed out to 2030. And we have that really by working with our -- working closely with our customers and ensuring that we have good visibility to those road maps.

Do you think about the growth, obviously, data solutions is driving the outsized growth. Power utilities is definitely part of that as well. But if you then sort of double-click into data solutions, would you call out liquid cooling or would you call out Avail as disproportionate drivers of that growth?

Yes, I would say in the quarter, as we said on the call, really almost all of our businesses exceeded our expectations. So really nice growth. Certainly, data centers is leading the way in both the gray space and the white space and the white space certainly anchored by liquid cooling, where we've seen tremendous performance.

Yes. Okay. You mentioned future-proof in the business. I want to come back on in a second. A couple of important things that happened this year. You've got the new facility in Blaine picking up. I think that went live, if I'm not mistaken, earlier this quarter. That seems to be releasing more capacity to sell. And then we've got the new lineup of products, the model kind of launching real time now. So I'm just wondering how should we think about the impact of those 2 items on order rates and maybe growth in the back half of this year?

Yes. So we're really excited about the new factory that we have up and running in Blaine. It opened. We cut the ribbon just a few weeks ago, but it's been producing product in the first quarter. That will continue to ramp throughout the year. And what we've estimated is that it will double our capacity on liquid cooling.

The team has done a great job going from signing the lease to getting up and running in around 100 days. So really a great effort there. From an innovation perspective, we showed a lot of new products at the Supercompute show. Those will really start to hit in the middle of this year as we ramp capacity, but there's tremendous interest in those products.

Okay. Would they be part of the order book for 1Q? Or is that more on the...

No, it's more on the horizon as we look to Q2 and Q3.

Okay. So doubling your liquid cooling capacity, that's quite a big number. I mean, we had estimate I don't know, $3 million, $4 million of capacity. I don't know if you can confirm or deny that. But would you expect to be sold out on that capacity by year-end? I mean, are we going to be in a situation where Blaine is sold out by year-end?

Yes. What I can say is that we continue to have discussions with customers, and they tell us that they would like more and they would like more faster. And I'm sure you're hearing that pretty broadly. As this builds out, certainly, we are already looking at what comes next and when we're ready to make those decisions, and we'll certainly let you know.

Okay. And then coming back to the point about future-proofing through 2030, I mean we're seeing, obviously, NVIDIA is a big gorilla in the market right now, but you've got Google with its TPUs and others. I mean, how well positioned is nVent across the different chip manufacturers?

Yes. And I'll start and maybe I'll ask Tony to pick up. And we work with all the chip manufacturers and a broad variety of customers. And many of them have very bespoke solutions and work with us very closely. And we're pleased with our partnership and certainly work with them to develop those solutions.

Yes. I mean as you think about -- go back to Supercompute in that portfolio, you even see how that kind of spreads across whether it's hyperscalers or the chip suppliers, right? You think of those 2 large CDUs, there's the Project Deschutes 5.0 CDU that's on the horizon. You saw that design at Supercompute in November, kind of that hallmark CDU that was next to it, part of that new portfolio, that's designed to support, as Gary mentioned, the additional chips, whether it's coming from NVIDIA, AMD out to 2030.

So really kind of having that breadth of that portfolio, both for the hyperscalers, but then also as you think of as it moves more and more into the neoclouds and the multi-tenants, we have a portfolio that supports them.

Okay. Feels to me like the 10% to 13% organic growth you put out in March for next year already feels a bit stale. Is that fair? Maybe after another Investor Day second half of this year.

Well, what I would say is that we were really excited to set those targets, a significant increase in trajectory for us as a company. And we're thrilled with the start that we're -- we've gotten off to both in the quarter as well as in 2026. Yes. So not just ready to set new targets here 8 weeks in.

I was half joking. And then the decision to disclose backlog on a quarterly basis, maybe just talk about that. Is that because the orders are so massive and lumpy. Is that because you want to refocus investors on backlog as opposed to order growth?

Yes. Really, it came 2 ways. One is the change in the portfolio and the change where we're much more long cycle than we were before. And our previous disclosure, we feel like wasn't giving a clear picture on what that looked like from a backlog perspective. So that's what we decided is to give visibility to that and work with the accounting experts, and that's where we landed.

Yes. No, I think that's great disclosure. First of all, any more questions on data solutions before we move on? Okay. You do have an industrial and commercial business. I'd be remiss if I didn't touch on that. I think you're guiding for commercial up low singles, industrial up mid-singles this year. How is that looking right now? I mean -- and I ask it in the context of there's concerns that maybe some of the strength that we saw in 1Q might have been prebuy activity, et cetera, et cetera. Maybe just touch on that as well.

Yes, sure. I'll start by saying we came into the year with a guide of mid-singles for industrial and low singles for commercial. We had a very good Q1, and we feel good about the performance of those businesses. And at the quarter, while we had a good Q1, we kept our guidance in line. But we feel really good about the performance of those businesses. They're not only -- I would say the execution from these teams has been solid, and we feel like that sell-in and sell-out was very much in line with expectations. So comfortable with that and feel like we're going to have a good year in those businesses.

Yes. So no concerns that we're seeing a weakening there. In the Middle East, we're getting a situation now where energy shortages are starting to become a bit more pronounced perhaps as a risk. Any concerns in, I don't know, Europe, Asia? I know those aren't big regions for you guys.

Yes, they're not big regions for us. In Europe, our business was up low single digits. Honestly, we have higher expectations for that region. But certainly, it was impacted modestly by what was going on in the region. Certainly, from a supply chain perspective, globally, our teams are working on a variety of challenges as they always are. And this is one of them that we feel like we can manage.

But certainly, it's not making it any easier for us to operate. I also talked a bit, you probably would go to inflation, but we did incorporate a higher expectation for fuel into our guidance. That, combined with copper brought us up just under 1 point for inflation for the year, and we're offsetting that with a bit of additional pricing.

Yes. I guess the other side of the growth ramp is that it does create some investment spending pressures, some margin pressures. Maybe just bring us up to speed in terms of where we are on overcoming the inflation, tariffs and some of that investment spending?

Yes. So as we came into the year, what we talked about is the first half would continue to have a bit more from a headwind perspective, primarily from inflation and tariffs. And the second half would be a little bit better. We'll continue to invest pretty consistently across the year to support our growth. The first half has our incrementals at about 20% and the second half will be around mid-20s, very much in line with our intermediate-term guidance. So we feel good about the growth and the returns that we're delivering on the business.

Okay. And then how does Blaine filter into the SP margins? Does that cause a little bit of pressure as you ramp it up and then you absorb some of that.

Yes, exactly. And that investment will pick up in the second quarter and then start to really contribute to SP. They had a great quarter in Q1 on margin, and that helped us balance out the overall margin performance for the firm. But Blaine will continue to ramp. We'll continue to invest, not just behind capacity, but also capability as we look to support what is now a very sizable business for us.

Yes. We get questions about the actual kind of the raw margins for the liquid cooling portfolio. And when we look at, say, I don't know, Boyd, you look at some of the other acquisitions we've seen out there, it seems that the margins are in the low to mid-20s for some of those comparable companies. Is that where you see the margins for your liquid cooling portfolio?

I think what we've said historically is that liquid cooling and our data center business is in line with segment averages for both segments.

Yes. So liquid cooling be similar to systems protection, including all the investments that we're making.

Okay. So on an EBITDA basis, that would be in line, yes. EC margins came under a bit of pressure, Gary, in 1Q. Maybe just talk about that and the -- you're guiding for a pretty sharp recovery, just confidence in that.

Yes. So we saw the inflation really pick up in EC, primarily driven by copper at the back half of the fourth quarter. That ramped in the beginning of the first quarter, and the team took action on price. And that pricing began to roll in towards the end of the first quarter. So we saw the margins really improve in EC as we got to the back half of the first quarter, and we expect those to bounce back to where EC has been traditionally in the high 20s in the balance of the year.

That's great. So price/cost in 2Q fairly neutral at this point?

Yes. We feel good about price cost for Q2 through Q4, as I said, a bit behind in EC and Q1. Pricing in aggregate in Q1 was higher than it was in Q4, and it continues to be at a healthy level.

Okay. Great. M&A, you guys have done a good job of -- with Trachte, Avail, others as well. How does the pipeline look at this point for future deals? And are we still going to be concentrated very much in that Data Solutions, Power Utility, Infrastructure segments?

M&A is a big part of capital allocation. As we talked about our capital allocation strategy at our Investor Day, we made it very clear that the first priority is growth, organic growth, and you're seeing that on the CapEx side from us. And then as we think about M&A, the team has done 8 deals and then in addition, the spin-off of the sale of Thermal Management and the team has been very disciplined in the acquisitions that we've made.

The last 2 have been nice chunky deals that have contributed really well from an accretion perspective, both from the top line as well as EPS, and we're very pleased with Trachte and Avail EPG. Again, the initial strategy there was to get us more exposure into power utility, a subvertical that we are really excited about and then had some data center exposure that kind of tops spin that growth and has helped us exceed expectations.

As we look forward, we've got a full pipeline. We'll continue to be very disciplined on M&A. Certainly, it's competitive, as you can see from what folks have announced. But we're pleased. We'll continue to be disciplined and expect that infrastructure will continue to be a focus.

Have you been surprised by the extent of deal flow amongst your competitors in the thermal management space?

Yes. What I would say is that as we think about these deals and fairly sizable deals in the space, it gives us confidence because of what we've been able to do organically. There's been a lot of interest in the space and a lot of very impressive companies and deep companies technologically that have decided to enter via M&A.

So we're not surprised. It's a very attractive space, one that we see multi-years of growth. So it doesn't surprise us that it's attractive. And we feel really good about the business that we've built over the past decade plus behind great technology, quality and our ability to scale.

And the trend has been power companies buying thermal management companies. So this consolidation across the sort of the whole kind of infrastructure spectrum within data center seems to be where the market is gravitating towards. Do you see that -- for nVent, do you think there's logic to being a much bigger player? Or can you pick your spots in the data center?

Yes. I mean I'll use your term. I haven't used it, but we like to focus on what we do best. And right now, that those are very discrete product lines that are differentiated technologically. And that's been our focus. We're not a big power company. That's not what nVent does.

And no ambitions to be a big power company.

That's not on the road map, certainly.

So when we think about the contours of future M&A, would past the prologue? Just think about like deals.

We like chunky deals that are accretive on the top and bottom line. So yes, we like the last couple of deals we've done. We like the size, and we like that vertical.

Yes. Free cash conversion, you're targeting 90% to 95% conversion this year, which given the growth rates would be pretty darn heroic, quite frankly. I mean -- so maybe talk about how you're managing working capital given the growth pressures.

Yes. I mean we delivered north of $100 million last year with tremendous growth, especially in the second half. Our CapEx will be elevated. And we're -- we -- cash flow was up certainly in the first quarter. So we feel good about cash and being efficient with our cash. It's a bit of a capital-light business for us. And so we'll -- the team has traditionally done a very nice job on cash conversion. We're focused on revenue, earnings and profit delivery as well as cash delivery.

Yes. And then CapEx has been stepping up progressively, I think, about $130 million this year. Does that continue to step higher next year? Or do you think we can maintain this kind of plateau?

Yes. I mean, we've continued to ramp CapEx as we've needed capacity. And while I'm not ready to talk about '27 and '28 CapEx, we certainly will continue to invest to support growth. And as a percent of sales, again, it's a pretty efficient capital structure from a CapEx investment perspective.

Yes. I've got a full room here. So I just want to make sure there's no questions from the -- yes, there's one in the back here. Can we get a mic to the back, please?

I was just wondering if you could talk a little bit -- I think on the Q1 call, you guys talked a little bit about European expansion potential as sort of data centers and things take off there. Maybe if you could just give a little more color around kind of the broad strokes of what you're thinking about Europe?

Yes, sure. The growth for us in data centers has been almost exclusively in North America, and there's been tremendous growth. However, going forward, we do see nice growth opportunity in Europe. And we're investing behind capability as well as capacity as we think about that market. So an attractive market that we expect to grow, but more in the future as North America has really driven our growth as a company here recently.

Good question. Anything else? One more, perhaps? No. Okay. One question we get a lot, Gary, is there's a lot of new entrants in the CDU market. The HVAC companies integrating towards the rack and there's some niche players there. Any concerns on competition of capacity in that market?

Yes. As I said earlier, it's an attractive market. And the attractive markets attract competitive entrants. For us, having been in the business for a long time, we feel good about our -- what we bring to the market from a capability perspective, quality, reliability as well as our scale. So it doesn't surprise us, and we're feeling pretty good about our position.

That's great. Well, Gary, I'll hand it back to you for closing remarks.

Yes. No, thank you, Nigel, and thanks for all of you in the room. We'll speak with many of you throughout the day. But we have tremendous momentum at nVent and excited about delivering growth on the top line, on the bottom line and through cash flow. And thanks for your interest. I look forward to talking more.

Thanks Gary. Thanks, Tony. That was a great discussion.

Thank you.

Good day, and welcome to the nVent Electric's First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead.

Thank you. and welcome to nVent's first quarter 2026 earnings call. On the call with me are Beth Wozniak, Chair and Chief Executive Officer; and Gary Corona, our Chief Financial Officer. Today, we'll provide details on our first quarter performance and outlook for the second quarter and an update to our full year outlook. All results referenced throughout this presentation are on a continuing operations 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 Investors section of nVent's website.

References to non-GAAP financials are reconciled in the appendix of the presentation. We'll 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 first quarter results and cover some key business highlights. We had a tremendous start to the year with record sales, orders and backlog exceeding our expectations. This was our third consecutive quarter with sales of more than $1 billion, both sales and EPS significantly exceeded our guidance, driven by strong sales growth in the infrastructure vertical led by data centers.

Our data center business grew across the portfolio in both the gray and white spaces. In the gray space, we had strong growth in engineered buildings, enclosures and power connections. In white space, we had outstanding growth in liquid cooling, along with strong growth in power distribution units and cable management. We are winning with a wide range of customers from hyperscalers to neo clouds and multi-tenants and also through our distribution partners.

Our investments in new products and capacity have been key to our ability to scale and respond on to customer demand. The tremendous growth in data centers was accomplished by our team working tirelessly to increase and expand capacity in our facilities and across our supply base. Earlier this week, we celebrated the opening of our new Blaine, Minnesota facility that started production in Q1.

We expect production to ramp throughout the year. In Q1, for total nVent, we had record orders in backlog. Organic orders were up approximately 40%, primarily driven by orders for the AI data center build-out, excluding data centers, organic orders grew mid-teens. In addition, we continue to see our backlog grow up low double digits sequentially to $2.6 billion, giving us visibility through the year.

Our free cash flow and balance sheet are strong and our disciplined capital allocation is focused on growth and returning cash to shareholders for continued value creation. We are raising our full year sales and EPS guidance to reflect our outstanding first quarter performance and significant momentum in data centers.

Now on to Slide 4 for a summary of our first quarter performance. Sales were up 53% and 34% organically, led by the infrastructure vertical. New products contributed over 20 points to our sales growth, and we launched 11 new products in the quarter. The EPG acquisition exceeded expectations growing sales, strong double digits year-over-year. Adjusted operating income grew 53% year-over-year, with return on sales of 20%, adjusted EPS grew 63%, and free cash flow grew 21% year-over-year.

Looking at our key verticals. Sales grew across all verticals. Infrastructure led the way with organic sales up nearly 80% driven by outstanding growth in data centers and double-digit growth in power utilities, both industrial and commercial resi grew mid-single digits.

Turning to organic sales by geography, the Americas led growing over 40%, Europe was up low single digits, while Asia Pacific was down. Looking ahead, we believe the infrastructure vertical has the highest growth opportunity with the trends of electrification, sustainability and digitalization. Infrastructure is expected to grow strong double digits this year, driven by AI data center CapEx acceleration. Our greatest growth opportunity within the infrastructure vertical is data centers.

Power Utilities is next with strong secular tailwinds as the demand for electrical grid capacity is increasing with electrification and the need for power for AI data centers. Our expectations for industrial and commercial resi remain the same. For industrial, we expect mid-single-digit growth with increasing CapEx investments, automation and reshoring, the commercial resi vertical is expected to grow low single digits.

Moving to Slide 5. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is showing up in our results. We have intentionally increased our exposure to the high-growth infrastructure vertical through both organic investments and M&A. Infrastructure made up 12% of sales at spin, expanding to 45% last year and now is over 55% in Q1. We have been significantly investing in our data center and power utilities businesses, which are rapidly growing and more capacity is needed to meet customer demand.

Overall, I am proud of our nVent team and how we continue to perform and deliver for our customers. We're on track for another strong year.

This wraps up my opening remarks. I will now turn the call over to Gary for further details on our first 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, orders, backlog and adjusted EPS.

Let's turn to Slide 6 to review our results. Sales of $1.242 billion were up 53% relative to last year. Organically, sales grew 34% well ahead of our guidance, driven by very strong data center sales. Acquisitions added $138 million to sales or 17 points to growth ahead of our guidance. Foreign exchange was a 2-point tailwind.

Adjusted operating income was $249 million, up 53%. Return on sales came in ahead of expectations at [indiscernible], flat to last year. Price plus productivity offset inflation of nearly $60 million including approximately $40 million in tariff impact. We also continue to make investments for growth in data centers and power utilities.

We had record earnings and it was the first time we reported quarterly adjusted EPS north of $1. Adjusted EPS grew 63% year-over-year to $1.09 well above the high end of our guidance range. We generated free cash flow of $54 million, up 21% year-over-year.

Now please turn to Slide 7, for a discussion on the first quarter segment performance. Starting with Systems Protection. Sales of $895 million increased 76%, acquisitions contributed 24 points of sales and have performed ahead of expectations. Organically, sales grew 50%, with all verticals growing. Infrastructure grew more than 100% largely due to continued strength in data centers. Industrial was up mid-single digits. Commercial resi grew in the high teens. Geographically, Americas grew by over 65%, while Europe was up low single digits. Asia Pacific was down in the quarter.

First quarter segment income was $203 million, up 95%. Return on sales of 22.7% increased 220 basis points year-over-year on strong volume and productivity.

Moving to Electrical Connections. Sales of $347 million increased 15%. Organic sales were up 8%, and the EPG acquisition contributed 6 points to sales. From a vertical perspective, infrastructure-led, growing in the high teens. Industrial grew mid-single digits and commercial resi was up low single digits. Geographically, all 3 regions grew. Sales were up high single digits in the Americas, Europe was up low single digits and Asia Pacific grew mid-single digits.

Segment income was $85 million, flat versus last year. Return on sales of 24.4% was down 390 basis points year-over-year. The margin performance was impacted by higher-than-expected raw material inflation. We have taken pricing and productivity actions and saw margins improve as the first quarter progressed. We expect margins to improve in Q2 and for the balance of the year.

Turning to the balance sheet and cash flow on Slide 8. We ended the quarter with $109 million of cash on hand and $600 million available on our revolver, putting us in a strong liquidity position. Our debt stands at $1.6 billion. Our healthy balance sheet and strong liquidity position gives us financial flexibility to support our disciplined capital allocation strategy.

Turning to Slide 9 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 investment, 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, and that 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 $130 million in CapEx, up 40%. We spent $36 million in Q1, up over 70% versus last year. Most of this increased investment is for new capacity to support growth in data centers, power utilities and supply chain resiliency.

In Q1, we returned $84 million to shareholders including share repurchases of $50 million, and we recently increased our quarterly dividend by 5%. We exited the quarter with net leverage of 1.5x well below our target range of 2 to 2.5x, providing ample flexibility to invest in growth and acquisitions. Overall, our disciplined capital allocation approach positions us to prioritize growth and create long-term shareholder value.

As Beth shared earlier, we are significantly raising our full year reported sales and adjusted EPS guidance, primarily due to our continued momentum in infrastructure. We now forecast reported sales growth of 26% to 28%. This includes expected higher organic growth, approximately 5 points from acquisitions and flattish on foreign exchange.

For organic sales growth, we now expect to grow 21% to 23% versus our prior guidance of 10% to 13% due to our strong first quarter performance and momentum in infrastructure. We are raising our full year adjusted EPS range to $4.45 to $4.55 versus our original guidance of $4 to $4.15. This new guidance continues to reflect tariff impacts of approximately $80 million. We continue to expect to offset the impact of inflation, including tariffs through pricing, supply chain productivity and operational mitigating actions. For free cash flow, we still expect conversion of 90% to 95%.

Looking at our second quarter outlook on Slide 11. We forecast reported sales of 28% to [ 30% ] with acquisitions contributing approximately 5 points to sales. Organic sales growth is expected to be up 23% to 25%. Pricing, coupled with productivity are expected to fully offset the impact of inflation, including tariffs in Q2. We also expect to continue to invest for growth, particularly in data centers and power utilities. We expect adjusted EPS to be between $1.12 and $1.15, which, at the midpoint, reflects over 30% growth relative to last year.

Wrapping up, I am very pleased with our first quarter performance. We delivered strong sales and earnings growth and are well positioned for another outstanding year. Through disciplined portfolio transformation and strong execution, our growth profile has meaningfully accelerated, we significantly raised our midterm financial targets at our Investor Day in March, and we are off to a great start. nVent is well positioned for the secular trends and electrification, digitalization and sustainability. We are confident in the growth and value creation opportunities ahead.

I will now turn the call back over to Beth.

Thank you, Gary. Please turn to Slide 12, titled our 2025 Sustainability Report. Last month, we published our latest sustainability report that outlines our commitment to sustainability and the meaningful progress we are making in our 3 pillars: people, products and planet. A few highlights from the report.

We achieved an employee satisfaction plus recommend score in our 2025 employee engagement survey that was 3 points above the global benchmark. 100% of our new products launched last year did not use single-use plastic packaging. We reduced our normalized CO2 emissions by 24%. We continue to receive accolades for our progress. We were recognized as one of the world's most ethical companies by Ethisphere for the third consecutive year and received a gold sustainability rating from EcoVadis placing us in the top 2% of our industry. Our sustainability efforts are key to our strategy and how we operate. I am proud of everything we've accomplished and the journey we are on.

Wrapping up on Slide 13. We are off to a tremendous start to the year with record sales, orders, backlog and adjusted EPS. Our portfolio transformation and the AI data center build-out are accelerating our growth. We expect another record year with strong sales and earnings growth. and 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.

[Operator Instructions] Our first question comes from Deane Dray with RBC Capital Markets.

Beth, I think you get the understatement of the year award for your analyst meeting just saying that quarter was tracking above initial expectations, but that's a pleasant surprise.

But I would love to hear -- would love to hear a bit more color in terms of what drove the outperformance. I mean in your prepared remarks, you gave us some real highlights regarding what was the white space, what was the gray space. It really did sound broad-based. But if we just kind of 0 in on what drove the outperformance this quarter, and that would be a good place to start.

Okay. Well, as we said, first of all, our growth was broad-based. We saw growth in all of our verticals and when it came to infrastructure, certainly, that was leading with the most growth. We saw nice growth in power utilities, but I would say a significant portion of our growth was coming from data centers.

As you know, we've continued to expand capacity for liquid cooling, but we also saw nice growth across the entire portfolio. I would say white space was leading stronger growth there. But continued growth as we focus on the gray space as well. So I think we are very pleased just to see that where we've been investing in new products and capacity that we've seen strong orders and have been able to execute to deliver on that growth.

All right. Really good to hear. And I want to follow up on the point on the new capacity adds. And you reaffirmed CapEx at $130 million, that's up 40% year-over-year. You just had orders up 40% organically. Just kind of take us through the time line for the new capacity that's coming online. And then when do you expect this new capacity to start to contribute to operating leverage for the firm? I'd love to hear that.

Okay. So as I commented, we had our grand opening of our Blaine facility just this week. However, it took us 100 working days to sign a lease to get that facility up and running. And we've been building our capability, bringing new operators, and we expect that production to ramp as we go through the course of the year. So a lot of the strength that you saw was our execution in our other plants, but this Blaine facility will be coming online and really ramping through the year.

And the next question comes from Joe Ritchie with Goldman Sachs.

Yes, echo what a start to the year. Maybe just on that last point, Beth, let's talk a little bit about like how you're thinking about capacity going forward. Clearly, the data center market, the whole infrastructure market is white hot. But how are you thinking about maybe even incremental investment from here? And then secondly, I don't know that I heard a specific number, but I think last quarter, you told us that infra is going to be up around 20% this year. Obviously, it seems like that number has been revised Upward. Any updated thoughts on what infrastructure is expected to grow in 2026?

Okay. So -- the way that we have our capacity -- and by the way, it's not just our new Blaine facility. We've expanded our capabilities globally to be able to support some of that data center product growth that we're seeing, liquid cooling and other. So we've been investing across multiple factories. We also have been investing in expanding some of our engineered building solutions sites because we've seen growth there from both data centers and utilities.

So we've expanded within existing sites as well. And what we continue to do is to look at that look at it as we're seeing we're winning more customers as we're launching new products. What do we view as that order acceleration or order growth and what we need to do to support that. So I think this is an area where we're going to continue to see that we make those investments for growth.

And as far as infrastructure, we gave that back in our Investor Day that our outlook on infrastructure was really strong and I think that's really what's playing out. And I look at it as our ability to expand capacity and execute and manage our supply base has really been a differentiator for us in terms of realizing that growth. And the teams are working really hard. It's a lot of work to be able to grow at these double-digit rates.

Yes. It's incredible to see. I guess maybe my second question, Gary, bringing you into the discussion. Just on margins, just talking through EFS for a second. I think you made a comment that sequentially as the year progresses, things should get better. Just help us understand like unpack the margin progression a little bit for that segment going forward.

Yes. Thanks, Joe. Appreciate it. And I'll start with our margins for nVent across the company were higher than we guided, that was driven by the strength of systems protection and leverage that more than offset the headwind that we saw in EC, where we saw higher-than-expected inflation, primarily due to copper. We took pricing and productivity actions, as I mentioned, leading to improved margins month-over-month throughout the quarter. And as I mentioned, we expect our margins to improve in Q2 and the balance of the year more towards historical levels that, that segment has delivered. And like I said, we're seeing proof of that in market and expect that to improve in the balance of the year.

