Eaton Corp PLC

Thank you for standing by. Welcome to Eden's third quarter 2025 earnings results conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Yan Jin, Senior Vice President of Investor Relations. Please go ahead, sir.

Hey, good morning. Thank you all for joining us for ETHEN's third quarter 2025 learning call. With me today are Paolo Luiz, Chief Executive Officer, and Olivier Biodetti, Executive Vice President and Chief Financial Officer. Our agenda today includes the opening remarks by Paolo. Then we will turn it over to Olivier, who will highlight our company's performance in the third quarter. As we have done on our past course, we'll be taking questions at the end of Paula's closing commentary. The price release and the presentation we'll go through today have been posted on our website. This presentation includes adjusted earnings per share and other non-GAAP measures. There are reconciling appendix. A webcast of this course is accessible on our website, and it will be available for replay. I would like to remind you that our commentary today will include statements related to the expected future results of the company and are therefore forward-looking statements. Our actual results may differ materially from our forecasted projections due to a wide range of risks and uncertainties, as described in our earnings release and presentation. With that, I will turn it over to Paolo.

Thank you, and thanks, everyone, for joining us. I'm happy to report we delivered solid results. From a demand perspective, we continue to see tremendous strength. On a rolling 12-month basis, our orders accelerated in electrical Americas up 7% from up 2% in Q2. Our electrical Americas backlog grew 20% year-over-year, hitting an all-time record. Demand in aerospace business remains very strong as well. we posted order growth of 11% on a rolling 12-month basis and backlogged expansion of 15% year-over-year. As a result, our book-to-bill for the combined segments was 1.2 on a quarterly basis and 1.1 on a rolling 12-month basis. As we continue to deliver robust growth in data center market, our orders accelerated 70% and our sales were up 40% versus Q3 2024. This strong demand picture gives us confidence in our ability to deliver sustained growth and add value to shareholders. Among the Q3 highlights, our adjusted earnings per share were up 8% versus prior year, and our segment margins of 25% hit a quarterly record, up 70 basis points year-over-year. We are also reaffirming our 2025 guidance. Lastly, yesterday, we were excited to announce the agreement to acquire Boyd's Thermal Business, a global leader in liquid cooling, and I will talk through this in much more detail in the following slides. Olivier and I will dive into Q3 and the four-year outlook in just a minute, but first, I'd like to share more details on how we are investing and executing for growth in our operations starting on page four. So earlier this year, I laid out our bold new strategy with three pillars, lead, invest, and execute for growth. All three are designed to accelerate our growth and create sustained value for shareholders. These three pillars also enable us to capitalize on key megatrends we've discussed for the last few years. Today, we will focus on invest and execute for growth. The board acquisition fits squarely into our strategy to invest for growth. Activity for growth involves elevating operations from good to best in class. It includes self-help growing the head and fixing the tail and controlling our destiny independent from end market developments. Today, I'll walk you through a few examples of what we are doing and the results we are starting to see from this strategy. Turning to page five. Yesterday, we announced the acquisition of Boyd, the global leader in liquid cooling technologies for critical markets like data centers, aerospace and defense, and industrial. This is a high-growth business playing a high-growth market, and we expect it to generate $1.7 billion in sales next year at an adjusted EBITDA margin of 25%. This level of sales represents significant year-over-year growth, demonstrating how the business is benefiting from strong customer demand, especially in data centers. And the business itself has a large global presence with over 5,200 employees and 16 manufacturing locations. This global presence is critical to Boyd's success as they are able to support customers almost anywhere in the world as they build out their data center infrastructure. Of those 5,200 employees, over 500 engineers, which is another important part of Boyd's success. These engineers work directly with the customer teams, design the next two platforms to understand the thermal characteristics of this next generation, and then this knowledge gets translated into Boyd's own designs. Boyd's manufacturing engineering teams are also involved in the design of the cooling systems to ensure the highest reliability and the production can be rapidly scaled to meet customer needs anywhere in the world. This deep application engineering expertise combined with world-class manufacturing and supply chain create a powerful flywheel for boards to always stay ahead of the competition in terms of technology, reliability, and scalability. On slide six, we show some market data. As we talked about previously, the chips used to power AI models and other high-performance computer applications are getting more and more powerful. If you look at the data before the advent of Gen AI, the power used in a typical rack was in the 10 to 15 kilowatt range. At this level, you can cool these chips using air cooling, which is a pretty mature technology and has been around for many years. Now, the introduction of more and more powerful AI chips, the power in each one of those racks is just skyrocketing. Take NVIDIA, for example. Its GB200 chip, unveiled in 2024, uses 120 kilowatts per rack. Fast forward a year to 2025, and NVIDIA's GB300 chip now uses 180 kilowatts per rack. And it's only increasing from there. NVIDIA's Robin chip is expected to use 600 kilowatts per rack, and its Feynman chip, 1,000 kilowatts per rack. Now, in addition to these higher power chips requiring more and more electrical equipment, which is a great thing for our business, once you get above roughly 50 kilowatts per rack, traditional air cooling is replaced by liquid cooling. The physics of these power levels require liquid cooling the chip, Otherwise, performance is degraded. Chips