Ladies and gentlemen, thank you for standing by, and welcome to the nVent fourth quarter earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Chief Financial Officer, Sara Zawoyski. Thank you. Please go ahead.
Thank you, and welcome to nVent's fourth quarter earnings call. Here with me today is Beth Wozniak, our Chief Executive Officer. I would also like to introduce Tony Riter, our new Vice President of Investor Relations. I know many of you already know him from his time at 3M, and we are thrilled to have him join the nVent team. With that, I will turn the call over to Tony.
Thank you, Sara, and good morning, everyone. I'm excited to be here at nVent and look forward to working with all of you. Today, we'll provide details on our fourth quarter and full year performance and the outlook for the first quarter and full year 2022. 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 nVent's 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 on the investors section of nVent's website.
References to non-GAAP financials are reconciled in the appendix of the presentation. We will have time for your questions after our prepared remarks. With that, please turn to slide three, and I will now turn the call over to Beth.
Thank you, Tony, and good morning, everyone. It's great to be with you today to share our fourth quarter and full year results. 2021 was an outstanding year. We grew sales 23% and delivered 31% adjusted EPS growth. We exited the year with orders up 37% in the fourth quarter and record backlog. I could not be more proud of our nVent team and what we accomplished. We executed on our strategy, had record growth, and navigated many challenges to deliver for our customers. We made great progress with new products and our digital transformation. We completed two acquisitions to strengthen our portfolio and expand our offerings in high-growth verticals. We made significant progress on our ESG priorities. We had a goal to emerge stronger, and our results demonstrate we have. Slide four summarizes our Q4 and full year performance.
Fourth quarter sales were up 28% with broad-based growth across all segments and verticals. Adjusted EPS grew 16% year-over-year, and we generated $101 million of free cash flow. Our fourth quarter results were solid. Looking at some of our key verticals in the quarter, Industrial continued to lead the way with particular strength in automotive, food and beverage, and material handling. Infrastructure had strong growth in data and networking solutions and power utilities. Commercial and residential continued its trend of double-digit growth across all segments. Finally, in energy, we continued to see a nice recovery, particularly in MRO. Looking at our geographical sales performance, North America was exceptionally strong, led by Enclosures. Europe was also up double digits with ongoing strength in Electrical and Fastening. Developing regions grew over 40%, led by China with particular strength in Thermal Management.
For the full year, we had record $2.5 billion, an increase of 23% or 18% organically. Adjusted EPS was up 31% and up 10% from 2019. For the full year, we generated $334 million of free cash flow. Let me share a few highlights for the year. We launched a record 58 new products, which generated 1.5 points of sales growth and increased our new product vitality to 18%. Our digital efforts are supporting growth, improving the customer experience, and driving productivity in our operations. Acquisitions are strengthening our positions in high-growth verticals. Vynckier and CIS Global expanded our offerings in solar and data networking solutions. The execution of our strategy to develop new products, invest in high-growth verticals, and make acquisitions is accelerating nVent's growth trajectory.
We recently announced a new strategy and business development role and are thrilled to have Nitin Jain join the nVent team. Nitin will be leading our efforts in strategy, M&A, partnerships and alliances, and identifying new growth platforms and technologies to further enhance nVent's growth. Looking at trends entering 2022, we anticipate ongoing supply chain and inflationary challenges, particularly in the first half of the year. We remain confident in our ability to manage these headwinds and deliver for our customers. We also expect strong demand for our products and solutions with the electrification of everything. I am proud of our team and the results we delivered in 2021. We made strategic investments to drive future growth and executed well. We believe 2022 will be another year of strong growth and value creation.
I will now turn the call over to Sara for some detail on our results as well as our 2022 outlook. Sara, please go ahead.
