Ladies and gentlemen, thank you for standing by, and welcome to the nVent Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to J.C. Weigelt, Vice President, Investor Relations. Please go ahead, sir.

Thank you, Regina, and welcome, everyone to nVent's fourth quarter and full year 2020 earnings call. I'm J.C. Weigelt, Vice President of Investor Relations; and on the call are Beth Wozniak, our Chief Executive Officer; and Sara Zawoyski, our Chief Financial Officer. Today, we will provide details on our fourth quarter and full-year performance, and provide an outlook for the first quarter and full year 2021. Before we begin, let me 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 can be found in the Investors' section of nVent's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for questions after our prepared remarks. And now, I will turn the call over to Beth.

Thank you, J.C., and good morning, everyone. We appreciate you joining us today. 2020 was a year that none of us could have imagined. There was not a playbook for a pandemic. And I could not be prouder of our entire global workforce and what we accomplished. Our number one priority was the safety and well-being of our employees. We implemented new safety protocols and learned to work virtually and with great flexibility. Our second priority was to continue business operations. Our team overcame many challenges and often went to extraordinary measures to serve our customers. At the same time, we improved our quality and delivery performance with our relentless focus on lean and digital. And finally, our third priority was to emerge stronger and we continue to invest in growth and execute on our strategy. Now, turning to our executive summary on Slide 3. We had a strong finish to the year. We delivered better-than-expected decrementals, executed over $70 million in cost reduction and generated strong cash flow. Fourth quarter sales trends improved sequentially across each segment. Electrical & Fastening had standout performance with sales about flat organically and strong return on sales at 28%. For nVent, decrementals of 26% improved sequentially, resulting in return on sales in the quarter at 18.6%.

Thank you, Beth. Let me begin by saying, I'm incredibly proud of our team's execution. It is because of this that we sit here today in this strong financial position with an outlook of growth, and we believe a clear path to emerge stronger. Let's turn to Slide 5, to review fourth quarter 2020 performance. Sales of $521 million were down 8% relative to last year and declined 11% organically. The acquisition of WBT added about 1 point to growth. Looking at trends, we are encouraged by both orders and sales. Sales improved sequentially across every segment versus the previous quarter with December our strongest month. Orders in the fourth quarter were down mid-single-digits, with Electrical & Fastening and Thermal Management orders generally in line with sales, while Enclosures was better. Looking at January for overall nVent, we continue to see orders and trends improve relative to the fourth quarter. Fourth quarter decrementals were 26%, which is slightly better than the third quarter, even as some temporary costs returned. Price was positive and we delivered strong gross productivity of $26 million, which was driven by many of the cost actions we took earlier in the year.

Thank you, Sara. Turning to Slide 12, you can see our priorities for 2021 which are consistent with our longer-term strategies. I want to walk through them today and we will expand upon them further at our March 3rd investor meeting. Our first priority remains the safety and well-being of our employees. Today, we operate at world-class safety levels and continue to set goals to improve our safety performance. Last year, our incidence frequency rate was 0.6%, which was a 23% improvement over 2019. Another imperative for us is social responsibility, as we are all part of one global community. We continue to make progress and we'll share our plans for driving improvements for people, products and the planet during our March 3rd investor meeting. It is certainly an exciting time at nVent as we advance our efforts here that are important to our employees, customers and shareholders. Growth remains a priority for us, both organic and inorganic. We continue to pursue higher growth verticals and expand strategic relationships with channel partners and end users. We remain convinced that our portfolio can benefit from macro trends such as the electrification of everything which aligns with our mission to connect and protect. Looking closer at the trend towards the electrification of everything, we are well positioned. Let me give you some examples. In Enclosures, we continue to build out our data center and networking solutions portfolio, including liquid cooling. We are expanding our presence in industrial automation with our new IEC portfolio. In Electrical & Fastening, we are well positioned around grid modernization within utilities, and electrical infrastructure build-out with our low voltage power connections, and grounding and bonding solutions. In Thermal Management, we are tapping into the industrial Internet of Things with our connected control solutions. Throughout last year, we accelerated our digital capabilities to improve the customer experience from enhanced websites to better configuration and search tools to enriched digital product information. An example of this is a recent launch of our instant quote feature for some nVent Hoffman Enclosures. This feature enables customers to quickly obtain price and availability information, which has resulted in an uptick in our win rate due to improved velocity in the end-to-end customer journey. We expect 2021 to be another strong year of product and digital launches. We're planning to introduce approximately 50 new products again this year, we continue to strengthen our portfolio expanding our cooling and smart enclosures, driving innovation in electrical and fastening and building out our connected control solutions. On the digital front, we are investing in our go-to-market capabilities, automation and the digitization of our back office functions and factories. The use of data and intelligence is expanding, helping us drive insights to support our growth. This will also drive productivity and working capital improvements. M&A is a top priority for us. Remember, we compete in a $60 billion space that is highly fragmented. Our strategy is to build upon our great brands, leading positions and to expand globally. Wrapping up on Slide 13, we have a strong foundation, with many bright growth prospects. The macro trend towards the electrification of everything we believe can drive more demand for our products and solutions. With our strong brands, our Spark management system and our momentum on marketing and sales excellence, new products and digital, we are well positioned to benefit from these trends. As we continue to execute on our strategy, we expect to emerge stronger to grow and to make nVent a high-performance electrical company. With that, I will now turn the call over to the operator to start Q&A.

