Good morning. My name is Carol and I will be your operator today. At this time, I would like to welcome everyone to the nVent Q1 Earnings Call. [Operator Instructions] At this time, I would like to turn the call over to J.C. Weigelt, Vice President of Investor Relations. Mr. Weigelt, Please go ahead.

Thank you, Carol and welcome everyone to nVent’s first quarter 2019 earnings call. We are glad you could join us. I am J.C. Weigelt, Vice President of Investor Relations and with me today are Beth Wozniak, our Chief Executive Officer and Stacy McMahan, our Chief Financial Officer. On today’s call, we will provide details on our first quarter performance as well as our second quarter and full year 2019 outlook. Before we begin, let me remind you that any statements made about the company’s anticipated financial results are forward-looking statements subject to future risks and uncertainties such as the risks outlined in today’s press release and nVent’s filings with the Securities and Exchange Commission. Forward-looking statements included here are made as of today and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today’s webcast is accompanied by a presentation, which can be found in the Investors section of nVent’s website. References to non-GAAP financials are reconciled in the appendix of the presentation. We will have time for questions after our prepared remarks. And now, I will turn the call over to Beth.

Thank you, J.C. Good morning and thank you for joining us. We are pleased with our first quarter results and continue to make steady progress on our strategy to grow our business. First quarter organic sales grew 3%, which was at the midpoint of our guidance and adjusted EPS was at the higher end of our guidance. We have a strong portfolio that are executing on a growth strategy that has delivered positive results during our first four quarters as an independent public company. We remain on track to deliver on our original 2019 outlook of 2% to 4% organic sales growth and 3% to 9% adjusted EPS growth, which includes a negative currency impact of approximately $0.02. Beginning on Slide 3 of the presentation, sales of $538 million grew 3% organically with each of our segments growing. Return on sales expanded by 50 basis points to 17.9% led by a 180 basis point expansion in Enclosures. Adjusted EPS was $0.39. We repurchased approximately $110 million in shares year-to-date. Given our confidence in the business, we thought repurchasing shares during this time was an attractive use of capital. We continue to evaluate how we use capital to generate the best returns for our shareholders. Turning to Slide 4, titled nVent Strategy, we believe our strategy is working and driving top line growth and shareholder value. Across the enterprise, we are focusing on common processes and investing in digital capabilities to help drive productivity and velocity. Moving to Slide 5, organic sales growth of 3% was at the midpoint of our guidance range and we saw fairly consistent growth across all 3 segments. The $15 million negative impact from currency during the first quarter was in line with our expectation. We saw broad-based sales growth in commercial, industrial and infrastructure. Sales…

Thank you, Beth and good morning everyone. I am starting on Slide 10 titled balance sheet and cash flow. At the end of Q1, our net debt was approximately 2x EBITDA. The first quarter is typically our heaviest cash usage quarter and this year was no different. We believe we are well positioned to deliver on our cash flow commitments this year and look to invest in our core businesses, look for attractive bolt-on acquisitions and continue to return cash to shareholders. Turning to Slide 11, we wanted to provide an update on our tax rate. Remember in January, we guided to a full year tax rate of 18% and identified a potential 300-basis point headwind from proposed regulations. The good news is that we expect to fully offset the impact on an annualized basis beginning in 2020. In 2019, we are updating our tax rate guidance to 19% to 20%. This reflects the retroactive timing of the proposed regulations and a partial year of mitigation. We are maintaining our adjusted EPS guidance for the year of $1.80 to $1.90. We estimate our second quarter effective tax rate to be approximately 21%, which translates into an approximate $0.02 headwind in the quarter. Please turn to Slide 12, titled second quarter 2019 nVent outlook. We expect second quarter organic sales growth for nVent to be 2% to 4%. Our growth strategy remains on track and should continue to contribute organic growth to our top line. We continue to expect a currency headwind to grow in the second quarter of approximately 2 points. Our adjusted EPS guidance for the second quarter is $0.42 to $0.46. Just to remind everyone, this will be our last quarter for pre-spin comparison. Our guidance takes into account slightly higher corporate and other costs as well as…

Thank you. [Operator Instructions] Our first question today comes from Jeffrey Sprague from Vertical Research Partners. Please go ahead.

Thank you. Good morning, everyone.

Good morning.

Good morning. I was wondering if we could just kind of focus a little bit more on the growth outlook, your guide is clearly apparent here in what you laid out, but just kind of looking at the comparisons, for example, in EFS, you had this volume pressure in the – particularly in the early part of last year, but all through last year, the comparisons there seems fairly easy. So I just wonder if you could give a little bit more color on maybe the potential uncorking, if you will, of the bottlenecks there, how the volumes actually played in the quarter, volumes versus price and do you anticipate the ability of that business to accelerate a little bit as the year progresses?

