Operator
Good day and welcome to the Invent 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 zero. After today's presentation there will be an opportunity to ask questions. To ask a question you may press star then one on the touch-tone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Tony Reiter, Vice President of Investor Relations. Please go ahead.
Thank you, and welcome to the event's second quarter 2026 earnings call. On the call with me are Beth Wisniak, our Chair and Chief Executive Officer, and Gary Corona, our Chief Financial Officer. Today we'll provide details on our second quarter performance, an outlook for the third quarter, and an update to our full year outlook. All results referenced throughout the presentation are on a continuing operation basis, unless otherwise stated. Before we begin, I'll 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 NVENS filing with the Security and Exchange. 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 NBEN's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for your questions after a prepared review. With that, please turn to slide three, and I'll 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 a billion dollars, including systems protection sales of more than a billion dollars 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 neoclouds, multi-tenants, 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 Invent, we continue to have strong orders and backlogs. 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've 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 data centers. Now, on to slide four. 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 car utilities. Commercial resi 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 remains 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 resi, 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 businesses, which are rapidly growing and more capacity is needed to meet customer demand overall i am proud of our invent 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 gary please go ahead thank you beth we had another excellent quarter, exceeding our guidance with record sales and EPS.
Let's turn to slide six to review our results. Sales of $1,471,000,000 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 dollars to sales or five points to growth sales from epg after may 1st became part of our organic growth foreign exchange was nearly a one-point tailwind adjusted operating income was 323 million dollars up 61 percent return on sales came in ahead of expectations at 21.9 percent up 110 basis points versus last year price plus productivity offset inflation of more than 50 million dollars including more than 30 million dollars 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 seven for a discussion on the second quarter segment performance. Starting with systems protection, sales of $1,072,000,000 increased 70%. The EPG acquisition contributed seven points to sales and has performed well. This was System Protection's first billion-dollar quarter. Organically, sales grew 62%, led by the infrastructure vertical, which more than doubled due to continued strength in data centers. Industrial and commercial resi were each flash in the quarter. Geographically, America's 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 two points to sales. Growth was broad-based across all verticals and geography. From a vertical perspective, infrastructure and industrial each grew strong double digits. Commercial resi 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 prepayable 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 nine 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 1.2 times, well below our target range of two to two and a half times, 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 portfolio. We now forecast reported sales growth of 37 to 39 percent, up from 26 to 28 percent previously. We are significantly increasing our organic sales growth guidance. We now expect to grow 32 to 34 percent versus our prior guidance of 21 to 23 percent. We are raising our full year adjusted EPS range to $5 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, this is 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 InVent 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 to 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 that is 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 more than $2 billion in 2026, more than double last year's sales. Wrapping up on slide 13, we had another tremendous quarter with record sales in EPS. Our portfolio transformation and the AI data center buildout 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.
Operator
We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, 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 Dean Dre with RBC Capital Markets. Please go ahead.
Thank you. Good morning, everyone.
Hey, I realize there's 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. I mean, the 18% organic was three times bigger than what we had been modeling for. So, Beth, what's hoping you could take us through? Are we seeing an inflection here? How broad-based is that? And just to make sure we're level set, were there any kind of thing unusual that got booked this quarter, any one-timers that would have skewed that organic growth rate higher?
All right, Dean, thank you for the question. As the quarter progressed, we saw strong orders. And as I mentioned in my prepared remarks, we saw growth across every vertical and every geography. And our orders were very strong through our distribution partners, which is where we see a lot of that short cycle industrial growth. So really, it was just a nice inflection point. And as you stated, our electrical connections business, which has a lot of short cycle business, performed very well to execute on those orders. And there was nothing unusual. All right.
All right. That's great to hear. And then the second question, and I know you guys hinted pretty strongly that there was more capacity expansion coming at your analyst day. So seeing the announcement today makes sense. A couple of questions here. How do you land on, I think it's a 60% increase in capacity, and where does this take you in terms of your current kind of order funnel? Does it take you into 2028? And then, Gary, how are you managing as you ramp each new line just in terms of the margin impact so there's not too much pressure on the incrementals? I know a lot of work goes into that.
