Conference Transcript - NVT 2026-06-03

Brian Draub, Analyst — William Blair

Thank you all for coming to the N-VENT presentation. I'm Brian Draub, the Industrial Technology Analyst at William Blair and the Analyst covering N-VENT. Before we get started, I, of course, have to remind you that you can find a full list of disclosures on our website, WilliamBlair.com. Today, we're very happy to have with us CEO Beth Wozniak and Vice President of Investor Relations Tony Ryder. Thank you both for being here. I've covered Invent for a few years and before that Pentair with you know where a lot of these businesses originated when I covered Pentair the electrical or electronics business as they termed it it's kind of like a three to four percent growth business in most years and not super exciting if you fast forward to today that was my opinion right I mean three to four just it's all relative right because today you know we just finished the first quarter where the company reported 34 organic revenue growth there's exposure to data center of course they're providing critical electrical infrastructure critical cooling technologies for data center there's a lot going on in the utility industry as well and they have an array of businesses that we probably don't talk about enough across industrial infrastructure in general commercial that are also great businesses so we're very happy to have with us Beth Wozniak I'll turn it over to you thank you all right good

Beth Wozniak, CEO

morning I'm gonna flip through these first couple of slides and start here so it has been quite a journey for invent and as I think through the last couple of years we've really gone through a portfolio transformation and I say that because as we spun out of another company we had to work to drive growth strategies and reposition the portfolio into higher growth verticals and the big change that we made in the last year was one of our segments our thermal management segment we knew that it was not going to have the growth potential like the rest of our portfolio so we sold off that piece of our segment and acquired two other companies that created this engineered building solutions platform and with that we repositioned our portfolio into higher growth areas along with making organic investments in our liquid cooling and our other data center capabilities and that really showed through our results and over the course of the last several years we have demonstrated very strong growth performance and value creation and what is really great to see is we very intentionally said we wanted to focus and vent on the high growth infrastructure vertical and infrastructure for us as data centers it's power utilities it's other electrical infrastructure as you might imagine and I'll show you in this presentation that that's where we see the highest growth and our exposure to that infrastructure vertical has grown significantly so this year we had a capital markets day in which we shared updated targets and I'll go through those again but it is a meaningful step up in those targets and we're very confident in the growth levers that we have and our opportunities for margin expansion. So I'll go through the presentation and share with you our story. So for those of you who don't know Invent, when we spun eight years ago we were about a two billion dollar company. Last year we finished at just under four billion and that was about 30% growth and we've always had nice margins and there's more room for expansion. We're a very strong cash generator and the way we like to describe Invent is we focus on connection and protection and those are very critical when it comes to what we do in the overall electrical industry. Our products are essential for the build out of electrical infrastructure we have two segments and we renamed those segments last year to systems protection and electrical connections and the reason we did that is when we first spun we talked a lot about our enclosures business but we are so much more than just an enclosure so that's why we renamed it because today we provide protection for data centers with liquid cooling we provide protection for electrical substations for utilities and it's not just the building we have switch gear we do relay control panels so there's a lot of capability and our other segment is called electrical connections where we have power connections rounding bonding all critical elements and as you see here last year infrastructure was about 45 of our portfolio in q1 it was over half the revenue coming from infrastructure so the bet that we made to say we want to position the company there is really showing that growth potential and while we have a strategy to be more global we've done a lot of acquisitions that have been in north america and our growth in data centers and empower utilities keeps outperforming the growth that we're seeing in the rest of the world but as we think about that data center growth is going to take off around the world and we're positioned to go after it so that's who we are and when you look at our value propositions the first value proposition for us is that we provide mission critical solutions we have innovated which is how we came up with the word invent when we first started for decades to find solutions to support our customers problems we can meet all global and regulatory standards around the world and i'll use the example here of if you think about liquid cooling and what it does in a data center it is ensuring that it's driving performance but it also is providing energy efficiency and our liquid cooling solutions can provide a 45 percent improvement in this term called power usage efficiency which is really how much power is being used to power the it compute versus hvac and all the other things that are in a data center when it comes to resiliency and safety that is our second value proposition we have products that may be a low cost on the bill of material but they provide outsized value and if you think about an enclosure that is protecting an automation system that is driving millions upon millions of output in a factory our enclosure is safeguarding those electronics from the environment from shock for safety reasons and i can go on and it's that resiliency and safety that our customers depend upon us and lastly it's around customer productivity our electrical connections portfolio has innovated products for years following contractors around a job site to understand how to take labor out of the installation process and this is really critical because if you think of the trends today we have more electrical contractors that are retiring from the industry that are entering it and time is money and these days whether it's a data center or it's new industrial construction ensuring that you can get on and off the job site in a safe and effective way this is where our products come into play so to step back about when we first spun we are now eight years old we were at that time about a two billion dollar revenue company and we ended last year just under four and that's with thermal management coming out and some other things coming in what i'm really proud of and our team are really proud of is the value creation our market cap when we started was around four billion and we sit here today with our market cap