Okay. Well, first quarter was in line with what we expected. And as we entered this year, we knew that growth was going to moderate. I can share this our growth initiatives are tracking really well. So we are still very pleased with our performance against all those objectives that we set in line with our strategies. For EFS, in particular, as we had shared, we had some inefficiencies. So, we had some bottlenecks in terms of some equipment. We weren’t operating at the availability level in order for us to service customers and we have started to see the momentum coming into this year. Some of those capital investments that we are putting in place aren’t going to fully be online until the back half of the year, so that’s when we will start to see productivity readout. But I do think that our ability to execute on growth we are in a much better position. Having said that, we are still calling 2% to 4%, because we think there is some moderation going on out there. Not to mention as we look at our distributors, there were various challenges throughout the quarter that they have shared with us, whether it was trade or tariffs and they were being cautious or whether it was even weather impacts. So I do think we will get momentum in EFS as we progress through the year.

Yes. Maybe just a little more specifically, did volumes actually grow in EFS, you had a – you are comping against negative year-over-year volumes. It looks like at 3% organic growth, all that growth might have just been price?

You are right. That growth was price. So, we were more or less flat on volume. And we do expect that to shift, right, as we’ve got availability and capacity coming online.

Okay thank you.

Our next question comes from Jeff Hammond from KeyBanc Capital Markets. Please go ahead.

Hi good morning.

Good morning.

Can we just touch on Thermal here, one, just what drove some of the slow start in commercial and how do you see that kind of forming into 2Q? And then just talk about what you’re seeing in the long cycle business in terms of order activity and visibility as you move through the year?

Okay. So far, our thermal business on the commercial side again, a lot of that business going through distribution. We saw, as I expressed with EFS, we saw some of our distributors being cautious with tariffs and trade, we saw weather impacts as well. We saw more momentum as we came out of the quarter for Thermal, definitely in our commercial business. So, our backlog did increase. But it was just a slow start given all those dynamics. When it comes to our longer cycle energy business, the quoting activity as we’ve said previously is very strong. We just haven’t seen that translate to orders and we’re expecting that, it’s not completely within our control, but we do expect that to turn through 2Q and 3Q this year.

Okay, great. And then is there a way to quantify the impact on segment income for EFS from these inefficiencies you had in 1Q and what you think the impact would be 2Q?

Yes. You are essentially saying the return on sales margin of EFS basically sequentially improved, but it’s still year-on-year unfavorable, but we are seeing a pickup in from Q4 to Q1 in productivity. And we do expect that to readout just more in the back half of the year, those capacity investments come online in roughly the Q3 time period and so that will help us get more efficiencies in the factory.

Okay. And then just sneak in a couple of housekeeping items. Just to be clear, so tax rate into 20%, you think you can get it back to 18% and buyback, just in the guidance, is that just reflect buybacks year-to-date or some additional buybacks?

We have taken into account the buybacks year-to-date and sort of anticipated dilution going forward.

And on the tax rate, yes, as we know it because regulations aren’t finalized, but as we as we know it today, we believe we have mitigation actions so that will be in line with that 18% tax rate.

Okay thanks.

Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead.

Thank you. Good morning everyone.

Good morning.

Appreciate all the specifics around the tax and your guidance for the year. That’s really helpful in how you’re going to offset it, so I appreciate that. The question I have starts with Enclosures. I just was interested given the margin strength there and the improvement, you talked about the stabilization of the new sites. And just maybe could you share with us exactly how that gets reflected in the margins when you talk about stabilization? What are you doing better and I trust that this is all sustainable?

Yes. So, if you think about when you’re bringing capacity online, you’re just inefficient, right, in terms of the labor effort, in terms of recall one of those new sites was a new distribution facility. So, we didn’t have our lanes and our routes as efficient as they needed to be. So, it’s all those things. When you bring on new capability, it’s really getting to a sustained performance level and optimization. And we’ve seen that progress, as we said in 2018, through several quarters and believe we’re in a very solid position at this point and it is sustainable.

Good to hear. And then I couldn’t help, but notice to maybe a little bit more of a spotlight on M&A prospects both in your remarks as well as Stacy’s remarks on the capacity. And you also started off your new public company with having M&A as not a priority, you want to show you can grow what you own but now having kind of established that, M&A seems to be coming back more as a priority. And maybe share with us what the pipeline looks like. And it seems to us that EFS is a prime candidate, just dropping in additional products into that portfolio is a terrific way to leverage the platform, and so maybe does – is that consistent what you’re looking at?

