nVent Electric plc (NVT) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us for day 2 here at the Citi Industrial Tech and Mobility Conference. We're very excited to have nVent here with us today, Sara Zawoyski, CFO and Tony Riter, VP of IR. Sara has been CFO since 2019 and previously was Senior VP of Finance and Treasury. And Tony joined nVent as VP of Investor Relations in January of '22. Prior to that, was at 3M. I'm sure many of you knew him in his role there. Sarah is going to kick us off with some prepared comments about nVent and then we'll dive into Q&A.

Appreciate it, Vlad, and thank you for having us here at the conference. Happy to be here. I'm just going to start with a quick overview of nVent. So we are a leader in the connect and protect space within the electrical industry. And importantly, we believe we are well positioned within the secular trends of electrification, sustainability, digitalization as well as infrastructure. I wanted to just quick highlight our 2023 full year financials. We are now $3.3 billion in sales. We grew 12% on a reported basis. And that's on top of 18% growth and 20% organic growth of the year prior. Return on sales really reflects the strong execution across all 3 of our segments a 22.1% ROS, up 410 basis points. And then earnings, another year of very strong earnings growth. Earnings per share up 28%, and that's on top of 22% of a year ago. Free cash flow, we generate a lot of cash as a company. Our free cash flow margins are very strong. That free cash flow increased over 30% in 2023. And that includes significant reinvestment back in the business as our CapEx was up over 50% year-on-year. So a record year in 2023, and we believe we're well positioned for another strong year here in 2024. Just like to take a moment, we operate in 3 segments and something we believe that's unique to invent is that many of our products, we believe, are essential as the world continues to electrify, as we move more and more towards a low carbon footprint world and as more and more things digitalize, we believe our products are essential to that, whether it be grounding, bonding, enclosures, low voltage connections, cable management, et cetera. From a vertical standpoint, one highlight here to make, you see that we have a very diversified set of verticals that we serve. Infrastructure specifically now sits at 25% of our revenues. That was in the teens when we first spun back in 2018 and that really is a byproduct of our focus around high-growth verticals, both from an M&A perspective, but also where we're focusing from a new product introduction standpoint. In geographies, you can see here that we're largely a North America-based business, but we continue to see Europe as a meaningful opportunity for growth for us to grow faster than that market. Just a quick data point there. If you look at Europe, ex Russia, we actually grew Europe, so growing faster than that overall market in 2023. Our strategy has been consistent since spin back in 2018, and we continue to execute on different elements of this strategy. So from a growth perspective, we really see 4 big levers. One would be high-growth verticals. When we think about our products, they're ubiquitous in terms of enclosures, cable management, grounding, bonding, et cetera but really upon spin, focusing on developing that new product, developing those solutions for those high-growth verticals, really elevating the overall growth profile of nVent. New products and innovation our vitality was in the teens when we first spun, so really spending R&D, spending it efficiently and pointing it to those higher growth areas was a very big initiative and continues to be a big focus for nVent. Today, our new product vitality sits at 22%, and we see new products adding over 2 points of revenue. So a big part of our overall growth as we look forward. Global growth, again, predominantly in North America, we see North America as a really positive place to be with all these secular trends. But when we think about our opportunity to grow faster than the market by bringing new products and really developing further that distribution channel presence, we see Europe as a big growth opportunity for nVent. And last, but certainly not least, is acquisitions. We've acquired 6 companies since spin, 2 of those were in 2023 and our largest acquisition, ECM Industries in 2023. So we continue to see acquisitions being a big part of our overall growth and earnings driver going forward. From a transformation standpoint, I would just say we're really pleased with our return on sales of 22.1% here in 2023, but continue to see further margin expansion opportunity from growth as well as the operational excellence, both from a functional as well as in the supply chain arena. And lastly here, before I wrap up is just we're laser-focused on value creating for our customers as well as investors building that strong track record, that was very important, being a relatively still new company. We'll be coming up upon 6 years here in April and really focusing on not just sales and profit, but also generating that strong free cash flow and then putting that back to use to develop those and drive those strong returns. Industry-leading products. We talked about this in many of our categories that we serve, we are #1 or #2 in the space. So we've got strong leading positions, and we continue to build on that from an M&A standpoint. And we see tremendous growth opportunities even here in 2024, when you think about the acceleration of AI and what that's doing for the growth outlook for our data solutions and specifically liquid cooling, energy transition, we're very excited about in terms of seeing that build within our backlog and really getting to those acquisition synergies of the 2 deals that we did in last year. And lastly, just in terms of capital allocation, we continue to prioritize growth when it comes to capital allocation. We operate in a very large $90 billion addressable opportunity space, it's very fragmented, and we continue to see M&A as a big driver of our growth going forward. So all in, we're very pleased with our performance in 2023 on top of several years of excellent performance from a financial perspective. We expect to see strong sales and profit growth here in 2024. And we believe our future is bright here at nVent.

