nVent Electric plc

Previous wording

This report contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "forecasts," "should," "would," "could," "positioned," "strategy," "future," "are confident," or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Among these factors are adverse effects on our business operations or financial results, including due to the overall global economic and business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions, including the ECM Industries and other recent acquisitions; competition and pricing pressures in the markets we serve, including the impacts of tariffs; volatility in currency exchange rates, interest rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; inability to mitigate material and other cost inflation; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; increased risks associated with operating foreign businesses, including risks associated with military conflicts, such as that between Russia and Ukraine, and related sanctions; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including this Quarterly Report on Form 10-Q and ITEM 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023. All forward-looking statements speak only as of the date of this report. nVent Electric plc assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Current wording

This report contains statements that we believe to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical fact are forward-looking statements. Without limitation, any statements preceded or followed by or that include the words "targets," "plans," "believes," "expects," "intends," "will," "likely," "may," "anticipates," "estimates," "projects," "forecasts," "should," "would," "could," "positioned," "strategy," "future," "are confident," or words, phrases or terms of similar substance or the negative thereof, are forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties, assumptions and other factors, some of which are beyond our control, which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. Among these factors are adverse effects on our business operations or financial results, including due to the ability to complete the pending sale of the Thermal Management business on anticipated terms and timetable; the overall global economic and business conditions impacting our business; the ability to achieve the benefits of our restructuring plans; the ability to successfully identify, finance, complete and integrate acquisitions, including the Trachte, ECM Industries and other recent acquisitions; competition and pricing pressures in the markets we serve, including the impacts of tariffs; volatility in currency exchange rates, interest rates and commodity prices; inability to generate savings from excellence in operations initiatives consisting of lean enterprise, supply management and cash flow practices; inability to mitigate material and other cost inflation; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging and transportation; increased risks associated with operating foreign businesses, including risks associated with military conflicts, such as that between Russia and Ukraine, and related sanctions; the ability to deliver backlog and win future project work; failure of markets to accept new product introductions and enhancements; the impact of changes in laws and regulations, including those that limit U.S. tax benefits; the outcome of litigation and governmental proceedings; and the ability to achieve our long-term strategic operating goals. Additional information concerning these and other factors is contained in our filings with the U.S. Securities and Exchange Commission (the "SEC"), including this Quarterly Report on Form 10-Q and ITEM 1A. of our Annual Report on Form 10-K for the year ended December 31, 2023. All forward-looking statements speak only as of the date of this report. nVent Electric plc assumes no obligation, and disclaims any obligation, to update the information contained in this report.

Previous wording

We classify our operations into business segments based primarily on types of products offered and markets served. We operate across three segments: Enclosures, Electrical & Fastening Solutions and Thermal Management, which represented approximately 50%, 34% and 16% of total revenues during the first three months of 2024, respectively.

Current wording

We classify our operations into business segments based primarily on types of products offered and markets served. We operate across three segments: Enclosures, Electrical & Fastening Solutions and Thermal Management, which represented approximately 50%, 34% and 16% of total revenues during the first six months of 2024, respectively.

Previous wording

On May 18, 2023, as part of our Electrical & Fastening Solutions reporting segment, we completed the acquisition of ECM Investors, LLC, the parent of ECM Industries, LLC ("ECM Industries"), for approximately $1.1 billion in cash, subject to customary adjustments. ECM Industries is a leading provider of high-value electrical connectors, tools and test instruments and cable management. The purchase price was funded primarily through borrowings under the 2033 Notes and 2023 Term Loan Facility (as defined below).

Current wording

On May 18, 2023, as part of our Electrical & Fastening Solutions segment, we completed the acquisition of ECM Investors, LLC, the parent of ECM Industries, LLC ("ECM Industries"), for approximately $1.1 billion in cash, subject to customary adjustments. ECM Industries is a leading provider of high-value electrical connectors, tools and test instruments and cable management. The purchase price was funded primarily through borrowings under the 2033 Notes and 2023 Term Loan Facility (as defined below).

Previous wording

On July 10, 2023, we acquired TEXA Industries for approximately $34.8 million in cash, subject to customary purchase price adjustments. TEXA Industries is an Italian manufacturer of industrial cooling applications that we will market as part of the nVent HOFFMAN product line within our Enclosures segment.

Current wording

On July 10, 2023, we acquired TEXA Industries for approximately $34.8 million in cash, subject to customary purchase price adjustments. TEXA Industries is an Italian manufacturer of industrial cooling applications that we are marketing as part of the nVent HOFFMAN product line within our Enclosures segment.