The next question comes from Nigel Coe with Wolfe Research.

Yes. Not a bad start the year, I'll put it that way. Congratulations. So just on that last one, Gary, do you expect to be sort of flat margins by the end of the year and sort of getting there pretty progressively or how would you think about that?

Yes. We should see meaningful improvement in Q2, Nigel. And as I mentioned, we'll get towards more historical levels of margin in EC as we move throughout the year. Overall, as we mentioned in our initial guidance, we have those headwinds coming into the first half of the year on margin and will be essentially flattish for the first half versus a year ago. We'll see nice sequential improvement overall in Q2, but we'll have nice margin growth and healthy incrementals overall in the second half.

That's great to hear. And then just thinking about the framework, your 2Q guide, I think, embeds pretty flat sales with 1Q. And I think the sales are pretty flat actually also the year. Normally, we have a nice pickup in Q2, Q3 and then coming down in Q4.

So just wondering, is the Data Solutions business sort of flattening out the seasonality, because I would expect with the blame silty ramping up there would be some lift there. Just curious on what you're seeing there.

Yes. Thanks, Nigel. We have organic sales growth in Q2 23% to 25%. So all in, almost 30% growth for the quarter, we feel really good about the progression we're making on growth. And we start to ramp with higher comparisons as we get into Q2 and then in the back half of the year. Obviously, our historical seasonality has become a bit reshaped as our portfolio has changed. But we're excited about the growth that we'll post in Q2 and in the back half of the year, and you see that our meaningful guidance raise.

Next question comes from Julian Mitchell with Barclays.

Maybe I just wanted to circle back to the sort of the organic sales growth assumptions and help us understand, perhaps, first off, with that backlog of $2.6 billion at the end of March. How much visibility you now having into second half revenues? And has there been any change in kind of lead time or ordering patterns from customers. And on that revenue point, it looks like on a sort of a 2-year stack basis, you're just assuming maybe mid-30s organic sales growth year-on-year each quarter. Is that the right kind of framework?

Well, let me start with our backlog. So our backlog continues to grow sequentially. And as we look at our backlog, most of it is over a 12-month period, the majority of it. So that takes us into 2027. And our view there is just -- I'd say we're trying to ensure that we're being competitive on our lead times. Of course, we have to work with our supply base [indiscernible] as we're ramping, that's really a significant part of our efforts is to make sure that our supply base can ramp with us. But I think we're making good investments that are allowing us to there. And I'll let Gary talk to some of the [indiscernible] guidance and the organic growth numbers.

Yes, Julian, you've got it exactly right. We're looking at mid-30s 2-year stack growth pretty much throughout the year.

Okay. Great. And then just a follow-up on the margins. Is it fair to say that the operating margin expansion guide for the year is largely similar with what you said 3 months ago, so it's up maybe some tens of basis points total company. Just wanted to make sure I had that right. And within that, how much extra kind of cost inflation dollar headwind that you're now assuming with that extra price offset in turn?

Yes, I'll start with the margin. Yes, we're essentially in line with what we had guided previously, sort of mid-20s incrementals in the second half. And call it, 30, 40 basis points overall for the year and margin expansion. As we think about inflation, we have updated our expectations on inflation. We shared mid-single digits at the initial guide. It's up a little bit under a point of inflation, still mid-single digits. And we've taken action with additional pricing in the first quarter to offset that inflation.

The next question comes from Jeff Sprague with Vertical Research.

A couple for me. Just on Blaine, do these orders represent sort of filling the book for the year? I think you were holding off taking orders on a lot of those new products that you introduced, and the factory wasn't ready. So I know the sales need to ramp, but do the orders sort of reflect kind of booking the year out.

Well, I would say this. Some of our new products are launching in Q2 and Q3. And so we expect that as those products get launched, the orders will follow. So with respect to Blaine, we're currently building out for the orders that we have, but expanding our capabilities within that site for both new products and existing business that we have.

And then just thinking about systems protections, maybe structural margins, I think somebody tapped on around this a little bit, right? But you clearly would have had factory inefficiencies in the quarter. you also would have had more inflation than you expected in the quarter, right? It's not visible to the naked eye here given the volumes. But -- and there's just naturally factory inefficiencies and any startup. So should we be thinking about just structurally higher margins as we look forward for systems protection, understand the margin should probably ramp somewhat over the course of the year. But just thinking beyond that.

Yes, Jeff, a couple of things. The first is we were very pleased with the margin expansion that we saw in the quarter from systems protection. We will continue to see nice leverage, and we will also continue to see investment. And we'll continue to invest both in the capacity expansion, as Beth talked about. It was Blaine ramps throughout the year. And also in our capabilities, as I mentioned in my remarks. So I think we'll see margin expansion throughout the year for systems protection. But we will continue to invest to set us up for the future.

Great. And just a quick follow-up. Incremental tariff $80 million, what is the all-in tariff expectation for the year now?

So yes, incremental is $80 million this year followed from $90 million last year. So $170 million all in. There were worth mentioning the U.S. tariff environment remains highly fluid, and we did have a lot of puts and takes since we were last talking to you 90 days ago. But we landed essentially in the same spot with an $80 million headwind primarily in the first half of this year.

We had an unrelated CEO say the administration is open to talking about this and there are some discussions. Are you guys aware of that you see any possibility of tariff relief relative to your current position?

We've kept to our current outlook, and I guess we'll wait and see.

Great. Good luck. Awesome results.

Thank you.

Thank you.

And the next question comes from Vlad Bystricky with Citi.

Congrats on a nice quarter and nice start to the year. So I just wanted to ask you about the orders we're seeing here because I know you've talked in the past about how orders can be lumpy quarter-to-quarter. But my math is right, the orders have grown almost 40% a quarter on average over the past year, and you're seeing accelerating contributions from NPIs with more products to come. So can you talk about how you're thinking about the durability of this accelerated orders pace over the coming quarters?

Well, you are correct and that orders can be lumpy. And so they can vary certainly month to month. I think when you -- as we broke it out, we said our orders were still very strong when you exclude data centers. And so I think that's really great. When we look at the orders we're broad-based across all of our verticals outside of data centers. So that's good.

And then I would say, with data centers, they tend to be lumpy. But we believe, and this is part of why we took up our guidance is that the backlog and the current order book gives us visibility to a stronger growth year?

Got it. Appreciate that, Beth. And then maybe just Stepping back to capital allocation. You highlighted net leverage back down at the 1.5x, well below your longer-term target. So -- can you talk about what you're seeing in the M&A pipeline and how we should think about your operational capacity to potentially digest a meaningful acquisition even as you're still ramping production and still integrating prior acquisitions.

Well, as you know, at our Investor Day, which was just 6 weeks ago, it seems like a long time ago, but it was 6 weeks ago, we raised our outlook in terms of what we thought acquisitions or inorganic growth could contribute. And so that speaks to our confidence in our ability to do larger deals, and so we have a really robust pipeline. And consistent with how we've talked about infrastructure being the highest growth vertical, our focus is there. And we believe there's opportunity for M&A, we remain very disciplined. And then we certainly continue to develop our execution capability, and we're very thoughtful about the different targets that we go after and how they would integrate into invent and ensuring that we have the right teams and capability to do that.

The next question comes from Nicole DeBlase with Deutsche Bank.

And I'll add my congratulations on a great start to the year. So maybe just starting with a question on the order pipeline. The book-to-bill that we calculated is also really strong 1.2x this quarter. When you look at the pipeline of orders and the magnitude of customer conversations that you're having, what would you say about the strength of the pipeline and maybe the sustainability of that 1.2x book-to-bill ratio?

Well, here's what I would say. There's a couple of comments that I made is that some of the new products that we're working on the launch in Q2 and Q3, and we know we have a lot of customer interest. And I think as you look at the landscape, at least in data centers, we're seeing a wide range of customer interest from hyperscalers, neo cloud, multi-tenant . And I would comment that we're seeing strength through distribution as well. So really, that diversification and the breadth of customers there, we view as a real positive.

And then the second comment that I would make is we said, if you excluded data centers, organic orders grew in the mid-teens, and it was very, again, across all of our verticals and through distribution, which is a good indicator for us just that in different verticals that we're seeing momentum.

Got it. And then one thing on that point that really stood out to me in the prepared remarks was you said that within systems protection, com resi was up high teens in the quarter, which is a lot stronger than I would have expected. Can you just give us some color on what you guys are seeing in the com resi vertical and where that improvement is coming from?

Yes. So in both systems protection and electrical connections, we are seeing commercial resi growth. And I will say some of our products being sold through distribution is being sold to our contractor base, and it's sometimes hard to distinguish if that -- where exactly that's going. So it may be sold to a commercial contractor, and then it ends up in a data center, we may not necessarily know that. So I do think what you're seeing is some of our products, whether it's core enclosures or our power connections just with construction build-out that we're seeing more uplift there and stronger orders.

And the next question comes from Brian Drab with William Blair.

It was 6 weeks ago when you said you're expecting about 3 points of growth from new products. And then first quarter, I know it's 1 quarter, but 20 points of growth from new products is pretty incredible. And I'm just wondering if you can elaborate on like which categories are you seeing the most success in? Do you feel like you're taking share in some of these categories? And how do you expect that contribution from new products to be playing out throughout the year?

Yes. So we've continued to see strength in -- and it's a big focus for us, right, on driving new products, driving velocity through our new product pipeline and our new products that contributed to our growth, so strongly in Q1 were really related to data centers, right? So whether it was liquid cooling or some of our other offerings, that was the strong contributor.

Okay. And you can't comment more specifically on like new versions of the CDU or anything more specifically, Beth?

Well, I will say this. We've got new -- some new product -- let's see, back at supercomputing in the fall, we showcased a lot of our new products. And many of those new products are still to launch through this year. So we think we're going to have continued momentum there with some of these new offerings.

Okay. And then just in terms of your visibility, I know a moment ago, you mentioned backlog is going to take you into 2027. But can you talk about some of the projects that you're working with or talking to customers about whether it's hyperscale or co-locators. How far out are some of these projects going? We're hearing a lot of people in the industry saying you've got now 5-plus years of visibility. You're talking about projects for 2030. Any comments along those lines?

Well, I would say this with some of our key customers, we have a view to what their demands are for several years out. And so as we think about making investments in our capacity, and this could be for liquid cooling, it could be for our engineered building solutions and whether that's part of data centers or power utilities. We're getting a view several years out and we're staying very close to those customers to make sure that we're making the right investments for expansion as we go forward.

The next question comes from Jeff Hammond with KeyBanc Capital Markets.

This is David Tarantino on for Jeff. Could you give us an update on Trachte and EPG as it seems the modular being is playing out quite well here. So could you talk about what you're expecting here from a growth perspective? And maybe give us some color on how you're driving some margin improvement in the deals as well.

Okay. Well, I'll start, and I'll turn it over to Gary. With Trachte and EPG, as you know, we decided that, that was a great platform for us because it extended capabilities from closures and integration. And we really thought it was going to be a good way for us to strengthen what we do in utilities, and that continues to grow nicely.

But in addition to that, we have found that there are significant opportunities in data centers. And so whether it is for modular data centers, whether it is for the gray space. And so there, we're seeing a really nice pipeline of opportunity and have been looking at how do we expand across our current sites to be able to drive our throughput and see some of those opportunities.

And I'll let Gary talk to margins.

Yes. I'll just I'll just start by reminding folks, especially 1 year today that we closed on EPG. So they'll flip to organic here as we move through the second quarter.

And look, we're running the playbook on both Trachte and EPG, leveraging our scale to drive synergy. And as we've talked about, has exceeded our expectations, not just on the top line but on the bottom line as well. So we're focused on growth, but the margin expansion is impacting our results as well.

Okay. Great. And you highlighted orders outside of data center are quite strong as well. I guess how much was driven by our utilities? And are you starting to see some broadening out of the order growth outside of infrastructure.

Well, yes, I would say we had double-digit growth in power utilities from a sales standpoint. And so we've had nice orders there. And when we looked at our orders overall, they were up mid-teens. And I think we see strength through our distribution channel, which is really where we see that broad across all verticals.

All right, the next question here comes from Alexander Virgo with Evercore ISI.

I appreciate the opportunity to ask you a question. I wondered if I could dig into the order development for a little bit more color. I want to double check what you just said on power utilities up mid-teens?

And then just on DC, can you give us a sense of sort of splits or even if it's qualitative rather than quantitative in terms of liquid cooling versus others and sort of a sense of how much of -- it looks like it's about $1.5 billion in the quarter. How much of that is actually DC? That would be really helpful.

Well, as we mentioned on orders outside of data centers are orders grew mid-teens, and that was across commercial resi that was across infrastructure that was across industrial. So organic orders were up 40% with most of that -- so you could do the math there with most of that being from data centers.

And I will say this, as I mentioned, we've seen really good strength on liquid cooling, but we have with some of our other product lines as well. So I mentioned that we've seen strength in the gray space with engineered buildings, with enclosures and power connections. And we've also seen the white space very strong on liquid cooling, but also power distribution units and our cable management.

So when I mentioned data centers, very -- well, I'll leave it at that. I think that's probably good color for -- we're just seeing good order growth across the board.

The next question comes from Neal Burk with UBS.

I had a question on the competitive landscape. I know there are a lot of relatively new players in liquid cooling. I know you've talked about having the largest installed base in liquid pooling. But can you just talk about how you see this competitive environment evolving in due quarters like the one -- like the strong quarter you just reported, does that give you confidence that you're maintaining or even taking share in liquid cooling?

Well, as we've always stated, our liquid cooling capability, we've developed organically, and we started at pre data centers and industrial and medical applications. And so because we have been working in liquid cooling for a while. We think we have good application expertise, good modeling capability that we've got good field experience.

And so we're continuing to invest in new products and strengthen our portfolio as well as work with our supply base. And I think -- it's a -- the space is growing so significantly that it's not a surprise that there would be a lot more entrants into the space. But we have confidence in our strategy and our ability to continue to work with various partners from the chip manufacturers to the hyperscalers. And I mentioned all the other customers that we're working with that we have a good view and have worked road maps in some cases in some of our next CDUs to launch out to 2030 with some of the chip manufacturers.

So we're going to continue to invest, and we're going to continue to build on our portfolio. And what's really important is the ability to scale and deliver for customers. And so we're really focused on that as well.

The next question comes from Scott Graham with Seaport Research.

Beth, Gary and Tony, great quarter, just flat out. I wanted to ask about inflation a little bit more. I know you said ex tariffs inflation was $20 million. Obviously, we've seen commodities prices rise across the board. I'm just wondering, what was the run rate of that number at the end of the quarter?

And did -- if it was, in fact, a higher run rate, which I suspect it might have been are you still increasing prices to catch up to that?

Yes, Scott. So we did see elevated inflation in the quarter. And as I mentioned, like in an earlier question, we have raised our expectations for inflation a little under 1 point for the year. And it's really driven by fuel and copper. And we've taken actions in the quarter on pricing. And we feel like we can offset this emerging inflation with pricing and productivity for the year. So that's what we're seeing, and we have a playbook to do this, and we've taken action.

I wanted to maybe just ask you about a seldom discussed subject or so U.S.-centric, and you're doing so well on the state side. Electrification is a secular trend in Europe as well. I was just wondering if -- I know you're kind of capacity Max, maybe even People Max, but -- do you have plans to start to move into Europe more aggressively over the next couple of years to try to tap some of that opportunity?

Well, the answer to that is yes. And one of the changes that we made a year ago was to put in place a President for both Europe and Asia Pacific to ensure that we had to focus on our customers to ensure we had focus on growth opportunities, working with our channel partners. And as I mentioned, we had growth in Europe and one of the areas certainly that we see is electrification is both the growth and the need for power as well as data centers are expected to grow more globally.

And so we've been making some of those investments for manufacturing capacity in our plants as well as our commercial teams.

The next question comes from Austin Wang with GLJ Research.

Congratulations on a great quarter. I think if you back out the lion's share of the inorganic sales for the quarter, I think you can get to around like an incredible organic growth rate for the total infrastructure vertical that's kind of in the 80s just for 1Q. I know it's chunky. I know we're early in the year here, but like -- is it fair to think that both overall data centers and liquid cooling and power within data centers are growing around the overall growth rate for that as well. And maybe how do you want us thinking about those businesses growing this year as we head into more difficult comparison in the balance of the year?

Well, I would say, as you try and look at those different pieces. It is -- you are right. It is very strong growth. And certainly, liquid cooling is significantly growing, but I will share with you that we're seeing some of our other portfolios beyond liquid cooling growing at significant growth rates, both in the gray space and in the white space.

And so as we look to our backlog and we look to the orders, that's what gave us confidence to raise our guidance is that runway that we have and as we're adding capacity in new products, we have confident in what we're going to be able to execute through the back half of the year and set up for '27.

That's great. And do you think we could maybe get a handle on the size of that gray space business last year. I know some of the acquisitions make a little messy, but maybe just a percentage of overall sales.

Yes. What we said at Investor Day was 80% white space and 20% gray space.

Got it. And that's within the total data center business. Okay.

This concludes our question-and-answer session. I would like to turn the conference back over to Beth Wozniak for any closing remarks.

All right. Well, I want to end by saying today is May 1, which actually is our birthday today. So it's a great day for our employees to celebrate. But I want to thank everyone for joining us today. We're confident in our strategy, which has remained consistent, our ability to execute. We have many growth opportunities and multiple levers to expand margins.

And we significantly raised our midterm targets at our Investor Day to reflect these opportunities. I'm proud of our performance in the first quarter. We will continue to focus on delivering for our customers, employees and shareholders, nVent 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.

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

All right. Good morning. Welcome to nVent's 2026 Investor Day. I'm Tony Riter, Vice President of Investor Relations, and we're pleased to be with you here in New York to share more about nVent. About how nVent is inventing the electrified future.

As you can see, we have a full agenda today. We will kick off the meeting with a video, and then you'll hear from the team, followed by a Q&A session with live questions in the room.

As a reminder, 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 presentation and nVent's filing 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 from anticipated results.

With that, just a few notes before we get started. This is a hybrid meeting. So we are in-person in the room, but we also have people watching live on webcast. The press release issued this morning, along with the slides have been posted to our Investor Relations website.

So let's get started with the video, and then I'll turn it over to Beth.

[Presentation]

Good morning. Thank you. I'm excited to share with you our nVent story and how we are inventing the electrified future. At nVent, we connect and protect critical electrical systems, making us an essential player in the electrical industry. As the world electrifies and the technology shift to AI accelerates, we are well positioned to invent new solutions to meet the needs of the electric future.

Over the last two years, we have transformed our portfolio and became a more focused, higher-growth electrical company. This has been driving our success and demonstrated in our strong performance and value creation. Our transformation has resulted in infrastructure becoming our largest vertical, and this is where growth is accelerating, particularly in data centers and power utilities. We are confident in our strategy, which has remained consistent and our ability to execute. We have many growth opportunities and multiple levers to expand our margins. We've significantly raised our midterm targets since our last Investor Day to reflect our opportunity.

All of the team have been leading transformation and driving initiatives to improve performance. You can see here our leadership team, and you will hear today from Aravind, Sara, Brian and Gary. Our newest officer, Mellinda Devese, joined us this week, and she is going to help us accelerate operational excellence so we can grow, scale and drive operational efficiencies.

For those of you who don't know nVent, we are a leading electrical connection and protection company. And last year was a transformational year for us. We divested our Thermal Management business and integrated two new acquisitions, creating a new platform of engineered building solutions. We renamed our segments to Systems Protection and Electrical Connections to reflect the changes to our portfolio.

As a result of our actions, our sales accelerated throughout the year, and we ended at nearly $4 billion in revenue, which represented growth of 30% or 13% organically. Adjusted EPS grew even faster at 35%. We have attractive margins, and one of our hallmarks is that we generate strong free cash flow. We expect to continue to drive strong performance as we are aligned to the macro trends of electrification, digitalization and sustainability.

We have several key value propositions that matter to our customers. When you look at the nVent portfolio, our products and solutions are mission critical. For example, our liquid cooling portfolio is critical for AI data centers to ensure optimal performance with rising chip power and heat densities. Our liquid cooling solutions can provide up to 45% improvement in power usage efficiency, maximizing performance and driving energy efficiency. Similarly, with our power connections platform, be it surge protection, lightning protection or grounding and bonding, these are all mission-critical components in electrical system. Our ability to meet global standards and provide the best connection solution with our broad portfolio and application expertise uniquely positions us.

Our second value proposition is resiliency and safety. As you think about the uptime that is required for the electrical grid or even a factory automation system, it is essential to have reliable performance. We protect against the high cost of failure. For example, everything electronic or electrical needs to have an enclosure to protect it from the environment and for safety and security reasons. We can meet stringent standards and certifications to provide virtually any type of enclosure anywhere in the world. If you think about automation systems running millions of dollars of output in a factory, we're protecting that system with our enclosures, preventing downtime that can cost up to $1 million an hour. We're a small part of the bill of material, but we provide outsized value when it comes to protection.

And third, a critical value proposition is customer productivity. Our products are designed to reduce the labor cost of installation, improve utilization and reduce the total cost of ownership. For example, our cable management solutions can cut the installation time by up to 50% and reduce the total cost by up to 20%. We do this by spending time in the field, observing how contractors do their work. We innovate solutions to make it easier, removing steps and in some cases, the need for tools, resulting in saving time on the job site. Our solutions create value for our customers that they can rely on.

I'd like to tell our story since we became a public company on May 1, 2018. We are coming up on our eight-year anniversary, and we've grown significantly. Our market cap has grown from $4 billion to $18 billion. And we accomplished this by transforming our portfolio and executing on our strategy. We have focused on the high-growth infrastructure vertical, both organically and inorganically, which now represents 45% of our sales. We have grown with new products and innovation. Our new product vitality, which is the percentage of revenue from new products launched in the last five years, was 27%, up 7 percentage points since our last Investor Day. We scaled our business processes as one event and strengthened our commercial capabilities. And we've established a strong acquisition track record, completing over eight deals that have added $1.5 billion in sales. It's been quite a journey, and there's more to come.

Here, you can see the actions we have taken in our portfolio transformation. The divestiture of the Thermal Management business and the two most recent acquisitions of Trachte and Electrical Products Group have reshaped our portfolio and increased our presence in infrastructure. The infrastructure vertical, which was the smallest at spin is now the largest. Data centers now represent over $1 billion of sales. We also have significantly increased our long-cycle exposure with a backlog of $2.3 billion, 3x what it was before, and that's like a year ago. This has created more balance in our portfolio. And as a result of these moves, our addressable opportunity has significantly increased from $60 billion to $130 billion.

On this chart, you can see our stock performance since spin. What really stands out is how our transformation has accelerated our performance and created shareholder value. Our share appreciation has outperformed each of the benchmark metrics and even the S&P 500 and we expect to continue to create value for shareholders.

I always like to come back to our strategy because it has been very consistent driving growth and performance. We have executed well on this strategy, and we keep working on various components to drive performance and increase our capabilities. From scaling as what we do as One nVent, to focusing on growth in high-growth verticals, new products and innovation, global expansion and acquisitions to transforming our employee, customer and supplier experiences, all through improved business processes enabled by digital, data and AI; and finally, accelerating operational excellence. I will touch on a few of these elements as well as the rest of the team on how this drives growth and performance for nVent.

I'd like to share how we are positioning nVent to capitalize on key macro trends. We are in the midst of a significant technology shift with AI. It's expected that there will be trillions of dollars spent on data center infrastructure over the next several years. As part of this, liquid cooling, which is critical for the performance of the AI chips is expected to grow more than 35%. We are investing in a suite of new products like CDUs that are high performance, modular and scalable. We also are expanding manufacturing capacity and commercial capabilities globally to meet the growing demand. When it comes to electrification, the demand for power and the need for upgrading aging infrastructure is driving significant investments in power utilities. We established a leading engineered building solutions platform, increasing our capabilities from relay control panels to customized switchgear to integrated enclosures. With respect to industrialization, we continue to see investments being made in manufacturing construction, digitalization and automation. We are well positioned in the industrial vertical with our existing portfolio. Sustainability is a global trend that is going to continue given the need for expanded power sources, whether it be renewable energy or battery energy storage. We have numerous solutions that are part of our core portfolio ready to serve these applications. We are better positioned today with our portfolio transformation to benefit from these macro trends.

Here, you can see nVent's total opportunity across the verticals where we play and how we align to these macro trends. At spin, we viewed our total opportunity to be $60 billion, and it has significantly expanded. And today, we view our total opportunity to be $130 billion and growing high single digits. With our portfolio moves, the high-growth infrastructure vertical opportunity has increased fivefold with data centers growing double digits and power utilities growing mid-single digits. We have prioritized our investments here, and it is resulting in us becoming a higher growth company.

When it comes to infrastructure, our greatest exposure and growth opportunity is data centers. When we spun, this vertical represented less than $100 million of our sales. Today, it's $1 billion and the fastest-growing part of our portfolio, and we're well positioned to win. We play in both the gray and white space of the data center. We offer solutions from liquid cooling, smart power, cable management, power connections, engineered building solutions. Most of our revenue is in the white space, roughly 75% of sales. And the gray space makes up 25%. We estimate the total opportunity for our portfolio is approximately $1 million per megawatt.

In the white space, we're a leader in liquid cooling with over a decade of experience and have a proven ability to manufacture at scale. We work closely with hyperscalers and with chip manufacturers on new innovation to meet the higher demands for power and cooling. In addition, we spent the last year investing in a new modular portfolio and building a service capability to support customers as the need for liquid cooling solutions expands to multi-tenant and enterprise data centers.

In the gray space, we have expanded our engineered building solutions offerings from enclosures to integrated solutions and are seeing increasing opportunities to provide more of our nVent portfolio. To keep up with the tremendous growth, we're increasing our manufacturing capacity, expanding several engineered building solutions sites. We recently opened a new site in Blaine, Minnesota to approximately double our liquid cooling capacity by year-end. We expect data center growth to be strong for years to come and believe we are well positioned to win.

