Q1 2021 Hubbell Inc Earnings Call

[music].

Good day and thank you for responding by welcome to the first quarter 'twenty 'twenty. One results conference call. At this time all participants lines are in listen only mode. After the speaker's presentation. There will be a question and answer session and I forgotten during the session you will need to press star one on your telephone please be advised that today's conference is.

And being recorded.

Any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today Speaker Dan Inamorato. Thank you. 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 first quarter 2021 and the press release and slides are posted to the investors section of our website at Hubbell Dot com.

I'm joined today by our President and CEO, Girvin, Bakr, and our executive Vice President and CFO Bill Sperry.

Note that our comments. This morning may include statements related to the expected future results of our company and are forward looking statements as defined by the private Securities Litigation Reform Act of 1095.

Before please note the discussion of forward looking statements and our press release and consider it incorporated by reference and to this call. Additionally comments May also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and slides now let me turn the call over to Griffin.

Great. Thanks, Dan and good morning, everyone and thank you for joining us to discuss <unk> first quarter results.

I will start my comments on page three with some key takeaways for the quarter.

At a high level, we are seeing strong improvement in demand across each of our end markets and we will give you some data points around that and the next page and throughout this presentation.

Our operating profit and margins expanded in the quarter as we continued to actively manage our cost structure and realized savings from the investments and restructuring initiatives.

Our results and the quarter are consistent with the guidance, we laid out at the beginning of the year and put us well and our path to achieving our full year EPS guidance, which we are raising today.

Who will walk you through our guidance in more detail later, but overall, we remain confident and our ability to deliver on our commitments.

Let's turn to page four with more details.

You see here that our sales were down 1% year over year and down 4% on an organic basis.

And our utility solutions segment secular growth trends around grid modernization and renewable energy continue to drive strong demand for hubbell products and.

And that is reflected and broad based double digit order growth in the first quarter across each of our major business segments power systems gas connectors as well as the Clara.

While revenues and the first quarter continues to be impacted by installation delays for certain projects. We anticipate this dynamic will normalize beginning in the second quarter and drive growth as we ramp up our capacities to meet the growing customer demand.

Backlog and our shorter cycle T&D components business was up almost 40% year over year exiting the quarter.

While the Aclara backlog is back up to approximately $1 billion. Following a strong first quarter with over $200 million of orders.

And our electrical solutions segment markets continued to improve as orders turn positive year over year, and we realized solid sequential growth in revenues and the first quarter.

Light industrial markets are strengthening as the broader industrial economy recovers a positive sign for hubbell that demand for electrical products and solutions will drive growth over the balance of this year.

Our backlog across the electrical solutions was up more than 30% year over year exiting the first quarter.

And our focus over the near term is to continue management managing through a tight supply chain environment to serve the critical infrastructure needs of our customers.

In terms of our operations, we achieved 30 basis points expansion and our operating margins in the first quarter as we overcame lower volumes and the impact of price cost turning to a headwind as we absorbed significant commodity inflation on our cost base.

We recognize and anticipated this towards the end of last year and took early actions to address it through price and productivity.

However, inflationary pressures have continued to accelerate through the first quarter, which necessitated and drove additional pricing actions and we will continue to take further actions while this inflation persist.

Over the last six months, we've implemented price increases, which have let most of our markets and frequency pace and magnitude and we will continue to utilize the strength of our product portfolio to drive profitable growth.

While commodity inflation remains a moving target we've contemplated a range of scenarios within our guidance and have levers at our disposal to effectively manage our operations and deliver on our near term and long term commitments.

You also see here that we delivered $1 72 of adjusted earnings per share and the quarter and $39 million of free cash flow and I will turn it over to bill and a minute to give you some more context around those results.

But before I do that I wanted to highlight a few key accomplishments for us in the quarter.

First of all Hubbell is very honored to have been named one of 2021 <unk> world's most ethical companies by Ethisphere.

And I'd like to thank our over 19000 employees, who have demonstrated the highest standard for integrity, each and every day and note that this achievement is a recognition of their commitment to compliance and ethics as a foundation of our strategy and culture.

I'd also like to highlight that Hubbell recently received two major awards from one of our top distributor partners.

Out of only three given annually.

Our gas connectors business received a top award for sales and marketing while power systems received the award for above and beyond service excellence.

Both of these awards are recognitions of the strength of our brand and the quality and reliability of our products and the marketplace.

And they demonstrate our commitment to service, which is a key differentiator for hubbell, particularly in recent years as our utility franchise had been so effective and serving our customers' needs to increase storm activity.

And finally, we closed the acquisition of Beckwith and the fourth quarter and I wanted to congratulate the leader of that business for being recently elected to the National Academy of engineering for his contributions to digital protection and control devices for the grid.

This is a recognition of the strength of <unk> technology solutions, and a testament to the talented people that joined Hubbell as part of acquisitions, which we're confident will drive further innovation and differentiation with.

With that let me turn it over to Bill to walk you through the financial results and a little more detail.

Thanks, Kevin Good morning, everybody I realize how busy the release schedule is today and I appreciate you being with us.

And I'm going to start my comments on page five.

And you see the sales.

Down 1% to $1 billion 78.

That figure includes the three acquisitions that we closed and the fourth quarter.

And it's good news for us to see all three of those investments off to a very strong start just to remind everybody on the electrical side, we made an investment.

In the <unk> space and tenant and housings for that space and the utility side, driven just mentioned that cliff.

Which is a controls business and armor cash, which makes and closures for utilities, all three high growth high margin.

Areas and happy to see them being well accepted by customers.

And off to good starts and contributing to our performance.

In the first quarter.

Also as curve and noted a clear inflection point and orders for us where we had orders up.

Double digits and.

Strong <unk>.