Previous wording

The following trends and uncertainties affected our financial performance in 2023 and the first three months of 2024 and will likely impact our results in the future:

Current wording

The following trends and uncertainties affected our financial performance in 2023 and the first six months of 2024 and will likely impact our results in the future:

Previous wording

•During 2023 and the first three months of 2024, we have experienced inflationary increases, primarily related to labor and raw material costs. While we have taken pricing actions and we have implemented and plan to continue to implement productivity improvements that could help offset these cost increases, we expect inflationary cost increases to continue in the remainder of 2024, which could negatively impact our results of operations.

Current wording

•During 2023 and the first six months of 2024, we have experienced inflationary increases, primarily related to labor and raw material costs. While we have taken pricing actions and we have implemented and plan to continue to implement productivity improvements that could help offset these cost increases, we expect inflationary cost increases to continue in the remainder of 2024, which could negatively impact our results of operations.

Previous wording

•The converging megatrends of the electrification of everything, sustainability and digitalization, including the increased use of artificial intelligence, have led to sales growth, particularly in the infrastructure vertical, which includes our data solutions business that is primarily in our Enclosures segment. We expect these megatrends to continue and further drive sales growth throughout 2024 and beyond.

Current wording

•The converging megatrends of the electrification of everything, sustainability and digitalization, including the increased use of artificial intelligence, have led to sales growth, particularly in the infrastructure vertical, which includes our data solutions business that is primarily in our Enclosures segment. We expect these megatrends to continue and drive sales growth in 2024 and beyond.

Previous wording

•We have invested in innovation and new products, which contributed to sales growth across nVent. We expect continued investment in new products to further drive sales growth throughout 2024.

Current wording

•We have invested in innovation and new products, which contributed to sales growth across nVent. We expect continued investment in new products to drive sales growth in 2024 and beyond.

Previous wording

•Executing our Environmental, Social and Governance ("ESG") strategy focused on People, Products, Planet and Governance;

Current wording

•Executing our sustainability strategy focused on People, Products, Planet and Governance;

Previous wording

•sales of $97.8 million in the first quarter of 2024 as a result of the ECM Industries and TEXA Industries acquisitions; and

Current wording

•sales of $51.7 million and $149.5 million in the second quarter and first half of 2024, respectively, as a result of the ECM Industries and TEXA Industries acquisitions; and

Previous wording

The 0.3 percentage point decrease in gross profit as a percentage of net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 0.5 and 0.1 percentage point increases in gross profit as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 1.8 percentage point decrease in SG&A expense as a percentage of net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 0.5 and 1.2 percentage point decreases in SG&A expense as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•intangible amortization expense of $25.2 million in the first quarter of 2024 compared to $17.6 million in the first quarter of 2023, as a result of the ECM Industries and TEXA Industries acquisitions; and

Current wording

•intangible amortization expense of $24.4 million and $49.6 million in the second quarter and first half of 2024, respectively, compared to $21.3 million and $38.9 million in the second quarter and first half of 2023, respectively, as a result of the ECM Industries and TEXA Industries acquisitions; and

Previous wording

The increase in net interest expense in the first quarter of 2024 from 2023 was the result of:

Current wording

The increases in net interest expense in the second quarter and first half of 2024 from 2023 were the result of:

Previous wording

•increased debt due to the acquisition of ECM Industries; and

Current wording

•increased debt due to the acquisition of ECM Industries.

Previous wording

The 4.1 percentage point increase in the effective tax rate in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 6.5 and 5.4 percentage point increases in the effective tax rate in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•the enactment of the Pillar II global minimum tax framework, effective January 1, 2024 in certain jurisdictions in which we operate; and

Current wording

•the enactment of the Pillar II global minimum tax framework, effective January 1, 2024 in certain jurisdictions in which we operate;

Previous wording

We evaluate performance based on sales and segment income and use a variety of ratios to measure performance of our reporting segments. Segment income represents operating income exclusive of intangible amortization, acquisition related expenses, costs of restructuring activities, impairments and other unusual non-operating items.

Current wording

We evaluate performance based on net sales and reportable segment income ("segment income") and use a variety of ratios to measure performance of our reporting segments. Segment income represents operating income exclusive of intangible amortization, acquisition related expenses, costs of restructuring activities, impairments and other unusual non-operating items.