Well, Dean, as we look at the demand and as we look at what our customers and the visibility that we have there, and as we are launching also our modular platform in, you know, in the fall timeframe, we knew that we needed to expand our capacity. And we're looking out. So, as you know, our Blaine facility, Blaine 1, that is coming online right now, is still ramping through this year and into 2027. So, as we looked at that, we knew with the demand that we're seeing that we needed to ramp another facility because it takes time to get them online. And we do believe that that takes us through 27 and into 28 at this time.
Dean, and just to pick up on the margins, you know, as we have said consistently, we expect to continue to invest to support the infrastructure vertical, to serve the backlog that Beth talked about. That's all embedded in our guide, which is assuming mid-20s incrementals in the second half.
Good to hear. Congrats to the team. Thank you.
Operator
Our next question comes from Jeff Sprague with Vertical Research. Please go ahead.
Hey, thanks. Good morning, everyone.
Got to add some width to my columns here that fit all this organic growth. Hey, just thinking about the ramp here, I mean, you know, looking at systems protection, I think we have, you know, eight or 10 quarters now of, you know, sequential revenue growth, you know, sort of this bow wave of activity has come through. It appears the guide sort of, you know, levels out here, though. You know, maybe even the guide is for a little bit down revenue sequentially in Q3 and more so in Q4. Isn't the seasonality of the business sort of being ironed out by this level of activity? Or perhaps there's something going on with how you stage the new production? Could you just address that, please?
This is Gary. I'll start off and just mention, you know, we expect a good organic growth in the second half and in the third quarter, certainly. We guided 32% to 35% in the third quarter. And keep in mind, you know, we're going to be lapping 20% organic and 50% EPS growth in the second half. You know, last quarter, we talked about mid-30s two-year stack growth, and actually in the third quarter, we're going to significantly accelerate 50% in Q3 at the midpoint versus 46% growth in the first half. So we're seeing nice acceleration. So I understand your question, but we really feel like the team is delivering and delivering nice momentum.
But is there any particular internal or external supply chain issue that might hold back kind of the sequential trajectory in Q3 versus Q2?
I think, Jeff, this is just our planning. and, you know, we're being very prudent because, as you know, as we ramp capacity, we're having to add in equipment, we're having to add in labor, we're having to make sure that our suppliers can respond. Certainly in Q2, we were managing those things and it worked out more favorable in terms of the growth that we saw. But as we look forward, we're just being prudent. And as we ramp up two new facilities, we want to ensure that we're putting the right, you know, doing all the right planning.
And then maybe just to follow on, I think we talked about this a little bit before, but could you just maybe address the kind of service opportunity that is being created or should be being created on the back end of all this installed base growth that you're capturing here, kind of the opportunity set there? Are you seeing traction in that regard?
Yes. As we designed our product portfolio in liquid cooling, we always designed it with modularity in mind so that parts could be hot swappable. And as we are also investing in a service capability to support the products, and as we move and see our growth from hyperscalers to other less sophisticated customers, let's say, we have that ability to help commission, install, and provide that service. So that is building as we go. And certainly, as we launch in the fall timeframe here, our new modular portfolio, that is a big element for us to support that portfolio, which we see will be very broad-based in terms of its appeal to the customer set.
Great. Thank you very much.
Operator
Our next question comes from Nigel Coe with Wolf Research. Please go ahead.
Oh, thanks. Good morning, everyone. Thanks for the question. So, Beth, I hate to be the annoying analyst asking the question about orders, but I know they're lumpy, so we get it. But is there anything around just the cadence of product launches and the capacity ramp that's pushed orders around a little bit here and made them perhaps a bit lumpier? And I'm thinking, obviously, about the modeler product launches, et cetera. So anything around those factors driving a bit more lumpiness in orders?