Thank you, Beth. Let's begin on slide 5 with our fourth quarter results. Sales of $669 million were up 28% relative to last year and grew an impressive 24% organically. Strong volume and price each added 12 points to the top line, while acquisitions added another 5 points of growth. Fourth quarter segment income was $110 million, up 14%, while return on sales of 16.5% was down 210 basis points. As you may recall, our Q4 guidance reflected a margin decline year-over-year, including growth investments and the lapping of one-time temporary cost reductions. With the stronger than anticipated sales, we saw increased cost pressures related to a very tight supply chain and higher inflation. Still, price more than offset the stepped-up inflation of $58 million in the quarter.
As a reminder, we talk about these costs as total inflation, including materials, wages, and freight logistics. Q4 adjusted EPS was $0.50, up 16% and above the high end of our guidance range. Free cash flow performance was also strong, with conversion of 120%. Now, please turn to slide six for a discussion of our fourth quarter segment performance. Starting with Enclosures, sales of $332 million increased 44% and 35% organically. Growth was broad-based across all verticals and geographies, and acquisitions continued to perform very well, adding 11 points to growth. Enclosures' fourth-quarter income was $43 million, up 22%. Return on sales was 13%, down 240 basis points. As a result of this very strong growth, we saw higher than anticipated costs and overall inflation. We also made investments in capacity.
These impacts were partially offset by solid price realization of 11 points. Sequentially, we expect return on sales to improve with better price cost and productivity. Electrical and Fastening sales of $171 million increased 17% organically, with growth across all verticals and strong double-digit growth in North America and Europe. Electrical and Fastening segment income was $45 million, up 9%. Return on sales was a solid 26.3%, down 170 basis points as we lap the one-time temporary cost actions of a year ago. Overall, return on sales was better than expected and price offset inflation in the quarter. It's worth noting that Electrical and Fastening expanded return on sales 120 basis points for the full year on top of solid margin expansion in 2020.
Thermal Management grew 16% organically, with sales of $166 million driven by continued strength in industrial and commercial and residential. High-margin industrial MRO growth was strong for the third consecutive quarter, up 34%. Backlog grew sequentially and year over year, reflecting an improving trend in longer cycle projects. Thermal Management segment income was up 30%. Return on sales expanded 290 basis points to 26.4%, driven by volume and positive mixed contribution from industrial MRO. Now, turning to slide seven, this gives us a recap of our full year 2021 results. We ended the year with sales of $2.5 billion, up 23% and 18% organically. Strong volume contributed 11 points to sales growth, while price added 7 points, nearly offsetting total inflation. Notably, we finished 12% above 2019 pre-pandemic levels.
For the full year, segment income of $436 million was up 25%. We expanded return on sales by 30 basis points to 17.7%. Adjusted EPS for the full year was $1.96, up 31%. I'm particularly pleased with our free cash flow performance of $334 million, up 9% versus prior year and 100% conversion of adjusted net income. In summary, our 2021 performance puts us on a great trajectory to deliver on the long-term targets we set out in our Investor Day last March. On slide eight, titled Balance Sheet and Cash Flow, you'll find we exited the year with $50 million of cash on hand and $493 million available on our revolver.
Our recent debt refinancing, coupled with our strong cash generation, provides ample capacity heading into 2022. Slide nine gives us an update on our capital allocation priorities. We exited the year with a net debt to adjusted EBITDA ratio of 2x, at the low end of our target range of 2x-2.5x. Our robust balance sheet puts us in a great position to invest in growth and execute on our M&A strategy. We continue to make investments in new products in digital and plan to launch another 50 new products in 2022. We added over $100 million in annualized sales from two acquisitions, and these acquisitions are on track to generate great returns like Eldon and WBT, both of which we delivered greater than 10% returns in year two.
We returned approximately $230 million to shareholders in 2021, including a competitive dividend and share repurchases of $112 million. We will continue to deploy capital to drive growth and attractive returns for shareholders. Now moving to slide 10 and our 2022 outlook. We expect organic sales growth in the range of 6%-9%. This assumes higher volumes along with price realization in that 4 to 5 point range. Growth is expected to be stronger in the first half given comparisons. From a segment perspective, we expect strong growth in Enclosures and Electrical and Fastening, with more modest growth in Thermal Management. Our outlook for full year adjusted EPS is between $2.10 and $2.20, which represents growth of 7%-12%.
