nVent Electric plc (NVT) Q4 2021 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the nVent Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chief Financial Officer, Sara Zawoyski. Thank you. Please go ahead.

Thank you and welcome to nVent's fourth quarter earnings call. Here with me today, is Beth Wozniak, our Chief Executive Officer and I would also like to introduce Tony Riter, our new Vice President of Investor Relations. I know many of you already know him from his time at 3M, and we are thrilled to have him join the nVent team. With that, I will turn the call over to Tony.

Thank you, Sara and good morning everyone. I'm excited to be here at nVent and look forward to working with all of you. Today we'll provide details on our fourth quarter and full year performance and the outlook for the first quarter and full year 2022. Before we begin, I'll remind you that any statements made about the company's anticipated financial results are forward-looking statements, subject to future risks and uncertainties, such as the risks outlined in today's press release and nVent's filings with the Securities and Exchange Commission. Forward-looking statements are made as of today, and the company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances. Actual results could differ materially from anticipated results. Today's webcast is accompanied by a presentation, which can be found on 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 your questions after our prepared remarks. With that, please turn to Slide 3, and I will now turn the call over to Beth.

Thank you Tony and good morning everyone. It's great to be with you today to share our fourth quarter and full year results. 2021 was an outstanding year. We grew sales 23% and delivered 31% adjusted EPS growth. We exited the year with orders up 37% in the fourth quarter and record backlog. I could not be more proud of our nVent team and what we accomplished. We executed on our strategy, had record growth and navigated many challenges to deliver for our customers. We made great progress with new products and our digital transformation. We completed two acquisitions to strengthen our portfolio and expand our offerings in high-growth verticals and we made significant progress on our ESG priorities. We had a goal to emerge stronger, and our results demonstrate we have. Slide 4 summarizes our Q4 and full year performance. Fourth quarter sales were up 28%, with broad-based growth across all segments and verticals. Adjusted EPS grew 16% year-over-year and we generated a $101 million of free cash flow. Our fourth quarter results were solid. Looking at some of our key verticals in the quarter, industrial continue to lead the way, with particular strength in Automotive, Food and Beverage and Material Handling. Infrastructure had strong growth in Data and Networking Solutions and Power Utilities. Commercial and Residential continued its trend of double-digit growth across all segments. And finally, in energy, we continue to see a nice recovery particularly in MRO. Looking at our geographical sales performance, North America was exceptionally strong, led by enclosures, Europe was also up double digits, with ongoing strength in Electrical and Fastening, and developing regions grew over 40%, led by China, with particular strength in thermal management. For the full year, we had record $2.5 billion, an increase of 23% or 18% organically. Adjusted EPS was up 31% and up 10% from 2019. For the full year, we generated $334 million of free cash flow. Let me share a few highlights for the year. We launched a record 58 new products, which generated a 0.5 of sales growth and increased our new product vitality to 18%. Our digital efforts are supporting growth, improving the customer experience and driving productivity in our operations. Acquisitions are strengthening our position in high-growth verticals, Vynckier and CIS Global expanded our offerings in Solar and Data Networking Solutions, the execution of our strategy to develop new products, invest in high-growth verticals and make acquisitions is accelerating nVent's growth trajectory. We recently announced a new strategy and business development role, and are thrilled to have Nitin Jain join in nVent team. Nitin will be leading our efforts and strategy, M&A partnerships and alliances, and identifying new growth platforms and technologies to further enhance nVent's growth. Looking at trends entering 2022, we anticipate ongoing supply chain and inflationary challenges, particularly in the first half of the year. We remain confident in our ability to manage these headwinds and deliver for our customers. We also expect strong demand for our products and solutions with the electrification of everything. I am proud of our team and the results we delivered in 2021, we made strategic investments to drive future growth and executed well. We believe 2022 will be another year of strong growth and value creation. I will now turn the call over to Sara for some detail on our results, as well as our 2022 outlook. Sara, please go ahead.