Now on to power utilities, which also has strong secular tailwinds as the demand for the electrical grid and capacity is increasing with electrification and the need for power for AI data centers. It has taken the last 100 years to build the grid we have today. And studies have shown we need to double that capacity in the next 25 years. We also need to upgrade an aging infrastructure with reliable electrical solutions and innovation. Our exposure to the power utility space is primarily in transmission and distribution, especially in substations. We're expanding our solutions by innovating new products, broadening our new engineered buildings solutions platform, including greater integration capabilities, and investing in additional capacity and operational excellence for growth. We also are focused on even closer partnerships with power utility customers and contractors, increasing the opportunity to provide more of our nVent portfolio. It's an exciting time for the electrical industry, and nVent is well positioned to be a part of this energy transition.

Turning to our other verticals. Industrial has always been an area where our portfolio has been strong with our core portfolio of enclosures and electrical connections. As industrial automation increases and factories become more digital, this creates more need for our products and solutions. For example, as new semiconductor plants or pharmaceutical plants or manufacturing plants are built, our products play a key role in industrial construction and automation. With our enclosure solutions, we're launching a new cooling portfolio to help ensure the electronics inside operate optimally as power densities and heat increase. Similar to what we see in data centers, the need for cooling is increasing. We provide more resilient and energy-efficient solutions. In commercial, electrification is driving more of our content for smart buildings, whether it's new construction or retrofits of existing buildings. We have many solutions to address the increased need for power and data in buildings. It requires more of our cable management, more power connections from surge to lightning to seismic protection, for example. We will continue to lead with innovation to find new solutions that address labor shortages and save time on the job site.

I want to switch from verticals to talk about a couple of other elements of our strategy, including global expansion. We've continued to grow nicely in EMEA and APAC. We are focused on building our commercial teams, products and manufacturing to support global growth. Last year, we named Robert van der Kolk to a newly created role as President of EMEA and Asia Pacific to oversee a new regional organization to focus on customers and drive further growth. We prioritized data centers and power utilities within the high-growth infrastructure vertical.

We are taking our highly successful One nVent commercial approach in North America and replicating it globally to focus on customers and distribution partners to win and drive further penetration in these geographies. In addition, we are further building out our global capabilities. In India, we've established an engineering center of excellence, where we are increasing our controls, modeling and simulation, capabilities for liquid cooling and power, for example. We also have invested in expanding our digital and AI capabilities in India. Finally, to support this strategy, we are investing in our global manufacturing and supply chain capabilities to support our customers in region.

Acquisitions have always been a key part of our growth strategy. We have a well-established acquisition framework or flywheel. In the connection and protection space, we're almost a $4 billion company playing in what is a $130 billion space. The electrical industry is highly fragmented, and that presents an opportunity. When we think about acquisitions, it starts with finding great products that are positioned in high-growth verticals that align with our focus on connection and protection.

Next, we determine how can we scale and grow. We think of scaling through our sales and distribution channels, through investments to globalize the portfolio or through investing in digital or manufacturing capability. If you look at the eight acquisitions that we've done since spin on the right, they have all provided us with great product portfolios. We've scaled these businesses, and they have accelerated our sales growth. In several cases, we have grown these portfolio sales by three or fourfold what they were when we bought them. Looking ahead, our pipeline is healthy. We've built a great integration capability that can deliver value, and we expect to continue to accelerate our growth through acquisitions.

One key element of our strategy is to accelerate operational excellence. It's critical to allow us to scale fast and grow. It's also important as we acquire and integrate new businesses. It first starts with safety. The safety and well-being of our employees is a top priority. We have a very good safety performance at nVent, and we strive to improve our safety record every year. Next, it is about lean enterprise, which is important in driving a continuous improvement mindset. We focus on end-to-end business processes and supply chain improvements to help us grow and increase our throughput. We always want to lean out our processes before we drive digital and automation, both critical elements to drive velocity and productivity. Next, driving an improved supplier experience is critical to having partners that can grow and scale with us as well as drive efficiencies. We've worked a lot on supply chain resiliency, which is very important. We aim to have strong regional supply chains to serve our customers globally. Finally, we have a lot of focus on capacity expansion, whether it's for some of our power connection product lines, expanding our plants for engineered building solutions or liquid cooling capacity for data centers. The addition of a new supply chain officer is expected to elevate our focus and execution on these areas to drive us to world-class performance.

Another area for us is our Spark management system, people, growth, lean, digital and velocity. These are core to the processes and capabilities we're building across nVent. We want to have the very best people at nVent, and we want them to grow their careers with us as we grow. We focus a lot on improving the employee experience, and we've seen an 8-point increase in our engagement scores since we started. On growth, we have built world-class industrial marketing and sales capabilities as One nVent. We grew 14% with our key distribution partners last year. A focus for us is to enhance our partnerships. For example, driving integrated marketing and activation plans. Our sales team are aligned to selling the full nVent portfolio, and our commercial teams are focused on providing a best-in-class customer experience. I already spoke to how lean is driving growth and productivity. It's helped us increase the throughput of our liquid cooling lines.

On digital, we are driving a platform approach to scale what we do across nVent and use data and AI, which Aravind will speak to. And finally, we are driving velocity in everything we do, be it lead times, response times to customer requests or reducing our new product introduction cycle time. The average time to launch a new product is now less than a year. It used to be more than two years at spin. Our Spark management system helps us drive performance and build a long-term competitive advantage.

Sustainability. We've made tremendous progress in our efforts over the last few years. We focus on three pillars: people, products and planet. In our people pillar, we're focusing on safety and employee engagement. These are important aspects of our employee experience, and we are committed to fostering a culture where all our people can thrive. In the products pillar, we're focusing on providing life cycle assessments and quantifying the environmental impacts of our products. This is something our global customers are asking for. We are also continuing our work using more environmentally friendly packaging.

And lastly, in our planet pillar, we're continuing to work to reduce greenhouse gas emissions and have added a more focused water goal to reduce water use in high-risk areas. By focusing on these initiatives, we can positively impact the communities where we operate. We've received numerous recognitions for our progress, and we continue to focus on our sustainability initiatives as a key part of our strategy. So, in summary, our portfolio transformation to become a more focused, higher-growth electrical company is driving our success. We are well positioned for growth with the trends of electrification, digitalization and sustainability. Growing in infrastructure is a top priority, particularly in data centers and power utilities. Accelerating operational excellence allows us to scale, grow and improve margins. Our future is bright.

And with that, I will turn it over to Aravind.

Thank you, Beth. Good morning, everyone. I'm Aravind Padmanabhan, nVent's Chief Technology Officer. I have a very unique role at nVent, where I oversee both our technology end-to-end from new product innovation to our broader digital transformation, including data and AI. I always say that AI is good for nVent from the outside and in. Our new products are helping build the AI infrastructure globally, and we are using the AI models and software running in these data centers to transform all parts of our business. My presentation today covers this along with an overview of our differentiated technology platforms and the work we are doing in our business process transformation initiative enabled by digital and data.

I'll start with new product innovation. We have a demonstrated track record over the past several years of new product innovation driving nVent's organic growth. When we spun as a company, sales generated from new products launched in the previous five years, what we call new product vitality was in the low teens. Three years ago, our new product vitality was 22%, and we set a long-term target of 25%. We exceeded that target last year, achieving 27%.

Our innovation engine is fueled by deep understanding of our customers' challenges. For example, our engineers spend significant time with contractors at job sites, observing how they work and the installation process. This helps them develop product designs that significantly reduce installation time. Another example is where we have engineers work directly with chip manufacturers and hyperscalers to understand their road maps and needs for liquid cooling. We are one of very few companies who are part of NVIDIA's partner network. This partnership enables us to embed nVent's liquid cooling technology directly into NVIDIA's reference architectures, making us a preferred plug-and-play design choice for liquid cooling for customers who are building AI data centers. And lastly, our deep engineering level partnerships with global OEMs and power utility customers help us develop solutions that meet their specific needs, whether it's stringent environmental specifications or helping them achieve their resiliency requirements. 80% of our revenue last year came from new products developed for the infrastructure vertical, including data centers and power utilities.

A key accomplishment when it comes to innovation velocity is that we have got product -- new product launch cycle time by 50% since spin, as Beth mentioned. This cycle time reduction was enabled by embedding agile methodologies in our new product introduction process by using modeling and simulation, leveraging AI in software development and scaling our India technology center. One of our key strategic capabilities is our network of global test labs that help accelerate the rapid certification of our solutions across multiple global standards, reducing time to market. Over the long term, we now expect new products to deliver 30% vitality and drive more than 3 points of sales growth annually and be accretive to nVent margins.

Moving to our platforms. We have six core technology platforms where we prioritize innovation and new product launches. Platforms give us scale and velocity. At its core, each platform is a set of modular and configurable building blocks that share a common architecture and have common interface designs. The platforms enable the launch of hundreds of differentiated products. Each platform can be used across multiple verticals. For example, products from our Power Connections platform enable solutions for data centers, renewable energy and industrial automation. Products from different -- from the various different platforms can also be integrated together to create larger solutions for verticals like data centers and power utilities. For example, the FleXbus product from our Power Connections platform can be integrated with an enclosure from equipment protection or an e-house from our engineered buildings platform to create system-level solutions for our customers.

We have expanded our India Technology Center as a core pillar of our globally integrated engineering network operating around the clock. The teams in India support our technology platforms. They specialize in advanced modeling, digital twin development, AI-enabled simulation, enabling us to evaluate complex system performance virtually before physical build. This simulation-first capability reduces prototyping cycles, improves first pass design quality and helps us reduce our overall innovation cycle time. Innovation within our technology platforms continues to be -- drive a significant portion of our organic growth. Last year, new product innovation contributed to 10 points of our sales growth.

I'll now explain in more detail how our technology platforms are differentiated. In cable management, we have over 70 years of experience developing time-saving, reliable and safe solutions for contractors. Our proprietary rapid prototyping process enables us to develop new designs from requirements rapidly. Our designs can enable tool-free installation, reduce time spent on ladders, enabling both a faster and a safer installation. Our equipment protection platform has one of the broadest ranges of enclosure products that can meet all specifications and global standards. For examples, our products can meet UL, NEMA and IEC standards. These products are designed for mission-critical environments like high heat, corrosive atmospheres and electrically demanding applications.

The breadth of our designs allows us to serve multiple verticals. In power connections, we offer a comprehensive portfolio of products spanning flexible power connectors, mechanical compression and exothermic connections and protection solutions like surge, grounding systems and lightning protection systems. These products can install faster, adapt to tight spaces. They have fewer terminations leading to higher reliability. Our solutions operate seamlessly above and below ground, indoors and outdoors, forming a complete cloud-to-ground protection system for our customers. Our new engineered buildings platform can meet multiple stringent structural, environmental and safety requirements. These requirements include seismic, ballistic and electromagnetic pulse protection.

We have a broad range of in-house designs from welded walls to interlocking panels and beam-based designs. The breadth of our designs, along with our integration capabilities, helps us develop solutions for a wide range of applications. In liquid cooling, we have well over 10 years of experience, a broad portfolio of products across the cooling continuum and deep end-to-end expertise. I'll talk in more depth about our differentiation in liquid cooling on the next slide. And lastly, on power management, our power distribution products are designed for AI scale power densities that demand increasingly higher currents. The network management controllers within these products are hot swappable, enabling maximum availability in a data center. We also have the highest outlet density in the industry, maximizing usable rack space in a data center.

Now let's look at what makes the underlying capabilities in our liquid cooling platform truly differentiated. We have one of the broadest offerings across the entire cooling continuum. This includes server racks with fans or air conditioners for air-cooled data centers, liquid-to-air or air-to-liquid heat exchangers and heat rejection units for hybrid air plus liquid cool data centers and all the way to the most complex liquid-to-liquid coolant distribution units for the highest power density AI data centers.

From a form factor perspective, these products can be designed for in-rack or in-row configuration depending on the customers' needs. Our CDU architecture is extendable to future higher power density AI chips and for AC and DC power topologies. Our CDU designs are built on a fundamental understanding of heat transfer, thermodynamics, fluid flow, enabling us to engineer products that deliver industry-leading performance and long-term reliability. We use advanced digital twin modeling to simulate the cooling loop before production. We optimize critical subsystems by evaluating hundreds of design variables rapidly. This allows us to refine efficiency, stability and reliability very early in the development cycle. We also simulate across a broad range of operating conditions, including variable loads and off-design scenarios, ensuring our products are engineered for the most complex deployments rather than just a single ideal design point.

Our deep technical expertise across the cooling architecture allows us to meet the most demanding pressure, flow and temperature specifications of various customers. Our newest CDU showcased at Supercompute 2025 and launching this year delivers enough cooling to support multiple racks in an AI data center, whereas competitors need multiple CDUs to achieve the same output. Our test labs, which meet both ASHRAE and UL testing requirements, provide both full system and component level performance and reliability testing across mechanical, electrical, thermal and environmental functions. We perform long-term life and reliability testing on complete systems and critical components to ensure our designs meet the high availability requirements in a data center. We are only one of a few companies that have such testing capability.

In summary, I want to say that our decade plus of real-world performance data drawn from thousands of installations across diverse operating conditions help continuously enhance our designs and give us insights that only long-term field experience can provide. This makes us unique in this industry.

As I mentioned at the beginning, AI is good for nVent outside and in. I want to now tell you a bit about how digital, data and AI are transforming our internal business operations. As part of our ongoing business process transformation initiative, we are standardizing key business processes across all major functions. We are also moving to standard cloud-based digital platforms. Over the past few years, we have put significant focus on improving data quality across the company. This is a key foundational element to create business insights and for scaling AI. In addition, we have centralized and unified the data from the various systems in our enterprise data platform, intelligence, that's intelligence without an eye. The analytics from the data provides real-time insights into our daily business operations. Having all our major digital platforms in the cloud has also helped us with integrating the acquisitions rapidly. We have a goal to onboard the acquired companies into our standard platforms in the first year and integrate their data. This has helped drive synergies.

Let me now share a few examples of where the transformation is already creating value for us. Our customer care teams have reduced query resolution times by 50% by automating key steps in the workflow and having end-to-end visibility of a customer. In addition, we are developing an AI agent that can collect data from internal systems and automatically create responses for the most common customer questions. This will create efficiencies and improve customer experience. Another example is in the pricing team in one of our businesses. They are using automation to achieve 40% improvement in pricing response time by eliminating manual processes. They are also deploying an AI-enabled analytics for price optimization and margin leak detection. The value from data and AI will scale as we expand and launch new capabilities across all our digital platforms and functions.

I'd like to wrap up with three key messages. First, new products in high-growth verticals continue to be a significant contributor to our organic growth. Second, our deep application expertise and technology leadership enables us to solve the most complex customer problems. Digital and data transformation continue to create business value and are laying a solid foundation for scaling AI. Thank you.

And with that, I'll turn it over to Sara.

Thank you, Aravind, and good morning, everyone. I am excited to be here with all of you today to walk you through our growth outlook and the drivers behind it. So let's jump right in.

When we last held Investor Day in 2023, our segment was known as Enclosures. Since then, we've evolved far beyond Enclosures and transformed into a systems-level solutions leader. And today, we are Systems Protection. Our record year results demonstrate not only the scale of that transformation, but also the significant runway ahead. In 2025, we delivered $2.6 billion of sales with 17% organic growth. Return on sales was over 20%, and we expect another great year in 2026. Our business mix has meaningfully shifted to higher growth verticals. Infrastructure, primarily data centers and power utilities now accounts for over 50% of our revenue. Systems Protection is a more resilient, higher-growth business with more integrated solutions. We have strong leadership positions, superior technical expertise and global scale. We are a trusted, innovative partner helping to protect, cool and power some of the world's most mission-critical infrastructure.

In Systems Protection, we deliver high-performance protection built on a strong legacy of reliability, innovation and resilience. First, we provide safe, reliable solutions for maximum uptime and lower total cost of ownership. From explosion proof to fire-resistant to temperature control, our solutions are engineered for the most demanding environments where reliability is paramount. Our deep application expertise enables us to design the right protection for our customers to deliver predictable, uninterrupted performance for mission-critical infrastructure.

We are technology leaders. We develop leading protection, cooling and power technologies to solve customers' toughest problems. Our integrated solutions span from end-to-end liquid cooling systems in the data center to control buildings in a substation to integrated cooling and enclosure systems in industrial facilities. Our solutions can scale globally with velocity. We specialize in modular, scalable systems designed for manufacturability, rapid deployment and serviceability. By pairing these trusted solutions with exceptional customer service and a global supply chain, we help our customers scale their operations faster.

Now let's turn to our largest growth accelerator, data centers. Our data center sales stand at over $800 million and have grown roughly 40% over the last three years, nearly 2x the industry growth rate. This outperformance reflects our leading positions in some of the fastest-growing areas with over 80% of Systems Protection sales in the white space. And as Beth mentioned, the white space in the data center houses the compute infrastructure, including racks, cooling and power. We believe the white space will continue to grow faster than the gray space. It is the highest value revenue-producing portion of the data center, and we expect a strong upgrade and replacement cycle as the technology continues to shift. And the demand for our products and solutions is tremendous. Liquid cooling is essential to address the unprecedented increase in chip power and heat density with AI. We solve our customers' toughest challenges with our continuum of liquid cooling solutions, our technical expertise and new products that are future-ready for that next generation of chips. This is our fastest-growing opportunity, and I'll expand on it shortly.

Our power distribution units are also growing at a faster pace than the industry as we expand our customer base and drive innovation. Our intelligent control platform and integrated power and cooling solutions are designed to enhance reliability, monitoring and operational efficiencies at the rack level. And we have expanded our Systems Protection portfolio with engineered buildings. These are highly customized modular structures designed for fast, easy installation. In the gray space, our e-houses protect backup power systems and critical switchgear, freeing up more data room square footage for computing. We're also seeing a growing demand in the white space with IT pods and modular data centers.

Now to meet this overall demand in data centers, we are rapidly scaling capacity, services and global presence. Over the last year, we have added more than 400,000 square feet of capacity across seven different sites. We are growing services and cooling from installation to preventative maintenance, aligned with our new products and the accelerating adoption in multi-tenant data centers and enterprise customers. And we are meaningfully investing in global sales and manufacturing capacity driven by increased AI readiness and sustainability requirements. We see years of strong data center growth ahead, extending beyond hyperscalers to multi-tenant, neo clouds and enterprise, growing services and new offerings with engineered buildings, expanding globally in Europe and APAC and leading technology and solutions with one of the best technical teams.

Now let's dive a little deeper into liquid cooling, one of the most significant growth drivers in our portfolio. nVent has held a clear leadership position here for more than a decade. Today, we are one of the few global players that provide complete liquid cooling architecture design from cooling distribution units to racks to manifolds. And the opportunity ahead of us is significant. We are in the early innings of the cooling technology shift in data centers driven by AI and high compute workloads. And just to put this into perspective, we estimate that only about 10% to 15% of data centers today utilize liquid cooling, which we expect to be over 30% by 2028. We see demand for liquid cooling growing 3x faster than traditional air.

Our established leadership and proven ability to scale make nVent uniquely positioned to capitalize on this technology shift. We have thousands of liquid to liquid coolant distribution units and over 2 gigawatts deployed with demonstrated performance and exceptional reliability. We are a liquid cooling expert and a trusted partner. Our team has over 300 years of liquid cooling expertise combined. Our scale and technical depth have made us a trusted partner to the world's leading data center operators and chip manufacturers like NVIDIA. What this does is it gives us early insight into future chip road maps, allowing us to design for that next generation of high-density compute. We deliver system-level, modular liquid cooling solutions that enable customers to scale while optimizing efficiency across the end-to-end cooling ecosystem with our cutting-edge lab. Our solutions are designed for easy serviceability and lower total cost of ownership for data center operators. And to support this explosive demand, we are scaling our supply chain and capacity with velocity.

From announcement to production, our new Blaine, Minnesota facility was operational in a little over 100 working days. We have increased our liquid cooling production capacity more than eightfold since mid-2023, and we plan to continue to expand capacity to meet growing demand. Our global manufacturing footprint and strong supply chain relationships are key differentiators for us. So with technology leadership, system-level solutions and proven performance, nVent is well positioned to lead the AI-driven shift to liquid cooling at a global scale.

So now let's shift gears and talk about another key part of our infrastructure vertical, power utilities. The strategic acquisitions of Trachte and EPG provide an exciting new platform for us in power utilities. We have moved from providing products and components to becoming a leading provider of integrated modular solutions, serving nearly all of the top 50 U.S. power utilities. Today, we not only protect but also control and distribute power across the grid and at a system level with our relay control buildings and customized switchgear.

Importantly, we can sell more of our nVent offerings, both in and outside of these integrated solutions, including more enclosures, more power connections and more cable management. We are well positioned with the megatrends, accelerating growth in power utilities with the explosive load growth driven by AI, data centers and electrification. And meanwhile, the aging grid is in critical need of upgrades to keep up with this demand. Our established relationships with major utilities have positioned us as a trusted partner to address these needs.

Our customers are facing a shortage of skilled labor and a mandate to add load capacity and modernize at record speed, driving demand for our engineered building solutions. These modular factory integrated buildings arrive on site, ready for fast connection, effectively moving complex engineering and construction work into our controlled manufacturing environment. This is the speed to power advantage that makes nVent a key partner.

We provide a breadth of offering within our engineered buildings platform, including stand-alone buildings, integrated buildings, relay control panels and customized switchgear. We provide ultimate flexibility and customization based on what our customers' needs are. We will accelerate growth with innovative design platforms, operational excellence and continued capacity expansion, and we are excited about our new growth platform in power utilities. As the transition to a more electrified and resilient grid accelerates, we believe we are well positioned to drive growth and expand margins.

So while we have spent much of our day today discussing our opportunity in the infrastructure vertical, industrial remains a core focus. We have a strong leadership position built on a long-standing legacy of quality and resiliency. Industrial represents approximately 40% of Systems Protection's revenue with growth driven by digitalization, automation and electrification trends. Anything that is electric or electronic needs to be protected with an enclosure. And we have a strong breadth of industrial solutions. We can meet virtually any specification, and we have a global presence. This enables us to meet our customers' needs. Today, we are one of the few providers capable of delivering one of the broadest portfolios that meet both NEMA standards in North America and IEC standards globally. Our IEC enclosures have grown more than 3x since our Eldon acquisition in 2019, and we continue to see significant runway. We have global product platforms that scale across many verticals with local manufacturing in all key geographies.

We are accelerating innovation in cooling solutions. Those same cooling trends in data centers apply to industrials. Higher electrical content, such as variable frequency drives, combined with rising power densities generate more heat requiring more advanced liquid cooling. This is driving more demand for our cooling solutions and a higher attachment rate with enclosures. Our integrated industrial enclosures plus cooling solutions help keep systems safe and resilient. We expect our new global cooling platform to launch later this year to help customers solve for increased heat loads, lower energy consumption and reduce CO2 emissions by over 50%, and similar to IEC, we believe our new global cooling platform will have years of runway of growth and margin expansion. Finally, best-in-class customer experience is key to winning in industrial. Fast, reliable lead times are essential to customers' project time lines, and we believe a key differentiator for us. We are making systems resilient with our breadth of offering, integrated solutions and deep application expertise.

So, to wrap things up, I'd like to leave you with three key messages for systems protection. First, we protect some of the world's most mission-critical infrastructure and serve some of the fastest-growing verticals, most notably data centers and power utilities. Second, we are winning. We are winning with our integrated systems and solutions, bringing together enclosures, cooling and power that scale across verticals. And third, we are solving customers' complex challenges with innovation and deep technical expertise from equipment protection to liquid cooling to engineered building solutions. We are technology leaders and trusted experts. Systems Protection is a more resilient, higher-growth business with integrated systems and solutions that are critical for electrification and digitalization. We are inventing the electrified future and have an exciting future ahead.

Thank you, and I will turn it over to Brian.

Thank you, Sara. Good morning, everyone. I'm Brian Coleman, President of Electrical Connections. I'm excited to meet you all and take you through a business that is benefiting from the same powerful trends that Beth mentioned.

In Electrical Connections, our solutions are focused on providing and protecting power when reliability matters most. And as electrification continues to grow, reliability matters today more than ever. Our business is grounded in trusted brands and has a long legacy of innovation. We win with differentiation, deep application expertise and long-standing customer relationships. In 2025, Electrical Connections had record sales of $1.3 billion and strong margins over 28%. And this success has been driven by our leadership position in cable management, where in the U.S., we believe we are the #1 provider, our broad power connections platform, which has expanded through innovation and our acquisition of ECM Industries and our deep application expertise with a global network of experts in the field working directly with our customers every day.

We hold a strong leadership position in commercial, and our growth has been fueled by our increased penetration in industrial and expanded efforts in infrastructure. We are extending the expertise that we've built in commercial to other verticals. Industrial and infrastructure applications need many of the same core products we provide at scale in commercial. And by applying a focused vertical go-to-market approach, infrastructure has grown to over 1/3 of our business and continues to accelerate. Electrical Connections is positioned to capture significant opportunity as electrification increases. We have application expertise that cuts across verticals, strong margins and a portfolio engineered for the reliability that mission-critical applications demand.

Our value proposition has always been built around the combination of productivity, resiliency and application expertise. And that has not changed and continues to drive our business forward. Labor productivity is a need from our customers across all verticals. Our products help reduce installation time and address skilled labor shortages through easy-to-install solutions that drive faster project completion at lower cost. We see this within our cable management platform, for example, where we have -- we can help customers save up to 50% in installation time and reduce their total install costs.

Resiliency is equally important. Customers cannot afford downtime in critical electrical systems, so they need trusted solutions they can rely on. And our products can reduce and improve terminations, eliminating failure points in critical power and electrical systems. Whether it's in power connections, grounding and surge protection or cable management, we have decades of experience providing solutions that contractors trust in the most demanding environments.

Our long-standing application expertise is a key differentiator for us as well. As projects grow in complexity due to increased electrification, customers need partners, not just products. And we are known in the industry for our engagement with our customers. Our engineers are around the world visiting job sites, talking directly to contractors, observing the insulation process and using those insights to innovate and deliver products that enable faster, safer and efficient operations. It's our understanding of our customers and how they do their work, combined with our decades of experience developing differentiated products that allows us to truly out-innovate our competition.

