Prepared remarks
Good day, and welcome to the nVent Electric Second Quarter 2026 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, to withdraw your question, please press star then 2. 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 A. Wozniak, our Chair and Chief Executive Officer, and Gary Corona, our Chief Financial Officer. Today, we will provide details on our second quarter performance, our outlook for the third quarter, and an update to our full year outlook. All results referenced throughout the presentation are on a continuing operations basis unless otherwise stated. Before we begin, I will 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 will have time for your 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 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-tenant operators, 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 nVent, we continued 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 have 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 and 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 verticals. 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/Residential 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 remain our most significant growth opportunity. We also see substantial opportunity in Power Utilities, where increasing electricity demand, grid modernization, and the growing power requirements of AI data centers are creating meaningful long-term tailwinds. Turning to Industrial and Commercial/Residential, 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 business, which are rapidly growing, and more capacity is needed to meet customer demand. Overall, I am proud of our nVent 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.
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 1 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 Systems Protection's first $1 billion quarter. Organically, sales grew 62% led by the infrastructure vertical which more than doubled due to continued strength in data centers. Industrial and Commercial/Residential 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% 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/Residential 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 pre-payable 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 portfolios. 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% to 23%. We are raising our full-year adjusted EPS range to $5.00 to $5.10 versus our original guidance of $4.45 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 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 build-out. 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 our Anoka campus and that proximity has allowed us to use the infrastructure, resources, and expertise nearby to quickly scale. We opened the Blaine 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, 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 $2 billion in 2026, 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.
Questions and answers
We will now begin the question-and-answer session. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw the question, please press star then 2. Our first question comes from Deane Dray with RBC Capital Markets. Please go ahead.
Thank you. Good morning, everyone. I realize there is lots of focus on the continued hyper-growth in your data center business, but I was hoping we could start off walking through your industrial short-cycle businesses and Electrical Connections. The 18% organic was three times bigger than what we had been modeling for. Beth, are we seeing an inflection here? How broad-based is that? And just to make sure we are level set, were there any unusual items booked this quarter? Any one-timers that would have skewed that organic growth rate higher?
Thank you, Deane. As the quarter progressed, we saw strong orders. We saw growth across every vertical and every geography, and our orders were very strong through our distribution partners, which is where we see much of that short-cycle industrial growth. Electrical Connections, which has a lot of short-cycle business, performed very well and executed on those orders. There was nothing unusual or one-time—this was a broad-based inflection point driven by real end-market demand.
Good. That is great to hear. Second question: you hinted at more capacity expansion and at your Analyst Day, so seeing the announcement today makes sense. A couple questions: how did you land on what I think is a 60% increase in capacity, and where does this take you in terms of your current order funnel? Does it take you into 2028? And Gary, how are you managing the margin impact as you ramp each new line so there is not too much pressure on incrementals?
As we look at demand and the visibility we have with customers, and given our modular platform launch in the fall, we knew we needed to expand capacity and plan several steps ahead. Blaine 1 is still ramping through this year and into 2027, so we needed to add another facility because it takes time to get them online. We do believe this expansion takes us through 2027 and into 2028 at this time.
Deane, on margins: as we've said consistently, we expect to continue to invest to support the infrastructure vertical and serve the backlog that Beth described. That is embedded in our guide, which assumes mid-twenties incrementals in the second half.
Thank you.
Our next question comes from Jeffrey Sprague with Vertical Research. Please go ahead.
Hey, thanks. Good morning everyone. Thinking about the ramp: looking at Systems Protection, we have several quarters now of sequential revenue growth as this bow wave of activity has come through. The guide seems to level out a bit, and perhaps Q3 or Q4 could be down sequentially. Is seasonality being ironed out by this level of activity, or is there something going on with how you stage new production? Can you address that please?
Jeffrey, we expect good organic growth in the second half, and in Q3 we guided 32% to 35%. Keep in mind we will be lapping strong comps. We expect continued acceleration: at the midpoint we're looking at 50% growth in Q3 versus 46% growth in the first half. We feel the team is delivering momentum.
Is there any internal or external supply chain issue that might hold back sequential trajectory in Q3 versus Q2?
We are being very prudent in our planning because as we ramp capacity we need to add equipment, labor, and ensure suppliers can respond. In Q2 we managed those things successfully, which resulted in favorable growth. Looking forward, as we ramp two new facilities, we want to ensure we do the right planning to avoid execution risk.
Could you address the service opportunity being created by the installed base growth? Are you seeing traction in that area?
Yes. Our liquid cooling products were designed with modularity in mind so parts can be hot-swappable. We are investing in service capability to support the products. As we expand beyond hyperscalers to a broader customer set, we can help commission, install, and provide service. That capability is building, and our modular portfolio launching in the fall will be an important element to support a broad base of customers.
Our next question comes from Nigel Coe with Wolfe Research. Please go ahead.
