Hubbell Incorporated Class B Stock

Thank you. Welcome to the 14th Annual Laguna Conference. For important disclosures, please see the Morgan Stanley research disclosure website at morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley representative. Pleased to have Hubbell here today with President and CEO, Gerben Bakker; and Vice President of IR, Dan Innamorato. I'm Toby Okwara, I'm part of our Morgan Stanley multi-industry research team. Thank you guys for being here.

Thank you, Toby.

And I guess starting off, just looking at the longer-term strategy, what's Hubbell's competitive advantage? Why do you win in your markets?

Yes. And I would say, first of all, thank you for your interest here today with Hubbell. I would say, in short, it's the specification that we have on our product. I mean we generally are spec product, and that's whether we're in the utility side or in the electrical side, a product that's critical to the function that they serve and generally a relatively small percent of the cost. So what we do matters, and certainly, the specification that we hold. The other competitive advantage, I would say, is the breadth and depth of our portfolio is a differentiator for us.

And if you think about in today's environment, partners generally want to do business with lesser, more strategic relationships. And certainly, we have those very strong relationships. We built those over many years of how we serve them. And so it's our position in the markets, the breadth of our portfolio, our prevalence of our scale around the customers that we serve is what helps us in our position.

And I guess kind of to that point, is there a difference in your competitive positioning or competitive strategy in electrical versus utility?

Yes. I would say there's a lot of similarities there in that value proposition that I stated that being critical to the function. And if you think about some of the products that we serve in utility, it's -- a connector is relatively small. The average price of a component in our portfolio is $25. So it's quite small, but the function is very, very critical. So if one of those connectors is not available, you're not putting up your line.

And if one of those connectors fails, your line comes down. So it's really hugely critical. And that applies on the electrical side as well. If you think about our Burndy grounding system, if you're not grounding a building, the data center probably will not function really well or is not well protected. So again, a small cost piece in the overall scope, but very critical. And I think on both sides of the portfolio, the specification is what really matters and holds strong. So I'd say there's a lot of similarities truly on both sides of the portfolio.

And I guess looking at utility in particular, you've had a lot of themes that have driven more confidence in the up cycle there, whether it be reshoring, electrification and now data center just bringing more demand to the grid. What gives you confidence in the durability of an up cycle and opportunity for that market to accelerate?

Yes. It's some of the underlying demand drivers and maybe separating the pieces and data centers, it's a conversation -- a topic of every conversation that we're having. And certainly, we have an important presence in the data center with a balance of systems components on the electrical side with our power distribution skids that we serve. But I'd say equally on the utility side with the power that's needed to -- demand that's needed to power all these data centers, a tremendous portfolio on that side as well. So while I'd say data centers is an important element of our portfolio, it's not the only thing that drives our business.

If you look at the utility, there's an element of data centers there with the power load. But if you think about the age and the state of our grid, when I talk about this, I don't talk in years, but I talk in decades of the investment that needs to happen here. And it's -- we have a very prominent and very strong position in this both in distribution, transmission and substation. And I think the drivers beyond load growth there is just a hardened, modernized grid infrastructure that's required. And again, I love our position in that.

And just maybe on the confidence in the sustainability, I think the biggest thing that we see is it starting to get reflected in utility capital budgets. And it's been a healthy CapEx cycle over certainly the last several years, but we've seen that again picking up as certainly we exited last year. We've seen utility capital budgets start to reflect some of these investments as we think about longer duration projects in areas like substation and transmission. We see our utility customers planning out a little bit further than typical. And that's because they have the visibility into load growth coming into their service territories, hardening projects that they need to do. And so I think those conversations with customers have expanded, and we've also seen it reflected in their budgeting process.

I guess, yes, kind of following on that point, you mentioned getting longer visibility from your customers. How would you compare conversations today versus where they were, I guess, the same time a year ago?

Yes. I'd say definitely more conversations around the planning of what they're trying to accomplish. And if you think about the utility customers, you have a tremendous amount of demand right now to put load in. It's probably more demand than they have the capacity to do today. And so they rely on their whole supply chain to be able to do this as well. So not only are they limited and having to worry about their own capacities, and that's oftentimes labor, but can everybody supply. So utilities have a lot of interest to talk with their partners, especially strategic partners like Hubbell that supply them with a lot of the materials that they need to do this with about the visibility that they can give us so that we can make the needed investments in our business to service.

And so I'd say the visibility is further out for us. The products that we serve, though, are still relatively short lead time. Now those are extending in some of the product lines where we're more constrained and we're investing in that to bring those lead times back down and that capacity up. But for us, what the important part is to get the visibility to what they're trying to accomplish so that we can prepare our business and our capacities to serve that. But we tend to be late in the cycle. Generally, our products are measured in lead times of weeks to a couple of months. So I don't need to get the order until they're actually going to -- they're going to install that product. And that's typically what they do. We're a trusted partner in that. And when we say we can do something, we generally can. So they can rely on us to not need to do that early. But the visibility to that demand, those conversations are definitely happening more frequently and earlier right now.

And you mentioned some of the limiting factors that potentially can temper the pace at which they can build out these projects. What are the main factors you see? And how can your solution, how can Hubbell solutions help solve those?

Yes. Yes. I think one, and maybe we can help less with that is permitting that they need and PUC approvals. That's certainly part of the equation. And it's a tension point. It's just the reality of it. I would say regulators are supportive of the need to do this. There's a clear need, right, of load necessity and even a clearer understanding of the age and the state of our grid and that, that needs to be invested. And even -- I would say even before data centers was a big thing we've been in this business for a long time. We saw the investments ramp up just to harden our grid. It's the heart of our economy is the power grid. So the need to invest and support to do that is there.

But certainly, that can affect the timing a little bit of getting that permitting and those right of ways that they require. I'd say the second part that utilities are dealing with is labor constraints. Can they put it all up? Now I think they're doing a lot of things to help with that. I think you see utilities actually relying on third-party EPCs, for example, to help them with the build-out and companies like Hubbell can help. So to the extent that we can make parts easier to install, it helps utility. And a good example of that is in our transmission business where -- and because we have the breadth of components that we can supply, if you think about what they do when they put up a transmission grid is they put every so many miles at a tower, and then they put all the hardware on it.

And so what we do is we actually bundle all that hardware together for each tower. So rather than them getting a whole bunch of insulators and connectors and hardware and they have to sort it all out in their yards, we actually bundle it and create sometimes partially assembled and they can put that right up when they build. It's a good example. The other one is in our substation control where we're actually building this control house in our factory and we ship it. So to the extent that we can take labor out of the utility's hands and put it in the factory, it's helpful. And we have a broad portfolio to be able to bring some of those solutions to them.

And then kind of following on the point mentioned earlier about utility budgets. I think when I'm looking at transmission versus substation distribution, they were historically seen as kind of competing with each other for spend. Are we seeing that dynamic shift as you get a return to load growth and potentially getting rate cases start to rise?

Yes. Yes. We view them, truthfully, as not competing so much with each other. And if you look at the utility budget, you see the spend going up in both of those areas. And they do separate that. So utilities have, for example, hardening programs that they put in and they get those approved and utilities have gotten looked at ways to get those regulatory approval in the past, it may have been more MRO type work where now they bundle it as a hardening program, they can actually get returns from them and get them through the PUC. We've seen that play out over the last years. So we have visibility in both. It's not always perfect because you can have transmission products that serve both those needs. But we see the investments going on in both.

Of course, it's higher in those areas that are supporting load growth right now. We see those investment levels higher. We see that in our business right now. But the other important part, I think, to understand with our portfolio, we broadly serve distribution, transmission and substation equally. Now distribution is larger just because there's more miles, there's more spend going on there. But if you look at it, at the content, at the on-the-grid that we supply, it's very evenly spread.

So if there is a decision to spend the additional dollar into transmission versus distribution or vice versa, we're kind of agnostic to that because as long as we have visibility to it, as long as we know that they're directing more one way or another, we can serve that demand equally well. So we think our position is unique in that perspective that it can if they make those decisions. But we see them actually investing and increasing those investment in both areas.

And kind of speaking on those investments and potential changes in the market, earlier this year, you guys mentioned some of the investments in high-voltage transmission. Are you starting to see any pickup there? And I guess, how do you kind of frame that longer-term opportunity?

Yes. And high voltage, it's a moving target, it seems like. And maybe I'll start with, this is in the core of what we do. I mean this is -- if you think about our transmission substation, we go today anywhere from 35 kV up to 500-plus kV already. That's evolved. A number of years ago, 500 was new when we developed those products, and we serve those today. We actually have a job going on right now that's in that voltage.

And that voltage class, the more recent voltage class is at 765. It's actually a technology that's probably 20 years old, but really never got adopted. That's a very efficient way to move bulk power. So it's what we do. I would say we're developing those products. We need to test those products. We need to specify those products. But that's what we're doing with our customers right now. We've actually gotten one award already that will start shipping next year. And the need for that is a very efficient way if you have more load growth and if you -- especially if you think about some of the possibilities of load needed with the data center, it's a really efficient way to do it.

So we'll play in that. We'll play an important role in serving that. And I think that will take time because those have to go through regulatory processes. But we believe that I think what we stated is that there's about a point of upside if you think about over the next decade, what plans are to invest in that, that we would benefit. But this is right down the fairway for what we do for a living.

And kind of staying on that technology aspect, looking at the meters and AMI business, are you starting to see more progress with advanced metering and better adoption with customers? And how can we see that shifting from the headwind we've seen over the past few years to potentially a growth driver?

Yes. Yes. So on that business, it's -- from just a volume standpoint, maybe I'll start there and then I'll talk a little bit about the technology of that business. From the COVID days, it's been quite challenged in that we first couldn't supply and then the chip shortage broke and then we caught up and it was really high and then as we got through that, then it came down again. One of the things that -- and that business has improved our expectation for that business is higher than what it is today, particularly in the margin front of that business. We've taken a good cost out of that.

And we were investing a lot in that business, particularly in the AMI side to penetrate with the IOUs. But traditionally, this business on the AMI side has been very strong with the smaller utilities, the co-ops, the municipal utilities. And our investment ramp to break into that IOU space proved just more difficult even for a company like Hubbell that has very strong relationships and a good reputation, just very difficult. So we've kind of reassessed that strategy, and we're now focused more on where we're very strong traditionally with the public power market.

But this is an area where I believe there's a lot of discussion of is spend being taken from one area to the other. And our view is that this is a little bit the case. So if you're a utility company right now, are you going to invest in your next-generation AMI system? Are you going to upgrade that now? Or are you going to slow that a little bit while you're investing in these other areas? I think the answer to that is yes. Now the thing with this is, this is electronics. This isn't nuts and bolts that we normally do. So we are seeing more of this equipment starting to fail. It is getting to the end of its life. We're actually starting to see more MRO right now where they're just replacing meters while they delay this a little bit.

So I think this cycle will come. Our view of it is much more modest, I think, than the rest of the portfolio. So as we look forward to specifically the Aclara business, and as we stated before, we've seen several quarters of decline. We believe that when we get to the end of the year, we'll start seeing that turn to modest growth again, but it's just part of that portfolio of grid automation and the other part of that, which is controls and...

Protection devices.

Protection devices, thank you. It's actually going really nicely more in line with the other side of the portfolio. As far as technology, it's certainly an area that we'll continue to add to, if you think about our meters and what the meter can do, not just as a cash register, but as a sensing device. And -- but I would say that that's just what you have to do to stay relevant in this market. So those are clearly investments we are making to make sure that, that hardware is capable of providing more insights into the grid behind the meter to the grid, and we're making those investments.

I guess now shifting gears to the electrical side of the business. Data center clearly has been like a stronger growth driver, 50% in the first half of this year. When we're looking outside of data center, light industrial has been another strong vertical. What's been driving the strength there in the other areas that have been outperforming? And how do you think about the trajectory for the businesses that have been somewhat softer?

You take that?

Yes, sure. Yes. I think light industrial has been really healthy for us for the last at least a year or 2. And again, it's -- I'd say, as we progress through this year, we have seen a little bit of a broadening of beyond just data center. I think the light industrial side of the business has picked up. The nonresidential side of the business, which has been soft for a while, has picked up as we've progressed through the year. And a little bit early to say what's driving that, right? Is there a general short cycle recovery or not? And I think when we look at least internally on a regional basis of like where that activity is going in, it tends to map very closely to where data centers are going in.

So I think there's obviously some halo effects there. But we have seen it improve as the year has progressed. Again, I think it's a little early to say exactly what that means. But I think as we've been talking about throughout the year, and I'd say we've continued to see just that improvement on the non-data center pieces. The heavy industrial side of the portfolio is still a little bit softer. But I'd say that's kind of progressing as we have anticipated.

And then I guess, looking at data center in particular, why does Hubbell win with data centers? Why does your portfolio resonate so well with those customers?

Yes. I'd say it ties to our general competitive advantage. The first question that you asked is these are products that serve critical needs. They're highly specified. They're synonymous. The brand -- our brands are almost synonymous with the product and the application. If you think about brands like Burndy, like our Pin & Sleeve wiring device, including the new acquisition that we just did with NSI. And if you think about Bridgeport Fittings and Polaris, which also serve data center, these are anchor brands that serve these customers. So I think that's the first reason why we win in that. And then we've been very proactive in investing in these businesses in capacity to serve the need.

And again, it's one of our primary value propositions is our -- the reputation that we have to provide products that are of high quality, and there's almost nothing we won't do to service our customers and to provide them with the products that they need. So I'd say that's another area of why we've been able to win in that is to be ahead of investing it. And then in product innovation as well. It's an area where we're doing quite a bit of work right now. And for example, our Pin & Sleeve connector is a good example. This is a product that traditionally served heavy industrial applications of really tough industrial environments.

The amperages and the heavy dutiness of that product became applicable to data centers, but the form factor wasn't perhaps the most efficient. And as data centers are starting to take up less footprint, you're trying to get more into a data center, not only are we increasing the amperages of these products to take on more power, but the form factor so that they fit better in the racks. And again, having the reputation of our brand and then being able to innovate products is what's helping us drive growth in that area.

Yes. Maybe one thing I'd add on both that question and the last one is just the work we've done on the electrical segment unification over time. And again, there's some things on the cost side that are a big part of that story. But on just the commercial side, too, last year, we consolidated the sales force and realigned it around -- and again, part of the broader segment strategy of -- historically, we compete as kind of individual brands on the electrical side and our strategy is now to compete collectively and we reorganized the sales force instead of selling individual brands to have a regional focus where we have our sales force selling the full package of the electrical product set.

And then around that, we've also invested in vertical market sales teams where data center is a great example. We've got dedicated teams who are calling on EPCs and contractors and speccing in our broad product portfolio, and that's examples of -- we've had a really good leading position in Burndy connectors, for instance, in data centers. But then when you drive those relationships and specs at the contractor level, you can start to pull in more products to some of those projects. And I'd say more broadly, even outside of data center, you see that with our channel strategy, too, right, of being easier to do business with to our channel partners, also enables us to get more shelf space of our existing product set, and that's also helping with some of the broader growth that we see across electrical. And I think NSI, as Gerben said, is another opportunity to just keep running that playbook.

And kind of staying on that, the innovation theme, there's a lot of discussion around this move to 800-volt data center. How does your portfolio prepare you for that transition? And how does it support data centers as they move towards that infrastructure?

Yes. I'd say part of the products that we serve, truthfully, won't change a lot. So if you think about our Burndy grounding, that probably has -- it may change the form factor a little bit, but still very much needed. Some products will evolve, our Pin & Sleeve product line, as a matter of fact, and some of the developments that we're doing there is very much adapt to this new -- not only higher amperages, which we're seeing right now, but eventually the 800-volt infrastructure.

And then if you look at our power skid business, it's where we're assembling the different gear on that to then bring that to the -- as a package to the data center for the power needs. I would say there, the equipment that goes on it will probably go through a lot of change, but you're still needing to package that also. So we're working with our customers there and with the manufacturers there of some of that gear to prepare for that. So I think the space is moving really fast. The 800 volts is one element. But even between where we have been and where we are now, there's just a lot of development, and they're constantly trying to get more through the footprints that they have, and you just need to adapt to that.

And kind of following on the space moving fast. I mean you did 50% in the first half, guiding to 50% in the full year. We've heard some others at the conference that are speaking to an acceleration in the second half. When you think about your target for data center growth this year, is there room for upside there? And how can we think about the durability into 2027?

Yes. Yes. So I mean, we certainly believe that there is durability to data center. The rate of which that happens is, I think, the question that's debated a lot. And can it all be put in place? Can utilities support all the need for the load that's required? But I think what our success and perhaps -- and it's our nature to not be over our skis when we promise things. And hindsight as we look back to where we were at the beginning of the year, we're probably a little bit conservative in what the projection, we've clearly done better. I would say part of that driving to do better is what we've added in capacity, and we're constantly adding here capacity to be able to do more. We're bringing new products into this basket of balance of systems to serve more. So I think the function of having done better is more in our ability to ramp up to serve the demand that's actually there.

So we believe that we feel good about the future of data centers. I'd say, importantly for us, though, it's not our only driver for our business. If you think about our utility business, yes, there is a piece of that, that's clearly tied to load growth in data center, but there's an equally attractive piece of that portfolio of just the hardening of the grid, the modernization of the grid. So we like data center. It's an important part of our business, but we believe we have very attractive other parts of our portfolio, particularly in the utility business.

And to the point on some of the outperformance year-to-date, do you see that as time lines moving up with projects you already had expected in your pipeline? Or were there incremental projects kind of flowing through?

I'd say, I mean, again, at the beginning of the year, the shorter cycle part of that business where we're booking and shipping components in 4 to 6 weeks, right? It's just hard to commit to 50% growth at the beginning of the year with nothing in backlog, right? And so I think part of it is we just saw the order book continue to accelerate. And then again, we're planning our capacity for more growth than that certainly. And I think our experience throughout the year particularly again on the Burndy side is every time we added more capacity and we're able to ship more product, the orders kept going up, right?

And so again, that part of the business, you're less focused on individual projects, I guess, other than you're getting those natural orders of -- as your big customers, your distributor partners, your EPCs and your contractors are doing the install work, they're just pulling copper lugs as they need them, right, grounding systems as they need them. And so I think it's just been more of that of -- that's been the experience throughout the year is seeing the order book continue to go up. We add capacity and then the order book keeps going up. And around that, we've been able to add some of these newer products and get more penetration. So I guess that's the way I'd summarize it.

And then you mentioned some of the work you've done on the electrical side of the business and unifying that portfolio. As you think of the room to run on margins, you already passed the 22.5% target for 2027. I guess what are the levers going forward? Is that restructuring just part of the normal operation? And what can drive expansion beyond that?

Yes. I'd say the -- it's not one singular thing that's driven us to kind of exceed the targets that we set a couple of years ago. Clearly, restructuring is one part of that. The unification of the electrical segment. Volume is helping in that equation as well. Pieces of our portfolio that are growing at a higher rate are very attractive margin as well. So that helps. I'd say it's not any one thing, but it's really what we call our strategic playbook that we said. We did a lot of portfolio work as well in a couple of years ago to push that to higher margin, the acquisitions that we're doing, DMC last year, NSI this year, the profile of that margin. So it's multilevel playbook that we're applying.

And there's still room in that, I would say, in all those fronts, right? As we look at the strength of the markets, I mean, we've clearly -- those markets have been stronger than we initially anticipated this year that benefited. I'd say the segment unification is still in the middle innings. And I think you'll see an electrical continued expansion there. Managing the whole price/cost productivity dynamic, we've managed that well over the last couple of years to at least neutral or better. And I think the history is that, that's turned out to be better. And of course, over a shorter period, if you're managing price/cost neutrally, that could actually be detrimental a little bit to margin on the short term. But our view is that there's still room for margin improvement going forward through managing this playbook with different levers.

And kind of to that point, what's your sense on the appetite for pricing in the environment right now? I know it may shift depending on which -- how different end markets are doing, but how have those conversations progressed with your customers?

Yes. I'd say we've managed that well over the last 5 years from the COVID era when inflation really shot up, where we had to take just a very different approach from what we've traditionally taken with the annual price increases where you're doing this every couple of months, you're having to go up. And I think the numbers would prove out, if you look at Hubbell over that period that in an inflationary period, we've actually done quite well. And so it's -- again, when we see inflation happening, and we're certainly seeing that this year, where we price for it, and again, we've seen those prices stick.

I remember a few years back, a lot of the conversation was when actually commodities were coming down and the margins expanded. The big question that we were getting then is, is that sustainable? Can we hold on to that? And I said there's reasons why we can, which is our value proposition. We're a small part of the total cost of what we do, but critical -- I mean, this is what we've been talking about, critical in function. So generally, price is not the primary discussion that we're having. Of course, we're in a competitive environment, but it's more our reputation, our quality, our service, our spec position is what matters.

So at the time, I said the best proof of this is the next price increase that we need to put in place and can we get that? And we've done many price increases since that time. So that's our view is when there's costs that come into the business. Certainly, we do a lot to try to combat that with can we source it elsewhere? Can we drive productivity, but price is a lever that we're using to offset. And I think it's proven to -- that Hubbell can do well in an inflationary environment.

And then I guess kind of tying it up here, as we get closer to the 2027 Investor Day, what key question do you think you're working to, without preempting any of the...

Yes. Yes, we're a little bit away from that yet, but it's coming up. And certainly, we're absolutely looking at this as part of our strategic plan that we always look. And when we set the last target that we -- longer-term targets that we probably set was in '24. And I think as we look back now at how that's progressed, I think one thing that's clear to us is that the underlying demand of our markets is stronger than what we anticipated when we set those targets. We see that come through this year already. Of course, there's still a lot going on in all of our markets.

I mean interest rates went up yesterday, whether the effect on the commercial side of that. But I think net-net, our view is incrementally positive on what the targets are going to be going forward. So I don't know -- more to come on that, I'd say, but it's definitely something we're thinking about, and we're really excited about what's ahead for Hubbell.

I think that's time. We can wrap it up there, but thank you for being here. Really appreciate it.

Thank you. Thank you all.

Thank you for standing by, and welcome to the Hubbell Inc. Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Dan Innamorato, Vice President, Investor Relations. Please go ahead, sir.

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the second quarter of 2026. The press release and slides are on the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker; and our CFO, Joe Capozzoli. Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and considered incorporated by reference into this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides.

Now let me turn the call over to Gerben.

Great. Thanks, Dan. Good morning, and thank you for joining us to discuss Hubbell's second quarter 2026 results. Hubbell delivered strong financial performance with double-digit growth in sales, adjusted operating profit and adjusted earnings per share in the second quarter as well as year-to-date through the first half of 2026. Our strong positions in attractive end markets as well as continued execution on our strategy are demonstrated by our first half performance. As megatrends continue to accelerate, most notably in data center markets and load growth-related investment in utility T&D markets, we are seeing continued strength in our order book, which gives us increased visibility to our second half outlook.

Operationally, we are managing inflation effectively through price and productivity actions, investing in capacity expansion to serve our customers in high-growth areas and deploying capital to further upgrade our portfolio in high growth and margin areas within our core. We are raising our full year 2026 guidance this morning to reflect double-digit growth in organic sales adjusted operating profit and adjusted earnings per share at the midpoint of our range.

Turning to Page 4. We're pleased to have closed on the previously announced acquisition of NSI in early June. NSI is a business we know very well and have followed for a long time. It operates in the end markets with common customers, similar manufacturing processes and a broad portfolio of critical electrical components with low cost of ownership and high cost of failure. The acquisition of NSI fits squarely within our overall strategy and enables us to double down on our attractive core while adding another high-growth, high-margin business to our portfolio.

Strategically, acquired a leading electrical fittings brand in Bridgeport Fittings fills a key product line gap in our HES segment in a high-value niche. While the Polaris brand complements our leading Burndy brand in electrical grounding and connectors and NSI's exposure in network infrastructure provides opportunity to further penetrate datacom, broadband and data center markets. We're also confident that the [ advent ] of NSI will further accelerate our successful HES segment unification journey, which has resulted in market outgrowth and significant margin expansion over the last several years. Our recent sales force realignment and vertical market investment will enable enhanced cross-selling and deeper penetration into high-growth verticals, while the leverage of scale and best practices across the two strong businesses will drive long-term productivity and cost savings, enhance service and optimization of capacity and manufacturing processes.

Now let me turn the call over to Joe to give you some more details on the financial impact of the NSI acquisition as well as our second quarter results.

Thank you, Gerben, and good morning, everyone. From a financial standpoint, we anticipate NSI to be accretive to both the Electrical Solutions segment and total Hubbell's growth and margin profile, and we expect the acquisition to add adjusted earnings accretion of approximately $0.20 in 2026 and approximately $0.80 in 2027.

Looking further ahead, we are targeting attractive revenue and cost synergies over the next 3 years, including 2% to 3% sales synergies from increased channel and vertical market penetration as well as approximately 3% to 5% cost synergies from leveraging the combined scale of our respective operations, supply chains, IT systems and back-office capabilities. The $3 billion purchase price was financed with a combination of term loan, a bond offering and commercial paper. And our pro forma leverage moves to approximately 2.9x net debt to EBITDA following the acquisition. As we continue to generate strong free cash flow in the second half of 2026 and beyond, we intend to continue aggressively investing in high-return CapEx to drive further growth and productivity, while also returning cash to shareholders through dividend growth and modest share repurchases.

We also intend to pay down significant portions of debt and deleverage our balance sheet over the next 24 to 30 months, which will drive strong adjusted EPS accretion in 2027 and position our strong balance sheet for further accretive M&A investment over the next several years.

Moving to the second quarter results on Slide 5. Hubbell's second quarter financial performance, strong with double-digit growth across sales, adjusted operating profit and adjusted earnings per diluted share. Net sales of $1.712 billion in the second quarter of 2026 increased by 15% as compared to the prior year. Organic growth of 10% was driven by 6% organic growth in Utility Solutions, an 18% organic growth in [Audio gap] metrical Solutions, an acceleration relative to our prior quarters, driven primarily by strong performance in electric distribution and data center markets, supported by capacity expansion investments and incremental price realization.

Acquisitions contributed 5 points to growth in the second quarter, driven primarily by DMC Power and a partial month of contribution from NSI, both high-growth and high-margin businesses which are off to strong starts and integrating nicely within our Utility Solutions and Electrical Solutions segments. From an operational standpoint, Hubbell generated $409 million of adjusted operating profit in the second quarter, representing 13% growth versus the prior year, with adjusted operating margins of 23.9%, representing modest contraction relative to a strong comparison in the prior year. Growth in adjusted operating profit was primarily driven by strong volume growth in high-margin areas as well as the impact of acquisitions.

While cost inflation continues to increase, our pricing and productivity actions are keeping pace, and we are confident in our ability to continue to manage this equation throughout the second half of 2026, just as we have demonstrated very successfully over the past several years. We also continued to invest in our business throughout the second quarter to expand capacity in high-growth areas and generate future productivity.

Adjusted earnings per diluted share were $5.52 in the second quarter, representing a 12% increase versus the prior year, driven primarily by adjusted operating profit growth. Below the line, higher interest expense associated with the recent borrowings for the NSI acquisition were largely offset by a lower year-over-year tax rate and a lower share count as a result of share repurchase investments made in the first half of 2026. While second quarter free cash flow of $213 million was down relative to the prior year on working capital timing and acquisition costs, first half year-to-date free cash flow of $259 million was up 12% year-on-year. On a full year basis, we are on track to deliver approximately 90% conversion of free cash flow to adjusted net income, which absorbs the impact of increased capital expenditures and acquisition costs.

Turning to Page 6 to review our performance by segment. Utility Solutions delivered another strong quarter with double-digit growth in sales and adjusted operating profit. Utility Solutions generated net sales in the second quarter of $1.026 billion, which represented growth of 10% versus the prior year and includes organic growth of 6% and acquisitions that contributed 4%. Our larger, higher-margin Grid Infrastructure business grew 7% organically in the second quarter, driven by strong double-digit growth in distribution markets. Transmission and Substation growth was solid in the second quarter, and we continue to expect double-digit growth on a full year basis in these markets. as large projects ramp up in the second half and capacity investments come online.

In Grid Automation, we were pleased to return to year-over-year growth in the second quarter as anticipated with continued strong growth in protection and controls, most notably in our substation switching products, while meters and AMI revenue grew sequentially and delivered strong orders that position us for continued recovery in the second half of 2026 and into 2027.

As Gerben highlighted in his opening remarks, orders were strong in the first half. And while we're not typically a backlog-driven business, our first half book-to-bill ratio of approximately 1.2x for Utility Solutions is strong and provides high visibility to our second half outlook, where we expect organic growth to improve modestly relative to first half performance. This demand is broad-based across T&D markets, but with particular strength in orders and quoting activity for transmission and substation projects driven by load growth and data center build-outs. We continue to believe utility T&D markets are in the early stages of a multiyear investment cycle, and we are investing proactively in additional capacity to serve the long-term needs of our customers.

