nVent Electric plc (NVT) Earnings Call Transcript & Summary

Welcome to nVent's 2021 Investor and Analyst Meeting. It looks like you have a front-row seat for today's meeting in this virtual setting. I am J.C. Weigelt, Vice President of Investor Relations. I'm really excited about the meeting today and grateful you are taking time out of your day to spend with us. All of us at nVent hope that you and those around you are safe and healthy. We have a great meeting today, starting with our CEO, Beth Wozniak; and then hearing from our Chief Technology Officer as well as our Chief Growth Officer. Each of our 3 segment Presidents will present; and then Sara Zawoyski, our CFO, will wrap up the prepared remarks session, which should be completed in approximately 2 hours. We will then open up the meeting for Q&A. Turning to the forward-looking statement. It's here for you to read in reference. 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 outlined in nVent's filings with the Securities and Exchange Commission. Forward-looking statements made today speak only as of the day of this presentation. The company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Logistically, this is an all-virtual meeting. The presentation is available on the Investor Relations section of our website, and the speaking portion is being recorded and will be uploaded as well. There will be a Q&A session after our prepared remarks. [Operator Instructions] Following the meeting, we will send a survey to registered participants. I value feedback as a gift and kindly request you take the time to complete the survey. And with that, I'm happy to turn this meeting over to nVent's Chief Executive Officer, Beth Wozniak. Beth, please go ahead.

Thank you, J.C., and good morning, everyone. I'm Beth Wozniak, the CEO of nVent, and I'm pleased to share with you our growth story. Many of you know nVent, but we are a $2 billion electrical company, focused on connection and protection. We are almost 3 years old when we spun and became a new public company. Yet, our business and our brands have been around for many, many years. We operate with 3 segments, and you can see that our verticals where we play -- our largest is industrial, followed by commercial and infrastructure, which I'm going to spend more time talking about later. Very important with electrification of everything and energy. And as a $2 billion company, 65% of our revenues are from North America. So we have plenty of opportunity to grow. What you should know about nVent is that we are a high-margin performance company. And we ended last year with all the challenges there were at a return on sales of 17.4%. The other thing is we are a very attractive company from a cash profile. And last year, we had 120% conversion. When we started nVent, we had to come up with a name that reflected who we were. And many of you may know our history is that we came together through a series of acquisitions. Well we came up with the name, nVent, because over our history, we've invented new products. And our history dates back well to the 1900s with one of our first brands, ERICO, which stood for the Electric Railway Improvement Company. And you know our brands like HOFFMAN and like ERICO and like CADDY, RAYCHEM. They've been around for many decades. And with that history, we've built customer loyalty and the breadth of a portfolio. Today, we have over 8,000 distribution points, and we manufacture in every region. And what's important for us is that we serve our customers with this mission. Now our mission, when we started nVent, was that we believe that safer systems ensure a more secure world, and we connect and protect our customers with inventive electrical solutions. And that mission is even more important as the world begins to electrify around us and as we need to have resiliency in everything that we do. Our value proposition for our 3 segments really falls into these 3 different areas. The first is because we have the breadth of our portfolio, we offer mission-critical solutions. We can meet stringent global regulatory and certification requirements, whether it's explosion-proof, whether it's hazardous, whether it's environmental requirements, and that is very important to our customers to know that we can meet those critical specifications. The second area for us is that we ensure that there is -- that we avoid a high cost of failure. And let me put that into perspective. If you think about an enclosure, that maybe costs $500 to $1,000. We're protecting tens of thousands of dollars of electronics that are protecting some factory automation that is producing something in a plant millions of dollars of output. And we know that, that reliability is important. We often say this: that we're a low-cost on the bill of material and yet the protection we provide is outsized in terms of the criticality of that production process. But the same can be true, whether it's our heat trace that is protecting pipelines with continuous flow manufacturing processes or whether it's our grounding, bonding, lightning and surge protection in our Electrical & Fastening Solutions business. We are a low-cost in the bill of materials, but we ensure that we have uptime and avoid that high cost of failure. And our third value proposition is around customer productivity and the lowest total cost of ownership. And that has different characteristics for us. So at the one end, we have Fastening Solutions, where our #1 selling product is less than $1. Yet we provide labor savings. And the value, because time is money, again, if there's significant value there for the contractor, that reliability that we can get a contractor on and off the job site and save them time. But all the way through to our Thermal Management solutions, where we're able to design and optimize a very sophisticated heat trace solution with our TracerLynx software, and we can optimize the power, for example, and ensure that we're reducing the overall installation costs that drive energy efficiency savings. So it's these 3 value propositions that allow us to have customer loyalty, customer retention and attractive margins because of that outsized value that we create. Now when we spun as a new company, we created a strategy, and we called it our One nVent strategy, and that strategy is the one that we continue to execute on today, and we're making tremendous progress here. One nVent, as an umbrella, was our strategy to really bring our 3 segments together and to drive scale and capability across. So as I mentioned, we had 3 businesses that came, a couple of them from acquisitions. We are a top supplier as an electrical company, yet we never built all those strategic relationships across our entire portfolio. So as part of our One nVent strategy was to develop more strategic channel partner relationships. And you're going to hear from Betty Noonan, our Chief Growth Officer, the success that we've had and how we see runway to continue there. Another aspect of the One nVent strategy was to look at what was core to really drive our overall segments and our nVent company: people, culture, our Spark management system and social responsibility, and I'll touch on a few of those areas later. Next on our strategy was to drive growth. And we think of growth in 4 different ways. We want to grow focused on high-growth verticals. And those are verticals where we're going to see growth higher than GDP because of the megatrends. We want to grow with new products and innovation, and you're going to hear from Aravind Padmanabhan, and you're going to hear from our segment presidents, how we continue to innovate and create new products, and 2020 was a record year for us. The other area for us is to grow globally, and you'll hear from our presidents their plans to be able to expand around the world. And our final element around driving growth is acquisitions and partnerships. Over our first couple of years, we've done a couple of acquisitions, but we think that, that can drive a point of growth for us every year. The next part of our strategy is around execution and transforming how we do business. Last year, we really did accelerate our digital transformation. We think about the customer journey. We think about digitizing our back office. We think about data and analytics. We made more progress last year than the first 2 years. Even though we provide products and we provide some solutions that have software, it's really thinking about that entire journey, the customer experience, the employee experience. Working capital. This is an area that you're going to hear from Sara, our CFO, that we have opportunity to improve there. And finally, productivity, which allows us to invest in growth, and velocity. We really believe speed can be a differentiator in everything that we do. Our strategy is working. We're making progress and we're continuing to execute on various aspects. So I want to spend some time talking about high-growth verticals. And let me start by saying the world around us is electrifying and with the mission that we have to connect and protect, we are well positioned. If you think about our entire infrastructure becoming more electric, if you think about technology and what that's driving, so whether it's the grid, whether it's renewable energy, whether it's 5G, what that means is that we're going to have more electrical systems, so electric transportation, be it rail, be it electric vehicles and smart buildings, smart warehouses, factory automation. All of these aspects that are changing around us have the need for more of our products and solutions. So I'd now like to play a video just to share with you some perspectives on the electrification of everything. [Presentation] So I think that video nicely illustrates the changes that we're seeing, the investments going on. And there are other megatrends. And we see this technology, connectivity driving more demand around connected devices, the industrial Internet of Things. We see a trend of sustainability, which is driving more renewable resources and more plug-ins to the grid. We see demographic shifts and in emerging economies where technology adaptability, the time that it takes for the next-generation to accept and embrace technology that it's happening faster and faster. And we're seeing, post the pandemic, that there are investments globally that are going to be made into this infrastructure. So what does that mean in terms of those investments? Well, we would expect to see more smart grid, more sustainability and hardening of the grid, more data centers, more 5G and telecom, renewable energy, as I mentioned, and all that smart infrastructure that goes with it. So what does that mean for us? Well, let me share with you by each of our segments, the implications. So starting with Enclosures, which is our largest segment. Our enclosure provides protection. All electronics need to be in an enclosure to protect the electronics, but to protect the user. And as we see more industrial Internet of Things, we're going to see more smaller enclosures, but we're also going to see larger enclosures in factories. We're going to see enclosures with 5G outside. We're just going to see more enclosures. And when it comes to data and networking solutions, as we see more high-density electronics, the need to protect from heat that's now generated in that closure becomes even more important. And we believe we have a differentiated position with cooling capabilities. So we really extend what we're doing around that protection thing. Our next largest segment is our Electrical & Fastening Solutions segment. Here, we provide solutions that support power and data infrastructure. So when we talk about anything around energy storage, power utilities, it's our grounding, our bonding, our surge protection, all which ensure that we're protecting against transience and ensuring resiliency. When it comes to a smart building, think about all the outlets that we see. With all that data and power, there's more cables. There's more infrastructure. The density of devices going into a building, a warehouse needs more of our fastening solutions. And in our Thermal Management business, with our electric heat trace capability, we ensure resiliency of power utilities. We ensure resiliency of pipelines for chemical processing plants. And we also, on the commercial side, have offerings, which are more energy efficient, such as the fact that we can trace a hot water pipe, which normally in a building would would've been a recirculation system, and we can be more energy-efficient by heat tracing that and providing instantaneous hot water. So as the world becomes more electrified, it creates more demand and more need for what we do at nVent. And we believe that we are well positioned. So let me break that down into some subverticals to really provide more color of what we do here. And I want to say industrial, commercial infrastructure and energy are those core verticals that we've always focused on, and we've broken it down further to show what parts of our portfolio by percentage and what we see in the near term as the growth rates. And let me point you to the infrastructure vertical. This is an area where we've recently done some reclassification, and we thought about it this way: that anything that is going to become electrical infrastructure, we ought to put here because we know the growth rates are higher, and we want to focus here and be well positioned to grow with those trends. So you can see datacom, telecom, power utilities, rail and transit and renewables. It represents about 19% of the overall nVent portfolio, and this is where we're going to see more significant growth drivers and trends. If we think about industrial, there's electrical trends there, too. It is our largest vertical. We expect this year, we're going to see some bounce back from last year, which was a very challenging year. But I think more importantly, we're starting to see more automation in all of these subverticals, which means a demand for more enclosures, for example. When it comes to commercial, while there are going to be some areas that are challenged like offices or like hospitality, we still expect there to be investment in warehouses, for example, in education, in health care. And I think more importantly, it's the electrical trend of more density, requiring more cable management solutions and more electrical infrastructure around a building, whether it's charging stations or solar or resiliency with lightning protection, that will still require the demand of our products, and we're well positioned there with everything that we do. So as we think about growth, we think about positioning ourselves with these electrical trends in these subverticals. So I want to give you some more description of where we play and what we do, particularly in some new infrastructure verticals that we haven't previously spoken about. On this page, we've highlighted telecom and 5G and power utilities. So on the left-hand side of the chart, we do about $75 million of sales, and it is a large growing space. And we played in the telecom sector for a while and now more emerging 5G. Again, we do everything from our enclosures and our monitoring solutions to grounding, to cooling capability and power connections. And I think what's important here is 5G is becoming an enabler for all the other electrical infrastructure. So our enclosures and our test and measurement capability is just extending into many other areas. When it comes to power utilities, for us, we really think about the power generation and distribution and energy storage. And so in a way, it's very broad. And we've been playing in this space for a while. We do about $50 million of sales. And again, a very large space, but it's that resiliency that we provide with our grounding, our surge protection. We even have theft deterrent capability because copper is often something that is sought on a job site. Lightning protection, electric heat trace, the entire portfolio of nVent comes into play, and we see this as an area of continued growth and investment. And then another vertical here, subvertical, one that we've spoken about before is around data and networking solutions. As we spun as a new company, this was one area where we stepped back and said, there's more value that we can create for customers as in that. We put in place a commercial team that really looked at marketing and sales and sold the entire portfolio. It started with the enclosure and it expanded into cooling capability. Then we added our leak detection from our Thermal Management segment and then extended with some of our cable management solutions. We most recently did an acquisition of WBT to extend further with innovative solutions. Pre-pandemic, this is an area for us that we grew double digits. Post-pandemic, this is an area where we expect that we can also grow at double digits, given the need for our capability and particularly liquid cooling. So I now want to talk about acquisitions and partnerships. We are a $2 billion company in a $60 billion space. It is highly fragmented. For us, we think there's opportunity to extend our mission of protection and connection, broadening out our portfolio, looking at elements that can help us grow and accelerate in those high-growth spaces, expanding with technology and innovation and helping us to grow globally. And the 2 acquisitions that we did over the last couple of years, I think are good proof points of how we're looking to build upon our strategy. The first was the Eldon acquisition. It allowed us to create a more global capability with the IEC modular portfolio, very innovative and very slick and easy to use by the panel shops or installer. That portfolio, we're now able to take it around the world and serve global customers who are looking to have 1 specification to be served to them in anywhere around the world because we're taking the Eldon portfolio and now producing it in North America and soon to be in Asia Pacific. So it's an acquisition that provided us with great product capability as well as global positioning. The WBT acquisition, as I mentioned, extended our innovative labor-saving solutions now [are] into wire basket tray, really focused on that data and networking solutions space. And a recently announced partnership is allowing us to have an alliance with a technology player in that cooling space so that we can jointly provide solutions to customers in data and networking solutions that takes from the -- right from the chip all the way to the racking a complete cooling solution. This is an area that we think we're going to see some tremendous growth and opportunity coming together. So when you see these different examples, I think it lays the framework for how you can expect us to continue to find those opportunities that position us well to growth. And as I said earlier, we think we can see about a point of growth as we go forward with acquisitions every year. I now want to transition and talk about our One nVent part of our strategy, which is around, really, the common elements across our company to help us scale and build capability. When we launched, we created a management system that we called Spark. And there's 5 elements to Spark. It starts with people. And when we launched as a new company, we made inclusion and diversity a core for us. Last year, we had our second engagement survey. And our scores improved by 8 points, and that was in such a challenging year. But it was a year where we said that the safety and well-being of our employees was our first priority. We want to have great people, and we want to have an inclusive environment where everyone feels safe and shows up to do their very best work. Our second element is around growth. And over the last couple of years, we've spent a lot of time looking at market back approaches, looking at how marketing and sales come together, looking at digital capabilities to really drive that integration. Lean has been at the core of what we do for many years and in our history, and it really is about looking at where there is waste and understanding customer value. And it's because of this Lean foundation, we had great execution at the end of last year and saw great productivity, but Lean is also the reason why our digital acceleration through agile methodologies was embraced so quickly, and we started to see significant progress. As we think about the future, Lean and Agile coexist together along with Digital, and those are powerful elements. Our Digital transformation: we think about digital in everything that we do. Even though there may be physical products that we provide that don't have any software in them, everything we do is getting enabled by Digital, and you're going to hear more about that today. And lastly, as I mentioned, Velocity. And yes, as we work with Lean and Digital, that drives Velocity, but it's also this idea that can we serve our customers faster? And can we launch our new products with a 30% reduction in our cycle time by really driving a cross-functional agile approach? Speed is important. So those are our elements of our management systems. It's driving performance and it's building competitive advantage. Next under that One nVent umbrella is social responsibility. And this is an area that we're very proud of that we launched our first social responsibility report last year. There are 3 elements for us: people, product and planet. And as I mentioned earlier, those elements around inclusion, diversity, employee safety. Our Board members, 60% of them are diverse. On the leadership team, 45% of the leaders are women. Our safety record, which is really at best-in-class performance improved last year by 25 percentage points with everything that we had going on. I think that really shows as a strong pillar for us. On products, here's how we think about it. We want to design our great products that we have today that meet those needs for our customers, but we want to do it with ecofriendly materials. Where we have products that drive energy efficiency, we want to ensure that we're doing a good job there. We want to make them safe to use, part of our mission, and make them efficient and easy to install. We have a couple of stories here. One around, I mentioned earlier, the fact that we heat trace hot water pipes, and we can provide up to a 25% energy efficiency. But liquid cooling, the real "so what" about liquid cooling is that we're able to provide a more energy-efficient solution, which really does matter as we start to see the demands upon energy of these data farms and there's the power usage efficiency measure that we are able to improve upon, which really is the use of energy in a data center. And lastly, the pillar of planet. We, for a long time, have done a lot of focus on energy and water management, waste diversion, but even thinking about renewables and our carbon footprint, are where we are headed. And 97% of total waste was diverted from landfills in 2019. So these are just a few of the stories around the work that we're doing, but this is really important to us. It fits with our mission. It's important to our shareholders. It's important to our customers, and it's really important to our people. So those are the key elements of our strategy, and you're going to hear more from the rest of the team today. But when I think about nVent, and nVent is a high-performance company, it's because we are going to demonstrate that we have a good track ahead of us for organic growth. We're focused on these high-growth verticals that have more demand for our products and solutions. And with our industry-leading brands and our portfolio, our positioning for global growth, sustaining momentum that we had last year and having more new products, more digital and building out alliances and partnerships, we know the future there looks bright. Last year was a tough year, but I think we showed that we could execute. We ended the year with very strong cash flow performance, good decrementals and a lot of that enabled by our Spark management system. Our financial metrics: we have top-tier margins, and you're going to hear from Sara that there's more runway there for us. We have strong cash flow generation. We have a strong balance sheet, and we have an asset-light model with CapEx at about 2% of sales. And from a capital allocation perspective, our dividend yield is about 2.5%, and we believe that we can allocate capital to drive investments in growth that position us well for the future. As I mentioned earlier, last year, we set 3 priorities: one was to take care of our employees, ensure their safety and well-being; two was to make sure we could continue to operate and execute, which I think we demonstrated; but three, to emerge stronger. And as we emerge out of this crisis, we know we are well positioned and well positioned to create value. So I want to close by saying this as our key messages. The electrification of everything positions us well. Our people, our culture, our Spark management system, those are differentiators for us. We have top-tier margins and great cash flow, and we have runway there. And our capital allocation is focused on growth. Our future is bright. We're excited about what lies in front of us, and that ends my presentation. And with that, I'd like to introduce to you our Chief Technology Officer, Aravind Padmanabhan. Thank you.