Thank you, Bet. Let's begin on Slide 5, with our fourth quarter results. Sales of $669 million were up 28% relative to last year and grew an impressive 24% organically. Strong volume and price each added 12 points the topline, while acquisitions added another 5 points of growth. Fourth quarter segment income was $110 million, up 14%, while return on sales of 16.5% was down 210 basis points. As you may recall, our Q4 guidance reflected a margin decline year-over-year including growth investments and the lapping of one-time temporary cost reductions. With the stronger-than-anticipated sales, we saw increased cost pressures related to a very tight supply chain and higher inflation, still price more than offset the stepped-up inflation of $58 million in the quarter. As a reminder, we talk about these costs as total inflation, including materials, wages and freight logistics. Q4 adjusted EPS was $0.50, up 16% and above the high-end of our guidance range. Free cash flow performance was also strong, with conversion of 120%. Now please turn to Slide 6 for a discussion of our fourth quarter segment performance. Starting with Enclosures, sales of $332 million increased 44% and 35% organically. Growth was broad-based across all verticals and geographies, and acquisitions continue to perform very well, adding 11 points to growth. Enclosures' fourth quarter income was $43 million, up 22%, return on sales was 13%, down 240 basis points. As a result of this very strong growth, we saw higher-than-anticipated costs and overall inflation, we also made investments in capacity. These impacts were partially offset by solid price realization of 11 points. Sequentially, we expect return on sales to improve with better price cost and productivity. Electrical and Fastening sales of $171 million increased 17% organically, with growth across all verticals and strong double-digit growth in North America and Europe. Electrical and Fastening segment income was $45 million, up 9%. Return on sales was a solid 26.3%, down 170 basis points, as we lapped the time temporary cost actions of a year ago. Overall, return on sales was better than expected and price offset inflation in the quarter. It's worth noting that Electrical and Fastening expanded return on sales a 120 basis points for the full year on top of solid margin expansion in 2020. Thermal Management grew 16% organically, with sales of $166 million, driven by continued strength in industrial and commercial and residential. High-margin industrial MRO growth was strong for the third consecutive quarter, up 34%. Backlog grew sequentially and year-over-year, reflecting an improving trend in longer cycle projects. Thermal Management segment income was up 30%, return on sales expanded 290 basis points to 26.4%, driven by volume and positive mix contribution from industrial MRO. Now turning to Slide 7, this gives us a recap of our full-year 2021 results. We ended the year with sales of $2.5 billion, up 23% and 18% organically. Strong volume contributed 11 points to sales growth, while price added 7 points, nearly offsetting total inflation. Notably, we finished 12% above 2019 pre-pandemic levels. For the full year segment income of $436 million was up 25%. We expanded return on sales by 30 basis points to 17.7%. Adjusted EPS for the full year was $1.96, up 31% and I'm particularly pleased with our free cash flow performance of $334 million, up 9% versus prior year and a 100% conversion of adjusted net income. In summary, our 2021 performance puts us on a great trajectory to deliver on the long-term targets we set out in our Investor Day, last March. On Slide 8, titled Balance Sheet and Cash Flow, you'll find we exited the year with $50 million of cash on hand and $493 million available on our revolver. Our recent debt refinancing coupled with our strong cash generation, provides ample capacity heading into 2022. Slide 9 gives us an update on our capital allocation priorities. We exited the year with a net debt to adjusted EBITDA ratio of 2 times at the low end of our target range of 2 to 2.5. Our robust balance sheet and cash generation puts us in a great position to invest in growth and execute on our M&A strategy. We continue to make investments in new products in digital and plan to launch another 50 new products in 2022. We added over $100 million in annualized sales from two acquisitions and these acquisitions are on track to generate great returns like Eldon and WBT, both of which we delivered greater than 10% returns in year two. We returned approximately $230 million to shareholders in 2021, including a competitive dividend and share repurchases of $112 million. We will continue to deploy capital to drive growth and attractive returns for shareholders. Now moving to Slide 10, and our 2022 outlook. We expect organic sales growth in the range of 6% to 9%, this assumes higher volumes along with price realization in that 4 to 5 point range. Growth is expected to be stronger in the first half, given comparisons, and from a segment perspective, we expect strong growth in Enclosures, and Electrical and Fastening, with more modest growth in Thermal Management. Our outlook for full year adjusted EPS is between $2.10 and $2.20, which represents growth of 7% to 12%. A couple of important items to note. First, our outlook assumes supply chain challenges inflation persist, particularly in the first half. We anticipate margin performance to improve as we move for the year. Second, we expect price plus productivity to more than offset inflation for the full year. Third, we will continue to invest in new products, digital and our supply chain. And lastly, we expect another year of strong free cash flow performance with conversion of approximately 100% as we execute on our working capital initiatives. Some 2022 below-the-line item assumptions we'd like to call out include net interest expense of $30 million to $35 million, a tax rate in the 17% to 18% range, and shares of approximately $170 million. Additionally, we anticipate corporate costs of $75 million to $80 million in capex of $50 million to $55 million. Now moving to our first quarter outlook on Slide 11, we expect organic sales growth in the range of 10% to 12% and adjusted EPS in the range of $0.42 to $0.44. Several items to note for Q1. First, margin performance year-over-year is expected to be similar to that in Q4, reflecting higher costs related to supply chain challenges. Second, we expect price to largely offset inflation in the quarter. Keep in mind, last year we had very favorable material locks as we began the year. Lastly, while we anticipate corporate costs to be similar to each of the last three quarters, they are expected to impact margins by 120 basis points due to the prior year comparison. We see margin performance improving sequentially through the year, easing price cost pressures and better productivity. In closing, our team delivered outstanding results in 2021 and I'm very pleased with our cash flow performance. I believe we are well positioned for another strong year. With that, I will turn the call back over to Beth.

