nVent Electric plc Ordinary Shares

Good morning and welcome to the NWEND Electric first quarter 2025 earnings conference call. All participants will be in the listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Vice President of Investor Relations, Tony Reiter. Please go ahead.

Thank you, and welcome to Invent's first quarter 2025 earnings call. On the call with me are Beth Wozniak, our Chair and Chief Executive Officer, Gary Corona, our Chief Financial Officer, and Sarah Zawoisky, our President of System Protections. They will provide details on our first quarter performance, an outlook for the second quarter, and an update to our full year outlook. As a reminder, all results referenced throughout this presentation are on a continuing operation basis unless otherwise stated. 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 Invenz's filings with the Security 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 you can find in the investor section of Invenz's website. References to non-GAAP financials are reconciled in the appendix of the presentation. We'll have time for your questions after our prepared remarks. With that, please turn to slide three and I'll turn the call over to Beth.

Good morning, everyone. I'm pleased to share with you our strong first quarter results and cover some key business highlights. First, the way we have set up the call today is to have Sarah cover our first quarter performance and then have Gary provide our guidance and outlook. Sarah and Gary have been working closely together to ensure a smooth transition. This will be Sarah's last earnings call, and I'm grateful for her leadership and partnership. Sarah, in her new role as President of Systems Protection, will be leading our largest growth opportunities, from our data solutions business to our newest acquisitions, which includes Trachte and the Avail Electrical Products Group. I know she will be successful and drive our business to new levels. I'm excited to have Gary as part of our team. Gary has a strong growth and operational finance background and will continue to drive our track record of performance. With his most recent experience as acting CFO for Medtronic and over 25 years in General Mills, he brings broad expertise to InVent. Gary is getting up to speed very quickly. He will build upon the transformation strategy in place and his experience will help us scale and grow to create shareholder value and strong returns. Turning to the business performance, we're off to a strong start with double digit growth across the board and order sales adjusted EPS and free cash flow in Q1. In addition, we continue to see our backlog grow up double digits sequentially, giving us visibility through the year. We continue to make great progress on our portfolio transformation to become a more focused higher growth electrical company. We closed the thermal management divestiture early in the quarter and the avail electrical products group acquisition yesterday. Our balance sheet is strong and our disciplined capital allocation is focused on growth and returning cash to shareholders for continued value creation. We are raising our full year sales and adjusted EPS guidance to reflect the electrical products group acquisition, data solutions, and power utility strength in the second half, and it also includes the expected impact of tariffs. Now on to slide four for a summary of our first quarter performance. Sales were up 11% and 2% organically, led by the infrastructure vertical. New products contributed over two points to our sales growth, and we launched 35 new products in the quarter. The Trachte acquisition performed well, growing strong double digits year over year. Adjusted operating income grew 4% year over year, with return on sales of 20%. Adjusted EPS grew 10%, and free cash flow grew 32%. Looking at our key verticals, infrastructure led the way with sales up mid-teens with strength in both data solutions and power utilities. Commercial resi declined low single digits. Industrial and energy were each down mid-single digits. Turning to organic sales by geography, the Americas grew low single digits while Europe was down slightly. Asia Pacific grew in the high teens. Organic orders were up mid-teens, including strong double-digit growth in data solutions and mid-single-digit growth in the rest of the business. Looking ahead at our verticals, we expect infrastructure to have strong sales growth across both data centers and power utilities, which is now a more meaningful part of our portfolio. We expect industrial to grow low to mid-single digits. we now expect commercial resi to be flattish for the year. While there remains uncertainty given the dynamic environment, we continue to prioritize our key growth initiatives, which includes new products, acquisitions, and capacity expansion for high growth verticals. With regard to tariffs, we are taking mitigating steps that include pricing, productivity, and supply chain actions. We continue to closely monitor the situation, scenario plan, and execute our playbook. Overall, I am proud of our InvenTeam and how we continue to perform and deliver impressive results. We are on track for a strong year. I will now turn the call over to Sarah for further details on our first quarter results. Sarah, please go ahead. Thank you, Beth.