Thank you, Beth. I'm Aravind Padmanabhan, Chief Technology Officer, at nVent. I'm excited to speak to all of you today about the progress we are making on our Digital transformation and new product introductions. Let me first start with Digital. At its core, our transformation strategy is all about reframing immense growth strategy to win in a digital economy. By definition, this touches all the segments and functions of the company. In order to deliver on this strategy, we are deploying platforms, tools and capabilities across all 4 of the strategy pillars you see on the top-left of this chart: digitizing our go-to-market, digitizing and modernizing our IT operations, building out our data platform and launching Connected Solutions. Let me tell you a little bit about some of the features and capabilities we've already launched across the customer journey you see on the bottom of this page. 80% our flagship websites have been upgraded in the last 12 months, many of them e-commerce enabled, all of them with rich digital product content, advanced search capabilities, guided selling that allows customers to find solutions fast and the ability to get instant quote and price along with product lead-time information. We can already see the benefits of some of these new features. For example, on our SCHROFF.com website, where we see an increase in the number of unique hits, new user registrations, request for live chats on the platform and over a 50% increase in the request for quotes. Moving from lead generation to order fulfillment, we are going to launch several new capabilities and features as part of our logistics optimization and transportation management platforms this year. This will significantly simplify and add velocity to our overall order fulfillment process, giving customers transparency throughout. Last year, we launched back office automation and factory digitization platforms, which continue into this year, releasing new features. This will give us productivity and customer experience benefit. Also in the last quarter of last year, we launched the enterprise data and analytics platform, Intelligence. It's already helping us solve critical business problems like supplier data spend optimization, which in turn will help us with working capital improvements. In order to measure the value from our Digital transformation, we've operationalized a value tracking system. The expected benefits can be seen on the top-right of this page. Sales increase of $20 million to $40 million and margin enhancements of 100 basis points ROS also increasing our working capital -- performance, I should say, also increasing our working capital performance. To summarize, our Digital transformation is truly an enterprise-wide change and will create measurable impact for nVent. As part of our delivery road map, we launched 40 products last year. We expect to once again launch 40 Digital products this year. The engine that is driving our transformation has 3 key components. First, the Agile software delivery system. Agile gives us velocity. It also helps us deliver incremental value fast by allowing us to deploy our resources efficiency. In the first half of last year, we pivoted 100% to Agile approach in all Digital, set up the internal training academy and trained over 500 people globally. The adoption of Agile was -- has been fast and great for us, mainly because of our long and deep legacy in Lean. The second component of our transformation engine: Platforms. The Platform product operating model is not only helping us reduce complexity and execution, it's also giving us the ability to scale Agile Digital fast. And then the third component, data. We are building a data-driven culture at nVent. As I mentioned on my previous chart, we launched the Enterprise data platform in the last quarter. This platform will analyze all the data coming from the various products and launches to continuously optimize our business operations. In summary, Agile helps us accelerate, Platforms help us transform and Data helps us optimize. Let me now shift from digital to new products. Our new product story and time line, you can see on top-half of this page. We launched a record 53 new products last year. We have momentum going into this year and expect to launch another 50-plus new products this year, increasing vitality by 1 point to 16%. We are also bringing in the Agile project delivery system from Digital into new product introductions, which will help us cut cycle time by 30%. All in all, our new products have an opportunity to contribute a point of nVent growth and will be accretive to nVent margins. Not only are we launching a record number of products, we are launching highly differentiated and innovative new products in all 3 of our segments. For example, globalizing our IEC portfolio and building out our liquid cooling solutions platform in Enclosures; launching labor-saving and easy to install solutions in our Electrical & Fastening segment; and thermal and Connected products -- sorry, Connected products and IoT in Thermal. We are launching a record number of new products, which will directly help support immense growth, and I'm personally excited about our Connected Solutions and software road map. Let me tell you -- let me provide you with some context on our Connected products road map in terms of where we are now and where we are going, which is what I call our software continuum. Software is not new to nVent. We've been developing design and configuration tools and embedded software for years, the first 2 pillars of this chart. RAYCHEM TRACERLYNX, which is a design and configuration tools, helps engineers and our customers design complex heat tracing solutions that meet demanding industry standards, all doing it very efficiently and for the lowest total installed cost. Embedded software is what runs inside our devices. Whether it's controllers or thermostat family of products in Thermal, or it's our fan and air conditioning controls in Enclosures, it helps run and optimize the performance of the device. Collectively, the first and second pillar enabled $330 million of nVent revenue today. That's a great base from which we can launch our Connected Solutions. Now if you go to pillar 3, which is Connected software. Software that helps us connect thousands of devices in the field, both ours and third-party to the cloud to get us remote access. It's a proprietary piece across software that translates to and fro from all the legacy protocols, which allows nVent to deploy IoT solutions, which allows us to deploy nVent IoT solutions easily and rapidly without needing expensive retrofits. And lastly, we are using our deep domain knowledge to build proprietary models and algorithms to analyze all the data coming from Connected products, which will then give critical insights and solve new problems for our customers. In summary, we are leveraging our large installed base and deep domain knowledge from which to launch our IoT solutions. I want to summarize with 3 key points. We are making strong progress on our digital transformation. Agile and Platform, which I described earlier, are giving us velocity and scale. Our new product launches will be a great enabler for our organic growth. That concludes my technology presentation. Thank you. And with that, I'll pass it over to my colleague, Betty Noonan, Chief Growth Officer.