A couple of important items to note. First, our outlook assumes supply chain challenges, inflation persists, particularly in the first half. We anticipate margin performance to improve as we move through the year. Second, we expect price plus productivity to more than offset inflation for the full year. Third, we will continue to invest in new products, digital, and our supply chain. Lastly, we expect another year of strong free cash flow performance, with conversion of approximately 100% as we execute on our working capital initiatives. Some 2022 below-the-line item assumptions we'd like to call out include net interest expense of $30 million-$35 million, a tax rate in the 17%-18% range, and shares of approximately 170 million. Additionally, we anticipate corporate costs of $75 million-$80 million and CapEx of $50 million-$55 million.
Now moving to our first quarter outlook on slide 11. We expect organic sales growth in the range of 10%-12% and adjusted EPS in the range of $0.42-$0.44. Several items to note for Q1. First, margin performance year-over-year is expected to be similar to that in Q4, reflecting higher costs related to supply chain challenges. Second, we expect price to largely offset inflation in the quarter. Keep in mind, last year we had very favorable material locks as we began the year. Lastly, while we anticipate corporate costs to be similar to each of the last three quarters, they are expected to impact margins by 120 basis points due to the prior year comparisons. We see margin performance improving sequentially through the year, easing price cost pressures and better productivity.
In closing, our team delivered outstanding results in 2021, and I'm very pleased with our cash flow performance. I believe we are well-positioned for another strong year. With that, I will turn the call back over to Beth.
Thank you, Sara. On slide 12, I'd like to provide our assumptions for our key verticals in 2022. Looking at the industrial vertical, we believe the trends in digital and automation will continue to drive investments and strong demand for our products across all sub verticals. In commercial, we anticipate another year of solid growth. The U.S. non-residential recovery is forecasted to be up mid-single digits, and in Europe, the construction PMI remains expansionary. The infrastructure vertical is expected to benefit from continued strength in the 5G rollout, data center spending, power utilities, and renewables. In energy, CapEx is anticipated to increase, particularly in North America. In summary, all of the verticals where we play are expected to grow. Turning to slide 13, we have executed well on our strategy with a laser focus on growth and serving our customers.
We made progress in all areas and continue to see significant runway for growth and value creation. Let me share a couple of examples of where we are well-positioned and winning with the electrification of everything. With our Eldon acquisition and our Global IEC Enclosures portfolio, we recently won a multimillion-dollar deal for protection solutions in the food and beverage industry. We were able to provide the same solution in Europe and the U.S., selling globally and serving locally. With infrastructure investments in universal broadband and fiber to home, we won a key project with one of the largest rural internet providers in the U.S., providing outdoor protection systems. With increased data demands and reliability in data centers, we won a multimillion-dollar project providing a highly resilient connection solution. With the move to renewables, we've won dozens of biofuel upgrade projects with our Thermal Management heat trace offerings.
Now turning to slide 14. Data and networking solutions is a great example of how multiple growth elements of our strategy come together. At spin, we decided to focus on this high-growth vertical and established a new commercial team. We developed new innovative products, in particular liquid cooling solutions, and expanded our offerings with acquisitions. We built strategic alliances with technology companies to expand our capabilities. Today, we provide some of the most innovative and energy-efficient solutions in the industry and are winning new customers. Recently, we were awarded a large multi-million dollar project for one of the world's largest software companies with our advanced liquid cooling solutions. Since then, we have more than doubled these sales to over $200 million annually and expect to continue to grow high double digits. Now turning to slide 15.