around 28 billion and we're not done we are on a journey i mentioned that more of our growth is coming from infrastructure i'll show you that how we see that growth outperforming other areas new products have always been key to our strategy and when we started as a company our new product vitality which is the measure of revenue from products that we generated in the last five years it was low teens it is at 27 percent and new products are an engine for us to drive growth new products in the first quarter of this year were had an impact of about 20 points to our growth it's those new products and those new liquid cooling solutions for example that are really propelling us and then we've done about a billion and a half dollars in sales from acquisitions and we've really gotten effective at being able to identify companies that align to our strategic view and integrate them and invest to scale them and grow. So it's been a good story for us and we're excited about there's so much more to come. This is the chart that shows the acquisitions that we've done over the course of our history and I'll go through all the way to the right where you see that we acquired Tracti that got us into we really wanted to get more into the utility space and so we acquired Tracti to create this platform of engineered buildings we then sold off our thermal management business and acquired EPG and when we did this we're very disciplined so we've always acquired companies and had a very attractive multiple. Well what we didn't know is that when we replaced thermal with Trachty and Electrical Products Group that we would more than offset the EPS that we lost in selling off that segment and that just speaks to our ability to drive the growth and execute. So in 2025 you can see infrastructure became a larger part of our revenue and I think one other important point for us is as we change the portfolio our exposure between short cycle and long cycle became more balanced because we traditionally had been seen as a short cycle business and I think that's really important for us to have that balance and so now we're sitting here with a record backlog of 2.6 billion which is significant for us as a company I always like to go back to our strategy and if If you looked at any of our presentations in the early days, you would see it's remained fairly consistent. We have taken a portfolio of products and really said that we want to scale everything we do across the company, our go-to-market approach with our channel partners and our customers, that we really unify those things. We've grown with high growth verticals, new products, M&A, and we've grown globally, just not as much as those other areas. And what we're transforming is how do we drive a more unified employee experience, customer experience, and doing that through business process transformation with digital data and AI. And as we think about it, it's scaling what we do so we can go even faster. And a big focus for us is operational excellence and how do we accelerate that. What drives us are macro trends, and I know you're very familiar with these macro trends. The first is AI infrastructure. As you know, there is $7 trillion of CapEx that's being invested in data centers. And it seems every day we're hearing some of that increase. Where we play with liquid cooling, we see that growing faster than some of the other technologies in a data center. And so we've invested over the last couple of years in a whole new suite of modular, platforms including CDUs many of those products released this year and that will enable us not just to serve hyperscalers but other customers from enterprise and colo when it comes to electrification when we think about the grid and the need for power not just for data centers but everything electrifying what has taken us a hundred years to build out in terms of our grid today we have to double that in the next 25. so that is a lot of electrical content it's upgrading the grid it's providing more capability it's not just one-way flow it's bi-directional with different energy sources and creating that engineered building solutions platform for us really gave us a stronger position in utilities When it comes to industrialization, there's a lot around automation, there's a lot around manufacturing, construction spend, and our products play there very well. We've always been a strong performer industrial. Sustainability with all new energy sources all required, there is a conversion from those sources to electricity, and our products play there as well. So we feel very well positioned with these macro trends. And this chart kind of puts that into light. You see across the bottom those trends and where they play across the infrastructure vertical, and we've broken a couple of things out there, as well as industrial and commercial. And I'll point out that we say our total opportunity at Invent is $130 billion. That's the space we play. and of course the electrical industry is well over 400 billion but that is more than 2x our exposure to where we were when we started and you can see where we view the high growth being in data centers and in power utilities and other infrastructure and we have migrated our portfolio so that we're more leaning towards higher growth in those areas so just to share how we think about the trends and how that's translated to the moves that we've made when it comes to data centers we play in both the white space and the gray space last year our data center sales were a billion dollars when we started we had less than a hundred million dollars of revenue most of our growth here has been organic we've invested in our capabilities and liquid cooling that even proceeded when we spun one of the questions we would always be asked and we share this fact here which is the takeaway is that we see our opportunity to be about a million dollars per megawatt opportunity and it's not just liquid cooling it's with our smart power our wire basket tray it's with our power connections and then we look at that gray space and see more opportunity there as well white space is going to grow faster than gray space and we believe liquid cooling has more longevity even once all the data center build out is done because that IT compute hardware is going to continue to be refreshed and the penetration of liquid cooling and data centers today is really low but on the gray space as everyone is trying to maximize the compute area they're moving power and other things outside well our engineered building solutions are perfect for housing that switchgear or that other equipment and we found that working with contractors were able to pull through a lot of our invent portfolio so we really see opportunity across this landscape when it comes to power utilities this was a smaller area for us before we did these acquisitions but it is growing significantly we're well positioned in transmission and distribution and in particular around substations one of the opportunities that we have is to pull through all of our invent portfolio in a substation whether that's enclosures wire basket trays power connections the need for power is only increasing and so our ability to provide safe solutions and we have good positions with utility customers that are decades in the making highly regulated and we see this as