Our first question will come from the line of Jeff Hammond with KeyBanc Capital Markets. Please go ahead.

Hey, good morning, everyone.

Good morning.

Good morning.

So, good color on the segment kind of outlooks. I think EFS and Enclosures makes a lot of sense. I think, Thermal, I'm just a little perplexed that you're expecting kind of modest growth, just given four years of declines and sharp declines in 2020. Just, I mean, talk about easy comps and talk about the backlog and how you see that shipping. And just any near-term trends on the MRO piece, which I think one of your competitors started to talk about some improvement there?

Yeah, as we've always discussed, Thermal Management is roughly one-third Residential and Commercial, one-third MRO and one-third projects. And as we stated through last year, our projects have held up; and in commercial, as we looked at the fourth quarter, started to improve. And I think the biggest driver where we see that in next year is going to be our MRO spend coming back because that was significantly reduced in 2020. We've already seen that trend of orders improve as we exited the fourth quarter and into January. And so, we believe that's where we're going to see the uplift. And as we talked about in Q4, that obviously had a mix on our - a negative mix impact on our return on sales. So that's how we see it as it goes into 2021. That it's really that MRO that's going to improve and commercial will. So we're off the lows, I guess, I would say from where we were in 2020.

Okay, so from a mix standpoint, you should have some mix-rich recovery if that MRO recovers?

Yes.

Okay. And then just, again, good color on price and productivity versus cost. But 2020 was a heavy productivity year and limited on price. Clearly, we're seeing inflation, as you talked about. Can you just talk about your - what you've announced in terms of price increases, and what you think the price component is going to be or what you built into the guide? Thanks.

Yeah, I'll start and Sara can jump in here too. So, we've already - as we exited last year, we'd announced some price increases going into 2021. As we started 2021, we've already announced some second price increases, some of them are underway, or some are still to come during the quarter. But that's in response to just what we've seen going on with inflation. And if you recall, in previous years, where we had inflationary environments, we've done multiple price increases. And, we'll watch that and we're managing the cost side just because of our price locks. You could look at 2018, 2019 as years of how we executed in inflationary environments. We always say we want to get a point of price. But when we're in these inflationary environments, we expect to do a lot better than that, somewhere between 1% to 2%, depending on the portfolio.

Yeah. And maybe just the only thing I would add to that, as we continue to expect to offset that inflation with price plus productivity, we see that happening in Q1 and we see that happening for the full year. So in addition to those pricing actions that Beth talked about, we're also driving that productivity, particularly as it relates around, productivity in the factory. With that volume, we do expect to get to some good leverage there, as well as underlying productivity, especially as it relates to logistics and some of the digitization efforts that Beth talked about as well.

Okay, thank you.

Our next question comes from the line of Deane Dray with RBC Capital Markets.

Thank you. Good morning, everyone.

Good morning.

Good morning.

Hey, I'd like to pick up where we left off there with Jeff's questions. And I'd be interested in hearing how much in the way of temporary costs came in, in the fourth quarter? And what the assumption feathered back in 2021? Maybe we can start there, please.