don't last as long, or they just might not work at all. So all the demand that you are seeing for Gen AI chips will drive commensurate demand for liquid cooling solutions to cool those chips. The growth goes hand in hand. Market estimates vary, but we believe that the global liquid cooling market will grow around 35% annually through 2028. just tremendous growth that is supported by long-term underlying factors. And to go back to my point from the prior slide, Boyd is the global leader in liquid cooling, which is why we are so excited about this business. With the acquisition of Boyd, Eaton's data center portfolio will now be even bigger than before, shown in more detail on page seven. We can now provide solutions for all major power and cooling systems from the chip to the grid. This includes all of our traditional power distribution, power quality, and infrastructure products in the data center gray space. And here you can see our other two recent acquisitions of fiber bonds, modular pods, and resilient power medium voltage solid state transformers. And in the data center white space, we can provide everything from power distribution units, remote power panels and bus way, to racks, enclosures, cable tray, and in 2026, liquid cooling. And of course, I need to mention our software and services capabilities, which historically have been focused on the gray space and the white space power distribution and power quality equipment only, and now we added the same service capabilities for liquid cooling, which we view as a really attractive avenue for growth. Truly an impressive portfolio of solutions for data centers. Moving to page eight, I already talked about how this acquisition bolsters our data center portfolio. And I also want to mention how it aligns with how our customers are thinking about the future data center architectures. Starting from the cheap out, there are really five main technology blocks that work outward towards the utility grid. There is the thermal management system to handle heat loads primarily from the chip, but also from other heat generating assets like storage devices and power supplies. There is wide space power distribution and infrastructure equipment to get the power to the racks. There is the grid equipment to distribute, transform, and condition medium voltage AC power down to low voltage AC and then low voltage DC power. There is ETHAN assets to connect the data center to the grid. And finally, there's software and services to monitor and manage all these power and IT assets. So with this acquisition of Void, ETA now plays a leading position in each one of those technology blocks. One reason this is important is that we can now offer our data center customers a greater share of wallet. This is important as they seek to consolidate their supply base among a smaller set of stronger, more globally capable players. And the other important reason is that customers are increasingly looking to integrate these various systems to drive increased technical performance and more rapid deployments. This is especially true in data center wide space, which is exactly where Boyd plays. So overall, a really exciting acquisition for us. and one that we know will allow us to continue supporting our customers today and into the future. Now, let's be able to execute for growth another exciting, important pillar of our strategy. So, on slide nine, these are key leading indicators in electrical Americas. This segment is clearly the head of our portfolio, and we have an execution plan to grow it even stronger and with increased margins. All lead indicators on this page are proof points of the generational growth opportunity ahead of us. They also show that our team is executing well to capture this growth. The visibility is unprecedented. So let me walk you through what we are seeing. Over the last two years, the mega project announcements have increased a staggering 185%. In the same timeframe, or negotiations pipeline have increased 35 percent, falling into rolling 12-month orders up 23 percent on a two-year stack and a book-to-bill of 1.1. For data centers specifically, the two-year stack of rolling 12-month orders are up more than 100 percent, and the data center book-to-bill is 1.7. And Latin America's backlog is up 51 percent over the last two years, of which data center backlog extends over two years. On a two-year stack, Electrical Americas has grown 23% organically, and within that, data centers have grown 104%. So the demand indicators clearly support why we are so bullish for this business. Our position of strength in the Americas keeps resonating across the market. We are proud to have the broadest portfolio of electrical products in the market, to cultivate strong and trustworthy relationships, and to be the partner of choice to co-design technologies of the future together with our key customers. Slide 10 showcases the electrical global organic growth journey. Last year, we grew 4%. This year, approximately 7%. We've talked about the focus to increase electrical global margins while we continue to make strong progress. Our 2025 guidance reflects year-over-year margin expansion of 100 basis points. And let's talk about the growth rate in electrical global now. Our electrical global organic growth is accelerating up to about 7% in our 2025 guidance from 4% last year. Our 2030 target of 6% to 9% growth for the portfolio assumes about a middle single-digit growth over the period, and we are off to a great start. We are seeing order acceleration, building strong backlog, and position to win for years to come. We talk about being the right markets, targeting fast-growing markets supported by secular megatrends. For example, the data center growth is impacting our business globally. as governments and enterprises are prioritizing data localization and resiliency, and we are partnering with our hyperscaler customers in various parts of the world. And by the way, all these data centers need power, and we are key beneficiaries of our global utility space as well. And we have a broad portfolio with breadth and capabilities leveraged across end markets. All this enables us to win and position us to gain market share on a global front. The strategy is clear, and as you'll hear from Olivier soon, we are booking sizable orders already, which is momentum to position us for strong growth for years to come. Now I will pass to Olivier to walk through the financials. Thank you, Paolo.