Ceiling like strong demand.

Ahead of us leading to expectation for stronger sales.

On the op side, Youll see 30 basis points of margin expansion.

Sure.

And.

There was some headwinds that we overcame there.

Starting with.

And the headwinds from the sales decline.

On the organic side the price cost lag.

That we experienced.

And the new acquisitions.

Early in their integration phase tend to perform at less and they are fully integrated margins and so you tend to get a little drag from that so the 30 basis points of expansion overcame those.

And really using productivity gains as well as importantly restructuring benefits.

Those benefits from restructuring came really from both sides of the restructuring program, namely savings from dollars, we invested last year as well as the tapering spending level that we had communicated to everybody. So.

Those contributions helped us pick up those 30 basis points you see.

EPS, expanding 5% to $1 72.

Besides the increase in operating profit there were also some tailwind from the non op side, including from pension expense as well as from the effective tax rate down to about 22, 6%.

And the free cash flow side.

And <unk> $39 million generated in the quarter.

Compares unfavorably to last year, but we have a significantly different mindset.

At the end of March last year, we were stopping with both feet on the breaks on the inventory side.

This year, we're feeling that order expansion and we're looking to invest.

And the working capital to help grow the company.

And so that 30 nines and in line with our full year target of getting to $500 million and.

Has the same seasonal shape that we had in 2019.

Just and thinking about talking about the balance sheet also wanted to mention.

And refinancing that we executed in the quarter.

We had $300 million.

Of bonds maturing in 2022.

We're paying and interest rate of 365%.

And it became clear to us that fixed income investors were starting to demand higher interest rates.

They saw inflation coming and the effects of stimulus.

And to get ahead of that.

We were able to to execute on some new bonds at two 3%, so a saving of over 130 basis points.

There is a slight anomaly.

And crossing the quarter and because those the new bonds price the end of March.

And.

The old bonds were not called until first week in April So those of you who look at the Q Youll see both bonds and still outstanding and the cash.

Kind of on hand, and then as a subsequent event and and the second quarter Youll see that we bought out the old bonds and we'll pay the make whole there so.

A good opportunity for us too.

Get our interest rate fixed for the next 10 years at two 3% which were quite.

And quite pleased with that execution. So I think the big takeaway from page five is twofold.

One is clear evidence that the recovery is underway.

Attractive orders expansion and secondly that the self help.

Window continues to contribute to hubbell's performance and the form of.

Programmatic acquisitions.

Well as a restructuring program.

And that continues to help drive performance as we go forward.

Next two pages like to unpack.

Queen and our two segments electrical and utility.

We talked to you before about.

Reorganizing the segments and specifically, having the electrical solutions segment really run as one business and.

And our attempt is to replicate when Gerber and was running power and how he turned all of those different brands into a really a single operating segment and Pete low is going to help us do the same on the electrical side now.

The other implication is we have built up over acquisition over the last couple of years, our gas distribution components business that had been and electrical and starting now and the new year.

Because its customers on the utility side.

And in front of the meter.

We've got that business now located inside the utility and so the first quarter has been adjusted for that change to make these two periods comparable on both sides. So.

So starting with electrical here on page six you'll see our sales.

Sales down 3% to $546 million.

Two important signs of recovery for the electrical solutions segments.

First is the sequential growth from the fourth quarter to the first.

And that normal seasonal pattern.

As for a contraction of about one point or two.

And in this period it grew 5% from the fourth quarter. So clear sign that there is some recovery underway there.

Was that the order rate was up.

Year over year.

And so that's.

I think portends good news going forward for the electrical segment.

As we reorganized inside of industrial we have the light vertical and we're really seeing that responding the quickest and soonest.

Not unusual for a recovery period, the heavy industrial responds a little bit later and.

And we're starting to see some of the early indicators.

Showing heavy having signs of improvement ahead of it.

And the non res side remains soft inside of non res, we still have our commercial and industrial lighting business.

They had 7% declined which is contributing to that softness and non res and on the.

The resi side, we saw markets.

And quite strong in particular on the single family side. So.

And there continues to be demand.

As people are looking to get out of multifamily and into single family solutions.

On the operating profit side, you'll see.

30 basis points of margin expansion.

The same story for the enterprise, namely.

The headwinds from the lower volumes and the price cost drag.

And was overcome by the productivity and expense management as well as the benefits from the restructuring program.

Page seven and we've got the utility solutions segment.

And you see a.

And again reminding everyone. This now includes gas components and you see a a 1% increase in sales to $532 million.

We've really got to unpack that to tell the story. So you see that legacy.

Our power systems business to what we see as components on here.

Up 6%, so we continue to see.

Grid hardening driving the distribution spending.

And the renewables, most notably solar and wind.

Causing transmission spending to grow.

And right now.

And that renewable trend is causing transmission to outgrow distribution right now and we'll talk about that a little bit more later.

On the Claris side, you see down 8%.

They continue to have.

Access issues with COVID-19, and we're anticipating that that frees up now and the second quarter and they start to grow girvin made.

Comments about.

Their order pattern.

And and orders across and utility space were really impressive and the first quarter, we had double digits on the power systems businesses.

Double digits and gas.

And components and double digits and a clear from terms of order generation and so I think signs of good future growth and visibility.

And for our utility solutions segment.

And as well you see margin expansion there again, similar story of lower organic volume headwinds and price cost headwinds being overcome.

Bye.

The productivity and expense management.

I wanted to highlight on page eight.

The renewables vertical and the wind and solar business.

Business that.

We feel.

And as a real secular mega trend.

Type growth rates anticipated.

The <unk> and district energy industry, clearly pivoting from fossil fuels to renewables, and we think hubbell benefit and as.

And as the economy continues to adapt to that.