Okay. So just bigger picture, we did execute roughly $70 million of cost reductions in 2020. And roughly $30 million of that was temporary in nature. And when we talked about that Q3 to Q4 and some of those costs, temporary costs returning, think of those in roughly that $5 million mark. As we think about that, those temporary costs feathering back in, if you will, in 2021, we wouldn't expect all of those to come in day one. And in fact, that's why we're expecting flat to up in ROS in Q1 here, because as you might imagine, no one is traveling, as we sit here today in Q1, and we also have those structural costs coming in from a savings perspective. So from that temporary cost perspective, I would say that roughly a third of that simply relates to T&E. And so, that's going to take time to kind of feather in. Another chunk of that is just discretionary spend. And so, you'd expect that to really kind of flow in as that top-line recovers. Maybe the only other thing, Deane, I would point out is from a structural cost, we talked about that $15 million of savings coming in, in 2021, based on what we did in 2020 on the cost action front. And you'd expect to see that come in really largely in the first half of this year, was a bit trickling into Q3.

I appreciate all those specifics. And then, over on free cash flow, which I think is one of the success stories for 2020, and Sara, can you just give us some insight here into some of the dynamics on working capital? Do you have specific goals that you're looking for as a percent of sales? And just confirm, were there any kind of one-timers benefiting? I know some companies benefited from the CARES Act, which gave you some relief on tax payment timing. Is there any of those one-timers in your numbers in 2020?

Yeah, so we feel great about the free cash flow conversion, really being a record year for us that at 120% mark? Certainly, our working capital performance contributed to that. We saw actually improvement from a perspective, really based on some data-driven work that the teams did, looking across the globe on harmonizing some of our supplier terms. I think the other thing to point out there would be the Electrical & Fastening business. They really improved every metric when it came to working capital, and specifically, on the inventory side. What drove that are further advancements in lean, really getting to plan for every part, improvements in demand planning. But also looking at ways we can improve our supply-chain efficiencies, looking at long lead-time suppliers and extending that vendor-managed inventory programs to over 20 suppliers. So - and I would say there is further runway for us from a working capital standpoint. Over time, I could see multiple points of working capital as a percentage of sales improvement. And inventory continues to be our top area that we're focused on. From an overall timing perspective and what impacted 2020, I would say 2 things. One, we did see the benefit of some of those deferral of payroll taxes, roughly $10 million in 2020. But I would also say that we also absorbed some of the restructuring cash payment efforts of roughly $20 million as well. So we had some puts and takes to that overall free cash flow performance.

I'm really glad you added that last piece and about the restructuring, because a large number of companies are excluding those from operating results. And that's good quality of earnings for you guys to include it. And then, I just - I know I shouted - gave free cash flow a shout-out. The other impressive point was all the new product introductions. I just think in a period of COVID to have continued that output on innovation is terrific. That's it for me. Thanks.

Thank you, Deane.

Our next question comes from the line of Nigel Coe with Wolfe Research.

Thanks. Good morning, everyone.

Good morning.

Good morning.

So I just flip to really - the framework sort of bodes pretty much with what we had expected. But I'm just curious, how does the - outsized trends we saw in EFS margins, and obviously the outsized weakness we saw in Thermal this year, how does that roll into 2021? And I'm wondering if we should expect EFS operating leverage to be sort of impacted to the downside, and then maybe Thermal recovers on MRO? So just any color there would be helpful.

So from a full year 2021, from a margin perspective, we do see our biggest expansion opportunities really in Enclosures and Thermal. Enclosures, because we expect that industrial recovery to really be the strongest from our overall verticals. And that should help from an overall drop-through. And Thermal, one, getting back to growth; and two, as we discussed earlier, a lot of that growth coming through that higher margin MRO part of that business. We do still expect expansion in EFS, but as you might expect, it would be just more moderated versus what we're expecting in Enclosures and Thermal.

Yeah, EFS was outstanding. And then, when we think about the price, productivity and raw material inflation impact in 2021, should we take that $15 million of restructuring savings as part of productivity or that is in the separate bucket?

That's going to be part of productivity.

Yeah. Okay. That's helpful. And then, just on capital deployments, you've given us share count guidance. I'm just wondering what you got baked in for buybacks in 2021.

I mean, our guidance overall really reflects a goal of offsetting dilution. And so, we ended the year with the full-year diluted share count of over 170 million shares, and so that 169 million really just is guiding to offsetting that dilution. So we may have to do a bit more buyback, just to get to that share number. But overall, as Beth talked about in our prepared remarks, our goal continues to be growth and getting after our overall M&A strategy.

Right. Thanks, Sara.

Our next question will come from the line of Julian Mitchell with Barclays.