To begin, I am honored for the opportunity to lead the systems protection segment, and I'm thrilled to have Gary part of the team. We have been working closely together to ensure a smooth transition. Now turning to the business performance, we are off to a great start to the year with double digit growth in both sales and adjusted earnings, along with robust free cash flow. Let's begin on slide five with our first quarter results. Sales of $809 million were up 11% relative to last year. Organically, sales grew 2% driven by volume, on top of six points of volume growth last year. Acquisitions added $71 million to sales, or 10 points to growth. Foreign exchange was roughly a one-point headwind. First quarter segment income was $162 million, up 4%. As expected, return on sales was down in the quarter at . Inflation was approximately $25 million. Productivity partially offset inflation, and we also continued to make investments for growth, particularly in data solutions. Q1 adjusted EPS was 67 cents, up 10% at the high end of our guidance range. we generated robust free cash flow of $44 million, up 32% compared to a year ago. Now please turn to slide six for a discussion of our first quarter segment performance. Starting with systems protection, sales of $508 million increased 16% driven by the TRACTI acquisition. TRACTI has performed extremely well with sales up double digits versus a year ago and a strong backlog. Organically, sales were flat on top of 11% growth a year ago. Infrastructure grew mid-teens with continued strength in data solutions. This was offset by declines in both industrial and commercial resi. Geographically, Americans declined low single digits while Europe was flat and Asia Pacific grew double digits. First quarter segment income was $104 million, up 10%. Return on sales of 20.5% decreased 110 basis points year over year, impacted by inflation and growth investments. Moving to electrical connections, sales of $301 million increased 3%. Organic sales were up 4%, reflecting strong volume. Infrastructure and industrial each grew double digits in the quarter, while commercial resi was down low single digits. Geographically, organic sales were up mid single digits in the Americas, while Europe and Asia Pacific declined. Segment income was $85 million flat year over year. Return on sales was 28.3%, down 90 basis points, mainly due to higher inflation. And that wraps up the quarter and I will now hand it over to Gary.

Thanks, Sarah. I really appreciate the warm welcome from you and Beth. I'm excited to be part of Invent. I've been impressed with the strength of the broader team, the disciplined capital allocation and focus on execution. The culture of the company focused on innovation, growth and performance is a powerful combination. I look forward to getting to meet many of you in the investment community in the coming months. Turning to the balance sheet and cash flow on slide seven. We ended the quarter with over $1.3 billion of cash on hand, including the proceeds from the thermal management divestiture. We also had $600 million available on our revolver. In addition, We repaid $390 million of term loans in the first quarter, reducing our overall debt. Free cash flow was robust in the quarter, growing 32% year over year. We believe our healthy balance sheet and strong liquidity position support our disciplined capital allocation strategy. Turning to slide eight, where we outline our capital allocation priorities. We continue to prioritize growth and execute a balanced and disciplined approach to capital allocation to deliver great returns. We are investing in the business via R&D and CapEx for growth and supply chain resiliency. In addition, we returned significant capital to shareholders already this year. We repurchased approximately $250 million in shares year to date. exceeding our plan, resulting in a lower share count, and we believe at a great value. As previously announced, our quarterly dividend increased 5%. We have additional capacity for capital deployment, with our first priority being to invest in growth. Moving to slide 9, as Jeff has As Beth shared earlier, we are raising our full year reported sales and adjusted EPS guidance. We now forecast reported sales growth of 19% to 21%. For organic sales growth, we now expect to grow 5% to 7% versus our prior guidance of 4% to 6%, mainly reflecting visibility and strength in data solutions and power utilities. We expect acquisitions to now contribute 14 points to sales, up from five points previously, reflecting the avail EPG acquisition. We now expect born exchange to be approximately flat. We are raising our full year adjusted EPS range to $3.03 to $3.13, up 22% to 26%, versus our original guidance of 298 to 308. This new guidance assumes tariff impacts of approximately $120 million based on what we know today. We expect to offset the impact with price, productivity, and supply chain mitigating actions. It also includes approximately 5 cents for the avail EPG acquisition. A few modeling assumptions to note. First, full year net interest expense is now expected to be approximately $75 million, reflecting the cash deployed to M&A, share repurchases, and debt pay down year to date. Second, we anticipate share count to be approximately $165 million. Lastly, we are raising our CapEx forecast to approximately $100 million. The increase is for additional data solutions capacity, supply chain resiliency, and the expected CapEx for the avail EPG acquisition. Looking at our second quarter outlook on slide 10, we forecast reported sales to grow 22 to 24% with acquisitions contributing approximately 18 points to sales. Organic sales growth is expected to be up 4% to 6%. Additional price increases coupled with productivity are not expected to fully offset the tariff impacts in Q2. We anticipate price plus productivity to more than offset the impacts as we get to the back half of the year. We expect adjusted EPS to be 77 to 79 cents in the second quarter, which at the midpoint reflects 16% growth relative to last year. Wrapping up, we are pleased with our first quarter performance. We delivered strong sales and earnings growth and are well positioned for another great year. I will now turn the call back over to Beth.