Operationally, the Utility Solutions segment delivered $263 million of adjusted operating profit in the second quarter, representing 10% growth in adjusted operating profit versus the prior year, with adjusted operating margins up slightly year-over-year on a difficult prior year comparison. Operating profit growth was primarily driven by strong volume growth and acquisitions, while we continue to drive price and productivity actions to mitigate increased cost inflation.

Moving to Page 7. Electrical Solutions results were also strong in the quarter. On the top line, Electrical Solutions generated net sales of $686 million, which represented growth of 25% versus the prior year. Organic growth of 18% was driven by strength in data center, light industrial and nonresidential markets. Data center sales were up approximately 65% in the quarter as capacity additions, new product introductions and content gains, drove out growth in a strong underlying market. Our vertical market strategy and sales force alignment initiatives continue to drive commercial success in the data center markets and other high-growth areas of our electrical solutions portfolio.

The acquisition of NSI contributed $35 million of sales for the partial month of June, representing approximately 7 points of sales growth at accretive adjusted operating margins in line with our expectations. Our integration efforts are off to strong starts early in the -- early order activity has been favorable and customer response has been positive. As Gerben noted earlier, NSI is a strong strategic fit within our Electrical Solutions portfolio, and we are confident that this business will drive near-term and long-term value creation for our shareholders.

Operationally, the Electrical Solutions segment delivered $146 million of adjusted operating profit in the second quarter, representing 18% growth versus the prior year. Strong volume growth strong price and productivity realization and attractive profit contributions from NSI were partially offset by higher cost inflation and increased year-over-year restructuring and related investments within the quarter. Adjusted operating margins of 21.2% were down 130 basis points versus a difficult comparison in the prior year, largely driven by the net margin impact of price/cost productivity as well as approximately 60 basis points of higher restructuring investment.

However, we have continued to take [Audio gap] pricing and productivity actions throughout the second quarter, and we are confident that the Electrical Solutions segment will return to adjusted operating margin expansion in the second half of 2026.

Turning to Page 8 to discuss our full year outlook. We are raising our 2026 outlook for sales growth, adjusted operating profit growth, adjusted operating margin and adjusted earnings per share. On sales, we are raising our growth outlook from plus 8% to 11% to plus 16% to 18%, reflecting an additional 5 points of acquisition contribution NSI as well as an increased organic growth outlook from plus 6% to 9% to plus 9% to 11%. We are raising our Utility Solutions organic growth outlook to plus 7% to 9%, largely reflecting strong visibility in T&D as a result of first half orders, and we are raising our Electrical Solutions organic growth outlook to plus 12% to 14%, driven by our increased expectations for data center growth of approximately 50% for the full year as well as stronger nonresidential and light industrial markets.

Our organic growth rate is primarily driven by stronger volumes, along with modest incremental price realization relative to our prior outlook in both segments to offset increased inflation. Operationally, we anticipate adjusted operating margins of 23.1% to 23.4%, representing 40 to 70 basis points of year-over-year expansion. This outlook includes margin accretion from NSI, accelerated investments in service and capacity expansion to support customer needs in high-growth areas of our portfolio and increased full year restructuring investment. Additionally, we anticipate an improvement in price/cost productivity relative to our prior outlook, driven by anticipated net benefit of $20 million in the quarter, largely as a result of IPA refunds net of potential customer considerations and a slight increase in underlying tariff costs from recent changes to the Section 301 tariff framework.

Below the line, increased net interest expense of $170 million is driven by borrowings for the NSI acquisition. We expect the full year adjusted tax rate of 22.0% to 22.5%, though we anticipate a higher tax rate of approximately 24% in third quarter, driven by timing of discrete items. We are raising our full year outlook for adjusted earnings per share from a range of $19.30 to $19.85, to a range of $20.25 to $20.55, which represents an increase of approximately 4% at the midpoint and a range of 11% to 13% growth year-over-year. We anticipate approximately 90% free cash flow conversion on adjusted net income in 2026, which reflects the impact of increased year-over-year spending on capital expenditures and NSI acquisition costs.

Finally, I'll highlight that our full year outlook reflects approximately 20% adjusted operating profit growth at the midpoint of our range, reflecting highly attractive underlying operating performance.

Now let me turn the call back over to Gerben to provide some concluding remarks.

Great. Thanks, Joe. We are confident in our ability to execute over the second half to deliver on a strong 2026 financial outlook. In the near term, we are focused on driving outgrowth in our attractive end markets through product and service differentiation, executing on investments to support customer needs and continuing to effectively manage price and productivity in an inflationary environment. Longer term, we continue to believe that our utility and electrical end markets are in the early stages of a highly attractive multiyear investment cycle, and we look forward to sharing more details with you on our long-term strategy and outlook in our next Investor Day, which we plan to host at our Utility Solutions training center in [Audio gap] Missouri on March 4, 2027.

With that, let me turn the call over to Q&A.

[Operator Instructions] Our first question comes from the line of Jeffrey Sprague from Vertical Research.

Can we just dive a little bit more into the mascara structural the strength in distribution, I thought was notable. So kind of wondering there if there's some to restock after destock have gone through for a while there. And then on the transmission and substation side, it sounds like it wasn't particularly strong on the top line in the quarter, but obviously, you have all these orders. Was there some sort of timing benefit that impacted that part of the business in Q2 that fortifying your fuel in the second half?

Yes, Jeff, thanks for the question. And certainly, strong order rates, as we mentioned, up 1.2% in the quarter, pretty broad-based across our business, both from grid infrastructure as well as grid automation and within grid infrastructure also broadly distribution and transformation. So certainly, with distribution up double digits transmission and substation also growing very nicely in the quarter and accelerating in the second half, and that comes through the visibility that we have with the orders and the backlog. The pipeline, certainly the quoting activity continues to accelerate, so when we look ahead at the multiyear investment cycle, we see strong momentum. Long-term growth supported by data center in utility CapEx and our position, a position in these markets is really a leading position with the installed base, with back position and our reputation. So we feel really good. Certainly, I should think about transmission substation, which you point out, perhaps being a little bit lower. We're up high single digits in the first half, and we expect to be up double digits in the second half here. And I'd say there's really nothing to read into [indiscernible]. You get a little bit of project, I mean, when sometimes these projects steps up quarter-to-quarter may have a slight noise in it. But again, based on what we're seeing in market based on our quote activity and our order we feel really good with the increased organic growth guidance that we're giving for the year and the second half.

Right. And the size of the guide, obviously, can base the confidence. Is there anything though like kind of the variance around that in terms of supply chain, your own capacity business or project timing that creates sort of a variable outcome in the second half in your opinion?

Yes, I would say nothing really to say on the supply [Audio gap] chain, we are continuing to add capacity in our business. Our substation part of the business, particularly where we're adding capacity. But again, this is embedded in our guidance, supported by the orders and the backlog. So it's why we're confident that we'll see growth accelerating there as we go into the second half.

And then maybe just one final one, maybe it's for Joe. But just thinking about sort of the illicit margin expansion in the back half that's part of the guide here. Would you level load that across the quarters? Just a little bit more back loaded. I mean, I guess you got the tariff refund in Q3, so maybe it's front-loaded Q3 to Q4. Just a little bit of color there, I think, would be helpful.

Yes. You put your finger on it there, Jeff. We're anticipating it is going to be a little more front-loaded given the nature and the timing of those IEPA tariff refunds and how they roll through. but really confident in that back half margin expansion playing out.

Our next question comes from the line of Chris Snyder from Morgan Stanley.

You guys talked about in utility specifically, the first half book-to-bill of 1.2x. It gives you guys pretty good visibility into the back half. I guess my question is, are you guys starting to build any sort of visibility into '27, or is it still too early to see that in the order book in the backlog? And then just maybe if you can't see it there, how have customer conversations trended on '27. Does it feel like you guys can sustain maybe something at the higher end or even above the organic target?

Yes. I would -- echo here. We are seeing orders starting to be booked into 2027. That's particularly on the transmission and substation side of the business. Again, if you look at what utilities are doing, they're having a plan well into the future with some of these load growth and capacity that they're bringing online as we see higher voltage systems, those tend to book out further. So yes, we're seeing orders being booked in our transmission substation area into '27. And again, we feel based on both what we're seeing in the order book, the conversations we're having. And if you just think about with what's going on, right, with the data center build-out and the need to add additional load in addition to what we've been talking about for years, which is system that needs to be hardened. It's just -- it's multiyear and utilities are starting to look further out.

I appreciate that. And maybe if I could just follow up on price. I don't remember a much prepared commentary on this. But if I remember correct, you guys pushed through price and I think it was in April. Can you just maybe talk about the realization of that? Has there been any pushback in the channel to the action. And then should we expect more price action here into the back half, just given kind of the clear inflationary pressure that's out there in the world.

Sure. Good morning, Chris. So yes, on the price equation, we did push price through in April and the expectation of that price increase, which was broadly across utility and electrical we were anticipating about 1 point of price to come out of that action. And at that point, was raising our full year price expectation to about 3 points. And since then, we've experienced a little more inflation, and we've gone out with additional price in July. And our expectation for that most recent price increases, we see about another 0.5 point in the back half of the year. So coming into the year, we were anticipating 2 points. We had the April price increase at a point, and now we're adding roughly another 0.5 point or so. So kind of think about it like 3 to 4 points for the full year, Chris.

And our next question comes from the line of Chad Dillard from Bernstein.

So just a question for you guys on your capacity expansion. Can you give a little bit more color on what verticals are you expanding? How do you think about the revenue unlock? And when do you think that will be completed?

So Chad, so the capacity expansion story is a really important part of our growth initiatives here as we continue to service strengthening demand out in the market. And so our CapEx investment this year, we're anticipating roughly $175 million to $190 million of CapEx, and that's up from our $155 million last year. A lot of our CapEx spend is going towards adding capacity and to adding productivity initiatives, but largely focused on capacity. Over the last couple of years, we continue to bring new capacity online in every quarter as that gets turned on, we continue to absorb new revenues into that capacity. It's hard to say exactly how much that translates to every quarter. But if you think about on a go-forward basis, bring on roughly $25 million of new capacity-ish. It's not always linear, but we'll continue to do that as we progress the back half '26 and as we work our way through '27.

Got you. That's super helpful. And then just secondly, it sounds like you're seeing a larger slug of projects flowing through. So I'd be just curious how does your win rate on those larger projects compare versus the corporate average? And then maybe you can talk a little bit more about your modular approach and then how that helps you win?

Yes. So maybe starting on the modular and then I'll come back to the win rate here. Tad, it's actually a trend that we're seeing broadly in our business. And I think in the market. And it's a lot driven by labor availability and by quality control of something that you can build in a factory setting versus doing it on site. So if you think about our businesses in the electrical side, like data center and the BCX business, what was the power skid or if you think about the substation business with system control, where you do the control houses and you're basically building these in a factory environment with good quality control that you then plug and play into a system. But you're also seeing it more on a SKU level and component and DCM -- DMC, sorry, is a really good example of a connector that you -- where you're crimping the connector onto the bus bar and the traditional way of that would have been to do a well in the field and now you can do a crimp in the field with less skilled labor requirement quicker. So there's absolutely a trend going on where you're bundling more. And we have a great position. We have -- if you think about the portfolio and the breadth of our SKUs, there's a lot of opportunities for us to bundle things together find solutions, how you -- one component can integrate each with the other. So surely a trend in the market. As it relates to project and project flow, and I'd say this has accelerated. And if you look, for example, in our transmission and substation business. The project quote has about doubled in the last couple of years, and that's driven in part by these higher-voltage projects where utilities are just looking further out, they're planning these further out and by the strength of our portfolio to be able to offer some of those projects. So I'd say the win rate on those is probably similar to what we've seen traditionally, but there's just more of those coming through right now.

And our next question comes from the line of Tommy Moll from Stephens.

Gerben, I wanted to start with the recent trends in distribution. Great to see up double digits this quarter, but that's clearly above the trend line for that business. So what more can you tell us about what's driving that strength? And what are you embedding for your assumption in the second half there?

Yes. Thanks. So distribution is off to a good start, I would say. It is a reflection of the strong underlying markets. But also, if you recall, destock of the last couple of years. And in a year over, I'd say, the comps are still somewhat easy to lap. There's a lot of investment going on into transmission and substation market, and that's great to see. But underlying distribution markets also remain very strong. And the foundation of that strength and I see that as a long-term positive is the age of that infrastructure and the need to harden and the resiliency. And that still remains, even though it's oftentimes overshadowed right now by the need for loan growth, the need to -- there's a good support for that. You see that embedded in CapEx budgets as well. So we believe the underlying -- we see the underlying market to be strong, but a little bit of Comcast. So longer term, we see this continue to be attractive and certainly going into the second half and going into 2027. And we continue to see over longer term for this to be a mid-single-digit plus market.

I also wanted to ask about the recent trends you called out in meters and AMI. I think you said you started to see steadily improving market there, maybe some orders suggesting continued growth second half this year, even into next year. That's a very different tone than what we've heard recently. And so any gaps you can fill in would be appreciated.

Yes, a little bit. And if you think back on what we said, right? So Grid Automation had gone through some declines for several quarters led by the Aclara business that we've talked a lot about. And what we had said last quarter that we expected grid automation to return to slight growth in the second quarter, and that indeed happened. The book-to-bill also there was above 1. And so that gives us confidence that what we also call was to see continued growth into the second half, and this provides us certainly confidence on that. If you then go specifically, I think your question was on the Aclara one. we're seeing improvement in the project flow there, particularly in the [ Munich ] cost space. If you recall, this is really an area we refocused on last year to really pivot the investment more to that to take some of the investments -- prior investment that we're making out to rightsize the business a little bit. And we're starting to see that pay off right now. So small and medium projects, some international projects that we're seeing that, that set us up for growth in the second half even in the Aclara business right now. So yes, it's a little bit what we expected this year, Tommy, but it's -- we're certainly happy that it's unfolding that way.

And our next question comes from the line of Christopher Glynn from Oppenheimer.

On the accelerated data center growth, you talked about the impact of the markets, capacity adds, new products as well as content. I just want to drill into the content component there. Is that a change in the allocations you're getting for certain product categories or really an expansion of the scope of your design wins?

Yes. I would call it more of the same. And so as we continue to add capacity on core product lines that are going into the data center. What's really important in a lot of this, we call it our short-cycle data center support business is if you've got the inventory available right time, right place. They're pulling it pretty quickly. And we've been very aggressive in adding capacity and making sure we're investing in the inventory on the shelf. So that's really supporting our vertical market strategy, which is putting us in the position to slice that business, but that's a big piece [Audio gap]

And the only thing I would add there, as you see data centers evolve where there are certainly higher capacity data centers, we're adapting some of our products for those applications. So I'd say there's a decent bit of new product development. If you think about our our new [ Pinesleeve ] devices that are going to higher amperage to the 800 of old infrastructure, it contributes as well.

Great. And then just the seasonality at Electrical was pretty pronounced. Even if you strip out NSI, it was up about 15% sequentially. Wondering if June was really killer in particular, it's up in the pull factor in the season strength, I think. And if the non-res acceleration, was that just kind of normalizing on project releases because I think the trend in those markets were product releases were just comes up, but now tariffs and different factors are becoming normalized in the baseline.

Yes. I would highlight that there is nothing noteworthy of June relative to the second quarter and that being particularly pronounced. We saw really solid growth over the course of the quarter within Electrical. And then in terms of some of the products and projects that we've got slated, we see continued growth and visibility on the electrical side, although it continues to remain -- short a lot of book and bill and we've got good momentum both on nonres and on data center and light industrial. I would highlight that we have seen nonres starting to click up over the last couple of quarters, and we were -- we saw that in the fourth quarter, signs of an uptick. We saw that continued in 1Q, and we really saw that gaining momentum. We're a little cautious to to say that, that's going to continue to accelerate, but nonres has been pretty solid one.

And our next question comes from the line of Nigel Coe from Wolfe.

We've covered a lot of ground already, but I did want to try and unpack the 40 bps increase in the operating margin for the full year. My wonky mask get 30 bps from tariffs, guessing about 40 bps from NFI, maybe that's -- maybe you can clarify that. And what I'm trying to get at here is how is the kind of the core price cost productivity kind of trended from your initial view. You talked about the price increase in the back half of the year. Just wondering how that's all playing out together.

Yes. Good morning, Nigel. Definitely, you're right on the 30 bps from net tariff to 40 bps on NSI, squares up with our math. And then we've got, we'll call it, operational, which is really volume growth, which is coming primarily from the Electrical side, nonres, light industrial, data center uptick that's being partially offset by higher levels of investment that we're anticipating making back into supporting all of this growth. And so that investment, which is partially offsetting that volume growth is really the other piece of the equation there.

Okay. Understood. And then the tax the $20 million, does that land disproportionately within electrical versus utility? And then looking beyond 3Q and into 4Q, do you think Electrical will be back to margin growth in 4Q?

So first off, the tariff, we would split that roughly half and half between electrical and utility, and that's going to be concentrated in the third quarter. And the second piece of your question around electrical margin, we do see electrical margin returning to expansion in the back half, both in 3Q and in 4Q. 3Q we'll see the surge with that IPA refund dynamic, but we're anticipating continued margin expansion year-over-year in the fourth quarter in Electric.

I'm sorry, if I'm a [indiscernible] just deduct that tariff in 3Q would Electrical will be expansion?

Yes. I mean that's hard to reconcile right now, Nigel, we can take that offline.

And our next question comes from the line of Alexander Virgo from Evercore ISI.

I wonder if I could dig into the book to bill, just at a little bit more. So 1.2x which bill implies what about $2.4 billion in the first half. I'm guessing that not all of it is expected to be delivered in H2. So I wonder if you could just expand that a little bit for us? And maybe help us with any color on duration and I guess, any changing dynamics in terms of customer projects duration that will, I guess, keep building that into the end of the year and building up for 2027.

Thanks, Alexander. And it's hard to exactly do all the math for you, but let me try to just broadly talk about it. So we are short-cycle business. So part of that book can bill, we will see in the second half. It's the reason why we're taking our organic growth guidance up for the second half. But as the question came earlier as well, are you seeing bookings into 2027? And I would say part of this specifically, if you look at the longer cycle product lines like in transmission and substation, there's part of that, that's booking into 2027. But I would say there, too, it gives us a lot of confidence on our longer-term framework that we've been talking about the disinvestment cycle is really multiyear and that we expect to continue to have attractive performance and results longer term. So it's a little bit of both more confidence and increased expectations for the second half and a good setup for '27.

Okay. And then could I follow up with just a question on the 60 bps of headwinds from restructuring HES year-on-year. Is that something we need to think about for the second half as well? Or is it more to do with the NSI acquisition and integration costs, and therefore, it's more of a one-off?

Yes, not really related to the NSI acquisition that just is part of our ongoing Electrical segment transformation program. And so we're anticipating, as our guidance implied approximately $20 million of restructuring related in the full year for which roughly half of that, maybe slightly more than half was spent in the first half and a lot of that was in Electrical. We continue to invest in that program in Electrical. So we're anticipating the back half is also pretty heavily loaded with restructuring and related investments that set us up and continue to position for efficiency and margin expansion in '27 and beyond related to that program among other things. But I think that's the most constructive way to think about that restructuring investment in Electrical.

And our next question comes from the line of Neal Burk from UBS.

So last quarter, you provided some commentary on the high-voltage transmission opportunity, the $1.5 billion over 10 years. And maybe this was part of some of the strength that you saw in book-to-bill in the quarter, but any update you can provide on these projects and the size of the opportunity as I think some of these projects should be starting around now in the second half of the year.

Right. Yes. So indeed, you're right, it's pretty broad-based, I would say, and we see it where load growth and data centers are going in. That's why the request for interconnection are the highest. And our first 765 , which we talked about winning, we'll start shipping in '27. We're also seeing 550 KV, which is similarly an application used for these interconnects that we're shipping this year in the second half of this year. So you're right to point out that it's about happening at later part of this year and then certainly into next year. The quote and pipeline activity is strong. I mentioned earlier, we're quoting about twice the volume that we were a couple of years ago and a lot of this is driven by the higher KV projects. And just a reminder of our position in this market. I mean, we have the leading installed base of transmission and substation infrastructure. We have the relationships and the capabilities to innovate these higher voltage projects. We're doing this in concert with our customers to specified in that process. We have very capable lab that we used to test and inspect these products in with. So it's a very attractive area, and we're well positioned. And as far as the growth rate, what we talked about, about $1.5 billion opportunity over the next 10 years. And if you think about that for our business, given our position, our win rate, it's about a point of additional growth over the next several years.

And just one follow-up question on the growth outlook for this year. And in grid infrastructure, I believe you said it was expected to be up double digits in the back half of the year. Please let me know if that's correct. But the comp gets a lot harder in 4Q. So curious about how to think about revenues sequentially in the Grid Infrastructure business. Is there any reason revenues in this business can't be up in 4Q given the momentum you've seen in book-to-bill? Or is there some seasonality that will limit growth from 3Q to 4Q.

Yes. Grid Infrastructure revenue pacing around double digits for the year. We would anticipate that continues. You're right to highlight there's a tough comp in the fourth quarter, but Grid Infrastructure continues with its momentum. So that's about the right way to think about the back half of the year, including the fourth quarter.

And our next question comes from the line of Brett Linzey from Mizuho.

Questions on price cost productivity. So the improvement of 20 in Q3, sounds like that's all refund. What's implied for Q4 in terms of the refund impact, if any? And then I guess, is there any benefit that's more structural from the recent changes on 232 or 301 that might be embedded in the guide or potentially incremental?

Yes. So I'll take those two. The first one on refunds. The refund we're anticipating is in the guide is all in the third quarter. If there's any more that sprinkles over, we would certainly update and be transparent about that, but it's all third quarter. And then in terms of any structural changes to 301 or 232, it's a over the course of this year, there's been minor changes along the way in of any substance one way or another. There's been some minor pluses and minuses. And I'd say that continued right on up through last week at the 122 sunset and were replaced with the new framework for 301 quick assessment on our business is minor impact on a go-forward basis. So by and large, over the course of this year, any changes in tariffs have been relatively small.

That said, it's still a very inflationary environment, right? And we still see copper and aluminum and steel and all the likes inflating this year.

Okay, great. Appreciate that. And I guess just on free cash flow, tracking to 90% of adjusted net this year. I imagine there's some one-timers on M&A and things running through there. How are you thinking about the progression and the ability to get back to 100% plus over the next 12-plus months as maybe some of those items roll off?

Yes. I think over the next, let's say, 12 to 24, we're anticipating continuing to pace at elevated levels of CapEx. So if CapEx used to be less than 2% of sales when we were converting at 100% of net income, what we're now pacing at 2.5% to 3% of sales, which is going to have a natural headwind to that conversion rate, which is why we're anticipating kind of pacing around 90% for the next couple of years as we do continue to invest to support all of this growth that's out there in the market that we're talking about that we do need to add capacity. The other dynamic, obviously, when we've got growth ahead, we have to invest certain amounts in working capital, and that's another part of the equation -- a smaller part of the equation, but that is another part of the equation there on our conversion rate.

This does conclude the question-and-answer session of this program. I'd like to hand the program back to Dan Innamorato for any further remarks.

Great. Thanks, everyone, for joining us. We'll be around all day for calls. Thank you.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

All right. Good morning. We'll continue with I'm very pleased to have Gerben Bakker, CEO of [indiscernible] thank you very much for joining us this morning. I'm Joe O'Dea the multi here at Wells. If over the course of the dialogue [indiscernible].

We'll jump right into it. I'd love to start on the utility side and specifically infrastructure, talk about demand trends that you're seeing out there. Starting on the transmission and substation side of things. And so you are in a multiyear stretch of seeing solid strong growth in both of these verticals. Talk about the pipeline, how you think about the medium-term growth potential that's out there for transmission and substation?

Yes. Perfect. Thanks, Joe, and thanks for the opportunity to engage here. With this group. And thanks for starting off on the high point of utility, which clearly transmission and substation is for us right now. So I'd say the pipeline and the growth rates have been very good there. And certainly, if you look at the order rates and backlog, it's very supportive of that. And drivers there are load growth and interconnect. And I would say these are more recent drivers on top of what has already been a long-term trend in this industry, which is grid hardening. I think grid hardening is more broadly we talk about the other parts of the businesses as well, something that utilities have been very focused on and that we benefited on.

But more recently, the load growth and interconnect part of that is driving our book and our shipments as well. So we talked a little bit about that business as being on the higher side of the portfolio of high single digits. And certainly, more recently, we've seen that exceeding those kind of levels. We're starting to think ourselves around the framework of what's the next few years going to look eventually, we'll do another Investor Day engagement with targets we set forward.

But I would say certainly over -- as we look out right now, we see those growth rates exceeding those high single digits as we're realizing right now. So we're very optimistic. We're investing in this part of the business pretty aggressively to sustain those growth, but we're very optimistic about our transmission and substation future.

And what kind of visibility do you have out in the conversations that you're having with your customers in your pipeline?

Yes. I would say the conversations are longer term. Certainly, the -- for our customers to put in a decent place takes time. They got to go to the regulators, they got to go to approval process. So they look out. If you look at the CapEx budgets, it's part of the reflection as they've seen those go up. Our products are highly specified. So we're actually talking and engaging with customers to select our products and bundling of our products. So I'd say it's pretty far out, but that doesn't always translate into orders being led.

Our products still, even if you think about transmission and substation, it's generally measured in months, [indiscernible] 6 months of lead time right now. So we talk more in agreements to supply with our customers, and we have long-term agreements, but the actual orders tend to come more as these projects happen. That's, I would say, actually a good part of our business as we look at our business, long backlog is actually something we try to shrink and this is usually a reflection of our lead times going out, and we want lead times actually much shorter, so we can be responsive to our customers.

And the other part is if you get orders 3 years out, you either need all kinds of indexes to make sure you're protected, or you may be on the wrong side of that equation 3 years out. So we actually don't mind that it's shorter term. As long as we know the commitment is made to Hubbell and that's often time how we do these.

And then also then group infrastructure on the electrical distribution side, so the biggest vertical that you're going to serve within that unit [indiscernible] through a period of stocking and then [indiscernible]. And so just to unpack a little bit of where you are today when you start to lap the destock comps? And on the other side of that, how you think about the growth potential for the distribution side?

Yes. Yes. And I think you're right, how you kind of characterize that. We went through a period of destock last year that was kind of a quite lengthy process of [indiscernible] channel and then the end user, we started to see us coming out of that last year. The best indication of that was orders returning in addition to the conversations with our customer. We've seen that grow nicely here in the first quarter. Our orders continue to be supportive of certainly what we've indicated for the year going out.

Hardening is a big driver there, a big continued driver of growth in that market. And we see that again, multi-years out, I even would say probably decades out of the need to invest in that market. So I think the kind of the rates that [indiscernible], there's probably a little bit of a comp still, and we're a little bit above that mid-single-digit, kind of, longer-term target that we've indicated. And I think that is a little bit comp short term. But we're very confident that this mid-single digit. It will lower than the transmission and substation for the drivers there, but still very attractive growth for us.

And do you find that your utility customers are in a position where they've got to prioritize transmission and substation spend such that it has any kind of impact on the distribution side that they can really manage [indiscernible]

Yes. I think it's a little bit how you look at it. And maybe I'll start primarily what our customers -- our customers are trying to solve for, which is providing power in a low growth environment, and providing that in efficient and reliable way. And that drives at the end why they need our products.

But then there is, of course, some constraints that utility customers have. One is affordability. They need to get, certainly, the spend to regulators oftentimes and find support and what the impact on the end user. There is labor constraints in the market and then just the budgets that they operate on there. So there's certainly some tension against the need to invest in this grid and how fast, and at what level can they do it?

I'd say perhaps less so that they're taking transmission from distribution. I think as you see the CapEx budgets increasing, which clearly we're seeing happening right now, more of that is going to the transmission and substation. So I think it's less about that has been taken away from distribution is that more of the incremental investment that we're seeing is going to transmission and [indiscernible] and why we -- our view is that the growth rate of that is going to be above that of distribution.

But maybe the other thing to highlight here. As we look at our portfolio. We are equally strong in transmission and substation as we are in distribution. About 80% to 90% of the components of the hardware of the materials that you need to build that grid Hubbell makes, and that's both in the transmission and the substation. So I would say if a utility makes a choice to spend the next dollar from distribution on transmission, we would benefit equally or vice versa. So we're a little bit agnostic of where the next dollar comes. But our view is that more of this is being directed now to transmission. This is why we're investing. So what does matter is do you have the capacity to serve when they move the dollar and we're being pretty aggressive in our investment in that area.

And then rounding out the infrastructure side of things when we think about gas distribution and telecom, there's a period of time where you saw some pressure on the telecom side of things. But just help us understand where you are in the demand patterns there? How do you think about that moving forward?

Yes. Yes. I think it's a little lower level of growth than what we're seeing in T&D, but still attractive GDP plus. And if you look at some of the drivers of that growth, [indiscernible] our gas business, it's to a certain extent, very similar to electric very aged infrastructure that needs to be upgraded with our components. And on the communications side of the business, we saw the big decline a couple of years ago that's returned to growth. Right now, there's still a lot of fiber going in. So I'd say those are GDP plus businesses going forward with, again, attractive dynamics of what we serve with our critical components.

