nVent Electric plc (NVT) Earnings

Management highlights

- Overall Company Performance - This was InVent's fourth consecutive quarter with total sales over $1 billion, and the first quarter where Systems Protection segment sales exceeded $1 billion - Organic orders grew low double digits broadly across the business, with a healthy backlog of $2.5 billion that provides revenue visibility through the end of 2026 and into 2027; Q3 year-to-date data center orders have been very strong - New products contributed over 30 percentage points to total Q2 sales growth, with 14 new products launched in the quarter; the EPG acquisition continues to outperform expectations, delivering strong double-digit YoY sales growth - All geographies grew: Americas grew very strong double digits, Europe grew mid single digits, and Asia Pacific grew double digits; all verticals grew, with infrastructure organic sales more than doubling (driven by data centers), Commercial Resi growing high single digits, and Industrial growing low single digits - Total adjusted operating income grew 61% YoY, adjusted EPS grew 69% YoY, and free cash flow grew 125% YoY; the company has a strong balance sheet with net leverage of 1.2x, well below its 2-2.5x target range - Portfolio Transformation - InVent has intentionally shifted its exposure to the high-growth infrastructure vertical via organic investment and M&A: infrastructure represented 12% of sales at spin, 45% in 2025, and nearly 60% in the first half of 2026 - Liquid Cooling Capacity Expansion - InVent has invested in liquid cooling capability for over a decade to support AI data center buildout; after a 2023 expansion was insufficient to meet accelerating demand, the company opened the Blaine 1 facility in Minnesota at the start of 2026, doubling capacity - Blaine 1 is progressing ahead of expectations and will continue ramping through 2026; based on strong demand and visible customer orders, InVent has announced Blaine 2, a third similar-sized facility near the existing Anoka campus, expected to open in H1 2027 - InVent expects full-year 2026 total data center sales to exceed $2 billion, more than doubling 2025 data center sales - Capital Allocation - The company's top capital allocation priority is organic growth, with 2026 capex expected to be ~$130 million (up 40% YoY), with most incremental investment going to new capacity for data centers, power utilities, and supply chain resiliency - $118 million was returned to shareholders in the first half of 2026 (including $50 million in share repurchases), and the quarterly dividend was increased 5% YoY

Guidance

- Full year 2026 guidance was significantly raised from previous levels driven by strong Q2 performance and ongoing momentum, particularly in AI data centers: - Reported sales growth guidance is now 37% to 39%, up from the prior 26% to 28% range - Organic sales growth guidance is now 32% to 34%, up from the prior 21% to 23% range - Adjusted full year EPS guidance is now $5.00 to $5.10, up from the prior $4.45 to $4.55 range; the midpoint represents 50% YoY adjusted EPS growth - Expected total tariff impact increased to $100 million from the prior $80 million estimate, driven by much higher volume growth; management expects inflation and tariff impacts to continue to be fully offset via pricing, supply chain productivity, and operational mitigations - Full year free cash flow conversion guidance is maintained at 90% to 95% - Q3 2026 guidance: - Reported and organic sales growth is expected to be 32% to 35% YoY, with 50% two-year stacked growth at the midpoint, an acceleration from first half levels - Adjusted Q3 EPS is expected to be between $1.35 and $1.38, representing 50% YoY growth at the midpoint - Incremental margins for the second half of 2026 are expected to be in the mid-20s range, which is embedded in current guidance - The infrastructure vertical is expected to deliver strong double-digit full year growth, while Industrial and Commercial Resi are each expected to grow mid-single digits for the full year

Segment performance

InVent Electric operates two product segments, with total Q2 2026 sales of $1.471 billion (up 53% YoY). 1. Systems Protection: Segment sales reached $1.072 billion, a 70% increase YoY. This represents 72.9% of total company revenue for the quarter. The EPG acquisition contributed 7 percentage points to this growth, with organic sales growing 62% YoY driven by strong data center demand within the infrastructure vertical. Segment income was $248 million, with a return on sales of 23.2%, an increase of 150 basis points YoY, supported by strong volume and productivity gains. 2. Electrical Connections: Segment sales hit $399 million, a 21% increase YoY. This represents 27.1% of total company revenue for the quarter. The EPG acquisition contributed 2 percentage points to growth, with organic sales growing 18% YoY across all verticals and geographies. Segment income was $109 million, up 15% YoY, with a return on sales of 27.3%, a decrease of 140 basis points YoY due to inflation and product mix effects. Margins improved sequentially into the high 20% range quarter-over-quarter.

Risks & headwinds

- Capacity ramp uncertainty: Ramping new production facilities requires adding equipment, labor, and aligning with supplier capacity expansion; management has taken a prudent approach to guidance to account for these execution risks as Blaine 1 ramps and Blaine 2 is planned - Data center order lumpiness: Large, lumpy data center orders create quarter-to-quarter variability in organic growth rates and backlog levels, which can lead to fluctuations in reported results - Inflation and tariff pressures: Ongoing inflation and higher-than-expected tariff costs have impacted margins, particularly in the Electrical Connections segment; while current mitigations are expected to offset these costs, unanticipated price increases could pressure margins going forward

Analyst Q&A

• Q: The 18% organic growth for short-cycle industrial and Electrical Connections was much higher than expected. Is this a real inflection, or are there one-time factors skewing the growth rate? What is the margin impact of the new Blaine 2 capacity expansion? /

  A: There is a real broad-based inflection, with strong orders across all verticals, geographies, and distribution partners, and no one-time factors distorted the Q2 growth rate. The new capacity is being added to meet visible demand through 2027 and into 2028. All investment and incremental margin impacts are already embedded in the updated guidance, which assumes mid-20s incremental margins in the second half of 2026.

• Q: Q3 guidance implies a slight sequential revenue decline from Q2. Is this due to supply chain issues, or is the guidance just conservative amid capacity ramping? How is the installed base service opportunity developing? /

  A: The guidance reflects prudent planning while ramping new capacity, including adding equipment, labor, and aligning supplier capacity, after Q2 outperformed expectations. There are no material unaddressed supply chain issues holding back growth. The service opportunity is growing as planned: liquid cooling products were designed with modular hot-swappable parts, and InVent is building out a full service capability for commissioning, installation, and support, which will be a key element of the new modular product line launching in fall 2026.

• Q: Backlog is roughly flat/down slightly sequentially at $2.5 billion. Is this the right target level going forward, and how do you expect Electrical Connections margins to trend? /

  A: Backlog is currently around the right level; the sequential decline reflects strong execution against backlog in Q2 to maintain good customer lead times, which is a strategic priority. Backlog will fluctuate quarter to quarter due to lumpy large data center orders. Electrical Connections delivered strong mid-teens profit growth in Q2, with a significant sequential margin improvement. Margins are expected to continue improving into the high 20s range as pricing and productivity actions fully take hold, in line with prior expectations.

• Q: What is the near-term sustainability of the recent acceleration in short-cycle Electrical Connections growth, and how much more price-cost margin improvement is coming in the second half? /

  A: The growth is sustainable: the segment is well-positioned with products like cable management that benefit from data center construction growth, expansion has been broad-based, and the company has added capacity and launched new products to support ongoing growth. Margin progress is on track, and continued improvement is expected as pricing actions fully take hold; margins will remain in the high 20% range for the full year, consistent with guidance.