Thank you, Gary. On slide 11, you can see the actions we have taken in our portfolio transformation. The divestiture of the thermal management business and the two most recent acquisitions of Trachte and Avail's electrical products group have reshaped our portfolio to increase our presence in the electrical infrastructure vertical. We believe these actions have positioned us as a more focused, higher growth connection and protection company. In addition, we have grown our data solutions business to over $600 million in sales. The infrastructure vertical, which was our smallest vertical at SPIN, is now the largest. We believe it is the highest growth vertical with the trends of electrification, sustainability, and digitalization. This year, the infrastructure vertical is expected to be over 40% of our sales with data solutions and power utilities, each approximately 20% of sales. Our portfolio is now a balance between short cycle and long cycle with a growing backlog. As a result, we believe we are better positioned for growth and value creation. Turning to slide 12, yesterday we closed on our acquisition of the Avail Electrical Products Group, a leading provider of control buildings, switchgear, and bus systems. This acquisition builds on our control buildings platform acquired with the TRACTI acquisition and expands our offerings and capabilities in new applications. The addition of the electrical products group further strengthens our solutions and high growth verticals with approximately 85% of its sales in power utilities, data centers, and renewables. This business has been growing sales strong double digits with a robust backlog, giving us visibility into 2026. Overall, the demand for electrical infrastructure products is increasing with the need to expand the overall grid, the move to more renewable energy, and the increase in data centers. Recently, NEMA, the National Electrical Manufacturers Association, released an independent grid study showing electricity demand is forecasted to grow by 50% by 2050. This study shows the electrification trend is upon us and electrical solutions and innovation will be required to meet the increasing demand. It is an exciting time for the electrical industry and Invent is well positioned to be a part of this energy transition. Please turn to slide 13, title 2024, sustainability report. At Invent, we are building a more sustainable and electrified world. Last month, we published our latest sustainability report that outlines our commitment to sustainability and the meaningful progress we are making. Our focus is on people, products, planet, and governance. A few highlights from the report. In 2024, we achieved above the global benchmark for employee satisfaction. On products, 85% of our new product introduction funnel has a positive sustainability impact. On planet, we've reduced our normalized CO2 emissions by 47% since 2019. Lastly, we were recognized as one of the world's most ethical companies by Ethisphere for the second consecutive year. Our sustainability efforts are key to our strategy and how we operate. I'm very proud of everything we've accomplished and the journey we are on. Wrapping up on slide 14, we are off to a strong start to the year with double digit growth in orders, sales, adjusted EPS, and free cash flow. Our portfolio transformation is on track and we expect another year of strong growth and value creation. And we believe we are well positioned with the electrification, sustainability, and digitalization trends. Our future is bright. With that, I will now turn the call over to the operator to start Q&A.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Dean Gray with RBC Capital Markets. Please go ahead.

Thank you. Good morning, everyone. Happy Friday.

Happy Friday, Dean. Good morning.

Thanks. So first, welcome to Gary. It was great to meet you in New York a couple of weeks ago and then best of luck to Sarah. I'm not going to say it's a new role cause it's not, you've been wearing the two hats. So but now it's a dedicated role and so best of luck there. So look, I know there'll be lots of questions about tariffs. It looked very much in line with what we were expecting, but I'd rather put the spotlight first on the data solutions business. And if you could give us further color, Sarah, before you write off the pace of orders, any push outs, just kind of like the tone of demand there. And then you said, double digit growth, but how's that square with America's being flat in for the segment? Thanks.