And then the other part of utility on grid automation and specifically on meters and AMI. 6 or 7 quarters into seeing declines in that business. What you view in terms of the outlook there when that business shifts to starting to see some growth?

Yes. You have to certainly have faced some challenges that we've talked about quite a bit here. That grid automation business, and that's kind of how we look at it holistically, will return to slight growth here in the second quarter after some periods of decline, primarily driven by the meter in AMI business, and we'll continue to see growth there into the second half as well.

If you talk specifically about our AMI and meter business. And maybe just to put it in perspective, it represents about 10% of the revenue of utility. But less than 5% of the operating profit of Hubbell. So it's quite a small contribution to the overall portfolio of what Hubbell does.

We've addressed the cost side of that business that we were investing quite heavily to drive new technologies in there. We've refocused that business to areas where we've traditionally done very well. And certainly, our expectation and the headwinds are behind us right now of the decline of that business. So our view is as that business now grows and it will grow more modestly. We'll see the margins improve. Those margins are below the average of our portfolio, our expectations are for higher margin for the business. But after the work we have done and with some modest growth, we can improve those margins.

What about its value to the broader utility business? And so when you think about lower growth, lower margin, but is there a synergy value that it brings into our overall offering that winds up having more value than what we see just [indiscernible]

Yes, it certainly serves the same customer base that we serve, and it's with critical products as well. It's clearly helped us build more of this grid automation business, and it's how we look at it. There's a lot of parts that are actually very attractive and growing -- have been growing really attractive [ for it ]. As we looked at our business a number a few years ago, we were primarily a hardware business. And as we looked about what the grid of the future look like, we started to see control on the grid and sensing on the grid, and we just didn't have that capability. And this was our way to build scale into that, and we've really, really benefited from that.

But we still measure our businesses in the pieces as well. It's what we do on our whole portfolio, how we look at the business. And the business has room to improve. And I think with what I told you with the cost that we've taken out and we modest growth, our expectation is that this business will show up that margin profile going forward.

And then within the grid automation piece, half of it is the grid protection and controls. What about the margin profile there and the growth [indiscernible]

Yes, yes. And then that's actually the part that I said that we've really built up, and it was a capability that 8, 9 years ago, we really didn't have. And it's really hard for a company that's what we call heat and beat. We're doing [indiscernible] and stampings and plating as a core competence, and that's still a hugely important part of our portfolio. But as we looked at what the future of the grid, that's a hard pivot for companies to do. And I think we've done that very successfully.

And if you look at the other half of the grid automation business, an indication of what we've done there. Both on organic growth as well as acquisitions, we've grown that. That's growing high single digits. And this period that is actually above that well margin profile that are very similar to the T&D business. Examples of new product that we've brought in more recently that have done really well is, for example, our [ line defender ]. It's a distribution product that actually helps with faults further down the line. These are very expensive faults to correct. Truck rolls, it's one of the highest cost the utility will have and to the extent that you can have self-correcting and identifying where faults on and this is one of those products, and it's taken off really nicely.

Another one is a power quality measurement. It's [indiscernible] that we actually acquired that sits in that. Serves not only utilities, but serves data centers. Power quality and data center is very, very important, doing really well. So I'd say that business overall is attractive margins, high growth. We just need to get that one piece that we just talked about in the better and -- but it's a very nice segment.

And then shifting to the electrical side and kind of the non-data center piece of electrical if we start there. In an environment where non-res activity has been challenging. But what you're seeing with respect to interest rates and inflation as overhangs versus, say, just duration of a challenged market that starts to give way to some [indiscernible] kind of what you're seeing there nonres?

Yes. Nonres it's -- become a smaller part of our portfolio as we certainly grown the company. We saw some modest improvement early in the year in that area. And I'd say, as we see the current situation that has persisted [indiscernible], we believe, driven by short-cycle activity around these markets. And if you think about the some of the electrification and the re-shoring that's happening, and some of the activity that that's happening around that on the non-res side.

Interestingly enough, too, that, that's -- it's not consistent throughout the region, and we see a lot where data centers are going in. We see more activity around other nonres activity. So it's not broad in the market. It's coming off a low. It's been kind of slow. So I'd characterize it as, okay, perhaps, and we have seen [indiscernible] growth this year that we see sustaining.

And then on the data center side, if you could just size your revenue for us. Explain the different ways that you're serving your data centers, both through the legacy side of the business as well as the M&A that you've done in PCX and in [indiscernible]?

Data centers, I mean, we often talk about data centers on the electrical side of the business, but actually the larger exposure indirect of data centers and utility business, and I'll talk a little bit about both of those here.

On the electrical side, about 10% of our revenues come out of data center and that's split between the balance of systems and what we call the PCX business, which is the [ Power Skid ] business. And on the balance of systems components, we have a very strong position. These are products that are sold in [indiscernible] that are sold in general industrial applications. If you think about our Burndy Grounding, if you think about a wiring device has been in sleeve products, these are anchor brands and products that we sell in data centers as well.

Actually, a lot of organic growth there as well. And if you think about as data centers are ever increasing the capacities of both amperages and different voltages, we're adapting our products to that. We just introduced a very innovative, we call power gain product [indiscernible] literally an industrial application that we've used for decades at a big bulky round connector that have done very well in data centers. But as the amperage have gone up and we've redesigned that product, we've actually made the shape of it such that you can fit it much easier behind [indiscernible] constraints is a big deal for data set, actually working with the data center operators to bring new innovation into the market. It's how we've continued to adapt that business.

But then if we look at the utility side of the business as well. A lot of the transmission and substation work that's happening there is -- even if it's utility work that's happening, it's to support those data centers. And it's -- our position there is very strong. We certainly benefit from serving those markets.

As far as acquisitions that you mentioned, the DMC systems control acquisition, and even the one that we recently announced with NSI has about 10% of their revenues also going to data centers, is adding to the portfolio of products that not only serve attractive core markets that we serve today, but data centers as well.

And then as we think about kind of behind-the-meter powering of data centers, just what that means for you from a revenue content. Think about it versus behind how the content opportunity changes for you?

Yes, yes. And the reason this is actually happening is because data centers need power. And I think if you ask most, if not all data center operators how they would prefer to have their power, it would be to rely on the utilities, but there are some challenges with that right now. I would say it's very early in that process, and we're having some discussions through the EPCs that are helping, or the IPPs that are involved in this in what those solutions are. And for us to gear the equipment that we serve is very similar.

These need substations. And if they put their own generation source behind it. They're still going to put a substation still with equipment that's the equipment that we sell to utility company. So if they stay disconnected from the grid, which our view is that they're probably going to want to interconnect at some point. But if they didn't, you'd lose that interconnection piece. I'd say it's a smaller [indiscernible] of that. But our view is that they probably want to interconnect but very importantly is utilities are trying to solve for this.

Our conversation with utility customers is how they're adding capacity, how they're adding -- this is the whole load growth. So if some of this is going to happen, it's probably going to be incremental growth over this period where utilities are trying to solve for it. And if we need to ramp up quicker and data center are able to solve for that, we'll probably see higher growth rates for a period of time as a result of that. So we see it as incremental, but our content is fairly [ similar ].

And then you mentioned NSI. Let's talk about that a little bit more. I think, $3 billion deal, the largest in the company's history. The fit within the business, just explain to us what NSI is going to you?

Yes. Yes. And first it's -- maybe I'll talk a little bit about our capital allocation. It's an important thing that we do. We've got, obviously, a strong history of adding quality businesses to the portfolio. We've talked a lot about the balance sheet getting larger and larger, and that's very positive. But how you deploy that capital, and we've indicated that we're going to remain disciplined in the types of businesses that we're going to add. And in periods where we don't have a business to add, but still have a strong balance sheet.

We see buyback as a very attractive alternative. Well, and we've done some of that earlier this year. So the point of that is, while the balance sheet is getting bigger, we're going to remain disciplined on where and how we invest our capital. So as we screen that -- and a lot of our businesses are coming out of -- a lot of acquisitions come out of our P&Ls, and we still run our business by P&L. We have GMs that manage. It's a way to really stay close to the customer as we get bigger. And a lot of that development of businesses goes through those, [ GM ]. And then we have an enterprise resource group to help execute on those.

So very few deals will come through, if any, that we don't have visibility. And it's -- we don't always want to acquire these businesses. We're not always successful in acquiring this business. But it's where that property would come to market that we don't have in NSI was no different. But one of the things, as we have broader part of the organization looking for deals, we really have a screen [indiscernible] what we call it the [indiscernible] of deals. And we put them through a screen, and it's more than these 5, but these are the main ones is, does it serve the same customer that we have? Does it go through the same channel that we serve? Are the products complementary to what we do? And then what's the growth rate of the business and what's the margin profile of the business? And the last 2 are more a reflection of the market and the customers that we serve and the strength of the brand.

And then we rate those things of the businesses. And sometimes they're squarely down the middle and sometimes they go in one of the categories a little bit, out of it. And it doesn't mean that if it goes out and when we won't acquire it, but its eyes open on. I'd say NSI hits all those boxes right down the middle. It's customers that we serve today. It's through the same channel that we serve it today. Very complementary product basket to what we have.

These are anchor brands. This is like Burndy and Wiring. Is [ Bridgeport fitting ] and [ Polaris ], you kind of use those in those same veins. Which brings to it a preference and a margin profile. So when we see that, we certainly lean in more to want to have the portfolio while we remain disciplined, I would say, some multiples of business have gone up, but so have margin profiles and growth rates.

But we see this business fitting extremely well within the Hubbell portfolio. This will be -- we talk about this like when we acquired Burndy and what that has done for us, that's how we see this company coming really what we would say right down the fairway.

And then this comes in expected to close middle of the year, margin accretive to HES. Our math on it is it could be $0.15 or $0.20 kind of lift. That sound reasonable?

Yes. Yes. I think, certainly, once we close it, we'll come back with depending on the timing and what it is, but I think you're pretty good at math. So I think you're in the ballpark of what you just indicated, yes. And margin accretive too. Its earnings accretive, certainly, and margin accretive to the company.

Yes. Something you brought up on the most recent earnings call, is the high-voltage opportunity out there when we talk about 765 kV. You sized that it's a $1.5 billion, sort of 10-year market opportunity. Just unpack a little bit for us in terms of the time line that you're looking at to start generating revenue there, what that ramp could look like?

Yes. Yes. And 765, even though there's a lot of activity and discussion about it. 765 actually has been around for 20-plus years. At the time, some infrastructure was put in and where -- where 765 really help, it's for bulk loads, trends for and for clearing capacity for -- for load really. And if you get load constrained on the grid, if you won't need a lot of power and it's trying to go to the infrastructure that you have and that's a constraint, I think about it pipe and water. And all of a sudden, you need a lot more pressure going through that, that pipe is going to burst. And that's kind of the infrastructure. So if you need more bulk transfer, it's very efficient. And then a load growth environment, it's actually a very efficient infrastructure to deploy.

So we've been actually working with some of our customers and that's, again, the value that we have if we are a leading prominent supplier of T&D materials with the largest installed base. So as we talk about new things coming up. Again, we've been working with our customers for some time already on this. Earlier this year, a first fairly large-scale 765 was awarded, and we were fortunate to be the recipient of that award. That -- and that was a combination of actually working and designing, inspecting that product with our customer. We'll start to see that start shaping in the early part of next year.

So I'd say it's early still in the cycle of 765. There's more projects that were certainly working on. And really, it's incremental to what's still needing to be done in interconnection, in hardening. And by the way, when you put 765 in, you need off-ramps of those. So you need [indiscernible] substations to go along with that. So it's additive to the growth of the grid is how we're looking at the network. We kind of sized it and -- it's not precise and the timing can vary a little. But you need to get these things to approval. But there's a real need for -- there's a good case for it. And we believe it's actually incremental to the investment that's already have on why we call that we think this could add a point of growth to what we've already indicated.

And then shifting to the price cost side of things when we think about some of the inflationary pressures over the course of the year. You saw commodity inflation to start the year. Tariffs and whatever impact that could have had in kind of April. Just explain what you've done on the pricing side of things? Any quantification of what you've had to do out there for pricing year-to-date?

Yes. Yes. And we've been -- over the last few years, certainly more -- much more aggressive, proactive and better organized. It's actually one of the benefits of having gone to more of an operating company that we put capabilities in place across the enterprise and pricing was one of them that we've moved from product management, and against product [indiscernible], but they're probably not the best prices and to really do scientifically. And it's just a muscle that we've built that has really benefited us.

So for us continuing to be price cost neutral, what we call it price cost productivity neutral or better, positive, and we've been to the positive side of that is our thought process there. And so we see more inflation. The -- a couple of things happened here recently, which the tariff regime continues to change, and this latest one is actually neutral to Hubbell. There's some pluses and minuses in that but not a lot of impact there. But we have seen inflation. We came out with price earlier this year, and that's going in. And I would say, as inflation continues to happen, we'll continue to respond to that with price and productivity to manage that to the net neutral or positive.

And then longer term, I think the margin is welcome. That's the other thing that we've proven over time that while we manage short term, this a neutral or positive, over the cycle with volume growth with -- as commodities maybe come down or we find more productivity, we actually see the margins go back, or actually up because certainly dollar-for-dollar price and cost would decrease your margin, though this is math, but we've actually proven to be able to recover that and then actually expand margins. And that's how we view it.

And so pricing that would have gone in place, I think, around February, you haven't had to do additional pricing?

Yes, we had some that went in effective April, right, then. And [indiscernible] But there's still inflation happening -- and so our view is as that happens, we'll continue to price for it.

And then the margin dynamic and the seasonality we see volume being the biggest kind of component, or in the middle of the year?

Correct. Volume and then longer-term productivity, we're still driving a lot, right? If you think about the efforts that we're doing in the electrical. And if we're doing the restructuring programs that we're still doing that has productivity. So I think that's another adder over the longer term to find margin expansion.

On that productivity front and one of the initiatives is around within electrical, the unification and simplification. And so that was a function of footprint rationalization, SKU reduction. Where are you in that process?

Yes. Yes, I'd say really good early success in that, and you can see that certainly by the margin of the Electrical segment that we've continued to expand after we shed our lighting business and a reflection of that effort. I'd say, over the last couple of years, we've been very busy with supply chain challenge in both during the COVID period, and more recently, was just inflation. So I'd say there's still opportunity there going forward of refocusing on that and doing more. So I expect more work there and more margin expansion as a result of it. But I would say we're maybe middle innings, a little past the [indiscernible] on that work.

Okay. Terrific. Well, I think that brings us to the end of our time. So thank you very much. Really appreciate you being here. Thanks for [indiscernible]

Thank you, Joe. Thank you all.

Good day, and thank you for standing by. Welcome to the First Quarter 2026 Hubbell Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

Now it's my pleasure to hand the conference over to the Senior Director of Investor Relations, Dan Innamorato. Please proceed.

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the first quarter of 2026. The press release and slides are posted to the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker; and our CFO, Joe Capozzoli.

Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and considered and incorporated by reference on this call.

Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides.

Now let me turn the call over to Gerben.

Great. Thanks, Dan, and good morning, everyone, and thank you for joining us to discuss Hubbell's First Quarter 2026 results. Hubbell delivered strong financial performance to begin the year, with double-digit growth in sales, adjusted operating profit and adjusted earnings per share. Organic growth of 8% in the first quarter was driven by double-digit organic growth in our Electrical Solutions segment as well as our grid infrastructure businesses within the Utility Solutions segment. Our core utility T&D markets remain strong with highly visible load growth, driving continued strong demand in transmission and substation markets and aging infrastructure resiliency investments, driving strong demand in distribution markets. Electrical Solutions growth continues to be driven by strength in data center and light industrial markets enabled by our leading brands and continued success in our strategy to compete collectively in high-growth verticals.

We are raising our full year 2026 outlook for total sales growth, organic sales growth and adjusted earnings per share this morning as we are confident Hubbell's strong position in attractive end markets and continued execution of our long-term strategy will enable us to execute through a dynamic operating environment.

Before I turn the call over to Joe to walk you through our financial performance in more detail, I would like to highlight an emerging growth opportunity for Hubbell in high-voltage transmission, a long-term mega trend that sits squarely in our core, and we are demonstrating early success in a multiyear investment cycle. As background, 765 kV transmission represents one of the most efficient methods to move large amounts of power over long distances in order to accommodate accelerating electricity demand from electrification and load growth. Operating transmission lines at higher voltages enables utilities to deliver more power per line with lower losses and fewer space requirements. For Hubbell, high-voltage transmission represents a significant multiyear opportunity which is largely incremental to existing strength in traditional 345 kV transmission markets.

Our leading position and strong customer relationships position us well to capture this opportunity and we are demonstrating early success with several key project wins supporting this initial phase of high-voltage transmission buildup. Additionally, our portfolio depth and breadth positions us as a preferred partner who customers can trust to provide a full package of critical components. This solutions offering enables high service levels and reliability while driving installation efficiency and ease of doing business for our customers. We are actively investing to support future growth in this market, including development and testing of new product offerings in collaboration with major customers as well as in capacity expansion investments. Overall, we believe 765 kV transmission represents an addressable market opportunity of approximately $1.5 billion over the next 10 years and we believe we are well positioned to serve this attractive long-term investment cycle.

With that, let me turn the call over to Joe to provide more details on our financial results.

Thank you, Gerben, and good morning, everybody. I am starting my comments on Slide 5. Hubbell's first quarter financial performance was strong, with double-digit growth across sales, adjusted operating profit and adjusted earnings per diluted share. Net sales of $1.517 billion in the first quarter of 2026 increased by 11% compared to the prior year driven by 8% organic growth and acquisitions contributing 3%. Consistent with our fourth quarter 2025 performance, both Electrical Solutions segment and grid infrastructure products within our Utility Solutions segment delivered double-digit organic growth in the first quarter, partially offset by anticipated softness in grid automation. Acquisitions contributed 3 points to growth in the first quarter with DMC Power off to a strong start and integrating nicely within our T&D business.

From an operational standpoint, Hubbell generated $301 million of adjusted operating profit in the first quarter, representing 18% growth versus the prior year with adjusted operating margins expanding 110 basis points year-over-year. This improvement in adjusted operating profit and adjusted operating margin was primarily driven by strong volume growth in high-margin businesses. While cost inflation accelerated against 2025 exit rates, as anticipated, our pricing and productivity actions continue to keep pace, more than offsetting those higher levels of inflation on a dollar-for-dollar basis in the first quarter.

We also accelerated our investment levels in the first quarter, as previously communicated, most notably to expand capacity in high-growth areas and generate future productivity. And as anticipated, we invested $7 million in our restructuring and related program to further streamline our operational footprint, primarily within our Electrical Solutions segment which as a reminder, R&R is included in our adjusted results.

Adjusted earnings per diluted share were $3.93 in the first quarter representing a 16% increase versus the prior year, driven primarily by adjusted operating profit growth. Below the line, higher interest expense associated with borrowings from the DMC acquisition, and a slightly higher year-over-year tax rate were partially offset with lower share count as a result of prior repurchase activity. Additionally, we repurchased $168 million worth of shares in the first quarter at a dollar cost average below $500 per share. We expect the net impact of these repurchases to be neutral to 2026 earnings as a lower share count will be offset by higher interest, but the repurchases of shares at attractive valuations is expected to provide us with earnings accretion in 2027.

Our balance sheet remains strong and is poised to invest on behalf of our shareholders. Our primary focus remains on internal reinvestments and acquiring differentiated businesses to bolt on to attractive areas of our portfolio. The pipeline of opportunities remains healthy and active, and we continue to remain disciplined in our approach. Share repurchases represents an additional lever that we can and will utilize to return cash to shareholders over time.

Turning to Page 6 to review our performance by segment. Utility Solutions delivered another strong quarter with double-digit growth in sales and adjusted operating profit. First quarter performance overall reflected a continuation of the momentum we realized exiting 2025, with overall drivers very similar across end markets. Utility Solutions generated net sales in the first quarter of $949 million, which represented growth of 11% versus the prior year, and includes organic growth of 7% and acquisitions contributing 3%. Organic growth of 7% in the first quarter was driven by 12% organic growth in our larger, higher-margin grid infrastructure business, where demand strength was broad-based across T&D end markets. Utilities are investing at heavy rates and demand for Hubbell solutions to serve the expanding critical infrastructure needs of our customers is driving continued momentum in orders and providing visibility to further strength over the balance of 2026.

As we will highlight in a few minutes, we now anticipate our Utility Solutions segment to deliver high single-digit organic growth on a full year basis. Outside of our core T&D markets, telecom and gas distribution grew attractively in the first quarter, while meters and AMI markets remained weak as anticipated. While Grid automation organic sales declined 7% year-on-year in the first quarter, sales increased slightly on a sequential basis. We remain confident that meter and AMI markets have stabilized and we anticipate easing comparisons and continued strength in Protection & Controls products will enable grid automation organic sales to return to slight year-over-year growth in the second quarter.

Operationally, HUS delivered $207 million of adjusted operating profit in the first quarter, representing 21% growth in adjusted operating profit versus the prior year with adjusted operating margins expanding 190 basis points year-over-year. Operating profit growth was primarily driven by strong volumes in high-margin grid infrastructure products, favorable price/cost productivity and acquisitions, which were partially offset by grid automation volume's decline.

Moving to Page 7. Electrical Solutions results were also strong in the quarter with double-digit growth in net sales and adjusted operating profit. For the first quarter, Electrical Solutions generated sales of $568 million, which represented growth of 12% versus the prior year. Organic growth of 11% was again driven by strength in data center and light industrial markets as well as solid nonresidential growth partially offset by softer heavy industrial markets. The Electrical Solutions segment achieved approximately 40% growth in data center markets in the first quarter, driven by strength in both balance of system component demand as well as sales of our modular power distribution skids. Data center order activity remained robust in the first quarter as build-out activity continues to accelerate across hyperscaler and colocation customers, providing enhanced visibility for us to increase our full year outlook in data center markets to more than 25%. Broader light industrial markets remain healthy as solid U.S. manufacturing activity generated demand for electrical components and our strategy to compete collectively in vertical markets continues to drive our growth.

Operationally, HUS delivered $93 million of adjusted operating profit in the first quarter, representing 10% growth in adjusted operating profit versus the prior year, reflecting strong volume growth. Adjusted operating margins of 16.4% were down 30 basis points versus the prior year, as benefits from volume growth and the associated operating leverage were offset by higher investments in restructuring and growth initiatives. As you'll see in our press release financials, within the Electrical Solutions segment, we invested $6 million in restructuring initiatives in the first quarter of 2026 versus only $2 million in the prior year which impacted year-over-year margins by approximately 80 basis points as we execute on footprint optimization projects, which we are confident will continue to drive long-term productivity and margin expansion. Price realization remained strong, which combined with productivity more than offset cost inflation on a dollar-for-dollar basis in the first quarter.

Turning to Page 8 to discuss our full year outlook. We are raising our full year sales growth outlook to 8% to 11% and our organic sales growth outlook to 6% to 9%. This represents an increase of 1 point to the lower end and 2 points to the higher end of our prior full year outlook and is driven by both incremental price realization to offset increased inflation relative to our initial outlook as well as enhanced visibility to continued demand strength in our T&D and data center end markets. Operationally, we anticipate double-digit growth in adjusted operating profit at the midpoint of our guidance range for 2026 driven primarily by strong sales growth in high-margin areas of our portfolio. We remain confident in managing price cost productivity to neutral or better on a dollar-for-dollar basis over the full year. So the math on higher inflation as well as planned investments to support accelerated growth initiatives results in a slightly more modest outlook for the full year margin expansion versus our initial outlook.

Below the line, we anticipate that lower share count of 53.1 million shares on a full year basis will be fully offset by higher net interest, while our assumptions for the other expense and tax rate remain unchanged. Overall, we continue to anticipate at least 90% free cash flow conversion on adjusted net income in 2026, and we are raising our full year adjusted earnings per diluted share outlook to $19.30 to $19.85 per share.

Now let me turn the call back over to Gerben to give you some more color on our confidence to deliver on this increased full year outlook as we continue to navigate a dynamic macroeconomic and geopolitical environment.

Okay. Thanks, Joe. Turning to Page 9 then and concluding our prepared remarks, while the current operating environment poses macroeconomic and geopolitical uncertainty, as well as dynamic inflationary and supply chain conditions, we are confident in our ability to deliver on an increased organic growth outlook while continuing to manage price and productivity in '26 and beyond.

From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as utility T&D and data center CapEx, where secular growth is being driven by long-term investment cycles. Our recent order patterns and key project wins, along with customer conversations around long-term investment planning are providing us enhanced visibility to continued strength in these end markets.

From a price cost standpoint, while inflation has increased relative to our initial full year outlook, we have implemented additional price and productivity actions, which we are confident will offset and we anticipate that recent updates to various tariff frameworks are largely neutral to our existing tariff cost structure. Overall, we have demonstrated our ability to manage through an inflationary environment successfully over the last several years, and we are confident in our ability to continue to do so in 2026 and beyond.

While we are closely monitoring macroeconomic and geopolitical conditions, our short-cycle demand is holding up solidly, and price and productivity across actions are being realized. Hubbell's portfolio is well positioned with more than 90% sales exposure to the U.S. and over 2/3 of our portfolio exposed to secular growth markets in data center and utility which we anticipate will continue to perform well through a broad range of economic environments. In short, we are confident that Hubbell's leading position in attractive end markets as well as continued execution on our long-term strategy will enable us to deliver attractive financial performance over both the near term and long term.

With that, let's turn the call over to Q&A.

[Operator Instructions] One moment for our first question. It comes from Jeffrey Sprague with Vertical Research.

I was wondering if you could provide a little more color on the high-voltage transmission outlook. Just the level of project rollout there, how you see that pacing in? You gave a little bit of color there, obviously. And is that $1.5 billion TAM all incremental relative to your prior view on the market? Maybe we could start there.

Yes. Maybe I'll start overall, Jeff, with transmission and substation, I'd probably categorize in that same area is that's continuing to do really well for us. We're communicated high single-digit growth there. And certainly, I would say we're off to a very good start against that background. Particularly the comments around 765 kV, it's the ability for utilities to bring more bulk power into areas where they're needed. There's a very efficient way to do that. We have some lines in the U.S. that were built, I think, over 20 years ago, that for 765 kV. There just wasn't a need for it. And I think that's becoming very clear right now that the ability to drive more bulk power is actually a very efficient way to do so. We are very well positioned. We have products today that can serve it already. We've won a couple of orders already in this. We're continuing to develop products, and these are just taking it to the next higher voltages. We were able to do that with our capabilities, certainly with our labs. So I'd say very well positioned. And we look at this truthfully as incremental, Jeff. We see this as upside to what's already needed. Any time you have a 765 kV, you need off ramps for that, right, where you take the power down, think highways and offshoots of that, off ramps with substations and then you step the voltages down. So we think it's an upside problem. And we think it can drive a point of growth above what we're currently projecting with transmission already.

And it sounds like you don't see this squeezing out spending elsewhere. There's obviously been a little bit of concern that all the generation spending may eat into T&D spending call in the kind of the core distribution side of the business also growing at a stable rate?

Yes, you needed both, Jeff. That's why we don't see it [ calling out ]. Certainly, we're not seeing that in the projects that are ahead of us that the orders that we're winning. I mean it's a logical question, certainly to ask is how far can budget flex up. But you see, too, that utilities are continually increasing their CapEx budgets. And I think that's a reflection of acknowledging and realizing that you really need to spend it on all these areas to get the outcome you need.

Our next question comes from Julian Mitchell with Barclays.

Maybe just a question, please, around how we should think about operating margins through the balance of the year and the operating leverage kind of cadence, if that's changed at all versus prior thinking, please?

Yes, as far as the operating margin goes for the year, we're really looking at the full year with a 20 basis point margin expansion, and that's going to lean a little heavier towards utility with more expansion and about flattish on electrical. As the year progresses, I think we see the utility side of margin expansion being pretty consistent. And certainly, on the electrical side, we see a little bit of headwind just on the year-over-year comp from last year's second quarter in electrical and the back half probably flattish. So that's kind of how we're thinking about margin for this year.

Keep in mind, there's a lot of inflation that's come on. And as we cover that inflation with price and productivity, that is certainly margin dilutive. So in our 20 basis point of margin expansion at the midpoint of the guide, there's about 1 point of dilution just from that price cost math.

That's helpful. And then maybe just my follow-up on the thoughts on sort of first half and sort of second quarter. Maybe I missed it, but did you clarify the sort of share of earnings in the first half? Is it still mid, high 40s. And so we're looking at kind of a 5, 20-ish EPS for Q2. Any pointers on second quarter or half's phasing, please?

Yes. So second quarter, so we would think about normal seasonal setup for this year, and let's think about that on the sequential. So typically, with our strong orders coming through first quarter, what we would anticipate a second quarter step up like we would normally see high single digits organic growth. And add to that, we're looking at price cost productivity at about neutral on the dollars. And so that's really the constructive way to think about 2Q.

Our next question is from Tommy Moll with Stephens.