<unk> really well and two different ways.

We've got about $350 million or so of transmission sales.

And right now the renewables are requiring.

And we're harvesting wind and Sun and places that are farther from the population centers and <unk>.

And that energy needs to be transported across the transmission lines to get to where it will be consumed by.

Users.

And that's that will be quite a favorable trend for the components, we sell the transmission grid.

And as well on the electrical solutions side with <unk>.

A variety of products brands, notably of Burndy, and Wiley that are selling lugs and connectors bonding and grounding products wire management.

And we've had a couple of wins recently.

And very large.

<unk> and wind farms that make us believe our brands and our products are in high demand and we're anticipating.

Strong growth rates going forward off of that $50 million base that we have so.

I think a very positive story for for a mega trend and one where Hubbell Inc.

Very very well positioned to serve our customers with.

High quality solutions.

And you've also talked about the drag from price cost and I wanted to.

<unk> illustrates.

The price cost relationship as is our business model dictates it and we've shared some data over the last 13 years or so here.

And.

We don't use derivatives.

As a hedge against inflation, we use price.

And.

And we think Thats a better.

To better mechanism because it lets you actually get get ahead.

The downside of it is it can create a lag.

A quarter or two between when we experienced inflation and when we realize on the price and that lag can sometimes create some margin distortions and side of the quarter, but it's important to show you all that through the cycle, we net out net positive.

And.

And this period there has been.

For interesting phases of spikes, which you see in the yellow line.

And in each case, we've been able to capture the price and as soon as those costs flatten and in fact, they seem to always turned down after they've spiked that's when and when.

And the lag reverses itself and we start to harvest some margin so.

<unk>.

Just wanted to make sure we were clear with showing you that that we've experienced.

And really from <unk>.

Later in 2020 through the first quarter.

Spike quite significant magnitude.

That really is a composite for us we're buying a lot of steel.

But also and that's the largest component, but it's also copper and aluminum resins.

And this has been a very significant spike compared to the last decade or so.

But as <unk> had mentioned we've been actively pricing for it and have a very dynamic dialog with our customers.

And then and pulling price and some areas multiple times through 2021 and.

We will create that blue curve.

Gets ahead of this price cost.

And we anticipate we can start to catch up and the second half.

This year, but the second quarter, I think will still be still be a headwind for us.

So with that discussion I wanted to hand, it back to <unk> to give you more feedback on our outlook.

Great, Let's turn to page 10, and starting with the end market Pie chart on the left.

With the first quarter behind us and increasing visibility on an economic recovery. Our markets. Overall are trending ahead of expectations that we had at the beginning of the year.

Particularly we see industrial markets, performing better driven by strengthening and light industrial verticals.

We see strong order growth and the power systems and gas connectors businesses and the first quarter.

And we also see our utility T&D components market performing ahead of our initial expectations.

And while our expectation for nonresidential markets remained more subdued.

And then our other end markets, we hear <unk>.

<unk> steadily improving markets and believe we could start to see some recovery towards the latter half of the year.

We now expect full year sales growth of 8% to 10%.

With the acquisition is still expected to contribute three and.

And organic growth now contributing 5% to 7%.

This increase of two percentage points versus our prior expectations is driven by stronger volumes as well as incremental price to address higher inflationary headwinds, which bill just gave some color on.

On net we are raising our full year adjusted earnings per share outlook to a range of $8 20 to 860.

Which represents double digit EPS growth at the midpoint of our guidance range.

Along with 110% free cash flow conversion on our adjusted net income.

Turning to page 11, I'll give you some more context for our guidance.

You see a solid contribution from increased volumes as our expectations for market growth are higher than our initial outlook.

We're also getting strong contributions from two key drivers of our financial models and acquisitions and restructuring.

Both of which are under our control and tend to be more programmatic and consistent and nature.

On acquisitions, we continue to expect about 25 of contributions from the three deals that we closed at the end of 2020.

Each of which is performing.

Well early on.

On restructuring, we continue to make good progress and driving cost savings with an incremental $15 million to $20 million of savings flowing through this year and continued savings moving forward, even as we begin to taper investment from the elevated levels of the last two years.

We'd highlight here that while we've invested and R&R consistent with the expectations, we laid out over a year ago and our Investor day, we've over driven on savings, which has been a key contributor to operating margin resilience.

As our markets recover and our volumes ramp back up we'll be able to drive sustainably higher margins performance across the company with a more efficient operating footprint.

And then as Bill walked you through earlier, we remain confident and our ability to manage price material and we will continue to drive this to a net favorable outcome over the cycle.

We're taking aggressive pricing actions with further actions to come low price capture tends to lag commodity inflation by quarter or two and we continue to expect price material to be a net headwind for 'twenty, one consistent with our prior guidance.

And finally, we.

And we'll also see and impact from the return and for some temporary cost benefits, particularly in the second quarter as we lap the impact of compensation reduction actions, we took last year and preparation for the pandemic.

Recall that in 2020, we manage the decremental margins of approximately 15% as we aggressively control our cost structure and drove productivity.

As our markets now begin to recover however, we plan on investing back into our business over the balance of 2021 to accelerate future growth, particularly in attractive areas such as the renewable markets with Bill just spoke about.

Along with the significant opportunity, we see for Hubbell and distribution automation, which we highlighted on our call last February.

All of this adds up to our full year earnings per share guidance of $8 20 to 860.

We remain confident and our ability to deliver on these commitments and are focused on returning to growth as we serve the critical infrastructure needs of our customers, while continuing to actively manage our costs and deliver value for our shareholders.

With that let me now turn it over to Q&A.

As a reminder to ask a question you will need to press star one on your telephone and can we drag.

Question for Keith Please standby and while we compile the Q&A roster.