Hi, good morning. Maybe just trying to look at the firm-wide margin guide, so it looks like you're dialing in about a 25% incremental margin for the segment on a pre-corporate basis for 2021. Just wanted to double check, if that's roughly correct. And then, related to that, looking at Slide 5, I think you'd called out $26 million of gross productivity in Q4. So that's leaving $10 million for that inflation and investments piece. Just wondered for fiscal 2021, what does that $10 million number look like?

Okay, so let me - what was the first part of the question here? Incrementals…

On incrementals, okay, yes, so sorry about that. So from an incremental perspective, yeah, we are expecting full-year incrementals to be in that mid-20s range. And really what that reflects, different than sort of how we were all thinking about things in December is really two things. One and the majority of it really is just related to that price/cost dynamic. So as you roll in more inflation and work to offset that, by way of price, that just impacts those overall incrementals. But from a pure volume drop-through outside of that, we continue to expect that to get back to that 30% to 40% range. It's really that price/cost dynamic that's impacting those overall incrementals for the full year. And from an overall run rate coming out of Q4, I mean, gross productivity is $26 million. Obviously, that's strong. We've talked about that being a bit muted in 2021, with the context of some of these temporary cost actions rolling back in. From an inflationary environment, we do expect that inflation number to increase. It will increase modestly in Q1, but we would expect that to ramp in Q2, Q3, Q4, but really looking again, as we talked about earlier, to offset that with price, along with productivity. I would say that, that dynamic, that that situation is dynamic. We continue to monitor it. And as Beth talked about, we've already taken multiple price increases here in the context of Q1, and we'll continue to monitor that as we go.

Thank you. That's helpful. And then, secondly, looks like Thermal is in for an okay year, not an easy one. Just wondered, strategically, I suppose how satisfied you have been with thermal's performance during this downturn. And whether there is the appetite to do something more surgical with the portfolio within thermal, if there are areas that you're trying to kind of reemphasize or deemphasize, as you try and position it better for the next upturn?

Yeah, I think, as we - certainly our thermal business segment was impacted the most as we went into the downturn with pandemic, and also what happened with the price of oil. This is the segment that we also took the most structural cost actions. And so I think we got on that very quickly from that standpoint. And so that's part of what you see in - as we go into next year, how we've repositioned that business. Our view is that - because that MRO spend dropped off so quickly, that we're going to see that improve. And like the other segments, we continue to invest in those strategic areas, because we have a really large installed base. So anything that we can do with connected controls as a retrofit opportunity, investing in that commercial side and residential side also that's kind of been the priority. And as we think about the go forward, our view is, let's ensure we're positioned where the growth is going to be. So when we think about projects, for example, as we go forward, we know that there's going to be investment in chemicals, for example, in APAC. And so we're ensuring that our resources and where we're prioritizing or putting our focus is in those areas that are going to grow. So we believe in residential and commercial, we've got opportunity there, mine the installed base from a MRO standpoint, just because of the millions of controls and sensors and everything that we have out there and heat trace cable to making sure that we're positioned in the right geographies as we go forward. And I guess the last part of that question is we're always looking to optimize our portfolio. And what makes sense, and you've seen us as we've done our acquisitions really focus on products that are helping us position for high growth, whether it's data and networking solutions, whether it's industrial automation, or whether it's global growth, and we're going to continue to do that.

Great. Thank you.

Our next question comes from the line of Joe Ritchie with Goldman Sachs.

Thank you. Good morning.

Good morning.

Maybe just starting off on inventory levels, I think you guys sell maybe two-thirds of your business through distribution. I'd be curious, any color that you can provide on where you think inventory levels are today. And then also secondly like the - on EFS that kind of downtick that you're expecting in 1Q, and how much of that is being influenced by what you're seeing to start the year in that business?

So a couple of things there, as we - in the fourth quarter, as we shared in our last earnings call, we expected that inventory levels were really going to sequentially improve to match the demand that the distributors were seeing. And I think that's exactly what we saw. And recall, we talked about the fact that a lot of times in a year you'll see it distributors stock up at the end of the year, and we just didn't expect that to happen because of where they were with respect to rebate programs, et cetera. But I'd say this, we've seen inventory improve - like demand on us improve, and it's meeting end demand, we've seen that continue into January. So I think we're still seeing that gradual improvement of inventory levels matching demand. So still more runway there, I would say as we go throughout the year. And then on EFS, I'll let Sara just talk to that.