Okay. So, Deane, you’re correct. We were very clear in saying in our first year as a new public company, it was most important that we show that we could execute, right? And so that was the priority for the leadership team and for us as a company. And we approached our 1-year anniversary next week, and so you’re correct, we’re in a position where we feel that we are ready to execute on M&A if there are opportunities. As you know, we are in a very large space. We characterize the space for replay as in electrical businesses $60 billion. And so, it is while there are some large players, it’s also very fragmented. We believe across each one of our segments that there are opportunities, right, that allow us to extend capability or help us to have a stronger global position. And certainly EFS, there are opportunities, but I will also share, we want to ensure we’re able to execute. And so, when we look at where those opportunities are, we want to ensure that we are delivering and executing on the current profile of the business, and so that also weighs into where we think we want to do M&A first.

Good to hear. Thank you.

Thank you.

Our next question comes from Julian Mitchell from Barclays. Please go ahead.

Hi good morning. This is Lee Sandquist on for Julian. Margins were up 50 bps in Q1 in line with the midpoint in the full year guide. Presumably, price cost gets better throughout the year. So, what gets worse?

Julian, I mean, Lee. Sorry. Lee, we are expecting that inflation continues to be heavy in second quarter. Also, currency as a headwind for the full year guide, it’s about 20 to 30 basis points of headwinds. So that is essentially where we go as well as expected projects coming back into the revenue mix for Thermal Management, which will moderate the margin somewhat.

Got it. And then just relative to the total company margin expansion guide for 2019, how should we think about the expectations by segment?

Well, I would say that most of the margin expansion’s going to be in Enclosures. Thermal will be flat to very modest and some in EFS.

Got it. Thanks a lot.

Our next question comes from Robert Barry from Buckingham Research. Please go ahead.

Hi everyone good morning.

Good morning.

Did you or could you say what the orders were in Thermal, the order growth?

Well, we don’t really comment and provide that detail. What we did share with you is that when you look at our backlog, it was down in the energy side of the business, so those were the longer cycle projects. The quote activity is up, but that hasn’t necessarily all converted to orders yet. We also did see our backlog grow in our commercial business, which tends to be shorter cycle business.

Got it. I mean, maybe they were one-off comments, but I got the impression that in the back half of last year order activity was actually very strong. So, is that still to come? Or was the short cycle just particularly weak to start the year?

Well, yes, in the back half of the years, orders were strong and we’ve worked through some of that backlog and some of it is just timing. But as we entered in Q1, it was just, we said it, it was a slower start, but we, again, see a lot of activity, it’s just timing of when that converts to orders, particularly in the longer cycle business.

Got it, got it. Following up on the earlier question on kind of price cost, do you think price plus productivity versus inflation will be positive again in 2Q? Is that assumed in your guide?

Yes.

Got it. And maybe just on Enclosures, I think when you originally talked about the margin outlook, you looked you were looking for just, I think, the phrase was like a little room for margin expansion and clearly, we’re off to a very strong start here. I know the margin comp was pretty easy, but is there kind of more room to go here as we progress through the year and is anything tracking particularly better there than you thought? Just looks like the margin picture there is just a lot better than it sounded like you thought it could be a couple of months ago?

Yes. I would say that we do expect that there will be continued margin contribution from Enclosures, so absolutely, yes. There is still room for year-on-year improvement and we were just pleased that our price and productivity equation has covered inflation and left a nice sequential improvement in Q1 from Q4. So, we are seeing though that the first half inflation impact is heavy in Enclosures. So Q2 will need to overcome a heavy inflation.

Got it. Just lastly, could you comment on what you’re seeing on the at the business in Europe, particularly in kind of the more industrial portions of the business like in Enclosures?

It’s slow. So, we definitely we characterized the U.S. market has been stronger in industrial and Europe has certainly moderated.

Alright. Thank you.

Thank you. Alright. With that, I want to say thank you for joining us this morning and your interest in nVent. Next week, we celebrate our first anniversary as an independent public company. I’m very proud of everything we’ve accomplished in our first year. We remain laser focused on the strategy we first shared at our February 2018 Investor Day. At nVent, our focus is to drive shareholder value through organic growth, margin expansion, high cash flow conversion and a balanced and flexible capital allocation strategy. We delivered on our commitments in our first year and we believe we have the right strategy, portfolio and people to continue to do so. I thank you again for your support. And operator, you may now conclude the call.

This concludes today’s conference. And you may now disconnect.