Core Insights - nVent Electric reported strong fourth-quarter sales of $1.067 billion, a 42% increase year over year, with organic sales growing 24% driven by robust data center sales [1][6] - The company achieved record results in 2025, with sales, EPS, and free cash flow each rising at or above 30%, largely due to strategic portfolio transformations and increased demand for AI-driven data center solutions [3][4][7] - For 2026, management projects sales growth of 15-18% and adjusted EPS of $4.00 to $4.15, reflecting continued strong demand and effective cost management despite anticipated inflationary pressures [5][16][17] Financial Performance - Fourth-quarter adjusted EPS was $0.90, up 53%, exceeding guidance, while free cash flow reached $189 million, a 26% increase year over year [8] - The company’s backlog at year-end was $2.3 billion, three times the level from a year earlier, indicating strong future demand [2][7][14] - Adjusted operating income for the quarter was $210 million, a 33% increase, although margins were impacted by inflation and growth investments [7][9] Segment Performance - In the Systems Protection segment, fourth-quarter sales were $737 million, up 58%, with organic sales growing 34% [9] - Electrical Connections segment reported sales of $330 million, a 15% increase, with 8% organic growth [10][11] - Infrastructure sales represented 45% of annual sales, with data center revenue reaching approximately $1 billion in 2025, up from $600 million in 2024 [3][13] Strategic Initiatives - The company launched 86 new products in 2025, contributing about 10 points to sales growth, and expects infrastructure exposure to exceed 50% of sales in 2026 [12] - nVent is investing in liquid cooling technologies, anticipating significant growth in this area due to rising heat loads in data centers [15] - The company plans to host an Investor Day on February 24 to discuss its growth strategy and medium-term financial targets [19]

Financial Data and Key Metrics Changes - 2025 was a record year for sales, EPS, and free cash flow, each growing at or above 30% [5][19] - Fourth quarter sales increased by 42% and 24% organically, with adjusted EPS growing by 53% [8][14] - Free cash flow for the quarter was $189 million, up 26% year-over-year, and for the full year, it reached $561 million, growing 31% [7][19] Business Line Data and Key Metrics Changes - Infrastructure sales grew over 50%, driven by data centers, while industrial sales grew high single digits and commercial residential sales were up low single digits [9][17] - Systems Protection segment sales increased by 58%, with organic growth of 34% [17] - Electrical Connections segment sales rose by 15%, with organic sales up 8% [18] Market Data and Key Metrics Changes - Americas sales grew approximately 30%, while Europe was up high single digits; Asia Pacific saw a decline [9] - The backlog at the end of the year was $2.3 billion, triple the amount from a year ago, indicating strong demand [6][44] Company Strategy and Development Direction - The company transformed its portfolio by divesting the thermal management business and acquiring EPG, increasing exposure to the high-growth infrastructure vertical [5][11] - Infrastructure is expected to grow at approximately 20% in 2026, driven by AI data center CapEx acceleration [12] - The company plans to invest in new products, capacity, and supply chain resiliency, with a focus on growth [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving another record year in 2026, with guidance for reported sales growth of 15%-18% and adjusted EPS growth of 20%-24% [7][22] - The company anticipates higher inflation in 2026 but plans to offset it through productivity and pricing strategies [32][46] Other Important Information - The company launched 86 new products in 2025, contributing approximately 10 points to sales growth [9] - The company received multiple awards for its ethical practices and sustainability efforts, including recognition as one of the world's most ethical companies [26] Q&A Session Summary Question: Impact of inflation and growth investments on 2026 guidance - Management expects higher inflation in 2026 due to labor and metals, with plans to address it through productivity and pricing [32] Question: Customer reception to new liquid cooling products - Customer reception has been strong for new modular liquid cooling products showcased at Supercomputing [36] Question: Backlog recognition profile and orders-to-sales cadence - Most of the backlog is expected to be recognized in 2026, with strong momentum carried into the year [43][44] Question: Operating margins and pricing dynamics - Management expects margin expansion in 2026, with pricing and productivity offsetting inflation [46] Question: Trends in industrial orders and growth visibility - Industrial orders are expected to grow mid-single digits, supported by investments in CapEx and automation [75] Question: Data center technology evolution and competition - The company has significant experience in liquid cooling and is well-positioned to meet growing demand [78]

Financial Data and Key Metrics Changes - The company achieved net sales of $656 million and Adjusted EBITDA of $69 million in Q1, both exceeding the outlook range [4][9] - Adjusted EPS was $0.83, above the top end of the outlook range, while the prior year's EPS was $1.63 [9] - Organic volume increased by 2% year-over-year, driven by strong performance in the electrical segment [4][11] - The tax rate in Q1 was 3%, a significant decrease from 21% in the prior year, reflecting a one-time discrete benefit [9] Business Line Data and Key Metrics Changes - The electrical segment saw net sales increase year-over-year, driven by higher volume growth, although adjusted EBITDA margins compressed due to higher material costs and lower average selling prices [12] - The S&I segment experienced lower net sales compared to the previous year, primarily due to lower volume, but adjusted EBITDA and margins increased due to improved productivity [12] Market Data and Key Metrics Changes - The company expects mid-single-digit volume growth for the full year, supported by core construction growth and contributions from solar and global construction services [13][15] - The Dodge Momentum Index indicates favorable growth in core non-residential end markets, with significant investments expected in the data center market [18] Company Strategy and Development Direction - The company is focused on its core electrical infrastructure portfolio, supported by broader mega trends, and is advancing its 80/20 Initiative to streamline manufacturing capacity [5][7] - The divestiture of the TekTube mechanical tube product line aligns with the company's strategy to enhance focus on electrical end markets [5] - The company plans to exit three manufacturing facilities in the second fiscal quarter to further streamline operations [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the FY 2026 outlook, expecting net sales between $2.95 billion and $3.05 billion, with adjusted EBITDA remaining unchanged at $340 million to $360 million [6][15] - The management highlighted ongoing productivity improvements and a favorable cash position despite a year-over-year decline in operating cash flow [12][13] Other Important Information - The company recognized approximately $18 million in cash proceeds from the TekTube divestiture and anticipates an additional $7 million from real estate sales in Q2 [13] - The company is on track to deliver its fiscal year 2025 sustainability report, detailing ongoing initiatives and accomplishments [6] Q&A Session Summary Question: Can you provide more color on the core markets? - Management noted good growth in PVC and steel conduit markets, with strong backlogs and commitments for data center projects [24][26] Question: Why was there no increase in EBITDA and EPS guidance despite good Q1 results? - Management indicated it is early in the year and preferred to maintain current guidance while monitoring progress [28][32] Question: What is the update on the competitive environment and pricing? - Management acknowledged ongoing import competition in PVC conduit but noted improved pricing and margins in steel conduit [34][35] Question: Can you provide an update on the strategic review and cost-saving efforts? - Management confirmed ongoing strategic alternatives and highlighted expectations for productivity gains from facility closures [41][42] Question: How is the solar market performing? - Management indicated that solar activity was down year-over-year but noted a good backlog and expected demand growth in the second half of the year [85][86]