As we look ahead, infrastructure is expected to become a greater portion of our business, driven by accelerated demand in data centers and power utilities. And over the last three years, we've outperformed the industry growth rate, and we expect that trajectory to continue because we have differentiated solutions and are intentionally prioritizing R&D and commercialization investments towards infrastructure to scale quickly.

What gives us further confidence in our growth trajectory is our ability to take the expertise we developed in commercial and apply it to infrastructure. Whether it's a commercial building or a data center, the needs for time-saving and resilient solutions are similar. I'll share one example. Our history in commercial has helped us build a deep understanding of cable management, and we are applying that expertise to data centers. The value of our innovative wire basket tray WBT system for data centers mirrors our successful commercial applications. It reduces cable stress to protect data integrity with our patented Shape wire technology. It eliminates sharp edges to improve job site safety, and it can be quickly installed because of our differentiated tool-free splice solution. This ability to translate commercial expertise to infrastructure is driving significant growth. Our WBT product line is growing at rates comparable to liquid cooling, and we are expanding capacity, making the investments to capture these growth opportunities.

Lastly, we are focused on driving sales synergies between electrical connections and systems protection, particularly in our engineered building solutions. This gives us a great opportunity to offer complementary nVent solutions more broadly and accelerate our penetration, specifically in power utilities. We are well positioned for growth now and in the future as the industry expands. And alongside this evolution, we're focused on investing in scalable key growth platforms, one of which I'll highlight in more detail, the flexible power connections.

One of the most important shifts that's happening in infrastructure is the scale of power required by next-generation data centers. Driven by AI, hyperscalers are moving from facilities that consume tens or hundreds of megawatts to campuses that require a gigawatt of power or more. That's roughly the electricity demand of a small city. And supporting that scale requires more on-site energy, storage and backup. And to reduce grid strain and increase reliability, large campuses are deploying on-site generation, long-duration batteries, microgrids and advanced backup systems, all of which increase complexity and put pressure on site footprints. At the same time, distributed power sources and stored energy increases reliability requirements for electrical design, protection and control at these heightened power levels. This all creates opportunities for electrical connections as customers will need reliable, higher current and higher voltage interconnects and compact high-density power delivery systems that can meet this increasing requirements.

Our power connections platform offers key products to help meet these increasing demands. We have built over time a best-in-class solution set for nearly every type of power connection our customers may need, providing secure and dependable power both between and within electrical equipment, whether it's space savings interconnects between major power equipment or reliable connectors for cabling infrastructure. We offer unique patented designs that help make more reliable connections in less time. Our power connections platform is engineered for demanding use cases. and solutions in this platform are already rated for 800-volt DC and above and are ready to support the evolving power infrastructure.

A key product line within our power connections platform is our flexible connection solutions. These differentiated and easy-to-install products have already proven to be a growth engine and are expected to continue as we invest in innovation. Flexible power connections can drive greater than 50% labor savings. And in addition to the ease of use, customers value them for their ability to be used in tight spaces, enabling customization and optimized footprints. One of our data center customers shared that switching to our products help them save four days of installation time. And with the scale of data center projects, that is significant.

We see a $2 billion addressable opportunity for flexible connections, and we are increasing our capacity globally. In 2025, we expanded within North America, and we are currently scaling our high-speed line in Europe to facilitate significant growth. As infrastructure demands accelerate, growth will come from those who can deliver unique solutions that meet the needs of our customers. And I'm excited about our power connections platform as it is well aligned with the accelerating build-out of large-scale power infrastructure.

Now let's turn to commercial. As I said, we hold a leadership position in commercial with labor-saving solutions across a wide range of project types. For decades, we have been developing products that eliminate the use of tools. We've been providing complete electrical solutions for easy installation at job sites and reducing the time workers spend conducting slow, difficult and potentially unsafe overhead work. We have unique patented hangers, fasteners and clips for workers to quickly and safely assemble complex systems that are proven to reduce installation costs up to 20%.

We see further growth opportunities as smart buildings require more of our products. Customers are working with more data, more integrated systems and more distributed power than ever before. And we see this in both new construction and in retrofits as contractors take on projects to bring older buildings up to modern power and data standards. A modern hospital, for example, carries significantly higher data and power requirements now than even a few years ago. And this all creates opportunities for us as a leader in cable management. We see structured cabling growing 2x faster than the overall industry, which requires more of our products. And in addition, with the shortage of skilled labor, we have an opportunity to innovate alongside our customers as we always have, creating labor savings and putting more of our solutions into an increasingly electrified commercial landscape.

So, in closing, Electrical Connections is executing a focused strategy designed to deliver both growth and margin expansion, supported by electrification trends and our focus on infrastructure. We are prioritizing high-growth verticals where differentiated solutions matter and create the most value. And our growth is being driven by our ability to enable productivity and resiliency in mission-critical infrastructure and our application expertise allows us to accelerate innovation across verticals and help customers solve their most complex challenges. So, thank you.

And now I'll hand it off to Gary to talk about our updated financials.

Thank you, Brian, and thank you, everyone, that's here in New York, and thanks to those of you tuning in by webcast for joining us today. I'm Gary Corona, CFO of nVent, and I'm really excited to speak to you about our strong financial performance and our plans for continued growth and value creation. As you've heard from the team today, nVent is well positioned for the secular trends of electrification, digitalization and sustainability. Through disciplined portfolio transformation and strong execution, our growth profile has meaningfully accelerated. Since our last Investor Day in March of 2023, we have stepped up our growth trajectory and have met or exceeded every midterm target we set. That consistent overdelivery underscores the strength of our strategy and execution.

We have also expanded margins over the last few years and remain confident in our ability to continue to do so by balancing disciplined pricing and productivity across the organization. Our strong balance sheet and robust cash flow gives us the flexibility to invest in high-return organic opportunities, execute disciplined M&A and return capital to our shareholders while we manage our leverage prudently. As a result of this momentum and increased conviction in our outlook, we are significantly raising our midterm financial targets today and are confident in the growth and value creation opportunities ahead.

Over the past three years, we've grown sales from $2.3 billion to nearly $4 billion, representing a 19% CAGR. This step-up reflects sustained organic investment and disciplined portfolio transformation that has increased our exposure to the high-growth infrastructure vertical, now representing approximately 45% of our sales mix. Over the same period, our adjusted EPS CAGR was 27%, materially outpacing our revenue growth. This reflects our strong operating leverage, disciplined execution and M&A that has been meaningfully accretive to earnings. Importantly, we fully replaced the earnings impact of the Thermal Management divestiture in less than 12 months. Free cash flow CAGR was 34% with 99% conversion, driven by strong earnings growth and working capital improvements. This strong cash generation has enabled us to fund growth investments while paying down debt, preserving balance sheet flexibility to support future capital deployment and value creation.

I want to briefly revisit our performance versus the midterm targets that we set at our 2023 Investor Day. At that time, we outlined a financial framework calling for mid-single-digit organic growth, 1 point plus of revenue contribution for M&A with margin expansion to 20%, resulting in 8% to 10% EPS growth and strong cash conversion. Since then, we have significantly outperformed across nearly every dimension. Organic sales growth of 8% exceeded our targets. Acquisitions contributed 4 points net of the Thermal Management divestiture. Acquisitions alone contributed 11 points to sales growth. Our adjusted EPS CAGR was 27%, well ahead of revenue growth and margin expanded to approximately 20% even as we invested for growth. Absolute cash flow dollars significantly exceeded our expectations and conversion was essentially in line with target.

Through our disciplined portfolio transformation and organic growth acceleration, we have structurally reset nVent's financial algorithm and raised the baseline for future growth and returns.

We are building on our momentum by investing for growth in areas where we have the highest conviction. And most importantly, those investments are delivering strong returns. R&D investment has increased meaningfully and is translating to the innovation engine that Aravind discussed earlier. In 2025 alone, new products contributed approximately 10% to our sales growth, and we also expect it to be a meaningful driver of our growth going forward. By focusing on differentiated innovation, we are launching new products that are margin accretive. We have increased CapEx investments over the past three years to approximately 2.5% of sales to scale manufacturing capacity and support our growth.

Looking ahead to 2026, we plan to invest approximately $130 million in CapEx, primarily directed towards capacity expansion and new products in our high-growth verticals, particularly data centers and power utilities. In parallel, we continue to invest in our digital infrastructure and support growth and increase our productivity. We expanded margins over the last three years to approximately 20% despite meaningful headwinds, including inflation and tariffs, growth investments and short-term margin dilution from recent M&A.

Looking ahead, while some of these headwinds will persist, our focus remains to further expand margins without compromising investments needed to support our growth. We expect margins to improve by roughly 2 percentage points over the next three years reaching 22%. This is expected to be driven by disciplined pricing, margin-accretive new products and volume leverage from growth in our attractive end markets. In addition, we see clear opportunities to expand margins on our recent acquisitions through cost synergies and operational improvements. Trachte and EPG are good examples where we're applying our integration playbook, and we expect their margins to improve towards segment averages. In parallel, we are driving operational excellence to deliver productivity by applying lean principles, automation and simplification across our manufacturing and logistics network, improving efficiency throughput and scalability as we grow. Our margin structure is very healthy, and we're confident in our ability to continue to expand our margins.

Moving to working capital and free cash flow. 2025 was a record year for cash generation. We delivered $561 million of free cash flow, up 31% year-over-year and more than 130% since 2022. This acceleration is a direct result of our sustained focus on working capital efficiency. We have improved working capital performance even as the business has significantly accelerated. Importantly, these efficiencies are translating into free cash flow margin expansion. Since 2022, free cash flow margins have increased by more than 400 basis points, reflecting margin expansion and disciplined working capital management. Our asset-light model is central to this cash flow profile. Even with the targeted capacity expansions, including our new Blaine, Minnesota liquid cooling facility and investment for our recent acquisitions, CapEx remains approximately 2.5% of sales. This higher level of cash flow has enabled us to both reinvest in the business and return capital to shareholders, supporting dividend growth, share repurchases and a reduction in our net debt to EBITDA to 1.6x.

Let me turn to capital allocation and how we deploy capital to drive growth and sustain our financial outperformance. Our framework has been consistent for several years and is centered on disciplined growth investment, rigorous execution of our M&A strategy while maintaining the balance sheet flexibility to consistently return capital to shareholders. From 2023 to 2025, we deployed $5.3 billion of capital. About 60% was invested to accelerate our growth through CapEx and strategic acquisitions. The balance was returned to shareholders through dividends and share repurchases and paid down debt to strengthen our balance sheet. This disciplined approach to capital deployment has delivered attractive returns, as Beth showed you earlier, and we expect to continue to allocate capital in a similar manner going forward. Our capital allocation priority is growth, and that starts with reinvesting in the business by funding capacity expansion, innovation and the capabilities required to win in high-growth verticals. M&A remains a top priority.

As Beth noted, we apply a rigorous strategic and financial lens to every transaction with a clear requirement that acquisitions align with our strategy and deliver returns above our cost of capital within three years. We're committed to a competitive dividend, which has increased by approximately 20% since our March 2023 Investor Day, alongside share repurchases to offset dilution.

Finally, we remain disciplined in managing leverage and maintaining a strong balance sheet. As I mentioned, we ended 2025 with net leverage of 1.6x, well below our targeted range of 2 to 2.5x, providing ample flexibility to invest in growth and acquisitions. Overall, our disciplined capital allocation approach positions us to prioritize growth and create long-term shareholder value.

Our track record of disciplined capital deployment is well established. By focusing on the high-growth infrastructure vertical, we've improved our return on invested capital profile. In 2025, nVent delivered ROIC of approximately 13%, up from 2022 even after completing 4 acquisitions during that period that totaled nearly $3 billion. Excluding goodwill, ROIC is approximately 28%, highlighting the strength of our underlying margins and capital efficiency. Our ROIC reflects high-margin growth, disciplined pricing and productivity that more than offset inflation and a rigorous approach to deploying capital into high-return investments. Looking ahead, we expect continued strong returns on our growth investments with ROIC exceeding 15%, an additional 2-point improvement by 2028.

We are confident in the ability to continue to accelerate growth and returns. And today, we're pleased to share updated three-year targets that represent a meaningful step-up from our 2023 framework. We now expect organic sales growth of 10% to 13%, an increase of more than 6% versus our prior target at the midpoint, essentially more than doubling our expected growth. In addition, we expect the impact of acquisitions to be more than 3 points of sales annually, up from approximately 1 point previously as we pursue larger bolt-on acquisitions.

From a margin perspective, we're targeting approximately 2 points of expansion to around 22%, driven by continued sales growth, high-return organic investment and disciplined pricing and productivity across the organization. This operating performance translates into a significant step-up in our earnings power. We now expect adjusted EPS growth of 17% to 20%, over 9 points higher than our previous target, more than doubling our EPS growth expectations. Finally, on cash generation, we expect to convert approximately 95% of our earnings into free cash flow. This reflects increased capital investment to support our higher growth outlook while maintaining a disciplined working capital management. Taken together, we are confident in our ability to deliver these updated financial targets and capture the substantial value creation opportunities ahead.

To wrap up, the nVent growth story is defined by a clear track record of transformational and financial delivery well ahead of the commitments we made in 2023. Our portfolio is tightly aligned with the powerful secular tailwinds of electrification, digitalization and sustainability, positioning us to capitalize on these significant multiyear growth opportunities. At the same time, our disciplined capital allocation and strong cash generation gives us the ability to invest for growth while consistently delivering attractive returns to shareholders. We have a winning strategy, strong execution and a great team. That gives us the confidence to raise our financial targets and to create value as we help invent the electrified future.

With that, thank you for your time, and I'll turn it over to Tony for Q&A.

Okay. Great. We'll just take a few minutes to transition the room, get all the speakers up and then we'll jump right into Q&A.

Maybe a first question around the operating margins. I don't know if those are sort of trending as you thought. You had the commentary in the press release about first quarter running well. So, flesh that out, if you could. And on the margins, trying to understand how you're thinking about margins by segment for the medium term. You have the 22% goal. Do we see both segments expanding margins at a similar rate?

Gary?

Yes, happy to take that. And as you mentioned, Julian, we are expecting to expand margin over the period of time for our intermediate targets around 2 points. That's approximately mid-20s from an incremental perspective and very much aligned with the growth trajectory of the business, the investment we expect to make and the mix of business that we are planning to see in the next three years. Both segments have nice margin improvement plans, and we expect to expand margin in both segments.

The core of that is really driven by our productivity that's driven by operational excellence. As Beth talked about in her remarks, it's our focus on lean and automation. Pricing. We have a nice pricing capability that Aravind actually talked about in his comments and the leverage that we'll see with this elevated growth across the business.

Great. And then just secondly, the data center exposure, you have $1 billion of revenue. Any sense of the split of that of power management versus cooling management and kind of any thoughts around 800 volt, what does that mean for nVent opportunity?

When you look at our portfolio, certainly, liquid cooling would be the most significant in our revenue, and we haven't really broken out that split or updated. But across our entire portfolio, there's -- we give the fact that it's a $1 million per megawatt. So -- and we looked at that, and it's led by liquid cooling, but other areas from power to cable management to racks and servers are equally important there.

And sorry, Julian, what was the second part of your question?

Any thoughts around 800 volt?

800 volts. Yes. When you think about our portfolio, the first thing that 800 volts is going to do, it's going to require more cooling. So we think we're really well positioned because of our liquid cooling portfolio that is extendable in terms of whether it's rack or row and all the additional thermal management capabilities that we know our controls and system understanding is able to support. So we believe liquid cooling, we've got great capability there.

You heard us talk about Brian's power connections that are already rated to 800-volt DC. And so while we're not architecting the complete power solution there, a lot of our components are part of those system solutions. And so we believe that we're also well positioned there.

And I guess the other thing about 800-volt DC, there's still going to be a need for AC systems, and it's going to be a while. And I think you're going to see some of our solutions will evolve over time as those architectures come into play.

The 10% to 13% organic growth is pretty impressive. I'm just wondering if you could maybe break it out between some of the major growth drivers, perhaps data center, utility, what's underpinning that 10% to 13%?

And then maybe on the 2 gigawatts of liquid cooling shipments, I'm guessing about half of that occurred last year. Just wondering if you could maybe confirm that.

So there's a chart that we had in our presentation that showed how we thought about the overall industry growth. And of course, we want to outperform that. So when you look there, you'll see that data centers has the highest growth, followed by some of the areas like power utilities. And then we said that we expect more moderate growth when it comes to, say, industrial and commercial. So really, the way we think about our portfolio, we've repositioned it almost 50% now into infrastructure at those higher growth rates. So that's one.

And Sara, maybe you want to talk about the 2-megawatt deployed?

Yes. I mean I think the math is generally right. I think it was roughly two supercomputing ago where we were talking about greater than 1 gigawatt, right? And now it's over 2 gigawatts. So it's something that we're really excited about in terms of the -- I think it speaks to the technical expertise that we have, that proven reliability and quality and really excited about the future of liquid cooling as well.

Because, again, as we said, we estimate roughly 10% to 15% of today's data centers are liquid cooled. Even if you fast forward that to 2028, it's still roughly 30% plus. So a long runway of growth there for us.

And then on the M&A, obviously, M&A is going to be a really important part of the equation going forward. I think you said 3x to 4x scaling up of some of the revenues for the acquisitions you mentioned. Maybe just -- could you maybe talk about what kind of post-acquisition synergized EBITDA margin or whatever, however you want to talk about it, what kind of ROI have you earned on that capital deployment for the last three, four years?

Yes. So we have a very disciplined approach to how we evaluate each and every deal. We review them at 3, 6, 12 months versus our strategic priorities, but more importantly, our financial priorities as well. As you mentioned, all of them more recently have exceeded our expectations, especially on the top line, but also on the bottom line. Some of these businesses came into nVent with margins below our expectations and are well on the path to get back to segment expectations.

So, the returns, as we've talked about, are -- we target between two and three years, exceeding cost of capital, and all of the recent deals have met those expectations.

Thanks for the details. So can we talk a little bit about your modular offering? There's been a few companies recently that have booked some pretty big orders as it relates to e-houses or e-pods depending on what you want to call it. Talk to us a little bit about how your offering potentially compares to theirs and then what your opportunity is.

Okay. I'll start and then Sara or Aravind jump in. So recall, we built this platform by putting two acquisitions together, which gave us a breadth of capability. And when you look at these modular houses, whether it's utilities or whether it's for data centers, they all have different requirements. And we have capability to meet different construction types depending on what their preference is.

As we -- one of the things that we've done as we've acquired these acquisitions is we've applied our lean mentality, our lean enterprise flow so that we can get more volume in sort of -- as you think about a line and how it flows from end to end. And so that's increased our throughput. And as we acquired these two businesses, we really wanted to strengthen our position in power utilities. And what we saw was this significant opportunity for gray and white space. And so we're working on modular data centers. We're working on the gray space capability and various different types of solutions. And so that is growing significantly for us.

And I'll let you guys comment further.

Yes. I mean maybe just to add to it, I had a little bit of this in my prepared remarks, but the growth we're seeing in the data center space for e-houses, engineered buildings, these modular solutions is significant. And again, we're seeing it both in the white space and in the gray space. In the gray space, I mean, some of these data centers are so large that they have their own substation, right? And so thus, you have the relay control panel, the customized switchgear systems, if you will, or they're just trying to free up the data compute square footage. And so anything that they can push out and put into a stand-alone building or doing some of the integration capabilities in the building itself for that.

And then within the white space, I mean, it's all about speed to deployment. And so these IT pods, right, that can make it really easy in terms of dropping in kind of the aisle, if you will, or a modular data center that is going to be dropped in with the cooling and the IT equipment inside. And so I think there's multiple facets for growth here well beyond what is already a very important part of the business, and that is our power utilities engineered building solutions business as well.

Super helpful. And then maybe going back to one of Julian's questions, I think you guys glossed over. Back in the press release, you did say that Q1 was trending ahead of expectations. What did you mean by that? And if there's any update you can give on order trends, that would be helpful.

Well, we didn't really want to comment on the quarter. So we just wanted to indicate that the quarter was progressing well, and it is another point to show confidence in our conviction to the numbers that we presented today.

It's Deane Dray with RBC. And first, I just want to congratulate you on being able to host this Analyst Day. I know Mother Nature did its best to block you multiple times in multiple ways in travel. So congrats on getting to the finish line.

I wanted to ask about services. It just seems like there's an opportunity for you there and just where and how might that present itself? And then related to this, and Beth knows I've asked this before, but a really important part of the value add that nVent has is design engineering. It's not quite services, but it's such an important part of your product offering. And maybe it's a two-parter. For Gary, where services fit and for Beth, where and how? Can you just size for us this design engineering part that's so important to nVent?

Well, Deane, I'm actually going to have Sara talk about services, and I'll let Aravind talk about design engineering.

Okay. So, from a services perspective, actually, on the industrial cooling side, we've had services for a very long time. As it relates to liquid cooling, we sort of officially launched our services program last year, and that really lines up nicely with our new product innovation as well as the growth that we're seeing in that multi-tenant enterprise space, which typically lines up very nicely with those service needs. We're seeing some very positive early feedback from our customers.

When we think about services, that's not just the installation, but it's also the preventative maintenance. We would expect that service revenue to kind of build over time and for that to be margin accretive. So we continue to invest in those field application engineers as well as work with partners to be able to do that both in North America as well as globally.

Maybe one quick comment, Deane. We design -- when we don't just think about services after the product is launched, we design for services. So when we say modular platform architectures, these are qualified components, subcomponents systems that are reused across all our platforms. So that makes service procedures pretty standard for service technicians in the field so that every time they see an equipment of nVent, it looks familiar to them in terms of how to service. So when we say our platforms are modular, we design for service, we design for reliability and we design for maintenance in the field. So the engineering end of it captures service right from the design I would say.

Great. And just a quick follow-up. And Sara had this in her slide, but the move towards global standards in liquid cooling, I mean this has been a long time coming. It's a little bit of the Wild, Wild West in terms of spec sheets. But just what's the path? I think nVent is having a role in some of the design of these standards. But what are the implications and the time line?

I think on those standards, and we have people who sit on those standards boards and with Ah, there's liquid cooling standards to come out. We think that's a good thing because today, everyone can claim that they have a CDU, but you may not know for what specification. And so because we have always fully provided a spec that we have testing behind, we think having standards out there is going to be very important for the industry, just like we see in every other electrical component.

There are standards. And even though you meet a standard, which has a certain level of performance, there's still a lot of knowledge and capability into how that architecture or system works. So standards are good and they're important for the industry, but we still believe that our capabilities and technical expertise allows us to provide differentiated performance beyond the standards.

Nicole?

Just a follow-up on the financial framework with respect to M&A. Just to clarify, does the 22% margin target include M&A? I would assume that maybe you would have embedded some dilution, maybe not. I know that the EPS growth target doesn't. And then could you talk a little bit about the M&A priorities, like where you guys see the most opportunity?

You'll start, Gary, and I'll finish.

Yes. I'll say that the margin forecast does not include M&A nor did the EPS, as you mentioned.

So we have this acquisition framework, and it's worked very well for us. And we say it's a great. We want to find a great new product capability, something where we can see that we can really differentiate there because we say no to a lot of things. And we've prioritized infrastructure. So if you've seen the last couple of deals that we've done in the utility space, and we think as much as we can find great products that add to what we do around protection and connection that it becomes a really good fit for us. And then key is our ability to be able to scale it, invest and scale and differentiate.

Okay. Got it. And then one thing was interesting to me in Sara's commentary, Sara, you talked about how you see a faster replacement cycle in the white space versus the gray, which makes a ton of sense, all the innovation that's happening in the white space. Is it possible at this point to get a sense of what that replacement cycle looks like in terms of years? Or is it too early?

I think it's too early just in terms of where we're at in that liquid cooling cycle. But when you think about the pace of the chip technology and how that's working, I do think that's going to be a positive trajectory for liquid cooling in terms of keeping up with that chip design.

So I think you've got a couple of different vectors there that are driving the growth. You've got the AI infrastructure build-out. You've got the chip technology that's requiring more and more liquid cooling. And then you've got the global growth aspect as well. So I think that replacement cycle is yet to be sort of, I think, defined exactly what that is, but we believe that, that upgrade and replacement cycle is going to be positive, along with services, which is, again, ahead of us from an event perspective, both from a top line as well as from a margin perspective.

Jeff?

Jeff Hammond, KeyBanc Capital Markets. I want to come back to Engineered Building Solutions. One, maybe talk about where you've seen the most success pulling through equipment to date and where you see the most opportunity going forward where it's less mature. And then you keep mentioning like significant growth, but maybe what's the industry growth rate you see for that engineered building materials space? And then the last one, just split between data center and utility today for that business.

I'll start. Sara, you can add on, if you like. So one of the things when you look inside some of those engineered buildings, and again, some of them have been specified or driven by utilities, but we look and see that there are products in there that are very much things that we do, enclosures, power connections, wire basket tray. And so this is all content as we look at future engineered buildings and new specifications, how we're able to pull in and provide more of what we do in our core portfolio.

I think the other thing I would say is with our customer set that we had in data centers, we've been able to then say, we now have engineered buildings that we can provide to support the growth of the white space. And so that's also been very synergistic. So there's just a lot of opportunities here. And I think we've always said that the engineered building side has similar growth rates to utilities. But now as you think about the data center side, we're just seeing that accelerate like we're seeing the whole AI build-out.

Yes. And maybe the only thing I would add, I think, Jeff, on your question you asked in terms of just mix. I mean, I would say today, the majority of that Engineered Building Solutions is power utilities, but the data center piece of that is rapidly growing. So, again, two great growth vectors there, those power utility space customers and the penetration opportunities we have across the nVent portfolio. I visited a power utility customer last year, and there was a Trachte control building, an EPG, switchgear house, a Hoffman control panel. And then you can begin to ask around what other opportunities do we have to be able to service that power utility customer. So it's both on the power utility side and on the data center side.

Neal Burk, UBS. Regarding the $25 billion opportunity in the data center market, I mean this industry is evolving and growing extremely fast. Like how do you gain comfort around that $25 billion target? Is that kind of a top-down number based on like the amount of capacity being added? Or is this sort of a bottom-up based on what you see in the pipeline today?