Thank you, Aravind. I'm Betty Noonan, Chief Growth Officer, at nVent. With an estimated $1 billion electrical opportunity addressable by nVent through top global and large North American distributors, we selected this initiative as a top growth priority of [STEM]. We're headed into year 3 in the second phase of our strategic plan to align our brands with large global North American and European partners. Let me talk a little bit more in detail about this strategy. At [STEM], we launched this initiative to position nVent as the preferred strategic supplier with leading electrical distributors. We established a strong team with seasoned channel professionals and dedicated strategic account managers with a Phase I focus on 5 global and North American relationships. We introduced nVent as a leading electrical company with world class brands. We developed strong strategic relationships, starting with top-to-top meetings to tell our stories. We've built strategic plans by partner, targeting high-growth opportunities and invested to build integrated marketing and training to teach our partners' teams how we protect and connect the world's electrical systems, align with them on key verticals and demonstrate how our superior value proposition and product deliver more value to serve their end customers. We've created a One nVent Connect distribution program designed to drive growth, improve working capital and make nVent easy to do business with. And after launching the initiative in 2018, we realized growth of 10%, and nVent was well positioned with winning distributors. This work was instrumental in laying the foundation for future growth. Today, nVent is well positioned to grow to this initiative. We are executing Phase 2 of our plan and are poised to take full advantage of many future opportunities for growth, and we're off to a strong start. We have over 100 conversion opportunities in our pipeline, and January bookings were strong. We're targeting strong growth rates in focus areas like data and networking solutions, and we're focused on jointly acquiring new customers through integrated online tools. This next phase will focus on 5 key areas. We [apply] growth from the strong foundation we've built, leveraging our global relationships to grow outside of North America and aligning our superior product portfolio with the key growth verticals in the applications, which you'll hear a lot about today. And we're working to be best in class by digital marketing practices and the end-to-end customer experience we need to jointly drive demand, especially for our new products. Just a word on e-commerce, where growth is outpacing traditional, and we're driving for even greater growth rate of 8% to 12%. Going into 2020, the growth rate in e-commerce sales continued to outpace traditional for many of our partners, especially in key European countries, and that trend has accelerated. Most of our partners in Europe see 2 to 3x the growth rate in digital versus traditional sales. The pandemic rapidly accelerated this shift, which we and our partners see as a new way to work and serve... [Technical Difficulty] ...[end] customers, which is here to stay. Our Digital engagement platform, mentioned by Aravind, is a high-growth enabler and an accelerator, which includes connecting our systems for transactional data, the creation and the syndication of enriched product data and an increase in digital marketing campaigns and virtual training webinars to build awareness of nVent's value proposition and superior solutions, all designed to drive digital demand. Looking to the future, we have a strong foundation from our initial rollout of this program. And we have a structure in place, and we're focused on execution with an added focus outside North America. We're deeply focused on growth opportunities in Europe and in Asia and are looking to apply and extend our success that we discovered in North America to drive One nVent solutions to the rest of the world [by]... [Technical Difficulty] ...country in Europe. We will continue to drive our vertical strategy with an emphasis on high-growth infrastructure verticals, and we have an emphasis on -- and a strong track record for launching innovative new products. In addition to our growth focus, our selected partners are well positioned to grow. We're aligned with them as they focus on growing their business through high-growth verticals, accelerating their own digital investment and they have continued acquisition activity to drive their growth engines. And globalizing our digital engagement, as I've mentioned before, is a key priority for all of us as digital continues to outpace traditional growth. Before I close, let me look at a specific example. Let me share one with you. Here're some results from our strategic global partner, Rexel. As you may know, Rexel is a EUR 12 billion global electrical distributor, doing business in 25 countries, with close to 2,000 branches. We're pleased with our partnership, and they're pleased with us. From 2017 to '19, we realized the 15% growth rate [into] Rexel and then nVent outperformed Rexel's overall supplier purchases by 4 to 5 points each year. We strengthened our alliance in 10 countries with a heavy emphasis on digital integration and demand generation. Finally, our global position as a supplier in 2019 moved up by 4 positions over 2018 and continues to decline. So in summary, we have a large opportunity with strategic distribution partners who want to work with us and represent our winning products. We have a proven growth strategy with strong performance and we're positioned for growth today and in the future through the power of One nVent. Now I'd like to introduce Joe Ruzynski, President of our Enclosures business.

Hello, everyone. I'm Joe Ruzynski, the President of our Enclosures business here at nVent. I'm excited to talk about what we've been working on these last few years and what we're excited about as we go forward. Our Enclosures business is just under $1 billion in revenue and just over 15.5% return on sales. We're leaders in enclosure solutions in the U.S. and second globally. We have great innovations, such as data protection and advanced cooling. I'm going to talk a little bit more about that today. And we have tens and tens of millions of our enclosures protecting systems around the world right now. One of the ways we do that is with a great set of partners, channel partners and over 4,000 distribution points. We have a strength in the industrial vertical and a lot of good history there, and I'll talk about what's changing in the industrial vertical. But we're seeing that diversify as data empowers smart infrastructure. And we see a lot of great opportunities to diversify into areas like data centers and smart rail. We're also diversifying our geographies. We have a traditional strength in the United States and North America. But we're seeing that grow rapidly in places like Europe with our Eldon acquisition in 2019, with the new factory-built in India in 2019 and the new factory being built right now in China, along with the products, the people and the processes to serve those markets. So what Enclosure Systems do is they protect critical systems everywhere. If you think of trends driving these critical systems like smart factories, the systems that are making those factories smart, we are protecting. If you think of 5G, it's not just about communication, cell phones, it's about data that powers smart infrastructure and systems that need protection. Data centers are powering so much of what we do every day and our enclosure solutions are managing heat and protecting those systems that manage the data. Smart infrastructure will become more and more present in all areas in the world. And smart rail is an area we're very excited about, and we saw good growth in 2020 even in a challenging year. I think a good example of a very critical system is included pharma. Although this is part of manufacturing or production, an area that we have a lot of history and strength with, we're seeing technology drive change. Just a few weeks ago, President Joe Biden was standing in front of a vaccine system, a production system, at Pfizer, and featured very prominently behind him, was one of our HOFFMAN enclosures and that's managing -- was managing that system. Our closures ensure resiliency in the most critical systems by protecting electrical equipment, electronics and data. We think of our value proposition in 3 ways. One, just like that critical system I just mentioned for vaccine production, the systems need to be resilient. That protection needs to be of very, very high-quality and optimal protection is a strength of ours. We need the expertise in each application to understand the environment that, that system operates, so we can give it the maximum protection. A protection just isn't about enclosing or protecting from the environment. It's about offering cooling solutions and other innovations around that system to make sure that it operates efficiently. Our customers are global. They want us to sell globally to them but to serve and execute locally. If you think of supply chain and some of the disruptions we've been reading about here over the past few years, we have the ability to serve locally through localized manufacturing and regionalized supply chains, along with the people, the processes and the sales force to be able to serve our customers the way they want to be served. And finally, we make it easy for our customers. It's not just about the breadth of product and giving them the protection needed. When that product gets to them, we want it easy to use, easy to install and ready to configure, the way they want to configure it. We have a great video here. It's just an example about what time savings and system integration means as 1 example of that. If you could please play that video. [Presentation] All right. So let's talk about our growth initiatives. First, the applications, the problems we solve and the customers we serve are in many different verticals around the world. We're positioned well to target and to deploy resource to the fastest-growing verticals. I talked about data and smart infrastructure. There's a few others that I'll mention here in just a moment. From a globalization standpoint, our customers want the same product and the same spec to be produced and sold to them globally, in many cases. We now have a position to diversify outside of the U.S. in a much faster way because we have the factories and the products to be able to serve our customers. It's a differentiated offering, and it brings a lot of the other innovations, and I'll talk about a few more of them in a moment. And finally, when we think about growth and innovation, we want to focus on those fast-growing verticals. We want to focus on customers that have the problems that we can best help and add the most value. We launched 18 new products in 2020. We have an awesome funnel in '21, and they'll be focused on those solutions and innovations to add the most value. And finally, when we think about digital, I'll explain some of the progress that we've made here over the past few years, but it's about being easy to do business with and offering our customers tools that can help them find the right product, find the right innovation and find the right solution. So our investments are positioning us for those growth verticals for global expansion and innovation. As Beth mentioned earlier, the world is electrifying. We have a big opportunity but not all of the areas underneath that opportunity are created equal. I think of automation and smart infrastructure and some of the verticals within. I mentioned a few of them, but food pharma is going through a massive transformation. Test and measurement to make sure that all systems that 5G empower are being tested on an ongoing basis. It's a position of strength and knowledge for us. We talked about discrete manufacturing but when I look at new verticals for us as well, such as aerospace and defense, we read a lot about SpaceX and the industry of exploration, and we're right there protecting those critical systems. Data and communication is one we're very excited about, and we've been serving this vertical for a number of years, but we're now adding solutions to add even more value and to solve more problems for our customers. We play in large, profitable and growing verticals. And those verticals that are global in nature have differences in each region that we have to be aware of and we have to be in tune with. And that big opportunity is an area -- if I look at that big opportunity, we're well positioned to serve it where that growth exists. In North America, Europe, India, China, I talked about some of our new investments in those fast growth regions. We're also ensuring that our factories in some of our legacy regions are upgraded to be able to manufacture that great product and to serve our customers in all regions. So we're now positioned where our customers need us to be able to grow and to serve them on a local basis. So on to innovation. I mentioned the data center vertical earlier and specifically within that vertical, there is an application or a problem that we've been focused on solving the last few years. Over 400 million servers are in existence today. Those servers have capacitors, have chips. They produce a ton of heat. And quite simply, heat jeopardizes electronics. When you think of all the critical systems and solutions that I mentioned before that are around us every day, managing heat, we believe, is one of the most important problems that needs to be solved. We've launched new advanced cooling solutions over the last few years, and we're very excited this week to announce a strategic alliance with CoolIT Systems. CoolIT Systems are leaders in scalable liquid cooling solutions for data centers. We believe that offering our customers a wide range of solutions will give them the tools they need to solve their most critical problems related to heat. So we will benefit from growth, data centers as advanced cooling becomes more and more critical, and it positions us very well. And finally, from an innovation standpoint, I mentioned before that when we think about how we innovate, we do it with the customer in mind. About 4 years ago, we did a detailed voice of customer, and we asked the questions about what the biggest problems were that our customers needed us to solve. And we've built processes. We built solutions. We tested how to best solve those problems, and we've seen some dramatic results. We now have 2 websites to bring a lot of these solutions together. They bring the products and solutions around those verticals I talked about before, and they bring the solutions that solve those problems, the innovations that solve those problems that our customers said were most pressing. I need a price quickly. I need the product quickly. I need to know when it's coming. I want to be able to make simple changes to it so by the time it gets to me, I can integrate it with my system, my computer, my solution and make it very easy. Through digital factory, we've piloted 1 site, and we have a few more in process, and we've seen a 40% lead time reduction where our customers had made a configuration for us to get them that product. We've seen a faster growth rate with an integrated sales approach powered by our CRM solution, and we expect to bring that to all of our regions and all of our verticals. And finally, we've seen higher win rates when we can go fast. Velocity is a term that our customers come back to. Velocity is a term we talk about quite a bit, and it's about speed of information and real-time sharing of that data and information. Our tremendous Digital progress is already driving growth. We have much more that we want to do and it's in process. But it will bring better productivity to us and velocity to our customers and a better experience. So in summary, our approach will bring faster global growth and it will allow for local execution, regionalized supply chains, better service within that region. This profitable growth is going to come from attractive verticals that are growing faster in than overall space that we play in. And finally, the Digital and the innovation that we're driving is done first, thinking about our customer; and second, to be able to drive growth and to do it most effectively and efficiently. So I want to thank you for your time today, and I want to hand it off to Robert van der Kolk, the President of our EFS business. Thank you.