Sounds like versus last quarter, we're expecting more pricing for the year, perhaps also better volumes than originally expected. So I was hoping you could unpack that 6% to 9% organic for us. how much of that is price versus volume? And how do those compare to what you provided last quarter?

So coming into the year, we were anticipating about 2 points of price, and the majority of that was coming from wraparound from actions that we had implemented last year. And as we saw some of that inflation, mostly on the metals side, copper, aluminum, steel in the first quarter, we went out with price actions in the second quarter, and that added about 1 point to our full year price outlook. So our full year 6% to 9% organic has about 3 points price, but with the rest being volume.

If you think, Tommy, about the way that, that price rolled on last year, the year-over-year are going to start to wrap here 2Q, 3Q. So we would anticipate that , that our contribution from price stayed as the year progresses and our contribution from volume growth kind of increases as we step through the year sequentially.

That's very helpful. I wanted to follow up on DMC. What update can you provide for us there? In particular, are there any elements that you're seeing unfold better versus worse than the original plan?

Yes. I would say, Tom, in DMC, as we stated, I think, in our last call, off to a really good start. I mean is squarely in the area of where the highest investment is going on in the utility, which is transmission and particularly this is a substation application. So I would say so far, it's meeting and even exceeding a little bit our expectations. It's also an area where we're really focused in adding capacity. I think our ability to get more out of that factory this year and next year is perhaps more a function of our ability to get capacity in place because orders are really support it. So we're very, very pleased with it. And as we are with the systems control is another acquisition we did last year also in this space and with very similar dynamics of good demand and need to add capacity. We're very pleased with them.

Our next question comes from Nigel Coe with Wolfe.

Just want to go back to the margins. How is the Section 232 tariffs sort of changing the landscape and maybe talk about both businesses? And I believe that you were utilizing U.S. Steel down in Mexico. Just any more color there would be helpful. And any thoughts on how to think about margins by segment as well?

Sure. So starting with the tariff, I'd probably start just answering it maybe more broadly with the events of tariff changes in the first quarter, of which, yes, 232 was a piece of what changed. We also saw the repeal of IEEPA. We saw 122 come online, and we saw some of those changes in 232. But the sum of all of that is about neutral to us for the year. So that impact was not significant. We were paying 232 going back to Liberation Day. So 232 with that -- with product lines that would have had U.S. melted steel the changes there were entirely offset by some other impacts on some other product lines. So overall, not significant.

On the -- your question about margins quarter-to-quarter, we have about 20 basis points of expansion embedded in the guide at the midpoint for the full year. The margin expansion is going to lean more heavy towards utility, and that utility is looking at margin expansion pretty ratably across each of the 4 quarters. Electrical is a little bit of a headwind on the margin in the first half of the year, and that normalizes in the second half of the year to get to about flattish on the full year margin for Electrical. That's how we see that.

Yes. That's great color. And then just a quick follow-on, maybe on the back of Jeff's question on transmission. Obviously, very healthy growth, very sort of vibrant end market. Some of the big players in that space, [indiscernible] are growing strong double digits in transmission -- group transmission. So I'm just wondering do you see scope for that to -- for this -- for your business to get up to those kind of levels? And is the scope of your content increasing with time?

Yes. I would say maybe on the first one on the scope. So we continue to develop products. We continue to do acquisitions in both the DMC and system control are two examples where scope is increasing if you have additional product lines. But also as you look at where the voltages go. So when we talk about 765 kV, our content on that per mile would also go up slightly from the lower voltages. So I think in net, both on what we're adding to the portfolio and kind of where the investment is going in, it does increase our content a little bit. So certainly, what we're seeing is double-digit growth. Our scope is broad. And we serve the majority of right, if you think about the transmission line, 85% to 90% of material that goes up on that research. So I wouldn't say we're going to get our fair share of that growth specifically how maybe [indiscernible] generator assets short term, it may be a little harder for me to comment on that dynamic. But I would certainly say we will participate and get our fair share of the build-out.

Our next question comes from Joe O'Dea with Wells Fargo.

Just wanted to touch on grid infrastructure growth expectations throughout the year. Is it reasonable to see something like low double-digit organic through the first few quarters of the year? I think the comp gets a little bit tougher as you get into the end of the year, so maybe that's more mid-single, high single-digit. And along with that, just any color on electrical distribution, understandably the transmission and substation is sort of driving strength, but just what you're seeing on the distribution side.

Joe, I'll take the first part of that question on the utility organic, and you are thinking about it the right way in terms of mid- to high single-digit organic growth as the year progresses. And that we're anticipating is going to be pretty consistent Q2, Q3, Q4.

Yes. And maybe on the distribution side of it. Yes, we've been talking for this for quite some time now is what's driving the need to invest there. And a lot of it is driven by just upgrading and resiliency of the grid. We felt last year and the last couple of years really with the destock where we talked about that underlying demand was still solid, but we're dealing with something very specific. So I think that's proving out now with the destocking behind us that we're actually seeing the underlying demand. And the drivers of it are really continued hardening. I think it is slightly lower than the transmission and substation for the reasons that we thought of getting the power that's so needed in data centers and other areas. But we're very optimistic. And there, too, if we think about the start to the year, it's not just off to a good start in transmission and substation but distribution as well.

And then just on the timing of pricing and the impact on demand, I think that the price announcements in the quarter. Were those in place middle of the quarter, in place kind of beginning of the second quarter and really just around any influence on demand pull forward? It sounds like no incremental pricing required to tariffs. Think over the course of kind of what we're hearing through reporting season right now, there's some debate on what kind of pull-forward dynamics there were, but broadly across industrials, but the degree to which you saw any of that in the quarter, it doesn't sound like much sort of carryover impact anticipated throughout the year.

Price increases went in for us in the beginning of the second quarter. And that typically takes 30 to 60 days to kind of work its way through the backlog and to kind of get to a point of fully realizing that, the run rate of that new price. So that all sets in, in the course of second quarter. And we did not see any significant impacts or unusual behavior with pull forward on demand. That order momentum that we've kind of seen continue going back to the fourth quarter, throughout the first quarter and into the second quarter here. Nothing unusual in terms of how that sets up around our price increases that we have implemented. Price increases so far have been sticking, conversations with customers have been very constructive. And the basis for our price increase has been around metals. And that metals inflation has been very visible and very well accepted in the channel.

Our next question is from Chris Snyder with Morgan Stanley.

I wanted to ask about data center. Obviously, came through really good 40% in Q1 and you guys did raise the full year data center guide now, I think, over 25% previously, up 15%. So I guess my question is, is this new 25% plus, is that basically all of your available capacity? Or if demand strength is sustained, is there opportunity to ship more this year?

We spend a lot of time, Chris, on that topic with all the activity and the significant demand that's out there in data center. You'd recall that we've got roughly half of our data center exposure is in our long-cycle power distribution modular skid business for which we've got good visibility to demand. Orders are booked out through the year and there's little incremental capacity, and that feels pretty well situated and that was well situated in our original guide. So no real change on how we're thinking about the long cycle piece.

On the short-cycle book and bill side, we do continue to see strong order demand coming through. We continue to add capacity in that space. Every quarter, we're adding more and more capacity and we continue to add inventory to every extent possible so that we've got stock on the shelf for that short cycle, book and bill side of products that are needed for data center. So we think we've got a little more capacity. And again, we continue to invest in that productive capacity coming online, and we'll continue to do that as the year unfolds so as to increase our capacity and serve that growing demand.

I appreciate that. And then I wanted to follow up on price cost. It seems like a year ago, you guys led on price cost and then over time into Q1 the cost inflation caught up and that was kind of maybe netting you closer to neutral. I mean, I guess, let me know if that's wrong. But I guess the question is, is that -- should we expect the same thing into this next round of price increases, like you guys will lead a little bit off the bat because you're now [indiscernible] and then it catches up a little bit in maybe 2, 3 quarters out?

You're definitely right in your first comment in terms of how last year played out. We were ahead of price versus cost, dating back to Liberation Day, tariffs and that benefit of being ahead kind of situated in the second quarter of last year, and we continue to run positive on PCP in each of the quarters of 2Q, 3Q, 4Q last year. We were positive PCP on a dollar basis to start this year, and we're anticipating to manage that equation on a dollar neutral or better basis. That does have an impact on margins, as you know, that math well. So do we think we can continue to hold the line on margin neutral on price cost? No, I think that was a little beneficial to us last year, but we're very focused on managing to positive or better and driving that double-digit operating profit growth for this year.

Our next question is from the line of Chad Dillard with Bernstein.

My question for you is on Aclara. Can you talk about the sales in the quarter and how that's turned sequentially? And then just more broadly, how that business is positioned for AMI 2.0? And how should we think about when that cycle kicks off?

Yes. And maybe I'll start, as you know, Aclara, is part of the grid automation business, and that business continues to inflect up. We're down. The decline started to shrink. And while we still are a little bit down year-over-year, in the first quarter. As we communicated, we expect that to start turning to growth. But if [indiscernible] and specifically to your question of Aclara versus the rest, clearly, Aclara had been declining higher while the other part of the business was growing and I think what you have seen is that the Aclara decline is just starting to get smaller and smaller. And we still, in the first quarter saw a decline in that business. And as you look ahead, that is an area that's been more challenged as utility, and it maybe goes back a little bit to Jeff's very first question of how our utility managing budgets and our view in certain indications with conversation is that the are deselecting this a little bit over the other areas of investments, while we've seen lesser projects come through. But the challenge for utility is going to be -- this equipment is going to fail at some point, right? The life span of this is not in the range of what our component technical components are. So what we're seeing is more projects discussions right now. We're quoting more projects. We recently won a pretty nice piece of business that's multiyear. So I think from where we sit today, where this business decline, we should expect going forward to start seeing this business realizing modest growth. But we feel it's been -- it's stabilized, and maybe that's another really important that we've seen the bottom. We're now starting to come up, we're not super expecting great growth rates, but the dynamics are such that this business should grow from here.

Great. That's helpful. And then moving over to grid infrastructure. I know in the past, you guys have talked about your order rates within distribution. I was hoping you give an update on how those trended for the quarter? And then can you maybe break down how much of the demand that you're seeing is restock in the channel versus just like pure sell-through in to the end market?

Yes. Maybe start with the second one that our view is that the demand is what's going up on infrastructure and not going to stock. And we talked we're off to a good start on revenue, and that's, of course, driven by order rates and that's on both the electric and utility side, but particularly to DMD, also up nicely in the quarter. And for us, I mean, we generally don't talk about book and bill a lot because it's about order rates. Because we're more short-cycle business. Our orders were up over 1, that's not atypical in the first quarter where people are starting to get their orders in to get ready for construction season, and that's typically a little bit over 1 where we're up stronger over that. We're closer to start off the quarter. I'd say that's both a mix of short cycle, our book and bill that was solid as well as projects. We talked a little bit earlier about some of these projects. So we feel really good about the start to the year, and it's what's driven us to raise our organic guidance. I realize there's a piece of that that's price, but there's a piece of that's volume as well. So we feel really good about how we started the year, and we don't see -- as a matter of fact, we see continuation certainly of this. So nothing unusual in it.

Our next question comes from the line of Scott Graham with Seaport Research Partners.

I was just wondering, you've got a global manufacturing footprint, global company. With inflation higher with some of these geopolitical uncertainties, how is your supply chain behaving? Are you getting what you need? Are you getting any pushback in any corners? I think I heard Joe say no, not yet on pricing, but we are starting to hear enough is enough, some corners are pushing back on pricing in different markets. How is your supply chain behaving overall? And then I'm hoping to the follow-up would be, how is your acquisition pipeline? Is there anything? It looks like you're pretty balance sheet is very lean right now. And I was just wondering what the outlook was for 2026. Anything you can say?

Scott, maybe I'll take the first one, and I'll hand it to Gerben for the second. So on the supply chain front, so we're not seeing any significant impacts or constraints on the supply chain side. I'd say what would be more noteworthy as over the course of the last couple of months with some of the disruption over in the Middle East. We did have a little bit of aluminum that we were purchasing out of that region. It would be a noteworthy area. We do have other qualified sources of supply around the globe. We were able to move that to other suppliers. And we weren't at the end of the day, impacted by that, but it was something we had to address. We're not seeing constraints in other areas, yet chips or metals or component parts of any substance. So I would say the supply chain as we see it right now is holding up well and supporting what we need to do to service our customer demand.

And let me take the second one on M&A. You're right to point out that our balance sheet certainly supports doing acquisitions at larger scale than perhaps we were able to afford in the past. And if we look at the -- maybe even before we look at the pilot, we are focused clearly around the core areas of our business. So if you think anything in T&D, if you think about things around the data center, if you think lines around our light industrial markets, those are all areas that we find very attractive. And they're still based on our pipeline of deals that we're looking at plenty of opportunity to deploy our capital there.

Of course, timing isn't always very predictable. But you've also seen and Joe highlighted what we did in share buyback during the first quarter that in periods where perhaps there is a little bit of a void in acquisitions. We think utilizing our balance sheet to do buybacks is an other attractive area to deploy our capital. Of course, our highest preference goes to CapEx, and we're certainly have increased debt. And based on some of my comments of areas where we're investing, you should expect to continue to see that elevated. The second one being M&A. And I'd say there's a good pipeline there, both of what we call maybe the bolt-ons, even though sales are getting larger as well as larger deals. And then we have buyback as an option. So we see within those areas that we could fully deploy our balance sheet.

And our last question comes from the line of Neal Burk with UBS.

I wanted to come back to the high-voltage opportunity through 2035. Apologies if I missed this, but is the $1.5 billion opportunity relative to Hubbell's $400 million, $500 million transmission business today? I just want to get a sense of how to think about the growth opportunity.

Yes. So if you think about that math a little bit, I'll help you, it represents about 7,000 miles of high-voltage transformation how we get to the $1.5 billion with our content. And that's over 10 years. And who knows if that's longer or shorter. But if you use that as a basis, and then we're not the only participant in that. So we certainly have a very good position in that market with our customers. But if you add all those things up, we believe it can drive a point of growth above the high single digits that we provided for transmission substations in the absence of it.

That's helpful. And yes, the RCO ISO recommendation for 7,000 miles. I mean I think there are a few hundred thousand miles of high-voltage transmission in the U.S. overall. So I mean, could that be more market opportunity if there's increasing content of 765-kilovolt in the U.S., like on top of that $1.5 billion? Or is it sort of too early to say?

I think the $1.5 billion was related to high voltage transmission overall, Neal. And so obviously, there's a baseline market transmission, that's also growing strongly, as we said. And so not sure what the question was driving that.

Thank you. Ladies and gentlemen, this concludes our Q&A session. I will turn the call back to Dan Innamorato for closing remarks.

Great. Thanks, operator. Thank you, everyone, for joining us. We'll be around all day for follow ups. Thank you.

Thank you. And this will conclude our conference. Thank you for participating, and you may now disconnect.

All right. We'll move on -- after Jamie's scintillating fireside chat. We'll move on with Hubbell. Joe Capozzoli, CFO; and Greg Gumbs, who runs the Hubbell Utility Solutions business. So a great one-two punch here from finance and a real growth business right now in utility.

Maybe just -- Joe, maybe just talk about the near term. You guys are mostly U.S., but I'm kind of just getting the Middle East vibe from every company and what you guys are seeing, if there's anything on the radar from that perspective? And then just kind of a standard update on anything you're seeing quarter-to-date in fundamentals.

Sure. Very, very heavy U.S. presence, as you pointed out there and limited exposure to the Middle East, a little bit of supply that comes out of there, aluminum, the shipping lanes impact us and ocean freight, things of that nature of tentacles, but it's pretty limited for us overall. Generally...

Are there -- mic, maybe you want to get a little closer to the mic.

Yes. Can you guys hear us? Okay. Great.

So...

Is that better, Scott?

Yes, sir.

Okay.

Overall, strong fourth quarter exited 2025. We had seen a really nice inflection in our incoming orders, primarily in our utility T&D business, which delivered a strong fourth quarter, was a good setup to begin this year. And we've seen some really nice momentum from that incoming order rate, utility T&D, data center, light industrial, that momentum has carried on nicely into the first quarter. So overall, a nice solid start to the year and very much in line with how we had provided our outlook about a month ago. I'd say not a whole lot is new since then, given a little bit of incremental inflation that we saw in the beginning of the year, metals, we talked about some of the geopolitical conflict and a little bit of inflation there. But overall, nothing that we can't manage. We did go out with a first quarter announced price increase that will kick in, in the second quarter and something that will be very important for us just in managing price/cost productivity over the course of the year.

What's the magnitude of that price increase? And is that kind of your normal -- well, I guess, normal is a relative term these days, but it's what -- how does that cadence compare to what you've done in the past?

I would say it's consistent with the multiple waves of price increases that we rolled out last year as we were addressing inflation. We came into the year with about 2 points of wraparound price. And with some more of that inflation settling in, in the first quarter, maybe there's another point or so that we add to that to the year. So overall, we feel pretty good about navigating this year.

And is that incremental price, do you target that to be margin neutral, dollar neutral? Just remind us, I mean, the accounting has changed a little bit. So how does that filter in ultimately to margins and the bottom line?

So we're going after dollar neutral or better, and that typically mathematically will have a little bit of a drag on the margin, but we're very focused on the dollars.

And as far as the other parts of the portfolio outside of T&D, just general industrial economy, what are you seeing there? Normal seasonality, a little bit better, a little worse? What -- how do you -- how does the general economy outside of the growth areas feel to you?

It's been solid for us, in particular, across -- broadly across industrial. Light industrial is a little better for us as we define it versus heavy industrial. Heavy industrial has been soft for a couple of years. A lot of that exposure is in steel mill, heavy industrial, transportation, pockets of oil and gas, mining and minerals, things of that nature. That's been a little soft, and we are anticipating that to continue to be soft. But our light industrial side is -- has been pretty solid. It's been solid for a couple of years now and some tailwinds from some mega projects and reshoring, things of that nature, they continue. So we're pretty positive on the light industrial side.

As we move into the rest of the year, do you view the year as being kind of normal seasonality off of the first quarter? Or are there any kind of seasonal fluctuations we should keep an eye on given maybe timing of projects in T&D or data center or things like that?

Yes. Generally, I would say it's more normal seasonality off of the first quarter. There are some minor pockets where we're continuing to add capacity, where we've got areas of high visibility, demand and growth and we continue to bring new capacity online. And as that capacity comes online, you naturally have a little more volume coming on the back half of the year in support of that capacity. A few projects in the back half of the year, but it's not anything that's really going to tilt that normal seasonality in a meaningful way.

And I understand the first quarter is maybe a little bit better than normal seasonality given the order strength coming out of the fourth quarter? Or are you planning the first to be in line?

Yes. I think the first quarter will be largely in line. We typically see a flattish revenue sequential from 4Q to 1Q, and that's very much what we're anticipating here. That will present a nice year-over-year growth for the first quarter, and we would continue to grow off of that base.

What's the rough year-over-year in the first quarter again?

High singles.

Cool. Organic high singles. Towards the higher end of the full year range, high singles. Okay. Sounds good. So let's talk about where all the action is on the utility side. Talk about the different parts of the business and how those orders are kind of differentiated currently.

Yes. As Joe alluded to, we rounded the bases in fourth quarter with relatively good inflection in orders. Last year, we kind of went through the whole destocking. We lived through a bit of that on the utility side of the business. For T&D, I would say we've continued in the first quarter with orders inflecting up to the right, very strong. So super bullish on the T&D side. I'd say grid automation is still a bit flattish largely on the back of Aclara and meters. So we're still living through a bit of a project roll-off cycle in the meters business, but that's coming to an end, say, into the end of Q1 into Q2. And so we'll start seeing that turn to modest growth in the back half of the year. But all in all, I mean, across all the businesses, Joe and I were just talking about it this morning, we're seeing order strength continue off of a good finish in the fourth quarter.

Can we expect the book-to-bill broadly for utility systems to remain above 1 in '26?

Yes. When you break it down in parts of the business, I'd say Aclara is probably right at 1. The core T&D franchise is above 1 right now. And we'll see how things play out. It's still early innings, but we feel really good about what we're hearing and what we're seeing in terms of our book-to-bill rates coming in.

Can you maybe talk about the differences between the transmission and substation stuff and then the more distribution-related MRO side? I know that's the distribution-related MRO has kind of gone through some waves. It doesn't -- it's not quite getting the love from a budget perspective as they really spend a lot on the T and the D especially. Maybe talk about if there is still bifurcation there.

Yes. From our point, super strong on book-to-bill MRO coming out of the gates this year. We don't see any sign of that slowing down at this point. Like I said, we've kind of gotten all of the inventory normalization out of our system. And so we really like what we're seeing right now in terms of order inflection on the book-to-bill side for MRO. T&D, I would say on the transmission and substation side of the business, high double digits high single to double digits. We're seeing really good inflection in the project cycle of the business. A lot of big transmission projects coming through the pipeline, and we're well positioned on all fronts in that category.

High double digits or high single digits, low double digits...

High single...

High single digits.

Okay. Because high double digits -- for these data center numbers, high -- we get crazy with high double digits. It could be a big number. That's interesting. You're definitely more bullish on the MRO side than maybe I was expecting. What's happening there? Are they now shifting some budget back there on the OpEx side? Or what is -- what's driving it?

We think it's really a result of what we had anticipated last year, which was at some point, there was going to be a snapback once the inventories got cleared in the channel, and that's really playing out the way we anticipated it.

Wow, okay. So like a bit of a -- not a restock, but like a bit of a resumption of that buying that's snapping in. And you said that's a first quarter phenomenon?

That is a first quarter phenomenon, yes. And we're hoping it carries through.

Yes. No, that sounds super positive.

So off to a good start. We saw that inflection back in the fourth quarter. That's been nice momentum. I think our full year guide in the distribution and MRO was more like mid-singles. And we'll see how that continues to pace as the year progresses. But overall, as Greg noted.

Way to keep the expectations low and snap right in, keep the expectations low. He's smiling over there. On the Aclara side, you maybe sound a little bit more confident on the timing of those orders picking up. Is there something that's kind of happened in the budgets there or anything specific to Aclara?

Yes, I think just zooming -- backing off a little bit and talking about Aclara, we went through a little bit of a lull in that business for the last couple of years. And I'd say we've taken a lot of time during that period to kind of reposition the business to go after that down market, co-ops and munis. On the meter side, we're really well positioned when that replacement cycle kicks in. And quite frankly, we repivoted the strategy and redirected a lot of our MRO spend or our R&D spend towards projects in that sweet spot of the business where we feel like we've got the right to win and play, and we're seeing that come through in our pipeline. So we're seeing our order pipeline start to fill back up, but I would say you're going to see modest growth coming from Aclara in the back half of year.

And for the year, that can still grow moderately?

Yes, we think it can.

Okay. And is there enough behind that to kind of exit rate at a mid-single-digit rate into next year, you think?

Yes.

Okay. Can you just talk about the new product that we saw at DistribuTECH? I think that was related to Aclara. There's some...

So there's a couple of things. One...

Yes, there's some innovation there that I thought was pretty interesting.

Yes, LineDefender, which is a lateral protection device. We're already booking well ahead of our capacity in that product line. So when that product line hits the street, it's already booked out in terms of orders. And then on the software side, Aclara 360, that's an edge software package that we're selling to collect meter data and run some analytics on the grid. That package is all software related on the Aclara side of the business, we're seeing a lot of interest from the market there.

So a little bit of innovation on that side as well as a bit of a pickup should be pretty positive. And then the perpetual question on telecom. Are we seeing any pickup there? Are we just kind of like bumping along the bottom?

Actually I'm pretty bullish on telecom as well. We still think there's quite a bit of broadband spend that's going to happen. We're still -- we're not banking on it in terms of our plan, but we see BEAD funding coming through in the back half of the year as well. Similar to Aclara, we repositioned the Enclosures business when we went through that lull when all the telecoms customers kind of hit the brakes and stalled buying and ended up overbuying and buying a lot of inventory. We've cleared that through the system. We've gotten really well positioned in that business, and we're seeing that order inflect as well. Their orders are up double digits year-over-year off of lower compares. And we're being very selective about what we go after in the telecom space. So we like the business. It's contributing. It's accretive to the rest of the portfolio. And our Enclosures business, broadly speaking, in utility, telecom and civil construction is doing very well right now.

So is there anything right now in this portfolio that we didn't cover that's not getting incrementally better or accelerating? Doesn't sound like there's much.

I'd say all the businesses are getting incrementally better, still modest to flattish growth coming out of the Aclara side of the business.

Right. And maybe telecom as well, although it's off a low base, maybe that's a little better. Are there any bottlenecks with these projects on the T&D, the larger project side that you're seeing out there?

No. When we talk to customers and some of the EPCs that we're partnering with, the feedback has been speed and execution. It's all about quality. They're not really grappling hard on price. So we feel very well positioned there. We're specified in many cases. So if there's upside to be had, as long as those projects get funded and get deployed, we're going to be going to be in the ring.

And are you expanding -- sorry, go ahead.

Yes, I was just going to add, and it's probably where you were going on capacity, just in some of those areas where we've got higher growth pockets of the portfolio and as we continue to add capacity, naturally, growth comes with you've got to manage your way through it and you're bringing a whole supply chain along. And so just pockets of transmission and substation as we grow those businesses, just managing our way through growth. And it's not unnatural to deal with pockets of supply chain constraints or supplier delivery realignment schedules to keep up with our demand. And there's pockets of that, that's happening out there, but nothing that's really slowing us down in a meaningful way with normal growth.

When it comes to your capacity, is there any of like floor space being added? Or is it mostly if you have to crank it up, you're just add a line here and add a line there, hire a few people. What's the nature of your capacity additions?

A lot of our capacity additions are on existing roof line and our existing footprint. That tends to be our approach to adding capacity. We're adding new mold machines. We're adding new presses. Sometimes you're adding people to man those machines. We do have pockets where there's higher growth within switching and fusing, within transmission and substation, where we are adding on roofline to existing facilities. But I'd say that tends to be -- you're adding 60,000 feet here, 100,000 feet there versus 0.5 million square feet greenfield locations. That's -- there's none of that really...

Right. There are a few people out there that are adding 1.5 million. It's pretty crazy. And obviously, you guys are a different type.

And aside from just buildings and equipment, what I see is a little bit of a congestion in terms of hiring and onboarding in some of the high-growth areas. So that's one area we've been navigating through. But it's really access to labor is probably the biggest thing keeping us up in the high-growth areas of the business.

Yes. That makes sense. Can we -- so CapEx broadly kind of flat as a percentage of sales going forward?

Yes, flattish as a percentage of sales. I think we'll probably be up about 10% to 20% versus last year, but in and around the 3% of sales range is where we'd like to pace that.

Got it. And then just on the operating margin at utility. Obviously, it's been pretty strong. How do you expect that to trend this year? And any real moving parts around the -- I think the long-term guidance for the company like 50 bps a year?

Yes. So operating margin, you're right to point out that our outlook contemplates 50 bps of expansion at the midpoint. That's going to lean a little heavier towards utility, a little higher than 50 bps electrical, a little lower. And that does also contemplate some investments that we're strategically placing in both segments, a little more R&R investment that you'll see coming through in electrical and a little more growth-oriented support over in utility.

Is there a mix dynamic that we should consider in the utility growth? Like what's kind of the hierarchy of the richest mix stuff?

I'd say the core T&D franchise as that volume picks up, that mix is constructive to the outlook. With modest growth on Aclara, that helps as well because that's a lower-margin business. So overall, I think with the T&D inflection that we're seeing, that's very constructive to our margin outlook.

And is there anything that kind of flips in the second half, whether it's price cost normalizing? I mean you guys are a different accounting now, so it's not as volatile. Or should it be pretty steady progression over the course of the year?

I would say steady progression. The one thing that would pick up in the back half, typically the way we planned it out is our productivity initiatives. Those typically kick in, in the second half of the year. You're working on those projects in Q1, Q2, you start to see the benefits in the back half. So that will also be constructive to expansion.

We also think the accounting change of last year is much more constructive to how we run the business. It's much more constructive to how our channel absorbs price increases and the timing in which all of cost inflation and price recovery comes together. So -- but we don't feel like there's going to be much of an impact in terms of timing of price cost over the course of the year.

Right. Okay. Anything we didn't talk about on utility that we should hit on?

No, I can't think of anything other than with regard to Aclara, one of the reasons we're bullish about the outlook there, we just announced a very large meter deal. in the Philippines. I don't know if you saw that.

I'm not sure we picked that one up.

Yes. That's worth 10 million endpoints over the course of the next 10 years. So that's a big deal for -- in terms of front load...

What's the value for something like that?

I don't know that we put numbers out given the size of the endpoint count. But just suffice it to say, it's meaningful, and it's going to help us with regard to our front load for that business.

A nice steady piece of international business over the next decade.

Yes. Is that -- how international is that business? Like what's the percentage outside the U.S.? I thought it was highly U.S.

Relatively low. We've got a strategic partnership with Meralco. So we've done business with them for a long time in the Philippines.

Got it. So that's kind of a Hubbell-specific hotspot that you guys are leveraging.