Yeah. So I would say, Joe, it's really more of a function of comps of a year ago that we're guiding to just a modest downtick from that roughly flattish organic growth rate that we saw in Q4. So no different than what we said more broadly in January for this segment, we see strengths here in January overall.

Okay, great. And then maybe just a longer-term question for Beth, you look, it's great to see all the investments that you guys are making on the product launches and all the digital launches as well. I'm curious, like, when you're thinking about this as part of the longer-term growth algorithm for the company, how much do you think this can contribute? How quickly do you expect to see some of this growth coming through from all of the launching that you're doing currently?

Yeah. Our new products, we'd like to see us get about a point of growth from new products every year. And recall, we've talked about getting our new product vitality up to 20%. We're in the mid-teens today. So that's our expectation that it's going to drive about a point of growth. On digital, it's somewhat of an enabler, right. In some cases, it's helping us drive growth and in other cases, it's helping us to drive productivity. So it builds into that equation of both the growth side, and what we see in terms of margin expansion. But I would say what we're tracking really closely is all these new digital launches are we getting the returns that we expected, as we kind of laid those out as an investment project. So I think we're doing a better job than we've ever done in terms of really looking at, are we getting the value from these efforts. And what's nice about the agile approach that we've adopted, is that we're very quickly being able to see success or make adjustments as we go. And I think we're only going to get better at that.

Got it. Thank you both.

Our next question comes from the line of Andrew Shlosh with Vertical Research.

Hi, this is Andrew Shlosh on for Jeff Sprague. Thanks for squeezing me in here. I just take quick one on data centers. Could you provide us with more precise growth rate on data centers in the quarter and some of the trends you're seeing there?

Yeah, I would say overall from a data and networking perspective, where we saw really strong double digits was on the global front, and importantly in orders, right. So where we see that growth is in some of the hyperscale, I mean, if you remember, WBT was one of the acquisitions that we did early on in the year that brought in a whole new cable management tray offering for that space. So that's something that has grown double digits for us really since we spun and would expect heading into 2021 that again it would get back to the double-digit growth rate.

Yeah, I think about it this way, we were pre-pandemic like we grown in data and networking solutions double digits for the last couple of years, and then obviously, impacted pandemic sites shutdown, integrators can't get on job sites. But we started to see that double-digit order trend occur again, and we think, as we - in 2021, there's no reason to believe that we can't continue to have strong growth, especially as Sara said, we've built out the portfolio, so more around liquid cooling, more around just to complete our solution with cable management. So we're excited about where we're positioned here and the potential for long-term growth.

Great. Thanks for the color. I'll pass on the baton.

Our next question comes from the line of Scott Graham with Rosenblatt Securities.

Hi, good morning all, and congrats on a year of only 15% decline in EPS, or they'd be much worse given what you were - on some of the markets you face. I really wanted to ask about the organic because I know that, well, certainly the first quarter looks a little bit less than what I was thinking in my model. Would the cadence here essentially be sort of your first quarter number and then sort of up low-teens in the second quarter on that easier comp, and then sort of plus mid-single for the rest for the second half of the year. Like, is that kind of the way you're thinking of it?

Yeah. So, Scott, that cadence sounds about right.

And then for the second quarter, what would be the big factors that kind of, I know, the biggest one is obviously the comp, but what are the markets that you see is going from sort of this down number to an up low-teens?

Well, in that quarter, I - what we said is we all historically, we've always seen industrial lead us out of a downturn period. And we know that CapEx was one of those levers that everyone constrained. So we would expect that industrial vertical to lead the way as well, as we mentioned seeing that double-digit orders growth in data and networking solutions, we would expect that also to be strong as we go throughout the year, those would be the key areas.

Okay. Two other quick ones. On the point that you just made, that's about the new products of the goal adding 1%. Would you expect that to be the case this year in 2021?

Yes, we would. Because, so if we - 53 products last year, extraordinary efforts to get those launched. And I think, we've done some contractor conversions. And so, for example, we've seeded some at OEM, so we'd expect to see that take place this year. And we'll build upon that with another 50 new products.

Yes. That's impressive. Thank you. And the last question is around capital, so Nigel asked a question earlier about share repurchases. And you obviously have a very large outstanding authorization. At what point in the year do we get to second quarter and third quarter? If acquisitions don't necessarily manifest the way you were thinking? When does that share repurchase become more than a placeholder - more than to offset the dilution? What is the trigger there?