Great. Great. That was a great overview. Lots to dig in on. So maybe just to start up, could you talk a little bit about the end market trends that you're seeing today? And how you see the 3 segments playing out versus you've guided to plus 3% to 5% for organic for the year. So how are you thinking about the segments themselves and the puts and takes that could impact the high end and the low end of that range?

Yes. So let me maybe talk about kind of how we see the verticals. And so we continue to see infrastructure vertical being the largest driver of our overall growth in here in 2024 and what's in that infrastructure vertical is largely going to be data solutions, but also power utilities, renewables, energy storage. And so we continue to see that being a large driver of our growth specifically within Data Solutions, we see that growing another strong double digits here in 2024 and expect that data solutions business as part of that overall infrastructure to reach over $500 million this year. Second, I would say would be industrial. We continue to see strong secular trends within our industrial vertical really centered around reshoring and automation. We're also really excited about what our new Texa Industries acquisition does within that industrial vertical. They're really focused on industrial cooling and they're a strong brand in Europe for which we didn't really have a local strong presence. So excited to see what we can do there in terms of the attachment rate for our enclosures similar to what we have here in the U.S. And then from a commercial resi perspective, we do expect that commercial resi to grow like it did in 2023, but more modestly than we think about the infrastructure growth, for example, and this is where, two, we expect the ECM sales synergies to kick in towards the latter half of this year as well as into next year to help grow that commercial resi business as well. And then energy. It did not grow for us overall last year in part because of the impact of the exit of Russia. But with the energy transition trends, we expect that vertical to grow and grow nicely for us. It's just that today, that just sits at roughly 5% of our overall revenue. From a segment perspective, if we think about that 3% to 5% organic growth, we really see enclosures leading predominantly because of the presence they have within infrastructure and specifically data solutions. But importantly, we see all 3 segments growing here in 2024.

Perfect. That's helpful. And I'm sure we're going to dig in a lot on enclosures and Data Solutions. But I did want to ask you, '23 channel inventory destock was an ongoing headwind for most of the year for you. And I think you said you still saw a bit of it late in the year, but we're starting to see better sell-through from your distributors. So any color you can give on what you're hearing from your channel partners now and where you think you are in that destocking cycle?

Yes. Maybe I'd start off by saying, for nVent, roughly 2/3 of our revenue goes through distribution. And as that supply chain improved and we had some lead times for our products out 25 weeks and now it's back to 1 to 2 weeks. So as that supply chain lead times improved, those channel level inventories were adjusted, as we expected it to. I would say that probably that supply chain improved a little bit quicker than what we thought in early part of 2023. We actually saw that positively on our productivity side, but did see that from an order intake and from a sales perspective, really in earnest in Q2 and Q3 and a bit like you said, Vlad into Q4 as we customarily see here in Q4 from a year-end standpoint. But I would say that we believe that those inventories are largely stabilized. In the concept of kind of -- as that supply chain and those lead times are largely back to normal, we still have pockets of areas that we're really focused on improving those lead times. But largely speaking, those lead times are more normalized and thus, we're seeing those inventories more stabilize. Now as we roll into 2024, we believe that those inventory levels will adjust up but in a measured and slow build way overall.

Got it. And then just in terms of the demand trends that you're seeing, you did mention, obviously, nVent's very much North American oriented, but you've got, I think, about 20% of your sales in Europe now and a smaller presence in Asia. Can you talk about what you're seeing in the regions and any differences amongst the regions globally?