Thank you, Joe. Good day, everyone. It's a pleasure to be able to speak with you today. My name is Robert van der Kolk. I have the privilege to be president of nVent's Electrical & Fastening Solutions segment. Let's start with who we are. We're a global leader in power and data infrastructure solutions. We're almost $600 million in revenues with a 26.4% ROS in 2020. Commercial and infrastructure are our largest verticals, with North America and EMEA as our largest geographies. Our business is very well established, underscored by the fact that we have been servicing customers since 1903. We have strong brands with clear leadership positions, and we believe we are the #1 Electrical & Fastening Solution provider in the U.S. We out-innovate the industry, leading us to achieve high customer satisfaction and margins. So in a short, we're a true leader in power and data infrastructure solutions. Within power and data infrastructure Solutions, we have 2 segments: 1 part of our business revolves around power and data cable pathway management. We primarily go to market on the nVent CADDY brand and we provide a broad range of innovative installation solutions for power and data cabling systems. We believe we are the #1 fastening provider in the U.S. The other part of our business revolves around protecting and connecting power and data systems. We go to market on an nVent ERICO and ERIFLEX brand names and provide grounding, bonding, surge and lighting protection solutions to protect power and data systems from electrical transients. In addition, we provide innovative electrical connection solutions that provide superior reliability and efficiency. In this business, we believe we're the #1 grounding and bonding supplier in the U.S. We offer industry-leading installations and protection solutions. Our value proposals resonate really well with our end users and our specifiers where we provide solutions for power and data cable pathway management. Our value proposal mainly revolves around reducing installation time and labor. There are many different reasons why contractors favor solutions that require less labor, whether that's the effect that labor is scarce and hence expensive or whether that's for safety and health reasons. And our methods and solutions can generate up to 30% installation time savings as compared to traditional installation methods, resulting in about 15% cost savings. We constantly work to develop and introduce new methods and solutions working alongside our end users. And you'll hear more about this in a few minutes. The way we protect solutions to connect and protect our power and data systems, our value proposal revolves around safety and reliability. In today's world, safety of people and assets and resilience or reliability of power and data systems are imperative. As an example, Plant Engineering, which is an industry magazine, estimates that problems are arising from transient overvoltage cost U.S. companies $26 billion annually due to damage to electrical distribution and electronic equipment. We offer surge protection, lightning protection, bonding and grounding to help minimize this type of damage. And as an additional data point, according to UL, lightning protection accounts for more than $1 billion in structural damage annually in the U.S. We have studies done that spent many years by reputable, independent, third parties that show that our lightning protection systems provide 91% lightning capture efficiency. And lastly, expertise and across our entire business are experts in their field. We hold over 200 technical committees globally. And in just -- in 2020, we hosted more than 130 instructor-led events. Our end users are engineers and our specifiers count on and turn to us for advice and expertise. Our value proposal positions us to service the most critical needs of our customers. There's 2 mega trends that are really critical for our business. These are technology and connectivity and the electrification of everything. These mega trends will drive both growth of our verticals and also increase the demand for our solutions within our verticals. Of these verticals that we serve and that will grow driven by these mega trends, are power utilities, data centers and smart buildings, just to name a few examples. Now let's discuss some examples of growth drivers for applications within our verticals. Let's take electrical reliability and resiliency. The electrification of everything will make the society more dependent on reliable power. We offer solutions to protect power systems from electrical transients and we offer very reliable power connections. Cable management is another example. Both the electrification of everything and the technology and connectivity will drive an increased use of cables within all our verticals. We offer highly efficient cable management solutions. And the last example is labor efficiency. Clearly, the trend is a shortage and hence, increased cost of skilled labor. Both the U.S. Bureau of Labor Statistics and the National Electrical Contractors Association agree that every new year creates an additional shortage of 3,000 electricians in the U.S. alone. There's 7,000 electricians entering the field, and there's about 10,000 that are leaving. And at the same time, the need for electricians will increase by about 10% in the next decade. This is all magnified by a desire to have less people on the job site, driven by COVID and safety and health reasons. Our solutions, which significantly reduce the need for labor at the job site, add a very strong value prop here. So stepping back, there's 3 focused pillars for growth for us. Geographic growth and new innovative solutions to increase our position and high-growth verticals and applications to benefit from mega trends. So here they are, our 3 growth pillars summarized in 1 page. Power utilities, data comm, low voltage power connections, clear verticals of applications where we're well positioned. We have a good track record and the megatrends drive, both because of the vertical itself and the use of our product suite in the vertical and the applications. And then globally, we have significant opportunity outside North America. Europe and Asia Pacific are the regions where we plan to grow disproportionately. And lastly, innovative solutions. Our value proposal and our reputation is built on innovative products and solutions. Working alongside contractors and engineers, we continue to innovate and drive well over our point of growth annually. The next few slides, I will go into a little more detail on our 3 main initiatives to accelerate growth. Infrastructure is 1 of our 2 main verticals. Let's zoom in into 2 separate verticals to illustrate how we will accelerate growth. The first one is data centers. Our Data Center business is about $50 million. Megatrends drive more data center and at the same time, more use of our solutions within the data center. So examples are reliable power connections, which drive more use of our nVent ERIFLEX products and clean power, which drives more use of bonding, grounding, surge protection solutions also our [new] nVent ERICO brand. And more cables drive more cable management solutions, so our nVent CADDY brand, and we see opportunities to grow our position in the Sub Vertical to grow geographically and to capitalize the on WBT acquisition we did in early 2020, which added [indiscernible] solutions to our offering. Another example is power utilities. Our Power Utility business is about $40 million. In the whole of power utilities, alternative energy sources and energy storage will offer significant growth opportunities. Electrification of everything will drive more use of electricity and the existing global grid infrastructure is not sufficient to accommodate the area energy transformation and needs to be upgraded. And the electrification of everything is also driving more connections to the grid. Think of alternative energy sources. That offers opportunities for our solutions. And as a data point here, last year in the EU, renewable energy sources overtook fossil fuel was the leading source of power, and we expect this trend to continue. And then more reliability and resiliency. Our applications in this vertical all revolve around reliability and resilience of the system. And our grounding, bonding, surge protection, lightning protection and power connection solutions all work together to enable reliable operations of the system. In 2020, we purchased a case study with BC Hydro, the largest electrical utility in British Columbia and the second largest utility in Canada. They were suffering from repeated theft of copper ground converters in their distribution system and our theft deterrent cables solved that problem for them. We see good opportunities to grow our business in utility as well as in alternative energy and energy storage as an emerging trend, 2 growing verticals, which have an increasing need for our products. And then commercial, commercial is our largest vertical. And while we recognize that the outlook for immediate future is softer, there will really be pockets that will grow. Think of warehousing and health care. And in general, for new building and retrofit, there is an increased need for our products driven by megatrends. An electrical infrastructure that supports commercial structures has to, and is being upgraded and extended, both for existing and for new surgers. So while the short-term outlook for commercial is softer, our opportunity with infrastructure and with retrofit is increasing. So let's talk through a couple examples. Technology and connectivity means that commercial structures have an increasing demand for smart devices, for IT and for Internet connections. This requires small data centers in commercial buildings. It requires cable management throughout the building and it requires electrical protection of data infrastructure. All of that requires our products. And the electrification of everything drives an increase of EV charging stations and alternative energy sources like solar panels at commercial structures. This drives more power cables, which is cable management, and it drives the need for clean power: transient protection. We expect the increase of density of power and data in both new build and retrofit to offset short-term softness of the commercial vertical. Then when you look at global growth, we have a tremendous opportunity to grow our business outside North America. Our value props resonate, and we have made progress adapting our products and solutions to local requirements and habits. We're continuing to improve our offering for these chosen regions and looking at opportunity, competition and our strength at the industry. We have a focused country model. We're very deliberate in both countries in what verticals we focus on. And we service those verticals and companies well. And within those countries, we're building our strategic distribution relationships with top distributors. To execute, we have a regional, commercial structure and support teams. So global growth is a very significant lever to increase the addressable opportunity and our position. And in innovation. Innovation is at the core of what we do, working along side contractors and engineers, continuously improve installation efficiency as well as reliability and resilience of power and data infrastructure is what we're known for. Every year, we introduce new products. We filed about 25 patent applications that drive around 1% of growth annually. Continuous and meaningful product differentiation and innovation delivers value to our end users and improves our position. To bring this to life, I would now like to show you a short video. Reducing installation time and costs, our working with contractors is key. You simply cannot drive innovation like we do without working side-by-side with contractors to understand improvement opportunities. [Presentation] I hope this video was helpful to illustrate what we do and how we operate. And as I wrap up today, I want to leave you with these thoughts. Megatrends, like electrification of everything, they're here. Power and data infrastructure will increase in all verticals we play in, and we are power and data infrastructure. Skilled labor shortage is real. Our products and solutions save up to 30% installation time. And innovation's key, and we out-innovate in our space. And lastly, we have multiple growth drivers. So with that, I want to thank you for your attention and interest, and I want to introduce Brad Faulconer, President of our Thermal segment.