Yeah, I would just start, Dean, by thank you and excited to take on this new role and work with a fantastic team in systems protection. So I would just frame it up this way. You know, we exited 2024 with roughly 600 million sales, and we expect this to grow strong double digits this year with a strengthening back half that was alluded to in the prepared remarks. And we continue to see overall orders strong year over year in the quarter. You know, backlog grew double digits sequentially, and that's providing some very good visibility as we head into the back half. I would also point out that this is broad-based growth, you know, not just in liquid cooling solutions, you know, but also in power distribution units, cable management as well. And I would say characterize it as seeing an acceleration and increased demand for our solutions from our customers. Maybe a couple more quick highlights. We expect another strong year in new product launches. I think the team is making some very good progress there, building on our strengths of performance, reliability, serviceability, and that's both across liquid cooling and power distribution units, so stay tuned there. I think the other thing we're seeing is that we're beginning to see the growth really extend from hyperscalers. into the multi-tenant and enterprise space, and also growth outside of the U.S. So you saw a little bit of that in that geographical commentary as well. I would say largely excited about what we're seeing, but also suggest that that growth is still largely in front of us because it's early in that investment cycle. And of course, we continue to make investments this year really focusing on R&D and building out our lab capabilities.

That's a great recap there. And just as a follow-up, can you talk about the latest deals, Avail and Tracky, just the contribution? Are there any synergies between those businesses? And did I hear Gary correctly, Avail's contribution, a nickel and 25?

Yes, you did. So all starts. Stapp, recall when we when we acquired track do we said, this is a new platform for us it's a different type of enclosure, if you like, with more enclosures in it. Stapp, But we saw that there were opportunities, both on the cost synergy side because we buy a lot of steel, but our ability to transform to lean manufacturing and to drive integration. Stapp, And we saw the opportunity for these types of buildings are growing, not just for utilities and the grid build out, but even for data centers so. With Avail, it is now building on that platform and giving us further integration capabilities from switchgear and from bus systems, et cetera. So we believe that it's going to be very synergistic building a more scaled platform here. And maybe I'll just have Sarah talk about some of the early things that we're seeing with Trachte in terms of our wins, because I think it's a very exciting space for us.

Yeah, thanks, Beth. I mean, maybe just another commentary on that end markets. The other thing we're seeing is a trend of data centers really freeing up that computing space, moving that IT equipment, IT gear, backup power into control buildings. So, we're seeing a nice kind of white space application as well in addition to the power utilities. So, maybe a couple things on track because I think it helps frame up, you know, how we're thinking about avail EPG. A quick reminder, while we don't put sales synergies in our deal models, it is a top area of focus for us by way of value creation. And for Tracti, we're already seeing opportunity here, specifically in data centers, where we're able to provide control building solutions to our customers. In addition, some exciting things happening in the battery energy storage system space as well. And then as it relates to cost synergies, we had talked about a $5 million run rate cost energy in sort of that three-year timeframe. And I would suggest here that we're well on track. Sourcing team has done an excellent job here executing on the procurement savings, really ahead of plan with a focus on the metals, for example. And another quick area of focus here for us has been lean. And I'm really proud of the team. I was just visiting one of our plants here last week from Trachte. And a quick data point there, since July when we acquired Trachte, and as of today, that team has more than doubled the output of buildings per month in a particular value stream. And this is driving capacity, productivity, ultimately better customer experience. So it's just giving you a flavor for the sales synergies and cost synergies that we would look to apply as we welcome the Avail EPG team members here with our day one celebrations yesterday.

And Dean, just to jump in on financial impact, as Beth said, we love the growth. It's been growing double digits, and it'll contribute nine of the 14 points of incremental acquisition growth. You know, EPG will be accretive in the first year. It drops an additional five cents to our EPS, and that's net of the interest benefit coming out. You know, as Sarah mentioned, strong cost synergies, and we also expect a nice cash tax benefit of approximately $15 million a year. And from a margin perspective, it's a bit lower. But like Trachte, we expect it to improve over time.

Great. Thank you.