Thank you, Sara. On Slide 12, I'd like to provide our assumptions for our key verticals in 2022. Looking at the industrial vertical, we believe the trends in digital and automation will continue to drive investments and strong demand for our products across all sub verticals. In commercial, we anticipate another year of solid growth. The U.S. non-residential recovery is forecasted to be up mid-single digits and in Europe, the construction PMI remains expansionary. The infrastructure vertical is expected to benefit from continued strength in the 5G rollout, data center spending, power utilities and renewables. In energy CapEx is anticipated to increase, particularly in North America. In summary, all of the verticals where we play are expected to grow. Turning to Slide 13, we have executed well in our strategy with a laser focus on growth and serving our customers. We made progress in all areas and continue to see significant runway for growth and value creation. Let me share a couple of examples of where we are well positioned and winning with the electrification of everything. With our Eldon acquisition and our Global IEC Enclosures portfolio, we recently won a multimillion-dollar deal for protection solutions in the food and beverage industry. We were able to provide the same solution in Europe and the U.S., selling globally and serving locally. With infrastructure investments in universal broadband and fiber-to-home, we won a key project with one of the largest rural Internet providers in the U.S., providing outdoor protection systems. With the increased data demand in reliability and data centers, we won a multimillion-dollar project providing a highly resilient connection solution. With the move to renewables, we've won dozens of biofuel upgrade projects with our thermal management key trace offerings. Now turning to Slide 14. Data and networking solutions is a great example of how multiple growth elements of our strategy come together. At SPIT, we decided to focus on this high-growth vertical and establish a new commercial team. We developed new innovative products, in particular liquid cooling solutions and expanded our offerings with acquisitions. We built strategic alliances with technology companies to expand our capabilities. Today, we provide some of the most innovative and energy efficient solutions in the industry and are winning new customers. Recently, we were awarded a large multi-million dollar project for one of the world's largest software companies with our advanced liquid cooling solution. Since then, we have more than doubled these sales to over $200 million annually and expect to continue to grow high double digits. Now, turning to Slide 15, I'm very pleased with the progress we're making on ESG goals which are an integrated part of our nVent strategy. As a reminder, we focus on three pillars, people, products and planet. At nVent, we believe our culture and our people are a differentiator. Attracting and retaining talent in today's environment is critical. We have increased the representation of women in management globally and racially diverse professional employees across our U.S. workforce. We are honored to be named to the 2022 Bloomberg Gender Equality Index, making us one of only 418 companies across 11 sectors and 45 countries to be included. Around products, we integrated ESG into our new product introduction process, and develop baseline metrics and long-term goals, and we had great results in our planet pillar, increasing our renewable energy usage and reducing our CO2 emissions. We received a silver medal for social responsibility from EcoVadis in 2021, ranking nVent in the top 13% of companies reviewed in our industry. We look forward to publishing our 2021 ESG report this summer and are committed to driving further progress of our goals in 2022 and beyond. Turning to Slide 16, I will leave you with some key points. 2021 was a year of outstanding performance and we enter this year with great momentum. The macro trends with the Electrification of everything are expected to drive demand for our products and solutions. We believe nVent is one of the best-positioned companies to grow with these secular trends. We are executing well on our strategy and are changing the growth trajectory of nVent. We are a stronger company today and our future is bright. With that I will now turn the call over to the operator to start Q&A.