Thank you, Robert. Hello, everyone. I'm Brad Faulconer, President of Thermal Management. I'm presenting today from Redwood City, California, home of one of our manufacturing facilities, also the home of our polymer science R&D center. I'm in our customer experience center, 1 of many that we have throughout the world. And last year, we converted all of them into virtual training centers. And our customers and partners have really resonated and quickly adapted to this way to keep them current on our products and solutions. So let me get started. Who are we? We are a global leader in Thermal Management solutions. We have the #1 brand, RAYCHEM electric heat tracing. We have a large global installed base that provides high-margin maintenance repair and overhaul sales. Last year, we had $477 million in revenue, over 19% ROS. Our vertical performance, 40% industrial, followed by commercial resi, energy and infrastructure. Just 3 years ago, our energy percent split was over 30%, and our commercial and residential was just at 26%. So you could see that mix shift that's happened over the last 3 years in our vertical revenue contribution. And coming up, I'll share with you those exciting verticals that we have in front of us for growth. Next, on geographies. Thermal is a very global business. We have 45% of our business outside of North America, and I'll also share with you coming up some more exciting opportunities to continue to grow outside of North America. So what do we do? We provide electric thermal solutions. And I'll give you some more specifics. We protect against freezing, whether it's pipes and vessels and industrial, facility sidewalks and roof systems in a commercial and residential building or platforms or even rails in a rail and transit environment. If you've ever been to JFK Airport, there's the people mover that goes around the airport. We protect and keep snow and ice free and clear from that platform so that people mover or can go around. We also keep process up and running. Take a chemical plant that they need our heat tracing and controls to keep very narrow temperature control. We protect people in the environment, like our PYROTENAX life safety fire-rated cables that keep critical electrical circuits operating in case of a fire to keep emergency elevators, emergency lighting, smoke systems, all operating, so people can evacuate safely in case of a fire. We also provide comfort in our electric radiant floor heating systems under our RAYCHEM and new heat brands. I want to share with you 1 important quote that we just recently received from a customer. This is in form of a testimonial and occurred just 2 weeks ago during the incredible winter impact in the Texas infrastructure environment. Our customer called us. They were a customer in the Southeast U.S. that has similar issue to what we experienced in Texas back in 2015. Their power generating facility had pipe freeze protection issues. They called us in to do a complete audit of their system, and then we installed the appropriate products and control systems to make sure that they were fully winterized going forward in that power generating facility. Our customer called us 2 weeks ago to make sure that we got the word out that what we did for him is what we can do for the Texas infrastructure power systems. And that's exactly what we've been doing, making sure we communicate with all those key customers to share what we can do to winterize their facilities. Let me share with you some of our strong value proposition. Starting on the left, we save on total installed costs. One way we do that is up front in the design with our proprietary digital design tools that helps customers select the right product, optimize so they have fewer material as well as lower operating cost and lower labor to install the material. We also provide labor savings in our systems working with contractors to make sure we design in areas to make it faster and easier for them to install our products. Take the product shown there on the page is our RayClic connector used by commercial contractors. It has up to 85% time savings versus traditional heat shrink connection systems. We also provide reliability to prevent downtime. Our RAYCHEM systems are used in mission critical applications. They're backed by a 10-year warranty and they perform. If a system goes down, it can cost millions of dollars of downtime to a customer's facility to a building or a piece of infrastructure. We also save on operating costs, like our smart controls, that save significant energy versus uncontrolled systems or conventional thermostats. So significant opportunities for us where we deliver those high-value, differentiated solutions. The world is electrifying. We serve over $3 billion industry with an opportunity to expand ever more so. Take chemical industry in industrial. The chemical industry needs process automation to increase their efficiency and to upgrade aging facilities. We're also seeing trends with increased spend in chemical consumption across the globe. We're seeing process technology changes where customers are taking downstream refinery processes and integrating that with chemical facilities on the same complex. These new processes require elevated temperatures, which are perfect for our electric trace systems and controls. Let's look at commercial and residential facilities. Here, residential, we have great products for what we're seeing in the demand for renovation and new housing built. In commercial facilities, we also see increased requirements for safety and sustainable building materials that our products meet and in some ways, exceed those requirements. And we're seeing spend in the health care sector, which is perfect for our products. In infrastructure, Joe talked about data centers. Data centers for Thermal, not only is the water and cooling inside a data center, but there's a lot of water on the outside coming into those facilities. And if you're in Northern Climate, we need to heat trace those pipes and vessels that are outside that are bringing in that chilled water, and that's a great application for us. We also have our liquid leak detection systems that are used inside a data center to make sure that we prevent any upset conditions from water leaks. So many different trends that we are focused around our thermal solutions that gives us a really nice runway for growth. Let me highlight for you our key focused growth initiatives for Thermal. First is to expand our commercial, residential and infrastructure verticals. You could see from 2017 to 2019, we grew those verticals 8%, and we have great opportunities that we're focused on to further expand in geography, in channel, in partnerships and with new products and Digital. Second is, I talked about that large installed base. We have an opportunity, and we're focused on mining the industrial installed base to help our customers upgrade their aging systems. That's upgrading them to the latest controls technology. That's providing our heat tracing systems, with our services, where we can go out and help our customers audit their system and make sure they're getting the most performance out of our heat trace systems. We're also expanding our channel, as Betty talked about, through the One nVent distribution programs to make sure we have more coverage to get to those end users around the world. We grew our MRO, part of the revenue, 12% from 2017 to 2019. And third, we see opportunities for strategic accounts and strategic investments in greenfield CapEx that we can capitalize with our products and solutions. The spend is different. It's in the chemical sector, and that's where we're positioned. And it's around the world and so we're there to make sure we can get that growth. We did start this year with a very strong backlog in our long-cycle projects business, over $150 million of backlog. Underpinning these 3 growth initiatives is the work we're doing on commercial excellence, new product introductions and digital transformation. Let me talk a little bit more about global growth. As I said, we are a very global business. You can see some of the strengths that we've shown here on this slide. Looking forward to growth, we're focused on Europe: what we're doing in One nVent distribution to improve our coverage to reach those end users. We're expanding our growth in electric radiant floor heating to other countries across Europe. We have a very large installed base of RAYCHEM heat tracing in Western Europe, and we're mining that with upgrades and services. And we're supporting LNG investments in Eastern Europe with our solutions. Moving to Middle East and India. There's major investment opportunities in chemical and infrastructure. And we're going after unique opportunities that favor our products with critical pipeline applications. In China, we also have chemical and infrastructure opportunities and here we're investing more in local: local manufacturing, local R&D and our commercial capabilities. So very exciting opportunities for us to continue to expand as a global business. Innovation. We'll continue to innovate to build on that key value proposition to differentiate. We have a strong new product pipeline with 1% incremental revenue each year and a strong 20% vitality coming from new products. Let me give you a few examples. First, last year, we launched an exciting wireless product in our controls family: ELEXANT. This product reduces field wiring, not just the cost of the wiring and cabling itself but the field labor costs. Prevent downtime. Here, we're pleased to announce that we're launching just next month, an exciting new product called RAYCHEM HTV. This is our most advanced heating cable to date. It sets the framework for a higher temperature, maintained exposure capability as well as it provides superior performance that our customers are looking for, particularly in that chemical space. Third, we continue to invest to save our customers' operating costs. Here's an example of our RAYCHEM SENZ smart home automation, floor heating thermostats that we launched just last year. Digital. Aravind talked about this. We have great opportunities and investments to support our growth with Digital. First, it's around our digital design tools used to configure and design. We have over $200 million of revenue that comes from enablement with these software design tools. In specifics, our TRACERLYNX 3D industrial design system, we have customer testimonials where we've saved them 1% of the total cost of the heat tracing system through the optimization capabilities of that tool alone. Next, this is a brand-new area that we're investing. I'm excited we launched just last year in the fall. Our brand-new RAYCHEM Supervisor IIOT platform and this year, you'll see more advancements as we take that platform and connect it to various different applications. It helps our customers connect, control, monitor the temperature of these critical heat tracing systems throughout the world. So software for Thermal is not only about enabling product and services growth, but it's also about this new exciting recurring revenue that we're building. In closing, we have positioned our resources and our focus to align with high-growth verticals and geographies. We're excited to be executing on our 3 focused growth initiatives, and we're continuing to innovate in new products, along with connected controls and software. Thank you. This ends my prepared remarks, and I'll now hand it over to Sara.

Thank you, Brad. Hello, everyone. I'm Sara Zawoyski, CFO for nVent, and I'm pleased to be here with you today to share with you our strong financial position, our outlook for growth and what we believe is a clear path to emerging stronger and delivering shareholder value. So let me begin by providing a quick snapshot of how we ended 2020. While certainly a challenging year, it marked a year of strong execution for nVent. With strong scenario planning and quick actions by our teams we've managed our decrementals and ended the year with a return on sales of 17.4%. We continue to make strategic investments, maintaining our CapEx levels, and setting a new record in digital launches and new products. We delivered record 120% cash flow conversion and with this strong cash generation, we ended the year at 2.1x net debt-to-EBITDA leverage, which gives us optionality as we enter into 2021. We believe we are well positioned for growth and value creation. So if we look at our financial performance since spin we delivered over 2% organic sales growth pre-COVID, and this is comprised of Enclosures, up 4%; Electrical & Fastening, up 4%; and Thermal Management, down 2%. And importantly, ROS expanded and then the pandemic hit in 2020. And while sales were down 9% or 13% organically in 2020, we executed very well. We've managed cash and costs, driving over $70 million of cost reductions, including $40 million of structural. You can see that we exited the fourth quarter of 2020 with decrementals of 26% even as some of our temporary costs returned. I also want to mention that safety, quality and delivery all improved year-over-year. I believe this is a testament to the team's strong efforts as well as our operational strength. So turning to the next 3 years and beyond, we believe organic growth will accelerate for several key reasons. First, we believe the electrification of everything that you've heard so much about today will benefit many of the verticals that we serve, particularly infrastructure. Second, we have good momentum in new products and Digital, both being key parts of our strategy since spin, and we believe we're just beginning to see the benefit. And last, we do expect the industrial recovery to certainly help more in the near term. And acquisitions would come on top of this. We expect margins to rebound and expand over time with higher volume on a more efficient cost structure, continued strong execution on productivity and price/cost management and the recovery of the high-margin MRO sales in our Thermal Management segment. We believe we are well positioned to grow and expand margins. So turning to the next slide, I just want to touch upon our outlook. We are confirming Q1 and full year guidance that we gave on our earnings call on February 9. For Q1, we are seeing positive momentum, particularly in industrial as well as infrastructure. Again, this is where you see data networking solutions, power utilities and telecom. With this strength we are seeing, we are trending towards the higher end of our previously issued outlook on both sales and EPS for Q1. For the full year, we continue to expect organic sales up 3% to 6%, with every segment growing and expanding margins. We expect our pricing actions and productivity to help offset inflation, fund our investments and expand margins. We are confident in our actions and expect to deliver full year EPS in the $1.58 to $1.68 range or up 9% at the midpoint. So you've heard from Beth and the nVent team, the many investments that we're making to fuel nVent's future growth. I'll start with new products. We are targeting over a point of growth per year. We believe we have good momentum coming into 2021 and are really focused on velocity and margins. And over time, we would expect our R&D as a percentage of sales, to be closer to that 3%. On Digital, we have prioritized our efforts on the highest returns. And Agile has brought rigor and great execution. As Aravind discussed, we expect these digital investments to deliver roughly $20 million to $40 million of sales of growth over the next few years. Examples of this are the digitization of our products through our channels as well as the configure price quote capability that Joe talked about in Enclosures. And last, we expect our global growth to add roughly 2 points of sales or more and really focused on Europe as well as China. So on return on invested capital, we sit to date at roughly 9%. The but I'd like to point out that the return on invested capital is over 20% if you exclude goodwill. If you remember, 2 out of our 3 segments: Electrical & Fastening as well as Thermal Management, were the result of acquisitions pre spin. So we started out with an outsized $2 billion of goodwill on the balance sheet. Over time, we expect to increase return on invested capital, with growth, productivity and high-return investments. So we expect the return on these investments plus our Lean enterprise and our deep Lean culture to help drive nVent margins higher with a long-term return on sales goal of greater than 20%. So from a segment perspective, we expect Enclosures to get back to high teens return on sales. We expect Digital and productivity in our integrated supply chain to both -- to both play a key role in margin expansion in this business. In 1 of our smaller plants, for example, last year, we piloted our digital production assistant platform, and it drove over $1 million of savings as well as inventory improvements. We also have plans to optimize our logistics and improve our transportation system. So turning to Electrical & Fastening. While this is our highest margin business, we continue to see the most opportunity here as they are earliest in their Lean journey, targeting high 20s return on sales. New products helps drive growth in customer loyalty and thus, margin and the team made significant strides in 2020, expanding return on sales 60 basis points and improving every working capital metric. So turning to Thermal Management. We see return on sales over time in the low to mid-20s. The recovery of the high-margin MRO sales will be a key driver, but we do see this as a slow recovery. We believe more connected solutions and software will also help margins. The next 2 levers really relate to volume leverage, we expect to see on a much more efficient cost structure, along with further regionalization opportunities we have within Thermal. We believe the combination of growth, plus Lean and Digital to really drive our nVent margins going forward. So now turning to working capital. This has been a top focus for nVent. While clearly, we saw some tailwinds or lower working capital because of the lower sales, we made great strides in our working capital initiatives while managing through the demand volatility of 2020 and supply chain challenges. A great proof point of this of our early successes here is Electrical & Fastening Solutions, where we drove 8 days' improvement in inventory due to our Lean advancements and 1-day improvement in days sales outstanding, driven by our One nVent terms harmonization. As we look forward, inventory continues to be our largest opportunity. Some examples of where we are focused is continued advancements in Lean, digitization and automation in the factories as well as in logistics, and we'll continue to look for further in-sourcing and regionalization opportunities to really reduce the lead time in our overall supply chain. We believe we have plenty of working capital opportunities going forward and have a long-term goal of less than 20% of sales. So turning to free cash flow. We've generated nearly $1 billion since spin of free cash flow. And we delivered record conversion of 120% in 2020 with help from our working capital initiatives. This is the hallmark of nVent: strong, resilient cash flow. Our top-tier margins and asset-light model also helped drive free cash flow margin at roughly 15%. Long term, we will target 100% cash flow conversion or greater and improve upon our already strong free cash flow margin. Our strong cash generation puts us in a good position to continue to invest in growth and execute on our M&A strategy, which is our priority that Beth laid out earlier. We exited the fourth quarter with net debt-to-EBITDA ratio at 2.1x, which is at the lower end of our targeted range of 2 to 2.5x. We expect CapEx to continue in that roughly 2% range, reflecting that asset-light model with a focus on new products and digital transformation, and on M&A, we target return on invested capital greater than WACC in 2 to 3 years. We continue to pay a competitive dividend with an attractive yield. And today, that sits at roughly 2.5% and this remains a key component of our overall capital allocation strategy. We expect to repurchase shares to offset dilution at a minimum. We will continue to deploy capital to drive growth and value creation. So let's turn to the long-term value creation model, which is really built around leveraging our strong brands, our leading positions and the electrification of everything. There are some updates here, so I'll go through each 1 of these. First, we continue to expect long-term organic growth in the GDP plus 1% to 2% range through cycle. The accelerators for us are the increased focus on high-growth verticals, particularly infrastructure and the investments in new products and global growth will pay off. Now turning to acquisitions. This explosive, long-term guidance is new, so we expect greater than 1 point a year from acquisitions. Eldon and WBT are great examples of this and we see this inorganic growth, turning to an organic growth accelerator as we look to strengthen capabilities and grow our global presence through acquisitions. And on adjusted EPS, we are providing more clarity here. With an outlook of 7% to 10% EPS growth over time, we expect incrementals in the 30%-plus in the long term. And we believe we are positioned well with a path of sales growth, margin expansion and capital deployment to deliver the EPS. And finally, on cash flow, we expect cash flow conversion of 100% or greater, and we expect our working capital initiatives to help us achieve this. We are confident in our model to deliver long-term shareholder value. So wrapping up, I'd like to leave you with these key points. We are seeing signs of recovery. We expect this plus favorable mega trends in the electrification of everything to drive our growth going forward. Second, we have top-tier margins. And we believe we have a clear path to expand margins in each 1 of our segments. Third, we have proven the strength and resiliency of our free cash flow. And fourth, our strong balance sheet and cash generation puts us in a good position to invest and execute on our M&A strategy. And last but certainly not least, we believe our future is bright. And so with that, it ends our presentations for this morning. And now we are going to transition to our live Q&A segment, so just a bit on the logistics here. [Operator Instructions]. So with that, I'll turn it over to J.C. to start our Q&A session.