No, not really. You know, I would say we've seen this over the last several years that these orders come in at various times and usually they're large. And as I commented through Q3 year to date, we've seen very strong orders.
So this is just normal in terms of these large orders that drop in. i get it no that's that's good i just wanted to just double check on that and then uh obviously you know really good news on the on the blaine 2 facility can you maybe just uh you know bring some speed in terms of where we are on the production ramp in in blaine one what's the capacity utilization and where do you think we'll be by by the end of the year um and i'm just you know kind of amazed that uh you're not seeing any capacity uh headwinds or um you know uh supply chain bottlenecks unlike a lot of your competitors and peers in data centers maybe just touch on where you are right now in your supply chain etc okay well as you know when you're ramping up it's
not just our capacity it's also ensuring that our suppliers capacity is also expanding so as we've ramped our own facilities we've continued to work with our supply base to ensure that they're ramping. And that's a lot of work. And as, you know, as I think about our Blaine One facility, it's come online faster than we expected, but still ramping through the course of this year and into 2027. So it is starting to contribute, but we expect more stronger contributions from that facility as we go into 27.
Our next question comes from Joe Ritchie with Goldman Sachs please go ahead hey good morning everyone good morning so I so obviously incredibly good results um and demand remains really healthy your backlog is now kind of sitting at two and a half billion dollars you know like basically kind of flattish maybe down a little bit sequentially I'm just I'm just curious like with the capacity ramp that you have coming and what you see in your pipeline, is this kind of like the right backlog level for you going forward? Do you expect backlog to continue to increase from here? I know that you have a really tough comp, obviously, in the third quarter. Just any comments around that would be helpful.
Yeah, I mean, I think it's around the right level. I mean, it's hard to say, because again, when you get these lumpy orders that come in, that can increase the backlog. But, you know, we're trying to turn it as well because it is important as we have a backlog that we're responding to the demand from our customers so we you know we worked hard in q2 to really execute on that backlog because we know it's important to have good lead times for our customers so is my answer to that question that that's around the right level okay yeah no fair enough uh and it's look it's great to see you guys you know turning the backlog uh and really impressive growth.
I guess my second question is just around like the electrical connections margins. I know that you guys have been dealing with some like inflationary pressures as well. The growth is really good in the segment. How do we think about kind of like the trajectory of the margins going forward and whether you're going to be able to kind of expand those margins?
Yeah, Joe, I'll take this. This is Gary. You know, the first comment I'll make is about the great growth. You know, both on the top line and the bottom line, you know, mid-teens profit growth for EC is a tremendous contributor to our performance. And on the margin front, you know, we did see a significant sequential step up, and we expect margins to continue to improve as the pricing and productivity actions that we talked about last quarter take hold. And again, that's going to be in those high 20s, in line with what we discussed as that segment continues to deliver really nice growth on the top and bottom line for Invent. Great. Thank you, guys.
Operator
Thank you. Our next question comes from Jacob Levinson with Milius. Please go ahead.
Hey, good morning, everyone.
Good morning. Good morning, Jacob.
I think you mentioned there was a pretty strong tailwind in the distribution channel, Can you give us a sense of maybe inventory has got a little too low over the last couple of years, and just how much of that is maybe an inventory restock versus a real underlying sell-through demand?
Well, you know, we look at both the sell-in and sell-out from our distributors, and it's actually been well-balanced. So, you know, the positive note is that they're seeing strong sell-through. So we actually think it's very healthy, and it's real demand that we're seeing, and that's the short-cycle strength.
Okay, fair enough. And just on the utility side, I'm not sure if you mentioned how much that market grew in the quarter, but that would be helpful to know, for one. And two, just how do you balance the demand in that space with data center? Because I know there's not a lot of overlap with some of those products, particularly with the acquisitions that you did recently.