[Operator Instructions] Your first question is from the line of Deane Dray.

Thank you. Good morning everyone and special welcome to Tony, great addition to the nVent team.

Good morning, Deane.

Good morning, Deane.

The first question is, I had to do a double take on how significantly above our expectations organic revenue growth was in the quarter, very pleasant surprise, can you talk about the cadence in the quarter organically, topline how did it play out and versus your expectations?

I think coming out of Q3, where we talked about the strength in our orders, we just saw that growth consistent across all three months of the quarter, so backed up by that strong orders. And I think we were very pleased just with - as the orders came in, just - that it was broad-based across all of our segments and all of our verticals which reinforced the work that we're doing around our strategy in these high-growth verticals. So just on every level, we just saw strong growth across the business.

All right, great to hear. And the second question relates to price. 2021 was really strong for you in terms of price realization, your expectations for '22, how many price increases do you think you'll need? And then on the flip side, on the input costs, maybe give us some insight on to the second derivative, just real time what's happening, steel, nickel, freight, have they plateaued or are you seeing any relief there? Thank you.

Well, I think, you know, this was a - 2021 was a year unprecedented with inflation and so, we were having price increases in different parts of our - different segments or different regions continually, throughout the course of 2021, and when we exited 2021, we had announced some price increases already for 2022. So I think we will look at how inflation plays out over the course of this year and we'll take whatever action we need too in terms of ensuring that we get out in front here. And I'll let Sara add some more cover on the inflation side of things.

Yes. Maybe a couple of things to point out here is just, we talked about this a little bit in our prepared remarks but we do expect strong carryover pricing in that 4 to 5 point range. I think the second piece in terms of inflation, a couple of things to note here, total inflation was significant for us in 2021, no doubt, it was, in total, roughly $145 million. As we look into 2022, we do see another year of significant inflation, I would say a bit more broad-based, we're seeing it across broader input cost, components, freight logistics, wages so we're going to continue to stay in front of it, I think as we've been very vigilant doing for the course of 2021, in terms of managing that price plus productivity, more than offsetting inflation for the year. I think the other thing I would point out is just kind of first half-second half dynamics, we do expect first half inflation higher and then that easing in the second half.

Your next question is from the line of Julian Mitchell.

Maybe just wanted to circle back on that sort of price volume aspect because you know, you are a sort of relatively rare multi-industry company and that you're guiding for higher growth in Q1 than you are for the year, which is a sort of welcome linearity but if we think about sort of the price versus volume within that number, is there anything to sort of call out as you go through 2022 or is it a similar development, whereby price and volume both start the year stronger than in the second half?

Yes, well, I mean maybe a couple of things to point out there. I think one, that organic growth rate of 10% to 12% Q1 outlook really reflects the strong momentum that we're seeing. So I'll point that as first. Number two, it does include both price and volume, more skewed towards price I mean, simply the math is as we exit the year at 11% and that carries over into Q1 of next year, we would expect a lot of that price carryover to benefit mostly in that Q1 timeframe.

But if you look at say the volume piece of the guide, is that expected to be kind of steady year-on-year, say first half and second half?

Well, the volume is going to be stronger in the first half than the second half simply because of our comparisons, right. So if you look at our growth rate in - you know, as we proceeded through the year, I mean obviously, in Q2 of this year because that was the lowest quarter a year before but you look at Q3 and Q4, we had really strong growth. So some of that is just the comparisons that we have in the back half.

That makes sense. Thank you. And then just a quick follow-up around the sort of margin progression for 2022, I think you mentioned on the revenues that thermals growth rate would lag the other two divisions. Just wondering if there was any sort of margin color year-on-year for 2022 as a whole across the three segments?