[Operator Instructions] So it looks like the technology's working, everybody. We have first question coming from Julian Mitchell, Barclays.

Hopefully, you can all hear me.

Yes.

Great. My first question is really, I think, focused on Sara and perhaps Beth. Just if you could give any more color on the first quarter trends, any particular geographic region driving that better revenue growth guide. And then maybe looking at 2021 overall, you mentioned incremental margins in the long run, 30%. This year, I think you'd said on the last earnings call, closer to 25% because of input costs. So do you still feel confident in that 25% number given the input costs keep marching higher?

All right. Thanks, Julian. Why don't I start and take the first part of that question, and I'll turn it over to Sara as well. So as we said on our earnings call, we started to see economies recover around the world much like how we went into shutdown in the pandemic. So for us, Asia and then Europe seeing some strength there and then now North America. So the trends that we saw coming out of December into January on order strength are continuing. With respect to margin, I'll let Sara talk about how we see our incrementals going forward.

Yes. So Julian, thanks. From an incremental perspective, we continue to believe into 2021 those incrementals to be in that mid-25% range, mid-20% range. And really, that's a couple things. One is that price/cost dynamic. We do feel like we're positioned well, given the multiple price increases that we put into place, heading into the year and given what we see in inflation. So we're going to continue to manage that price/cost dynamic. Productivity is a big part of that, as well. We're going to leverage some of the cost savings that we have coming into the year: roughly $15 million from the cost structural actions that we took last year. And then obviously, we're going to have some of those temporary costs fold in over time. So really, structurally, right, we would see those incrementals in that 30%-plus range that we talked about in that long-term guidance framework. But this year, we see it more in those mid-20s range, really related to the temporary costs that are folding back in as well as that higher inflationary environment. Even as we price that off, that -- the equation just has an impact on those overall incrementals.

And then maybe my follow-up, I'm not sure really if it's for Beth or Sara or Brad, but just focusing on the Thermal Management business. It looks like you're targeting around 300 basis points of operating margin expansion at Thermal. So maybe give any more color around the levers getting there, some of those specific cost measures and productivity measures that I think Sara had mentioned for Thermal, that would be great.

Sure, yes. Julian, I'll -- let's have Brad answer that directly, so he can share with you the work that he and his team have done.

Sure. Thank you for the question. So on Thermal Management perspective, certainly, last year, we had the steepest decline in our industrial MRO, which is our highest-margin component of the business. As we looked at last year, MRO was down steep. And then our long-cycle energy projects, which was a challenge for us going back [ 2016 to 2019 ] With different cycles there, actually grew last year. So that mix shift with growth in the longer-cycle, lower-margin business component and then that steep decline in industrial MRO impacted our overall margin. This year, we see a rebound, particularly in the industrial MRO. We have a number of customers that deferred spending last year. That's the first lever to pull, is your maintenance and OpEx spend. We do know that the activity now is picking up, that people are coming to us as they're planning those turnarounds and plants that were delayed last year and making that spend happen this year. In addition to that, from an MRO perspective, it's really where our focus is from our growth initiatives. I talked about industrial automation and focusing on our customers' control systems to upgrade to latest technology. Betty talked about distribution and an example with Rexel and those expanded distribution partners that we benefit from with One nVent also gets us to more of those higher-margin MRO customer. So that mix shift is definitely a big part of our margin expansion. The other part, obviously, which you brought up, is we did a lot of structure cost actions last year. So the mix shift on a lower footprint is going to give us that lift.

All right. Thanks, Julian. I'm going to pull the next question from Nigel Coe from Wolfe Research.

Can you hear me?

We can.

I think this is a question for Joe. On the Enclosures, obviously, a huge installed base out there. And so just curious, what does the replacement cycle look like for Enclosures? And more specifically, within the commercial building, perhaps, as the electrical load increases dramatically, what does that do to the types of enclosures you need to sell? And secondly, does that change the replacement dynamics you see?

Joe, go ahead.

So appreciate the question. So in terms of the refresh rate or the replacement for Enclosures, part of it depends on the industry that we're serving. So if you think of manufacturing, new products mean new lines, new systems and new installs. So basically, there's always a process for when new products, new lines get installed for new enclosures to be used in those environments. And I think the other thing, we talked earlier about data centers. We're excited about the fact that not only do we serve, sell and support new installs, new hyperscales, greenfields, but a lot of our new applications or our products actually allow customers to upgrade existing or legacy sites. So that innovation of, historically, maybe ambient air or room air could cool a data center, to be able to go in there and to apply liquid cooling solutions or upgraded cooling solutions, I think, is a big opportunity for us. So you mentioned or you talked about increased data in buildings. I think it's an opportunity for Robert and I both. New buildings, when they're not put up, but you still have to increase the data that's being used or the systems that are using that data, I think it's a big opportunity for us. There's no set refresh or reinstall or upgrade cycle, but based on the industries that we're in, we're constantly finding systems that need to be improved. And I think there's a big opportunity for us.

And then I want to go back to Thermal on my follow-up question. And maybe just -- it seems that you've got a real opportunity here to help improve the efficiency of hot water systems in the -- in commercial buildings. And I'm just wondering if you're seeing a significant acceleration in demand rates of that. And therefore, are you confident you can outgrow sort of a kind of weak commercial market over the next few years? And then maybe just touch again on the Thermal margins. They've been historically, solidly mid-20s, I think. You talked about maybe low to mid-20s. Does this mean different going forwards, maybe some changes that we should think about in terms of mix or investment spending maybe drive us down towards -- more towards the low versus mid-20s.

Maybe I'm going to say a few words just before I turn it over to Brad. I think with respect to the margins, we've always seen that Thermal business operating in the mid-20s. So it's really just how fast does that MRO spend come back. You've seen commercial and residential, which is also a very profitable piece for us, is a high-margin area. So it's -- we've always said Thermal can be in that mid-20s area just because of the nature of what we do. So I'll turn it over to Brad to talk about some of our applications around heat tracing, hot water and other -- and even green energy, for example, as an opportunity there as well.

Thanks, Beth. So back to the question on the commercial side. So we do have a unique portfolio of applications that we cover that we see an opportunity to outperform the industry. So you mentioned our hot water solution, which provides energy efficiency, water savings and provides green points for LEED certification in buildings. So engineers see that as a great application to specify in buildings. Beyond that, we have some neat products like our PYROTENAX fire-rated cables that meet and exceed safety standards. They're used in buildings for life safety electrical circuits. And as we see buildings being repurposed, retrofit opportunities exist, where you need to bring in a higher electrical load into a building. Our products save space and provide that fire protection. And then we have the whole range of winter-safety applications from pipe freeze protection, snow melting and de-icing. So wide range of applications. We're focused on specification with a consulting engineer and then making sure that we have the right distribution to cover the contractor base. So excited about what we see there with the trends in this renovation and building upgrades.

Thanks, Nigel. Our next question's going to come from Deane Dray at RBC Capital Markets. I know I'm new to this moderator thing, but it shows that your microphone is unmuted.

Here we go. You hear me yet?

There we go.

Sorry about that. Great format for the presentation today. Video works well. And 2-dimensional is not as good as 3-dimensional, but a lot of content here. Appreciate it. So first question is to get some clarity on the global growth ambition. Sara said 2 points of top line growth globally. But when you want to grow globally in electrical, you face different regional standards. And so what is the approach here? How much do you want to do organically with new product introductions into these different markets? And how much might you use M&A to accelerate your penetration globally in applications that you know already but just would already be preapproved, prequalified specs?

All right, Deane. Maybe I will take that question since it's across all of our segments. So I think you've seen us -- examples of both, where -- let me start with -- our Thermal Management business is our most global business. So we're able to meet all those specifications around the world. And sometimes, they're very global design. So we can engineer and support anywhere around the world. We've done more localization to drive velocity, for instance, into Asia Pacific. Now when we think about our Enclosures business, clearly, the Eldon acquisition was a big game changer for us and -- to take a specification that is used, as Joe talked about, more around with global customers when they want one specification around the world. And so that really is accelerator for us. Now we had the manufacturing footprint, and we're expanding some of our facilities in Asia, in India and in China. And now combined with the product that we acquired, it allows us to do that. For Robert, clearly, Robert had -- the EFS business is our least global, so to speak. And we've been launching new products, but I think M&A would be a big opportunity for us there to look at how we could enhance our position around the world. So I think you could expect that we would look at both ways of going after global growth.

That's really helpful. All right. And second question -- this came up in Brad's presentation, but it does cut across all of nVent is Texas. And just like -- I'd love to get an update in terms of -- did you have disruption? But just the longer term, all the opportunities for weatherizing, hardening the infrastructure that speaks to the Thermal business, but there's also, on the infrastructure side, talking about hardening the grid but more micro grids, which would speak to Enclosures. So what is the opportunity you see today coming from all of the Texas weather events?

All right. Well, how about we do this? Each president could speak to it. Maybe I'll just say from a disruption standpoint, we don't manufacture per se in Texas. We have some distribution. And obviously, right, that got impacted in terms of just all the transportation. But I think that's a couple of days of downtime, and then we were able to work through some of that. But tremendous opportunity here for us. So let's start with Brad, Robert and then Joe.