Well, yeah, power utilities grew double digits for us in the quarter. So it was very, you know, strong growth. And, you know, as we look at our whole portfolio, again, I've commented before, we intentionally have shifted to data centers and power utilities. And certainly, as we look at opportunities, we want to ensure that we're serving our core customers. And so we make prudent decisions if there has to be tradeoffs. But in some cases, we have separate facilities or depending on the product line, you know, of liquid cooling is, you know, in separate facilities from where we're doing some of our power utility business. But it's overall part of our planning to ensure that we're looking far enough out, talking to our customers, and, you know, ensuring we can execute on all that customer demand.
Great. I appreciate it. I'll pass it on.
Thank you. Thank you, Jay.
Operator
Our next question comes from Jeff Hammond with KeyBank Capital Markets. Please go ahead.
Good morning, everyone. Beth, could we count on 100 days to get Blaine too opened, or is that too aggressive?
I think that's too aggressive. I mean, we are, like, running flat out, so I don't think we can have that repeat performance.
All right, all right. It's good to talk about electrical connections again. I know you mentioned a lot about the short cycle, but I'm just wondering if this step up in acceleration, like how sustainable do you think it is and then just gary on the mark you know you had some price cost issues nice recovery there you know are kind of are we where we want to be or is there more kind of price for us cost recovery into into the second half i guess you know how should margins look on on ec uh as we go forward electrical connections growth you know one of the things that we've really focused on is ensuring that you know our product portfolio which is uh positioned well in, you know, we have cable management, for example, that is used in data centers,
and there's a lot of construction that goes on in the gray space of data centers. So we've done a lot of work to ensure that our sales teams and our portfolio is positioned there. So we feel very good about that. And again, the growth was broad-based across electrical connections. And like what we do overall in Invent, we continue to come out with new products. And we also have added capacity for some of those core lines in electrical connections as well to be able to you know really you know uh perform and execute on all that growth so um so we feel good about the trajectory of that business and i'll let gary uh respond to the second part of that question yeah jeff um you know as i mentioned earlier uh we're really pleased with the profit contribution to Invent EC delivering mid-teens is certainly far higher than they've contributed previously.
On the margin front, we saw the progress that we expected in the quarter, and we expect to see continued progress as that pricing fully takes hold. And, you know, one of the things I would mention is keep in mind we've got some acquisition contribution in that business as well. We love that business in the high 20s and that's where I expect it to be this year.
Okay, great. And then just two quick ones on liquid cooling. One, just feedback, early feedback on your modular product offering and uptake. And then just if you could level set us on the $2 billion revenue for 2026 data center, what you think the mix of liquid cooling versus other is. Thanks.
So our modular platform is going to launch, you know, later this fall, and the interest is very high with a broad set of customers. And so we feel, you know, very confident about our new product offering and the growth that it's going to provide us. On the $2 billion, certainly we haven't broken that down yet, but it's a significant contribution coming from liquid cooling.
Okay. I would just say we have broad-based impact on data centers from our portfolio, and it's really nice to see that growth contribution. As Beth talked about, the infrastructure vertical is a significant part of our business.
Operator
Our next question comes from Neil Burke with UBS. Please go ahead.
Good morning. Thanks. I wanted to ask about customer purchasing behavior for data center. I mean, it's clear that demand overall for Envent is very strong, but within your data center portfolio, can you kind of talk about how customers are purchasing your products? Like, for example, are there customers for large projects who are buying just liquid cooling from Envent, or would you say that it's generally more balanced for a typical customer between power and cooling?
Well, it really depends. You know, we have customers who will buy lots that we have to offer from cooling, power, cable management, to customers who might just buy a portion of a liquid cooling system as well. So we try and ensure that we understand what our customer is looking for. Are they looking for more integration? Are they looking for just a part of a solution? And we're very flexible to serve across that value chain. Because recall, we're working with hyperscalers, we're working with colos, we're working with distribution integrators. So we're able, you know, that's one of the things about Invent, we're able to provide solutions across that continuum from a product all the way up through an integrated solution that you might see in an e-house.