It is.

Yes.

And it's been in the base. It's been in the run rate.

Got it. Okay. That's great. And it sounds like Aclara from a portfolio perspective, I think we had Gerben out last fall, and we kind of played a little ping-pong on strategic value of Aclara in your portfolio. It sounds like it is definitively a keeper for now as it improves.

Yes, in its current setup, we like what's coming down the pipeline, and we think it's going to be additive, not subtractive to the portfolio.

Okay. Yes, makes sense. Sounds super positive on the utility side. Where do you think we are in the spending cycle? What inning do you think we're in? I mean, I guess for MRO, we're kind of early. And then for the T, the more project side, where are we on in that spending cycle in your mind?

I think we're early on both of them.

Okay. Got it. All right. Easy enough. On to electrical, the rest of the portfolio. The renewables business is for many have been pretty weak. How is that looking for you guys?

Yes. It's not -- we're not dissimilar to others. The majority of our utility -- our renewables exposure is in utility scale solar. And over the last couple of years, it's been growing. It's been a little flattish last year. Obviously, policy has not been particularly friendly under this administration versus the prior. So we are seeing some of that cool off. We do talk regularly with our customers and the projects that are in the pipeline right now, and there's still a healthy amount of work that's in the pipeline running out. But overall, in the longer term, I think we see utility scale solar being an important component to source of generation to satisfy low growth in demand. So we think it's going to be there longer term, but to what degree is kind of still TBD. But overall, well positioned to support and service, but I think we're not an outlier from some of the others you're talking about in that space.

Anything you do in and around battery storage and where would that be in the portfolio?

Yes, not much in there.

Okay. Got it. And the other businesses, I mean, you mentioned light industrial, a little bit better than heavy industrial, but you also have some construction exposure, some non-resi exposure, seeing anything there outside of data center, which we'll get to in a second?

Yes, not seeing a whole lot of uptick in nonres. Nonres has been flattish to low singles for us, and that's kind of contemplated in our '26 outlook. Conversations with the channel and with customers have been getting more and more bullish. But we're just not -- we're not seeing yet in a meaningful way in our incoming order rate. So we'll continue to remain cautious but optimistic, ready to service that demand if and when it comes. For us, within nonres, think about commercial, hotel, it's -- there's some transportation. There's some warehousing that runs through there. And on the institutional side is more like it's university and education, it's health care and there's some government. So been a little flattish for us. But again, we're well positioned once that picks up.

A decent amount of the innovation we talked about is it utility and putting data center aside. Anything electrical that stands out innovation-wise that you think is exciting and could be an incremental growth driver over and above the end markets?

There's a lot of singles that are queued up. The portfolio, I think on both sides has a really attractive portfolio over the next couple of years coming out. A lot of it is dedicated to some of these high-growth areas. Data center, I know we'll talk about that shortly. We've brought out a lot of new products in the renewable space and in some of our high-growth verticals. So overall, really pleased. New products are contributing roughly 1 point of incremental revenue for our portfolio, and we think that could grow in the future. But overall, we're pleased with the NPI program.

On the data center side, I think it's like a $250 million business in '25. Can you just split it down between the longer cycle modular kind of PCX business and then the other components that you sell in there. And they're obviously all growing fast, but like what are the differences between the trajectory in those 2?

So the -- they're split about half and half. The long-cycle modular power skid distribution business is largely that longer cycle business. We're booked out through 2026 with orders and capacity, and we're taking orders for 2027. And that business has been growing nicely for us, and we've got more visibility to that growth that it's locked and loaded in the backlog, and we're delivering against it. The other half is on the shorter cycle book-and-bill side, and that's primarily within our Burndy business, our wiring device business, where they're providing grounding systems, they're providing higher amperage pin and sleeve products and other connectors that you'll find in the data center. So again, that's been growing nicely for us as well. Short cycle, a quick turn in the book and ship side. So limited visibility to what the back half of the year or even into Q2 is going to look like. But overall, we continue to add capacity to service that demand.

And do you need to -- I guess, if you're booked out through '26, will you need to add more capacity to kind of grow in '27? I mean I'm sure we're talking about some pretty strong double-digit rates, the high double-digit rates, 30% to 40% in these businesses. Is that?

We can handle the growth in '27, we get beyond '27, and we're working through how and where to add that capacity out in '28 and beyond for the year.

Okay. And is that the right kind of rate of growth for this $250 million of revenues, like 30%, 40%-ish?

It depends. We'll see what comes. And they've been growing 30-ish plus or minus over the last couple of years, and we'll see what plays out.

And then I just wanted to pivot back to utility on data center. How much of the demand that you're seeing today do you think is directly whether it's a substation that has to be refurbed and upgraded because there's a data center right there, maybe you're doing even a little bit of on-site stuff you never would have really done. Like what -- how much of the business that you're seeing today in HUS do you think is directly related to hooking up data centers?

I'd say it's low. I'd say that's an area we're focused on right now, but I'd say it's probably less than 10%.

Yes.

If you think of substation that's probably 60-40 new versus MRO and a big chunk of that new projects would be data center related.

Yes. So just to repeat it, 60-40 for substation is new versus MRO and a decent amount of the new would be data center related.

Support data center.

Yes. And that would be for the substation business. Yes. Okay. Everybody got that? Well, we can connect afterwards then. As far as the margins are concerned in Electrical, you said a little bit below. I mean, they had a great run on margins. Are we now at kind of a more normalized rate of conversion in that business? Or is there still a lot of like low-hanging fruit, blocking and tackling related margin opportunity?

I think the low-hanging fruit has been picked, but I also believe that we are in the middle innings of that margin expansion story, and we've got room to continue to run. I think the best way to think about it is within the context of our long-term financial framework, think about our mid-single-digit organic growth, think about 25% to 30% incrementals running through electrical. And as we continue to drive more project work, restructuring, there could be a little bit more that comes on top.

Okay. And the inflation, just to kind of put a finer point, I think you said inflation was mid-single digit exiting '25. You're saying it may be a little bit higher than that. So you're going to get a little more price? Or are we still in kind of the corridor of what you had said for guidance. There's no real change in that.

Largely within the corridor of guidance. Last year, full year was mid-singles for which we covered with price and productivity. Our guidance was built off of, again, mid-singles, and we'll cover that with price and productivity. A little more inflation to start the year here in the first 90 or so days. And so we think we'll get a little more price and a little more cost inflation, but it doesn't change that -- the math there.

Okay. As far as the balance sheet is concerned, you guys do some episodic M&A. Any change in strategy there? How is the pipeline? And where are you guys looking to add from an M&A perspective?

Pipeline remains very healthy and active. We continue to look at those high-growth areas of our business, I think transmission, substation, light industrial, data center, grid interconnect are kind of our core areas of where we're targeting M&A. The pipeline is comprised of a mixture of small bolt-ons as well as some larger opportunities there. And timing of those is always uncertain as they progress. So we feel really good about the pipeline. M&A does remain a top priority for us as it relates to capital deployment. And our balance sheet, as you know, is very well positioned to do a combination of small and larger deals. So we're excited about those opportunities. Valuation has obviously clicked up over the last couple of years. We've also seen the quality of the companies in our portfolio or in the pipeline are also a little higher, higher in terms of growth, higher in terms of margin. So there is some justification of the premium multiples that we're seeing. But overall, we'll continue to be disciplined in our approach, but M&A remains a top priority.

I was a bit surprised with these substation assets that you guys bought and then nVent, I think, bought one as well, that the multiples were actually like reasonable there. I would have thought that right now with the growth ahead of everyone that those would have been a lot higher. What -- how do I kind of reconcile that those lower multiples? What -- I mean, they were like low double digit, which is kind of heard of.

I think the growth -- a lot of that growth is buyer has to go get it. Buyer has to go build and service capacity to go get it. So it's not like if they're coming online with tons of capacity that can swallow that growth over the next 5 to 10 years, you got to go add space.

Got it. So that's kind of the synergy as you guys coming in and driving the growth to make it an even lower multiple, which is pretty impressive. Is there a view that the HUS is really kind of getting all the love from a growth perspective right now? So you want to keep things balanced and maybe there are some opportunities and where other people are zagging you guys can zig and go to a little more on the electrical side or you're really kind of reinforcing the growth areas?

I think we are reinforcing the growth areas, but I also believe they are on both sides. Yes, the last several years, you've seen a lot of acquisitions over on the utility side. You've seen some dispositions and portfolio management on the electrical side. But as we go forward, I think you could see M&A on both fronts.

Yes. Do you -- is there an aim to keep it balanced or it's really whatever pitch, you're going to hit whatever pitch is coming your way?

Whatever is in the pipeline that looks really attractive and will be a good fit for our business.

Okay. Any questions out there? Scott? Scott? Yes. No, I was talking to you. How are you guys leveraging AI at the company? Is there any initiatives there, product development, back office? We just -- we're asking all the companies about how they're applying it.

Yes. Very early innings on the AI side. First was evaluating this technology and what can it do for us like realistically. And that was a lot of work we put into that last year. Second was establishing a secure environment for which we can put the right guardrails up to deploy this from a data security standpoint, and that's been completed. Right now, we've adopted a couple of enterprise AI solutions that are embedded within our existing technology stack. I think Microsoft Copilot, some of the other key areas of technology that we invest in our ERP and other areas are bringing embedded AI into the solution.

So we've been introducing those to our organization and training our organization, training our knowledge workers to adopt these tools to deploy them to their day-to-day work, and that's underway. And then we've been piloting some larger use cases to see if we can really put some of these capabilities to work. So starting with just a handful of use cases last year in the back half, proving them out, and we're starting to expand the use cases across our business. So we'd call it more of a marathon here than a 40-yard dash, but the marathon is underway, and we've started to invest in that in our business.

And anything really stand out as something that you've noticed that people are either using more of or where there's been like an interesting productivity angle any kind of early successes or wins?

Yes. One of our early use cases was turning quotes around much quicker using AI. And so where it used to take us weeks to turn quotes around and a lot of research and a lot of back and forth, we can do that work in a matter of hours. So turning quotes around very quickly is super helpful to our customers and helping us take business off the street. So again, things like that, Greg, would you add anything to your business?

Yes I think on the electrical side, they ran a competitive benchmarking, competitive analysis tool where cross-referencing using AI to a competitor's part number to our part number. They launched that on the electrical side of business. We're looking at a use case right now on chemical analysis for our MOB blocks to continue to improve and evolve the technology on the MOB block. And I'd say broadly, the organizations, if you look at our adoption rates of Copilot, which is kind of the entry level of AI, you're seeing adoption rates across the company climb, and you're seeing really good utilization out of that.

I think an IR avatar could be good. Can't -- hard to recreate that guy.

Yes.

Definitely cannot.

Not doable.

He is the best. He is the best.

We try.

Any else out there? Yes.

Just talking about [indiscernible] earlier on the price cost cadence. So just we have said expect strong start from a margin perspective based on an easier comp. And we did highlight second quarter of last year was a harder margin comp because of the accounting change. And so that's factored in the outlook as well and it kind of more normal in the second half.

And just remind us of what you had said on cadence for the year from a -- whether it was a percent of EPS or percentage anything you guys had said on the call, just cadence?

Yes, I think a normal seasonal year, right? And if you look at where consensus settled in so far for the early part of the year, I think that's consistent with how we were building the outlook, so.

Okay. Great. Guys, thanks a lot. Thanks for all the clarity and the numbers. Appreciate it.

Appreciate it.

Fantastic. Well, thanks, everyone, and welcome to the second session this morning. It's my pleasure to have Hubbell up here.

Gerben Bakker, President and CEO; Joe Capozzoli, CFO. So thank you very much, Gerben and Joe for being here with us this morning.

Maybe just kind of to launch into it. You had pretty good volume growth exiting 2025, up kind of, I think, mid-single digits is company-wide where you ended up last quarter. How sustainable do you think that type of volume growth is when you look at recent order intake activity and so forth?

Yes. We feel good about the exit rate from the fourth quarter. And our outlook for 2026 had contemplated about 5% to 7% organic growth, and we feel really well positioned entering this year to deliver that level of growth.

You're right to point out that there was a nice order acceleration as orders picked up late third quarter into the fourth quarter. And we've seen that momentum continue nicely to the start of this year. So overall, feel really good about how the year sets up on the organic growth side.

And when you think more structurally about the U.S. kind of electrical market and particularly U.S. electricity consumption, are you expecting an acceleration in U.S. electricity consumption in a meaningful way? Maybe help us understand if we see that, how does it kind of percolate down into demand for Hubbell's products?

Yes. Yes. Clearly, electricity is a big driver for all that we do and particularly our utility business. We are seeing a growth in electricity demand. It's for many, many years that load was kind of flattish and we've seen it more recently even before the data center boost that we're seeing kind of growing again, and that's clearly now being helped by data centers.

If we look at our business on the utility side, our transmission and substation business is seeing really nice growth, double-digit growth we saw last year. We see more of that this year, and that's really to help interconnect that grid and to help connect that load onto the grid and to the consumers.

And then if you look too on our electrical business, our exposure to data centers and the balance of systems components, our power skid business that's obviously directly related to data centers, which is driving some of that load growth. So I'd say it's -- load growth is definitely driving our business over the next couple of years. And our position is just really strong to support that.

And when you look at kind of electric utilities behavior, and it's hard to generalize because there's many different sizes and types of them. But if you look at kind of their behavior in aggregate, do you see much in the way of accelerated replacement activity of their grid network? Any sense of how they're thinking about balancing distribution spend versus transmission spend, those types of factors?

Yes. Yes. I'd say, there is more bias today to the transmission. And when we say transmission, call it transmission, but it's really transmission and substation and part of the portfolio. And that's about 1/3 of our portfolio is in that area. We've grown that quite nicely with recent acquisitions in that. And that's an area where utilities are really spending a lot of time and effort for that load interconnect that we benefit from.

But I'd also say on the distribution side, it's a very nice growth market for us as well. And if you think about what's driving that, it's the hardening, it's the resiliency that is needed on this very aged grid. So but I think there is certainly a biased towards transmission and substation where we're seeing double-digit growth. We see distribution kind of what we've guided at mid-single growth, also being driven by some of those needs.

And the other thing maybe that I'd point out is if you look at our portfolio, I would say we're equally well positioned in both sides of that business to serve our customers. So we're truly a little bit agnostic where the next dollar goes. If that goes into transmission or distribution, I think we benefit equally for it because I do think at some point, there will be more of a focus again to the distribution side, and we can serve that very well.

And then maybe even returning to that first question of electrical load growth. Another benefit truthfully of that is utilities are making more revenues and better profits. And when that happens, there is a tendency to reinvest back into that hardening of the distribution system. So these things are kind of a little bit circular helping each other, but it's definitely benefiting our business.

And if you think about that distribution portion, there was some noise the last couple of years around kind of restock, destock dynamics. Now it looks like it's on a more kind of stable footing in distribution. And just maybe help us understand what kind of medium-term growth in the distribution side you should expect now that, that inventory dynamic is behind us.

Yes. And indeed, that is, this is what we worked through last year. And I think as we saw the exit rate of '25, we really saw after we saw -- getting through that destock, actually, the demand flex up to what's really been put out on to the pole.

Our long-term view in here is from mid-single type growth. We do believe it's a little bit lower than what's on the transmission and substation side, but the need is really driven, again, what I said before, the need to invest in this grid is for us, a multiyear, I would even say, multi-decade. There is over 6 million miles of distribution out there to give you an idea, if all the roads, all the navigable roads in the U.S. is about 4.5 million miles. So it's about 50% more of that in distribution miles. And they're very aged. And so this truly will take decades to really work on.

A question we always get asked, could it be better? Could it be better than that? And I think there is periods that utilities are trying to prioritize. And I think right now, clearly, utilities are prioritizing getting load -- more load onto the grid. But the need on distribution, one of the measures on that is even reliabilities, right? It's what we call SAIDI and CAIDI, it's the frequency of outages and the duration of outages and utilities are very driven there by those, and that drives them to keep an eye on the distribution network and having to invest.

So I'm very optimistic about it. And could there be periods where it's higher than that? I'd say, yes. But as we think about our long-term planning horizon, that mid-single digit, consistent mid-single digit is kind of what our structure is of how we think about long term and about the business.

And one part of utility that's been under pressure most recently is around that meters side. So kind of help us understand where we are there? Because I guess the secular sort of penetration story is maybe somewhat played out...

Yes.

But then you have the cycle dynamic as well. So kind of where are we on those 2 fronts?

Yes. So the meter business has gone through quite a few years of probably some of the biggest disruption that we saw in our portfolio of products with the chip shortages. And then we saw the normalization of that following that. And then last year, we saw a lot of big projects that we're rolling off that we communicated. That business kind of exiting '25 is back to a base business of MRO and smaller projects.

I think that's good. It's a smaller part. It's around 10% of the portfolio. So I think we've rightsized that business for where it is today. And so to your question of where can it go from here and in context of where are we with the AMIs cycle and meters. So I would say you're right to point out that today in the U.S. the first generation of this AMI meter. Those have traditionally been electric -- mechanical meters and then became electronic meters or the smart meters. That first phase is done for the most part.

But why I point out what's different in this meeting, they're electronic meters today. And their lifespan is not what the old electrical mechanical meter is. So they are starting to come up to the end of life, and we're actually seeing that because we're seeing more MRO right now in our meters, meters that are actually starting to fail to replace. But going back to what our utility executives and companies prioritizing right now, it's load growth and how to support that.

So what we see is on this AMI next cycle, some push outs, but eventually, they're going to need to do this again. And our view to it is muted or maybe a little more conservative in when that's going to snap back. I think we are seeing MRO coming back. I think you will see that business for here grow. But I say all of that to say, if the utility right now is investing their money into the other area, which is a larger part of our portfolio, a higher-margin part of our portfolio, that's not a bad trade for Hubbell.

And when we switch to maybe the electrical business, remind us, I suppose, the data center, the 2 main types of kind of product that you're selling into data centers and it looks like the guidance embeds quite a sharp slowdown this year in revenue in data center. Is that kind of purely conservatism or anything else happening there?

Joe, do you want to?

Yes. I would -- not that I'd call it a sharp slowdown. We're still anticipating mid-teens growth, which is quite nice. We've got 2 pieces of our electrical business that are servicing data centers. We've got a short cycle business, which is on connectors and grounding balance of systems products. And that tends to have more of the book-and-bill orientation towards it.

So in terms of the visibility of what's out beyond, let's say, the next quarter or so is relatively limited. And so we want to be a little cautious about not getting ahead of our skis on how large the growth could be in the short-cycle side of the business. That said, we do continue to add capacity and investment in key product lines to service that short-cycle business in the data center space, and we're very well positioned to capture additional growth, if that is there to be had in short cycle.

On the long cycle side of the business, where we've got our modular power distribution skid business, that business basically has a backlog that's got us booked full for 2026. So we feel really confident in the outlook on the long cycle. A little more capacity to flex on that side of the business, it is -- it tends to be a longer sales cycle. So we're really focused on '27, '28 orders at this point. So feel really good if there is a little more to be had in data center on the short cycle side, we feel, again, like we're in a good position to pick that up.

And is the sort of teens growth, is that just capped by capacity? Or no, there's potential to grow above that rate if the short cycle demand stays very strong.

Yes. The short cycle demand stays strong. I think we could exceed that mid-teens growth. But again, let's see how the year is progressing and if it's there, we'll get it.

Yes.

Yes. Okay. And the -- if you're thinking about the rest of electrical, there's a lot of investor focus at this event on kind of industrial activity in the U.S. is that picking up the PMI got people excited and that kind of thing. Are you seeing any change in the industrial demand landscape in the U.S. or it's pretty steady?

Yes. I think we've got, some of the leading indicators that you point to and others that we're looking at. We do see favorable trends there, and that would certainly bode well for some of our more cyclical areas of our portfolio.

We have seen nice mid-single-digit growth in our light industrial business over the last few years, and we're anticipating in our 2026 outlook, kind of anticipated more of the same, mid-single digit in light industrial.

In nonres and heavy industrial portion there, we've been relatively soft over the last few years, and we haven't seen a meaningful acceleration in growth in orders yet. And so until we see that kind of click through, we're kind of holding with a low single-digit growth profile. Again, those businesses for us are well positioned. They've got ample capacity to service more demand, should it start to accelerate. So we'll see how that plays out as this year progresses.

And then in terms of technology changes, and this affects, I suppose both the utility and the electrical segments at Hubbell, but a lot of focus on the 800-volt DC straight into the IT room, higher voltages in general within the data center. Maybe help us understand kind of how well positioned is Hubbell for that transition? Is it an opportunity, a risk, a bit of both? How should we think about that?

Yes, I'd say on net probably not a big driver either way for our portfolio. And and maybe first talk a little bit about our portfolio. So we are anywhere from the electrical side from very low voltage product to when you think about the utility side ultra-high voltage product. So we covered a range of certainly products that are out there. But as you point out, data centers are innovative -- innovating quite rapidly. And one of those things is around 800-volt DC. So if you look at our portfolio and things like connectors and grounding, really no effect. These are more mechanical products that you would need to put into a data center, no matter what the power source or voltages or amperages are.

Then when you think about our electrical wiring devices or pin and sleeve would be a product. These are products that we are developing with our customers to be able to adapt to higher amperages, which is what we're seeing already going into the data center as well as the voltage, the 800 kV. So we'll have products available for that as that happens.

Then if you think about the portfolio that they have of our power skid business, and that's really a configurable products. We put different gear and different materials, some our own, some third party on that. And that clearly will evolve with 800-volt DC, but that's a little bit what that business is, right? We're doing that right now. And as that equipment changes, we'll configure different equipment on those skids and sell those.

So I think, again, that will be somewhat neutral for us. And then really on the utility side, I say very little change in how that -- the power still needs to come into the data center from which then it rectifies and changes to 800-volt DC, but little change there. So I'd say overall, not much of a change, but it does require us to reconfigure product, different to develop products, but that's what we do. So...

Fantastic. And maybe talk a little bit about the operating margin outlook. The metal costs and other things have been going up. What's the confidence in being able to pass those on to customers? And also when we think about kind of margin expansion from here across the 2 segments, do you still see a lot more upside in the electrical business because of the self-help actions?

Joe, why don't you take...

Yes. The operating margins have made a lot of progress over the last several years, and we would anticipate that we continue in line with our long-term financial framework to continue to expand our margins across both electrical and utility. There has been some inflation, certainly over the course of last year, mid-single digits for us. We're projecting another mid-single-digit year of inflation on our total cost base. And we've got effective price and productivity programs in place to manage to offset neutral or better on the cost inflation side.

Certainly with mid-single-digit levels of inflation, if you're neutral on price cost management, there is a little bit of a margin headwind from that dynamic, and that could play out this year. We'll see how that -- how much price and productivity we're able to recover. But again, neutral or better, still positions us very well.

On the electrical side, we have expanded our operating margins by over 500 basis points in the last several years. We would describe that as a middle innings program with a lot of initiatives, the a, that have been completed over the last several years, and b, that are still on the horizon for us ahead. Things like portfolio management with the different brands and businesses, exiting noncore, low-growth, low-margin businesses and acquiring high-growth, high-margin business has been part of that, as has our ongoing restructuring program where we continue to reshape our footprint, exiting subscale factories and consolidating into larger, more efficient factories.

We've continued to delayer our management structure, and as Gerben has talked about in the past around reshaping from more of an independent hold company -- holding company type of an operating model to an integrated operating company environment has also been a very important part of that program and also has been consolidating our systems and our business processes as we talk about segment unification. So a lot of pillars at play and they're, I guess, the middle innings, but more runway to go in electrical and continued progress on utility.

Yes. And I'd say maybe to add to this. This was really what Joe and Mark, who runs that segment, came out of the utility business. That's what we did there for many years. So it's almost taken that playbook that we've seen work out, and that's why they can clearly see where they are in the innings and what's still available, if we've gone through this in our utility business before. So we feel quite confident in our ability to execute on this.

And I think last year, you already exceeded the 2027 sort of margin goal. So very good performance on that front. I think you're at the low 20s right now on margin. Should we just kind of see that moving into the mid-20s, and we'll get some update on that goal at some point?

Yes. We see continued progress there. I would point to our long-term financial framework, mid-single-digit organic revenue growth. Roughly 25% to 30% incrementals on that, and that will continue along with the other actions that we've been driving to drive margin expansion. So multiyear margin expansion program, lots of opportunity to continue to expand, and we'll continue to update as we progress there.

And sort of very short term, anything to watch out for seasonality or anything like that this year? Or you think most of the quarter is pretty steady top line growth and margin expansion kind of similar to the full year guidance?

We feel coming out of last year was an atypical seasonal year with a pretty strong fourth quarter. And as we turn the page to '26, we do see a bit of a more normal seasonal year where we typically -- we describe it as a head and shoulders where our first quarter is the lowest revenue and a profitability quarter and that grows as we go through 2Q peak in 3Q and come back down in 4Q. That's more of the shape of the year that we're anticipating. The way that we see our business set up both in our book-and-bill business as well as the projects that are slated for the longer cycle businesses.

And when we think about that price/cost element, does that have any particular headwind in any period? Or again, the margin expansion should be fairly steady through the year?

It should be fairly steady throughout the year. That's how we're anticipating without any major spikes.

Great. And then lastly, I think capital deployment. Hubbell's has been extremely successful at acquisitions. What's the pipeline looking like now? And as there's been some IPOs in the electrical space, I don't know if that's had an effect on pushing up private valuations? How does that look right now?

Yes. Yes. So I'd say the -- it's a big part of our strategy. It's a big part, I would say, of our core competency to both in the bolt-ons as well as in periodically the larger deals that we do. I'd say the pipeline has both of those in it, the timing of which is always hard to predict. But our focus really with our M&A is to continue to build scale and breadth in the market in the areas that we're in, and we still see a lot of opportunity to do that. When we do that is when we get the best returns because, we built scale. We -- our fixed cost spread over more SG&A, you can generally take out. We know how to operate in this market. We know how to fold these businesses in. So that continues to be the focus for us.

To your point of valuation, clearly, we've seen from when we're buying businesses a number of years ago to now multiples go up. But I'd say our returns on those businesses are still very, very good because we're operating in higher growth markets. So you're paying more. So I mean, I'd say we are disciplined in this, Julian. We look at those multiples and when the return -- when we believe the returns are good and sometimes you have to use a little bit of the synergies to get there, but that's okay. You don't want to give all the synergies away, but keep some those as well. But I think we'll continue to be successful in this.

And of course, our balance sheet, right? We have a much, much larger balance sheet today than we've had in the past. And my point of discipline is, we're not just going to go buy crazy, right? If there's periods where the timing doesn't work out, we have other ways to deploy that capital, and you've seen us do higher buybacks here more recently. And we believe that, that's also a good way to deploy our capital in those periods.

Fantastic. Well, now we'll switch quickly to audience response questions, please.

So the first one, I think, is around current ownership of Hubbell. It's about half, not owning it yet.

Second question is around kind of general bias or attitude to the stock today.

These look good.

Yes. So positive to neutral.

Third question is around EPS growth expectation kind of versus the multi-industry average here. So in line to above.

Next question is about capital deployment and balance sheet usage. So a mishmash, but basically bolt-on M&A.

Next question is around valuation, what year 1 PE should Hubbell trade at? So sort of low 20s.

And then final question is kind of what's the main valuation headwind or anchor facing Hubbell right now? So core growth. So with that, thanks so much. Thank you, Gerben and Joe for being here.

Thanks for doing this.

Thank you very much.

Thanks a lot.

Good to see you.

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2025 Hubbell Incorporated Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Dan Innamorato, Vice President of Investor Relations. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter and full year 2025. The press release and slides are posted in the Investors section of our website at hubbell.com. I am joined today by our Chairman, President and CEO, Gerben Bakker; and our CFO, Joe Capozzoli.

Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and considered incorporated by reference into this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides.

Now let me turn the call over to Gerben.

Great. Good morning, and thank you for joining us to discuss Hubbell's Fourth Quarter and Full Year 2025 results. Hubbell delivered strong financial results in the fourth quarter, highlighted by 12% total sales growth, 140 basis points of adjusted operating margin expansion, 19% adjusted operating profit growth and 15% adjusted earnings per share growth. Organic growth of 9% in the fourth quarter was driven by double-digit organic growth in our Electrical Solutions segment as well as our Grid Infrastructure businesses within the Utility Solutions segment.

Our core utility and electrical markets remained strong as data center build-outs, load growth and aging infrastructure resiliency investments generate robust project activity in front and behind the meter. Hubbell's portfolio of critical components and solutions is uniquely positioned at the intersection of grid modernization and electrification megatrends and strong recent sales and order activity along with continued execution on our strategy positions us well to deliver on an attractive outlook in 2026 and beyond.

Before I turn the call over to Joe to walk through our financial performance in more detail, I'd like to highlight a few key accomplishments in 2025. Starting with Electrical Solutions. We made significant progress in 2025 on our strategy to unify this segment to compete collectively. We generated above-market growth in attractive verticals with an integrated solutions-oriented service model for our customers while simultaneously driving business simplification, and operational efficiencies to expand margins. These efforts resulted in 7% organic growth and 14% adjusted operating profit growth for the full year. Additionally, full year adjusted operating margins at HES exceeded 20% for the first time in history.