Thanks. Good morning. Beth, on orders: I know they are lumpy, but is there anything around the cadence of product launches and the capacity ramp that pushed orders around and made them lumpier? Thinking about the modular product launches, etc.
Not really. We've seen over the last several years that these orders come in at various times and are usually large. Year-to-date in Q3 we've seen very strong orders. The lumpiness is normal for large data center orders.
Regarding the Blaine 2 facility: can you give some cadence on Blaine 1 production ramp and capitalization? Where do you think you'll be by the end of the year? And how are you avoiding the supply chain bottlenecks that some peers are seeing?
When ramping up, it's not just our capacity—it's also ensuring our suppliers ramp. We've worked closely with our supply base to ensure their capacity is expanding. Blaine 1 came online faster than expected but is still ramping through this year and into 2027. It is starting to contribute, but we expect stronger contributions in 2027. A lot of work goes into coordinating supplier ramps alongside our own facilities.
Our next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.
Good morning. Demand remains healthy. Backlog is about $2.5 billion and relatively flat sequentially. With the capacity ramp and what you see in the pipeline, is this backlog level appropriate going forward? Do you expect backlog to continue to increase, given the tough comps in Q3? Any comments would be helpful.
I think it's around the right level. Large, lumpy orders can change backlog quickly, but we are working to turn backlog because it's important to respond to customer demand and maintain good lead times. We worked hard in Q2 to execute on backlog for that reason. We have seen a strong start to Q3 on the order front.
Second question on Connections margins: you've been dealing with inflationary pressures. The segment's growth is strong—how should we think about margin trajectory and whether you can expand those margins?
Joe, we're pleased with top-line and bottom-line contribution from Electrical Connections. They delivered mid-teens profit growth in the quarter. We saw a significant sequential step-up in margins and expect continued improvement as pricing and productivity actions fully take hold. I expect that segment to be in the high twenties for margins as pricing implementation completes and productivity continues.
Our next question comes from Will Branco with Melius. Please go ahead.
Hi. Good morning. You mentioned a strong tailwind in the distribution channel. Can you give a sense of whether this is inventory restocking versus real underlying sell-through demand? Also, how much did Power Utilities grow in the quarter, and how do you balance demand in that space with data centers?
We look at both sell-in and sell-out from our distributors, and the activity is well balanced. They are seeing strong sell-through, so we believe it is real demand—not merely restocking. Power Utilities grew double digits in the quarter. As we intentionally shift toward data centers and Power Utilities, we are ensuring we serve core customers and make prudent decisions when trade-offs are required. In some cases, we have separate facilities for liquid cooling versus power utility products. Overall, planning and coordination ensure we can execute across both opportunities.
Our next question comes from Jeffrey Hammond with KeyBanc Capital Markets. Please go ahead.
Good morning. Beth, can we count on 100 days to get Blaine 2 opened, or is that too aggressive? Also on Electrical Connections, how sustainable do you think the step-up in acceleration is and, Gary, on margin recovery, are we where we want to be or is there more price/cost recovery into the second half? How should margins look on EC going forward?
One hundred days is too aggressive. We're running very fast but can't repeat that performance. On Electrical Connections growth, we've focused on positioning our product portfolio—cable management used in data centers is one example. We have improved channel coverage, launched new products, and added capacity on core lines, which supports sustained growth.
We are pleased with EC's contribution; mid-teens profit growth is significant. We saw the progress we expected in the quarter and expect continued margin progress as pricing fully takes hold. Keep in mind there is some acquisition contribution in that business as well. I expect EC margins to be in the high twenties this year.
Quick questions on liquid cooling: early feedback on your modular product offering and uptake? For the $2 billion data center revenue target in 2026, what do you think the mix of liquid cooling versus other data center products will be?
Our modular platform will launch later this fall, and interest is very high across a broad set of customers. We are confident about uptake and growth from the new offering. On the $2 billion projection, we haven't broken the mix down publicly yet, but a significant contribution will come from liquid cooling, with additional contributions from our broader data center portfolio.
Our next question comes from Neil Burke with UBS. Please go ahead.
Good morning. Within your data center portfolio, how are customers purchasing your products? Are customers buying full systems from nVent or more commonly buying portions such as liquid cooling only? Also, on Power Utilities, can you talk about drivers there? Is the mix benefiting nVent and are you dealing with data center customers directly given power constraints?
It depends. Some customers buy across our offering—cooling, power, cable management—while others buy portions of a liquid cooling system. We try to understand each customer's needs and are flexible across the value chain. We serve hyperscalers, colocation providers, distribution, and integrators, providing products up to integrated solutions such as e-houses. On Power Utilities, demand is being driven by data centers, an aging grid, and modernization. We sell direct to utilities and through distribution, and we also see opportunities in engineered buildings and the gray space. Overall demand for power is increasing, and we are positioned to serve those needs.
Our next question comes from Varun Govindaraj with Bernstein. Please go ahead.
