nVent(NVT) - 2024 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Financial Statements (unaudited) Presents unaudited condensed financial statements for Q2 and H1 2024, including key acquisitions and subsequent events Condensed Consolidated Statements of Income and Comprehensive Income Reports a 9.6% YoY increase in Q2 2024 net sales to $880.3 million and a 13.7% increase for H1 2024 Q2 and H1 2024 Financial Highlights (in millions, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $880.3 | $803.0 | $1,754.9 | $1,543.6 | | Gross profit | $368.3 | $331.9 | $723.8 | $635.1 | | Operating income | $167.8 | $146.7 | $327.0 | $270.8 | | Net income | $111.0 | $112.9 | $216.1 | $206.7 | | Diluted EPS | $0.66 | $0.67 | $1.28 | $1.23 | - Cash dividends paid per ordinary share increased to $0.19 in Q2 2024 from $0.175 in Q2 2023[3] Condensed Consolidated Balance Sheets Shows total assets of $6.19 billion as of June 30, 2024, with increased equity and decreased liabilities Balance Sheet Summary (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,422.7 | $1,336.1 | | Goodwill | $2,568.8 | $2,571.1 | | Total assets | $6,188.1 | $6,161.7 | | Total current liabilities | $654.1 | $733.6 | | Long-term debt | $1,730.6 | $1,748.8 | | Total liabilities | $2,900.3 | $3,019.6 | | Total equity | $3,287.8 | $3,142.1 | Condensed Consolidated Statements of Cash Flows Details a significant increase in H1 2024 operating cash flow to $220.8 million, boosting total cash reserves Cash Flow Summary for Six Months Ended June 30 (in millions) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $220.8 | $146.6 | | Net cash used for investing activities | ($34.3) | ($1,120.8) | | Net cash (used for) provided by financing activities | ($83.2) | $811.2 | | Change in cash and cash equivalents | $88.9 | ($159.0) | | Cash and cash equivalents, end of period | $274.0 | $138.5 | Notes to Condensed Consolidated Financial Statements Provides details on accounting policies, acquisitions, goodwill, debt, and significant subsequent events - On July 16, 2024, the company completed the acquisition of Trachte, LLC for approximately $695.0 million in cash[78] - On July 31, 2024, nVent entered into a definitive agreement to sell its Thermal Management business for $1.7 billion in cash[78] - The purchase price for the May 2023 acquisition of ECM Industries was allocated, resulting in $379.7 million of goodwill and $524.0 million of identifiable intangible assets[27][28] Net Sales by Geography - Six Months Ended June 30, 2024 (in millions) | Region | Enclosures | Electrical & Fastening Solutions | Thermal Management | Total | | :--- | :--- | :--- | :--- | :--- | | North America | $633.0 | $493.2 | $167.7 | $1,293.9 | | EMEA | $196.7 | $74.6 | $81.6 | $352.9 | | Asia-Pacific | $49.5 | $19.5 | $33.7 | $102.7 | | Rest of World | $1.5 | $3.9 | — | $5.4 | | Total | $880.7 | $591.2 | $283.0 | $1,754.9 | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Discusses H1 2024 performance, highlighting a 13.7% sales increase driven by acquisitions and organic growth - Key trends impacting the business include inflationary cost increases, a higher effective tax rate due to the Pillar II framework, and sales growth driven by the megatrends of electrification, sustainability, and digitalization[86] - The company's 2024 operating objectives include achieving differentiated revenue growth, integrating recent acquisitions, driving operational excellence, and deploying capital strategically[87] - Subsequent to the quarter end, nVent acquired Trachte for ~$695M and entered an agreement to sell its Thermal Management business for $1.7B[85] Consolidated Results of Operations Details a 9.6% YoY net sales increase in Q2 2024, driven by acquisitions and organic volume growth Components of Net Sales Change (YoY) | Component | Q2 2024 | H1 2024 | | :--- | :--- | :--- | | Volume | 3.7% | 3.8% | | Price | (0.1)% | 0.4% | | Organic growth | 3.6% | 4.2% | | Acquisition | 6.4% | 9.7% | | Currency | (0.4)% | (0.2)% | | Total | 9.6% | 13.7% | - The effective tax rate increased by 6.5 percentage points in Q2 and 5.4 percentage points in H1 2024, primarily due to the enactment of the Pillar II global minimum tax and a one-time benefit in 2023[99] Segment Results of Operations Breaks down H1 2024 performance by segment, with Enclosures leading organic growth and E&FS boosted by acquisitions Segment Performance - H1 2024 vs H1 2023 | Segment | Net Sales (H1 2024, $M) | Sales % Change | Segment Income (H1 2024, $M) | Income % Change | | :--- | :--- | :--- | :--- | :--- | | Enclosures | $880.7 | 11.3% | $198.6 | 15.1% | | Electrical & Fastening Solutions | $591.2 | 25.1% | $177.7 | 20.2% | | Thermal Management | $283.0 | 1.0% | $59.8 | 0.5% | - Enclosures segment income margin increased by 0.8 percentage points due to higher sales volume leverage[103] - Electrical & Fastening Solutions segment income margin decreased by 1.2 percentage points due to unfavorable product mix from acquisitions and inflationary pressures[108] Liquidity and Capital Resources Highlights a strong liquidity position with $274.0 million in cash and a significant increase in free cash flow Free Cash Flow Reconciliation (in millions) | Metric | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $220.8 | $146.6 | | Capital expenditures | ($34.6) | ($32.3) | | Free cash flow | $186.5 | $114.5 | - In June 2024, nVent entered into a new two-year $500.0 million senior unsecured term loan facility, which was subsequently used to help finance the Trachte acquisition in July 2024[126] - A new $500.0 million share repurchase authorization was approved by the Board, effective from July 23, 2024, to July 22, 2027[127] Quantitative and Qualitative Disclosures about Market Risk States no material changes in market risk occurred during the quarter ended June 30, 2024 - There have been no material changes in the company's market risk during the quarter ended June 30, 2024[133] Controls and Procedures Confirms the effectiveness of disclosure controls and procedures as of June 30, 2024 - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2024[134] - No material changes to internal control over financial reporting occurred during the second quarter of 2024[135] PART II OTHER INFORMATION Legal Proceedings Reports no material developments in legal proceedings since the 2023 Annual Report - There have been no material developments in legal proceedings since the end of 2023[137] Risk Factors Identifies a new risk factor concerning the potential non-completion of the Thermal Management business sale - A new risk factor was added concerning the sale of the Thermal Management business, highlighting that the transaction may not be completed as anticipated due to risks such as failure to obtain regulatory approvals or satisfy other closing conditions[139] Unregistered Sales of Equity Securities and Use of Proceeds Details no share repurchases in Q2 2024 and the authorization of a new $500 million program - No shares were repurchased under publicly announced plans during Q2 2024[141] - A new $500 million share repurchase authorization began on July 23, 2024, and expires on July 22, 2027[141] Other Information Confirms no directors or officers adopted or terminated Rule 10b5-1 trading arrangements in Q2 2024 - No directors or Section 16 officers adopted or terminated Rule 10b5-1 trading arrangements in Q2 2024[142] Exhibits Lists key exhibits filed, including a new Term Loan Agreement and CEO/CFO certifications - Key exhibits filed with this report include a new Term Loan Agreement from June 2024, CEO/CFO certifications, and iXBRL data files[145]