Yes. I would just say North America led in terms of the overall growth. And again, we see really strong trends here around sustainability, around electrification, digitalization with AI and some of the infrastructure funding that we believe will come in earnest more here in the back half. So North America continues to lead the way in terms of growth. But I would say that, like I said in my prepared remarks here, we continue to see Europe, which is roughly 20% of revenue for nVent as a growth opportunity. In part, if you look at kind of our position in Europe versus what our position is in North America, we've got plenty of room for growth there. And we're focused around making sure that we have the right product set. Texa Industries is part of unlocking that growth opportunity. When we think about cooling going alongside the enclosures and looking at that attachment rate, so Europe grew for us ex Russia in 2023, and we expect it to be another area of growth here for us in 2024. In Asia Pacific, we're smaller, roughly 7% of sales, China is less than 5% of that, but we did see growth in Q4 and really, that's been a focus of ours since then is really focusing on local for local, number one, but really focusing on those higher growth verticals that we believe we can differentiate and win. And so some of those areas are transportation within enclosures as well as data centers thermal management specifically when it heat tracing management on the process industry side, specifically chemicals. We've seen some nice growth there. So really that focus on that high-growth vertical is allowing us to win in Asia Pacific and specifically China.

Got it. That's helpful. I'm sure we all want to dig into the segments a bit. So maybe just starting with Enclosures. You meant your data solutions business, $450 million business expected to be over $500 million this year, I believe. And we know one of the big growth drivers there is liquid cooling and you're ramping capacity there. So can you just talk about within data solutions specifically how big your liquid cooling business is today? What's in your liquid cooling portfolio and really how you see that business evolving as we see ramping adoption of GPUs?

Yes. So we're really excited about our liquid cooling technology platform and the growth prospects there. Maybe just to reframe it a little bit, data solutions is just over $450 million in 2023, but that's for nVent. Now the majority of that is enclosures, but we also have a cable management, for example, that sits in our Electrical & Fastening Solutions business, as well as leak detection and thermal management. But a big part of that Data Solutions business does sit in Enclosures. We do expect that to grow again strong double digits for us here in 2024 to over that $500 million in sales. When you think about liquid cooling and power distribution, collectively, those are over 40% of that overall data solutions revenue. And we're really excited about liquid cooling. This is something that we really began to focus on in earnest when we spun back in 2018, saying data solutions is where we want to be. We want to build on the strong platform that we had in Enclosures. We had liquid cooling expertise and technology, but more so on the industrial front and really thinking this is something that we can pair up and partner with some of these hyperscalers and really build out this liquid cooling expertise and technology. So this is something that we've been working on for a multitude of years. Now clearly, with Gen AI in that Q1, Q2 time frame last year, that accelerated the growth that we were seeing, and that really caused us to accelerate some of our capacity expansion plans as well to ensure that we have the capacity to deliver on the demand that we're seeing. But from an nVent perspective, we're really focused on the technical expertise to really solving for that broad cooling set of problems that these hyperscalers have as they rapidly grow and the heat is also growing and in many cases, in these smaller spaces, and we believe our liquid cooling offerings really allow for solving for that heat dissipation as well as that energy efficiency. Maybe one other thing I would say is when we think about this liquid cooling technology, while today, it's center stage for data centers, we also believe that this has application beyond data centers, in industrial cooling, edge computing and edgy storage are some of the things that we're thinking about. And then the other thing is looking to move it more into a standard offering as well. Specifically, it relates to cooling distribution units as well as our rear door heat exchangers.

Got it. We'll open it up to questions from the audience.

I guess on those lines, can you talk about the competitive landscape within that space and sort of what really makes your product differentiated and the investments you're making to continue that differentiation?

Yes. So today, we see smaller emerging technical liquid cooling players emerge. And our viewpoint is the liquid cooling space is going to continue to evolve in the various liquid cooling applications, whether that be immersion, [ director ] to chip and rear door exchangers, et cetera. And our view is this. One is we want to bring that technical expertise directly to the hyperscalers regardless of what cooling technology and set of solutions they want to go select. And so we think that's a real differentiator of being on the forefront, putting together that technology solution that's unique in many cases to that particular hyperscaler, whether it's going to be new, greenfield or otherwise. So that technical expertise. The other thing I would say is that while we see emerging smaller technology players, the hyperscalers are looking for the manufacturing capability and the ability to scale and do it with very evolved and sophisticated quality management systems. And again, I think that speaks right to what we do being a manufacturer. And so we've been able to really grow and scale and scale quickly with these hyperscalers because it may take over a year for us working with the hyperscaler directly to get a prototype. But once it passes all the lab requirements on our side of the fence and theirs, then they want to ramp. And then it's about how many units per week can you produce. And I think the third piece would just be the innovation, continuing to bring new ways of solving for the cooling, the cooling technologies and importantly, how the system and solution comes together with the manifolds, the racks, the cooling distribution unit itself, et cetera. So I think it's those 3 things. It's the ability to scale the technology and the expertise that we bring through our years of working in the liquid cooling space and then also the innovation that we're bringing forward.