I'm very pleased with the progress we are making on ESG goals, which are an integrated part of our nVent strategy. As a reminder, we focus on three pillars, people, products, and planet. At nVent, we believe our culture and our people are a differentiator. Attracting and retaining talent in today's environment is critical. We have increased the representation of women in management globally and racially diverse professional employees across our U.S. workforce. We are honored to be named to the 2022 Bloomberg Gender-Equality Index, making us one of only 418 companies across 11 sectors and 45 countries to be included. Around products, we integrated ESG into our new product introduction process and developed baseline metrics and long-term goals. We had great results in our planet pillar, increasing our renewable energy usage and reducing our CO2 emissions.
We received a silver medal for social responsibility from EcoVadis in 2021, ranking nVent in the top 13% of companies reviewed in our industry. We look forward to publishing our 2021 ESG report this summer and are committed to driving further progress of our goals in 2022 and beyond. Turning to slide 16, I will leave you with some key points. 2021 was a year of outstanding performance, and we enter this year with great momentum. The macro trends with the electrification of everything are expected to drive demand for our products and solutions. We believe nVent is one of the best-positioned companies to grow with these secular trends. We are executing well on our strategy and are changing the growth trajectory of nVent. We are a stronger company today, and our future is bright.
With that, I will now turn the call over to the operator to start Q&A.
Ladies and gentlemen, at this time, if you would like to ask a question, please press star and the number one on your telephone keypad. Again, that's star one to ask a question. To withdraw your question, press the pound key. We will pause for just a moment to compile the Q&A roster. Your first question is from the line of Deane Dray.
Thank you. Good morning, everyone, and special welcome to Tony. A great addition to the nVent team.
Good morning, Deane. Thank you.
Good morning.
Hey, the first question is, you know, I had to do a double take on how significantly above our expectations organic revenue growth was in the quarter. A very pleasant surprise. Can you talk about the cadence in the quarter, organically, top line? You know, how did it play out and versus your expectations?
You know, I think coming out of Q3, where we talked about the strength in our orders, we just saw that growth, you know, consistent across all three months of the quarter, so backed up by that strong orders. I think we were very pleased just as the orders came in, just that it was broad-based across all of our segments and all of our verticals, which, you know, reinforced the work that we're doing around our strategy in these high-growth verticals. Just, you know, on every level, we just saw strong growth across the business.
Great to hear. The second question relates to price. 2021 was really strong for you in terms of price realization. You know, expectations for 2022, how many price increases do you think you'll need? On the flip side, on the input costs, maybe give us some insight into the second derivative, just in real time, what's happening, steel, nickel, freight. Just, you know, have they plateaued? Are you seeing any relief there? Thank you.
Well, I think, you know, 2021 was a year unprecedented with inflation. We were having price increases in different parts of our different segments or different regions continually throughout the course of 2021. When we exited 2021, we had announced some price increases already for 2022. I think we will, you know, we will look at how inflation plays out over the course of this year, and, you know, we'll take whatever action we need to in terms of ensuring that we get out in front here. I'll let Sara add some more color on the inflation side of things.
Yeah. Maybe a couple things to point out here is just, you know, we talked about this a little bit in our prepared remarks, but we do expect, you know, strong carryover pricing, you know, in that 4-5 point range. I think the second piece, in terms of inflation, a couple things to note here. You know, total inflation was significant for us in 2021, no doubt. It was, in total, roughly $145 million. As we look into 2022, we do see another year of significant inflation. I would say a bit more broad-based.
You know, we're seeing it, you know, across broader input costs, components, freight, logistics, you know, wages. We're gonna continue to, you know, stay in front of it, you know, I think as we've been very vigilant doing, you know, through the course of 2021 in terms of managing that price, you know, plus productivity more than offsetting inflation for the year. I think the other thing I would point out is just kind of this first half, second half dynamics. We do expect, you know, first half inflation higher, and then that easing in the second half.
That's real helpful. Thank you.
Your next question is on the line of Julian Mitchell.
Hi, good morning.
Good morning.