Your first question comes from the line of Jeff Brad If I could.

Goldman Sachs. Your line is open.

Thank you and good morning, everybody.

Good morning, Jeff Martin.

And just maybe first on price and costs. Thanks for all that additional detail on the chart.

And I have a little bit better understanding of what youre expecting obviously price cost was negative in Q1 going to be negative in Q2.

Do you actually see it turning positive and in the second half of the year I understand youre, saying negative for the whole year, but do you see the second half of the year flipping back into positive territory.

Yes, I think we do Jeff a lot of that depends on.

That yellow curve flattening at some point during this year, but that would be our expectation and if that happens then we and we could catch up and start to ease.

Heat into the lag.

And you pointed out that you've been kind of.

Leading.

And price up.

Are you seeing kind of the competitive response be rational as it relates to that or any.

Kind of.

Kind of pushback from the customer standpoint in terms of being able to absorb price I'd say I'd say broadly speaking.

It's been and understanding.

Channel and.

I think and all walks of everyone's life they are seeing prices increase.

And we will get to.

Bigger numbers and the second quarter and so it keeps we keep pushing into that Jeff, but so far the channel.

Understands and end user understands.

But it feels like.

Net debt yellow spike is pretty steep right now relative to the last decade of activity or so and so that's.

And I was watching everybody react to that and will continue to be something we study very closely.

And maybe I'll add a couple of comments to that Jeff is one as bill talked about the curve of that incline is so steep so while.

And in many instances, we're leading to price we see a quick follow ons on the other side that is encouraging is that our stick rate of price increases is actually running ahead of what it was historically.

<unk> do for our business and.

And I can speak even going back a few years when I ran the power business and I think it was in the 2018 timeframe. When we saw commodities go up and we saw tariffs go up.

And our approach was perhaps a little more cautious and hesitant.

Those customers.

We are currently.

April and we're going on our third price increase and the utility business. So it's just a sign of how we've learned and how it works.

Go and much more aggressively after when we see commodities go up that we.

We go up with price.

And maybe just one other one from me just thinking about so you manage the positive margins despite price cost and it gets a little tougher in Q2, I guess, but.

I would imagine you get some help on the M&A and how you're thinking about margins in Q2.

So kind of a fight to hold them flat or is flat actually ambitious do you think.

Yes, I think flat would be ambitious so I think the simple way we're looking at it Jeff is.

Volume and restructuring are going to give us.

A decent tailwind.

But price cost is kind of kind of continue at the same drag right.

Percentage wise and second quarter, and then we get as well really the absence of the furlough. So all the cost management initiatives that we're sort of temporary.

Back and I think that gives us a temporary margin headwind and <unk> Jeff.

Understood makes sense alright, thanks, a lot guys appreciate it.

Your next question comes from the line of Steve Tusa with Jpmorgan. Your line is open.

Hello.

Hey, Steve good.

Good morning.

Sorry.

I thought I did something wrong, there for a second given the silent treatment.

Okay.

[laughter].

<unk>.

The non res outlook.

That you are seeing out there the activity I mean, some companies that have reported so far vaccine had some pretty good results. When it comes to their non res business. Obviously the data remains reasonably weak I mean, what are you guys seeing out there when it comes to U S. Non res and when you think about it from the.

And the difference between kind of like the core commercial side and then maybe institutional.

Yes, we we changed our outlook up a little Steve we still have it down I think maybe one of the elements.

And that continues to color us is half of our non res is commercial industrial lighting.

And they had a.

First quarter, it kind of down 7%, so that kind of weighs a little bit but the.

Outlook, which is I think the emphasis of your question does feel better than when we started the year and the other kind of commercial products are showing.

Some order patterns that would suggest some good firming so for us it's a little bit mixed I think because of that.

Got it Okay, and then just the outlook for for.

The T&D side.

Yes, So I think we continue to see.

Strong growth despite having a.

First quarter compare empower though was actually impressive last year and.

We see the demand.

And really pulling through.

I think the drivers.

And are pretty solid, namely <unk>.

<unk> got.

Grid hardening against environmental problems.

<unk> got this renewable trend.

And you've got just and aging infrastructure that needs to be updated and so we continue to see.

Pretty healthy demand, there and have a pretty positive outlook for that.

Got it okay. Thanks, a lot I appreciate it.

Thank you Steve.

Your next question comes from the line of Tommy Moll with Stephens. Your line is open and good.

Morning, and thanks for taking my questions.

Morning, Tim.

And I wanted to start on a Clara maybe and make sure I heard a couple of these data points correctly I think you said.

You booked about $200 million of orders and the first quarter.

And net revenue should be up starting in second quarter.

But then more broadly I am just curious what anecdotes you could share does it feel like.

Planning and back to business as usual for customers, there and Theres still some hesitancy.

200 number with an impressive one I'm just trying to think about it.

And you're continuing headwind to customer planning.

And it is.

If you run all that through and mid singles on the revenue side is still the right way to frame up the full year I know that was part but yeah no no no. Let me let me let me respond to.

And some of them <unk>.

<unk> financial questions and like urban talk on the operating side, a little bit. So 200 of bookings. We thought was was good as well against essentially a $600 million revenue base and that looks like.

Pretty strong situation, there backlog, which we report on to you all periodically is up at a $1 billion.

Again relative to a $600 million revenue base you've got.

And.

And it has worth of visibility there so that all.

Feels good and maybe let curve and comment a little more on the access issue and how we see that evolving.

Yes.

Look from a order and then and activity and market activity perspective, the underlying fundamentals are still very much there for growth right.

Project planning is there so it comes down to what you alluded to is during the pandemic.

How are we managing through quoting these big project work and what utilities to spectrum.

And those take time, so I think.