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

Hi, good morning, and I'll echo the congratulations to Sarah and welcome Gary to this call. Maybe just my first question would be around the organic sales outlook. So I think you're guiding the first half organic sales up sort of low single digits year on year. The second half implied is up high single digits year on year. So just sort of In the context of this macro backdrop, kind of help us understand confidence in that second half acceleration. I see the orders the last six months very good. Not sure how much lead time there is from those into your 2H revenue, though, and maybe any clarification around what drives the acceleration in terms of price step up or a specific end market or segment.

uh well let me start on this so as we look forward so yes we had strong orders growth and we also talked about our backlog building as we look at data solutions and power utilities in particular here's where we see that growth accelerating and i would make a comment trochty which is performing very well we closed on that deal last july so that turns into organic growth starting you know the back half uh you know into august so The growth that we're seeing in those particular, that infrastructure is strong. Our backlog is strong. Our orders are strong. And then, of course, from a reported standpoint, it's the addition of EPG.

And I would just add, in addition to the confidence that we have in the orders backlog and underlying growth, the comps, as you look at it, were much stronger last year in the first half, first

half and flattish in the second half that's helpful thank you and then my second question just around the operating margins so I think those were about 20% in in the first quarter it looks like the guide is embedding maybe 20% in q2 and in the second half I just wanted to double check if that math is is roughly right and how we should think about the tariffs affecting the margins in those quarters in the balance of the year?

Sure, I'll take that, and I'll paint the picture for the year first, and then I'll talk about Q2. On the base business, we are expecting first half margins to be down a bit on price-cost timings from tariffs, as well as the investments that we're putting into the business to support the second half strong growth. On the base business, we expect margins to flip positive in the second half as pricing and the other mitigating productivity and supply chain actions fully take hold, and we have really, really strong growth contribution. When we layer in avail EPG, we are expecting margin dilution for both the Q2 and the year. Um, again, as we talked about, uh, with a path on, on improving over time, you know, we, we love the, uh, the, the growth and it's delivering a creative top and bottom line to overall invent, but it will impact, uh, uh, will impact our, our reported, uh, reported margins, you know, on the Q2 front, you know, we expect Q2 to be up modestly on a sequential basis, but it will be down versus year ago. as I mentioned, primarily driven by the timing of price costs with tariffs. But the most important thing we want you to take away is the actions that we're taking will put us in place to grow our base margins in the second half.

That's great. Thank you.

Our next question comes from Brian Drab with William Blair. Please go ahead. Good morning. Thanks for taking my questions.

First one, just on the tariff situation, if we see a reversal or the trade war died down with China, what sort of impact did that have to the upside for your 2025 and your estimate of that $120 million in tariff headwinds?

You know, it's really so uncertain to be able to make a comment on that. You know, I think part of our offsets with the tariff is pricing productivity and supply chain actions. So I would say this, you know, we're managing our price as we see these additional cost impacts. I think it takes longer for us in terms of any supply chain you know, reconfiguration that we do. So I wouldn't, I'd like to say it, you know, we're just neutral. And that has been our goal as we go forward is just to manage to offset the impact of tariffs through numerous actions.

Okay. Okay. And then can you just put a finer point on the order growth? You know, good double digit order growth. But, you know, is that organic? And, you know, we're, which segment is contributing the most to that order growth. If you could just kind of peel that back a little bit, that would be great.

Yeah, so as I said in my prepared remarks, organic orders were up mid-teens and strong double digits in data solutions with the rest of the business growing mid-single digits. And I would characterize it this way. Where we see infrastructure, which of course is data centers and power utilities and renewables, That's where we're seeing the strongest growth, and that's also where we have that backlog.

Okay. Thanks very much.

Thank you.

The next question comes from Joe Ritchie with Goldman Sachs. Please go ahead.

Hey, guys. Good morning.

Good morning. Good morning.

So, Sarah, thanks so much for all the help throughout the years. Wish you the best in your – kind of new role, but, and Gary, welcome on board. So I guess just my first question is, if you think about just, let's just start with Avail. It's kind of surprising to me that the contribution's only five cents. It just seems like the margins are a little bit lower. I'm calculating to, let's just call it like roughly a 10% EBITDA margin for the rest of the year. So help me just kind of understand what's going on there, what the expectation is for that business.