When we look at the sizing of those industries, we look at all opportunities for the types of products and solutions that we offer. So they tend to be very big numbers. And then we look at -- so is it a large space? Do we have the ability to win and what is our growth potential? And clearly, that pie keeps getting bigger and our growth rate keeps -- there's significant opportunity there.

So, as we presented that, we -- to be able to service that, we're investing in capacity. And a lot of times, we're getting good visibility because we're working with hyperscalers, we're launching new products. We've got a good pipeline of opportunity, and that gives us the confidence in when we're expanding capacity because usually, the question we get is how soon can you ramp up or provide us these products?

Vlad?

Vlad Bystricky from Citigroup. you mentioned briefly your global growth and expansion focus. So can you talk a little bit about, as we think about this three-year outlook, should we think about growth opportunities internationally as being more organically focused or whether that could be an area for M&A as well?

I think it's both. And a lot of the acquisitions that we've done lately have been more North American-based. And so that's why I made the point to say we've still grown very nicely outside of North America. Certainly, as we see the growth in data centers that is expanding around the world, we see that as a huge opportunity for us. So we wanted to have a team just focused on regional growth, applying some of the same playbooks that we were successful in North America. So that's the new regional structure that we have. So a big focus on organic, but there are opportunities for us inorganically. So it has to fit within our framework, and we look to see, again, what makes good sense for us. So there is opportunity both to grow organically, inorganically.

And Vlad, one point I may add is, as Beth mentioned in her prepared remarks, Robert leading that region is bringing the One nVent approach to that market. And we see opportunity to expand margins in that market as well. as we drive scale and as we leverage our scale in the market.

Great. And then just -- maybe this one is for Gary. In sort of a more volatile inflation environment and tariff environment and as you've added more backlog-driven revenue to the business, can you just talk about how you're thinking about price/cost dynamics in the outlook and how you're sort of protecting yourselves in this volatile environment?

Yes. A few moving pieces for sure on the tariff side, as you mentioned, with the IEEPA decision with 122, it's worth mentioning 232 metals are the primary tariff impact for us, and there hasn't been a change there. And obviously, there are some other moving pieces. We'll be together in about six weeks, and we'll lay out more clarity for you on what we're seeing from an inflation perspective. Coming into the year, we estimated about mid-single digits all in, including tariffs.

From a price/cost perspective, as we've mentioned before, a big chunk of our business is with our distributor partners that as long as we give them a good timing that we've had success and this team has had success over time, delivering the price increases that we need to cover inflation. And then we work with our direct partners very closely to manage that.

Okay. Scott?

Well done. I do have a couple of questions. One, a bit of a drill down further on M&A. So if we look at the target, which is now 1 point higher than it was, on a much larger sales base with a focus on the infrastructure side. It suggests a pretty good line of sight on that 3%. Could you kind of unbundle that for us a little bit, tell us -- you guys don't put out numbers without doing your homework. So what does that entail? What are the areas you're potentially looking in, particularly now with asset prices on the data solutions side a little bit higher than they used to be. So maybe you can comment on that. And then I have a short follow-up.

Yes. I think the first point I would make is when we were a -- when we started early in our journey, we had prioritized doing smaller deals because we wanted to ensure that we were good at integration and execution. And then as you've seen, our last several deals have been larger. So in some cases, I think it's signaling the confidence that we have in doing larger deals that we can execute our playbook and ensure that we're driving both top line growth as well as the synergies. So it's a nod to that, that we're very confident in our playbook for larger deals.

The second comment that I would have is if you look at our track record, I think we've had very good deals that we've done at very attractive valuations because we are very disciplined. And there's a significant pipeline. As I mentioned, we're a $4 billion company approximately in a $130 billion space. So that just speaks to the fragmentation of the industry. So we're looking at opportunities that add to this protect and connect space, can be larger bolt-on deals, and we'll remain -- we'll ensure that we're disciplined in terms of the valuations that we see and how we can drive growth and margins.

Okay. So you do feel good about that 3% being able to achieve that.

Okay. Then I want to do a subset of that and say the power utilities sales that you have now are greatly aided by a couple of acquisitions you've made. It seems like there's still, particularly with the TAM that you have put in have provided a significant opportunity to do acquisitions in the power market, the team complex is extraordinarily complex. So I was wondering what you would want to buy in power that could maybe extend your range? Or are there areas that you're doing really well in that maybe you would like to double down in. Any comments on what the power M&A opportunity looks like, if you would?

I think my comment would be that we think that the power utility space, there's a good opportunity. And if it fits just like these engineered buildings were really an extension of what we did with Enclosures. We look to find things that build upon our capabilities where we really can drive a leadership position and trying not to be in already existing crowded spaces. So I think there's plenty of opportunity, and I'll leave it at that.

Justin?

Justin Clare with ROTH Capital Partners. So in the presentation, you mentioned $1 million per megawatt opportunity that you see. I was wondering if you could just speak to how that number has been trending, where you see it going ahead? Where could it be in the 2028 time frame? And maybe just speak to some of the levers that you have to expand the content that you're delivering into data centers.

So that is a new number that we provided because we were always asked that question and never had shared it before. And we spent some time really looking at all aspects of our portfolio. Look, I think it can increase over time as with everything. Certainly, for us, liquid cooling. And as you hear about more of these higher power, higher heat load densities, we just think that's going to continue to grow significantly. But as you heard Brian say, all the other things we do from cable management is also a core contributor. So I think over time, that can increase, but this is the first time that we've shared that number.

Okay. Great. And then maybe just on liquid cooling, the numbers you presented, I think, 35% annual market growth. Wondering if you see the potential to grow in line with that level, potentially above that level and what you've kind of embedded in those 2028 targets for the liquid cooling growth?

When we -- some of those charts, we always like to show what we see as the industry growth rate. And so we said it's at 35%. If you look at what Sara had shared on her systems protection growth, I think it was 50% over the last couple of years. So we always want to grow because of our differentiation and performance and customers -- we always want to grow ahead of those targets.

Any last questions? Joe?

Thanks to round two. So going back to the white space, right? You've seen some of your competitors come out with modular offerings, both on the power and thermal side, so whether it's Vertiv, now Eaton acquiring Boyd, Schneider with Motivair. I'm just curious, like when you talk to your customers, how important is it for you guys to get maybe more content on the power space to continue to be relevant going forward?

I've often made this comment that as we've been in liquid cooling, and we get questions about you have to have a broader portfolio. When it comes to the cooling architecture, we have a very broad portfolio. And I often say, no one has ever said, oh, you're not in HVAC, so how can you provide liquid cooling? I mean it just -- we never get that question. I think what really matters right now is that you've got reliable solutions that you can deploy and scale quickly.

The biggest things that we are asked is, do we have the technical capability with higher heat loads and power densities, can you perform at higher levels and higher complexities of the system? And how fast can you provide those solutions? So I would say to that, Joe, we feel very good about the breadth of our cooling portfolio. We have some powered capability. But I think at this point for us, it's really about ensuring we can meet the needs around those unique solutions. And that's really what our customers are counting on us for.

Great. And then just one last follow-up. So yesterday, there was a headline on Google being in talks with Envicool. We haven't really seen much of a threat from Chinese competitors here in the U.S. I'm just curious, what's your take on the potential competitive environment getting tougher? Or is this more of kind of like a local-for-local type opportunity for Google in Asia?

I'll comment and then Sara, maybe you want to add. The demand for liquid cooling right now is so significant, and we always think the pie is just getting bigger and bigger that I think just as we're ramping as quickly as we can, 100 days to open a new plant is kind of unheard of for our arts to do that. I think you're seeing that companies are just looking for more and more suppliers to fill the demand. And I do think there are some regional plays as well going on.

Yes. I mean I would say similar, right, tremendous demand. And then the emerging sort of global growth aspect of this. I mean a lot of this growth has been North America. I think as we look at our portfolio and importantly, the conversations with our customers, I mean, our North America footprint and then the global capacity that we have is really valued, number one. And number two, I would say, back to what Beth mentioned earlier, they're really counting on us with that decade plus of experience to come in design, make and commission.

And I think that's an important part, especially when it comes to the multi-tenant, the neo clouds, the enterprise that maybe don't have some of the engineering horsepower that some of the hyperscaler customers have. And so I think with a decade of experience, a lot of our customers value the North America base with that global footprint flexibility, coupled with that proven experience, we believe we're well positioned for the future.

Maybe one last question, Nigel.

Just wanted to follow up on the HVAC question. I mean you're definitely seeing a bit of a trend towards closing the loop from chiller to rack. And so just wondering your views on how important that part of the cooling equation is. And then maybe just talk about cold plates because there were some argue that cold plates integration is also important as well. So just maybe just comment on those two items.

So we talk about the technology cooling system that is in the white space, right, versus all the other cooling, facility cooling, and that's where we play. And we think there's system knowledge and cooling architectures that we know very well. And that's very distinctive than facility cooling systems. So understandable, everyone wants to get into liquid cooling in the white space because it's growing so significantly, and we feel very good about our strategy and our breadth of opportunity.

And then what -- Nigel, the second part of that question?

Cold plates.

Cold plates. Okay. We've always said that we are agnostic to whether it is a cold plate or immersion because we can work with any of those solutions. And what's really important in that cooling system architecture is the cooling distribution unit. And we provide way more than that because we have all the manifolds and the disconnects and everything, and we can provide PDUs. So different customers have -- some have their own cold plates, some are counting on others. there's other technologies out there. We're really agnostic to that. And for us, it's about the rest of that architecture.

Okay. Great. That concludes our Q&A portion. Thank you very much for your interest in nVent, and that concludes the program. Thank you.

Good day, and welcome to the nVent Electric Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead.

Thank you and welcome to nVent's Fourth Quarter 2025 Earnings Call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer; and Gary Corona, our Chief Financial Officer. Today will provide details on our fourth quarter and full year performance and 2026 outlook. All results referenced to [indiscernible] presentation on our continuing operation basis unless otherwise noted.

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 Investors section of nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for questions after prepared remarks. With that, please turn to Slide 3, and I will now turn the call over to Beth.

Thank you, Tony, and good morning, everyone. It's great to be with you today to share our outstanding fourth quarter and full year results. 2025 was a record year for sales, EPS and free cash flow, each growing at or above 30%.

Through 2025, organic sales accelerated, resulting in consecutive record sales quarters. It was an important year as we transformed our portfolio with the divestiture of the Thermal Management business and the acquisition of EPG. These strategic moves increased our exposure to the high-growth infrastructure vertical. Infrastructure now makes up 45% of our annual sales with data center sales representing approximately $1 billion in 2025.

Fourth quarter was our second consecutive quarter with sales of more than $1 billion. Both sales and EPS exceeded our guidance. We also had strong orders and backlog growth. Organic orders were up approximately 30%, primarily driven by large orders for the AI data center buildout.

Excluding data centers, organic orders grew low double digits. With the strong orders, we ended the year with $2.3 billion in backlog, triple what it was a year ago. Our free cash flow was very strong in the quarter and our balance sheet is healthy. In 2026, we expect another year of record performance. Our full year guidance includes reported sales growth of 15% to 18% and adjusted EPS growth of 20% to 24%.

Now on to Slide 4 for a more detailed summary of our Q4 and full year performance. Fourth quarter sales were up 42% and 24% organically, led by the infrastructure vertical. Adjusted operating income grew 33% year-over-year with return on sales of 19.7%. Adjusted EPS grew 53%, and we generated $189 million in free cash flow, up 26%. Looking at our key verticals. Infrastructure led the way with organic sales up over 50% driven by outstanding growth in data centers. Industrial grew high single digits and commercial resi sales were up low single digits.

Turning to organic sales by geography. Both Americas and Europe are strong. Americas grew approximately 30%, while Europe was up high single digits. Asia Pacific was down. For the full year, we had sales of $3.9 billion, an increase of 30% and 13% organically. Adjusted operating income grew 21% with margins of 20.2%. Adjusted EPS was up 35%. For the full year, we had record free cash flow of $561 million, growing 31%.

Let me share a few strategic and operational highlights. First, we launched 86 new products in 2025, contributing approximately 10 points to our sales growth and our new product vitality was 27%. Our innovation is delivering growth and solutions for our customers. Second, as I mentioned, the infrastructure vertical now makes up 45% of our sales, led by data centers, which grew over 50% for the year. Third, our organic growth and recent acquisitions more than offset the EPS impact from the Thermal Management business we divested in the first quarter.

Importantly, we cannot accomplish these results without the dedication of our nVent team, transforming our portfolio and accelerating to become a higher growth company takes a lot of effort and teamwork I'm very proud and appreciative of all the hard work by our nVent team to support our customers and deliver the outstanding performance in 2025. Looking ahead, we expect 2026 to be another record year of strong growth and value creation.

Moving to Slide 5. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is showing up in our results. We have increased our exposure to the high-growth infrastructure vertical from 12% of sales at spin to 45% last year and infrastructure is expected to be well over half of our sales in 2026. In addition, we have been aggressively investing in our data center business, which is rapidly growing and accelerating with the AI build-out. In January, we opened a new facility in Blaine, Minnesota to expand our liquid cooling capacity. Production is online, and we are ramping quickly.

Turning to Slide 6 and our outlook for the verticals in 2026. We believe the infrastructure vertical has the highest growth opportunity with the trends of electrification, sustainability and digitalization. Infrastructure is expected to grow at approximately 20% this year, driven by AI data center CapEx acceleration. In addition, power utilities, renewables and energy storage are expected to grow with the increasing demand for power.

For Industrial, we expect mid-single-digit growth with increasing CapEx investment, automation and reshoring. The commercial resi vertical is expected to grow low single digits. This wraps up my remarks. I will now turn the call over to Gary for further details on our results as well as our 2026 outlook. Gary, please go ahead.

Thank you, Beth. We had another excellent quarter, exceeding our guidance with record sales, strong adjusted EPS and very strong free cash flow. Let's turn to Slide 7 to review our results.

Sales of $1.067 billion were up 42% relative to last year. Organically, sales grew 24%, well ahead of our guidance, driven by stronger than forecasted data center sales. Acquisitions added $126 million to sales or 17 points to growth ahead of our guidance. Foreign exchange was roughly a 1 point tailwind.

Adjusted operating income was $210 million, up 33%. Return on sales came in at 19.7%, a bit lower than expected, due to higher investments, incentive compensation and mix. Inflation was nearly $55 million, including more than $40 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth, particularly for data centers and our recent acquisitions. Q4 adjusted EPS was $0.90, up 53% and above the high end of our guidance range. We generated robust free cash flow of $189 million, up 26% year-over-year.

Now please turn to Slide 8 for a discussion on the fourth quarter segment performance. Starting with Systems Protection. Sales of $737 million increased 58%. Acquisitions contributed 23 points to sales and have performed ahead of expectations. Organically, sales grew 34% with all verticals growing. Infrastructure grew approximately 70% largely due to continued strength in data centers.

Industrial was up high single digits. Commercial resi grew low single digits. Geographically, Americas and Europe were both strong. Americas grew over 45% while Europe was up high single digits. Asia Pacific was down in the quarter. The fourth quarter segment income was $149 million, up 49%. Return on sales of 20.3% decreased 120 basis points year-over-year, impacted by inflation, growth investments and recent acquisitions.

Moving to Electrical Connections. Sales of $330 million increased 15%. Organic sales were up 8%, and the EPG acquisition contributed 6 points to sales. From a vertical perspective, infrastructure led growing approximately 25% and Industrial grew mid-single digits and commercial resi was up low single digits.

Geographically, all 3 regions grew. Sales were up high single digits in the Americas. Europe was up low single digits and Asia Pacific grew double digits. Segment income was $91 million, up 8% versus last year. Return on sales of 27.6% decreased 180 basis points year-over-year impacted primarily by inflation. That wraps up the quarter.

Now turn to Slide 9 for a recap of our full year 2025 results. 2025 was an outstanding year with 30% or more growth in reported sales, adjusted EPS and free cash flow. We ended the year with sales of $3.9 billion, up 30% or 13% organically. Acquisitions contributed 16 points to growth for the year. Adjusted operating income grew 21% to $786 million.

Overall, return on sales came in at 20.2%. Inflation was more than $160 million, including approximately $90 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth. Free cash flow was $561 million, up 30% with 102% conversion of adjusted net income. This included higher CapEx investments for growth and capacity. In summary, 2025 was a year of record performance and strong execution with nVent now a higher-growth company.

Turning to the balance sheet and cash flow on Slide 10. We ended the year with $237 million of cash on hand and $600 million available on our revolver, putting us in a strong liquidity position. Our debt stands at $1.6 billion, down approximately $600 million from a year ago. Our healthy balance sheet and strong liquidity position gives us financial flexibility to support our disciplined capital allocation strategy.

Turning to Slide 11, where we outline our capital allocation priorities. Our capital allocation strategy is all about investing in and capitalizing on opportunities that generate the highest returns for our shareholders. Our first priority is growth. We are investing in new products, capacity and supply chain resiliency. In 2025, we invested $93 million in CapEx, up 26%. These increased investments are for recent acquisitions and new capacity to support growth in data centers and power utilities.

We returned $383 million to shareholders in 2025, including share repurchases of $253 million, and we increased our quarterly dividend 5%. We exited the year with a net debt to adjusted EBITDA ratio of 1.6x, below our targeted range of 2 to 2.5x. 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 12 and our 2026 outlook. We are forecasting another year of strong sales and earnings growth. Reported sales are expected to grow 15% to 18% with organic growth in the range of 10% to 13%. This assumes strong volume growth and positive price. Acquisitions are expected to contribute approximately 4 points to growth and foreign exchange to be a 1 point tailwind.

Our outlook for full year adjusted EPS is $4 to $4.15 which represents growth of 20% to 24%. And we expect free cash flow conversion to be between 90% and 95% of adjusted net income. We expect net interest of approximately $70 million, our adjusted tax rate of approximately 22% and shares outstanding of approximately 164 million.

Price and productivity are expected to offset inflation, including tariffs. We forecast incremental tariffs of approximately $80 million, largely in the first half of the year. Corporate costs are expected to be approximately $130 million, CapEx of approximately $130 million and depreciation and amortization of approximately $230 million.

Moving to Slide 13 and our first quarter outlook. We forecast reported sales growth of 34% to 36% with acquisitions contributing approximately 15 points to sales and foreign exchange, approximately a 2-point tailwind. Organic sales growth is expected to be up 17% to 19%. Price coupled with productivity are expected to offset inflation, including the tariff impacts in Q1. We expect adjusted EPS to be between $0.90 and $0.93, which at the midpoint, reflects more than a 35% increase relative to last year.

Wrapping up, our team delivered a strong year with record sales, adjusted EPS and free cash flow. We are well positioned for another record year in 2026. With that, I will now turn the call back over to Beth.

Thank you, Gary. Please turn to Slide 14. Key to our success and performance has been our people and our culture and making nVent a great place to work. We are focused on improving our employee experience and having a positive impact on our communities.

On this slide, you can see numerous awards and recognitions that we have received as we focus on our people and building a more sustainable and electrified fall. For the second consecutive year, we were recognized as one of the world's most ethical companies by Ethisphere. We also earned a gold sustainability rating from EcoVadis Batis, placing us in the top of companies assessed, and we were certified as a great place to work for the fourth consecutive year. These are just a few of the many awards and recognitions we have received. I'm extremely proud of our nVent team and everything we have accomplished together. And there's always more we can do. We want people to grow their careers at nVent as we grow as a company.

Turning to Slide 15. On February 24, we will be hosting our Investor Day, and I look forward to sharing more details about our growth strategy, new medium-term financial targets and how nVent is inventing the electrified future.

Wrapping up on Slide 16. 2025 was a year of outstanding performance for nVent delivering differentiated value for our customers and shareholders. Our portfolio transformation and data center organic investments are accelerating our growth and we expect 2026 to be another record year of financial performance. Our future is bright. With that, I will now turn the call over to the operator to start Q&A.

[Operator Instructions] The first question comes from Deane Dray with RBC Capital Markets.

Maybe we can start with getting a bit more color, maybe you can size the impact of inflation and these growth investments in your '26 guide. And then also, if you can just give us some context as new capacity comes online, what does that do into your typical margin progression?

Thanks, Deane. This is Gary. I'll give a bit of color on inflation. And we expect higher inflation in 2026 due to labor metals. And as I mentioned in my script, approximately $80 million in carryover or tariff impacts. We plan to address that through strong productivity as well as pricing. And those 2 actions will offset the inflation in the year. As you mentioned, we'll continue to invest to support growth, and we have been doing that in the second half of '25 as well as into '26 and you're seeing that support the tremendous top line growth that we've delivered in the quarter and we'll continue to deliver in '26.

And with respect to your point on as we're investing in the margin impact, I would just say that we're ramping so quickly and having to train a lot of new people, there are some inefficiencies. And as we start to scale, we'll get better in terms of improving those inefficiencies and that productivity.

That's really helpful. And then just as a follow-up, really impressive new product introductions, new product vitality index. And maybe if we could you made a lot of impact at Super Compute this year, launching a new line of standardized modular liquid cooling platforms. Just how -- what's been the customer receptivity to the launch and where does that stand today?

Yes. Thank you, Deane. Yes, we did showcase a lot of those new products at Super Compute and some of those products start to launch here through Q1 and Q2. Customer reception to that has been very strong because as you know, we've driven some very high-performance and very capable products that are very scalable and modular. And so as we see this year, a lot of those products launch, and we think that will be part of our growth story as that ramps through 2026.

The next question comes from Julian Mitchell with Barclays.

Just wanted to start perhaps with -- any color you could give us on that backlog kind of recognition profile? I think it was $2.3 billion at the end of December. So it's about 50% of your revenue guide for the next 12 months. Maybe help us understand, I suppose, how the -- maybe the book-to-bill trended recently, so we can get some sense of that order to sales cadence. And how much of that backlog do you think will be recognized in the next 12 months? I think we get your RPO in the 10-K.

Julian, maybe I'll start and I'll let Gary fill in. So as we transformed our portfolio and we talked about how we have more of a mix between short cycle and long cycle, you're seeing that we're more of a -- we have more backlog than we would have had traditionally and so some of that is in data centers. Some of that is in power utilities. And so you're just seeing the strength there. And I would say that most of that backlog is through 2026, although there's some beyond that. But a lot of that is what gives us confidence in our guide for the year given the strength of it.

Yes. I just would add, we mentioned in the script, the backlog is now 3x what it was last year, primarily data center and our new Trachte and EPG business, supporting the infrastructure vertical. But there also is healthy orders and backlog in our electrical connections business and our core systems protection business, Julian. So healthy backlog orders were up nicely in the quarter. And we feel good about the momentum that we're carrying into '26.

My second question would be on the operating margins. So I think the guidance embeds about a 70 basis point decline year-on-year in the first quarter, and then operating margins are up maybe 20 bps or so for 2026 in aggregate. Just wanted to check those numbers are roughly okay.

And I suppose more specifically, it seems like the organic operating margins maybe are not getting the lift yet that you had expected. So I just wondered what you thought the main culprit there was. Is it -- if it's price cost, that's okay on the cost side, but has anything got worse on the price side because of all the capacity everyone is adding.

Thanks, Julian. I'll take that one, and I'll talk about '26 margin. We expect margin expansion in '26, including better incrementals in '26 than we had in '25. As you mentioned, the inflation will persist, including the tariffs, but we expect price and productivity to offset it. We expect more price and we've announced pricing that's in the market. The inflation driven by the tariffs will be more first half oriented, and margins are expected to improve both year-on-year and sequentially.

One thing to mention about Q1 is we expect margins to be flattish sequentially in the quarter, but up factoring in for the accelerated share-based compensation that we'll recognize in Q1, which is really phasing across the year.

The next question comes from Nigel Coe with Wolfe Research.

This is [ Will Branco ] on for Nigel. If I kind of go back to the margin point for '26. First, I think the implied incremental margins in the guide are around 25% next year -- or this year, which is obviously a step-up from '25. But just in terms of the first half versus the second half, you've increasingly easy comps through the year. So just how should we think about the first half or second half weighting on incrementals?

And then maybe if I could just extend that out beyond '26, I think longer term, you've talked about, I think, incrementals in the 30% to 35% zone. Obviously, the portfolio, very different now from a few years ago. So any color on how we should think about incremental margins in the business beyond '26 as well.

Yes. Thanks for the question. And as you mentioned, incrementals will be better in '26 than they were in '25 and we expect that to progress nicely throughout the year. The first half has the impact of the carryover tariffs, the EPG acquisition and some of these investments for growth that Beth mentioned as we get some new capacity online. Second half will be better as those headwinds abate. We're very confident in the direction that our margins are headed and I'm not going to comment on anything beyond '26. We will have the opportunity to speak to that as we're together in about a month at our Investor Day.

Great. And then maybe for my follow-up, if I could focus on orders, obviously, 30% growth in the quarter. Any color on maybe how orders trended Q-over-Q in 4Q? And then, obviously, through January, maybe a color on year-to-date order trends. Specifically, any orders that may have pushed out in the fourth quarter into the first quarter. But any color there would also be very helpful.

Yes. As we commented in our last earnings call, our orders ex data centers were up high single digits. And as I just remarked, orders for Q4 were up low double digits. So in the nondata center business, we've seen orders improve. And I would say orders continue to look good through January.

The next question comes from Joe Ritchie with Goldman Sachs.

This is [ Andy ] on for Joe. I had a broader level question around your 2026 guide. So in 2025, your order growth has averaged close to 30% through the year and you exited 4Q with a 24% organic clip as well. So can you just help us understand the puts and takes on the growth guide of 10% to 13% for 2026 and then the implied step down after 1Q?

Yes. I appreciate you recognizing the strong growth that we had in Q2 or Q4. And we expect really a strong Q1 on revenue and EPS, both growth over 30%, mid-30s at the midpoint. Annually, I would just say, look, it's early in the year, we've entered a period of unprecedented growth for nVent. And we'll continue to update our outlook as we deliver the results quarter after quarter.

Keep in mind, we are overlapping organic and 50% EPS growth in the second half of 2025. We want to ensure that our guidance gives us the flexibility to invest to support growth in the long run. So we feel good about the momentum and we'll continue to update you as we move throughout the year.