Yes. And so from a full-year perspective, we do expect again another year of margin expansion despite that inflationary pressures and some of the supply chain challenges that we're seeing in the first half. And we would expect margin expansion across all three segments, albeit a bit higher in enclosures. Thermal, we expect to continue to benefit from that recovery as well as that industrial MRO strength continuing. And I think Electrical and Fastening is where we're seeing expecting to see maybe a bit more of a muted margin performance there kind of year-over-year, but keep in mind that business has expanded gross of 180 basis points over the last two years. So a good growth on the top and bottom line there in electrical and fastening, just more modest on the margin side.

Your next question is from the line of Joe Ritchie.

So I wanted to pick up on that last point you just made around EFF, because historically, I've kind of thought about the EFF segment as still being where the opportunity exists from a margin perspective longer term. So maybe just expand on that, is that changing at all where you kind of see kind of longer term entitlements across the different businesses just based on the trends that you've seen the last few quarters?

Yes, I would say, nothing has changed in terms of us continuing to see margin compression - margin expansion in the longer term in electrical and fastening. And we've talked about that in terms of bringing more lean enterprise within Electrical and Fastening, bringing more automation as well as digital factory in some of the investments we're making on the factory automation side of things. So nothing has changed there, I think it's simply two things: one, reflective of this, 180 basis point expansion since 2019 but I think the other piece is just price cost, we're not back yet to what I would say more normalized historical incrementals are in that 30% plus range, Electrical and Fastening is definitely part of that, given their more - strong margins and so I think we're just seeing that in the context of another year of significant inflation, even as we offset that with price and productivity that is having an impact on incrementals as well as to absolute loss.

Got it. That makes a lot of sense. And maybe I'm sorry if I missed this earlier, but the pricing this quarter this was tremendous. I'm just thinking through kind of the environment that we're in right now with some steel cost curves are coming down, I'm just curious like if we get into some of your raw materials actually deflating as the year goes on, how does that impact the price cost contingent to you guys, you have to give back pricing in certain businesses, like how do you think that will kind of play out for you guys?

One of the things as we think about pricing and we continue to drive differentiation and value in our solutions and offering, so we like to be able to hold that price. And I also would say that we're seeing a very highly inflationary environment, so even if we see raw materials going down, we still expect there to be inflation in electronics, there's still going to be inflation in wages, in freight and energy costs and there's multiple dynamic here, so. I believe as we go through the year, we're going to continue to manage to hold that price and I'll let Sara just comment a little bit more on the margin side.

Yes, I think your question was more around the steel and maybe I'd offer up a couple of things. One is material costs in total are roughly 30% of sales and metals account for more than 40% of those, what that means is there are other input costs, right, in relation to the overall COGS, as Beth just commented upon. I think the other piece I would say is clearly if costs go down, that will help, that's not something that we're counting on, I mean, again, we're going to stay very vigilant on managing that price plus productivity offsetting inflation for the year.

Got it, that's super helpful. Maybe if could sneak one more in. The Thermal margins this quarter, can you maybe just kind of parse out, you had really, really good margins this quarter. Is that margin kind of sustainable going forward, any color on parsing out what drove that really strong margin in 4Q?

Well, maybe I would say a couple of things. The biggest drivers of that margin performance in the quarter was first, the tremendous growth - that Thermal Management had, I mean they're still working back in terms of recovery to 2019 levels, so that was helping. I think the other piece is just the strength on the industrial MRO, that sort of had an outsized impact on gross performance last year and we're seeing that come back strongly this year. And I think the other piece I would call out is just that team continues to be - do a really nice job with price cost, they don't necessarily see the magnitude of the material inflation, as the other two businesses but they've been very good on managing that price cost equation, we see that improving as we go into this year.

Your next question is from the line of Jeff Sprague.

A couple of questions and I'm sorry I got on late. How much price is embedded in the 6% to 9% organic growth guidance for 2022?

Yes we talked about that carryover pricing in that 4 to 5 point range.

So what's interesting and maybe you could address this, right, although your price I think surprised all of this year in the quarter, when I actually look at it, it's quote unquote only 200 or 300 basis points above what I forecast, what sort of is jumping out actually is the volumes, right. Everybody is dealing with inflation, but in a lot of these calls we're hearing inflation and supply constraints and therefore we can't deliver on sales, came in light et cetera, from a volume standpoint. You actually didn't experience any meaningful, from my vantage point anyhow, volume constraint, I'm sure there were some, but the question really is, are you now at some kind of capacity constraints that it's going to be difficult to drive volumes much higher than here? I mean if there is literally four or five points of price in 2022, I would think you've got the prospect of some decent volume upside this year from what's embedded in that guide.