Then maybe just digging in on liquid cooling a little, Sarah. Can you talk about how should we be thinking about the margin profile of liquid cooling and Data Solutions more broadly as you are ramping capacity and investing to ramp capacity. So how should investors think about the margin profile today and then longer term, when you're at a larger scale?

Yes. So I would say that our margins today are good in Data Solutions, and we often say they're kind of on par with our Enclosures margin profile from a gross margin standpoint. And that's even with the investments that we've made. So I think that just overall speaks to the strong value proposition for our customers. And then over time, we would expect those margins to expand for a couple of different reasons. One, scale but two, as we think about that from a expanding to a more standard product offering and through distribution, that often brings a higher margin profile over time. I will say, in the current year in 2024, we have pointed to some investments because we are investing meaningfully to essentially double our liquid cooling capacity here in 2024. We started that in the back half of '23. And as that capacity comes online, sort of the midpoint of the year, we do expect that to show up as an investment, if you will, from a margin perspective. But again, we expect that to quickly ramp as we move forward and more broadly believe that there's margin opportunity there as we work towards a more standard offering and then through distribution.

Perfect. And then I guess just stepping back to Enclosures more broadly. Obviously, Data Solutions and liquid cooling gets a lot of focus, but you have a very large what I would call the core in Enclosures business. And so can you talk about your near-term outlook for that core Enclosures business? And how you're thinking about visibility in that portion of the market?

Yes. So our Enclosures business also has a large industrial presence as well as commercial resi. And I think it's important to point out that we saw growth in those 2 verticals and Enclosures in 2023. So that's positive. And as we think about those underlying trends, specifically in industrial around automation and reshoring. When you think about anything electrical or electronic that needs to be protected, it needs an Enclosure. Oftentimes, it needs to be cooled via industrial cooling, for example, so we think there's some strong trends there. And commercial resi has grown nicely for Enclosures in 2023, and we continue to expect modest growth within that vertical within Enclosures and I touched upon it a little bit, but we're -- I know it was on the smaller end of our acquisitions from a Texa industry standpoint, roughly $30 million of revenue. But we think about that cooling acquisition similar to Eldon, which is our first acquisition that we did when we spun, meaning Eldon gave us a great IEC portfolio and more of a foothold there in that European market. And with Texa Industries, it not only gives us a cooling now offering, and we think a very good offering from a competitive landscape there to grow that business in Europe, but also even looking at that as a platform and leveraging that here in the States. So we believe that's going to be another kind of boost to that overall growth from an industrial standpoint. So I know data solutions get lots of attention. We're really excited about Data Solutions and liquid cooling and power distribution within that Enclosures business but we also see good growth in the other aspects of those verticals within enclosures as well.

That's helpful. And then you'd mentioned commercial and resi and having grown in commercial and resi and still expecting modest growth there. One of the questions we get a lot is what's within commercial resi and within the overall portfolio, your exposure to commercial real estate and how investors should think about could be a potentially extended downturn in commercial real estate, now that would impact nVent.

Yes. Obviously, you've got to like peel it back once or twice beyond that broader commercial resi umbrella to really understand the drivers of the business. And when you look at commercial resi for nVent, which is just over 30% of our revenues, a lot of our products are ubiquitous and really agnostic of new or old from a new build versus renovation. And probably equally, if not more importantly, a lot of the driver is in regards to power and data infrastructure. So you could have a commercial building that's been there for 30 years. But if you're upgrading the computer system, if you're upgrading the localized kind of data center as more and more gets computed closer to the source, if you're putting in new building automation or upgrading your building automation, that's going to create a demand for our products around the power and data infrastructure and specifically for Electrical & Fastening Solutions business. So I think it was a couple of years ago in our Investor Day where we kind of put all the sub-verticals there. And you can see that we're everywhere when it relates to commercial because, again, a cable management J-Hook is agnostic to what part of commercial you play in. Office buildings are a part of that, but so is health care, so is education, et cetera. So I think, one, it's diversified. And two, the power and data infrastructure is an equal important part of that overall vertical as it is to what that -- what those sub verticals are that we present.