Got it. That makes sense. And just as a follow-up, maybe a broader question around liquid cooling and a lot of the growth today is driven by data centers, whether it's the orders or the top line. But liquid cooling still remains underpenetrated and ultimately, like data centers are going to need it forward. So can you give like a higher level on how you're thinking about the TAM over the next 3 to 5 years and nVent right to win on this opportunity?

Sure. Well, one of the things that we just said as our data centers is now over $1 billion, and it's been growing significantly with liquid cooling at Super Compute. We showcased a lot of new products that we're launching. So we see that liquid cooling is currently less than 30% of data centers have liquid cooling, and that is going to grow significantly because of the heat loads and power densities, et cetera.

So as we go forward, we have a lot of new products that are modular, that are scalable, that we've been investing in our capacity. So we just see a lot of opportunity with data centers and with the AI build-out and the need for liquid cooling.

The next question comes from Jeff Hammond with KeyBanc.

This is [ David Tarantino ] on for Jeff. Maybe going back to orders, maybe just on the profile of the orders in data center versus the growth we saw in 3Q. Are you seeing any change in the order patterns in terms of size, scale and/or lumpiness of the orders quarter-to-quarter as these kind of larger data center projects are contributing to it?

Look, I would say we've -- data center orders can be very lumpy. And so we had tremendous orders in Q3 and good orders in Q4, but I think we're going to continue to see large orders and those are not going to be necessarily smooth as they go through the year.

Okay. Great. That's helpful. And then there's been a lot of talk about the effects of operating data centers at higher temperatures as of late. Could you walk us through your view on what the implications this has around your portfolio? And maybe could you speak to your visibility around technology evolutions as you work with your customers on them?

Sure. So one of our new CDU products that is launching this year, and we showcased at Super Compute. What we shared is that we've been working with NVIDIA and we understand those technology road maps and those heat loads out of 2030 and we have designed those products with a lot of flexibility built into them.

So in some cases, what we can do with this new CDU we're launching would have taken 2 CDUs in the past. So those higher heat loads, we're well aware of. We're working with all the chip manufacturers, and we're designing that into our product portfolio.

The next question comes from [ Vlad Distrii ] with Citi.

So I just wanted to ask you, obviously, a lot of focus on data centers and infrastructure vertical. But I wanted to touch for a second here on the 1/3 of your portfolio that's industrial. So can you just talk about how you're seeing underlying trends evolve in that market and your level of visibility and confidence to the mid-single-digit growth in industrial in '26 and whether you're seeing orders currently sort of consistent with that demand?

Well, as we discussed at ex data center, our orders in Q3 were high single digits than they're in Q4, low double digits. And we're seeing that we're seeing industrial orders at a nice rate given investments in CapEx, investments in automation and reshoring. So some [indiscernible] breadth to the orders coming across some different industries. And it's really those order trends and what we're hearing from our channel partners and customers that gives us the perspective that we're going to see industrial grow mid-single digits for this year.

Got it. That's really helpful, Beth. Appreciate that. And then just shifting back to data centers. Can you just talk about as we're seeing the data center technology and architecture continue to evolve? And as we're seeing new entrants trend coming to the space, can you just talk about how you see your position in thermal management evolving going forward? And maybe more specifically, what you're seeing in terms of competition in liquid cooling?

Sure. So as you know, we've been doing liquid cooling for well over a decade and have been working with some large hyperscalers for a long time. And on -- we're several generations in here. So when we think about our capability, we have a lot of application expertise. We've developed a lot of manufacturing and supply chain capability to be able to scale.

And in our case and point is from when we announced that we were going to expand to a new facility and signed a lease to where we started actually producing, that was just over 100 days when I mentioned that we're up and running in January. And I think that speaks a lot to our capability from a manufacturing supply chain perspective.

So as we go forward, look, I think there's a lot of new entrants that want to get in because they see the growth opportunity here. And what I would just share is we continue to invest. We continue to launch a broader scale of products because we see that there's going to be demand for liquid cooling from hyperscalers to colos to enterprise into even nondata center applications in the future. And so our investment here, our investment in our labs. We've got good partnerships that I think we're going to continue to differentiate with our performance and our ability to scale.

The next question comes from Brian Drab with William Blair.

On the $1 billion figure in data center, I just want to be clear, is that a run rate that we're exiting the year at -- and sorry if you said this, but I might have missed it. But is that a run rate? Or is that the total for '25? And that's my first question.

Well, the first is that was our revenue and data centers reached $1 billion.

Okay. And then can you talk about what the comparable number was for '24 and I know there's acquisitions in there. And then -- any color that you --

In 2024, it was $600 million.

Okay. And then can you talk at all about in '25, what the different categories within data center, like what type of growth you saw, at least maybe like rank order cooling versus powering versus the enclosures and other business? Like where are you seeing the fastest growth? I assume it's in liquid cooling, but I just want to -- if you could add some color to that.

Yes. I mean we're really seeing the fastest growth in liquid cooling and tower. But behind that, I would say our cable management is also growing very nicely as well.

The next question comes from Nicole DeBlase with Deutsche Bank.

I don't think we've spent much time on power and utility yet in the Q&A. So I just wanted to kind of dig in there, Beth. Trends that you guys saw during the quarter with respect to orders. And then last quarter, you commented that Trachte and EPG were trending ahead of your deal plan. Is that still the case?

Yes, it is. We're very pleased with those acquisitions and the growth that we're seeing in the performance. Look, power utilities, this is an area where we're seeing just solid growth and opportunity. And I think there's some very synergistic plays for us as we're able to pull through more of our portfolio, especially into some of these integrated engineering building solutions. And we just see some nice long-term growth in this area, very synergistic to what's in the rest of the nVent portfolio.

Thanks, Beth. And just orders, were they up double digits in Power and Utility, I would assume so, but wanted to clarify that?

I don't think we've been that specific. I don't think they've been as strong as data centers, but they're part of that overall everything ex data centers is up low double digits.

Okay. Understood. And then maybe on the M&A pipeline, if you could talk a little bit about the level of activity that you're seeing today and the level of excitement about potential M&A into 2026.

Yes. I mean our -- first of all, our balance sheet and our net debt-to-EBITDA ratio are in really good shape. And when we think about our pipeline, it's very strong. It's very robust. We remain very disciplined. And I think there's always opportunity for us to find some new acquisitions like we did with Trachte and [indiscernible] that are really helping us build out infrastructure in particular. So you never quite control the timing of deals, but we've got a good pipeline that we're currently working through.

The next question comes from Scott Graham with Seaport Research Partners.

I have a question about I have a question about productivity, let's call it, let's say, away from the acquisition integration. So sort of in the first half of the year, we're going to have some dilution margin-wise with the ramp in the LC capacity suggesting that the offset on productivity elsewhere has to be maybe a little bit higher. What are you doing in productivity elsewhere to kind of make some of that up?

Yes. I appreciate the question, Scott. And as I mentioned in my remarks, we plan to have our productivity as well as our pricing offset the mid-single-digit inflation that we're expecting in the year. And what we've talked about is we're advancing our lean capabilities while we invest in our capability, we're working on driving capability in transportation, automation and our funnels and our sourcing productivity side are quite good. So we're very focused on driving additional productivity, especially as we've increased our investment, and we're confident that price plus productivity will offset the inflation in '26.

Okay. Got it. I too wanted to ask a couple of questions about power. So I know you're mostly grade T&D, but now for the -- I think for the first time in a while, you've started to mention renewables as being 5%. I was just kind of wondering what the dynamics of renewables growth look like as well as generation, do you have opportunities in generation?

It's more for us through T&D and in particular substations. And as you think about substations, whether that's for utilities or supporting data centers, that's where we see the most opportunity currently.

Okay. Close enough. And then last one was on the penetration of liquid cooling. Is that a number you guys are able to update?

Well, we will give an update at our Investor Day on February 24. But we've said that liquid cooling less than 30% of data centers have liquid cooling today, and we see it growing significantly.

The next question comes from [ Neal Burk ] with UBS.

Question on data center. I mean, we see CapEx continuing to accelerate. But the guide for organic growth for this year is like a pretty meaningful deceleration in the back half. Is this just comps getting harder? Or is there some sort of kind of timing difference between what we see on the hyperscaler CapEx side and advance orders or sales?

Yes, Neil, I appreciate the question, and we're pleased with the backlog and our momentum that we have on data center. I'll just go back to the comment I made earlier, which is, look, it's early in the year, we're managing unprecedented growth here for nVent. And we'll continue to update you on the outlook as we deliver results here in the first half of the year. But we're confident in the momentum and we'll talk about the multiyear opportunity in data center here in a month or so at our Investor Day.

And just like on the multiyear opportunity. So I look forward to hearing more on that. But do you -- just sort of like high level feel like you have a better level visibility now as you scale this business? Obviously, backlog is a lot higher. But like in terms of the data center project pipeline, do you feel like you are getting closer to customers as you grow this business and you have more visibility on future demand?

Well, I would say, in general, with this portfolio transformation, it's given us more of a balance between short cycle and long cycle. And whether it's data centers or even power utilities just because of the nature of those types of build and projects, we certainly have more visibility into multiyear projects or even just understanding technology road maps and where they're going. Both of those are very important and are helping us to think about our capacity as well as our new product technology road map.

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.

Thank you for joining us today. I'm extremely proud of our performance in 2025. We will continue to focus on delivering for our customers, employees and shareholders by executing on our growth strategy. We believe nVent 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.

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

All right. Well, welcome, everybody, to our next presentation. We have nVent here today. I should mention, it is the only name I have on our Americas conviction list right now. So no pressure, Gary. So we've got CFO, Gary Corona; as well as Tony Riter, Head of Investor Relations. Guys, thanks so much for being here today.

Yes. Thanks a lot, and I appreciate the support of nVent this year for sure. Well, look, for those of you who are new to the story, I'm going to just give a quick overview, and then we'll jump into some Q&A. This is our normal forward-looking statements. And then I thought we just get a quick overview. We're the leader in connection and protection, industry-leading positions in brands and most importantly, well positioned in electrification, sustainability and digitalization trends.

Attractive margins, you can see we have 2 segments, 2/3 systems protection, 1/3 electrical connection and a really important pie chart here in the lower middle around our verticals. You can see year-to-date, our infrastructure vertical is our leader at 43%, industrial 30% commercial, resi and then energy.

Very much a U.S.-focused business. Over 80% of our revenue is in the Americas, but our Europe business is strong as well. The story for us is really the year-to-date acceleration. On a reported basis, 25% net sales growth in the first 3 quarters of the year, almost 30% growth in EPS and free cash flow up really strong of 34%. Our guide as of the third quarter was mid-teens organic growth for the second half in the fourth quarter, almost 50% EPS growth, so a nice acceleration.

Our strategy has been very similar since we've spun. It's been about growth verticals, new products and expansion globally, but M&A and partnerships are a big part of that growth. We're focused on productivity and velocity and working capital management, really around our strategy around one nVent.

This is an important page, which really shows the evolution since we spun out of Pentair, 8 acquisitions, 1 divestiture. What's really important is how the portfolio has changed through aggressive portfolio shaping. As you can see, when we spun out in 2017, we were a $2 billion business, mid-40s industrial and infrastructure was only 12% of our portfolio.

Fast forward on a full year, just shy of $4 billion, infrastructure is now over 40% of our portfolio with data centers and power utilities about half and half of that 40%. And we now have a nice balance between short and long cycle. So a real portfolio transformation that has positioned the business for accelerated growth.

And a big driver of growth, and I'm sure, Joe, we'll talk about that is our business in liquid cooling. We have a record number of orders in backlog. We're expanding capacity. And we just announced an expanded portfolio of new products.

We've been recognized by NVIDIA as a solution adviser and our new tagline that we rolled out at SuperCompute in St. Louis a few weeks ago, where I think many of you were there as we do cool stuff. So it's a significant year of acceleration.

The future is bright here at nVent. We're well positioned for growth. The portfolio transformation is on track and has positioned us for acceleration and expect a really strong year here in '25.

Great. I appreciate those prepared comments. And you're right, we're going to get right into liquid cooling. So it was good seeing you guys at SuperCompute a couple of weeks ago, saw 10 new products that you've rolled out. Look, liquid cooling is getting a ton of attention, right? And you're seeing several competitors making like recent acquisitions to build scale. How do you think about your moat in that business and how your technology potentially differentiates from others?

Yes. It was great to see you and many others. It was exciting to launch some new products. Over 10, to be specific, it was 14 new products in the -- that we launched. And the moat for us, as we think about our business, is really around 3 things. The first is around our technological capability. We've been in this business for over a decade. We have deep technical knowledge and deep technical partnerships with the leading chip makers and the leading hyperscalers. And we have to take that technology, we have to scale it and scale it in manufacturing is sometimes easier said than done. We've been doing it for a long time.

We announced some recent capacity expansions. I'm sure we'll talk about that. And the third is really quality. And these products can't leak, and that is something that we've been able to deliver on time in -- time and time and again and build a real reputation in the industry for those 3 things, technology, quality and scale of manufacturing.

Great. So you take that moat and you had one of the biggest announcements at SuperCompute was Modine's announcement that they were launching a chiller product that could potentially circumvent the CDU. So keep it open ended. How would you like to respond to that?

Yes. So I'm not going to comment on any of other companies. What I will say is, we really like our CDU business. And as we work with our customers, we know it's absolutely critical for them as they think about managing pressure as they think about managing flow rates, but more importantly, they think about risk management in the -- in their data centers. And that's how we think about it. Our customers are really excited about our products and we're really excited about the new products that we brought to market at SuperCompute.

So take that in the context of, look, you've now increased -- you're increasing your capacity by 8x since the initial announcements back in, I think, early 2024, late 2023. So when you think about the capacity expansion that you currently have underway, like how much visibility do you have to demand for that capacity expansion? And then I know it's probably early stages, but like are you already thinking about what your next potential capacity builds could be?

Yes. We shared the news for our capacity expansion. I think it was late summer, early September. Obviously, we had visibility to the orders that we would report in Q3, and we have been working on it for some time. There's good progress that we're making with that expansion. Again, that's doubling our square footage of our liquid cooling manufacturing, 117,000 square foot expansion in Blaine, it's on track for opening in the first quarter. And so we have good visibility. And as we work with our customers, many of them are looking for us to accelerate delivery, and we're absolutely starting to talk about what and when will be that next expansion?

So we're pleased with the progress that we've made, good visibility into Q4 and in 2026 as we think about our liquid cooling business. And our team is working hard. Beth has made a number of comments in our last couple of earnings calls, and our teams are working hard over the Thanksgiving holiday to deliver product for our customers, and we're appreciative of that.

Great. So look, if you're going to be ready to go, I guess, you said the first quarter of 2026, with -- how far out is that capacity based on your crystal ball today, how far is that capacity taking you out to? .

Yes. Yes, it's worth mentioning the first sort of shipments will come out of that factory in Q1, but that capacity will build over the course of the year from Q1 through Q4 will be fully up and running. And we've got good visibility to that business next year. And as I mentioned, we're starting to think about what's next because our -- the response to our new product innovation at SuperCompute was very positive. As we expected, it would be, especially with our row-based CDU that is future-proofed out into 2030 with the NVIDIA and AMD platform, and there's a lot of demand. That product, because of its capacity, because of the pressure, actually requires fewer CDUs on the floor than our competition. And that's creating demand. We expected that product to be primarily through distribution to widen the customer base, but there was a lot of big customers that are very interested in that technology. Tony, anything you'd add?

No.

Okay. One of the things that we noticed at the show, right? And going around like it was pretty clear that some of the larger players were looking to basically combine a -- some type of like modular offering that had both power and thermal, right? You saw it in Vertiv's booth, you saw it with Schneider and Motivair. You didn't see it yet with Eaton and Boyd, but that's where we're going. How important is it for you to partner with somebody that has a power like offering a more holistic power offering to stay competitive in the industry?

Yes. I mean, certainly, partnerships are one way to do it. What I would say is most of our business today is direct. And that go-to-market approach has worked quite well. But we also talked about in the meeting last week or a few weeks ago, partnership with Siemens, where they bring the power. We're bringing the liquid cooling for NVIDIA, super pod products. So that type of partnership, I think, will be common, but we're feeling pretty comfortable about our go-to-market approach and our relationships with a lot of the players on the power side.

I'm sure we can talk about liquid cooling for a while, and I'll stay on this for maybe 1 or 2 more questions and then we move on. But the -- so when you think about it, there's a lot of discussion in -- from the investor base around like capacity additions that are occurring across the sector, like you have seemingly multiple new entrants, right? It feels to us that you have been doing this now for about a decade, have a first-mover advantage. Like how are you thinking about the TAM for you guys? And then also, I know it's still very underpenetrated. So we're just trying to get a real good understanding for the runway here.

Yes. No, it's an attractive market. And as you've said, we've been in it for some time. We're focused on our game and what our customers need. From a penetration perspective, we estimate the penetration is still in the single digits. We said mid-20s in the next couple of years, but we think that's even conservative. We'll have Capital Markets Day here at the end of February, and we'll give a bit more granularity to you and others about the opportunity, but it's -- the penetration opportunity is really, really significant. I mean some of these new chips require liquid cooling, and that sets up really well for the market to really evolve.

So let's talk about your order rates, so that's eye-popping. So now I guess now I'm going to be paying very close attention to your capacity announcements, and it's since those happened slightly earlier, but like up 65% this quarter was a big number, right? And -- but it's interesting because the data center business is up a lot, but then the rest of your portfolio is also high single digits, right? So talk us through what's really inflected across, I mean seeing holistically across your portfolio? And then are we starting to even get some visibility into 2027 at this point?

Yes. So yes, absolutely, that was an exciting quarter for orders, plus 65% organically. It doesn't include what we've seen on Avail, EPG and other long-cycle business, but the core business is solid, high single-digit growth and I think one of the things that's important to mention is the power utility business. And when we acquired Avail and Trachte, that really strategically was about getting exposure to power utilities, getting more long cycle and both those businesses are growing double digits, so we're excited about that.

In the broader business is doing well. So good order rates, good acceleration, as I mentioned in my prepared remarks, mid-teens organic is what we expect and what we said we would expect in the second half what -- which is excellent. So yes, that balance of a little more long cycle, combined with the short cycle gets us that. As we think about the growth really was around Q4 and '26 as we think about the order growth.

There wasn't a lot of '27, but we are, especially in the power utility business, starting to see some of those orders into '27. And that's part of -- it's a positive part about having a long-cycle business.

Seems like a lot of growth into 2026 then. We'll get there in a second. But -- so you mentioned Investor Day, right? So Investor Day at the end of February, your organic growth targets before, I think we're in that 5 to 7 zone and M&A, adding a point, it seems like the acquisitions are working out well. So how -- I mean, I know you're going to give us exact targets later on, but like, how should we kind of think about what -- like what organic growth and M&A target should look like going forward?

Yes, you got it. The last time we gave intermediate targets, they were mid-singles, a point plus of M&A. Obviously, the M&A is far out clubbed that growth in the second half of this year and fiscal '25 is far greater. The big important thing to note is that was pre the Thermal divestiture. That was really a key unlock for us to accelerate our growth. We've made a couple of acquisitions, that from an organic perspective, as I mentioned, are growing double digits. So the short answer to your question is there's going to be more growth, and how much that is, we'll ask you to wait until we speak more formally on it at the end of February, but the portfolio transformation has really positioned us for accelerated growth. We're doing it here in the second half and in '25, and we expect that to continue.

That's great to hear. And like, look, I said earlier, the order number this past quarter, I'm not going to layer that in every single quarter, right? But now you've had 4 quarters of double-digit order growth, right? And it seems like if you take a look at what some of the longer cycle data center equipment providers are doing, I mean you have like companies like Renova that are booking out to like 2029, 2030 and your lead times seem to be like 12 months, like 12 to 18 months.

So like, I mean, are we in an environment now where like orders should kind of sustain itself at like a double-digit clip going forward for the time being? Or like how are you thinking about the outlook for your entire portfolio?

Yes. I mean, clearly, and we said this pretty directly that, that Q3 order growth is 65% is not going to repeat itself every quarter. There were some accelerated orders that came in, not just one, there were multiple orders that built to that. But look, the long-cycle business, we expect to continue to accelerate the data center and power utility part of our business is very healthy. Those orders are going to be lumpy and that is the nature of a business of this size and this exposure, but we're positive about the future of both businesses.

Yes. So I have a couple of more questions. I'll open it up to the audience as well after these questions. But maybe just talk about the power utility side of the business a little bit more because that's also been a double-digit growing business. Like -- where specifically is your opportunity in power utilities?

Yes. So in the power utility business, I mentioned it a couple of times, is something that we're spending a little bit less time talking about because so many of the questions are about liquid cooling, but it's a really important part of our portfolio. As you mentioned, it's been growing double digits. It's the reason why we made those acquisitions to get into power utility for Trachte and Avail EPG. We knew they had some data center exposure. As we've said before, we don't put revenue synergies in our acquisition models, but we thought there'd be some opportunity. There has been more than we expected.

Those businesses really exposed to T&D, really the control houses supporting transmission. You guys know the power load is expected to double in the next 25 years, and we're going to be right there with those businesses. And we talked a lot about the power excuse me, the liquid cooling expansion that we're doing up in Blaine, but we also talked in our third quarter results about expansion that we're doing on our Avail and Trachte, 4 facilities that we're expanding capacity in to drive that differential growth supporting our power utility customers.

Yes. I mean, it's been a key element, right, to really change that portfolio mix in that longer cycle because I think before Trachte EPG, our power utility business, call it, $100-ish million more short cycle through distribution, we've got a lot of visibility as we talked, some of these orders span well into 2027. These customers are very sticky.

Yes. And just to level set, today, that power utility business is still roughly around 20%.

It's kind of approaching 20%.

20%.

Like roughly a $4 billion business.

Got it.

Okay. Not a full year of Avail in there either.

Yes. Yes. Short cycle, I mean, I used to describe nVent as a cyclical company with a data center kicker. And now you guys are more data center utility exposed than -- but you still have a bunch of short-cycle exposure as well. So talk a little bit about the short-cycle industrial business. Where are you seeing green shoots across, where are you not? Like where is the business still not seeing much of growth?

Yes. I'll just level set us. The industrial side of things, we're guiding a low single-digit performance for the year, commercial resi flattish. And look, we see the makings of green shoots. The interest rate, environment, the taxes, some reshoring. So we see the makings, we don't see the green shoots just yet. Those businesses that we manage are doing well. But a lot of it is top spin finding its way into the data center infrastructure. So we're not ready to talk about our '26 expectations just yet, but we see the makings of some green shoots, just not ready to call it.

Okay. Great. So I'll open it up to the audience, see if there's any questions or I can certainly keep going. All right. I'll keep going. So one of the questions that we get often is the leverage, the incremental margins that you would potentially get in the liquid cooling data center business, right? And I recognize that there's probably some like labor inefficiencies today because you guys are trying to run as fast as you possibly can to get this product out the door. You just mentioned working through the Thanksgiving holiday, right.

Talk to us about like what are really the kind of like, incremental margins when we get to steady state? And how long is it going to take us to get to steady state? Because I also recognize that you're making investments in the business as well.

Yes. Let me just kind of level set us on margin expectations. So in the Q3 call, we said that we expect margin growth, excluding the recent acquisitions in Q4 -- so we expect to exit the year in a healthy place from a margin perspective. That assumes sequential improvement in margins. A lot of things going on, on the margin line this year. We had tariffs. We had some significant M&A coming in. And then as you mentioned, significant investment to support this differential growth. Our data center business is -- the margins are -- we've said is in line with our broader systems protection business. And as I think about '26, we'll guide on margins more formally as we get into the new year, but there are puts and takes. We still have tariff overhang in the first half.

We've got the M&A to still be new in the first half, but we've done a nice job with pricing, and that has ramped throughout the year and will continue to ramp, and then we're going to get some leverage, but on top of that, we're going to continue to invest because we're going to invest to support the growth. But margins should be better.

What I say is, and what I've said, we're focused on growth and returns. And what our guidance implies almost 50% EPS growth in the fourth quarter. So we feel good about both growth and returns.

Great. We have question here from the audience. Right there, wait on a minute. There you go.

Yes. I'm just curious, like there's been a lot of market noise over the last couple of months as Google's model kind of started to look like it's a lot better than what OpenAI has, and there's a lot of success with their ASICs chips. I'm just curious, does liquid cooling needs differ that much between GPUs versus ASICs chips? And how do you think about just like the ability for you guys to grow with those guys?

Yes. What we've said is we partner with all the big customers here in North America. And we're many times agnostic to what's happening at the chip level with our liquid cooling technology. So we feel good about our ability to compete and deliver against, as these announcements come out and as the market shifts, we have visibility. We're partnering with all the chip manufacturers and all of the -- all the hyperscalers. So we have pretty good visibility to what's happening on the ground. And that doesn't mean we aren't running paddling like crazy under water, both to support the business today, but even more importantly, to go where the puck is going from a technology perspective.

I think maybe just one thing we always -- we kind of forget is, hey, a lot of these new chips have to be liquid cooled, but we're not even talking about the efficiency, right, that cooling provides. I was going to remind liquid cooling versus air provides 4x as much efficiency. So as you think about the amount of power, if you can cool more efficiently, right, you can do more. So that's part of the equation that really is kind of a nascent. But as we continue to move forward, that's going to become a bigger part of it.

How do you think about pricing into the hyperscalers? Because here's my -- I guess, my two cents on this. When you take a look -- when I first started seeing what a CDU was like, it was hard to see the differentiation between one CDU versus the next. And what's become a little bit more clear to me is that you spec into the different road maps, right? So to me, it almost kind of seems like this is a more kind of like higher mix, low volume type product because you're specking in. There's more customization, which tends to lead historically to a little bit more pricing power. That's my hypothesis. I could be wrong. Like, what is your pricing dynamic with hyperscalers, colocators as you're specing into this?

Yes. It's a great question, and it's one that we spend a lot of time. What I will say is the partnerships are good and the push is more faster. And in that discussion, price is not a big part of the conversation. However, we've had incremental prices come at us as we've seen inflation in those conversations are -- have been very constructive. And I think it's important to think about the technology and the moat using your term, what -- that we have in the business.