Maybe just wanted to circle back on that sort of price volume aspect because you know you're sort of relatively rare multi-industry company in that you're guiding for higher growth in Q1 than you are for the year which is a sort of welcome linearity. If we think about sort of the price versus volume within that number is there anything to sort of call out as you go through 2022 or it's a similar development whereby price and volume both start the year stronger than in the second half?
Yeah. Well, I mean, maybe a couple things to point out there. I think, one, you know, that organic growth rate of 10%-12%, Q1 outlook really reflects, you know, the strong momentum that we're seeing. I'd point that out first. Number two, it does include both price, you know, and volume, more skewed towards price. I mean, simply the math is as we, you know, exit the year at 11% and that carries over into Q1 of next year, we would expect a lot of that price carryover to benefit, mostly in that Q1 timeframe.
Got it. On if we look at, say, the volume piece of the guide, is that expected to be kind of steady year-over-year, say first half and second half?
Well, the volume is going to be stronger in the first half than the second half simply because of our comparisons, right? If you look at our growth rate in, you know, as we proceeded through the year, it, you know, I mean, obviously Q2 of this year because that was the lowest quarter a year before. You look at Q3 and Q4, we had really strong growth. Some of that is just the comparisons that we have in the back half.
That makes sense. Thank you. Just a quick follow-up around the sort of margin progression for 2022. I think you mentioned on the revenues that Thermal's growth rate would lag the other two divisions. Just wondered if there was any sort of margin color, you know, year-on-year for 2022 as a whole across the three segments.
Yeah. From a full year perspective, you know, we do expect again another year of margin expansion across all three segments, albeit a bit higher in Enclosures. Thermal, we expect to continue to benefit from that recovery as well as that industrial MRO, you know, strength continuing. I think in Electrical and Fastening is where we're expecting to see maybe a bit more of a muted margin performance there kind of year-over-year. Keep in mind, you know, that business has expanded 180 basis points over the last, you know, two years. Good growth on the top and bottom line there in Electrical and Fastening, just more modest on the margin side.
That's great. Thank you.
Thank you.
Your next question is on the line of Joe Ritchie.
Hi. Good morning, everyone, and welcome, Tony.
Morning, Joe.
Good morning.
Good morning.
I wanted to pick up on that last point you just made around EFS. I 'cause I've historically kind of thought about the EFS segment as still being where the opportunity exists from a margin perspective, you know, longer term. Maybe just expand on that. Is that changing at all where you kind of see longer term entitlements across the different businesses just based on the trends that you've seen in the last few quarters?
Yeah, I would say nothing's changed in terms of us continuing to see margin compression or margin expansion in the longer term in Electrical and Fastening. We've talked about that in terms of bringing more, you know, lean enterprise within Electrical and Fastening, bringing more automation as well as digital factory and some of the investments we're making on the factory automation side of things. Nothing's changed there. I think it's simply two things. One, reflective of this 180 basis points expansion since 29 back to what I would say, you know, more normalized historical incrementals are in that 30%+ range. Electrical and Fastening is definitely, you know, part of that given they're another year of significant inflation.
Even as we offset that with price and productivity, that is having an impact on incrementals as well as just absolute raw.
Got it. That makes a lot of sense. Maybe I'm sorry if I missed this earlier, but like the pricing this quarter was tremendous. I'm just thinking through kind of you know the environment that we're in right now with some you know steel cost curves are coming down. I'm just curious like if we get into some of your raw materials actually deflating as the year goes on, how does that impact the price cost equation for you guys? You know could you have to give back price in certain businesses? Like how do you think that will kind of play out for you guys?
You know, one of the things as we think about pricing and we continue to drive differentiation and value in our solutions and offerings, so we like to be able to hold that price.
I also would say that we're seeing a very highly inflationary environment. Even if we see raw materials going down, we still expect there to be inflation in electronics. There's still going to be inflation in wages, in freight, in energy costs. I mean, there's multiple dynamics here. I believe as we go through the year, you know, we're gonna continue to manage to hold that price. I'll let Sara just comment a little bit more on the margin side.