Great. And then I think you touched on this in your prepared remarks, but nVent actually has a number of growth verticals, not just liquid cooling and Data Solutions. So you have areas like infrastructure and new products you've talked about global growth. So as you think about these growth vectors, can you talk about how they're impacting growth here in '24 and then how you think about these growth vectors really driving growth for the company beyond '24?

Yes. Well, let me maybe start with new products because we had a record launch year in 2023 that we're really excited about, 95 launches. It's probably not as much about the number of launches, but as a team, the engineering team might count the number of launches, but importantly, the revenue impact and that vitality and so that contributed more than 2 points of overall growth and now our vitality is 22%. Like I said, we believe we're well on our way to reaching that 25% vitality and that's something that we've really been building over time. And maybe another thing to point out is our R&D spend. So as we drive productivity and improvements in other parts of the P&L, that's really allowed us to invest and invest back in the business. And if you look over the last couple of years, our R&D dollars have meaningfully increased from year to year. But from a basis of percentage of sales perspective, it's been roughly 10 basis points a year, but because our top line has grown so significantly that's a lot more R&D dollars to go and invest in the business and really drive that new product revenue. So we continue to see new products in that new product revenue is a meaningful part of overall delivering on that top line growth. High growth verticals, we've talked about, clearly, infrastructure and Data Solutions is a part of that. But we also look at industrial solutions and energy transition, we haven't necessarily talked about as much. But again, I think a really exciting data point for me is if I look at our Thermal Management business, which has most of that energy business. And if you look at our project backlog, as we exited 2023, roughly 30% of that was in the energy transition space. So think about LNG, carbon capture, biofuels, hydrogen, et cetera. And as we entered 2023, ex Russia, that was in the low single digits. So that just speaks to the positive momentum there that we're seeing on the energy transition space. So it is going to be a combination of those new products in high-growth verticals. And I think the third thing I would say is really acquisitions. So we do get the rollover effect of that inorganic growth, roughly 5 points is what we're expecting on the top line for the ECM Industries and Texa Industries acquisition. And while it takes a bit of time, we also expect closer to the back half, we'll begin to see some of those sales synergies that we've talked about in Texa Industries but on ECM industries, for sure, again, it's our largest acquisition. And when we think about the sales synergies there, one, it's a highly complementary portfolio to our power and connection offerings. And two, we believe we can take, especially their ISCO brand and put it in more places with our distribution channel. And so those are sales synergies that tend to show up faster than another area of opportunity is taking that to Europe. Now there's some spec work that's required there. So that takes a little bit more time. And the last area that we're focused on is they provide some nice new channels for nVent, and that's specifically in that retail space that captures some of those, what I'll call, prochannel or medium-sized contractors, and we're looking at other some products that we don't serve even that market today that we can reach by putting our nVent products within that portfolio.

That's really helpful. Do we have any questions from the audience?

Sorry, I just wanted to ask you, like you said in the beginning, right, [ debt ] inventory is in balance. And I just -- I get confused a little bit because I listen to distributors, and they're kind of all over the place and your 2/3 strip distribution. So what gives you that confidence as you go forward this year given sort of what we've heard from everyone?

Yes. Well, I think that, one, it depends on the product category. So you've got to be -- we're looking at our product categories and the inventory in relation to the nVent products. Two, we have visibility into some of our larger distributors where we can see what we're selling in and importantly, what they're selling out as well as some lens into that level of inventory and we saw there to be the biggest disconnect, if you will, in Q2 and Q3. But then in Q4 is when we began to see that become tighter and tighter and importantly, seeing that positive sell-through. So I think it's going to depend on the category. And because I'll give you an example, there's one part of it that we still feel like we maybe haven't all the way worked through that. And that's infrastructure within electrical and fastening solutions, specifically in power utilities. So it's a smaller piece of our overall product set and verticals that we serve. But we saw that supply chain get healthy a little bit later than we saw the broader supply chain, so we believe that's in part what we're seeing within our Electrical & Fastening Solutions business in the back half of '23, and we expect that to continue a bit into Q1, Q2 from a comp perspective.

Just one more quick one. You mentioned reshoring like a few times. So -- like do you see the pace of mega projects kind of the same, getting better, moderating a bit? Like how would you sort of say the environment is right now on that front?