In our Utility Solutions segment, while full year organic growth was negatively impacted by metering and AMI markets, we delivered strong performance in the larger, higher-margin grid infrastructure businesses in our portfolio. Our leading positions in strong transmission and substation markets enabled double-digit growth for the full year while distribution markets accelerated throughout 2025, as customer inventories normalized amid a healthy market backdrop.

Over 80% of our HUS portfolio is aligned to electric T&D components and solutions, where our leading installed base and depth and breadth of product offering uniquely positions Hubbell to benefit from a highly visible long-term investment cycle. Importantly, we also continue to invest and allocate capital to high-return areas while further differentiating our unique service advantage with customers.

Most notably, we closed on a high growth and margin acquisition in DMC Power. We invested in automation and expanded production capacity in high-growth area. We positioned our sales force to gain share in attractive vertical markets. We successfully launched new innovative solutions and we continue to be recognized and awarded by our customers for our industry-leading service level. We plan to continue investing in each of these critical levers of our long-term strategy to drive ongoing growth and productivity benefits in 2026 and beyond.

Hubbell's 2025 free cash flow margin of 15% and return on invested capital of 19% are strong evidence of the quality of our business model and of our ability to invest on behalf of our shareholders to generate strong returns, both now and over the long term.

Let me call it -- turn the call over right now to Joe to provide some more details on the financial results.

Thank you, Gerben. I'm starting my comments on Slide 5. Hubbell's fourth quarter financial performance was strong with double-digit growth across sales, adjusted operating profit and adjusted diluted earnings per share. Net sales of $1.493 billion in the fourth quarter of 2025, increased by 12% as compared to the prior year, driven by 9% organic growth and acquisitions contributing 3%. Both Electrical Solutions and Grid Infrastructure products within our Utility segment delivered double-digit organic growth in the fourth quarter, an acceleration versus prior quarters, driven by incremental price realization and stronger demand in data center and Utility T&D markets. This strength was partially offset by continued softness in grid automation, though declines in this business have moderated relative to prior quarters.

From an operational standpoint, we generated $349 million of adjusted operating profit and expanded adjusted operating margins by 140 basis points in the fourth quarter which, combined with strong sales growth, generated adjusted operating profit growth of 19%. While cost inflation accelerated in the fourth quarter as anticipated, our pricing and productivity actions have been successful in more than offsetting these costs. Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price/cost productivity in the quarter.

Adjusted diluted earnings per share were $4.73 in the fourth quarter, representing a 15% increase versus the prior year and were driven by strong operating profit growth, partially offset by higher interest expense associated with the DMC Power acquisition and a higher year-over-year tax rate.

Fourth quarter free cash flow generation of $389 million was strong to close the year. On a full year 2025 basis, we generated $875 million of free cash flow, representing 90% conversion on adjusted net income, which was in line with our previous outlook.

Our balance sheet remains strong with net debt-to-EBITDA of 1.3x exiting the year, which positions us well to continue reinvesting in our business and deploying capital for shareholders at high rates of return, as Gerben just highlighted.

Turning to Page 6 to review our performance by segment. Utility Solutions delivered a strong quarter with double-digit growth in sales and adjusted operating profit. Starting with the top line. Utility Solutions generated net sales in the fourth quarter of $936 million, which represents growth of 10% versus the prior year and includes organic growth of 7% and acquisitions contributing 4%.

Grid Infrastructure, which, as a reminder, represents approximately 3/4 of the segment sales, was up 12% organically. Grid Infrastructure strength was broad-based with strong growth across distribution, substation and transmission markets. Utility customers continue to aggressively invest in new transmission and substation infrastructure to interconnect new sources of load and generation on the grid, while aging infrastructure trends drove solid hardening and resiliency activity in distribution markets against easier prior year comparisons. Outside of T&D markets, telecom and gas markets experienced solid growth in the quarter.

Grid Automation sales were down 8% in the quarter as solid growth in grid protections and controls was more than offset by weaker new project activity in meters and AMI. Operationally, HUS achieved $235 million of adjusted operating profit in the fourth quarter, representing 20% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 200 basis points year-over-year. Operating profit growth was primarily driven by strong volumes in Grid Infrastructure, favorable price/cost productivity and acquisitions, partially offset by volume declines within Grid Automation.

Turning to Page 7. Electrical Solutions results were strong in the quarter, with double-digit growth in net sales and adjusted operating profit. For the fourth quarter, Electrical Solutions generated net sales of $557 million. Organic growth of 13% was driven by significant strength in data center markets and solid growth in light industrial markets as well as strong price realization, partially offset by softer heavy industrial and nonresidential markets.

Data center growth exceeded 60% in the quarter. In addition to healthy end market dynamics, our data center performance in the fourth quarter was bolstered by targeted capacity investments in our balance of systems components as well as strong project activity in our modular power distribution [ skid ] business. Overall, our vertical market strategy and commercial alignment initiatives as well as new product introductions continue to drive out growth in key markets.

Operationally, HES delivered $114 million of adjusted operating profit in the fourth quarter, representing 18% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 60 basis points year-over-year. Operating profit growth was primarily driven by strong volumes and favorable price cost productivity in the quarter, including attractive returns from our ongoing restructuring investments.

Before I turn the call back over to Gerben to provide our full year outlook, I'd like to highlight on Slide 8, some recent investments we've made in our HES segment, which are generating increased output in high-growth areas, as well as enhanced productivity across our manufacturing footprint.

Our Burndy brand is a leader in electrical connectors and grounding products across a wide range of industrial end markets, including data center markets where Burndy has strong specified positions with major customers who value our leading product quality and service levels. With the significant demand inflection we've experienced in high-growth verticals like data center, we've had the opportunity to leverage capacity expansion investments to reconfigure our production workflows and drive productivity through automation.

The example on the page highlights our recent investment in forward specialized and closed automation work cells for copper lug production, where we've been able to combine 6 manual production processes into single flow automated lines for high-running SKUs, reducing factory processing time from days to minutes for certain product lines and reduced manufacturing complexity. The end result of these investments is that we are able to increase output to serve strong customer demand while also driving productivity through reductions in labor and factory floor space.

While this is one example of a major product line in one of our businesses, it demonstrates our ability to utilize CapEx investments to meet customer needs and drive both enhanced growth and margin expansion. This has been one of many critical components of our successful HES segment transformation strategy over the last several years, and we see further opportunity across both segments to invest in high-return growth and productivity initiatives within our factories.

With that, I will turn the call back over to Gerben to provide our 2026 outlook.

Great. Turning to Page 9. We anticipate 5% to 7% organic growth across our portfolio in 2026. Similar to the preliminary view we provided in October, we anticipate broad-based strength across our largest businesses serving attractive Utility T&D, data center and light industrial end markets. In Utility Solutions, we anticipate 5% to 7% organic growth for the full year. Transmission and substation demand remains strong, and we expect our leading positions in these end markets to drive continued success in converting on high visibility project pipelines as Utility customers invest in Grid Interconnections. Utility distribution activity is healthy, driven by both routine maintenance and systematic upgrade to aging infrastructure in order for customers to meet key outage and performance metrics.

In Grid Automation, modernization initiatives targeted by delivering more insights and control capabilities in the field are expected to lead to continued strength in Protection & Control Solutions in 2026, more than offsetting a more modest outlook for meters and AMI markets.

In Electrical Solutions, we anticipate 4% to 6% organic growth for the full year. And similar to 2025, we expect growth to be led by data center markets, which now represent more than 10% of segment sales and are expected to expand mid-teens. While we expect nonresidential and heavy industrial market growth to be more muted, industrial reshoring and electrical medical project activities are expected to drive continued solid growth in light industrial and renewable markets.

Looking across our portfolio, we expect a strong year of organic growth in 2026, and we believe our largest, highest-margin end markets are still early and multiyear, highly visible investment cycle which will enable attractive growth for the next several years and beyond.

Concluding our prepared remarks on Page 10, we are initiating our 2026 outlook this morning for 7% to 9% total sales growth, $19.15 to $19.85 of adjusted earnings per share and approximately 90% free cash flow conversion on adjusted net income. At the midpoint of the range, this outlook anticipates approximately 10% year-over-year growth in adjusted operating profit driven primarily by strong organic growth and core operating leverage as well as wraparound contribution from the DMC Power acquisition.

Operationally, we anticipate another year of margin expansion in 2026 as we are well positioned to manage price and productivity to at least offset inflation while also reaccelerating investment back into our business following period of proactive cost management over the last couple of years. Our 2026 outlook is in line with our long-term financial framework which we are confident will continue to deliver long-term value creation for our shareholders off of a strong multiyear base of performance.

With that, let me turn the call over to questions and answers.

[Operator Instructions] And our first question comes from the line of Jeffrey Sprague of Vertical Research.

Sorry about that, I was on mute. There was a comment about orders in the prepared remarks. I'm sure that's contemplated in your revenue guide. But can you just give us a little bit more color on what you're seeing in orders, kind of the complexion across the business?

And one of the things I am wondering about is just the strong load growth and CapEx you're seeing, is that negatively impacting MRO activity kind of in the core legacy business? Or is that sort of kind of [indiscernible] along at a normal rate?

Yes. Let me maybe start with a general comment on orders, Jeff. And certainly, the recent momentum has been strong. And as we talked on our last call, we started to see this inflection in our order book in like the September time frame and particularly in the areas of T&D and data center. As a reminder, we are primarily a book-to-bill business. But in that, the order strength over the fourth quarter really drove our organic sales growth. So it wasn't working through backlog or anything. This was reflected in the actual orders that we saw.

And I would say even exiting the year that was very positive, and we've even built a little bit of backlog in some of our businesses like the T&D business. That order momentum going into '26 has continued. So I would say this, visibility together with what we know our favorable end markets provides us confidence for '26. Now of course, being a book and bill business, our visibility doesn't extend throughout the entire year of '26. We do have a few businesses where we've fully filled with backlog. But the majority of the business being book and bill, we need to see how the year unfolds with that. But I would say it's off to a good start, ending the year and starting this year.

And particularly to your question of CapEx with OpEx, and that's a question related to our utility and infrastructure business. As you see those percentage, there's clearly a very strong inflection in the CapEx. It's very hard to say because a lot of the materials that we supply, Jeff, are fungible to whether the same materials go into CapEx that go into OpEx as well. What we are seeing shorter term, there's a lot of investment right now going into generation. And I would say that too falls within the general budgets that we have, and our exposure, of course, is less in generation.

But that said, what we see in transmission and substation, what we see in distribution, it's certainly very supportive of our long-term framework and positive going into '26.

And then just on meters and AMI, I thought we might be done talking about it declining in the third quarter, but we're still heading south. I see you don't have any real expectation of note through 2026. But I mean, is there something else going on with that business? Or is it just the total lack of project activity? We know the backlogs are completed, but any other color there?

Yes. It's a little bit of what you said, Jeff. And as we work through '25 and as we communicated, we're still working through that large project backlog and through a lot of '25, we actually consumed backlog as we did that. What we haven't seen return is a lot of those larger projects. So the business right now is more smaller projects, more replacement product. It's evident for us when we see the book-to-bill at 1 or close to 1 -- that we kind of have stabilized that business off this lower base.

I'd say the good part with that is we're now working off of this lower base, and we do expect from here on to modestly grow that business. Now of course, if you compare that to last year where throughout the year, that business declined, we have some comps to lap here in the first quarter. But if you think about it sequentially from here, I would say it's really at the bottom and from here, which -- it should start to grow modestly.

Great. And maybe just one other quick one, if I could. Just kind of you're indicating maybe Q1, right, a little bit tougher. Are you suggesting Q1 would be sort of outside the recent normal or sort of 19% to 20% of the year?

Yes. I think the interesting point on Q1 is a little bit the comps. I think for us, the better way always to look at this is year-over-year. In this -- and from that perspective, it will be a very strong quarter if you compare to how we started last year. But I think if you think about the year in total, it's a fairly normal year. So I think in the kind of things that -- the percentage that you're thinking about that -- the only thing I would say in percentage is to not use it as the sole factor because those things, as you will do your models, are very, very sensitive to 1/10 of a percentage point. But you're in the [indiscernible], there's really nothing specifically to highlight of '26 that's -- as we think throughout the year.

Our next question comes from the line of Julian Mitchell of Barclays.

I am sorry about that. I think I was maybe muted. So maybe just to start off with, could you help us understand on the margin front? I think the guide is embedding maybe 50 basis points of operating margin expansion for the year for the total company. Maybe help us understand if that's correct? And how we should think about that sort of playing out through the year? And is it weighted to any one segment of the 2?

Yes, Julian. Yes, I would say that you're thinking about that level of margin expansion is about right. Like Gerben had mentioned, thinking about the way that our 2026 is kind of taking shape in terms of a bit of a normal, let's say, seasonal head and shoulders type shape, from 1Q, re-peak in 3Q, come back down in 4Q, but still higher than 1. I think that's a good way to think about it. And Julian, I would just -- I would say maybe just from a timing perspective, we anticipate investing roughly $15 million to $20 million of restructuring this year. I think you'll probably see that a little front-end loaded. Maybe you see 1/3 of it come through in the first quarter. And I'd probably also highlight our tax rate tends to be a little higher in the first quarter as well.

I understand. And so just to sort of follow up a little bit on that first quarter point. Should we assume organic sales growth is sort of front loaded a little bit because of comps? And then in light of what you just said on the sort of BTLs and so forth, are we thinking sort of first quarter is about 20% of the year's EPS, that type of typical cadence?

Yes. I think, Julian, we'll see a strong start to the year from an organic perspective and Gerben highlighted that. So I think you'll see nice 1Q year-over-year growth. And I think that's how we would anticipate starting off the year.

Got it. And that sort of 20% share of the year for EPS is roughly sensible?

I would say on that, I would be careful with using this percentage, as I said to Jeff's earlier question. Those tend to be very, very sensitive in tens of a percentage point, if you do that math. I wouldn't use that as the sole determinant of the first quarter, rather think about the moving parts.

Our next question comes from the line of Chris Snyder of Morgan Stanley.

I wanted to follow up on some of the margin commentary. So as you said, to Julian's question, maybe the guide calls were about 50 bps up in '26 at the midpoint. But I mean, is it fair to think that Q1 would be well ahead of that level? I know it's always the -- Q1 is always the lowest margin quarter of the year. But the comp a year ago just seems much easier in Q1 relative to Q2 to Q4. So just kind of any color on that?

Yes. I think we are anticipating solid margin expansion throughout the year, including the first quarter. And so I think, again, we're anticipating the momentum that we're carrying out of the fourth quarter positions us well to start the year.

And maybe adding to that, and it was asked in an earlier question as well, the margin expansion we expect in not only the company but in both segments.

I appreciate that. And then if I could just follow up on price. I believe you guys pushed some incremental price during the quarter in Q4. So could you provide any color just on how price shook out in Q4? And then any expectations that's underwriting the guide for '26? And if you could share anything around the wrap versus the incremental '26 action. That would be helpful.

Sure. So you're right to highlight that we did have some incremental price actions that were implemented in the fourth quarter. And I think we highlighted previously, we were anticipating about 3 points of price for the full year. And that's consistent with what we saw come through. Certainly, that will have some wraparound impact that will carry price into 2026 will also carry some cost inflation into 2026. And I think consistent with how we've been managing price cost productivity, and again, consistent with our guide, we're anticipating neutral to positive on that front.

Our next question comes from the line of Steve Tusa of JPMorgan and Chase.

Just on the flip side of that question, what -- I know FIFO kind of changes things, but like what is your current assumption on raw materials prices? Are you guys just taking what the spots are today and then kind of running that through? Are you assuming some sort of average, some forecast? Like what are you assuming for kind of the underlying metals pricing, acknowledging it's not as big of a swing factor in the near term as it used to be?

Sure, Steve. And yes, we're -- we've been watching in the materials, the metals prices very closely. And we did see some creep coming out of the fourth quarter with higher copper, aluminum, steel. And we're anticipating maybe more broadly, including metals and other inflation, we're anticipating about mid-single digits for cost inflation in 2026. And our price actions and productivity is anticipated to address that level of cost inflation that we're expecting. Certainly, we'll manage as the year progresses, but similar to levels of inflation that we addressed last year. I think that's how we're thinking about 2026, Steve.

And is that inflation based on what price level like at year-end? Where we are today? Like what does that inflation assume for the actual price levels?

Yes. It's in and around where we exited the year which, again, you kind of coming out of the fourth quarter, we saw some rising metals prices. That's kind of continued a little bit here in January. And we'll continue to keep our finger on the pulse with how they move and what we're doing on the price and productivity side.

Okay. And then one last quick one on this first quarter question. Did you mean that like the 20% or whatever the guys talked about earlier, that were not -- that first quarter should be better than that? Or like I'm having trouble kind of reading the [indiscernible], whether better than the 20% or a little bit less than the 20% [indiscernible]?

What we said, Steve, as we get off to a strong start from an organic growth and margin expansion perspective. I think, again, if you're looking at percentages of the year, it can be very sensitive. So if you just look at how we exited '25 from a revenue perspective, that's good to think about seasonally from a year-over-year margin perspective, we'd expect expansion, right?

Yes, I wouldn't necessarily be thinking about that, that number is higher.

Our next question comes from the line of Joe O'Dea of Wells Fargo.

Can you talk a little bit about first half versus second half growth in Grid Infrastructure? And in particular, the transmission and substation side versus the electrical distribution side and trying to get a little bit of color around electrical distribution comps, what you think kind of that underlying growth rate is in the back half of the year when the comps adjust? And then in addition, just what the backlog looks like on the transmission and substation side and visibility that you have into something like high single digit, low double digit throughout the year versus kind of stronger first half over second half?

Yes. I would say as we think about those markets, clearly, we're optimistic about the investments that are going in. And I would say on the transmission and substation, that's been growing in this high single, low double digits for a while, and that's how we continue to see that unfolding. In distribution that was strengthening throughout last year, right? That's why we said earlier in the year, we're still somewhat challenged by that growth, but that we expected that to come, and we did see that come. So if you think about that, it partially drives, of course, the better comp -- easier comps earlier in the year or [indiscernible].

But fundamentally thinking about these markets, think about the substation and transmission that kind of the high single digits in distribution, mid-single digits for '26 is the right way to be thinking about that.

Okay. And then on free cash flow, it looks like maybe you shake out in a range of kind of $900 million to $1 billion for the year. Just how you're thinking about the spend opportunity there with respect to the M&A pipeline, appetite on share repo, just how we can think about your approach to some pretty good free cash generation?

Sure, Joe. So we're -- yes, you're right that we're thinking about $900 million to $1 billion of free cash flow next year. And I think 2025 was a really good year of deploying capital to a combination of high-quality CapEx program. Our M&A was rather successful with 3 deals that -- roughly $950 million deployed. And we also layered in some share repurchase over the course of 2025. So with that level of cash flow we're anticipating next year, I think we would think about deploying in a similar fashion to the extent that there's attractive bolt-on M&A that fits very complementary to our portfolio. And I think with that level of cash flow, we would probably think about supplementing with some more share repo as well.

So I think going into the year, that's how we would think about it. The deal pipeline, maybe Gerben, you can comment on that. But looks pretty good to start the year, but a lot still has to come together on the M&A front to be more specific.

Yes. And I think as we think about the return, CapEx continued to be highest return project, followed by acquisitions. And I would say, as far as acquisitions, that pipeline has bolt-ons in it that has some larger deals and the timing, as we always say, is very, very hard to predict, but focused on the areas where we clearly have the right to play and right to win. So think about T&D markets, think about some of the core electrical markets is where we focused on.

So I feel good in our ability to continue to deploy capital, but we will remain very disciplined. And we see dividend and share repurchases as a good alternatives in periods where that acquisition pipeline is perhaps -- or the execution of that pipeline is a little bit lower.

Our next question comes from the line of Nigel Coe of Wolfe Research.

[ Just want to build up on ] Steve's question on the cost inflation side, 6% on COGS, I think, is the metric. Maybe can you just break that down between sort of your the metals and raw materials, which I think is about 25% of your COGS, if I'm not mistaken and then maybe components and then other COGS. And I'm wondering, is that 6% a gross number? Or would that be net of productivity?

Yes. The -- you have the cost pie split about right. Half of the cost pool is materials, which includes metals and components. And about half of that cost pool is -- or a quarter is more on the metal side. So that's about right. The mid-single digits that we're anticipating for total inflation on our total cost pool is not net of productivity. Price and productivity would be outside of that to manage that mid-single-digit cost pool. And Nigel, I probably also highlight what we saw about a similar level of inflation, total inflation in 2025, mid-single digits. And again, that was managed effectively with price and productivity levers throughout the year.

Okay. Maybe as part of my follow-up, if I could maybe just clarify, is there additional price actions in the plan in the first quarter to address that? Or does the wraparound price address that? But just a quick follow-on really on the data center growth. I think you said mid-teens, which mid-teens isn't shabby, but certainly seems to be a bit below where the market is trending in '26. So just wondering what gives you sort of informs the mid-teens view?

So I'll start with the wraparound price. And yes, so we're anticipating wraparound price and modest incremental price to start the year as we typically have first quarter price increases roll through, and those are in motion and having conversations with customers. On the data center side, we highlighted 60% data center growth in the fourth quarter. I think that was roughly 40% growth for the full year in data center. And data center for us kind of discretely the way we describe that is more on the electrical side. And that's coming from 2 places primarily. One is our modular power distribution skid business. And that side of the business had a pretty heavy project load throughout 2025, which really drove a lot of those strong year-over-year growth rates from '25 versus '24, there anticipate to continue a heavy project load in 2026. So those growth rates in '26 versus '25 will step down a little bit.

And then we certainly have our connectors and grounding products, which also service data center and continue to grow nicely. So to start the year, we feel really good coming out of '25 on data center. And we're looking at that mid- to high teens on our outlook for data center on the electrical side.

Yes, maybe add -- a good part of that business is short cycle, right? If you think about Burndy connector, so the visibility out there that last year was a good year. And I would say it's a good example that we show where we're adding capital. We're expanding. And if that proves out to be conservative, we'll do better this year, [indiscernible] serve that demand.

Our next question comes from the line of Chad Dillard of Bernstein.

So I wanted to [indiscernible] on your price cost through the year. So how do you expect that to trend? What's baked into your guidance? And then can you just remind us the total tariff impact in '25 versus '26? And what is [indiscernible]?

Yes, price/cost throughout 2026, it's a little hard to kind of pinpoint or walk that quarter-to-quarter. We certainly anticipate as the year progresses, we'll see more inflation kind of settle in, and we would certainly anticipate between our price and productivity actions. They continue to ramp throughout the year. And so we're confident that we'll navigate that equation of managing price cost productivity to neutral or better throughout the year, and we don't anticipate a tremendous amount of lumpiness.

Tariffs is a -- that's certainly -- I think we said in the middle of 2025, there's roughly -- we saw about $150 million worth of tariff and related costs. And over the back half of 2025, we managed that number down a little lower than the $150 million level and there really haven't been a whole lot of changes in tariff rates recently. Obviously, that can change at any point in time. We feel like we're managing that very effectively at the moment and we're ready to react and respond if there's large changes in tariffs going forward.

Got you. That's helpful. And then just a second question for you. It sounds like there's larger transmission projects that are in the [indiscernible] over the next couple of years. And you guys have talked about, I think, 85% of the [indiscernible] addressable to Hubbell. But if we just like zoom-in on like the transmission portion alone, what does that look like? And how should we think about the TAM opportunity problem?

Yes. Certainly, I would say it's an area of strength. And if you look at our portfolio, I would say our portfolio is very similar, whether you're talking distribution or whether you're talking transmission and substation in the percentage of materials that we provide on it now. While we provide a very large percentage of the material, the cost tends to be low because of the nature of this component. And that speaks to the -- really the strength of our portfolio where the quality of that and the service of that is extremely important, but it represents a lower percentage of the cost. So it's a really good position that the price is not the first leading indicator there to compete rather some of these other ones.

But these markets are very strong, and we'll -- the visibility is further out on. You're right to point out some of these projects go into '26, '27 and beyond the scale and scope of these both in length of a project of miles and in voltages of it -- we very much participate in. And so our position is quite good in this market, and the markets are strong. So I'd say well positioned.

Our next question comes from the line of Scott Graham of Seaport Research Partners.

On Aclara, I know that I think we -- just generally stated earlier in other calls that there was supposed to be sort of a bottoming maybe in the fourth quarter. And now it seems like maybe it's at the bottom going forward. I'm just wondering, was there a business there that you walked away from perhaps repositioning it? And what is really the long-term portfolio fit here?

Yes. Maybe I'd say there's nothing specific to point out of business we walked away from. But what we have talked about in the past is that this business has traditionally served munis and co-ops really well. And a few years ago, we made a quite large investment in the technology to also be able to serve large IOU and the technology is just a little bit different in those utility. That proved to be hard at both projects were being delayed during the COVID period of time, but even the adoption of that technology at large IOUs proved more difficult.

So we did a pivot last year. We reshaped that business a little bit. We took a lot of cost out of that business to really continue to focus it on the market where we have a really strong position. And I think that business could do really well in that market that we're focused on. So that's really our focus for that business right now. It's a quite small percentage of the overall utility business. If you look at it, it's about half of the Grid Automation business. And I would say the rest of the portfolio, the other half of that Grid Automation business as well as the Grid Infrastructure business is very attractive margins and very attractive growth. So I'd look at this as a business that will -- we expect to do better, that we expect the margin to improve from here going forward. It fits the portfolio. But that said, we continue to look at our portfolio, what I said before. So at this point, though, that's the path that we're on for this business.

That's very helpful. I very much appreciate that. You made a comment about a number of your divisions being early in a multiyear investment cycle. And obviously, I think we know most of those. But I wanted to maybe just focus on substation, which has been a great business for you for some time now. Is that one of the businesses where you think it's still early and why? And if I may also say how much of that business' growth has been sort of aided by data centers, if you could?

Yes. Yes, that's a great question. So the first -- the short of it is very, very attractive. We're very well positioned. We've historically been well positioned. But if you look at some of our recent acquisitions, if you look at systems control, that's very much in that space. If you look at DMC that we just acquired, very much in that space. So we're growing our -- continue to grow our scale and scope of the products we offer in there. And I would say, attractive area without data center, but clearly aided by data centers right now as well. It's -- sometimes it's very specific and data center will be putting up the infrastructure and they will put the substation right next to it. And I would say those are very directly related, but utilities are investing on a lot of this to adjust interconnect more power throughout the countries, and that requires a lot of substations. So it's very -- something that's very hard to pinpoint. Is it specific or not today, but the space is very attractive, Scott. And we're very well [indiscernible].

And the substations themselves, the infrastructure itself is pretty old still, right?

Absolutely, absolutely.

Our next question comes from the line of Tommy Moll of Stephens.

It sounds like the market conditions for your electric distribution business are somewhat normal now. I think you mentioned channel inventories seem normalized. I'm curious for any more detail you can give us there, just given some of the uncertainty as we go back, say, a year ago. And when we look at the mid-singles guide you provided for this year, should we think of that as a accurate reflection of the underlying demand? Or is there a little bit of help from perhaps a restock in that number?

Yes. I would say maybe start with the last one. It's an accurate reflection of the end demand. Clearly, last year, we still saw that destock and I'm glad to stop talking about destock because it lasted way too long and first with distribution and then with end customers, not going homogeneous, different parts of the region, different customers going at different rates there. But we're through there. And I think that the best indication that we saw that early in the year starting to reflect with orders then later in the year, we started to see it by actually shipping in the book-to-bill stay at that level. So we really feel confident that we're through that.

What we didn't see though is customers, both [indiscernible] so what didn't happen is that they actually ran those inventories way down -- too far down and that they had to restart our conversations with our customers are -- what days they were targeting, how we're coming to getting to those days, specifically in distribution, and there was not an overshoot to that. So I'd say indicative of demand, Tommy.

Yes. Thank you, Gerben. Perhaps this is indeed the last quarter, we'll have to address this topic. A follow-up question for you on M&A. It sounds like the pipeline is still pretty full. There have been a number of pretty high-profile transactions in your space, several of which you've been involved in, where you've been able to acquire at pretty reasonable multiples despite some of the impressive growth in the out years. So I'm just curious from where you sit today, does it still feel like that's going to be possible in the year ahead? Or how would you characterize the seller versus the buyer expectations here?

Yes. Yes. I mean, what you point out, clearly, multiples have gone up over the [indiscernible]. I mean, we were buying a company not too long ago in the single-digit multiples, and that's clearly increased. But you're pointing out the correct -- the returns on those businesses are still very good for us because the growth rates have gone up. Those are more attractive businesses. We do really well with those. And there are businesses that -- what we call right down the fairway, the bolt-ons, even some of the larger ones, the synergies that we can get out of those businesses, the complementary growth that we get out of it, it's -- we're very good buyers of those businesses and can generally get more out of them probably than the average acquirer because it scales with the rest of our portfolio.

