01—Abstract
Summary
Summary of the 10-K filed February 25, 2022. Cited figures are marked; the original filing is the authoritative source.
nVent Electric plc, a leading global provider of electrical connection and protection solutions operating through three segments (Enclosures, Electrical & Fastening Solutions, and Thermal Management), reported net sales of $2,462.0 milliona for 2021, up 23.2% from $1,998.6 million in 2020.
Gross profit rose to $941.9 millionb (38.3% of net sales), and operating income was $355.4 million versus $38.4 million in 2020, which had included a $220.5 million impairment of goodwill and trade names. Net income was $272.9 million, or $1.61 per diluted share, compared with a net loss of $47.2 million in 2020. Growth was driven by volume (11.3%), price (7.1%), acquisitions (2.8%) and currency (2.0%), with the company citing supply chain challenges and inflation in raw materials, logistics and labor that it expects to continue into 2022.
Backlog rose to $558.5 millionc at December 31, 2021 from $307.0 million a year earlier, and management expects most of it to ship in 2022. Net cash from operating activities was $373.3 million and free cash flow was $334.4 million. The company acquired CIS Global and Vynckier for a combined $228.0 million in cash net of cash acquired, repurchased $111.5 million of shares, and paid $117.7 million in dividends.
Total debt was $1.0 billiond at year end, and the company said it was in compliance with its financial covenants. Investors should also note risks tied to Ireland incorporation and U.K. tax residency, exposure to energy-sector capital spending, and goodwill and intangible assets equal to 71% of total assets. The filing states that sales outside the U.S. were approximately 43% of net sales in 2021.
02—Key points
Key Highlights
- Net sales rose 23.2% to $2,462.0 million in 2021, driven by 11.3% volume growth and 7.1% price increases.
- Net income swung to $272.9 million ($1.61 diluted EPS) from a net loss of $47.2 million in 2020, which included a $220.5 million impairment charge.
- Backlog increased 81.9% to $558.5 million at December 31, 2021, with the majority expected to ship in 2022.
- Free cash flow was $334.4 million, up from $306.0 million in 2020, after operating cash flow of $373.3 million.
- Acquisitions of CIS Global ($202.4 million) and Vynckier ($27.0 million) expanded the Enclosures segment, and the company repurchased $111.5 million of shares during 2021.
- Management expects supply chain pressures and inflationary cost increases to continue into 2022.
- Goodwill and intangible assets were $3.3 billion, or 71% of total assets, creating impairment risk if conditions deteriorate.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2021, nVent Electric kept $0.11.
- Revenue$2.46B100.0%
- Cost of revenue−$1.52B61.7%
- Gross profit$941.9M38.3%
- Operating costs−$586.5M23.8%
- Operating income$355.4M14.4%
- Interest, other & tax−$82.5M3.4%
- Net income$272.9M11.1%
Where FY2021 revenue went
$2.46B- Cost of revenue: $1.52B, 62% of revenue
- SG&A: $537.9M, 22% of revenue
- Net income: $272.9M, 11% of revenue
- R&D: $48.6M, 2.0% of revenue
- Interest, other & tax: $82.5M, 3.4% of revenue
Kept 11% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 25, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $2.46B$2.00B | +23.2% |
| Cost of Revenue | $1.52B$1.25B | +21.7% |
| Gross Profit | $941.90M$749.40M | +25.7% |
| R&D Expenses | $48.60M$43.50M | +11.7% |
| SG&A Expenses | $537.90M$447.00M | +20.3% |
| Operating Income | $355.40M$38.40M | +825.5% |
| Interest Expense | $32.30M$36.40M | −11.3% |
| Net Income | $272.90M-$47.20M | +678.2% |
| EPS (Basic) | $1.63$-0.28 | +682.1% |
| EPS (Diluted) | $1.61$-0.28 | +675.0% |
| Shares Outstanding (Basic) | 167.90M169.60M | −1.0% |
| Shares Outstanding (Diluted) | 169.70M169.60M | +0.1% |
05—Questions
Frequently Asked Questions
What drove nVent's revenue growth in 2021?
Net sales increased 23.2% to $2,462.0 million. The filing attributes the increase to volume growth of 11.3%, price increases of 7.1%, acquisitions contributing 2.8% and favorable currency effects of 2.0%. Enclosures grew 30.6%, Electrical & Fastening Solutions grew 15.5% and Thermal Management grew 17.4%.
Why was 2020 operating income so low compared with 2021?
In 2020 the company recorded a pre-tax, non-cash impairment of $220.5 million, of which $212.3 million related to goodwill in the Thermal Management reporting unit. Operating income was $38.4 million in 2020 versus $355.4 million in 2021, when no impairment was recorded.
How is nVent's debt structured and is it in compliance with covenants?
Total debt was $1.0 billion at December 31, 2021. In 2021 the company issued $300.0 million of 2.750% senior notes due 2031 and redeemed $300.0 million of 3.950% notes due 2023, incurring a $15.2 million loss on early extinguishment. The company stated it was in compliance with all financial covenants and that there was no material uncertainty about meeting them.
What are the main risks for investors identified in the filing?
Key risks include cyclical end markets, particularly energy-sector capital spending, intense competition and pricing pressure, supply chain disruption and cost inflation, and goodwill impairment risk given goodwill and intangibles of $3.3 billion. The filing also flags tax residency risks because nVent is incorporated in Ireland but managed and tax-resident in the U.K., and exposure to foreign currency and sanctions-related restrictions.
06—Continue