And what you see here in the in the first quarter is a little bit the effect of projects that we're working through even pre pandemic with our utility customer that we've continued to work through.

That are now coming through.

And orders, we talked earlier about the dip we saw when the pandemic happened in in our proposal and quote activity. So I think those will start see coming back later and so there's definitely demand out there we're.

C and more.

Activity back and taken up these projects, but there is a lag of diamond is and as we've also talked about these tends to be lumpy. So I certainly wouldn't take the 200 for a quarter and multiply that by every future quarter, but I will say, we are continuing to be positive on this space and again your bottom line.

Think of mid single growth is very much what.

We see and this business.

Great. Thank you that's all helpful.

As a follow up I wanted to talk about the disruptive storms in Texas.

Earlier this year and maybe maybe you could just share any anecdotes.

Observations you have anecdotes you can share from customers on the utility side of the business.

It.

The world's attention was focused there or certainly.

And within the U S attention with focus there and specifically your customers is there any takeaway there in terms of the.

Fundamentals.

And any potential tailwind you might see.

And Texas or elsewhere.

Thanks, Tim.

And placed there.

Yes, I think Tom Youre right that if you look at the utility side.

These environmental challenges continue to.

Place a valuable premium and.

The eyes and utilities on on grid hardening and making sure they can operate.

And whether it's through wind or ice or.

And this case unexpected real freezing and Texas and.

So I do think ultimately it.

It reinforces the value proposition of grid hardening.

And.

I think thats I think thats to hubbell's benefit I think if you.

Go on the industrial side.

The resin supply side.

And it seems to US went through a challenge with the freezing there and that's kind of.

Disrupted their supply chain, a little bit and so I think.

Between the utility may be a favorable impact on the industrial side with that that resin production being disrupted I think thats to the negative.

Great. Thank you Bill I will turn it back.

Your next question comes from the line of Josh.

Lynskey with Morgan Stanley Your line is open.

Hey, good morning, Good morning, Bill Hey, good morning.

And John Good morning, Josh.

And just maybe ask.

Margin question with a little bit finer point on it and if theres a lot of moving pieces.

And we expect to get to kind of normal incremental margins again, it sounds like <unk> definitely not margins might be flat to down year over year, but.

Is it more third quarter or are we really talking about next year, because you have the temporary costs some.

Some of the price cost actions and investment just trying to put all those pieces together when folks should start to expect kind of a normal operating leverage.

And then start to filter into the business yet.

Yes, Josh I think our view it would be fourth quarter and then into next year.

Once you get urban kind of describe the aggressive pull off price that we've made.

So you sort of really need that flatten out and then.

And even were to come down and some of the spiky activity suggest it could.

And then you start to actually get some super normal activity, because you are actually getting kind of tailwind, but I think it's.

You are talking ultimately about fourth quarter and into next year.

Got it Thats helpful.

And I understand we still have some bottlenecks on the.

The acquirer side, or I guess communications and controls now health.

How fast can that business really grow when you folks are able to go out and feel new installations again I would imagine there's a labor component like can this business grow double digits.

And when we're out in the wild again or are there kind of bottlenecks that would say that $1 billion of backlog Inc.

And could take awhile to get out and the way.

Yes, I think if you.

And just put it in perspective of what we talked about before that we think it's mid single digit growth, but even if you look at the first quarter that it's still down if you just do that math.

And we're in that range of what you just talked about around the double digit growth. It is a lot of labor and I talked about that and the last.

Call that thats.

That's not an unlimited resources.

Quite challenging as a matter of fact right now.

So I would say, that's probably the biggest constraint, but yes.

And we definitely expect a ramp up.

And the second quarter from that business.

Got it that's helpful and I'm, just going to try and squeeze one more and I really appreciate slide nine there bill would that price material spread.

Hard not to notice that GAAP was super wide over the past couple of years.

Is there some sort of philosophical change in pricing behavior and a strategy that you guys have had that couldnt still kind of a wider range. Once we normalize here on the material side.

Yes, I think Gerber and made some reference to.

And that period.

And when tariffs were pushing the spike up.

And there may have been a little bit of caution on the part of our sales and customer service teams.

And.

There is a lot to this this pricing actions right.

<unk> with the.

And the brand quality and standing for quality and.

It continues to service levels.

And it extends further to customer relationships and communication with customers because ultimately we're implementing a price increase that goes through a distributor to the user. So we need kind of this two step coordination and.

And.

I do think perhaps that 18 period that curve and had reference may be made that dynamic.

<unk>.

Function, a little bit more smoothly, that's allowing us to be a little more aggressive during this the spike I would say, yes, and maybe just to add to that I would also say that one of the things that we continue to invest and work on is the discipline around the analytics of pricing and the organization around.

Our pricing discipline with people.

People that.

And that solely focus on pricing.

And so I think it's a combination of just learning from the past being a little more aggressive and having better tools to manage it.

Great. That's helpful. That's all cash.

Your next question comes from the line of Crazy Snyder with UBS. Your line is open.

Thank you.

So I guess, starting with the updated guidance if I take the midpoint on.

On the res and Embeds just around high single digit margins on the incremental 200 bps of topline if my math is right.

So is this all just more challenging price cost relative to the Q4 guidance or are there other headwinds here.

Potentially yes, our installation ramp or just did Q1 come in softer than maybe you guys thought weighing down the full year.

No, Chris I think youre, putting your finger on the math.

Right way, which is it.

If you got a point of extra point of price and all that does is offset cost and it puts a.

It alters the incremental math, which is what you are pointing out.

Okay I appreciate that and then I guess just following up on that point. So of the 200 bps organic growth guidance would you like a separate volume and price as it does seem like the pricing increases have been more meaningful and.

And maybe on the Q4 call.