Yeah. I think your question was more around the steel, and maybe I'd offer up a couple things. One is, material costs in total are roughly 30% of sales, and metals account for more than 40% of those. That, what that means is there are other, you know, input costs, right, in relation to the overall COGS, as Beth just commented upon. I think the other piece I would say is clearly, you know, if costs go down, that will help, but that's not something that we're counting on. Again, we're gonna stay very vigilant on managing that price plus productivity offsetting inflation for the year.
Got it. That's super helpful. Maybe if I could just sneak one more in. Just on the thermal margins this quarter, can you maybe just kind of parse out, you know, really good margins this quarter. You know, is that margin kind of sustainable going forward? Like, you know, any color on like, you know, parsing out what drove that really strong margin in 4Q ?
Maybe I would say a couple things. The biggest drivers of that margin performance in the quarter was first, you know, the tremendous growth, right, that Thermal Management had. I mean, they're still working back in terms of, you know, recovery to the 2019 levels, so that was helping. I think the other piece is just the strength on the industrial MRO. You know, that sort of had an outsized impact on gross performance last year. We're seeing that come back, you know, strongly, this year. I think the other piece I would call out is just that team continues to do a really nice job with price cost.
They don't necessarily see the magnitude of the material inflation as the other two businesses, you know, but they've been very good on managing, you know, that price cost equation. We see that improving as we go into this year.
Great. Thank you.
Your next question is from the line of Jeffrey Sprague.
Thank you. Good morning, everyone.
Good morning.
Good morning, Jeff.
Hey, a couple questions, and I'm sorry I got on late. How much price is embedded in the 6%-9% organic growth guidance for 2022?
Yeah. We talked about that carryover price being in that 4-5 point range.
What's interesting, and maybe you could address this, right? Although your price, I think, surprised all of us here in the quarter, when I actually look at it's quote, unquote, only 200 or 300 basis points above what I forecast. What sort of is jumping out actually is the volumes, right? Everybody's dealing with inflation, but in a lot of these calls, we're hearing inflation and supply constraints, and therefore we can't deliver and sales are, you know, came in light, et cetera, from a volume standpoint. You actually didn't experience, you know, any meaningful, from my vantage point anyhow, volume constraint. I'm sure there were some, but the question really is, are you now at some kind of capacity constraint that it's gonna be difficult to, you know, to drive volumes much higher than here?
I mean, if there's literally 4 or 5 points of price in 2022, I would think you've got the prospect of some decent volume upside this year from what's embedded in that guide.
From a volume standpoint, you know, one of the things we're very pleased with is just how our supply chain has performed. As you look at Q4, there was a cost to that because, you know, certainly in our Enclosures business, having, you know, over 30% organic growth, with constraints of labor and, you know, just even having to go get materials on the spot market, et cetera, all of that, we were, you know, you're inefficient. I think as we go forward, what we've been doing, and we started even throughout the year, is investing in capacity. We do think labor's still going to be a constraint. We think there's still some constraints around electronics. We think, you know, we're managing through the commodity materials and getting access there.
There's inefficiencies there, and I would say as we started this year with Omicron, I mean, that created some labor issues for us. We feel good about the orders, and so we exited the year with 37% orders growth. You know, when I talk about the momentum going into 2022, we would expect that we're going to have some nice volume growth. Now, as we look at the back half of the year, remember, with some of these strong organic growth rates, the comparisons get a lot harder, right? You know, this quarter being over 20% organic growth, it, you know, it gets harder to get some of, you know, that volume on that.
We do feel very good where we're positioned, and we believe our strategy and what we're seeing with the focus on high growth verticals and all the other things we're doing is positioning us well.
Great. I just wonder if I could sneak one more in. You know, if we think about the segment income bridges that you gave us for Q4 and for 2021, I just wonder if you could give us a little more color on kind of the, I mean, you spoke to inflation, but kind of the productivity and investment buckets that underpin, you know, what the headwinds might be in 2022, relative to the price and volume coming in on the other side?