Yeah, I mean, I think you've seen that we've always - we're going to do some repurchases based on share dilution. But as we go throughout the year, if - although, we feel very confident in our funnel and the opportunities in front of us, but we've always said we wouldn't just have cash hanging on our balance sheet, and we put it to work. So we're constantly looking at that, Scott, although I do think that we're going to see some opportunity for us over the course of this year to do a couple of acquisitions.

Great. Thanks a lot for your time.

Thank you.

Thanks.

Your next question comes from the line of Justin Bergner with G. Research.

Good morning, Beth. Good morning, Sara.

Good morning.

Good morning.

Nice delivery on things you're able to control in this environment.

Thanks.

To start, I want to ask, in regards to the - I guess margin guide, which is five modest margin expansion, is that coming from volume leverage or is that coming from mix? Do you expect mix to be neutral, some margins are positive margins?

So I guess the way I would answer that is both. So from an overall volume leverage perspective, clearly, that's going to help in 2021. So it would be one thing. And then two, we would expect mix particularly in the thermal business to help, I mean, you've seen sort of an outsized negative impact here in 2020 based on that MRO side of that business, which is highly profitable being down strong double-digits. And as that fully recovers, we'd expect that to not only drive the growth but also drive some positive mix impacts as well.

Okay. But some of that would be offset by, I guess, the other segments growing faster than EFS, right?

Yeah, clearly at a kind of total portfolio basis, you'd have some offsets there. But again, within each one of these segments, mix is going to have a bigger play in thermal management to the positive than what we might see otherwise in Enclosures and EFS.

Okay. That's helpful. And then the thermal side, do you expect to grow all three portions of that business, the project, the MRO in the commercial and residential in 2021 or will some of them be more breakeven neutral?

So we expect the most growth in MRO, we expect commercial and resi, resi should have some strengths, commercial is expected to have some softness there. But our view is we always want to outperform how the industry is. So we'll see how that plays out over the course of the year. And with respect to projects, I think we see that flattish over the course of the year. So that's kind of how we're viewing. And we'll see - there's, we'll see how and when the economy still recovers in that dynamic, but that's why we continue to just temper that just saying there still is uncertainty, how quickly the economy recoveries and where.

Okay. And then maybe lastly just thinking about the organic growth down materially in 2020, as expected bouncing back 3% to 6% in 2021. Do you think getting back the level of organic growth in 2019 is sort of more of a 2022 or more of a 2023 event, recovering that full 13% organic decline from 2020?

Well, it may depend on the segment, I'd say - and I just - again, it's the timing of how we see the economy recovery around the world. So if you think about it, we think industrial is the vertical that's going to lead first. And I think as we start to see how that recovers that could take us into 2022, as we think about commercial that's expected to be slightly down this year. And so maybe that recovers into next year, we'll see. And I think the view is that energy is improving. Well, it's going to be tough this year, we're going to improve relative to that, but I think that's a slower improvement rate. So those three different dynamics there and infrastructure should be strong. So we call infrastructure includes data and networking solutions and utilities, and we expect that to be strong. All those different dynamics for us is by segment, some likely recover in 2022, and others maybe out to 2023.

Okay. Thank you. That's a very helpful framework. I appreciate it.

Your next question comes from the line of David Silver with CL King.

Yeah. Hi, good morning. Thank you.

Good morning.

Good morning.

Yeah, great. I was hoping to kind of maybe parse some of your comments about the cost outlook. So I've heard inflation, I've heard costs of your productivity. But I was hoping to tease out the raw material and logistics elements of your cost expectations for next year. So, leave out labor, leave out the temporary cost outs. But could you maybe talk about where you see the greatest raw material cost pressures, I'm guessing metals, of course, but I'm also thinking of the shortages that have been talked about quite a bit on the chip and electrical components side. So whether it's cost, whether it's availability, how do you assess kind of the ability to continue to operate without disruptions, and then to capture and recover the incremental raw material, and maybe logistics costs that you anticipate? Thank you.