Previous wording

The 12.5 percent increase in Enclosures net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 10.2 and 11.3 percent increases in Enclosures net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 0.5 percentage point increase in segment income for Enclosures as a percentage of net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 1.0 and 0.8 percentage point increases in segment income for Enclosures as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 42.1 percent increase in Electrical & Fastening Solutions net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 12.1 and 25.1 percent increases in Electrical & Fastening Solutions net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

•organic sales decline of approximately 4.5% from our infrastructure business, partially offset by selective increases in selling prices.

Current wording

•organic sales decline of approximately 1.5% and 3.0% from our infrastructure business in the second quarter and first half of 2024 from 2023, respectively, and approximately 3.0% and 1.0% from our commercial & residential business in the second quarter and first half of 2024 from 2023, respectively, partially offset by selective increases in selling prices.

Previous wording

The 0.6 percentage point decrease in segment income for Electrical & Fastening Solutions as a percentage of net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 1.5 and 1.2 percentage point decreases in segment income for Electrical & Fastening Solutions as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 1.0 percent decrease in Thermal Management net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 3.1 and 1.0 percent increases in Thermal Management net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The 0.8 percentage point increase in segment income for Thermal Management as a percentage of net sales in the first quarter of 2024 from 2023 was primarily the result of:

Current wording

The 1.1 and 0.1 percentage point decreases in segment income for Thermal Management as a percentage of net sales in the second quarter and first half of 2024 from 2023, respectively, were primarily the result of:

Previous wording

The primary source of liquidity for our business is cash flows provided by operations. We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt and to pay dividends to shareholders quarterly. We believe we have the ability and sufficient capacity to meet these cash requirements by using available cash, internally generated funds and borrowing under committed credit facilities. We are focused on increasing our cash flow, while continuing to fund our research and development, sales and marketing and capital investment initiatives. Our intent is to maintain investment grade metrics and a solid liquidity position. As of March 31, 2024, we had $211.4 million of cash on hand, of which $38.4 million is held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Current wording

The primary source of liquidity for our business is cash flows provided by operations. We expect to continue to have cash requirements to support working capital needs and capital expenditures, to pay interest and service debt and to pay dividends to shareholders quarterly. We believe we have the ability and sufficient capacity to meet these cash requirements by using available cash, internally generated funds and borrowing under committed credit facilities. We are focused on increasing our cash flow, while continuing to fund our research and development, sales and marketing and capital investment initiatives. Our intent is to maintain investment grade metrics and a solid liquidity position. As of June 30, 2024, we had $274.0 million of cash on hand, of which $33.4 million is held in certain countries in which the ability to repatriate is limited due to local regulations or significant potential tax consequences.

Previous wording

Net cash provided by operating activities was $90.0 million in the first three months of 2024, which primarily reflects net income, net of non-cash depreciation, amortization, changes in deferred taxes, of $144.5 million, partially offset by a $60.9 million increase in net working capital.

Current wording

Net cash provided by operating activities was $220.8 million in the first six months of 2024, which primarily reflects net income, net of non-cash depreciation, amortization, changes in deferred taxes, of $294.2 million, partially offset by a $87.3 million increase in net working capital.

Previous wording

Net cash provided by operating activities was $69.4 million in the first three months of 2023, which primarily reflects net income, net of non-cash depreciation, amortization and changes in deferred taxes, of $123.1 million, partially offset by a $57.1 million increase in net working capital.

Current wording

Net cash provided by operating activities was $146.6 million in the first six months of 2023, which primarily reflects net income, net of non-cash depreciation, amortization and changes in deferred taxes, of $264.8 million, partially offset by a $117.2 million increase in net working capital.

Previous wording

Net cash used for investing activities of $15.8 million in the first three months of 2024 relates primarily to capital expenditures of $16.1 million.

Current wording

Net cash used for investing activities of $34.3 million in the first six months of 2024 relates primarily to capital expenditures of $34.6 million.

Previous wording

Net cash used for investing activities of $16.9 million in the first three months of 2023 relates primarily to capital expenditures of $17.1 million.

Current wording

Net cash used for investing activities of $1,120.8 million in the first six months of 2023 relates primarily to cash paid for the ECM Industries acquisition of $1,091.8 million, net of cash acquired and capital expenditures of $32.3 million.

Previous wording

Net cash used for financing activities of $40.2 million in the first three months of 2024 relates primarily to dividends paid of $31.9 million.

Current wording

Net cash used for financing activities of $83.2 million in the first six months of 2024 relates primarily to dividends paid of $63.6 million.

Previous wording

Net cash used for financing activities of $50.8 million in the first three months of 2023 relates primarily to dividends paid of $29.3 million and share repurchases of $15.2 million.