Yes, that's about half and half and say attribute.

One point of the rise the price and the other to volume.

Thank you.

Alright.

And your next question comes from the line of Jakafi and <unk> with G. Research. Your line is open.

Hi, good morning.

Good morning.

Hi, Thanks for taking my question.

Questions or carbon and.

Bill I guess first off.

The infrastructure Bill that was just proposed.

How do you see the framework and the numbers.

Yeah.

Potentially increasing or extending the.

T&D cycle.

Yes.

Thank you.

And this isn't going to sales.

I think that.

We can affect.

Both halves of our business in front of the meter and behind the meter.

I think it suggest there would be investment and buildings.

To make them more efficient.

But certainly on the front of the meter seems to be a lot of intention.

To promote.

Global energy and and as we said I think that really benefits us on the transmission side and.

It's not exactly clear to us.

When some of the spending really starts.

The middle of next year that almost feels optimistic so.

The flavor.

And the stimulus seems we seem to be well poised to benefit from but I'm not I'm not sure all great visibility as to when that would start to benefit and yes, yes, and and maybe just to add because.

The clear one that to everybody.

<unk>.

Is the renewables and net clearly is positive for our utility business, but as bill alluded to right. There is proposals to invest into telecom infrastructure. There is.

Proposals to investing.

Transportation and roads and we play in those verticals as well, whether it's with our enclosures business for four.

Fiber installations or with our grounding and connectors and.

Products that we use for real and Roche. So it's a net positive for us it's more of a as bill alluded to is what's the timing.

Around the spend.

Okay.

And then one other.

Just big picture question I mean, you did a few acquisitions at the end of last year and they seem to be tracking well how do you view the M&A landscape as you look throughout the rest of 2021, obviously, we may see some tax code changes valuations are expensive.

What is sort of the puts and takes and how does eager does that make you to do more deals this year.

Yes, I think.

Our enthusiasm is driven by a couple of things I think one is where we might have a white spot and our offering where we can extend our brands.

The growth rate and the vertical the margin potential.

And.

I do agree with you that.

Prices and multiples can start to look.

Like and inhibitor, if especially if you get into areas maybe like software.

And it seems to larger transactions seem to have a larger multiple associated with them.

But and average hubbell deal.

Which is about $50 million and size our business development teams.

Continue to be quite.

Quite hopeful and are in active dialogue.

With a pretty robust pipeline of appropriately multiples and valued.

Situations that can extend our franchise so I would.

I would hope that we can continue.

To do a programmatic level of acquisition investing year in and year out at reasonable valuations that.

Ultimately, we will contribute quite a bit of value to our shareholders. So that.

Even though I do agree there is some pricing and certain places.

We still have our eyes on some appropriate appropriate targets.

Great. Thank you.

Alright, there are no further questions at this time I would like to turn the call back over to the presenters for their final and Mike.

Alright. Thanks, operator, thank you everyone for joining us I'll be around for a question and the rest of the day. Thank you.

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

Okay.

Yes.

And.

Yes.

[music].

Yes.

[music].

And.

[music].

[music].

Good day and thank you for responding by welcome to the first quarter 'twenty 'twenty. One results conference call. At this time all participants lines are in listen only mode. After the speaker's presentation. There will be a question and answer session and I forgot syngenta, such and you'll need to press star one on your telephone.

Why is that today's conference is being recorded if you require any further assistance. Please press star zero and I would now like to hand, the conference over to your speaker today as they go down either morado. Thank you. 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 first quarter 2021 and the press release.

And slides are posted to the investors section of our website at Hubbell dotcom.

I'm joined today by our President and CEO, Girvin Bakr, and our executive Vice President and CFO Bill Sperry. Please note that our comments. This morning may include statements related to the expected future results of our company and are forward looking statements as defined by the private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward looking statement.

And our press release and consider it incorporated by reference and so this call. Additionally comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures that are included in the press release and slides now let me turn the call over to Durbin.

Great. Thanks, Dan and good morning, everyone and thank you for joining us to discuss hubbell's first quarter results.

I will start my comments on page three with some key takeaways for the quarter.

At a high level, we are seeing strong improvement in demand across each of our end markets and we will give you some data points around that and the next page and throughout this presentation.

Our operating profit and margins expanded in the quarter as we continued to actively manage our cost structure and realized savings from the investments and restructuring initiatives.

Our results and the quarter are consistent with the guidance, we laid out at the beginning of the year and put us well and a path to achieving our full year EPS guidance, which we are raising today.

And I will walk you through our guidance in more detail later, but overall, we remain confident and our ability to deliver on our commitments.

Let's turn to page four with more details.

You'll see here that our sales were down 1% year over year and down 4% on an organic basis.

And our utility solutions segment secular growth trends around grid modernization and renewable energy continue to drive strong demand for hubbell products.

And that is reflected and broad based double digit order growth and the first quarter across each of our major business segments power systems gas connectors as well as the Clara.

While revenues and the first quarter continued to be impacted by installation delays for certain projects. We anticipate this dynamic will normalize beginning in the second quarter and drive growth as we ramp up our capacities to meet the growing customer demand.

And.

Backlog and our shorter cycle T&D components business was up almost 40% year over year exiting the quarter, while the aclara backlog is back up to approximately $1 billion. Following a strong first quarter with over $200 million of orders.

And our electrical solutions segment markets continuing to improve as orders turn positive year over year, and we realized solid sequential growth in revenues and the first quarter.

Light industrial markets are strengthening as the broader industrial economy recovers a positive sign for hubbell that demand for electrical products and solutions will drive growth over the balance of this year.

Our backlog across the electrical solutions was up more than 30% year over year exiting the first quarter and.