Yeah. I maybe I'll give it a couple points here. I mean, we talked about kind of that price carryover and that 4-5 points. On that net productivity bucket, I mean, obviously it was a net negative, you know, this year of $155 million for the full year, $145 million of that being inflation, and $10 million net headwind on productivity investments. We would expect, you know, that productivity to turn positive, you know, really as those supply chain challenges ease, you know, in the back half. Importantly, you know, as we also drive that underlying productivity. I mean, we're doing a lot around, you know, automation, bringing digital in the factories, and optimizing on the logistics side. We would expect that productivity to turn positive.
I think the other piece is, on the growth side. I mean, clearly, that growth bar was a solid green for us as we lapped, you know, the year of COVID there in 2020. We would expect it to be green again, you know, here in 2021, you know, just not to that magnitude. I think I would end by just saying, you know, we expect another strong growth on top of the 18% organic growth that we saw here in 2021, along with margin expansion driving to that EPS growth.
Great. I'll leave it there. Thank you.
Your next question is from the line of Nigel Coe.
Oh, thanks. Good morning, and congrats to Tony on the new role. I think this is the first time I've talked to one person on two companies in a quarter. That's some kind of record. I wouldn't normally start off with corporate expenses, but it is, you know, quite a bit above my number, and it's been trending higher. Just wondering, is that just comp or is there something else driving corporate expenses higher? Are we at a good run rate here going forward?
I would say you know, two things in Q4 there. One, and we talked about this even going into the year, is we are gonna make some digital investments, you know, including migration to the cloud. That's been included in those corporate costs. I think the other piece I would just call out in Q4 in terms of that sequential bump, you know, that did include some comp accruals. As we look at that in the context of 2021, in that $75 million-$80 million range, that really just simply reflects kind of that underlying run rate, in that Q2 to Q4 range, you know, of the prior year.
Maybe a follow-on to that would be, you know, the R&D. You know, obviously a big theme at your I-Day this year was, you know, investing in products, et cetera, R&D increases. Just curious where R&D finished this year and what's baked in for 2022.
Well, you know, with R&D, I would say that we're one of the things we continue to increase our investment there as we go forward. The one thing I would say I'm very pleased with is just the effectiveness of our R&D. You know, we look at our investments between digital and R&D, and sometimes they go hand in hand. When I step back and look at we're launching more new products, our cycle times are going down, and we're having more of an impact, and some of that's just our approach with Agile and just better marketing and understanding customer needs. The output that we're getting on the R&D side is, you know, better than the goals that we set for ourselves. We still have runway to continue to invest there.
We somewhat prioritize a little bit more on the digital investment side than we have R&D.
A quick follow if I can. You called out Omicron as a factor behind the productivity headwinds. Are we now moving beyond that impact on the labor side, either from your perspective or from your supply chain?
Well, I think January was very tough. You know, you just need to look at caseloads and look at the news around the world. January was tough with absences. I'd like to think that you know, we're getting better, but who knows, right? You know, we've always said there's no playbook for a pandemic. I think, you know, with the volumes that we've seen, labor is going to be inflationary, and I think it's gonna continue to be a challenge for a while. Now, having said that, you know, we've done everything that we can to serve our customers. It's been a big theme of ours, and you've seen that in our volume growth. I think we're just gonna see some inflationary pressures there as we go forward.
Great. Thank you very much.
Your next question is from the line of Jeff Hammond.
Hey, good morning. Thanks for putting me in here.
Good morning.
We covered a lot on price cost, et cetera. Just a clarification on price. Is that 4%-5% carryover, or does that include kinda your January 1 pricing as well?
That carryover basically includes, you know, these pricing actions that we had in the context of Q4.
Okay, great. You made the comment that you kinda outgrew 1.5 points on the new products. Just wanna understand better, one, how you're measuring that, and two, you know, maybe differentiating the new product outgrowth versus just your outgrowth from maybe being able to supply better than some of your comps in this environment.