So from a volume standpoint, one of the things we're very pleased with is just how our supply chain has performed. And as you look at Q4, there was a cost to that, because certainly in our Enclosures business having over 30% organic growth with constraints of labor and just even having to go get materials on the spot market et cetera, all of that we - you're inefficient but I think as we go forward, what we've been doing and we started even throughout the year, is investing in capacity. We do think labor's still going to be a constraint, and we think there's still some constraints around electronics, we think we're managing through the commodity materials and getting access there. - So there's inefficiency there and I would say as we started this year with Omicron I mean, that created some labor issues for us, but we feel good about the orders and so we exited the year with 37% orders growth and so when I talk about the momentum going into 2022, we would expect that we're going to have some nice volume growth. Now as we look at the back half of the year, remember with some of these strong organic growth rates, the comparisons get a lot harder, right, this quarter being over 20% organic growth, it gets harder to get some of that volume on that, but we do feel very good where we're positioned and we believe our strategy and what we're seeing with the focus on high-growth verticals and all the other things we're doing is positioning us well.

And I just wonder if I could sneak one more in, if we think about the segment income bridges that you gave us for Q4 and for 2021, I just wonder if you could give us a little more color on kind of the, I mean you spoke to inflation, but kind of the productivity and investment buckets that underpin what the headwinds might be in 2022, relative to the price and volume coming in on the other side?

Yes, I mean I'll give a couple of points here. I mean, we talked about the price carryover that 4 to 5 points on that net productivity bucket, I mean obviously with a net negative this year of $155 million for the full year, a $145 million of that being inflation, - and 10 net headwind on productivity investments, we would expect that productivity to turn positive, really supply chain challenges ease in the back half and importantly, as we also drive that underlying productivity, I mean we're doing a lot around automation, bringing digital in the factories and optimizing on the logistics side. So we would expect that productivity to bar - to turn positive. And I think the other piece is on the growth side, I mean clearly that gross bar was a solid green for us as we lapped the year of COVID there in 2020 and we would expect it to be green again here in 2021, just not to that magnitude but I think I would end by just saying, we expect another strong growth on top of the 18% organic growth that we saw here in 2021, along with margin expansion driving to that EPS growth.

Your next question is from the line of Nigel Coe.

Good morning and congrats to Tony on the new role. I think this is the first time I'll talk to one person in two companies in the quarter. So some kind of record. I wouldn't normally spell corporate expenses but it is quite a bit above my number and has been trending higher. So just wondering, is that just comp or is there something else driving corporate expenses higher and are we had a good run rate here going forward?

Yes, I would say two things in Q4 there, one, and we talked about this even going into the year, we are going to make some digital investments including migration to the cloud and so that's been included in those corporate costs. I think the other piece I would just call in Q4 in terms of that sequential bump, that it did include some comp accruals. And so as we look at that in the context of 2021 in that $75 to $80 million range, that really just simply reflects kind of that underlying run rate in that Q2 to Q4 range of the prior year.

Okay. And then maybe a follow on to that would be the R&D obviously a big theme and your idea this year was investing in product et cetera, R&D increase, so just curious where R&D finished this year and what's baked in for 2022?

Well, with R&D, I would say this one of the things, we continue to increase our investment there as we go forward, but one thing I want say I'm very pleased with is just the effectiveness of our R&D. So we look at our investments between digital and R&D and sometimes they go hand in hand. But when I step back and look at we're launching more new products, our cycle times are going down and we're having more of an impact and some of that's just our approach with agile and just better marketing and understanding customer needs. So the output that we're getting on the R&D side is better than the goals that we set for ourselves. So I think we still have runway to continue to invest there, we somewhat prioritize a little bit more on the digital investment side then we have R&D.

And a quick follow-on, if I can in, you called Omicron is the fact that you're having productivity headwinds, are we now moving beyond that impacted on the labor side, either from your perspective or from your supply chain?