Sure. So we have a big presence in Texas, particularly with our services team in supporting the Gulf Coast chemical industry. And for Thermal, definitely, extreme cold weather events drive heat tracing demand. We see that not only in industrial MRO, where people are working those fixes in the middle of the event to maintain their infrastructure in their systems. We're seeing it in commercial and residential, whether it's commercial and a fire protection system that needs to be protected in a parking garage. So those are events that take place when people are going through that cold temperature. But also, we see more of that comes afterwards as people work through those upgrades and repairs through the next following months to prepare for next winter by fall. From Texas infrastructure, when it comes to power, currently, we're engaging with the power utilities now to make sure we educate them on how we winterize pipes and vessels, [meaning] power infrastructure in Northern climates that you see in other parts of the U.S. where we have those products installed. So we're active right now. Some of it's going to come down to where the spend occurs and how quickly the money is spent to do these upgrades. But we've got great solutions, and we're educating people on how we can do that.

I might just add. Brad has a field service team. And so one of the things we do are audits. So that team has been really engaged immediately to go out there and do inspection and audits and just see if everything is functioning properly. So big pull and big demand there.

And I guess from an EFS perspective, we're really looking at this from a reliability and resilience perspective. In my presentation, I talked a little bit about that we are expecting that the global grid infrastructure will get upgraded, both on capacity but also on being focused on making it more reliable and more resilient. And that's really where our products play, making sure that bonding and grounding and lightning protection and surge and that it's well designed, and that it works together to deliver the required performance. And that is a big opportunity, ongoing opportunity for us.

Maybe just to add to that, I'm always happy when Brad stands in front of one of our Enclosures that manages his system. So obviously, we're participating right there when they're looking at managing heat and heat tracing. Maybe a couple of things, Dean, to add to that though. If you look at municipalities, water and wastewater, those are important markets for us. And there was some damage and disruption there. So we're making sure that we're out there and we're serving and solving for those cities and municipalities. Maybe one other thing, and this is something that we're going to talk more about in the future. But when you look at power outages or some of the disruptions that the weather caused, I think you're going to see more need for UPS, uninterrupted power supplies, for battery backup. And you're going to see residential solar becoming a bigger and bigger market. We see that a lot in California. I think events like this accelerate the need for that. So we're excited about that. It's a space that we play in today, and we're looking to grow.

Here, we move to Jeff Hammond at KeyBanc Capital Markets.

Can you hear me?

We can.

Great. So I just want to focus on growth here. Certainly, between now and the spin, growth has been a little bit muted. Certainly some macro and some headwinds in Thermal. But Beth, just want to get your perspective kind of just over the last 3 years. What's different now? What's more mature? Where have you really gained momentum where you've got more confidence that you can hit those growth targets and not only outgrow GDP but really add to the outgrowth story?

Okay. Yes. As Sara shared, as we thought, as we looked at it, our first 2 years of spend, both the CAGR for both EFS and Enclosures was around 4%. And where we had our challenges were just on the projects in Thermal because our commercial business grew, the CAGR there for the commercial business in Thermal and MRO grew. But here's what's different. So as we talked about our strategy, we've really been executing on all those core elements. Let me start with one of the first things. For both Enclosures and EFS, as we spun as a new company, we had supply chain issues. We had a distribution center challenge. We didn't have capacity within our EFS business. And we've addressed those things and put in the investments and really done a lot of work around our supply chain optimization, looking at stronger regional supply chains, looking at our capital, our investments. And we believe we're in a better position than we've ever been to respond to growth, particularly if we see things accelerate. That's one. The second thing I would say is this focus on new products. And Aravind and the presidents talked about that. We have launched more new products last year and just seeing that momentum. And these are products that we've done a lot of work understanding that they're big opportunities, that they're differentiated, and that's going to drive, as we think, around a point of growth. I would also say this. It's back to the strategy around these high-growth verticals. We really stepped back and said, are we positioned to grow with these macro trends? So our Enclosures business that had historically, right, always been a strong industrial-based business, we really looked at data and networking solutions and not just in Enclosures but across the portfolio to say, how do we strengthen our position here? Joe really focusing on that protection now to cooling and building that out, we see as a great growth driver for us. So it's those verticals. For Robert, it's looking at some of those infrastructure verticals where he already plays, and we can extend what we do. So I'd say we've demonstrated that we can execute a lot better. You've seen that as we came out of the last couple of quarters in our decrementals and our execution. It's the investments that we've made in new products. It's the acquisitions that we have done. And it's the digital capability enabling all of that. So from that standpoint, I'm confident that we put in place a lot of things, executed on our strategy and are positioned well to grow.

Okay. Great. And then just as a follow-up on the inorganic growth profile. I think you're earmarking like 1% growth. And it just seems like after your dividend payment, you've got $150 million to $200 million of excess cash to put to work. And it seems like the [ bend ] is a little bit more to growth in acquisition versus buyback. So it seems like with that capital firepower, you can do a lot more than 1 point of growth. And I just want to better understand kind of the opportunity there from an upside perspective.

Yes. From that standpoint, yes, you can never always count on being the timing or being able to execute acquisitions, but it is a priority for us with our capital allocation. And we believe that it's at least a point of growth. And it just is going to depend on the timing of when we're able to execute on some of those M&A opportunities.

And our next question is going to come from Joe Ritchie at Goldman Sachs.

This is great. My question is going to be to Betty. So Betty, a really interesting example that you gave with Rexel and the progress that you've made there. If you could kind of maybe point to like 1 or 2 success factors that really drove that increased opportunity with Rexel. And then I'd love to know, where do you stand today on your journey with the other large distributors that you've highlighted that make up 1/4 of your revenue?

Yes. Thank you for the question. I'm sorry, Beth.

Betty, no, you go ahead.

Yes. Sorry about that. Yes, thank you for the question. I'd say that 2 of the factors with Rexel, I would call, overall engagement, I mean, just getting engaged top-to-top all the way down to the branch level to drive the activity that's needed to engage with the distributor. So it could be a relationship between the CEOs or it could be the training and marketing content that we need to drive demand to the local level. So we have a very broad-based engagement plan with Rexel. And at the end of the day, we have very well-aligned value propositions, solutions, applications that align great with their end markets. So that's number one. Number two has been a heavy focus on digital engagement. Aravind spoke to it a little bit. I spoke to it in my presentation as well. And I think we were a little bit ahead of the curve there, especially with Rexel partnership. To your second question, I would say we have as much emphasis -- I used Rexel as an example, but we have as much emphasis on these best practices, whether it's engagement or Digital, with our top 5 distributors in North America and are well on our way outside North America as well. So I would say that even though we didn't speak about them today, we have that level of emphasis and engagement.

I would just add one thing that we had -- we have -- our brands are well recognized. And we said this as we spun that not everyone knew that all those brands were part of nVent, right, which is why we talk about nVent CADDY, nVent HOFFMAN, nVent RAYCHEM. So some of it was -- we started from a position of strength of just having great products, and we're launching more new products. And you add that to Digital, we are a top supplier. We just weren't engaged everywhere with these channel partners. And look, consolidation is happening. Digital drives some of that, and I think we're really well positioned as we go forward to extend those relationships.

That's great to hear from both of you. I guess if I just had 1 follow-up question, maybe focused on Robert this time. And again, just a longer-term question for you. That opportunity outside of North America, you talked about being along the path of adapting your products to different in-country specifications. I'm just curious again, like where are you in your journey in terms of having your products ready for specific geographies, and then secondly, in building out your distribution internationally?

Go ahead, Robert.

Yes. Thanks for the question, Joe. Good question. We've been at this for a while. So we've had, over the last couple of years, put significant effort to really understand what are the local habits, what are the local standards. How can we create a value proposal to really resonate with our end users in those specific countries. And they're a little different, as you indicated. It's a little different geography by geography. So we are making continuous headway. I don't think we are there yet, if you compare that to what our position in North America is. But I think we have significantly improved. And where we are today, we are far enough in our journey that we can make significant headway. So our growth efforts outside North America are going to be a big lever for us.

Our next question is going to come from Scott Graham from Rosenblatt Securities.

This is a really good use of time. Very helpful all around. Very detailed, my first question is for Betty. If I may, kind of go back to the Slide #30, where you're talking about the previous page, the 5 largest distribution relationships you have. Would it be fair to say that in the Slide 30 that today is about those 5? Or are you speaking maybe more holistically toward this initiative? Because I guess I don't fully understand also what the 100 is relative to the 8,000 sales points and what the 8% to 10% really represents. Could you maybe walk us through what this slide means a little bit more?

Betty, go ahead.

Sure. We -- the original -- the numbers are focused on the top 5 distributors. But that doesn't mean that we don't do great business outside of that top 5. This was our One nVent focus and initiative where we bring all the segments together to drive growth. So that's number one. Number two is the conversion on opportunities is a pipeline measure. So we look at, in a highly developed area like North America, our conversion rate, where in Europe, we're looking more at penetration, how many different branches we can open up, right? And then the last question, I think, was about the 8% to 10% -- or 8% to 12%. And that is we see an accelerated and outsized growth through our digital engagement. And digital engagement can be defined as e-commerce, what we sell, but it also can be everything that we do to engage with our distribution customers and our end customers in a digital manner. But that 8% to 12%, we're seeing some outsized growth rates depending on where you are in the world and how developed your digital infrastructure is. So that's what those numbers we're referring to.

Okay. So the 8% to 12% is not to be likened to the '17 to '19 6%?

No. Two different things.

Next question is really around infrastructure. Maybe this is more for you, Beth. I think we've all heard about smart cities and smart buildings forever. And it does appear as if, particularly as it relates to you, this smart building side has kind of been more of a piecemeal approach. And I was just wondering if, because you can't do a smart building without you, what kind of -- how are your conversations going with your customers on this? Are they looking at this more holistically? Or is it just sort of a piece of the factory, piece of the distribution center? What are those conversations like?

Well, it depends on what part of a building because, one, what we do is we service electricians and contractors. And so that could be a small electrician or contractor who's just going to a counter in a branch and picking up our nVent CADDY products to be able to install them into a building, or it could be more extensive, where it's a more specified system. So in the case of Brad's, fire-rated wiring. In the case of Robert, looking at some of our lightning protection. So we work there to support them with all those electrical infrastructure needs. I think the conversations are -- there's more data and power. You're going to see more connections to buildings from solar to chargers for electric vehicles to ensure resiliency or data -- the data and networking, which all of our segments play there, including Enclosures. So we have multiple conversations. We work with contractors specifically. We work with specifiers specifically. We will work with our channel partners who are focused on that. And so we always say that demand, you've got to create it all the way through the value chain. And I think it's really that everything -- it's more about this electrification, right? We're just going to see more power and data everywhere. And so for us to have efficient solutions, that's what's going to win at the end of the day.

Our next question is going to come from Jeff Sprague at Vertical Research Partners.

All right. You got me now?

There we go. All right. We can hear you now, Jeff.

All right. Perfect. One maybe kind of maybe wider-ranging question. One of the things I'm curious about looking at a Chief Growth Officer and a Chief Digital Officer and these various things we're seeing today, how is the decision-making on where and what to invest in from a product or channel standpoint actually made? Who has the responsibility for the dollars and the decision making? And how is that managed in the organization?

Yes. Good question. And maybe I'll throw this one to Aravind in a second. But it starts with, we have our strategies and we look at what is the return. And so the presidents themselves will all have their priorities within their portfolio. But then from an enterprise-wide perspective, Sara, myself, or let's say, it's digital, Aravind, we would look at what is the highest impact or return for nVent, right, to make sure that we get, overall, the best return. And so Aravind, maybe you'll talk about how we look at our digital investments and how we're making those decisions because that's very well structured.