Yeah. Let me start, and then - I'll start by just talking about supply chain resiliency. And then, I'll let Sara talk more about the cost side. So recall, as we mentioned most of our materials are metals. And so we have great positions in terms of just how we procure our supply and do these rolling price locks. And so we feel good about our access there. I would say, we have looked at our supply chains, and even in fourth quarter in some areas look to ensure that we had the right positioning of components, so that we - as we expected this year and as we saw the sequential improvements that we would be in a good position to be able to respond. So whether that was on just inventory and parts on the supply side or even our own capacity, because they can - we've addressed a lot of capacity requirements in our factories. So I think, for us at this point, we see minimal disruptions really and we've - our supply chain has been robust all of 2020. And so we're very actively working to ensure that we're in a good position with our own supply and also working that through with the distribution channel. So I think, at this point, we think we've got the supply chain managed fairly well. And again, we'll see how demand goes over the year, but we're going to keep having scenarios to be able to respond to that. So I'll let Sara then talk about the cost side.

Yeah, so I think your question was kind of around materials overall and how to think about metals specifically. So, materials overall are roughly 30% of sales and metals are less than half of that. And as Beth talked about, a lot of those metals is going to be steel, copper and a little bit of nickel. And we feel really good about the access to that supply. And with these locking programs, it gives us some great kind of lead times and visibility into these inflationary pressures. So, we feel like we've got that dialed in, if you will. It is dynamic. And as things progress, as Beth and we alluded to earlier, in the Q&A, we're going to continue to monitor that, right. If inflation continues to increase, we'll look at pricing, we'll look at productivity as ways to manage that.

Okay, thank you for that. I'm going to ask you a question maybe about the sequential progression of revenues in the fourth quarter. So, I did go back, and overall, your revenue guidance was - you kind of met or beat your revenue guidance overall. But I was kind of scratching my head and I was saying, if you look at it segment by segment, I mean, there was a sequential decline in 2 of your 3 segments, thermal being the exception. And I'm - year-to-date, I mean, those had been the stronger performing segments. So I'm just wondering, was there a surprise there, not so much overall, but segment by segment? In other words, were you surprised that there was a sequential revenue decline for EFS and Enclosures? Thank you.

Yes, I would say that was right in line with our expectations. If you just look at the kind of seasonality of our segments, typically, there's a downtick in Enclosures from Q3 to Q4, as well as in EFS. So those are kind of as expected and in line with that seasonal downtick.

Okay, thank you for that. And then, last question, this is maybe an 80/20 question, in other words, of your 50-plus new products, last year product launches, I mean, are there a couple that you could just call out either for their especially bright prospects due to either their innovative capabilities or just they're hitting the right market at the right time? So you mentioned a point of growth overall for the company from the new product launches. But are there a handful or one or two that you might cite as kind of being, especially - that your optimism is especially high about? Thank you.

Yeah, okay. I mean, maybe I'll give that in sort of categories. In our Thermal Management business, we've continued to release a lot of connected solutions. So we're excited about that because we believe that they not only present great value for our customers on a new project perspective, but they're also an MRO opportunity. So as I mentioned, our ability with having the largest installed base, our ability to go back out there and have controllers that can drop in and be replacements for existing products out there to create more value in terms of just monitoring capability and better performance, et cetera, we're very excited about that. We've been on that journey for a while. And those controls have done very well for us. I'd say in Enclosures, there's a general category, around globalizing this IEC portfolio, but as well building out our data and networking solutions capability, particularly around cooling, for example, we're very excited about that. And then, I would say in our EFS business, maybe there are two categories of products. We've extended what we do with our CADDY portfolio into areas in seismic and prefab, and just extending the range. And we've been able to see contractor conversions as a result. And similarly, on the electrical side of our EFS business, we've been launching new products there that we think really position us well as you start to see the utilities, grid build out, anything around our - we have some differentiated capability in our nVent ERIFLEX portfolio. So, all of those are playing into those electrification trend. So those are broadly some categories that we have, that we're excited about because they - we believe they're positioned to be able to differentiate and create value for our customers and pointed at higher growth opportunities.

That's great. Thank you very much.

We have no further questions at this time. I'll turn the conference back over to management for any further remarks.

Well, thank you for joining us this morning. We are pleased with our fourth quarter performance and believe we executed at a high level during 2020 to help set us up for growth and success. We are grateful for all the hard work our global employees put forth to help us emerge stronger. While economic uncertainty remains, we have confidence in our ability to execute on our 2021 priorities and deliver growth. We hope you remain safe and look forward to speaking to you again on March 3, at our Investor Meeting. Thanks again for joining us. This concludes the call. Thank you.

Ladies and gentlemen, thank you all for joining today's call. You may now disconnect.