And our focus over the near term is to continue managing managing through a tight supply chain environment to serve to critical infrastructure needs of our customers.

In terms of our operations, we achieved 30 basis points expansion and our operating margins and the first quarter as we overcame lower volumes and the impact of price cost turning to a headwind as we absorbed significant commodity inflation on our cost base.

And we recognized and then dissipate and dish towards the end of last year and took early actions to address it through price and productivity.

However, inflationary pressures have continued to accelerate through the first quarter, which necessitated and drove additional pricing actions.

And we will continue to take further actions while this inflation persist.

Over the last six months, we have implemented price increases, which have led most of our markets and frequency base and magnitude and we will continue to utilize the strength of our product portfolio to drive profitable growth.

While commodity inflation remains a moving target we've contemplated a range of scenarios within our guidance and have levers at our disposal to effectively manage our operations and deliver on our near term and long term commitments.

You also see here that we delivered $1 72 of adjusted earnings per share and the quarter and $39 million of free cash flow and I will turn it over to bill and a minute to give you some more context around those results.

But before I do that I wanted to highlight a few key accomplishments for us in the quarter.

First of all Hubbell is very honored to have been named one of 2021 <unk> world's most ethical companies by Ethisphere.

And I'd like to thank our over 19000 employees, who have demonstrated the highest standard for integrity, each and every day and note that this achievement is a recognition of their commitment to compliance and ethics as a foundation of our strategy and culture.

I'd also like to highlight that Hubbell recently received two major awards from one of our top distributor partners.

Out of only three given annually.

Our gas connectors business received a top award for sales and marketing while power systems received the award for above and beyond service excellence.

Both of these awards are recognitions of the strength of our brand and the quality and reliability of our products in the marketplace.

And they demonstrate our commitment to service, which is a key differentiator for hubbell, particularly in recent years as our utility franchise had been so effective and serving our customers needs through increased storm activity.

And finally, we closed the acquisition of Beckwith and the fourth quarter and I wanted to congratulate the leader of that business from being recently elected to the National Academy of engineering for his contributions to digital protection and control devices for the grid.

This is a recognition of the strength of Beckwith's technology solutions and a testament to the talented people that joined Hubbell as part of acquisitions, which we're confident will drive further innovation and differentiation.

With that let me turn it over to Bill to walk you through the financial results and a little more detail.

Thanks, carbon and good morning, everybody I realize how busy the release schedule is today and I appreciate you being with us.

And I'll start my comments on page five.

And you see the sales.

Down 1% to 1 billion and 78.

That figure includes the three acquisitions that we closed and the fourth quarter.

And it's good news for us to see all three of those investments off to a very strong start just to remind everybody on the electrical side, we made an investment.

In the <unk> space and <unk>.

Turner and housings for that space and the utility side Durbin just mentioned that cliffs.

Which is a controls business and armor cash, which makes enclosures for utilities, all three high growth high margin.

Areas and happy to see them being well accepted by customers.

And off to good starts and contributing to our performance.

In the first quarter.

Also as curve and noted a clear inflection point and orders for us where we had orders up.

Double digits and.

Strong <unk>.

Feeling like strong demand.

Ahead of us leading to expectation for stronger sales.

On the op side, Youll see 30 basis points of margin expansion.

Yeah.

And.

There was some headwinds that we overcame there.

Starting with.

The headwinds from the sales decline.

On the organic side the price cost lag.

We experienced and the new acquisitions.

Early in their integration phase tend to perform at less and they are fully integrated margins and so you tend to get a little drag from that so the 30 basis points of expansion overcame those.

And really using productivity gains as well as importantly restructuring benefits.

And those benefits from restructuring came really from both sides of the restructuring program, namely savings from dollars, we invested last year as well as the tapering spending level that we had communicated to everybody. So.

And those contributions helped us pick up those 30 basis points you see.

EPS, expanding 5% to $1 72.

Besides the increase in operating profit there were also some tailwind from the non op side, including from pension expense as well as from the effective tax rate down to about 22, 6%.

And the free cash flow side.

$39 million generated in the quarter.

Compares unfavorably to last year, but we have a significantly different mindset.

At the end of March last year, we were stopping with both feet on the breaks on the inventories side.

This year, we're feeling that order expansion and we're looking to invest.

And the working capital to help grow the company.

And so Thats 30, nines and in line with our full year target of getting to $500 million and has the same seasonal shape that we had in 2019.

Just and thinking about talking about the balance sheet also wanted to mention.

And by bond refinancing that we executed in the quarter.

And we had $300 million.

<unk> and maturing in 2022.

They were paying and interest rate of 365%.

And it became clear to us that fixed income investors were starting to demand higher interest rates as they saw inflation coming and the effects of stimulus.

And to get ahead of that.

We were able to to execute on some new bonds at two 3%, so a saving of over 130 basis points.

There is a slight anomaly.

And crossing in the quarter and because those the new bonds price the end of March.

And.

The old bonds were not called until first week in April So those of you who look at the Q Youll see both bonds and still outstanding and the cash.

Kind of on the hand, and then as a subsequent event and and the second quarter and Youll see that we bought out the old bonds and we'll pay the make whole there so a good opportunity for us too.

Get our interest rate fixed for the next 10 years at two 3%, which we are quite.

And quite pleased with that execution. So I think the big takeaway from page five is twofold.

One is clear evidence that the recovery is underway.

Attractive orders and expansion and secondly that the self help.

<unk> continues to contribute to hubbell's performance and the form of a.

Programmatic acquisitions as.

And as well as our restructuring program.

And that continues to help drive performance as we go forward.

Next two pages like to unpack.

Between our two segments electrical and utility.

We talked to you before about.

Reorganizing the segments and specifically, having the electrical solutions segment really run as one business and.