Well, I would say we saw some great growth in 2023 from what I would characterize as a manufacturing construction standpoint and specifically within our Enclosures business, but when we think about those bigger megaprojects, we believe that growth is largely in front of us because it takes time for that to one, formulate and then two, for it to get down into now you've built the 4 walls of which we participate in, but we also really participate in when those 4 walls get filled out with automation equipment, et cetera. So we believe that a lot of that growth by way of the mega projects is still largely in front of us.

And then I did want to ask you about profitability. You highlighted your strong return on sales last year and the overview. You actually delivered op margin that's above the longer-term target of 20% that you have out there. So can you talk about how you're thinking about the potential for continued op margin expansion? And whether you've given any thoughts to, I'll say, revisiting that longer-term target given where you're operating?

Yes. I think we will have to revisit that longer-term target, given the fact that we're surpassed at this stage, but here's what I would tell you is we believe we continue to see margin expansion opportunity. We're really pleased with the exit rate of return on sales of 22.1%. All 3 of our segments expanded margin. And I think that just points to the strong execution of the teams, managing that price cost equation, in driving that productivity and really thinking about new products and what our portfolio construct looks like. But as we think about margin expansion going forward, we do expect in 2024 to see more modest margin expansion that was implied in our guidance. And some of that has to do with some of the investments that we talked about earlier, putting that capacity online for liquid cooling and some of the investments for our ECM acquisitions as well as lapping some of our tremendous return on sales of our Electrical & Fastening Solutions business that we pointed out in our earnings call that some of this is just mix. So we've got some of that in the works. But medium and longer term, we still believe we've got plenty of runway there. One, growth. Growth is going to be a big part of that. If you have followed us in the past, we get great leverage and drop through. Our incrementals are in that 30%-plus range because we're not a very capital-intensive business. And beyond tracking vitality and new product revenue, we also are very focused on NPI margin. Our view is that, that's really a measuring stick of what problems we're solving for our customers and the strength of that value proposition. So we're looking to be accretive from an NPI margin perspective. The second piece is supply chain. While we're really pleased with the productivity that we saw in 2023, a lot of that productivity was material as well as logistics. So we still have a lot of that 4-wall productivity in front of us, and we're not back to what I would characterize as our productivity that we know we're capable of with lean and automation and progress within our 4 walls. So we're not back to those kind of pre-COVID levels. So focused on that here in 2024 as well as beyond. I think the third piece, I would say, is just that functional excellence. So we'll have our 6-year anniversary here in April. We've done a lot to build up shared services in our back office to get to centers of excellence. But I would say there's still a lot more we can do around that, especially as we grow as a company. So those are things that we're focused on to drive that -- to do more with the same or less from a back-office standpoint and really get to productivity from a G&A perspective. And that's what's also going to help us fund that R&D while also expanding return on sales.

That makes a lot of sense. And then I did want to make sure I get to one question that we've been asking every company at the conference, which is what are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? And are there any emerging industry trends that are maybe being overlooked in the current discourse?

Yes. I would say, Vlad, that 2 things come to mind, and one is something that we've talked about a little bit, and that is just new products. This is something as a team, we over-index the amount of time we spend still in our business reviews on new products and believe that is, we think more and more about technology platforms like a liquid solutions, which is solving some really big problems in hyperscalers today and how are we going to take that same know-how and technology and really extend that into a different vertical like industrial, like edge computing, like battery storage. So really evolving and continuing to evolve how we think about new products and technology and building upon those platforms, I think, is one. And I think M&A is another one. I mean I do think that the fact that we did our largest acquisition in 2023 and importantly, these acquisitions oftentimes are growing a lot faster than the legacy nVent business. And I wouldn't say it's overlooked but I do think it's just -- it's -- we're still what I would call early days. Really proud of the fact that we've done 6 acquisitions and 2 in the last year but continue to believe that in this $90 billion addressable opportunity space that's largely fragmented, that nVent is well positioned for that acquisition in those spaces around high-growth verticals and those that have a great product position. And we believe that, that's going to be very additive when it comes to our one event approach and through our distribution channel to continue to elevate and increase our relevance in the electrical space.

Got it. That makes a lot of sense. Unfortunately, we're out of time. Thanks again very much, Sara and Tony, for joining us here today.

Thank you, Vlad.