So any one deal, depending on the competition for it, could, of course, be in hardline. We do see the entire pipeline. I can tell you that even though we don't always own every business that goes to this process, it's not because we didn't see it coming. There's different reasons at times where we don't end up owning these businesses. But we're very active in it. And I would say kind of the multiples that you see, I would say, is about where we continue to see pricing right now, not higher, not necessarily lower.

Our next question comes from the line of Brett Linzey of Mizuho.

Just back to the outlook and specifically the nonres heavy industrial piece you're planning for continued softness this year, exit rates appear to be pretty soft in Q4. How do we think about those markets in the context of the mega project momentum you noted in the prepared remarks? Are those just longer duration? Or any color would be great?

Yes. I think we've seen nonres and heavy industrial have both been flattish, low growth for the last couple of years and we're not really seeing tangible signs of meaningful acceleration there, which is kind of consistent with what you saw us lay out on our '26 revenue outlook. I think for us, we see mega projects really impacting our light industrial business. And light industrial and data center has been a source of strength over the last couple of years. So I think that's probably where we're seeing it more so is on the light industrial side. Cautious on nonres and heavy. And again, when we start to see that come through more tangibly, I think we feel better about the outlook on those markets.

All right. Understood. And then just one quick follow-up on the price cost productivity equation. So the payback on the $15 million to $20 million of restructuring, is that contemplated within the netting or should we think of the associated savings as maybe some cushion as those paybacks convert through the year?

Yes, those paybacks tend to convert through the year. And discretely, we started in action and they're typically 2- to 3-year paybacks, they're quite attractive. And our history the last several years has been investing a similar amount, $15 million to $20 million a year. So we have some really nice momentum from all the initiatives that we have rolling. So think about them like in the year, they're kind of self-funding with productivity from prior actions. We're investing for the future. Those future projects have 2- to 3-year paybacks, and there'll be nice tailwinds for next -- for '27, '28 and beyond. And we see a horizon with really attractive ongoing R&R opportunities. It's tough to do a lot of them at a single time because they can be complicated. They can be -- there's some risk associated with them, but we've been managing them very thoughtfully, and that's contemplated in [indiscernible].

And our next question comes from the line of Alexander [indiscernible] of Evercore ISI.

I wondered if you could just pick up a couple of small ones for me. DMC coming in, in 2026, I think you talked about it being in line with prior expectations. But I'm just wondering about the benefits of margin accretion from the deal versus the cost to integrate? And if you could give us any color on that.

And then on HES, it looks like ex DC, the business kind of built to a decent mid-single-digit exit to the year. The implication and the guide, I guess is that, that perhaps inverts somewhat in the back half. I'm just wondering if there's anything specific you're baking in there or if it's just a bit of caution on lack of visibility and whether there's anything that you've got in there in terms of new product contribution to growth that can help offset that?

Yes. So on the -- I'll take the DMC margin, first. I think DMC was with us for basically a full quarter in the fourth quarter. Their sales and their margin was right in line with our expectations and what we had previously communicated. And our outlook contemplates $130 million of revenue and roughly 40% operating margins, which is net of integration costs. So that no change in how we were thinking about DMC and communicating that coming out of the fourth quarter to start the year, and we're very excited about what DMC adds to the portfolio.

On the HES side, with that -- with the fourth quarter exit rate, that fourth quarter was pretty heavy with data center projects. And so we would anticipate and we have good line of sight to data center projects throughout the duration of 2026. And so I think what you would see on electrical is nice year-over-year growth rates as we progress through the year. And naturally, with such a strong fourth quarter of '25, you'd see that year-over-year when we get out to 4Q of '26, for electrical, that will shrink a little bit because of that surge in 4Q '25 dynamic.

I'm showing no further questions at this time. I'll now turn it back to Dan Innamorato, for closing remarks.

Great. Thanks, everybody, for joining us. We're [indiscernible] for calls and follow-ups. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Hubbell Inc. Earnings Conference Call.[Operator Instructions] Please be advised conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Innamorato, VP of Investor Relations. Please go ahead.

Great. Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the third quarter. The press release and slides are posted on the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker; and our Executive Vice President and CFO, Bill Sperry.

Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and considered incorporated by reference on this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides. Now let me turn the call over to Gerben.

Great. Good morning, and thank you for joining us to discuss Hubbell's Third quarter 2025 results. Hubbell delivered double-digit adjusted earnings growth in the third quarter driven by strong high single-digit organic growth in Electrical Solutions and grid infrastructure as well as a lower year-on-year tax rate. In Utility Solutions, T&D markets remain strong as utility customers invest to interconnect new sources of load and generation on the grid, while aging infrastructure continues to drive solid hardening and resiliency activity. Our grid infrastructure businesses achieved high single-digit organic growth in the quarter. While the pace of inflection in grid infrastructure growth was steadier than we anticipated in our July outlook, markets and order activities are strong, and we anticipate further improvement in year-over-year organic growth in the fourth quarter. While Grid automation sales declined 18% in the third quarter on large project roll-offs, we anticipate these headwinds to fade in the fourth quarter as the business returns to more normalized comparisons.

In Electrical Solutions, we delivered high single-digit organic growth with continued margin expansion and double-digit adjusted operating profit growth. Our segment unification efforts and strategy to compete collectively are driving outgrowth in key vertical markets, most notably in data center, where new product introduction and capacity additions contributed to strong performance in the third quarter, with visibility to continued strength in the fourth quarter. We continue to simplify our HES segment to drive productivity and operating efficiencies, which we are confident will drive long-term margin expansion. Turning back to overall Hubbell. While cost inflation accelerated from the first half as anticipated, our pricing and productivity actions have been successful in more than offsetting these costs. Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price/cost productivity in the third quarter and positions us well to drive continued profitable growth going forward. We are raising our full year 2025 outlook this morning.

Operationally, we anticipate the impact of lower organic growth to be fully offset by stronger margin performance. while a lower full year tax rate drives higher adjusted earnings per share relative to our prior outlook. As we look ahead to 2026, we anticipate a year of strong broad-based organic growth across the portfolio. Hubbell is uniquely positioned at the intersection of grid modernization and electrification, and we have driven strong performance over the last 5 years. As these megatrends accelerate, and we exit 2025 with recent supply chain normalization dynamics behind us, we are confident in our ability to deliver continued strong performance in 2016 and beyond.

Now turning to Slide 5. We announced at the beginning of October, the closing of our acquisition of DMC Power. We are very excited to add DMC to Hubbell's portfolio as the business is highly complementary to our utility connector product offerings and provides a unique technical solution in high-growth substation markets. Hubbell has been very successful in our acquisition playbook in utilizing our industry-leading sales force and portfolio, brand, to drive penetration of new solutions across our customer base and we are confident that we can accelerate DMC's strong growth trajectory further over the long term. This acquisition is a continuation of our capital allocation strategy to acquire high-growth high-margin businesses in attractive markets with strong strategic fit and product differentiation. We anticipate the acquisition of DMC will contribute approximately $0.20 of adjusted earnings per share accretion in 2026.

Before I turn the call over to Bill, I want to highlight our recent announcement of Bill's upcoming retirement as CFO at the end of this year. Bill's contributions to Hubbell have been immeasurable over his 18-year career with the company, but let me highlight a few statistics that put his impact into perspective. He led 68 quarterly earnings call, including more than 50 as CFO. He led the acquisition of 50 companies averaging a double-digit ROIC for our shareholders and most prominently, under Bill's tenure, Hubbell has more than doubled sales, improved OP margins from low teens to over 20% and increased our market cap from less than $3 billion to $23 billion. In short, Bill's strategic and financial leadership have helped shape Hubbell in the company it is today. He is valued and respected by employees, customers and shareholders alike. And on a more personal note, Bill has been a trusted partner to me and our entire leadership team. Thank you for your distinguished service to Hubbell, Bill, and we wish you all the best in a well-earned retirement.

One of Bill's many strength was developing a strong bench of finance under Hubbell, and I'm pleased to have announced Joe Capozzoli as Bill's successor. Joe has held a wide range of leadership positions across Hubbell, and the finance organization over his 12 years and most recently has been the CFO of our Electrical Solutions segment where he has worked as a close business partner to our segment President, Mark Mikes, in implementing our strategy to transform HGS as a unified operating segment. You can see the success of Joe's leadership in that role to the strong growth and margin expansion of ATS over the last few years. Joe and I have worked closely together over our careers and I am confident in a seamless transition and in Joe's ability to drive further value for all of our key stakeholders in his new role as CFO starting in 2026. With that, let me turn the call over to Bill to provide some additional details on our financial results.

Good morning, everybody. Thanks for joining, and thank you, Gerben, for those remarks especially appreciative of the partnership you've offered me over my 18 years. And I think particularly the past 5 have been really special to me and Joe, I congratulate. I recruited him about 15 years ago, worked super closely with him. We've given him a variety of roles, as Gerben has noted, in corporate, in the field, inside of finance, operations and shared services. And I think you're going to find these really well prepared to be our CFO. And I think will be a great partner to Gerben, and I'm sure a great communicator to our shareholders.

So I'm going to use the slides that you found. I'm starting on Page 5, the third quarter results. You see sales up 4% to about $1.5 billion, OP similarly up 4% to $358 million. Adjusted diluted EPS up 12% and free cash flow up 34%. Let's go through each of those measures individually. So starting with sales, those results show really strong performance across the entire Electrical segment and the grid infrastructure unit within our utility segment. Those 2 areas, electrical and grid infrastructure grew collectively at around high single digits, where the grid automation component of utilities segment contracted and created about a 4% drag to the overall growth. What's important about that, as we look forward, we can see that the year-over-year compare for grid automation will start to flatten and that drag of 3 or 4 points will start to ebb away, as Gerben said, fade.

So the combination of growth in the Electrical segment growth in grid infrastructure plus the flattening of good automation is good driver of Q4 and ultimately a good setup for 2026. The second column there is operating profit, 4% growth to $358 million margins roughly comparable with effective price pulling offsetting combination of tariffs and a higher level of restructuring spending, which we feel it's really important to continue to drive productivity and to keep pushing margins up into the future. The earnings per share in the third to up 12% more than the growth rate in operating profit, and that's driven by tailwinds below the OP line. Specifically, we had share repurchases in the first half of the year totaling about $225 million that's helping lift EPS. And we had a lower tax rate as there was an international acquisition that gave us the opportunity for a tax-friendly restructuring and helped us drive the rate down. So helping push EPS up. And the fourth is free cash flow up 34%, $254 million, most importantly, in line to deliver our 90% of net income to the full year which continues to replenish the balance sheet.

So Gerben commented on the DMC acquisition. And even after that, $825 million investment, our balance sheet is still poised for investment. And so very good to see us be able to absorb an acquisition of that size and just take that in stride. So now let's unpack the performance by segment. And on Page 6, we'll start with the Utility segment results. Sales up 1% to $944 million. OP roughly comparable in dollars to $242 million. Back to sales, you see the grid infrastructure unit which accounts for about 3/4 of the segment grew high single digits. And I think the good news about that strength is that it was broad across all of the end markets. So Transmission was double digit, seeing strength driven by low growth and grid interconnections. Substation was up mid- to high single digit distribution up double digit with grid hardening and resiliency initiatives, and that's a good sign. That's representing acceleration as we move past a period of inventory normalization and distribution area.

And lastly, Telecom and Enclosures returned to growth in the third quarter. I think you'll remember that had been dragging on us through an overstock situation there. So third quarter experiencing good breadth of sales strength in utility grade infrastructure. I think as we look to the fourth quarter in that area, we've got very good visibility to stronger growth rates in the fourth quarter. That's really being driven by the order book, which has really accelerated over the past 2 months in September and October, really releasing some pent-up spending and I think is a good sign for 4Q and beyond. Grid automation, continuing the trend from the last several quarters, down double digits driven by project roll-offs that aren't being backfilled with new projects, and that's being partially offset by growth in grid protection and control products. I think what's important here about the grid automation is we're really coming up to the point where we've had 4 quarters in a row now sequentially bouncing around between about $230 million to $240 million of quarterly sales. And so that started in the fourth quarter of 2024.

So as we get to the fourth quarter of 2025, we're going to start to see that sequential flatness turn into year-over-year flatness and really remove the drag on the segment that we've been experiencing. So good news there, just around the corner. On the OP side, dollars roughly comparable. Pricing and cost management created a nice tailwind, but offset largely with higher levels of restructuring spend and decrementals from the grid automation side.

Page 7, let's switch to the Electrical segment. And you'll see Electrical segment continuing a string of strong performance here over the last several quarters. So you see double-digit sales growth of 10% and 17% OP growth with about 140 basis points of margin expansion. Returning to those sales, you'll see 8% organic fundamentally across the end markets, that lift is coming from 2 of those markets. One is data centers where we're selling connectors and grounding balance of system products as well as modular power distribution skin solutions, very strong growth there. Also very strong growth from the Light Industrial segment where you see connectors being sold into industrial applications, providing the lift there. That's where our R&D brand is continuing through the markets heavy industrial, a little bit mixed in the quarter and nonres remaining soft as it has been for the past few quarters. So basically by market there, you see about 8% growth. But beyond market growth, we feel good that we're pushing for both organic and inorganic growth here.

So we've effectively realigned the sales force. We have a more geographic bent now, which creates some efficiency, and we're complementing that with some vertical market specialists which creates some effectiveness, and we're very happy about how that's working for us. New product development, which Gerben had mentioned, we continue to expand the franchise organically through those measures. And on the inorganic side, we've been successfully operating an acquisition since the first quarter of '25, inventive provide solutions that power protect and connect wireless network. So Electrical really doing both organic and inorganic measures here. On the OP side, the 140 basis point of margin expansion coming through volume growth, price cost management and productivity initiatives to drive efficiency, as Gerben described, both Joe and Mark Mike and their team putting in initiatives to compete collectively as a segment. So really nice job turned in by Electrical Solutions segment, continuing multiyear story there, driving margins up.

Let's pivot from describing the third quarter and so looking forward on Page 8. And you'll see that we've adjusted our EPS guidance upward for the year as well as narrowing the range. So we had a $0.50 range from $17.65 to 1815. We now have a $0.20 range from $18.10 to $18.30. That's a midpoint movement from $17.90 to $18.20 or a $0.30 increase, and we're essentially passing through lower expected tax rate for 2025. And that really implies that operationally for us, the third quarter was in line with what we needed to hit the full year target. We're getting there with a little more weight to electrical versus utility, and we're getting there with a little bit more weight to margin and sales versus what we had originally expected. But this outlook now can be summarized in that 3% to 4% organic growth, OP margins expanding in the 50 to 100 basis point range, good pricing, good productivity initiatives. The DMC acquisition, which Gerben highlighted, we're anticipating being neutral to earnings in Q4 as we set it up to contribute $0.20 next year. And we've got the free cash flow driving towards 90% of adjusted income conversion.

It may be instructive to comment on and talk about the Q4 that's needed to deliver this full year guide. It's a little bit stronger than normal seasonality. And I just want to take a second to describe why we're confident to have the visibility in that. So the fourth quarter would imply 8% to 10% organic growth with contributions from both segments. And if you think about the step-up in growth, if we walk sequentially, you can see -- we talked about the absence of the grid automation headwinds that adds substantially. We've got incremental price in the fourth quarter, and we see strong visibility to data center projects new capacity inside of our Burndy business from some investments we've made in automation there and very substantial pickup in September and October in the transmission and distribution orders of utility segment. So we see that we've got visibility to that, and we're going to see margin expansion in both segments in the quarter. And so that's leading to our ability to maintain that original guide with the pass-through of the taxes creating a $0.30 increase.

So with that, I'll pass it back to Gerben and ask him to pull back the lens from this quarterly focus to a longer-term view of our utility franchise.

Okay, great. Before we give our preliminary thoughts on 2026, we thought it would be instructive to set the stage by taking a closer look at the performance of our utility segment over the last 5 years and how that sets us up looking ahead to 2026 and over the next several years, and this is on Page 9. While there is a lot of information on the page, let me highlight a few key points. First, while supply chain dynamics have impacted the various pockets of our segment over the last few years, we have executed well through these dynamics, and they will be fully normalized exiting 2025. Second, the strong growth and margin expansion we have delivered has been driven by our large, high growth and margin businesses. Most notably, T&D infrastructure has grown a double-digit CAGR over the last 5 years underpinned by our strong portfolio, position and secular megatrends and proactive price cost management.

While our meters and AMI performance has been more modest we are confident that we have repositioned this business with the appropriate cost structure and a more focused strategy to deliver growth at improving margin levels moving forward. Third, our M&A and capital allocation strategy has been effective in driving outgrowth while expanding our leading utility positions. Most notably, in substation automation with the acquisition of Systems Control, as well as the attractive area of grid protection and control. And finally, as we look back at the last several years of performance as a whole, HUS has delivered organic growth in line with strong utility CapEx budgets, which are set to accelerate further over the next several years as customers increase their investment budget to meet the demands of grid hardening, load growth and data center interconnections. We are confident that our strong position in these attractive markets will enable our Utility Solutions segment to meet or exceed our long-term targets for mid-single-digit organic growth moving forward.

Now turning to Page 10. I'd like to provide some preliminary views on our end markets for the next year before providing a more comprehensive full year outlook in the next few months. In Utility Solutions, we have high visibility to a robust project pipeline supporting continued strength in substation and transmission markets. While ongoing hardening and resiliency activity support continued momentum in distribution markets and modernization initiatives support strong growth in grid protection and controls. In our smaller end markets, we anticipate a return to growth in meters and AMI as well as telecom. In Electrical Solutions, we expect data center, light industrial and T&D markets to remain strong. While macroeconomic uncertainty drives a more modest preliminary growth outlook in areas of the portfolio such as nonresidential construction, heavy industrial and renewables. We are confident that our strategy to compete collectively in HES will continue to drive above-market growth and long-term margin expansion.

Overall, we see an attractive end market environment which we believe will enable us to deliver organic growth in line with our long-term targets, and we are confident that accelerating mega trends impacting the largest high-margin areas of our portfolio will underpin strong performance in 2026 and beyond. With that, let me turn the call over to Q&A.

[Operator Instructions] Our first question comes from the line of Jeffrey Sprague from Vertical Research.

Bill, thanks for everything over the years, and that's a lot. Hopefully, we'll see you around. And then just kind of appreciate on 2026, maybe you don't want to kind of get over your skis given how frustrating this utility guide has been this year. But I just want to sort of interrogate a little bit Q3 versus Q4 in utility and think about what that exit rate really means for 2026. I think there's a little bit of debate about what is normal seasonality but 1 could certainly make a case on simple arithmetic that this exit rate for utility would actually point to maybe double-digit utility growth in 2026. So I just want to get your thoughts on that. Again, I understand you don't want to get ahead of your skis here, but maybe how unusual is Q4, the stuff that you expected to happen in Q3 slip into Q4 and therefore, we need to be a little judicious about thinking about the exit rate.

Yes. I think you hit on several important points in that question, Jeff, which we would agree with. And thank you for the well-wishes by the way. But I do think that there's a chance you could see a very strong year. I think we think, as you say, it's prudent for us to plan our resources around that sort of long-term guidance that we've had. Fourth quarter's got some easy compares and you point out seasonality as a point of debate, which usually we have a head and shorter construction where the fourth quarter is a little bit lower. And we still probably have that, but your year-over-year with some easy comps help really boost that. I think you started looking at the sequentials and then apply seasonality to $26 million and you start to feel that setup is pretty good. So we share your confidence. We think it's prudent as you say, not get over the skis.

Yes, maybe the 1 thing, and we're certainly looking at those exit rates as well with the businesses and to see what could be and I think, Bill, you said it well. maybe going into the year and a little bit to your point of the frustration this year is that we'll take a more conservative approach going into next year and really making sure that our cost is aligned to that lower volume. And then if we do see the upside, and I think, Bill, you're correct that, that upside could likely happen, we'll benefit from it.

Could you elaborate a little bit more on the September, October order strength? And also just thinking about the up arrows here on the slide for telecom and meters specifically. Obviously, these have been nagging issues and problems all through 2025, some of it's comps, but still sort of an issue of can those businesses grow, why will they grow? Should they grow? Just the confidence to put up arrows on those into 2026.

We started with Telecom, again, it's a function of sequential math where we got flat for more than 4 quarters. And so the growth comes, but certainly, Jeff, off of a lower level, right? And that's just that's already sort of happened, and we see demand there and orders in line to support that. I think with meters and AMI it's not dissimilar. We've seen 4-ish quarters of contraction and building a franchise that's maybe led off some of the larger public utility projects and kind of getting down to a size that is based on stronger MRO base as well as some good repeatable business inside of the union co-op segment. So I think that's -- and you will note the color there of yellow maybe suggest it's not bar, but let's call it, modest Jeff. And then the September October order strength I think the best thing to say about it is it's very broad-based inside of the T&D world really across all of the products. So I don't know, Gerben, if you have anything to add.

Yes. I would say this was the inflection we were expecting to happen and perhaps a little bit later. And if we think back and with some of the discussion with our customers, certainly with the tariff environment, and there have been some pretty significant ongoing tariff increase and pricing increases over the summer. These customers are working within their budgets and assessing what this all means for their budgets. And I think that perhaps influenced a little bit but it's very hard to call exactly in timing to a specific month or quarter. But the good news is we're seeing it come up. And I would say this is what been waiting and expecting to happen.

I'm sorry, just 1 quick one. Is this tax rate sustainable into '26?

Yes. It's driven by an international acquisition restructuring. So I'd say it's project-driven, Jeff, and we're anticipating tax rate normalizing next year.

Our next question comes from the line of Tommy Moll from Stephens.

I want to make sure I'm hearing you here on the pace of recovery for utility. Is it a fair characterization that in reducing the organic guidance for this year, the revenue guidance -- it was entirely within the Utility segment, but that the shape of the recovery is as expected, the timing has shifted.

I would say both your points are accurate, yes.

Okay. And that would be true as well of the distribution piece of that business?

Yes. I think we saw a good inflection in distribution in the third quarter, Tommy, but I think that's a similar comment as well.

And I'll move to a housekeeping type item here. On your early commentary for 2026, which is appreciated as always, you indicated that organic growth is in line with long-term targets. We've heard from you before on the sales piece of that 4 to 6, have you commented explicitly on what your organic earnings algorithm is? I know you've communicated a double-digit pace, but I think that includes some acquisitions. And so if there's anything you could do to tightness that would help.

What we've talked about is 4 to 6 from the top line. We've talked about incrementals in the 25-ish to 30% range that gets you a loan into high single digits. And then we're talking about buttressing that inorganically, Tommy. So the -- that's kind of mathematically how we built to double digits for kind of mid-cycle sustainable earnings growth.

Our next question comes from the line of Steve Tusa from JPMorgan Chase & Company.

I am not a big management tire pumper here, but thanks a lot for all the interactions over the years, Bill and I think you're not only a really good and honest CFO, but a great guy. So it's been a pleasure working with you and hopefully set around the golf course in the future.

Thank you, Steve, Likewise, back at you.

So just on the quarter pricing, what was -- what's kind of the breakout by the 2 segments?

Yes. We were talking about pricing for the year being in the 3-point range and the quarter was in line with that and I'd say, reasonably balanced between the segments. Steve?

Okay. And then any -- can we just talk about the puts and takes on the margins for next year? Anything moving around on the PCP front for next year?

Yes. I mean I think I'd rather wait and let my esteem colleague, Joe give you those guidances in our January call. But I do think if you take the long-term setup that we're referring to, which goes back to Investor Day, the incrementals that we cite are below what I would call maybe harvesting incrementals and that implies that we would anticipate continuing to make investments along the way. As you know, there's a little bit of wraparound price embedded. And we'll talk through all that in detail in January, but that's kind of how that long-term framework really plays out.

Yes. Maybe the only thing to add is we certainly will continue to manage the price cost productivity equation to net neutral or better.

All right. And then, Jeff, I'd like, I think, 3.5 questions. So I'll just do 3. The -- I guess just on this drag from the meters and the other kind of infrastructure, more infrastructure-type businesses. How much visibility do you think you have on that bottoming and do you just get the sense that some of your businesses are getting like crowded out from an investment perspective with such a significant focus from the utilities on P&G as opposed to the D side of the equation?

Yes. So first question. Remind me sorry, Steve, I was thinking about the direct.

I did. I snuck in 3.5 maybe 4, but the first 1 is just how much visibility do you have on the Aclara and grid infrastructure drag? Like how confident are you?

Yes. Thanks, Steve. I would say it's generally longer dated than our -- certainly our distribution side of the business. But -- it's after this big project rollout, this business now has more of a component of MRO and we see future projects actually being less lumpy. We're refocusing this business on more of the public power. Those projects tend to be smaller, and they tend to be implemented over a longer period of time as well. So I would say what was much longer visibility is now much smaller. But I think it's also going to be more predictable for that business. And certainly, distribution is still going to be very good growth.

Yes, the crowding out point, I think, is one we debate a lot, Steve. And I think even the way he was asking is a heavy amount of T&S spending going to for by definition, drive kind of down a little bit and we've seen a very healthy deed. And even though there's some logic and there's a fixed number of dollars, -- it just feels like there's going to be growth across those 3 markets.

And maybe the 1 thing that, if it did drag it out and we saw the upside in substations at which we will. We're a little bit agnostic. We're very strong position in all 3 of those markets. I'd say equally strong position, so $1, an additional dollar goes to substation and transmission that just delays the investments that need to be made in distribution. So we'll probably extend that cycle of investment that will benefit. So we see our position to benefit equally if some of that happens, and it could.

[Operator Instructions] Our next question comes from the line of Chris Snyder from Morgan Stanley.

I just wanted to follow up on, I guess, the softer back half utility organic growth. I guess, maybe relative to 3 months ago, is this like a function of Aclara, maybe softening a little bit versus that Q2 kind of expectation. Is distribution turning just maybe not as sharp as previously expected? I guess just kind of what specifically is kind of causing the utility back half to come in below?

Yes, Chris, it's not Aclara. Aclara has been kind of as expected. There is just a little less from the T&D side. Now we say that and it's growing 8%, right? It's not like that's a low growth rate, but we were expecting kind of this sharper snapback that the September and October orders are suggesting. And so I think Gerben's -- Gerben described it as a more steady improvement rather than maybe that third quarter snap back, but I think we're going to see a little snap in the fourth quarter here. So it's within T&D, just, I'd say, 90 days delayed. Chris, is really what I would say.

I appreciate that. And then, I mean, it seems like the full year guide kind of calls for pricing to exit maybe in like the 5% range versus, I think you guys said 3% in Q3. So I guess, is that right? And then just any commentary you would have on price realization? Any pushback on price in the market, any elasticity you're seeing tied to that?

Yes, let's start with kind of the timing of pricing, and we've recognized tariff costs increasing throughout the year. And similarly, pricing to match that has increased throughout the year. So I think you're right to say if we end the year in the ballpark of 3%, you do a little bit better in the fourth quarter. And then I think some of that would wrap around. In terms of stickiness, I think the stickiness has been quite good in terms of pushback. Maybe ask Gerben to comment. But I would say, so far, we're talking about very constructive discussions with our channel partners very constructive discussions with our end market partners. And -- but I don't know Gerben if you had anything to say on stickiness and/or...

Yes. No. I'd say our price realization has been quite strong this year. And I'd say not much different from what it has been the last couple of years. And if you remember, our certainly are in the market -- some of the markets that we operate in, the demand is pretty strong. If you look at utility and data centers. The other thing to remember, we're generally a small part of the total cost of systems going to go in, but critical in the use. So usually, quality, service, availability is the leading conversations and questions with strong specified positions in many of the markets that we deal in. So that all works in our favor for why you would have strong stake right now. The conversations have been more frequent, I would say, as some of these tariffs came through, but a big part of that was just helping our customers understand where some of these costs we're coming from, how this affected our product line. What we're doing about it to partially offset it. And I would say that combination of those 2 things has caused us to have pretty good stake rates here.

Our next question comes from the line of Joe O'Dea from Wells Fargo.

Can you just touch a little bit on behind-the-meter infrastructure investments and what that means from a content perspective for you on both the utility and the electrical side, how that would compare to an alternative of in front of the meter, any perspective on sort of dollars per megawatt in the data center and how to think about that from the different kind of angles of investment?

You're talking about, Joe?

Data center investment, show or specifically data center investment, but whether that's being supported from kind of behind the meter or in front of the meter and how to think about what it might mean for differences in your content opportunity.

Yes. I would say probably immediately on the data center, it's directly more on the electrical side with some of the Berne businesses with the grounding system, I mean, tremendously strong position with some of our electrical connectors that are going into the data centers. As a matter of fact, a lot of that we're doing to continue to support data centers with higher amperages that are going through it as well as our PCX business. So I would say there, we feel the direct impact of it. But I think what you're pointing out, it is clearly a benefit for us as well on the utility side of how do we support the data centers with the power that they need. And that comes in various forms. I would say the primary way that a data center wants to be served by utility companies for that power and there's a lot of investment going in there, not just in regeneration, but in how you can connect -- interconnect the grid better to provide that load.