Right. And as a follow-up to that, I mean, on the power utilities, you mentioned double-digit growth. It seems like very strong double digits.
Can you just talk about, the kind of drivers there i mean i think of this business power utilities is typically kind of dependent on utility spending and maybe the mix is benefiting and vent particularly but are you are you dealing more with like data center customers directly given the power constraints to the industry thank you certainly power is the demand for power is being driven by data centers by an aging grid etc and uh when we think about what we do for power utilities again there's a lot that we're selling direct to utilities as well as through the distribution channel but i would say there's also some integration or opportunities as we think of our engineered buildings and in that gray space so we're trying to be able to serve all of those opportunities but in in general the demand for power is just increasing great thank you Our next question comes from Varun Govindaraj with Bernstein.
Operator
Please go ahead.
Good morning, everyone. Good morning, everyone. Quick question from my end. So what's next in terms of product vitality? Obviously, you have the new CDUs coming in the back half of the year, but as you think about your content per megawatt, where are you really looking to expand looking ahead?
Well, as we think about our overall product portfolio and new products, We're looking at how do we launch new products for these high-growth verticals in general. So whether that's our modular liquid cooling, whether that's looking at some of our PDUs and new capability there, whether it's looking at our AeroFlex flexible bus that can be used for even medium voltage applications, we really are thinking about where are those opportunities where we're going to see some differentiated growth in those high-growth verticals. So it's broad. I mean, we look at, you know, we've been improving our new product vitality across the entire company. And, I mean, that's been one of the core tenets behind our growth strategy and working well for us.
All right. I hear you. Thank you. And then how do you look at 800-volt DC and how that really impacts your opportunity. Any concerns about potential headwinds there? Are you already working with customers and talking about what the outlook for that is going to be? We'd just love any color that you could add.
As we think about 800 volt DC, and again, for us, there are others who are more power players, so to speak. For us, we think about in terms of cooling and what is that going to mean at the rack level and what is that going to mean for rising heat densities and what does our offering need to support? We think about it in terms of our rack PDUs. A lot of our portfolio, by the way, whether it's just in some of our power connections, is already rated to support higher storage capacity or low capacity. So we look at it as, you know, the industry is evolving. 800 volt DC is going to have some application in data centers, but you'll still have lower voltage requirements. And we just make sure we understand what it means for our roadmaps as we look at next generation products and what they need to be capable of meeting. So I think it's, you know, it's an opportunity for us to continue to extend what we do.
Thank you so much. I'll pop it on.
Operator
Our next question comes from Vlad by Stricke with Citigroup. Please go ahead.
Hey, good morning, Beth and Gary. Congrats on a nice quarter.
I just wanted to ask, in terms of order patterns from customers, you know, particularly on the utilities and data center side, are you seeing any change in sort of timing of how orders are coming in? Are customers, you know, ordering with sort of longer lead times trying to lock in capacity, if you will?
Yeah, I would say this, that not necessarily in the product portfolios that we play. We certainly are getting visibility from our customers what their future demand is so that we understand that when we're planning out our capacity. But we're not, you know, for the portfolios that we have, and keep in mind, there's different programs. So some programs are rolling off and new ones are coming in. We're typically just getting, you know, we're having those discussions on what's next, is what I would say.
And, Vlad, as we think about the backlog, you know, we've said previously and continue to say that the backlog is mostly 12 months or less, and that hasn't extended out.
Yeah, that's really helpful. Appreciate that. And then can you just talk about in terms of data center opportunities and potential that you see outside of North America, how you're seeing those markets develop and evolve and how you're thinking about Invent's ability to meet demand overseas as data center investment ramps in other regions?
Well, we certainly see that trend, that data centers are expanding in both Europe and Asia. And what we've been ensuring is that we're both investing in our commercial capabilities in those regions, as well as setting up our manufacturing. We do, you know, we do have a footprint that is global. So, and some of our products today for our data centers are, we do manufacture in Europe. And so, you know, we're thinking about, you know, or we have plans, I would say, just to continue to extend what we've done here in North America to be able to capture that opportunity around the world.