And we've also talked about the more modular products. We talked about those and the ability to sell those both directly and through distribution, where we've historically had nice partnership with our customers on price. And we feel good about the margin structure. Again, it's a partnership. So there's not a -- we're being very balanced. And even though there's such demand, we're being very balanced with our pricing efforts.

There's still so much innovation, right? And it's generation after generation of new products that need to come out. So to Gary's point, right, it's like -- it's not comparing price, it's what's the value that we're providing that really shows up to the margin, right? Are we getting the contribution for the value that we're providing. And that's the key element.

You mentioned modular. What is -- what's your kind of like dollar content on a modular product/system versus a stand-alone system? And how far along are you in terms of really seeing penetration with your modular offerings?

Yes. So the modular offering that I was mentioning was for those of you who were at SuperCompute was that specific row-based CDU that had high capacity that's customizable for a lot of different customers, and we think will really broaden our reach in our customer base. That is -- that product that was on the floor will be launched in the first quarter, and that will ramp, I will tell you it will ramp as the capacity ramps across the year. So we're really excited about it. We got a lot of really positive feedback at the show and look forward to having it be a bigger part of our business as we...

Effectively, we have no orders there yet right? And so it's all...

Right, yes. Okay. Got it. No, that's super helpful. Maybe just talking about the margin profile of each of the businesses for a second. The -- so let's talk about electrical connections, right? The margin profile today is around 30%. I have to tell you, like when we get to 30% typically across most industrial companies, they start to get a little nervous. So what's the -- what is kind of like the opportunity for margin expansion across that business.

Yes, electric Connection had a really nice quarter in Q3, as you mentioned, mid-single-digit growth, 30% margin. And I love that business. We don't get a chance to talk about it a lot. I mean, really, to continue to grow that business, both on the top and bottom line, it's about innovation and it's about go-to-market. And that team is leaning in and driving both of those things. So we're excited about the growth prospects of that, and we really like the margin and cash flow that it delivers.

Yes. So the way to think about it, this is a -- the margin opportunity is going to be volume-based going forward predominantly.

Yes. I think it's a healthy margin business, where we innovate and where we drive productivity, there's opportunity everywhere in our business, not just electrical connections in particular, to both grow the top line as well as expand margins. And they've got a really nice productivity funnel and some good innovation.

Got it. M&A. You've been a lot more active, right, the last couple of years. Obviously, we've been talking about Trachte and Avail, how are you guys kind of thinking about your pipeline? I know that you've been very active both on buyback and capital deployment via M&A. So how are you balancing that as well?

Yes. The capital allocation prioritization for the year really started a couple of years ago. And it was the work to drive the exit of thermal to redeploy those proceeds into Trachte and Avail EPG. But to your point, we also bought back around $250 million of stock this year. We leaned in a bit more than expectations at the beginning of the year when we saw an opportunity from an intrinsic value perspective, our stock is clearly undervalued, and we stepped in more aggressively.

We paid down a little bit of debt. And as we stand here today, we're below our leverage ratio. That's our target, which is 2 to 2.5x. So the funnel is full. And I will tell you that we will continue to be disciplined as we look, but we really like these chunky deals that can drive meaningful acceleration on both the top line and EPS accretion like we've seen in these last 2. So team is busy, but we'll remain disciplined as we think about the next deal.

Good choice in the buyback, define chunky.

Well, we like the size of the last couple of deals. Never say never on something more transformational, but that's not where our focus is.

What types of assets are you looking at right now?

Yes. Our focus, as you can see, our focus has been to expand the pie of our infrastructure business. Clearly, our organic growth is going to drive expansion there. But we're certainly on the lookout in both power utilities and data centers. Really, a lot of our capital allocation on data centers organic growth. We also look globally. We've made some really good changes in Europe, putting our former EC leader over in Europe where he's based to drive in a one nVent approach. So we would -- and we're underpenetrated there. So an opportunity there. So basically, there's a lot of spots in our portfolio that we see opportunity, but infrastructure is certainly where our capital allocation focus is.

Historically, nVent has been a product-centric company, right? So the answer might be, we're just going to be a price-centric company. But there's got to be some service opportunities that also open up from how your portfolio is evolving. What's kind of like the longer -- what does that look like from a service standpoint 5 years from now?

Yes, especially as our liquid cooling and data center business, as that customer base expands, we do see an opportunity for services. And the system protection team is building a capability there. It's early days, not contributing significantly today, but we do see an opportunity, especially as that liquid cooling business broadens from a customer base perspective. These are customers that might not have the same level of sophistication and technical acumen as hyperscalers and the colos do.

Look, exciting times. And in nVent, Gary, any last final thoughts before we exit.

No, I really appreciate all of your interest in the company. We're having a great year. We're really seeing the work of this team change in the portfolio, accelerate our growth. And the future is bright.

Nice. Thanks for coming. I appreciate it.

Thank you.

Thank you. Good to see you.

Good day, and welcome to the nVent Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Tony Riter, Vice President of Investor Relations. Please go ahead.

Thank you, and welcome to nVent's Third Quarter 2025 Earnings Call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer; and Gary Corona, our Chief Financial Officer. Today will provide details on our third quarter performance and outlook for the fourth quarter and an update to our full year outlook.

As a reminder, 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 Investors section of nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We 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.

Thank you, Tony, and good morning, everyone. It's great to be with you today to share our outstanding third 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 had record sales and adjusted EPS in the third quarter. For the first time, quarterly sales were more than $1 billion.

Adjusted EPS was $0.91, both sales and EPS exceeded our guidance. We also had record orders and backlog in the quarter. Organic orders were up approximately 65% primarily driven by large orders for the AI data center buildout. Excluding data centers, organic orders grew high single digits. With the record orders growth, our backlog grew strong double digits sequentially. We had very strong cash flow in the quarter, and our balance sheet is healthy. Our first priority for capital allocation remains the same, invest in growth. We are investing in new products, commercial capabilities and expanding 4 of our facilities to add capacity for data center and power utility growth.

Now on to Slide 4 for a summary of our third quarter performance. Sales were up 35% and 16% organically, led by the infrastructure vertical. New products contributed over 5 points to sales growth year-to-date, and we have launched 66 new products so far this year. Adjusted operating income grew 27% year-over-year with return on sales of 20.2%, adjusted EPS grew 44%.

Looking at our key verticals. Infrastructure led the way with organic sales up over 40% with strength in both data centers and power utilities, industrial and commercial resi sales were each up low single digits.

Turning to organic sales by geography, both Americas and Europe were strong. Americas grew high teens, while Europe was up approximately 10% and Asia Pacific was down 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 single digits and commercial resi to be flattish for the year. For guidance, we are again raising our full year sales and adjusted EPS guidance to reflect our outstanding third quarter results and stronger performance in data centers.

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. Importantly, we cannot accomplish these results about the dedication of our nVent team. Transforming our portfolio and accelerating to become a higher growth company takes a lot of effort and teamwork. I am very proud and appreciative of all the hard work by our nVent team to support our customers and deliver this outstanding performance.

I will now turn the call over to Gary for further details on our third quarter results and our updated outlook for 2025. Gary, please go ahead.

Thank you, Beth. We had another excellent quarter, exceeding our guidance with record sales and adjusted EPS, along with very strong cash flow. Let's turn to Slide 5 to review our results. Sales of $1,054 million were up 35% relative to last year. Organically, sales grew 16% driven largely by volume and an increased contribution from price. Acquisitions added $139 million to sales or 18 points to growth ahead of our guidance. Foreign exchange was roughly a 1 point tailwind.

Third quarter segment income was $213 million, up 27%. Return on sales came in at 20.2%. Inflation was more than $45 million, including nearly $30 million in tariff impact. Price plus productivity offset inflation, and we also continued to make investments for growth, particularly for data centers and our recent acquisitions. Q3 adjusted EPS was $0.91, up 44% and above the high end of our guidance range. We generated robust free cash flow of $253 million, up 77% year-over-year.

Now please turn to Slide 6 for a discussion on third quarter segment performance. Starting with Systems Protection. Sales of $716 million increased 50%. Acquisitions contributed 26 points to sales and have performed ahead of expectations. Organically, sales grew 23%, with all verticals growing. Infrastructure grew over 50% with continued strength in data centers. Commercial resi grew low double digits, Industrial was up low single digits. Geographically, Americas and Europe were both strong, driven by data centers. Americas grew over 25%, while Europe was up low teens. Asia Pacific was down low single digits. Third quarter segment income was $146 million, up 40%. Return on sales of 20.4% decreased 150 basis points year-over-year, impacted by inflation, acquisitions and growth investments.

Moving to Electrical Connections, sales of $338 million increased 11%. Organic sales were up 5%, and the EPG acquisition contributed 6 points to sales. From a vertical perspective, infrastructure led, growing high teens. Industrial grew high single digits and commercial resi was flat. Geographically, sales were led by the Americas, up mid-single digits, Europe was flat and Asia Pacific was down low single digits.

Segment income was $102 million, up 10% versus last year. Return on sales improved sequentially coming in at 30%. Compared to last year, return on sales was down 40 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 7. We ended the quarter with $127 million of cash on hand and $570 million available on our revolver. We had very strong quarterly cash flow generating $253 million in free cash flow, up 77% year-over-year. We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy.

Turning to Slide 8, 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 $351 million to shareholders year-to-date in the form of share repurchases and dividends. We exited the quarter just below 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 9. As Beth shared earlier, we are raising our full year sales and adjusted EPS guidance to reflect our strong Q3 results and our improved outlook. We now forecast reported sales growth of 27% to 28%. That includes expected higher organic growth and approximately 16 points from acquisitions, with foreign exchange approximately a 1 point tailwind. For organic sales growth, we now expect to grow between 10% and 11% versus our prior guidance of 8% to 10%, reflecting our Q3 beat, along with stronger growth in data centers and power utilities. We are raising our full year adjusted EPS range to $3.31 to $3.33, up 33% to 34% versus last year. This new guidance continues to reflect tariff impacts of approximately $90 million. We expect to offset the impact of inflation, including tariffs through pricing, supply chain productivity and operational mitigating actions. For free cash flow, we expect conversion of 90% to 95%. One additional modeling assumption to note, we now expect corporate costs to be approximately $120 million versus $110 million previously.

Looking at our fourth quarter outlook on Slide 10. We forecast reported sales growth of 31% to 33%, with acquisitions contributing approximately 15% to sales and foreign exchange, approximately a 1 point tailwind. Organic sales growth is expected to be up 15% to 17%. Price increases, coupled with productivity are expected to offset inflation, including the tariff impacts in Q4.

We expect adjusted EPS to be between $0.87 and $0.89, which at the midpoint reflects a nearly 50% increase relative to last year. Wrapping up, we are pleased with our excellent third quarter performance. We delivered record sales and adjusted EPS, and we are well positioned for a strong fourth quarter.

I will now turn the call back over to Beth.

Thank you, Gary. Please turn to Slide 11. Our portfolio transformation to become a more focused, higher growth electrical connection and protection company is showing in our results. We have increased our exposure to the high-growth infrastructure vertical. In addition, we have been investing in our data center business, which is growing and accelerating with the AI build-out. We believe the infrastructure vertical has the highest growth opportunity with the trends of electrification, sustainability and digitalization.

Turning to Slide 12. I want to share our latest highlights on liquid cooling for data centers. We are a leader in liquid cooling with over a decade of experience and more than 1 gigawatt of cooling deployed. Our strength lies in our ability to design modular, service-friendly, high-performance systems that simplify deployment and provide resiliency across large-scale environments. We differentiate with deep application expertise, complete system designs, lab capability, rigorous testing and a proven ability to manufacture at scale.

In September, we announced a new manufacturing facility in Minnesota, our second liquid cooling expansion in the last 2 years. This new facility is expected to begin production early next year and effectively double our overall footprint to support our record orders and backlog. Recently, we were named to NVIDIA's partner network as a solution adviser with our cooling solution and design architecture. This brings both credibility and awareness with global customers designing next-generation AI facilities.

At the upcoming Supercomputing Conference, we will debut over 10 new products, including our newest generation of high-performance, high-reliability, modular liquid cooling solutions, purpose built to meet the growing power and thermal demands of next-generation AI data centers. And we now have a new tagline for our liquid cooling solutions. We do cool stuff.

Wrapping up on Slide 13, we had record performance in the third quarter, including strong double-digit growth in orders, sales, adjusted EPS and free cash flow. Our backlog has never been larger. Our portfolio transformation and our focus on data centers is delivering accelerated growth, which we expect to continue in Q4 and beyond. I'm very proud of our nVent 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.

[Operator Instructions] Our first question comes from Joe Ritchie with Goldman Sachs.

Yes. So look, let's start with the incredible quarter acceleration this quarter. Beth, I'm wondering if you could maybe just parse it out a little further for me. So it seems if my math is right, your data center orders were up, I don't know, almost 3x this quarter. I'm just wondering, are you starting to like see a little further out in your pipeline for data centers. Is the lead time still pretty comparable. I always think of your backlog as being kind of like 9 to 12 months? And is the type of data center order changing. So are you doing more modular type data centers? Just any color on that would be helpful.

Okay. Thanks for the question. Well, yes, you are correct, our data center orders are accelerating. And as we look at that, some of those orders are through 2026, but we do have some view into '27. And of course, we have visibility into '27 and beyond with some of our key customers.

One of our key focus areas this year was to continue to expand our customer base and expand our portfolio. So I would say we're seeing some new customers there as well. But as you know, a lot of these orders are particularly for liquid cooling and are large orders, and so they can be lumpy. And I think we're just seeing the overall data center growth accelerating.

Okay. Great. And then maybe just as part of that question, just the type of data centers that you're actually booking orders for? I know that you have some more modular offerings as well that typically carries higher content? Just trying to get an understanding for the orders that were booked this quarter, whether you're seeing any shift in the type of orders that you're booking to the data center business?

Thanks for the question. As I mentioned, we are expanding the customer base, and we are seeing a broader range of orders. So it's not just liquid cooling. There's other things in there in cable management and our power distribution units. But I would say our expectations for seeing smaller customer orders through distribution, for example, goes hand-in-hand with this portfolio of new products that we are going to showcase at Supercompute and launching through the end of this year and into next year.

And I think that will take some time, but we really do expect that modular platform and suite of products to really drive a further diversification of our customer base. And of course, I want to make the point that it's -- the level of orders that we're seeing that gave us confidence for our capacity expansion to be able to meet that overall demand.

Yes. Great. Great to see. I'll see you at Supercompute.

Our next question comes from Deane Dray with RBC Capital.

I want to stick with this -- the new modular liquid cooling loss. So congratulations. Can you talk a bit about the implications for the industry data cooling specifically? Is it moving more towards standardization. Will there be -- what are the implications that there's less customization? What does that do to your mix?

Yes. Thank you for the question, Deane. I think one of the things that we've stated is it's a modular platform. And as we start to see expansion of liquid cooling from hyperscalers to colos to enterprise to more different types of customers that we wanted to have complete flexibility in our offering. And so the modular approach allows us to meet higher flow rates, higher power rates and/or smaller applications.

And so if anything, we're seeing more standardization on the interoperability, which is really key for all these data center customers. But the modularization gives us the flexibility and allows us to scale through our manufacturing processes, our capabilities to be able to deliver with speed. So if anything, what we're -- what this whole launch of new products is allowing us to expand liquid cooling beyond hyperscalers into more diverse customers and applications.

Great. That's exactly what I was looking for. So I appreciate that. And then second question, and thank you for sizing the capacity expansion. You said it was 2x. Can you help unpack the margin impact on Systems Protection. You said part of it, the decline which we had modeled for was the impact of investments. Is that all M&A, but is there any capacity expansion there on that new facility?

Deane, this is Gary. I'll take the margin question. And as you noted, systems protection in the quarter was actually a bit better than we expected on the margin line. Some of that is driven by growth. But certainly, also, we did experience a bit of a headwind from the M&A in Systems Protection but a bit less than we expected, and the investments are certainly in there to support the really nice growth, both of the business this year as well as we move into next year and expand capacity. So good quarter for Systems Protection on the top line and on the bottom line.

And is the capacity expansion in that as well? Or is that part of the CapEx spend?

Yes, it's both CapEx and OpEx investment to support the expansion.

Including investments in our engineering capability as we continue to launch and expand our new product offerings.

Our next question comes from Jeffrey Sprague with Vertical Research.

Just back to all these orders dialed right on this. First, I'm just wondering, are you including in the organic orders at Avail EPG because you now own it, and therefore, you consider those organic? And I'm also just wondering sort of the base we're coming off of. Obviously, things are very, very strong, right? But I don't want to run with 300% order growth, if that's somehow misleading, so to speak. So can you just kind of give us a sense of the base and this question about the acquisitions, if any?

Yes. When we talk about the 65% order growth, that is all organic. And so that does not include inorganic. So for example, the Avail EPG acquisition. So this is all the organic orders. And as we mentioned, the core business is up high single digits on orders and ex Avail EPG, but data centers overall is driving significant order growth for overall nVent.

Yes. And then can we just think about we're going to exit the year with data center being roughly 20% of revenues. What percent of orders might it be as we think about 2025? .

Jeff, as you think about -- I mean, you're guiding to go back to Beth's point, right, is think about it from the standpoint of all in orders, we're roughly 65% organically, taking data solutions out, so you can say, 20-ish-percent of the business, orders were up high single digits. So certainly, data centers are growing very, very healthy in the quarter. We saw some very large orders come in.

Great. No, understood. And then can you just give a little bit of more color on what you're seeing on the utility side of the equation, primarily, I would guess some closure related and the like, but any other detail there would be quite interesting.

Yes. I think on the utility side, we've continued to see nice orders in our Electrical & Fastening Solutions business. Recall, they have some utility exposure. And that what we're also seeing is continued orders and continued growth for the large enclosures that we acquired through the last 2 acquisitions. So overall, we talked about our growth being driven by both data centers and power utilities and that we've been expanding our capacity to support our power utilities as well.

Our next question comes from Julian Mitchell with Barclays.

Maybe just wanted to start off with the operating margin outlook. So I think in the fourth quarter, it seems that maybe the operating margin that's dialed in is maybe up slightly sequentially and down a bit year-on-year, maybe in that 20%, 21% range. Just wanted to understand if that's the right sort of placeholder? And should we expect the company to return to operating margin expansion sort of fairly soon next year? Just when you're thinking about the margins in the backlog and the margins in the current orders being booked today?

Julian, it's Gary. Thanks for the question. And you're pretty close there. Margin performance for the quarter came in essentially in line with our expectations. Coming into the quarter for the second half, excluding EPG, we expected margins to be slightly down in the third quarter and up in the fourth quarter. And that's what we've assumed in our updated guidance.

Q3 is impacted by recent acquisitions, being margin dilutive, the investments for growth that we talked about. And it's worth mentioning, we had higher incentive compensation in the quarter as our 2025 performance continues to exceed expectations. As you mentioned, Q4 margins will be up sequentially and an improvement to Q3 as our actions continue to build, and we'll build -- be up excluding EPG in the fourth quarter. We're not going to give guidance here on '26 on this call. But all in, we do expect margins to improve and to see better incrementals next year.

That's very helpful. And then just circling back, I'm sure not for the last time to the whole orders and so forth discussion. Maybe one other way I would ask about it perhaps is that, I know you don't disclose the backlog quarterly, but you typically in the 10-Q disclosed the RPO. And I think that was about $800 million at the end of June, up from about $150 million in March. I know we'll get the Q fairly in the next few days, but any help you could give us on how that RPO ended September, just as some kind of crude backlog movement proxy?

Julian, as we mentioned in the script, our backlog was up double digits sequentially. And we're feeling very good about where we're at, and we will disclose the backlog as we get to the end of the year.

Got it. And the RPO is sort of moving sort of commensurate with that?

Makes sense.

Our next question comes from Nigel Coe with Wolfe Research.

Gary, I'm going to really annoy you here. We're calculating something in the range of about a 1.3x book-to-bill. Would that be in the right zone? Again, I'm not looking for deal points here, but in that kind of ballpark. And then just thinking about the gross margins. Obviously, you're sort of absorbing a lot of headwinds here with tariff inflation acquisition dilution. How do we think about the contribution margin from liquid cooling sort of ramp up? Is the gross margin comparable to fleet average here? Or is there any kind of variance that we should be aware of?

Yes. I'll just start with -- we're not going to disclose the book-to-bill, but we had healthy book-to-bill in both segments in the quarter. On a gross margin perspective, as I mentioned in the script, price and productivity is offsetting inflation. What it's not offsetting is the investments that we're making and then the incremental compensation expense, as I mentioned.

But we do feel really good about our margins on liquid cooling. And as we've mentioned before, they're healthy and in line with the averages in systems protection. So we'll -- it's also worth mentioning from a gross margin perspective, we bought a couple of businesses that structurally had lower gross margin. We've got good plans in place as we deliver against our playbook, but it's in line with our expectations, and we expect it to continue to improve.

Okay. You can't be for trying to get that number, but thanks for the detail there. And then just a quick one on 4Q modeling. Your revenue range, obviously, very healthy growth, but it does imply revenue step down quite a bit in, I think, maybe 5% in 4Q, Q-over-Q. As the mix of data center increases, I expect that the quarterly revenue profile to be a lot more stable. In fact, in many cases, 4Q can be stronger than 3Q in the data centers. Just curious why sales would be below -- so much further below to 3Q levels?

Well, one thing I just want to point out, yes, certainly, there's strength in data centers. But typically, as a business, we always see Q4 as a lower revenue quarter. And recall, in Q4, it depends what our distribution channel wants to do with their inventory position. So we tend to see some seasonality in the core business in Q4.

In our organic guidance, 15% to 17% is very much in line with the growth that we're seeing, which is significantly accelerated from the first half and where we've been -- we guided 15 points from acquisitions in the fourth quarter. That is down a bit from a much higher than expected performance in Q3. But remember, we also had a little bit attractive in the inorganic growth in Q3.

Our next question comes from Brian Drab with William Blair.

I was wondering if you could just remind us of the margin impact as you're developing this modular solution and you're rolling out new products, a lot of which are going to be in the standard -- more standardized category. How does that impact margins and maybe like the timing of when we could start to see that impact margins?

Yes, Brian, as we create this more modular suite of products, over time, we expect that to scale through distribution, and we typically see stronger margins through our distribution business, but that is going to take some time because certainly, there's a lot of growth through our hyperscaler customers.

So that -- we won't see that any impact on margin there. The margins will continue to be good and in line. But it will be a while before we really see that grow to the scale that we see, but that is our strategy as we go forward that liquid cooling will play a role in many different applications and even beyond data centers.

Okay. And then there is -- it seems like every couple of months or 6 weeks, there's just a panic among investors around these companies like nVent and others exposed to data center because there's some new technology that's going to change entirely the way that we're cooling data centers. So the microfluidics announcement for Microsoft and earlier announcements of Amazon and people are talking about 2-phase direct to chip potentially changing the world. What -- can you just talk for a second about what you're seeing across all the different types of customers that you're serving? And what direction do you see the market going over the next 2 to 3 years in terms of technology?

Well, sure. I mean recall, we always start with by saying that less than 10% of data centers are liquid cooled. And as you think about the new GPU chips and the need for liquid cooling, it is only going to expand. And on top of that, liquid cooling also provides up to 50% energy efficiency. So when you think about it from that perspective, there's going to be a continued increase in liquid cooling. And there's many different types of architectures. However, right, our view is you need to have a cooling distribution unit and typically some manifolds no matter what configuration you have, whether it's immersion, whether it's hold play, there still needs to be that controlling CDU type of capability.

And in fact, at Supercompute, while we're showing a whole launch of new products, we're also showing how we partner with immersion players and how we partner with those who are looking at 2-phase. We think some of those cooling technologies will have applications but not as broad. And so our strategy has been to have a wide range of products and portfolio, and we're flexible that we can integrate with any of these different types of cooling technologies and fluid that are being used.

Our next question comes from Nicole DeBlase with Deutsche Bank.

Can we just start with EPG Avail? I think in the slides, you mentioned that the business was performing ahead of your expectations. Is there any way to give some stats on what you're seeing with respect to apples-to-apples growth in that business? Or if it's margins ahead of expectations. Just some more color there would be helpful.

Yes. I think when we think about as we said, when we acquired both Trachte and Avail, we really were building a more core utility platform base. And I think what we have -- while we've said it's exceeded expectations is some of our growth synergies that we're seeing this growth in both the gray space. Certainly, the need for power because of data centers continues to grow and there's nice steady growth there, but we're seeing some more data center applications. Some of that is because of the customers that we've had, that we brought with these acquisitions and some of it is just the overall demand to more modular or ensuring that there's data center pods and things like that. So that's when we talk about exceeding our expectations. We're finding more applications and we're winning some new type of business. And I'll let Gary speak on the margin side.

Yes. Just to build, we're seeing double digits apples-to-apples growth. It will contribute 15 points to the fourth quarter, and it's nicely accretive for us in the first year. And based on the really strong and ahead of expectations, revenue and profit in Q2 and Q3, Nicole, it will be approximately a $0.10 impact to EPS, higher than the nickel that we originally quoted when we had just acquired the business. Of course, that's net of the lost interest benefit that we initially guided on. So really nice performance from EPG, both on the top line and on the bottom line.

That's great. And then just on the non-data center order growth in the high single-digit range, Beth, can you just parse that out a little bit between Comm/Resi and Industrial? Like did you see growth across all of your markets in the quarter?

Yes, we did. So we certainly saw strength of orders in industrial, in commercial resi and certainly saw some strength there for our electrical connections business as well. So we are very pleased with just the breadth of the order growth. .

Our next question comes from Jeff Hammond with KeyBanc Capital Markets.

Just wanted -- I think with all this demand, it's awesome and you guys are adding capacity. And I think what we're hearing from some of our other companies is just how hard it is, and you guys seem to be confident that the margin trajectory starts to improve as you get through kind of the acquisition noise. So I'm just wondering what you think are the big challenges or pitfalls as you kind of ramp all this capacity and you're getting all this business in?