Joe, I'll take that. I'll take that one. And, you know, please keep in mind that the nickel that we talked about to EPS is net of the interest that we assumed in our guide coming out. You know, we're expecting on a gross basis the EPS impact to be much, much higher than that nickel. and the margins that we're seeing um are are higher than what you uh what you suggested as as well so while the avail epg margins are a bit lower than the overall invent margins we love the top and bottom line growth and as sarah talked about with trachte we've got a nice plan to uh to improve them over time okay great yeah i can walk through kind of the math i guess offline but then

Then the following question is, look, the guidance range that you've now reset and increased, it's interesting because it seems like a lot of that is being driven by the extra point in volumes. But clearly with the tariffs, there's going to be some incremental pricing as well. And so I know you're not breaking out the pricing anymore, but I'm just curious, like If the $120 million, that kind of equates to like roughly four points on top line. So are you expecting to offset most of it with price? And if that's the case, then ultimately if the tariffs are in place throughout the year, would we expect the organic growth number to go up commiserately?

Well, here's the thing. As we said in our remarks, there's a lot of uncertainties. And so as we looked at, you know, going forward, yes, we have backlog and infrastructure is growing. We, you know, and as we looked at our quarter and how we performed in industrial and commercial resi, we think there's just an uncertain background there. And so we believe there's a balance of, yes, we'll likely get more price, but maybe there is some volume impact as a result. And so that's how we thought of it going forward. And I'll let Gary add some more color to that.

Yeah, you know, coming into the year, you know, our guidance assumed really primarily a volume-driven year. And based on the environment changing and the uncertainty, as Beth said, we'll have more price. And, you know, I think that syncs up with your comments. You know, as I think about the pluses and minuses on the EPS, you know, we mentioned the avail EPG nickel. And we mentioned the strength in data solutions and power utilities in the back half. In addition, we have fewer shares outstanding than our initial guide. It is worth mentioning, we talked about the softness and the prepared remarks in commercial resi. And as Beth said, we're managing the tariffs with our playbook, which is pricing for the balance of the year.

Okay, helpful, guys. Thank you. Thank you.

We have our next question from Jeff Sproge with Vertical Research. Please go ahead.

Hey, thank you. Good morning, everyone. Good morning. Hey, just coming back to sort of the you know, the commercial resi, all the stuff that implicitly, you know, didn't grow or declined, right, in the Americas. I think the comment was that you did admit single-digit growth in those, you know, kind of recently sluggish markets. Can you just speak, though, a little bit to, you know, that side of the portfolio, what you're seeing from a demand standpoint? Do you think inventories are now in the right place? You know, kind of a set of questions around sort of the shorter cycle, you know, elements of the portfolio.

Yeah, you know, as we came into this year, you know, we said for, we expected industrial to grow and we still do. And we said commercial resi would be low, would be low single digits growth. And I just, you know, updated that and said, now we think that's flattish because we think this may have more of an impact coming from the tariffs in terms of just the demand side. But I would say this, as we look, a lot of our short cycle business goes through distribution. Our sellout is positive there. Sell-in has been positive as well. So we think that inventories are, you know, in alignment there. But we just, you know, with the uncertainty, we just think commercial resi is going to be softer and some short cycle may be a little bit softer.

Understood. And then just back on tariffs, Is this number you're sharing all China or we've got some other countries, we've got steel and aluminum. Can you put a little bit finer point on this kind of the origination of the tariff number?

Yeah, as we looked at this, this is everything that we know as of today. So, of course, things may change. But the biggest impact, one of the biggest impacts for us is the 232 on steel and aluminum. And as you know, we make a lot of enclosures and other products. Then China, and not, you know, China just the magnitude of that tariff has an impact. Then we look at all other countries and the impact there. Of course, we have a lot of things where we have coverage through USMCA could change, but what we know today. And then we also thought about some of the secondary or third level tariffs through our supply base. So that was how we constructed that number, as best as we could determine it at this point in time.

TAB, Mark McIntyre, yeah okay but still aluminum number one not China okay and then yeah just maybe a little bit more color on what you are seeing on the power utility side, I think we. TAB, Mark McIntyre, probably given us about all you want to say on data solutions appreciate that, but maybe just how the portfolio is coming together there. TAB, Mark McIntyre, You know kind of trajectory of orders in that business, and you know how you see the year playing out a little bit more specifically.

