nVent Electric plc Ordinary Shares

Ladies and gentlemen, thank you for standing by and welcome to the InVent Q1 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to Mr. J.C. Weigelt. Thank you. Please go ahead, sir.

Thank you, Shelby, and welcome everyone to InVent's first quarter 2020 earnings call. I'm J.C. Weigel, Vice President of Investor Relations, and also on the call are Beth Wozniak, our Chief Executive Officer, and Sara Zawoyski, our Chief Financial Officer. Today, we will provide details on our first quarter performance, as well as a COVID-19 business update on actions we are taking and what we are seeing in our business. 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 in-vents 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 in the Investors section of Invent's website. References to non-debt financials are reconciled in the appendix of the presentation. We'll have time for questions after our prepared remarks, and now I will turn the call over to Beth.

Thank you, Casey. Good morning, and thank you for joining us. Our goal today is to provide a business update around COVID-19 and spend some time on first quarter results. First, We hope that you and those around you are safe and healthy. I also want to take a moment to thank our InVent employees, all of whom are making extraordinary efforts to support our customers, support our communities, and support one another. In a recent survey, there were two common themes that emerged across InVent. The first was results, and the second was caring. And I see these qualities each and every day with our employees, especially right now. I am so proud and grateful. Turning to slide three, I would like to share our three near-term goals. First, we are focusing on the safety and well-being of our employees. Across our sites, we've adopted social distancing, expanded our hygiene practices, and are working from home where possible. In addition, all of our plants have checklists laying out best practices to follow and learn from one another. We've launched updated well-being programs for employees focused on mental health, social, financial, and nutrition components. We are taking proactive safety measures. All of our facilities have COVID-19 readiness plans. We are in the process of rolling out a temperature testing program. Thank you for joining us today. Many of our employees are working from home and a global cross-functional team is developing plans for returning to the office over time. Our second goal is to continue business operations to serve our customers and support critical infrastructure. As we have discussed, we serve mission-critical applications with our Connect and Protect portfolio. We have worked closely with authorities and followed local guidelines to implement safety practices. As a result, all of our sites remain operational today, including sites across Europe, India, and our facilities in Reynosa, Mexico. Third, we are taking actions to emerge from this current situation as a stronger company. We are continuing to invest in critical areas like new products, digital, and improving the customer experience. And I'll share more about that shortly. While we continue to serve our customers around the world, our ability to operate and respond quickly is helping us find new customers, serving us well today and for our future. I will now turn to slide four of the presentation titled Executive Summary for a discussion of our first quarter performance. We saw demand deteriorate in geographies impacted by the COVID-19 pandemic. First, it was China, and then in Europe, and then North America. Turning to our first quarter performance, enclosures and EFS were generally in line with our expectations, with the exception of COVID-19 impacts. Thermal Management saw increased macro pressure during the quarter from the material drop in oil prices at a warmer than usual winter. Our new acquisitions, Elvin and WBT, performed well. Elvin continued to grow during the quarter and improved return on sales over 300 basis points, while WBT grew modestly and expanded margins. In both thermal management and enclosures, negative volume pressured margin during the quarter as segment income fell 15% and return on sales contracted 230 basis points. Adjusted EPS of 34 cents declined 13% and importantly, free cash flow improved versus prior year as our working capital initiatives began to take hold. Turning to slide five, We want to provide an update on April trends. Although this is a short-term view, we think it is important to review given the deterioration we saw at the end of the first quarter. In April, daily organic sales were down approximately 20% year-over-year. Enclosures was down 20%, thermal management down 15%, and EFS down 25%. Looking at geographies, North America daily sales were down approximately 25% and Europe was down approximately 15%. Asia, which for us is mostly China, is up almost 15%. While China is less than 5% of our business and the first to enter the recovery phase of the COVID-19 pandemic, we do not view it as an exact blueprint to how the rest of the world will recover. Looking across our specific sub-verticals, we're seeing significant weakness from the pandemic. However, there are pockets of strength. Examples of strength include infrastructure, specifically utilities, and investments in data centers and networking solutions. As companies invest in IT systems, in distribution centers, and build out the internet in rural areas. Not surprisingly, we are seeing especially weak trends in areas such as oil and gas and commercial construction. Slide 6 identifies the actions we have taken in response to COVID-19. We have begun executing on a downturn scenario plan to reduce costs by approximately $50 million. These actions include temporary salary reductions for myself and other executives, as well as the reduction of board fees. We've instituted a two-week furlough and other actions globally. We've also implemented a hiring freeze and limited discretionary spending, such as T&E. These actions are in response to demand trends we see and additional actions should demand deteriorate further. On capital allocation, cash is critical and we are taking necessary actions to preserve cash, such as reducing CapEx budgets for the year, While still prioritizing strategic investments, we have also temporarily suspended share buybacks. We view our dividend as an important part of our shareholder return strategy and expect to continue to pay our current dividend. As we take these actions in response to COVID-19, our goal is to manage decrementals, preserve cash, and be ready for a recovery. Now, please return to slide 7, titled Emerging Stronger. We are making decisions and taking actions to build a stronger event. We are responding to new demand dynamics and customer needs with programs such as Hoffman on Demand. We are seeing the benefits of our regional supply chain, which has worked well servicing distributors and new customers. Distributors have reached out to us seeking our help in meeting customer demand. These partnerships are proving to be mutually beneficial, extending our reach to new customers. We continue to bring new products to market with 11 launched in just the first quarter, and we are prioritizing research and development investments. In addition, our team quickly established digitally enabled training for channel partners and electrical contractors. We're finding new ways to connect with customers with video and virtual training sessions, and as a result, are driving orders and sales through these new ways of engagement. Digital is a part of our Spark management system, and we continue to accelerate our digital transformation. We have new go-to-market programs focused on external-facing websites, expanded sales and marketing tools, and enriched product data for end users. Our new Chief Technology Officer quickly identified an opportunity and established an agile project delivery practice to enable velocity and quality for all new software launches. We've begun driving robotic process automation for back office functions to drive productivity. To summarize, we are executing on our near-term goals to prioritize the safety and well-being of our employees while ensuring that we are serving customers. We expect the steps we are taking will help us address current challenges and emerge stronger. With that, I will turn the call over to Sara for some detail on our first quarter results and share some of the different ways we are thinking about the balance of the year. Sara, please go ahead.