Good morning. Quick question on product vitality: beyond the CDUs coming in the back half of the year, where are you looking to expand content per megawatt? Also, how do you view 800-volt DC and its impact on your opportunity set—any concerns or are you working with customers on next-generation requirements?
We continue to launch new products for high-growth verticals: modular liquid cooling, PDUs with new capabilities, and our Aeroflex flexible bus for medium-voltage applications are examples. We are improving new product vitality across the company to drive differentiated growth. Regarding 800-volt DC, we consider how it affects rack-level cooling and rising heat densities. Much of our portfolio is already rated to support higher surge or load capacity. We see 800-volt DC as part of the industry's evolution; we'll continue to assess roadmaps and ensure our next-generation products meet customer needs.
Our next question comes from Vladimir Bystricky with Citigroup. Please go ahead.
Good morning. Are you seeing any changes in order timing from utilities and data center customers? Are customers ordering with longer lead times to lock in capacity?
For our product portfolios, we are not necessarily seeing customers extend lead times across the board. We are getting visibility from customers on future demand so we can plan capacity, but programs vary—some roll off and new ones come in. We are having those discussions and using that visibility in our planning.
Vlad, as we have said previously, the backlog is mostly 12 months or less, and that has not extended out.
How do you see data center opportunities outside North America evolving, and how are you positioned to meet demand overseas as investment ramps in other regions?
Data centers are expanding in Europe and Asia. We're investing in commercial capabilities in those regions and establishing or extending manufacturing footprint where appropriate. We already manufacture some data center products in Europe and are planning to extend North America approaches to capture opportunities globally.
Our next question comes from Nicole DeBlase with Deutsche Bank. Please go ahead.
Good morning. Backlog ticked down a bit sequentially, which is a high-quality problem since you shipped a lot this quarter. Considering customer pipeline and production plans as we exit 2026, do you think backlog grows from these levels?
You're right—Q2 strength was driven by executing against backlog. Our backlog is typically within 12 months and we keep adding capacity. We aim to be balanced so we can respond to demand and maintain good lead times. Because orders are lumpy, backlog can move quarter to quarter, but this level feels appropriate given our capacity plans and our goal to turn backlog efficiently.
Does 'off to a strong start' mean orders are accelerating from Q2 levels? Also, what's the M&A pipeline look like?
On orders, we continue to see short-cycle strength and some of those lumpy large orders start to come in early this quarter. On M&A, we have a strong pipeline and remain disciplined. We continue to evaluate opportunities that strengthen our position in infrastructure, and our healthy balance sheet gives us flexibility.
Our next question comes from Luke Junk with Baird. Please go ahead.
Good morning. To what extent is the short-cycle strength company-specific versus broader end-market? Also, on the capacity increase in cooling, does the order book enable you to open orders further, and how much inherent flexibility do you have when bringing modular online and ramping customer programs?
Short-cycle strength reflects both market dynamics and company actions. We've improved channel coverage, integrated marketing planning, launched new products, and expanded capabilities to drive distribution performance. Regarding capacity, our expansions are driven by customer visibility and backlog plus the upcoming modular launch. The proximity of these facilities to our Anoka campus gives us flexibility with resources, infrastructure, and labor. We've planned flexibility into the campus to serve hyperscalers and other customers and to support program revisions as they come online.
Our next question comes from Scott Graham with Seaport. Please go ahead.
Hi, good morning. On third quarter organic guidance, which is slower than Q2, is there upside to that organic number? Is it being driven by shipments from backlog in liquid cooling? Also, you mentioned mid-twenties incrementals—previously 30% was discussed as a stretch target; is that still a target?
We are pleased with the guidance of 32% to 35% in Q3. Remember the two-year stack gets tougher with stronger comps, and the two-year stack at the midpoint in Q3 is 50% growth, which is acceleration versus the first half. We're being prudent to provide flexibility to execute and invest to support growth in the second half. On incrementals, our midterm target is mid-twenties, and that is the expectation embedded in our planning.
Our next question comes from Brian Drab with Willblair. Please go ahead.
Thanks. On the longer term beyond 2026 and 2027, how have conversations with hyperscalers and large customers developed? What visibility are you getting on the broader pipeline—how far out do you have visibility to projects?
We have visibility several years out and work with partners such as chip and system providers on roadmaps through 2030 to future-proof our products. Liquid cooling currently represents a smaller portion of overall cooling but is on a long runway as heat densities increase with next-generation AI chips. Even if new data center build-outs slow at some point, the white space refresh and replacement cycle support continued growth for liquid cooling.
One last quick point: LTM orders are probably more relevant—are those growth rates higher than the low-double-digit you mentioned this quarter?
Yes.
This concludes our question-and-answer session. I would like to turn the conference back over to Beth A. 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, and in our ability to execute. We have many growth opportunities and multiple levers to expand margins. I am 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 is now concluded. Thank you for attending today's presentation. You may now disconnect.