Current wording

Net cash provided by financing activities of $811.2 million in the first six months of 2023 relates primarily to receipts from long-term debt of $800.0 million and net receipts from the revolving long-term credit facility of $100.0 million, offset by dividends paid of $58.5 million and share repurchases of $15.2 million.

Previous wording

Our debt agreements contain certain financial covenants, the most restrictive of which are in the Senior Credit Facilities and the 2023 Term Loan Facility, including that we may not permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense ("EBITDA") on the last day of any period of four consecutive fiscal quarters (each a "testing period") to exceed 3.75 to 1.00 (or, at nVent Finance's election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions, which we elected in connection with the acquisition of ECM Industries in May 2023 for each of the next four fiscal quarters beginning in the second quarter of 2023) and (ii) the ratio of our EBITDA to our consolidated interest expense for the same period to be less than 3.00 to 1.00. In addition, subject to certain qualifications and exceptions, the Senior Credit Facilities and the 2023 Term Loan Facility also contain covenants that, among other things, restrict our ability to create liens, merge or consolidate with another person, make acquisitions and incur subsidiary debt. As of March 31, 2024, we were in compliance with all financial covenants in our debt agreements, and there is no material uncertainty about our ongoing ability to meet those covenants.

Current wording

Our debt agreements contain certain financial covenants, the most restrictive of which are in the Senior Credit Facilities and the 2023 Term Loan Facility, including that we may not permit (i) the ratio of our consolidated debt (net of our consolidated unrestricted cash in excess of $5.0 million but not to exceed $250.0 million) to our consolidated net income (excluding, among other things, non-cash gains and losses) before interest, taxes, depreciation, amortization and non-cash share-based compensation expense ("EBITDA") on the last day of any period of four consecutive fiscal quarters (each a "testing period") to exceed 3.75 to 1.00 (or, at nVent Finance's election and subject to certain conditions, 4.25 to 1.00 for four testing periods in connection with certain material acquisitions) and (ii) the ratio of our EBITDA to our consolidated interest expense for the same period to be less than 3.00 to 1.00. In addition, subject to certain qualifications and exceptions, the Senior Credit Facilities and the 2023 Term Loan Facility also contain covenants that, among other things, restrict our ability to create liens, merge or consolidate with another person, make acquisitions and incur subsidiary debt. As of June 30, 2024, we were in compliance with all financial covenants in our debt agreements, and there is no material uncertainty about our ongoing ability to meet those covenants.

Previous wording

On May 14, 2021, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $300.0 million (the "2021 Authorization"). The 2021 Authorization began on July 23, 2021 and expires on July 22, 2024.

Current wording

On May 14, 2021, the Board of Directors authorized the repurchase of our ordinary shares up to a maximum dollar limit of $300.0 million (the "2021 Authorization"). The 2021 Authorization began on July 23, 2021 and expired on July 22, 2024.

Previous wording

During the three months ended March 31, 2024, we did not repurchase ordinary shares under the 2021 Authorization. During the three months ended March 31, 2023, we repurchased 0.3 million of our ordinary shares for $13.2 million under the 2021 Authorization.

Current wording

During the six months ended June 30, 2024, we did not repurchase ordinary shares under the 2021 Authorization. During the six months ended June 30, 2023, we repurchased 0.3 million of our ordinary shares for $13.2 million under the 2021 Authorization.

Previous wording

During the three months ended March 31, 2024, we paid dividends of $31.9 million, or $0.19 per ordinary share. During the three months ended March 31, 2023, we paid dividends of $29.3 million, or $0.175 per ordinary share.

Current wording

During the six months ended June 30, 2024, we paid dividends of $63.6 million, or $0.38 per ordinary share. During the six months ended June 30, 2023, we paid dividends of $58.5 million, or $0.35 per ordinary share.

Previous wording

On February 19, 2024, the Board of Directors declared a quarterly cash dividend of $0.19 per ordinary share payable on May 10, 2024, to shareholders of record at the close of business on April 26, 2024. The balance of dividends payable included in Other current liabilitieson our Condensed Consolidated Balance Sheets was $32.1 million and $32.6 million at March 31, 2024 and December 31, 2023, respectively.

Current wording

On May 17, 2024, the Board of Directors declared a quarterly cash dividend of $0.19 per ordinary share that was paid on August 2, 2024, to shareholders of record at the close of business on July 19, 2024. The balance of dividends payable included in Other current liabilitieson our Condensed Consolidated Balance Sheets was $32.3 million and $32.6 million at June 30, 2024 and December 31, 2023, respectively.