Yeah, I think the exciting thing for us is where we are today, now with the most recent acquisition, we believe power utilities is about 20% of our overall sales. So that's significant for us from where we started. And it's not just the Trachte and Avail acquisition. I mean, certainly that gives a scale. And what we like about those businesses is that on Avail, it's grown at double digits. It has a nice backlog into 2026. Similarly, we've shared with you the results on Trachte, which was very strong growth and backlog building. But within our electrical connections segment, we also have some of the products aimed at utility space as well. And they have also been growing in that double digit range. So we think overall, just with that infrastructure build out, that is going to be a strong growth driver, just like data solutions has been for us. So the two of them together, really 40% of our portfolio now.

Great. Thank you. Good luck, Sarah. I hope we'll still see you around. I'm sure we will.

Thanks, Jeff.

The next question comes from Nicole DeBlaise with Deutsche Bank. Please go ahead.

Yeah. Good morning, banks, and congrats to both Sarah and Gary. I guess maybe just starting with a follow-up question on the comments you made, Gary, around margins for the business for the rest of the year. Does that commentary hold for both businesses? And maybe that kind of dovetails with the question of, you know, is the tariff and price cost impact kind of spread relatively similarly across the businesses, or is there one versus the other that's more impacted? Yeah.

Yeah, Nicole, there's nothing unique to call out. Both of the businesses are juggling a pretty dynamic environment, and both of the businesses are deploying the playbook that I mentioned. From a growth perspective, we will see differential growth from system protection in the second half, and a lot of that is A lot of that, Bess and Sarah talked about. In the first half, I also mentioned impacting our margins with the investments that we're making in data solutions. And that'll be an entire year, but that first half investment really was to support the growth that we'll see in that business in the second half.

Okay, perfect. Thank you. And then just a clarification question on what you guys are doing from a pricing perspective is, Is this via list price increases or surcharges or some combination of the two? And have those price increases already been fully implemented? And was that like an April 1st sort of date?

Yeah, well, as you know, you know, over 60% of our portfolio goes through distribution. And so we typically will increase our prices there as long as we give them notification. And, you know, our playbook, and as we've seen through other inflationary times, is that often you're doing multiple price increases just as you're adjusting over the course of the year. So we've done some price increases, and we'll monitor the situation if there's more impact. You know, we can certainly manage price effectively there. And then we also ensure with some of our more direct business that we, you know, manage price with those customers on a project-by-project basis. So we're actively managing pricing right now.

Thanks, Beth.

I'll pass it on.

Thank you.

Our next question comes from Nigel Cole with Wolf Research. Please go ahead.

Thanks. Good morning, everyone. And Sarah, congrats. And Gary, look forward to seeing you soon. So the, yeah, look, maybe a couple of follow-ons here. So as I understand it, the organic uplift is basically the price associated with the tariff kind of measures, volume unchanged. But If I put in an extra point of price, I'm getting about $30 million direct price versus $120 million of the tariff impact. So I'd like to understand a little bit better the kind of the offsets against that 120.

Well, I just want to start by saying it's not, you know, we assumed a shift between price and volume, but really what we drove the uplift with was just stronger orders and backlog. That was the number one reason for updating our organic guidance.

Yeah, Nigel, just to clarify again, we came into the year with a very strong volume plan, and as Beth mentioned, we have now more price into the market, and our assumption is a bit less volume as we've taken our organic guidance up a point.

Okay, so there's more than a point of price, but it doesn't seem like there's four points of price to offset the 120. So I'm just curious, you know, if you could maybe provide a bit more color there. But maybe moving on to the Avail acquisition, I have to agree with Joe. I'm getting more than $0.05 as well. So I'm curious, on the assumption that we've got a high-teens EBITDA margin, which maybe you can clarify that, are there any integration expenses or investment spending against that $0.05?

Yeah, so just to reiterate, the nickel was a net impact to Invenz. which is the profitability of the business coming in, but now our assumption that we'll no longer be gaining the interest benefit on the investment. So it's a net number, mid-teens margins. And keep in mind, we closed the business yesterday, and we're just getting under the hood. And we've got a good playbook from Tracti to improve margins. and we'll plan to do that and update this group as we have more to share.