When we look at, I gave the number of 18% new product vitality. That's those products we've released. You know, what's the revenue of these new products over the last five years? We look at those new products, and we look at what percentage of our revenue was generated in the course of a year, and that's where we came up a point and a half. I think that, I mean, new products are fundamental. As we look at how we're driving growth, where we're going with liquid cooling solutions, for example, when we're looking at some of these trends around the electrification of everything, and are we driving more resilient, labor-saving connection systems that's positioning us well for some of these new growth verticals?
We have a really good way of measuring the value that we're creating, and any time we launch new products, we look at margins, and if they're differentiated, they should launch with higher margins. I think we have a really robust process there, and it's very important to our growth as we go forward.
Do you see that 1.5, you know, as kind of a stable number as you kinda continue to improve, or is that something that you think can move up over time?
Well, you know, we target to get over 1% growth. I think in a strong year, like we saw this year, 1.5, certainly. If we had, you know, this year is another good year, so I'd say, you know, we'd expect to get above 1% again. That's kind of our general target.
Okay, thanks so much.
Your final question is from the line of David Silver.
Yeah. Hi, thank you.
Morning.
Hi, good morning. My question, I think, would be on the financing activity that was undertaken this quarter. You know, I was kind of looking at your debt structure and I noticed that this quarter you paid, I think, a $15 million prepayment issuance. There was maybe $3 million of costs. I was just kinda scratching my head, but you know, this kinda has the feel of restructuring your debt, you know, Sorry, reworking your debt structure in service of a broader corporate strategy. Could you discuss your thinking about why you chose to do a significant refinancing here and what that, you know, I'll just say $18 million, but the prepayment and the issuance costs.
Like, what does that buy you, either in terms of lower interest expense or covenant relief? I mean, maybe if you could provide some background on that decision, that would be great. Thank you.
Yeah. I mean, I would start off by saying we feel really good about the refinancing that we did in the context of 2021, both on the revolver, you know, as well as that $300 million bond tranche. It really was in advance of the maturities that were slated for April of 2023, so kind of right within that window. It really did two things for us. One, it gave us an opportunity, given sort of the favorable you know, backdrop and market conditions, to take advantage of some of those lower rates. I think the other thing too is it really set us up well from a balance sheet and maturity perspective.
It took that $300 million, you know, bond tranche and put it out, you know, 10 years. As you look at our maturity ladder, we feel really good about where that stands. From a cash, you know, perspective, we had an in and an out there. You know, clearly we had the $15 million kinda takeout premium, if you will, on those bonds, you know, but we also had roughly a $10 million, you know, benefit on that treasury rate lock. Net, it was closer to that $3 million mark.
Importantly, we feel really good about that refinancing, and we believe it just puts us in a great position on the maturity ladders as we look forward and taking advantage of some of the favorable, you know, interest rate conditions here in 2022 or here in 2021.
Just to follow up, but I mean, I think that particular notes issue that was taken out, you know, dates back to when your company was first set up independently. I'm just wondering if there's any meaningful covenant relief or any kind of flexibility that you think was gained that you think is noteworthy. Thank you.
Yeah. I would say nothing really to note. I mean, we launched and spun as a company with, I think, some very good elements around both the revolver as well as on the bond issuance side. Those we see continuing with their debt refinancing.
Okay. Great. Thank you very much.
There are no further questions. I will turn the call back over for any closing remarks.
Well, thank you. Thank you for joining us this morning. We are incredibly proud of our strong fourth quarter and full year 2021 performance and believe we are well positioned for continued growth and success going into 2022. I'm grateful for the outstanding work our global employees put forth during the year to help us continue to meet customer demand and execute on our growth strategy. Thanks again for joining us. This concludes the call.
This concludes the nVent fourth quarter earnings conference call. Thank you for your participation. You may now disconnect.