Operator
Our next question comes from Nicole DeBlasi with Deutsche Bank. Please go ahead. Yeah, thanks. Good morning, guys.
Maybe just a backlog question. And backlog did tick down a little bit sequentially, which is, you know, high quality problem because you were able to get so much out the door this quarter. But I guess if you look across the full year and considering the customer pipeline and your production plans, as we exit 2026, do you think backlog kind of grows from these levels?
Well, you know, as we indicated, right, part of our, and you're exactly right. I mean, we had a strong quarter because we were executing on some of that backlog. And as Gary just commented, you know, our backlog is typically within 12 months. So we keep adding capacity. So, you know, we want to see that we're in balance, that we're able to respond to that demand to support our customers, because that's really important to have very, you know, good lead times. So it's hard to say. And in any, as I mentioned, we get these lumpy orders. So, you know, at some point in a quarter, backlog could go up, but we want to work it down. So, you know, it's hard to say, but we're probably around the right level that we think we should be.
And I just reiterate what Beth mentioned in her prepared comments is we're off to a really Q3 on the order front.
Got it. Thanks, Gary. And maybe just to follow up on that, off to a strong start. I'm sorry to ask this annoying question, but does that mean that orders are actually order growth is actually accelerating from what you saw in the second quarter? Any comments on that? And then no one's asked the question about the M&A pipeline yet, so I'll throw that in there too, what you're seeing and the level of activity.
Well, two things I would say on orders. One, you know, we're seeing that short cycle strength, and the other would be some of those lumpy type of orders. You know, we're seeing some of those come in at the start of this quarter. And on M&A, you know, we have a very good pipeline, and, you know, I think we continue to be disciplined and we continue to look at opportunities that are going to help, you know, position us further in that infrastructure space. And, you know, our balance sheet is in a very healthy position.
Operator
Thank you. I'll pass it on. Our next question comes from Luke Junk with Baird. Please go ahead.
Good morning. Thanks for taking questions. To start with, just, Beth, curious to the extent you think we're seeing any company specific elements uh especially one and then contributing to the short cycle strength beyond just end market uh and market improvement can you clarify that question are we seeing i'm sorry are we seeing yeah yeah just in terms of the short cycle strength especially into distribution and a lot of discussion at investor day about improving channel the market coverage those types of things it seems like we're seeing that show up in the short cycle strength, to some extent, just how you would attribute kind of what is, and then specific growth versus, you know, market tailwind in the short cycle.
Yeah. So in terms of just that short cycle growth and through distribution, and you're right, it's been a key strategy for us is to ensure that we've got strong partnerships, to ensure we're doing integrated marketing planning, to ensure that we're driving our vertical growth strategies. So I do think, you know, and introduce produce new products. Also very important. So I think it's a combination of those actions that is strongly positioning us across those distribution partners. And, you know, we just we see strength there. And again, that sellout and sell in is well balanced.
Got it. And then in terms of the capacity increase in the cooling, just a couple of So that I'd be curious to hear your thoughts on. First, in terms of the order book, does it enable you to open up the order book anymore? I don't know to what extent there were any constraints in terms of taking orders in the near term before you get this capacity scheduled to come online. And then, you know, as you step into these three large facilities now, just curious how you think about, you know, there being any inherent flexibility in that, especially as you're bringing modular online and you know theoretically ramping you know multiple customer programs as part of this as well thank you well certainly um extending capacity as a result of us looking into getting visibility into what our customers demands are as well as our orders backlog and and also because we are launching a new platform coming up here so it's all of those factors.
And I think the flexibility that we have, and I made this comment, is the fact that we have opened up these facilities very close to our core Anoka Center allows us to flex our resources, our infrastructure, our labor. And certainly already, you know, we've mentioned that certain programs with hyperscalers have come online and moved to the next revision. So So flexibility is really key for us. And so, you know, there's been a lot of thought into that as we expand this capacity, kind of all in a larger extended campus here in Minnesota.