But then also, we have very strong relationship with the independent power producers, the EPC. So in some cases, you see data centers, maybe looking in the short term, to fulfill some of that generation more directly. And I'd say we would benefit from that as well when you interconnect these data centers to with substations and with the short lines that you would need to bring into the data centers as well. So I think our position is good to benefit from this. But I would say, generally, a data center would have a preference to have utilities provide that power.

And I think, Joe, maybe one of the things you're pointing out when we talk explicitly about our data center exposure. We are talking about that behind the meter piece. And I think you're pointing out that in front of the meter, there's quite a bit driving growth that doesn't exactly -- we don't call that a data center because it's going into our utility customer. But I agree with you, there's a driver there, too, for sure.

Right. No, exactly. Just trying to understand kind of those different phases of investment and opportunities and appreciating the direct kind of data center exposure within electrical that you're reporting. And then just thinking about the grid automation piece, where that sort of CAGR has been relative to target over the past couple of years. and trying to think through like any perspective that you can add on meters and AMI maybe sort of growth not performing to what those targets would be. But whether there's broader value within the portfolio that maybe is underappreciated. And so is there synergy value that, that business is bringing that remains attractive to you?

Yes. Yes. I would say the short answer to that is yes. And you're right to point out that the financial performance of it has been below our expectations. Now we've not said still on that, and we've pivoted that business to where we believe we can compete, we can win and we can get a margin that's more closely in line with the rest of our portfolio. But yes, it's actually one of the strategic reasons we acquired that business in 2018 when we assessed our portfolio and we have a tremendously strong position in the component side, and that continues today. That continues to be needed for tomorrow. But as we saw the grid modernizing, we really didn't have the right resources of portfolio to do that. And so we acquired Aclara in it. And initially, it was just Aclara, today it's great automation. So half of the revenues of this business today is not Aclara for products that we've since acquired that we have developed that are growing at the high end of our portfolio growth. So I would say it's absolutely contributed to the whole of grid automation, but we're also focused as we are in the rest of our portfolio that the individual businesses have to perform and contribute to the whole. And that's our focus right now is with Aclara.

Our next question comes from the line of Julian Mitchell from Barclays.

And I wish you all the best, Bill. Thank you for the help and congratulations to Joe. Maybe just my first question would be around operating margins. Just wanted to try and understand as we think about next year, I understand there'll be more flavor or color in 3 months' time. But if there was anything to highlight in terms of the effect from restructuring costs not repeating or higher savings, any kind of carryover to margin effects next year from self-help measures this year? And whether there would be any effect on the year-on-year margin progression from the accounting change earlier this year. Just to see if you could flesh out a little bit the comments around incrementals next year.

Yes. I think restructuring, Julian, we've tried to put it into this virtuous cycle where we spend roughly the same amount every year. Maybe it bumps around a little bit quarter-by-quarter. But then you don't notice it annually in terms of the margins. And we continue to believe that restructuring program is important in driving future productivity, we might call that productivity with a capital P, lots of smaller productivity initiatives with a lower case p, obviously. And so I think that part is something we hope not to whipsaw you with margin-wise and that we feel -- I know a lot of our competitors would exclude that number from their margin and say that it's a discretionary item. And we just feel it's going to be part of our year in and year out modus operandi. And therefore, we include the cost because we expect you to experience it every year plus, it's not just an expense. It's basically an investment to get margins up. So that's why we included and hoping that you don't see a lot of distortion from that. And the accounting change, I don't think would change the margins percentage next year either.

That's great. And then just maybe on the top line for a second. A lot of explanation understandably around the utility market that may be switching to electrical and the commentary around, I think, nonresidential and also kind of heavy industry into next year is quite muted per Slide 10, I think, maybe sort of flesh out any movement you've seen there? I know some other companies have sort of talked up U.S. nonresidential in the past month or 2? It seems like you're a bit more cautious.

I think we are probably a little cautious. It's been reasonably mixed and soft for us, but I wouldn't be surprised if you see a decent rebound, our exposure in that space has gotten smaller as a result of some of our business development work, both in terms of what we bought and what we sold and the heavier industrial, it's always interesting to look at steel prices and the like to see if you start to see some output increase there. But that will certainly true that up, Julian, by the time we get to our January guidance, I think you'll find -- I don't think we'll be an outlier from the general market expectations there.

Our next question comes from the line of Nigel Coe from Wolfe Research.

Bill, you look forward to useful to be retiring, but I know you've had a long career. So congrats and hope you enjoy your retirement. So no comments on that, so I'll move on. So couple -- a couple of quick modeling items -- but a couple of quick modeling items. And then I've got a bit more of a strategic one. Just on DMC, we understand the margins there are a reaching north of 40% EBITDA margins. Is that the case? And then maybe just comment on the 3Q utility performance -- was there any impact from the storm activity? It seemed like there weren't any big storms down in the Gulf Coast area. I know that can swing things a little bit. So I was just wondering if that was an impact as well.

Yes. Maybe I'll start with the second first. So storm impact there was none. It was quite a calm season, although there is a big one right now that's hitting Jamaica. But yes, that's -- and that generally, we would say in the overall scope of Hubbell is not a big driver of revenue. But within a quarter, certainly, that could have a couple of points if there's storm activity. On the first question on DMC, that's indeed a quite attractive margin business. And if you think about the application of this, it's in substation, very high stakes, I would say, environment of power with a very unique solution of a swage technology to put this crimfirst on these connectors onto the conductors what traditionally would be a specialized welding application in a substation. So you can imagine both the application of something like this and the savings or the efficiency in installation, that's what drives a really nice margin. And when you put that then in our portfolio, and I would say this is about as down the fairway, as you can get for fitting in our portfolio because we do a lot of connectors and this is yet not solution of that. We generally are able to add and to boost what privately or single line player can get with our sales force without relationships. So we're really excited when we are able to hold in businesses like that into the portfolio.

DMC. And then my follow-on question is really, it seems like there's a huge market for control house applications in data center and my understanding is systems control, certainly, the sort of the history of system control is very much in the substation for utilities. So I'm actually wondering if there's a sales channel opportunity into the data center for that business.

We bought a company a little while ago called PCX, which does the control house to data centers. And we do think, Nigel, the application has got a lot of growth in it. And we do agree there's some interesting best practices to be shared between data centers and the utility side on the substation. So I think your -- we would agree with your press.

The only thing I may say is we are very busy trying to serve our utility customers at this point. We're adding capacity in this business, but we see like you an opportunity to expand in those other areas.

Our next question comes from the line of Christopher Glyn from Oppenheimer & Company.

A lot of ground's been covered, but Bill, it's been a pleasure to work with you when we observed the excellence you brought to Hubbell for a long time. So thanks for all the work together. Yes. Just looking at data center, I don't know if we got a particular call out on the growth rate there. But I think that's kind of the spearhead of your vertical market strategy. Light industrial is obviously a little more diversified, but I think you're probably seeing some of that there. Just curious if you could comment on that as we think about the vertical market strategy being bigger than a data center theme for HES.

Yes. It's -- I would say, you're right, the data center is driving a lot of notable growth inside of the Electrical segment and some of it is a dedicated unit, PCX and some of it is the connectors and grounding solutions. So I agree. But I think I also agree with you that there are other verticals besides data centers where we've tried to add sales and marketing specialists do a better job of cross-selling across different units, and we're finding those efforts to be well worth it. And it's not just the data center vertical, as you say. It just happens to be a very high-growth pointed one right now.

Okay. And then just wondering if you have the D&A numbers for DMC in particular, maybe the depreciation since the amortization backs out anyway?

I don't have it off the top of my head. But the math right, you're talking about sales growth in the 20-ish percent range, you're talking about EBITDA, as we said, in the 40-ish percent range and you should assume, I may be guessing here, but it's a couple of points of sales. And then we'll do -- we'll be doing some investing in that business. So we'll be ramping those margins up over our ownership time, I would think Chris.

Thank you. At this time, I would now like to turn the conference back over to Dan Innamorato for closing remarks.

Great. Let me take the call here. And I just want to make a comment of thanks to all of you for the well-deserved well wishes for Bill. I'm sitting here across from him. And while he's long is reacting verbally, I can tell what it means to him. And also, I think we set the bar for Joe coming in of beating 50 earnings calls as CFO. So I'll make sure to relay that to him. But thanks, and look forward to connecting in the first quarter. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Well, thank you, everybody. Chris Snyder, U.S. multi-industry analyst. Super excited to have Hubbell up here with me. We have current CFO, Bill Sperry. We have future CFO, Joe Cappasola, and then we have Dan in Amerada from IR. So thank you, guys, for joining us today.

I guess maybe starting off high level. The company has gone from a GDP grower to now targeting mid-single-digit through cycle growth. I think a combination of secular trends in electrical and utility that we can all appreciate, but then also portfolio high-grading you guys mixing into better growth verticals in the market. But we've seen growth below that mid-single-digit level now for a few quarters. I guess what gives you guys confidence that this is now a mid-single-digit through-cycle growth business?

Yes, I think that's a great question to kick off with, and thank you all for joining us. I know the day is getting maybe a little long. And -- but I always love your conference because it feels like labor days over, it's back-to-school. All the summer holidays are over, and we can all get back and grind and finish the year. So it's always fun to be here.

So I'm going to introduce Joe, but I wanted to start and use your question maybe to frame where we are. So if you look at the last 5 years, we've been growing compounded at 10%, we've had some impressive margin expansion that time. So our earnings per share have actually grown at 20% compounded. So to me, that time frame helps answer your question that over the medium term, we're seeing higher growth and higher margin. And where '25 stand specifically is kind of interesting because we put out guidance in the beginning of the year. we had enhanced and increased guidance as the year went on. And as we see ourselves hitting that newer higher revised guidance -- we might be getting there slightly differently. It's maybe a skew a little bit towards margin and away from volume. It might be a slight skew towards electrical and away from utilities. So things don't always happen the way exactly that you expect, but I think it's a good example of us executing and living up to our promises in a year that has, frankly, some challenges as tariffs and some other things have been layered in on us.

But I think ultimately, that sets us up for our long-term expectation, which is that we think we can grow the top line mid-single digits over the medium term. We think there's 25% to 30% incrementals. That helps us grow margins. We think that results in, let's call it, 8% earnings per share growth. And then we've got some nice cash flow that can really help us buy companies and add another couple of points to get to steady state, medium term, double-digit earnings growth that we'd like to provide you. So I think the market, getting to your question, are really better than GDP. I know there's been some, to your point, some slight dislocations over the last few quarters. But over the last 5 years, and we think over the next 5, you're going to see a really solid positioning, really good markets, and you're going to see it perform like that.

And our strategy and how we're approaching things is going to be consistent. I'm happy to have the opportunity to introduce you guys to Joe. I have -- I'm approaching in next February, my 64th birthday and have been in conversation with our CEO and our Lead Director about the best time to effect a transition. And as we've talked about that over the last couple of years, we kind of landed on it now at the time. And -- and Joe has proven to be the perfect candidate, and he was part of our thinking. So I found Joe a coffee shop and random coffee shop in Connecticut 13 years ago. convinced him to join as our Controller and Principal Accounting Officer. We had Excel at that role for a number of years. We then asked them to run shared services and he did incredible job, saving basis points out of the margin of the whole company by getting some services offshore and done much cheaper, including customer service, engineering some of the finance functions, et cetera.

We then asked them to run operations which was a great opportunity for him to vision and lead some restructuring projects and again, kind of really pushing productivity and operational excellence. And then most recently, we've asked him to be of half the business in Electrical segment. So he's had a really great experience. He has excelled at all the roles we've asked them to do. And I'm really pleased that he's going to succeed me, and I'm hoping carry on basically the mission and the strategy. And so to me, great opportunity. Joe has just announced yesterday, and he's going to be leading our January call. So I thought perfect opportunity for him to meet all of you.

And so that by the time we get to that January call, you'll feel it won't be a cold introduction. And so I welcome my partner, Joe, to the world.

Welcome Joe. A lot of excitement around utility, you guys compete really across the landscape. You have a lot of touch points, transmission, substation, electric distribution, smart meter. Can you kind of just talk about what you're seeing across those verticals on a near term, but then also what is the medium-term growth rate expectations for the

Yes. I think they are different, and there's been years ago, it was quite similar across those. So I think it's an important question because they are behaving a little differently. So if you started with distribution, -- there's been, in our opinion, sort of a mid-single-digit growth end market where about mid-single digits materials being hung off of poles, -- and by distribution, I'm referring to that last mile in the suburban neighborhood, think of those 14-foot wooden poles.

And we have some good evidence. We were under shipping that install rate and there had been some stocking both at our distributor level as well as at the end customer, the utility level. And we believe we've exited that period and we've started to see sequential growth and the book is progressing, meaning our orders are progressing in a kind of nice steady improvement level. And that leads us to believe that over the medium term and starting basically as this year ends, sort of that low towards mid-single-digit growth rate seems like the right level for that. It's interesting because that contrasts to the transmission and substation, which is growing double digits. We think that's being driven fundamentally by the demand coming from data centers where there's really the need to hook those up if you have scale they're going to need a substation. They're going to need some transmission to get the power to that data center. And those needs are quite urge and pressing and those customers are asking our utilities to hook them up and get them powered. And so we're benefiting from that on the substation and transmission side.

And so -- those things don't always grow at different levels, but I think because of the nature of the drivers and the urgency of some of that need we're going to see different growth rates over the medium term, which is interesting statement.

And then the other smart meters have been under pressure. Are you guys -- do you guys feel confident that maybe not things are getting a ton better, but the trough is in are the worst is in the rearview there?

Yes. I would say that's a good way to describe it. I think -- we've seen large projects roll off that haven't been backfilled. So we've seen over several quarters now, a contraction in that business. And what we're starting to see now is a sequential flattening. And basically, the franchise right now is at a level where it's not needing to replace any mega projects. It's basically a franchise that's servicing munis and co-ops with smart meters enabled with comms -- on the electric side, it's providing comms to gas and water utilities. And it's selling meters to large IOUs that will more likely than not have someone else's comes in it. And there's small projects right now that are replenishing constantly. There's MRO and replacement work that's replenishing constantly. So it feels like it's flattened to that point and will emerge starting to grow in the fourth quarter, such that we're expecting at a modest growth level. And we think we probably won't be talking as much about Aclara next year. I think it's going to fit into the portfolio as a nice contributor.

Yes, I appreciate that. I wanted to follow up on kind of the disconnect that you're talking about between transmission and substation, double-digit growth, electric distribution, having cycled down. Is there a connection there in that if the utilities are spending more and more on transmission and substations, then there's effectively just less money to go in distribution and maybe that's why the destock and just the demand there has been softer than expected.

I think that's a very likely driver. I think the urgency -- so if you've got a budget and what's been exciting for us is to see utilities commit to larger budgets, especially including capital budgets, which they're quite explicit about talking about. But it's also good news that they've got load growth which means their revenues are going up. They're quite a fixed cost industry. So that's a lot more profit and that helps fund a lot more spending, which is great news for us because certainly, the demand for both distribution and transmission substations product. But I think your finger is on the source of the differential growth rate is the urgency of getting higher data center installs hooked up. And I think that's what's driving -- there's slight crowding out or prioritization, let's call it, that's driving the transmission substation spending higher against a fixed budget.

Yes. A theme of this conference is something we're hearing again and again is a return to load growth for the utility sector. I think I understand that, that would be positive for Hubbell. But is there any way to think about like what that means? Is it -- if we get 1% load growth, is there like any sort of multipliers or things we could think about in terms of what that would mean for the spend, whether the OpEx or the CapEx?

I don't know, Dan, if you think of it in those terms, I mean, I don't know that I think about it that way. It's hard to quantify it that way. I'd say generally, load growth is great for the utility P&L. They have fixed costs. So revenue growth is great for them. And I think particularly when you look at the OpEx side, things that they're funding themselves that low growth dropping through nicely and incrementally will drive more investment on the OpEx side over time -- it's a big opportunity there.

Appreciate that. Maybe going to the electrical side, -- you guys have high-graded this portfolio a lot over the last couple of years. We've seen those margins step up maybe Joe gets credit for that. But -- can you talk about the exposure today and why that piece of the business is a better grower versus history?

Yes. Maybe I'll ask Joe to respond to that.

Sure. Yes, that's been a really important part of our portfolio transformation over the last couple of years in reshaping the end market exposure that we have, which is really peeled off a lot of our commercial exposure non-res as well as residential exposure, which leaves us with a very high concentration towards industrial as well as data centers. So -- that's been a very important and intentional part of our portfolio management. And we will continue to identify opportunities to prune and pair where appropriate. That was kind of on the addition by subtraction side. And then on the growth side is we've been acquiring companies on the electrical side in the high-growth, high-margin space. Again, that's kind of focused on data center and attractive areas within industrial. So that high grading has been an ongoing journey, very intentional part of our strategy, and we'll look to continue that.

And what about could you comment on margin growth, that's all top line? You've been putting a lot of energy into improving productivity and efficiency. Maybe it's worth talking about growing the bottom line as to as well.

Yes. And I would say that margin expansion story has been -- which you've seen it over the last couple of years playing out. It's been kind of a multipronged approach. -- portfolio being 1 piece of it. Restructuring has been another important piece of it, which is less episodic and more just in the normal push-ups and setups of running our business. We have opportunity to consolidate factories in our footprint where appropriate. Those tend to be longer lead time projects. they have really nice attractive returns, and that will continue. We've also kind of put our foot on the gas with our investment in capital and CapEx. And so electrical for a decade plus that invested about 1.5% to 2% of sales in CapEx. We're now almost double that. And a lot of that CapEx investment is going into these very targeted areas of adding capacity to existing facilities, machine automation, where this capacity is in high demand. A lot of that's going into data centers and renewables and a few other key areas in industrial. And that incremental volume at very high margin has also contributed nicely to that margin expansion story in Electrical.

The last piece of that -- the strategy of margin expansion is around operating as a unified segment. And you probably have heard Mark Mikes, our President talk about that strategy, and that's a multiyear strategy that's well underway. And there's a lot of power in competing collectively, streamlining our systems and our processes, delayering our layers of management and other opportunities. So that's been ongoing, that's been part of the margin expansion story, and that will continue over the next several years as well.

Yes. I mean I appreciate that. I wanted to follow up on data center. The very strong growth for you guys there in Q1 -- in the first half of the year within the electrical business. Could you just maybe talk about for that are newer to the Hubble story, what does the company exactly sell into data center -- and a big theme is the gray space to the white space. Any -- does that have any impact on the company's content into data center?

So maybe I'm going to hand that to Joe, but think about -- he's going to talk about the products that are directly going to data centers on our electrical side. I would say there's a piece we don't attribute which to your question of a 5 minutes ago that the substation and transmission has been terrific even though our customers the utility. So we call that utility, but influenced by the trend of data centers. So -- but maybe the direct products that you're selling to data center customers?

Sure. So we've got a handful of key products in the basket. One is -- we have mobile power distribution skids that go in and help power those data centers. Those tend to be larger, longer lead time, more visibility projects that were working on with hyperscalers well in advance of those projects. So that's 1 piece, a very large piece. We also have a number of components and connectors, grounding equipment. -- higher amperage condensed products, everything that's moving power through those data centers. And that's been flowing more through typical stock and flow business through distribution. So both have all complemented that offering very nicely.

The other thing that we're seeing is that these data center designs are continuing to evolve and change rapidly. And they're also calling for higher average power supply through the data center. And so new product introductions and innovation has been a really important part of that, along with our acquisition strategy. So really, really nice opportunities for us there.

Maybe on that acquisition strategy, I mean, Hubbell has a long strong track record on M&A, can you kind of just walk through the process that the company looks for when they're identifying targets and then ultimately integrating them and driving value.

Yes. So it starts with working with Dan as our corporate strategist, it extends then to the dedicated business development teams that we have in the 2 segments and then the dedicated business development team that we have at corporate. And it starts with identification of end markets that we think are outgrowing GDP -- it extends to identifying targets in companies inside of those markets. And I would say we have evolved to become now very targeted where we're looking for specific things. I would say when I started with Hubbell 18 years ago, it was maybe a more reactive what company was for sale and it's now quite intentional.

So from all that identification, we then create incentives for the field. So in other words, if Joe has a general manager and if she or he buys a company I ask that they pay you back the cost of the capital for that and everything they earn above that is premium that goes into their bonus. So they have a nice incentive to actually go through the work. And our screening is driven by several important factors, but market growth is 1 margin and the potential for higher margin is another -- so we look at the competitive intensity inside, we look at what is the nature of the competition. Would Hubbell as owner have the right to compete successfully.

And when you go through those evaluations and you find the targets, we get involved in most often in auctions. There was 1 of our targets we landed recently, where it was through a direct approach and a long-term relationship, and you kind of work together and you end up agreeing on a price. That used to happen a lot more. I'd say today is much more governed by a hired banker intermediary and auction and going through a process like that. And when we're lucky enough to land something, we'll put together an integration team and that team will spend maybe 12 months, making sure that business gets integrated, some things happen in the first 100 days, getting bank accounts hooked up. getting receivables processes and payments processes lined up, getting the e-mail to work. You got to spend a lot of time on cybersecurity and making sure that stuff is hooked up. And then over the longer term, as Joe, maybe you bought something where the facility itself is subscale. So maybe we've got a restructuring project to bring that volume to 1 of our facilities. Often, we're buying things that have agent reps who are the sales force. You go through a process in the medium term of transitioning from reps to our sales force that creates a lot of value because they're expensive to hire third-party reps and our sales force already works for us.

So it's quite an end-to-end process. We feel really good about doing it on a portfolio basis. We look -- we just had our board in this week, and we look every September backward at the last 5 years of deals we did, and we study the ROIC of them. We study their performance relative to the plans that we put together to get approval from the Board. And those reviews are quite favorable looking at it as a portfolio and looking at it as a process rather than episodically, you do a $2 billion, $3 billion deal every 5 years as we're meant to do 3 deals, 4 deals every year, and we find that we can run into really nice success both with the integration and with their performance on a portfolio basis, and we feel very much that we're investing on behalf of our investors to find these private companies that public investors can invest in and that we are responsibly adding those. They're worth a lot more on our platform. We take cost out and we think we create lots of value.

So I'd anticipate, as Joe takes over that, that continues to be big part of our strategy.

Yes. I appreciate that. I wanted to talk about the recently announced acquisition, DMC Power, $825 million, which is a bigger deal for you guys. I guess, can you talk about what the business brings to Hubbell? What kind of growth rates could we expect there? And does the -- what kind of visibility does that business have into next year?

Yes. So DMC, which is something we signed and announced haven't yet closed. We're expecting to close it in the fourth quarter. It is a high-voltage transmission connector business. And we have connectors that work in high voltage and transmission applications. That product line for us is quite highly profitable. It's an area where quality matters a lot. And basically, these connectors, they take conduit and that connection is terminated using a couple of technologies. One is rim 1 is bolts and the other is using welding. And the welding is the best connection but it's also really expensive to have welders in the field to do that. So DMC offers an extension of our product line with a technology they call Sage, which is a crimp which is really cost effective, but they achieve well like results. And so it's kind of this really effective at being able to get welded prices but having a much cheaper cost structure.

And so when we think about its growth rate, we're doing double digits on our side, this is going to outgrow the transmission market because this technique is actually gaining share. So it's been growing at 20% and I'm expecting that it continues to grow really impressively. Our existing product is very high margin. This is even higher margin because of this dynamic between super high-quality output and a cheaper cost structure. So we're really looking forward to having a joined Hubbell family in the fourth quarter. I think it's going to contribute nicely to 2026 -- what's interesting, you mentioned the $825 million of value. We're going to have to borrow to buy it. That has an interest rate. And so -- in the old days, accretion meant nothing because debt was free. So now you're borrowing in that 5% range. And so it becomes -- what I like about the financial side of DMC, it's growth, it's margin, but it's going to contribute incrementally to $26 million because we'll close in the fourth quarter. But then at the end of 2016, as we start paying the debt down it's going to really contribute even more to 27. So it's quite a nice really nice strategic add and it's going to be a nice financial add too. I was trying to do some mental math -- did you guys say -- was it $60 million EBITDA for that business next year? Yes. So 14, 15x EBITDA for something that grow 20%.

Like how -- like what -- how deep is the pipeline or like opportunity set to buy things that can grow like that for those kind of multiples.

So I would say data centers is an area that offers that transmission and substation offer that. But I'm much more in the habit of saying 10 to 12x things. So to see us go to 15 as a pretty good sign to you of the scarcity value of opportunities like that. And I think that's important that we lean in on the right things. And -- but we're always cognizant of value, making sure the returns are going to be attractive.

Maybe kind of like zeroing on the market a little bit. You guys obviously have a lot of metal content in the products you sell. So price is always a big topic or focus point I believe -- like I think your pricing in Q1 was about 1%, and I think Q4 was maybe like something closer to 5%. So maybe like 4 points or so of tariff price. Can you just maybe talk about realization, market acceptance? Is there like pricing fatigue that's coming? What's going on in the pricing -- the fatigue is an interesting question.

I was going to ask Dan to give you a little bit of the ramp. And I think Generally, I would say the prices are sticking well. Fatigue is a pretty interesting question. I think there's conversations continually about price. I think lots of us are doing price elasticity analysis. But I would say, generally speaking, the prices are sticking. Maybe Dan can give you a sense of the momentum of that and how it's going?

Yes, I think your math is in the right ballpark. We saw a step up in second quarter. I think we'll see a step up in the third quarter as price layers in obviously inflational layer in as well. So price will offset the inflationary impacts as we progress through the year, and we'll see another step up in the fourth quarter just as things layer through the P&L.

Bill, you mentioned doing like elasticity analysis. I'd be interested in like what is the -- it doesn't feel like at least on the utility side, that there is that much elasticity in the market.

Yes. So I'll maybe ask Joe to respond. I think when we started in March, thinking about price increases, Joe and his counterpart utility might have said, well, we're planning on this much elasticity and I would say it was an educated guess at best. It feels to me like you guys have really interesting data now, much more experience of sort of 6-ish months of dealing with operating in a higher price environment. And -- what would you say about trying to assess elasticity?

Yes, I would say it's been a very important part of our pricing strategy here since this tariff on slot set in the first quarter. We were very quick to evaluate our lines and our exposures, and we were very quick to evaluate our competition's product line exposures to the best that we could. So based on our overall assessment of the landscape of where we're at, where our competition is at -- there are certain areas where we had to be very thoughtful about price. We price up. Competitors don't have exposures from those same geographies. and we could be losing share. So we really had to be thoughtful about it. We built models for many of our product lines -- actually all of our product lines had exposure from, let's call them high tariff countries or regions.

And so going into it, those models were formulated based on a number of assumptions and our best guesses with our teams and lots of collaboration and people knowing our competition. And so we put all of that into the into our elasticity of demand models, and they're playing out now over time. So we've been monitoring them very closely. And we've had to make some tweaks to pricing up and down along the way. And the interesting thing is with multiple waves of tariffs we've had multiple waves of price actions as well, which has enabled us to manage and navigate prices up down as the year has been playing. So they've been really instrumental in terms of our ability to manage price.

And I think on the utility side, communication has been a really important part of creating the inelasticity that you're observing? And some of that is with the utility themselves, but a lot of it has been with our distributor partners. And a couple of them in particular, have approached us and really wanted to understand our cost structure and wanted to understand the justification for the price increase. And that proved to be really constructive.

So as they got to understand why we were asking for the price and where it was justified and the fact that we had productivity and other factors that were offsetting what you might think you had to ask for that enabled them to be effective wholesalers essentially of that thought process. And so there's been besides analytics, there's been a lot of communication and customer relationship discussions that have really been a really essential part of managing through kind of a year of increasing inflation.

I appreciate that. The latest 232 expansion that came through in August, does that have an impact on Hubbell? Is it something that we would expect more price for?

I mean, in a small degree, yes, maybe Joe could describe. But I would say materially, it's just noise in the tariffs. That being said, I mean, you're putting through some October increases, right?

Yes. I mean relative to what transpired in the first 7 months of the year, the new 232 was quite small in relation to the rent.

Yes. I appreciate that. The -- maybe on the electric distribution side, that was obviously kind of a pretty big drag for the company for a while, seemed to show positive momentum. Are you guys continuing to see signs that, that market has turned versus risk of kind of stepping back down you're talking about utility, the distribution electric distribution.

Yes. So I would say, yes, the order book is improving creating a decent amount of confidence from us that we're going to see that improve. I think in the second half, we're expecting a nice steady improvement not some kind of dramatic snapback, but nice steady improvement in for us where that -- it gets back to your first question, which is from there, that should set up for '26, '27 and beyond a nice base from which 2 that we all grow from there. So it's kind of emerging from this period of having been overstocked and I think we're just getting to the point where we'll be exiting the year in a really kind of better, more healthy, much more normal book-and-bill kind of relationship. So we're looking forward to that being nice steady improvement over the next few years.

Well, I appreciate that. We're up on time. Thank you guys. Really enjoyed this.

Thanks for having us. Thank you all for joining us. Thank you.

Thank you. Thank you.