long term steady growth for us so we're very excited about the opportunity here for further penetration and long-term growth i'll speak to industrial and commercial in industrial we've always had a strong position here and i'll share with you something interesting just like we think about liquid cooling and data centers you need to cool the electronics inside an enclosure and that's where we really started our capability this year we're launching a whole new modernized energy efficient platform for cooling electronics just keep getting hotter and hotter but when it comes to industrial we have products that can meet any specification outdoors indoors caustic environments chemical manufacturing and we're seeing nice growth there this year when it comes to commercial that's an area where I'd say the macro is more challenging but the content in a building is all becoming more electrical you only have to stay in a new hotel these days and you see all the electrical connections that didn't exist it's frustrating when you go somewhere and you don't can't find a place to plug in all your devices and our ability again to provide labor-saving solutions and innovate here has always allowed us to see growth in that commercial space so both of these areas play to our core when it comes to global growth what was new for us last year is that we created an organization to focus on europe and apac and that team are driving commercial excellence customer market-backed capabilities we've expanded our sales team to go after data center growth for example and we have a great manufacturing footprint and our manufacturing products to serve some of those trends and those customers around data centers and power utilities along with that i might add we've really established capabilities in india as a center of excellence for us whether it's engineering and simulation and modeling or digital capabilities and as we see data centers also grow in india building off that capability and our manufacturing footprint is key for us so as i've said we have grown nicely in those regions just not as strong as we've seen that north american growth but it is still a big opportunity for us when it comes to acquisitions we have a very strong capability here we have this framework and it has played us well is we're very thoughtful about where we want to grow and why and it starts with great products and high growth verticals but we have to understand how we differentiate and how we can invest and scale to grow and we've done a great job because our deal models are based on cost synergies but we drive those revenue synergies and that has allowed us to outperform some of these businesses that we have acquired we have 2x or 3x the revenue growth and we have more that we can do here when it comes to operational excellence we recently added a new supply chain leader and this is really critical as we acquire new businesses they may not have the same capability that we've had in our core business we need to have safety first we want to drive lean capabilities and then we can drive automation and digital but there's a lot of opportunity here in terms of our margin levers we we can get a lot better in terms of ensuring that we are more productive i will say this we focused a lot on our supply chain you have to in order to ensure that you can deliver for whether it's utilities or data center customers and the last point i will make here is capacity expansion we've expanded our liquid cooling capacity we're in the at the second factory that we're expanding we're expanding our engineered building solutions manufacturing capability as well and we're doing line expansion so we're making investments for our growth and it all comes together and what we call our spark management system people as we grow we need to have people growing the company with us and i'd like to say our culture is around performance but people really matter and so we want people to grow with invent and and grow their careers with us as we grow our engagement scores have shown continued improvements when it comes to growth there's a lot we're driving around customer and sales and a best-in-class customer experience we think about our sales and marketing organizations from the customer or market back with solutions not just promoting a product through distribution which is a big channel for us our sales last year grew 14 percent so it's a key focus area for us i spoke about lean it's allowing us to increase our throughput digital is very key for us we're using ai across the company in various phases to learn but to allow us to be more productive because we're very busy and then velocity and this is key we want to reduce our cycle times we want to deliver faster what took us years to launch a a new product when we first started, the average new product at Invent is less than a year. That's really important. So these are our new midterm targets that we shared at our investor day. Some of them have doubled from the targets that we set a couple of years ago. It's a reflection of the confidence that we have in our strategy, in our ability to execute and the transformation that we've done our sales growth targets are 10 to 13 percent that's up six and a half points from the previous target acquisitions as we have the capability we've been doing larger acquisitions so we think that can contribute three points of of growth a year. Margins at around 22 percent. Adjusted EPS up significantly, 17 to 20 percent. And our free cash flow around 95 percent. And we are a really strong generator of cash, but right now we're investing for growth. So significantly increased targets from where we were a couple years ago and our first quarter performance we're certainly well on track so i want to close with the next two charts invent we'd like to say we're inventing the electrified future we're positioned well with the core macro trends of sustainability digitalization electrification we've transformed our portfolio we have great products and brands they are well known in our space our track record of performance has been good and we know how to execute and are going to continue to drive all those levers there are tremendous growth opportunities for us but we will remain very disciplined on knowing where we can go and execute and how we're positioned to win and I think we're very disciplined and made smart decisions around our capital allocation and we will continue to do so. So we're confident in our plans, we're confident in our ability to deliver shareholder value. So I'll end on this as a summary. Our portfolio transformation to a more focused higher growth electrical company is really driving our success. We're well positioned with the key macro trends, and we focus on that to ensure that we know where the opportunities are. Growth in infrastructure, data centers, power utilities, that is a priority for us, and we're going to continue to invest in new products and capitalize on our strengths there. And accelerating operational excellence is a key focus across the company because we need to be able to scale, grow, move with velocity, and that will also allow us to improve our margin capability. So I want to end on that and say thank you for your interest in Invent. We're excited for our future, and we always like to say our future is bright.