Yeah, yeah, we're still getting high numbers, but we'll follow up offline. And then maybe just a quick one on data solutions. I mean, if you just back into the mid-teens kind of all-in core and then five mid-single digits X data solutions, we're getting to like 50% type numbers for data solutions. Is that in the right zone of order growth there?

Yeah, Nigel, they were very strong in Q1, you know, on top of strong growth in Q1 of a year ago.

Right. Okay. Thanks, guys.

The next question comes from Vlad Bystryky with Citigroup. Please go ahead.

Hey, good morning, team, and congrats to both Gary and Sarah. Thanks for taking my questions here. I guess just a quick clarification on the increased CapEx outlook. Can you kind of dissect how much of that is related to avail coming into the portfolio versus sort of core investments in legacy and vent, if you will?

Yeah, Vlad, as you notice, we did take our CapEx assumptions up, and the majority of the increase is really related to the core business and supporting growth, not just in the second half, but beyond. But we did layer in, you know, CapEx associated with the EPG acquisition in the guide as well.

Got it. That's helpful, Gary. Appreciate it. And then maybe just one follow-up. So when I look at the segments, I guess, can you just talk a little about, you know, the divergence between declining America's sales and systems protection versus, you know, the robust America's sales worth you saw in electrical connections and sort of what you think is some of the driving factors behind that divergence and, you know, how we should think about either as potentially a leading indicator going forward.

Yeah, I think some of that is really just the comp of a year ago because we had really strong growth a year ago out of systems protection, and we were a little weaker on the electrical connection side. So that's really one of the primary reasons.

So I wouldn't extrapolate that going forward.

All right, that's helpful. Appreciate it.

The next question comes from Scott Graham with Seaport Research. Please go ahead.

Hey, thanks for taking my question, and welcome aboard, Gary. Great to meet you. A couple weeks back. And Sarah, best of luck to you. You've been truly excellent. I wanted to ask a couple of questions, and I'll just ask them both and let you go at it. So the incremental margin in the quarter was sort of below what we've been seeing. Is that all inflation and investments? Or was there maybe something else there? And does that improve in the second half of the year? And then on acquisitions, how is the pipeline and is pricing better?

So I'll take the margin question in the quarter. And as you mentioned, Q1 margins were down. That net productivity bar was down 17 million. As you mentioned, it reflects both the inflation offset somewhat by positive productivity, but also net of investments that are ramping for the back half. Going forward, as we mentioned, gross productivity will ramp, tariffs will ramp, and then the pricing in our playbook will flow throughout the year. As I mentioned, excluding the EPG deal, we did expect margins to grow in the second half modestly as we get our playbook in place. As we layer in the deal, as we said, it comes in with a bit of a nice top and bottom line contribution, but it will impact margins a bit. But we feel good about our margin game plan in the back half that we'll be putting into place.

And on the acquisition M&A pipeline question, I always like to say that where we play in this Connect and Protect space, it's about $100 billion opportunity. And remember, at $3 billion, we're one of the larger players. So it's very fragmented. And I think there's a lot of opportunities. And you've seen the last couple of deals that we've had, and I think We've been very disciplined. This is our eighth deal, and we always want our deals to cross the weighted average cost of capital in two to three years, and Avail will do that. And I think for us, as we go forward, it's just looking to see that there is the right deal and the right timing and our capacity to be able to execute on it as well. But We do have more capital to allocate and feel, you know, we're in a good position if there's the right opportunity for us to continue to do deals in the near term, I would say.

Thank you.

Thanks, Scott.

This concludes. Sorry, go ahead.

No, go ahead.

This concludes our question and answer session. I would like to turn the conference back over to Beth Wozniak for any closing remarks.

Well, thank you for joining us today. I am proud of our performance in the first quarter. We will continue to focus on delivering for our customers, employees, and shareholders by executing on our growth strategy. We believe Invent is a top-tier, high-performance electrical company well-positioned for the electrification, sustainability, and digitalization trends. Thanks again for joining us. This concludes the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.