nVent Electric plc Ordinary Shares

Ladies and gentlemen, thank you for standing by and welcome to the InVent Q2 earnings conference call. At this time, all participants' lines are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference call is being recorded. If you should need further assistance, please press star zero for the operator. I would now like to hand today's conference over to J.C. Weigelt, Vice President of Investor Relations. Sir, the floor is yours.

Thank you, Carmen, and welcome everyone to InVent's second quarter 2020 earnings call. I'm J.C. Weigelt, 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 second quarter performance as well as a COVID-19 business update. 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-vent 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 Investor section of Invent's website. References to non-GAAP 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, JC. Good morning, and thank you for joining us. We continue to hope that you and those around you are safe and healthy as we navigate through the pandemic. I want to extend a special thank you to all of our InVent employees who have been resilient and who are adapting to a new way of working. Our focus and collaboration has never been stronger. The safety and well-being of our employees remains our first priority at InVent. I want to acknowledge that these are challenging times and our employees have been putting in tremendous effort, living our customer first value to go above and beyond to keep our business running. I'm truly grateful and inspired by their commitment and dedication. I also want to make a comment on racism, inequality, and injustice in our society. Invent stands with the black community, with all people of color, and others who feel marginalized. We stand against inequality and injustice of any kind and we will not tolerate racism in any form. We have launched listening circles across InVent as part of an effort to engage our employees in a dialogue on racism. We have made the commitment that we will listen, we will talk, and we will act. Together we will emerge stronger. Now I would like to turn to our second quarter results on slide three of the presentation titled Executive Summary. We remain focused on our three near-term priorities, which are first, focusing on the safety and well-being of our employees. Second, continue business operations to serve our customers and support critical infrastructure. And third, take actions to make Invent a stronger company, well-positioned to exit the crisis. I am proud of our execution during the quarter. Since spend two years ago, we have always been asked by investors, how would Invent perform in a downturn? I think if you review our second quarter performance, you will see that we executed well during a unique and challenging time. Our teams executed on our plan to keep operations running with minimal supply chain disruptions. We managed decrementals and strong free cash flow conversion generation with 160% adjusted conversion. In addition, we continued to invest for growth. We launched 13 new products, made progress on our digital transformation, and the integration of our acquisitions are on track and performing well. In April, we highlighted the actions we were taking to emerge stronger, and we view these results as evidence that we are on a path to do just that. We executed on the cost actions we laid out last quarter, and second quarter decrementals were 39%, including a 7-point negative impact from acquisitions. These decrementals were better than our initial expectations of approximately 40%, which excluded the impact from acquisitions. Second quarter sales were down 17%, as each segment's demand was negatively impacted by COVID-19. We improved our free cash flow performance versus a year ago, and adjusted EPS came in at 29 cents. Our two recent acquisitions, Eldon and WPT, performed well during the quarter. We continue to target a mild to moderate scenario of sales down 10% to 20% for the year. We are taking additional cost actions given our view of a prolonged recovery in certain verticals. More broadly, we are seeing improving trends where countries or states are beginning to open back up. Specifically, verticals within infrastructure are performing well relative to other verticals. Data Centers and Networking Solutions and Rail are seeing improved trends. In Data Centers and Networking Solutions, we have a strong value proposition with our integrated solutions inside and outside the enclosure with leak detection, cable management, liquid cooling, and power management. We're also seeing improved trends in commercial tied to the reopening of economies across the globe. Prefab remains a favorable long-term trend, and our InventCatty prefab business is seeing double-digit orders and backlog growth. General industrial continues to be weak, although there are some areas that remain more resilient, such as material handling and food and beverage. Overall, we continue to expect an uneven recovery, as channel partners manage inventory levels and companies manage their spend. Similar to last quarter, oil and gas trends remain weak, although I will point out our thermal management project orders and backlog grew double digits this quarter. In summary, although our business experienced pressure related to COVID-19, we executed on our three near-term priorities, managed decrementals, and generated strong cash. We're confident in the actions we are taking to emerge stronger. I will turn the call over to Sara for some detail on our second quarter results, an update on our cost actions, and share some thoughts on the balance of the year. Sara, please go ahead. Thank you, Beth.