Well, growth is hard, and that's why I said, our employees are working really hard because as you scale, we've got to ensure that we're expanding our facilities that we're bringing them online that we're developing our supply chain. I do think that's a strength for us because as I started, we've been over working it in liquid cooling for over a decade. So we're partnering well with suppliers to help them scale. We're having to ramp up in terms of people and finding innovative ways to train and bring people into our facilities.

So there's a lot that we're doing. But I will say this, the fact that our expansions have been close to where our core capabilities are and our lab expansion, it's given us a lot of flexibility. So it's a lot of work, but I think we've got a very disciplined approach to how we're driving this increase in growth.

Okay. That's great. And then just a quick one, a follow-up on EPG Avail. I think with Trachte, you found some really good business optimization and flow in the plan. I'm wondering if you're seeing similar opportunity with Avail and if you're considering any capacity expansions, I think you're doing some on Trachte already with Avail?

I'd say it's a similar story. Certainly, part of our integration playbook is to look at some of the areas for optimization, which includes looking at lean and flow through the plants, which does provide capacity. It's looking at our supply chain capabilities in combination and where we can drive -- where we can look to strengthen the supply base. And yes, we are expanding our capacity in many of these facilities, both with people and extensions to those plants to be able to support the demand that we see.

Our next question comes from Vlad Bystricky with Citi.

So I just wanted to follow up on the comments about the stronger M&A contribution in 3Q and a slight rate to the outlook for 2025. Can you talk about -- is that driven by better demand patterns that you're seeing? Or is that more reflective of better productivity and your ability to ship product out versus sort of your initial expectations?

Thanks, Vlad. Yes, as I had mentioned, our acquisition of Avail EPG is performing well. And to answer your question directly, it's both. We are driving more top line growth than initially expected. And the margins are looking a bit better than we initially forecasted as well as we drive scale and efficiency through the plant network. So very pleased with the acquisition and look for continued growth there. .

Great. I appreciate that color, Gary. And then just circling back to data centers and the liquid cooling growth that you're seeing. I know, Beth, you mentioned and highlighted some large orders that came through in the quarter. Can you just talk about what you see in the large order pipeline going forward and whether you see in your pipeline, incremental large orders like you saw in 3Q that could repeat over the coming quarters, understanding that they can be lumpy.

Well, certainly, large orders are typically tied to larger programs from hyperscalers. They do tend to be lumpy. So it may not -- it's not smooth the way those orders get booked. But I think that's just how we see the overall data center business accelerating. And again, it was those orders and that backlog build, which is -- which we tied to why we're investing in expanded capacity, which will be online here in 2026.

Our next question comes from Scott Graham with Seaport Research Partners.

Congratulations on the quarter. I was hoping you guys could tell us maybe on the 5% contribution from new products. If we took out infrastructure, what would that number look like?

Well, it would be lower. Just like a lot of our growth is being driven by infrastructure. We intentionally are focusing on new products across both data centers and power utilities and that infrastructure vertical. So strategically, as we position the nVent portfolio, to be more aligned with those macro trends, those investments in new products in R&D are also targeting infrastructure. So that's intentional.

Okay. So it's possible that the 5% is all infrastructure. What you said?

It's not all infrastructure. Oh, no. It's not all infrastructure. But it certainly has a significant portion of the infrastructure. .

One easy one. Will fourth quarter tariff impacts both in dollars and sort of with the price cost calculation we do here, even including your productivity, will tariffs be about the same in the fourth quarter as they were in the third. And what does that overall net number kind of look like in that productivity number?

Yes. So as I mentioned, the tariff dollars will continue to build. But I had mentioned as well earlier, is that we expect price to be sequentially stronger in Q4 as well. And that's what's driving from a margin perspective, excluding EPG, we expect to be up in the fourth quarter. .

If I could just sneak in this last one, the the net leverage, I know you said it's like a little bit below your target. What does that look like pro forma right now? Is that like a 18 type of number or that territory?

Yes, you're right in the zone there. .

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.

Thank you for joining us today. I'm extremely proud of our performance in the third quarter. We will continue to focus on delivering for our customers, employees and shareholders by executing on our growth strategy. We believe nVent 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. .

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

All right. Thank you, everybody. Chris Snyder, U.S. multi-industry analyst. Very excited to have nVent up here with me today, CFO, Gary Corona; and IR, Tony Riter. So thank you, guys, for joining.

Before we get to the Q&A, Gary is going to start off with some prepared remarks.

Thanks a lot, Chris, and good morning or good afternoon, everybody. I have some quick prepared remarks. I'll start with just our normal forward-looking statement. First, for all of you that don't know us well, a quick overview of nVent. The figures here are for our full 2024 financials, where we are a $3 billion electrical company, a leader in the connection and protection space with long-standing brands that are really mission-critical to the electrification, sustainability and digitalization trends. What I want to share is we recently announced our Q2 and where we grew reported sales 30%, organic sales were up 9% and EPS was up 28%. And we expect to grow the full year 24% to 26% reported and 8% to 10% organically with EPS at the midpoint just over 30%. So all of that growth on top of the 2024 financials that you see here.

And on the EPS front, we divested Thermal earlier this year, and we'll fully replenish the EPS that went out the door when we did that deal. Third quarter, the midpoint of our growth is 28% on a reported basis and 12% organically. So needless to say, all those numbers to say we are accelerating our growth quite significantly as a company. In our portfolio, we're primarily in North America. I'll talk a little bit about our growth in other parts of the world. We have Electrical Connections and System Protection, our 2 reported segments. And then on a vertical front, industrial has been our focus historically. But as I'll talk about infrastructure because the organic growth as well as the deals that we have done is accelerating quite quickly, and we're excited about that. I'll touch about that more a bit. From a strategy perspective, our strategy hasn't changed since we spun out. It's remained consistent.

Really 3 growth areas are high-growth verticals, particularly in electrical infrastructure. Two is new products. First half of the year, we grew more than 3 points from new products. And then global growth. We've been primarily North America, as I mentioned, but we enhanced our leadership as we transform and have Robert who used to run our Electrical Connections business based in Europe, now on the ground, leading the company. And really, we're starting to see some nice growth in Europe. And then lastly, M&A. The portfolio has been managed aggressively. I'll talk about that in a second to expose us to more growth. As I mentioned, this is an important slide for us as we think about what our portfolio transformation has looked like. Starting in 2019, we've done 8 deals over the course of that time, growing from $2 billion in 2017 to almost $4 billion here in 2025. And when we were a $2 billion company, almost 50% in industrial and almost about 10% in infrastructure.

And what's really important is over that time, we've reexposed the company to over 40% infrastructure, 20% of that data center, 20% of that power utilities. And that's exposed us to really, really accelerated growth. And it's also balanced us between the short cycle and the long cycle to give us a little bit more visibility and transparency into what's coming. So on the data centers, I'm going to talk a little bit about how we're exposed to data center white space and gray space. And it's really driving really, really strong demand for cooling solutions. And we believe that liquid cooling is growing 3x faster than legacy cooling. And as you can see from our broad portfolio, the AI build-out is really helping us drive growth and increase penetration.

And we're also seeing a trend towards modular data centers using large outdoor enclosures that we've picked up through our Trachte and our Avail, EPG acquisitions to support that nice growth. And with our strong technical expertise and the ability to manufacture at scale, we're expected to launch a whole new range of cooling solutions here in the second half. And as you've seen from our performance, really nice orders and backlog to accelerate our growth in the white space. And as you look at here on the gray space side, AI is also driving gray space demand. You can see our expanded portfolio on the left-hand side of that chart. Really, as companies try to maximize the white space, it creates opportunities for us on the gray space, Trachte and EPG as well. And we have a focused sales initiative to really maximize the impact of that gray space opportunity. So just to close my quick prepared remarks, we're well positioned to take advantage of accelerated growth that we're seeing in electrification, sustainability and digitalization.

Our portfolio transformation that's been extensive is on track, and it's driving accelerated growth. And as we talked about in our Q2 call, we're expecting very strong sales growth and earnings growth with -- and robust cash flow in our 2025. So excited about speaking about nVent and our growth opportunities, and I'll throw it back to you for Q&A, Chris. Thank you.

Thank you. I appreciate the presentation. Obviously, liquid cooling has been a very hot topic in the market the last 2, 3 years. We're seeing more companies announce CDUs and try to get into the space just given the growth. But nVent has been doing liquid cooling for a long time. So can you talk about the company's history in liquid cooling and ultimately, why you are positioned to win?

Yes, I'm happy to. And as you mentioned, we've been in liquid cooling a long time, 10-plus years. It started on the industrial side, working with a health care customer. We've evolved that into early days with the hyperscalers. And as we talked about, we have the technical capability and scale to participate and lead in liquid cooling. And that's a unique position. We've innovated with our customers and with the chip manufacturers over time. But it really comes down to that scale, technical expertise as well as our quality. And that quality is so important, and I'll put ours up against anybody's.

I think everyone obviously appreciates that data center demand is really strong and liquid cooling is even stronger than that. But I guess from the outside looking in, what can investors look to, to kind of get a sense, okay, yes, liquid cooling is taking share in the market. The growth is actually accelerating, decelerating. Like what should we look at?

Yes. While we don't report these individual products quarter-over-quarter, what we're really excited about is the significant acceleration that we're seeing, not just in the revenue that we're reporting, but also our orders. In Q2, we reported that our orders were up over 20% and our system protection business is growing in a significant way. But we're seeing that growth really across our entire portfolio. What we would say is it's a pretty low penetrated product right now, less than 10% liquid cooling penetration. So we see a long runway, not just quarter-to-quarter, but over the course of a significant period of time as this technology is really incorporated into the mainstream.

When we look at data center broadly, it seems like things reaccelerated in the first half of '25. You guys obviously put up really good growth numbers and are expecting even more. I guess, is there any signs of let up? It seems like a silly question after Oracle yesterday. But I guess, any signs of a let up? And then beyond that, like how much visibility do you guys actually have? Is it '26? Any thoughts on that?

Yes. We had been anticipating this acceleration for some time, and we had pointed to the orders that were coming in. But it was great to share that and share that showing up in the revenue line in Q2, which was really exciting. But again, we're looking well out into the future and have a lot of confidence in acceleration. A big part of our increased guide for the second half and in the third quarter was some of this acceleration that we're seeing now externally as we start to get visibility to it. But we saw this coming. We knew we would have nice acceleration throughout the year. And as we look out into our order book, we have visibility now into '26 and even to some extent into '27 as we work with our customers, not just on next quarter, but what are multigenerations of innovation look like.

Tony, anything that you'd add?

No.

You mentioned like you guys were expecting this or seeing something strength coming. I guess, can you talk in that -- about your capacity? Like are you guys adding capacity given that you see the demand getting better? And on the topic of adding capacity, do you think that could be a driver of share gain for the company in that if your lead times you can deliver sooner, maybe there's more opportunity out there in the market?

Yes. We're really excited about the opportunity. We announced publicly last week that we're expanding our manufacturing and doing that in Minnesota. A couple of years ago, we talked about 4x increase in capacity. We're essentially replicating that again here in what we announced with, obviously, those plans have been in place for some time now, but it's exciting to be able to speak about that publicly. And we're going to work hard to get that online and accelerate our growth even more. But I would say that our manufacturing plans to expand our capacity are very much in line with the acceleration that we're looking at and we expect to fill it up very, very quickly.

In the presentation, you kind of talked about the company's offerings in the white space and the gray space. It's a big focus in the market as the CapEx dollars are seemingly shifting more so to the white space. I guess, one, do you guys agree with that? Is that the way you see things headed? And what does that mean for nVent given that you guys sell into both sides?

Yes. I mean on the white space front, we see -- as I mentioned, it's early days for liquid cooling. We see a long runway to support that white space. And as there becomes more and more demand for that space, that white space, we're seeing opportunities for the gray space to get pushed outside of the brick-and-mortar not only does that help us from our broad nVent portfolio, but the recent acquisitions of Trachte and EPG, where we make enclosures, we can put those right around the data centers to really maximize our selling against the gray space. So we see really nice opportunity in both areas.

One thing that I've been wondering about is when a hyperscaler is building a new AI data center today, are they future-proofing the gray space to cover where the white space will go in 3 to 5 years? Or as we start to see more chips come through, could there be an upgrade cycle on the gray space to accommodate that?

In a lot of ways, because it feels like it's both, right? I mean you're just seeing growth across both the gray space and the white space and everything that they're trying to do and move the power out and you're seeing more and more. I mean, quite simply, I just think of it as the more power you need, the more compute that you generate is going to create more heat, right?

So there's going to be -- we're still very, very -- to Gary's point, very early, right, in liquid cooling adoption. It's penetration rates in a single-digit space, right, that is expected to grow pretty significantly. But at some point, yes, there will be -- you think of a replacement cycle or will there be an upgrade cycle or as the new chips come out, are they going to require new enhanced types of cooling? Those are all, I think, opportunities that I think we should expect to see in the marketplace.

And remember, we're looking and working with all kinds of customers, some of whom have really good multi-generation out road map and some who are trying to catch up. So to some extent, to Tony's point, it depends on the customer for sure.

Yes. I mean maybe following up on that and being close to the customers because as it becomes harder to debate the outlook for hyperscaler CapEx, at least over the near term, I think that maybe the next debate for the market is going to be on competition within the space of cooling and power and then also maybe pricing and margins alongside that. But I guess, could you just maybe start off by talking about your relationship or closeness with key customers and kind of how that helps protect or provide a moat versus new entrants?

Yes. And I won't talk about any customers one by one specifically, but we work with all the hyperscalers in one way, shape or form and also have many other enterprise or colo customers as well. And it's really important for us to work closely with them, as I mentioned, on what that pipeline looks like. And I also -- I talked about it a bit. We also plan to launch some modular liquid cooling solutions here as we get into the second half of the year that will be available more broadly and many times sold through distribution.

I appreciate that. I guess maybe thinking about the industrial side a little bit. You kind of called out -- it is a big material space for you guys. Trump policy, it feels like first and foremost, is about reindustrializing the U.S. I guess, what could that mean for you guys in that business?

Yes. We're certainly optimistic. The industrial part of our business is an important part of our business. We've guided for the year to be low to mid-single digits on the industrial side. And as you mentioned, we're starting to look to the benefits of the lower interest rates of some of the potential cash benefits coming in from the tax cuts to support us reshoring. That will be down the road, but we expect that to help the business as well. On the commercial, resi side, we guided that to flattish for the year. we're -- so we don't expect that to accelerate here in 2025, but certainly are optimistic about the future.

So anything you'd add, Tony, on our industrial business?

No.

It is a really important part, and we've got some great customer relationships, and we're executing well this year on that business.

Yes. Maybe on the commercial and residential side, are you seeing any positive rate of change in that or any rate of change in either direction in that market?

We had a good quarter in Q2 on our commercial, resi business. And when pressed for green shoots, we did point to our guidance for the year, which we said is flattish. So while I think we're executing well, we're not seeing a material acceleration there in that business. And I imagine that's what you've been here in the conference.

Yes. Maybe -- I know you guys are mostly U.S. But maybe can you talk about what you're seeing in the international markets? It seems like inevitably, the AI data center build-out will broaden. Maybe can you talk about your ability to kind of compete and win in those markets and kind of how you see the outlook there progressing?

Yes. As I mentioned briefly in our prepared remarks, we enhanced our management team here by moving Robert over to Europe to run Europe and to run Asia Pacific. And what was behind that really is the opportunity that we see to accelerate and grow our business in Europe. We have an opportunity to leverage our scale. We have good scale there, but really going to market as one nVent. And we see and especially an opportunity on AI and data center. And the good news is the customers there know us, and they know that we bring a unique capability and have been a key part of the success here in North America and are excited for us to show more publicly our commitment to that market. So we had a good quarter in Q2 in Europe. And I will say we look forward to many more with Robert leading that business.

No, I appreciate that. Maybe looking at the portfolio, obviously, a lot of change over the last few years. I guess how do you think about the portfolio moving forward, specifically M&A? Is it fair to assume that it's going to be data center focused? Anything else out there that's of interest to you guys?

Yes. No, the portfolio moves, as I highlighted in my prepared remarks, have been very thoughtful. The 8 acquisitions that we've made with a focus on infrastructure, deploying the cash that came in from thermal, we did a couple of those deals. We also bought back some shares at a really good value in the low 50s. And as we think going forward, our portfolio management and our capital allocation priorities will still be focused on growth, whether that's organic growth or whether that's M&A. And on M&A, we really like the infrastructure vertical. So data center is part of that, but power utilities is part of that as well. And I would expect that 40-plus percent vertical will certainly expand over time organically, but also through M&A.

And what I want to comment on is the discipline and acquisitions that we've made. The team is -- the capability is always on from an M&A perspective. We've got a full funnel. Our integration playbook is clear, and we've delivered nice returns on these 8 acquisitions that we've made. We have a high bar. We do our deals based on cost savings. We don't underwrite deals on top line revenue synergies. But I will tell you that in these last 2 deals, especially with Trachte and EPG, we're seeing nice top line synergies. So we're excited. Our balance sheet is healthy. We're in our leverage ratio right now between 2 and 2.5x, and we're rapidly deleveraging because this business creates a lot of cash. So we'll be active, but we're going to be very disciplined and follow our capital allocation priorities as we've done so far.

Any -- obviously, U.S. is bigger for you guys. Is it fair to think that, that is the focus, just that's where you have your biggest business, it's where things are the strongest? Or is there some interest in scaling some of those international opportunities?

Yes, it's a great question. And what I would say is, obviously, the most recent deals that we've done have been really focused on North America. It is a hell of a market. It's growing really well. So as we prioritize, that's where the capital has flowed. But putting Robert in charge of that, putting the focus in Europe, we've got scale, but we could use a little bit more. So I guess that's a way to say that we're looking at both areas, and we're focusing very much on it. So yes, we're looking very much outside of North America for possible M&A.

Data center, a hell of a market might be the tagline of the day today, I think. I might steal that for a note tomorrow. I guess just on that, like I kind of said earlier, it's getting -- I think it's going to be hard for anyone to probably take the other side of the demand equation over any near term. But what about margins and the pricing environment in data center? I guess both as it relates to the existing business, obviously, backlog, but then maybe more specifically like new orders, are you confident that price and margins will come through on what's next?

Yes. Let me take that in a couple of parts. I'll talk, first of all, about our margin structure overall. Our Q2 came in from a margin perspective. It was actually a little bit better than we expected. It was down as we had guided as both price cost from tariffs as well as the new M&A has come in a bit lower than our corporate average. As we look at the second half of the year, excluding our new EPG acquisition, we expect margins to be flattish in the third quarter and then accelerate and grow and be healthy as we exit the year. So that's really important to our focus on healthy margin profile going forward.

As it relates to data center -- our data center business specifically, it's very much a margin that's in line with the broader segment systems protection. We work with our customers. Obviously, there's tremendous demand for those products. So we're working with those customers as costs elevate or come down. And we're feeling really good about the margin structure of that business. We have been very much focused on rapid ROI in the capital that we're investing on that business and to be -- to ensure that we have good visibility to the orders coming in, so the returns on that capital investment are going to be healthy. And we're really pleased with deploying capital against that market for sure.

And when I think about that margin trajectory that you laid out, Q2 down, Q3 okay, Q4 feels like you're going to start to accelerate that. Is that just effectively the new orders rolling through the backlog? And what was in the backlog was pressured because costs went up, but now we're starting to see the new orders come in?

Yes. Some of it is just that it's the revenue ramp. I will tell some of it was just getting our price/cost lined up with the tariffs that came in and impacted our cost structure in Q2. And what we're doing is adjusting our pricing, our productivity as well as our mix. We've got a great playbook to offset inflation, and that's what we're doing, and you're seeing that just take a bit of time. The -- obviously, we're also investing, and we're investing in capability to grow our business because we're -- that's our first priority is growth. But we're seeing nice acceleration on the revenue line and that leverage certainly doesn't hurt as we think about the margin structure.

One thing I do just want to clarify is those margin comments that I made do exclude the M&A that's coming in. The M&A is coming in a bit under our corporate average. What I love to see is the previous deals that we've done, we've got a really good playbook to get those margins up over time. And that's certainly the plan for EPG and Trachte as well.

When we think about price, on one hand, data center has the strongest demand of any vertical, clearly. There's probably more urgency there to get the product than any other vertical, which all of that sounds very good for price. On the other hand, they're the biggest customers, and I'd imagine they have a lot of negotiating leverage. Like any way to think about price on the data center side versus the rest of the business? Is one easier or one harder to get than the other?

Yes. You said some key phrases in there, which is around partnership. These are long partnerships that we've had with these key customers. And while there is a real spike in demand, certainly, we're not trying to overprice that business. These are partners of ours that are -- will be long-term partners, but they're also open to the conversation when we have cost pressure coming at us. And we have those conversations when it's appropriate. On the distribution side, more of the short-cycle side that goes through distribution, that's a bit more of a transactional pricing environment that as long as we have the lead times, we'll get that pricing -- we're confident that we'll get that pricing through in the -- and the firm has been very successful over time doing just that.

And maybe this question, we should separate data center versus non-data center. But like what lead times for nVent, are they coming in? And are customers -- so I guess, are your lead times coming in, in terms of turning around the product? And then are the order lead times coming in between when they place the order and when they ultimately want delivery of it?

Yes. What I would say is the demand is significant. And as we try to accelerate our capacity, the opportunity is right there in front of us. So we don't see any shortening of lead times. We're seeing -- we're definitely -- we definitely have more than we can get after.

Yes. It's a good problem...

Anything that you'd add, Tony?

No, I think just then you think of kind of more traditional short-cycle side of the business, that's more of a book and ship business, right? That's pretty well in line as you think around kind of lead times and stuff, but certainly on the data center, even on Trachte, EPG, that's -- as we've talked about, that's where we're seeing our backlog grow and it's giving us a lot of visibility and the confidence in raising the guide here for the year.

Yes. I mean on that distribution side, more -- you said more short cycle, more transactional. Do you think -- is there a risk that those customers were trying to get ahead of these price increases that they probably expected? And could they have been overbuying for the last couple of quarters?

Yes. We've been very focused on that. It's certainly not the first time our teams have worked through this sort of inflationary cycle. And we very closely follow the sell-in and sell-out with those customers. And they've very much been in line with what we expected, and we're not seeing that sort of pre-buy type of activity as prices has flowed through.

I appreciate that. Maybe on the other side of tariffs, there's a competitive dynamics. Do you feel like the tariffs have brought competitive tailwinds for nVent versus a lot of European or Asian producers trying to get into the U.S. market?

What I would say is, over time, we've very much gone for an in-region, for-region manufacturing strategy. And I would say a lot of our competitors have really done the same. Some of these products are quite sizable and the economics just don't work to ship them across the ocean. So while I feel good about our competitiveness, I don't feel like we have uniquely cornered the market on in region for region.

I appreciate that. I guess maybe thinking a little bit of capital allocation, how do you -- clearly, there's a lot of tech advancement coming into these markets. And if you're able to innovate, that's obviously a good place to be. How do you think about inorganic going out and buying technology versus maybe developing something in-house, maybe you could even work with some key customers to develop very specific products for them. How do we balance that or think about that?

Yes. It's certainly something that we've been talking about a lot. We've talked about increasing our investment in research and development. It's something that we've said we've targeted to try to get that up to 3%. I will tell you, our rapid revenue growth has made that a bit more challenging to chase, but it's an area as we think about capital and resource prioritization that we're really focused on internally. That's the internal side. Externally, we're definitely working with our customers as well as our suppliers to co-develop products.

Anything that you'd add on that one, Tony?

No, I think -- I mean, we're certainly -- I think from an external perspective, inorganic, I don't feel like we've got any hole per se in the portfolio by any means. It's just what can continue to complement, right? We're very focused on finding great products in high-growth areas that we can scale, right? And we always talk about really that framework, how do we continue to drive that and really over and over repeat it.

Yes. What about service? Is that a big piece of the business? Is that a place where you feel like you could do more? A lot of companies talk about almost an equipment service flywheel, like the reason we win the equipment is because we can service it.

Yes. We've been asked that a few times. And what I would say is it's a small -- to answer the question very directly, it's a small part of our business. But it's a part of our business that we see a real opportunity for and more just as -- to partner with our customers and make sure that they are getting what they need. So far, especially in the cooling part of the business, that hasn't been something that's either helped us or kept us from winning business. But as we look going forward, especially as the -- as we start to get to that standard product portfolio that we'll talk about more in the second half of the year, we feel like there could be an opportunity there, and the team is working on that.

Yes. I guess 2 of the big deals you guys did, Trachte and Avail, can you just maybe update us on how the integrations there are progressing? How they performed relative to initial expectations?

Yes. Happy to do that. And the short answer to that is they're both performing quite well. Trachte, we've had just a little over a year now. Trachte will flip to organic growth, and it's actually one of the areas that gives us a real strong reason to believe on that aggressive acceleration that we're seeing on revenue in the second half. And EPG, one quarter in the books. We guided a day after that deal closed and a day after that closed. So we just are getting under the hood, but it had a good quarter, and we're seeing the backlog be quite good.

So teams are working hard to run our playbook on integration, one that has been very successful for us in the past, and we're really excited. It's exceeding our expectations for sure. And it's that -- I'll just go back to the portfolio focused on infrastructure where there's nice healthy growth, not just in the short term, but in the intermediate and long term as well. We're really excited about the future for nVent, and those 2 deals are a great example of getting the portfolio right through transformation and accelerating our growth.

And then I mean, kind of following up on that last one, growth inflected in the first half. You guys are calling for even better growth in the second half, well above the 4% to 6% kind of target level. Like I guess, how long do you think this strength can last here?

Yes. We know that certainly, that second half performance is really -- is accelerated. And that -- when we did the Thermal deal, we said that this would be a portfolio that would have accelerated growth. We gave more intermediate targets a couple of years ago in our last Capital Markets Day. We're due for another one, and we'll do that in the first quarter of next year, and we'll give you a little bit more visibility of what that intermediate term looks like. But I will tell you that we feel very much like the business has inflected to a higher growth future, and we're excited about it.

Well, I look forward to that. Thank you, guys. Really appreciate this.

Thank you.

Thank you.