Great. I'll leave it there.
Operator
Our next question comes from Scott Graham with Seaport. Please go ahead.
Hi. Good morning, Beth, Gary, Tony. Congratulations on the quarter. I wanted to ask about third quarter organic guidance, which is, you know, obviously slower than what we just saw, but it's on about a 10-point more difficult comp. And then the orders this past quarter were, you know, in your growth business of liquid cooling seemed like a little slower, and I understand the lumpiness, of course. But then you also said that, you know, you're trying to be prudent with some guidance areas. Could you kind of wrap all that together for, you know, third quarter still looks pretty good organically. Is there upside to that organic number? And is that being maybe more driven by shipments from the backlog in liquid cooling?
Yeah, I'll take that one. And, you know, look, we're really pleased with the guide that we laid out. you know, 32 to 35% in the third quarter. I think I mentioned it earlier, you know, the two-year stack, because as you mentioned, the comps get tougher. So we're being very mindful of that. The two-year stack in the third quarter is 50% growth at the midpoint. And that's acceleration from what we saw in the first half. Certainly, as Beth talked about, as we went into the second quarter, you know, there's a lot going on and there's a lot going on and the teams did a great job to deliver against it. So it's important that we're prudent in our guidance and we'll continue to be that way to give ourselves the flexibility to execute as well as invest to support the growth in the second half and in the future.
All right. Thank you, Gary. The other The question was, you know, the mid-20s incremental margin in the second half of the year. You know, in the past, and this was before the sale of thermal, you know, the 30% number was sort of bandied about. I was wondering if that's still maybe a stretch target for you.
As we said at an investor day, our midterm target was mid-20s for incrementals. And that's to ensure that we can invest to support the growth. And, you know, that's what we'll see in the second half. You know, it's worth mentioning, you know, we feel really good about the growth and returns that we're delivering. You know, at the midpoint of our guidance, our EPS this fiscal year will be more than double what we delivered in 2024. And the team's doing a great job delivering not just growth, but returns as well.
Operator
Our next question comes from Brian Drabb with William Blair. Please go ahead.
Thank you. I want to ask a bigger picture question because I think a lot of the concerns around companies that have similar exposure to Envent, you know, concerns lately just been around the longer term. And, you know, it's really nothing new. But, like, the question is, like, is 26 and 27 going to be great and what happens in the out years? So I'm wondering, over the last few months, how your conversations with Hyperscaler and large customers have developed, what kind of visibility you're getting. Are there, you know, your broader pipeline and longer-term pipeline, how far out do you have visibility to some of these projects at this point?
Well, look, we've got a visibility several years out, but I will also tell you because, you know, we are in liquid cooling, we're working with NVIDIA and others on their roadmaps out through 2030 and trying to future-proof our projects. And keep in mind, liquid cooling is, you know, maybe it's now 10% to 15% of cooling in data centers. And as we see these high-performance AI chips and we see these higher heat densities, liquid cooling is going to have a very long runway in terms of just the replacement cycle and being able to match these next-generation chips. So, we've always said that maybe the build-out of data centers at some point down the road slows, but that white space and that refresh cycle, liquid cooling capabilities are going to continue to expand.
I appreciate that. Okay. Thanks, Beth. And then I know this is obvious, but maybe you could just comment on LTM orders, I think, is probably a much more relevant, in my mind, indicator of how things are going. I mean, obviously, data center revenue up 100% tells us how it's going, but are LTM orders, that growth rate, much higher than the low double digit that you mentioned for this quarter?
Operator
This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak, Chair and Chief Executive Officer, for any closing remarks.
Thank you for joining us today. We are confident in our strategy, which is remain consistent, and our ability to execute. We have many growth opportunities and multiple levers to expand margins. I'm proud of our performance in the second quarter. We will continue to focus on delivering for our customers, employees, and shareholders. Invent 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.
Operator
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