Yes. No, thank you for that question. Maybe I'll start up one level higher. I think Sara alluded to our portfolio planning process when it comes to Digital where we solicit not only the best ideas but the ones that create the maximum return. We call it our zero-based water lining process. And that led to the investments we decided to make for 2020 and then the investments we decided to make for 2021. In terms of decision-making in the leadership team, maybe at a high level, the Digital team, my Digital team is more of the how. The what comes from the businesses, through the customers, through the functions, through the various organization. So we are very well -- one of the benefits of Agile, it brings us all together, cross-functionally, very well together in the context of each individual project. So there's a front-end portfolio planning process that allows us to pick what we want to work on. We look at that every quarter to see if it's giving us the benefits we need and if it's not, what do we need to do [about it]. And then, the second part is how do we execute within the context of each project, working cross-functionally across nVent.

Great. And just a second question actually for Brad, and I appreciate all the kind of the detail on all these various end market exposures we got today. I think a lot of us are still trying to get our kind of heads around what kind of winterization or kind of a reevaluation of some of this infrastructure in certain places could actually mean. And so however you want to frame it, but for example, like a typical refinery is, what, a couple hundred thousand barrels a day. Like is there something you could give us, let's say, like the nVent opportunity in a typical refinery is X or Y? Or again, I'm just grabbing an example. Maybe you have something else you could use. But any color there would be helpful and appreciated.

Sure. When we look at total CapEx spend on greenfield project, we sized the total opportunity which would be all of our systems, the installation, the associated products that are required to put in a full heat management system. And we look at it differently between temperature climate. So if you have an LNG investment in extremely Northern climates, Russia, whether it's investments in Northern Canada, we look at that from a 0.3% of CapEx from a total opportunity. Now we might not serve all of that, but that gives us some scope and size. If it's in a similar investment size but in the Gulf Coast, for example, where the temperatures aren't as extreme, it would be in the 0.01% of total CapEx. And that just gives us some sizing, and then it depends on the scope of what that means. To get a little more specific on winterization and the power industry, example of -- during my presentation, supporting a customer that had a challenged heat tracing system at a power plant in the Southeast that we supported back in 2015, going in and doing that audit that Beth mentioned, auditing the customer's plant, determining what was not working or not properly installed or designed and then providing the materials to install. That was roughly a 2,000-megawatt, 4-unit power facility, and it was roughly $1 million opportunity or something of that size.

Our next question is going to come from Cliff Ransom at Ransom Research.

I always get scared when people smile when they introduce me. It makes me nervous. Certainly a different company you're running today than when you made papermaking machinery. Can you talk a little bit about the culture again? Can you -- for instance, when you talk about the employee engagement survey, what were the specific numbers on the raw scores in the increase? 8 points or 9 points, whatever it was, it makes a big difference. It goes from 70 to 79 or 90 to 98. As [what is] the participation rate, we really can't tell. The other broader question there would be what other metrics do you use to gauge employee engagement? Look, I also appreciate you're a brand-new company because it's -- so you're in your second year of the survey. But how do you think about that employee engagement on the cultural side?

Yes. Thank you for that question, Cliff. This is really important to us. And I think we started our company with a great foundation, with our Win Right values and our culture training. And we built upon it. So we started by hiring an inclusion and diversity leader. We launched as a new company, doing our first employee engagement survey to baseline what were the areas where employees thought we could do a better job. And when we launched that right after spin, one of the things they said was communication. It was one of the biggest areas for opportunity. And so we worked on that. And 2 years later, that's now one of our strengths. So I think it's a good indication of where we focus, we improve. Now our scores, where we ended up on the engagement score improved in the mid-70s. I would say we had just high 80s in terms of participation rates because we're looking at all 9,000 employees around the world. And so we were really pleased with that. That participation rate also went up. So we've got hourly employees, professional employees, global employees. There is lots of questions, all done digital. So it's efficient. But 27 out of 28 of those questions we improved. And those questions range on a variety of things. Do you have the resources to do your job? Do you feel that you are recognized? Do you feel good about the prospects of the company and the direction that you're headed? I mean it is very extensive. And what we like about this digital survey is that we're able to then do these pulse surveys over the course of the year, and we actually hold ourselves accountable as a leadership team to improve those scores. And we've done that for the last couple of years. Every manager has to have an action plan to improve the area that was -- came up through their employees as an area of opportunity. So this is an area that I think we take very seriously. We always say that we listen, we act and we improve. I mean, of course, there's other things that we look at and other metrics. It's our retention rate as well. So there's different things. It's our safety record. We look at all of these things, but we feel we attract a lot of diversity, those metrics we look at, and they're improving. And we feel very good about -- we can always do better, right? But we feel very good about the progress that we're making. And I think our ability to move with velocity and drive to digital and all of those things, I always look at how we executed last year as a testament to the commitment of our employees, on our customers, to each other and to adapt new things from a digital perspective, embrace Agile. I think that speaks very loudly to the culture we're building here at nVent.

A quick follow-up would be in the -- given the nature of your business, the kinds of products that you make, when I look at working capital to sales, I would say -- and I'd like you to correct me if you think I'm wrong. But over time -- and you don't have to put a time horizon on it. It's one of my 3- to 5- to 7-year questions. Isn't 15% much closer to it -- well, obviously, it's closer to a world class. But isn't 15% an aspiration in that metric? At 23, I would say there's a lot of room there. And correct me if there's something I'm missing about the nature of your business.

Cliff, I'm going to let Sara answer this, but I'm going to say we agree. There's a lot of opportunity.

That's fine. And then the very last question is, any of you guys use consistently across the company and to what levels [ push in economy ] or policy deployment?

Yes, we do. And that is part of our Lean foundation. And I'd say it's more extensively and absolutely used within our integrated supply chain. But our businesses, for instance, our segments, will start with what is their goal deployment process. And then -- and we do that across our leadership team, but sometimes our segments really drive that. And it's more detailed as we get into our plants and our integrated supply chain team, as well.

Okay. So we actually have some written-in questions. So people want me to do a little work here. So I'm going to read these off. The first couple are going to be from Justin Bergner from Gabelli Research. His first question really gets at the role of modularity in reducing labor and installation. Wondering if we can touch on that for Enclosures and maybe EFS. And a broader discussion about what this trend means for your businesses.

I'm going to answer the last part first. And then, Joe and Robert, jump in. But we talk about being easier to do business with. And time is money. And if you can make great products that are easy, we always say this, we're low cost in the bill of material. So any labor savings that we can create, I mean that's real value. And everyone -- time is money. So we want to create great products not only that are differentiated and provide that protection and connection, but efficiency's important. So over to you, Robert and Joe.

Yes. Thanks. And it's one of our -- one of the things we're known for. So we innovate products and particularly innovate on the ease of installation and reducing labor. It's always been a really strong value proposal. But certainly, the last couple years, labor shortage is getting more intense. And as I talked about in my presentation a little bit, other reasons like safety reasons to reduce traffic and people in the job sites, it just gets more important. So we are -- we see that the value proposal that we always have, just increasing the value to the end users, and we're building that by doubling down on our innovation.

Yes. Maybe just one thing I'd say is I'm glad we picked the video we did to show -- that really highlights modularity in terms of speed of installation. It's an important part of the Enclosures business. The earlier question of what -- how often do enclosures get replaced or updated, I would say it's just as common for us to add on to existing installs. So modularity is critical. And we're excited about -- one of the decisions and a key factor of Eldon as an acquisition is we felt their modular platform was world-class, and we're extending that now being able to build it in all the regions that we serve. Maybe just one final comment about modularity and simplicity. If you -- Aravind talked about CPQ of configure, price, quote. The Enclosure systems are very well suited for engineers or purchasing agents to be able to go online and make simple changes to what we would call our base platform. And then we can bring that design or that document straight to our factory floor. So those efficiencies and them designing something that can be quickly integrated, it's still that modular mindset, but it really gives them something that's very easy to use. So it's core to our business so I think a good question.

All right. Thanks, everyone. Justin's second question, this would likely be for Beth or Sara on global growth. Just thinking about this greater than 2 points contribution from global sales -- and let me just read this off. To use illustrative numbers, if 35% of sales are ex U.S. and ex U.S. GDP is growing about 3%, then growing with the market would mean about 100 basis points of contribution from global sales and you would be doubling that 3% market growth to get that over 2 points of contribution. Is he thinking about it correctly?

Sara, I'm going to let you take that one.

Yes. So that's the math, right? So with over 35% of our sales outside of the U.S. and getting to that 2 point contribution at an nVent level, that would mean that those global sales would be growing in that kind of mid-single-digit plus range. But I also think for all the reasons that we discussed here, while we're shy of that in the last 2 years, we've done a lot to ensure that we have the right foundation, starting with the footprint, right? We invested in India. Joe talked about expanding our China capabilities. And then importantly, really focusing on our go-to-market, our sales investments and, importantly, our product portfolio, looking at things like extending our IEC portfolio, not just with the global OEMs, but we're also looking at penetration opportunities that Betty talked about. So the math is right.

Thanks, Sara. I got a couple more here. One is -- this one's going to be for Joe on margins for your business, Joe. The goal is high teens, as we shared today, but margins at one point were above 20% for a couple of years. The question is what prevents us from getting back there?

Yes. Thanks. Good question. I think the answer is nothing prevents us. And our -- but our focus is on growth, and it's on margin expansion. So as we look at '21, and I think Sara commented on margin expansion, we're going to be an important participant to that. But one -- maybe a few things to comment on. Beth talked about, as we approached and went through spin, we had to solve a lot of operational issues. There were some new factories and other problems we talked about that are a few years back. We feel we're in a good position to grow and grow productively. I think if you look at, as a proof point, the back half of last year, basically, our margins were flat. As we are coming into this year, our goal is to be productive as growth comes. So we expect growth on the top and expansion on the bottom line, and I think you're going to see that here in '21.

Okay. Thanks, Joe. All right. We got one more, and I think it's a good one to end on. Focusing on the electrification, or as we call it internally, EOE, as a key driver of growth during our presentation today, can you give us an idea of how much of the infrastructure vertical will represent overall relative to today? And maybe by division, how can that grow organically? And is this a focus for inorganic growth as well?

Yes. Well, as we showed in the one depiction of the verticals that we serve, infrastructure today represents about 19%. And as we pointed to what we see as those 2021 growth rates, certainly those are the higher growth areas. So you would expect with those megatrends and infrastructure overall growing, that we're going to see the fastest growth there. If you look across our businesses, you'll see that for Robert, infrastructure is a significant portion. And while Joe in Enclosures tends to have a large industrial base, but I would say that there's electrical trends there as well with factory automation, but data centers and networking, that's squarely in that infrastructure space. So I think what you're going to see over time is that our portfolio -- and sorry, I should mention Thermal Management as well, we're in infrastructure. You're going to see that grow as a more significant vertical. But I do want to say, look, the trends within smart buildings and industrial are -- electrification trends are there as well. So I think you're just going to see infrastructure grow faster for us.

Great. Well, I think that's all we have today. So looking at the queue here. Beth, did you want to give any final remarks?

All right. Well, thank you, everyone, for joining us today. We hope we had an opportunity to share with you our story, what we see as the growth opportunities ahead of us. We're really excited about the electrification of everything. As we talked about last year, it was all about demonstrating that we could keep our employees safe, take care of our customers and emerge stronger. And as things start to improve around the global economies, the investments that we've made, the changes that we've made over the last couple of years, position us well for that growth because at the end of the day, we connect and we protect and that's what's most critical as the world becomes more electric. So thank you for joining us today.