Well, I think January was very tough. You just need to look the caseloads and look at the news around the world, so January was tough with absences and I'd like to think that we're going we're getting better but who knows, right? There we've always said there's no playbook for a pandemic. But I think with the volumes that we've seen, labor is going to - it's inflationary and I think it's going to continue to be a challenge for a while. Having said that, we've done everything that we can to serve our customers, it's been a big theme of ours and you've seen that in our volume growth, but I think we're just going to see some inflationary pressures there as we go forward.

Your next question is from the line of Jeff Hammond.

We covered a lot on price cost et cetera. Just a clarification on price is that 4 to 5 carryover or does that include kind of your Jan 1 pricing as well?

That carryover basically includes these pricing actions that we had in the context of Q4.

Okay, great. And then just on, you made the comment that you can outgrew a 0.5 on the new products. Just want to understand better one, how you're measuring that? And two, maybe differentiating the new product outgrowth versus just your outgrowth from maybe being able to supply better than some of your comps in this environment?

When we look at I gave them a number of 18% new product totality so that's the products we've released what's the revenue of these new products over the last five years? And so then we look at those new products and we look at what percentage of our revenue was generated in the course of the year and that's where we came up a point and a half. And I think that, I mean, new products are fundamental, as we look at how we're driving growth, where we're going with liquid cooling solutions, for example, when we're looking at some of these trends around the electrification of everything and we driving more resilient labor saving connection systems that's positioning us well for some of these new growth verticals? So we have a really good way of measuring the value that we're creating and any time we launch new products we look at margins and if they're differentiated, they should launch with higher margin, so I think we have a really robust process there and it's very important to our growth as we go forward.

And do you see that 1.5 as kind of a stable number as you can kind of continue to improve or is that something that you think can move up move up over time?

Well, we target to get over a point of growth and I think in a strong year like we saw this year a 1.5, certainly, if we - this year is another good year, so I'd say we expect to get above a point again. So that's kind of our general target.

Your final question is from the line of the David Silver.

Yes, hi. Thank you. Hi, good morning. So my question I think would be on the financing activity that was undertaken this quarter. And I was kind of looking at your debt structure with - and I noticed that this quarter you paid I think a $15 million prepayment issue, there was maybe 3 million of cost and I was just kind of scratching my head but this kind has the feel of restructuring your debt - reworking your debt structure in service of a broader corporate strategy. But could you discuss maybe you're thinking about why you chose to do significant refinancing here and what that I'll just say $18 million but the prepayment and the issuance costs, like what does that buy you? Either in terms of lower interest expense or covenant relief, I mean - but maybe if you could provide some background on that decision, that would be great. Thank you.

Yes, so I mean I would start off by saying we feel really good about - you did in the context of 2021, both on the revolver as well as that $300 million bond tranche and it really was an advance of the maturities that were slated for April of 2023 so, kind of right in that window. It really did two things for us, one, it gave us an opportunity given sort of the favorable backdrop and market conditions to take advantage of some of those lower rates and I think the other thing, two, is it really set us up well from a balance sheet maturity perspective, so, it took about $300 million bond tranche and put it out 10 years. As you look at our maturity ladder, we feel really good about where that stands. From a cash perspective, we had an in and out there. Clearly, we had the $50 million kind of take-out premium if you will on those bonds but we also had roughly a $10 million benefit on that treasury rate lock. So net it was closer to that $3 million mark. But importantly, we feel really good about that refinancing and we believe that this puts us in a great position on the maturity ladder as we look forward and taking advantage of some of the favorable interest rate conditions here in 2022 or here in 2021.

Yes. And just a follow up, but I mean I think that particular notes issue that was taken out dates back to when your company was first set up independently. So I'm just wondering if there's any meaningful covenant relief for any kind of flexibility that you think is - that was gained that you think is noteworthy. Thank you.

Yes, I would say, nothing really to note. I mean we launched spun as a company with I think some very good elements around both the revolver as well as on the bond issuance side and those we see continuing with our debt refinancing.

There are no further questions, I will turn the call back over for any closing remarks.

Well, thank you and thank you for joining us this morning. We are incredibly proud of our strong fourth quarter and full year 2021 performance and believe we are well positioned for continued growth and success going into 2022. I'm grateful for the outstanding work our global employees put forth during the year to help us continue to meet customer demand and execute on our growth strategy. Thanks again for joining us. This concludes the call.

This concludes the nVent fourth quarter earnings conference call. Thank you for your participation, you may now disconnect.