Brian Draub, Analyst — William Blair

Thank you so much, Beth. That was great. We do have three minutes left in this room, so I thought maybe I'd start with one question for a lot of different directions we could go but could you just talk about you know a little bit further about the data center product portfolio that you have and how you're winning there it's it's of course becoming a more competitive space but can you just talk about you know the need to have the capacity the quality the reputation the relationships and sure that enable you to win okay so we do a lot in data centers

Beth Wozniak, CEO

from engineered buildings power connections power management but I will talk about liquid cooling because it seems that's what everyone likes to talk about we started doing liquid cooling and industrial and metal medical applications and a hyperscaler found us well before we spun and we started working on product capability controls logic systems and have over two mega of cooling deployed in the field. And we think that's significant compared to others. And we've been launching a platform of modular products so that our CDUs can cover a wide range of power requirements at a rack level, at a row level. We provide manifolds. We have great lab capabilities. So one of the things that we're known for is that we're able to model and test how our products will work under different operating environments. We've designed our products to be hot swappable so you don't need to pull down a data center that you can replace a pump or heat exchanger while it's still running. And it's the experience that we have and the fact that we've invested to scale our capability and are doing that with velocity that has allowed our partners and customers to trust us and why we believe that we're winning. Our most recent facility, which is about 10 miles from where our main campus is, we opened that facility from signing the lease to production in about 100 working days. We have never moved that fast before, but our ability to build on that team and those core capabilities and then be up and running, that is how we are approaching you know the growth here and i believe it's really that full suite of capabilities and the fact that we know how to manufacture and manage our supply chain well because you do not want leaks in the data center is one of the reasons we're well

Brian Draub, Analyst — William Blair

positioned to win and see continued growth here in this space okay thank you thanks very much we we're out of time in this room thanks beth thanks tony we do have a breakout session

Beth Wozniak, CEO

in the adler room if you want to