And and our attempt is to replicate when Gerber and was running power and how he turned all of those different brands and two.

Really a single operating segment and <unk>.

Pete low is going to help us do the same on the electrical side now the other implication is we had built up over acquisition over the last couple of years.

Gas distribution components business that had been and electrical and starting now and the new year.

And because its customers on the utility side.

And in front of the meter.

We've got that business now located inside the utility and so the first quarter has been adjusted for that change to make these two periods comparable on both sides.

So starting with electrical here on page six you'll see.

Sales down 3% to $546 million.

Two important signs of recovery for the electrical solutions segments.

First is the sequential growth from the fourth quarter to the first.

And that normal seasonal pattern.

As for a contraction of about a point or two.

And in this period it grew 5% from the fourth quarter. So clear sign that there is some recovery underway there.

Was that the order rate was up.

Year over year.

And so that's I.

I think portends good news going forward for the electrical segment.

As we reorganized inside of industrial we have the light vertical and we're really seeing that responding the quickest and soonest.

Not unusual for a recovery period, the heavy industrial responds a little bit later and.

And we're starting to see some of the early indicators.

Showing heavy having signs of improvement ahead of it.

And the non res side remains soft inside of non res and we still have our commercial and industrial lighting business.

They had 7% declined which is contributing to that softness and non res.

And on the resi side, we saw markets being quite strong in particular on the single family side. So.

There continues to be demand.

As people are looking to get out of multifamily and single family solutions.

On the operating profit side Youll see.

And 30 basis points margin expansion.

The same story for the enterprise, namely.

The headwinds from the lower volumes and the price cost drag.

And was overcome by the productivity and expense management as well as the benefits from the restructuring program.

Page seven we've got the utility solutions segment.

And you see a.

And again reminding everyone. This now includes gas components and you see a a 1% increase in sales to $532 million.

We've really got to unpack that to tell the story. So you see that legacy.

Power systems business to what we see as components on here.

Up 6%, so we continue to see.

Grid hardening driving the distribution spending.

And then renewables, most notably solar and wind.

Causing transmission spending to grow.

And right now.

Renewable trend is causing transmission to outgrow distribution right now and we will talk about that a little bit more later.

On the Claris side, you see down 8%.

They continue to have.

Access issues with COVID-19, and we're anticipating that that frees up now and the second quarter and they start to grow Gerber and made.

Comments about.

Their order pattern.

And and orders across the utility space were really impressive and the first quarter, we had double digits on the power systems businesses.

Double digits and gas.

And components and double digits and a clear from terms of order generation and so I think signs of good future growth and visibility.

For our utility solutions segment.

And as well you see margin expansion there again, similar story of lower organic volume headwinds and price cost headwinds being overcome.

Bye.

And the productivity and expense management.

I wanted to highlight on page eight.

The renewables vertical and the wind and solar business.

Business that.

We feel.

And as a real secular mega trends.

Type growth rates anticipated.

The <unk> and district energy industry, clearly pivoting from fossil fuels to renewables and we think hubbell will benefit and as the economy continues to adapt to that.

Positioned really well and two different ways.

We've got about $350 million or so of transmission sales.

And right now the renewables are requiring <unk>.

Harvesting wind and Sun and places that are farther from the population centers and.

And that energy needs to be transported across the transmission lines to get to where it will be consumed by.

Users.

And that that will be quite a favorable trend for the components, we sell the transmission grid.

As well on the electrical solutions side to see a variety of products brands, notably of Burndy and Wiley that are selling lugs and connectors bonding and grounding products wire management.

And we've had a couple of wins recently on very large.

Solar and wind farms that make us believe our brands and our products are in high demand and.

And we are anticipating.

Strong growth rates going forward off of that $50 million base that we have so I.

Zinc.

Very positive story for for a Mega trend and one warehouse, Inc. Is very very well positioned to serve our customers with high.

High quality solutions.

We've also talked about the drag from price cost and I wanted to just.

Illustrates.

Price cost relationship as is our business model dictates it and we've shared some data over the last 13 years or so here.

And.

We don't use derivatives.

And as a hedge against inflation.

Use price.

We think thats a better.

And to better mechanism because it lets you actually get get ahead. The downside of it is it can create a lag of a quarter or two between when we experienced inflation and when we realize on the price and that lag can sometimes create some margin distortions and side of it.

Quarter, but it's important to show you all that through the cycle, we net out net positive.

And in this period, there has been for interesting phases.

Spikes, which you see and the yellow line.

And in each case, we've been able to capture the price and as soon as those costs flatten and in fact, they seem to always turn down.

After they've spiked that's when when the lag reverses itself and we start to harvest some margin so.

<unk>.

Just wanted to make sure we were clear with showing you that that we've experienced.

Really from.

Later in 2020 through the first quarter.

Spike quite significant magnitude.

That really is a composite for us we're buying a lot of steel and.

And but also that's the largest component, but it's also copper and aluminum resins.

And this has been a very significant spike compared to the last decade or so.

But as Kevin had mentioned we've been actively pricing for it.

Of a very dynamic dialog with our customers and.

And pulling price and some areas multiple times through 2021 and.

We will create that blue curve.

It gets ahead of this price cost.

And we anticipate we can start to catch up and the second half.

Of this year, but the second quarter, I think will still be still be a headwind for us.

So with that discussion I wanted to hand, it back to Gerber and to give you more feedback on our outlook.

Great, Let's turn to page 10, and starting with the end market Pie chart on the left.

With the first quarter behind us and increasing visibility on an economic recovery. Our markets. Overall are trending ahead of expectations that we had at the beginning of the year.

Particularly we see industrial markets, performing better driven by strengthening and light industrial verticals.

We see strong order growth and the power systems and gas connectors businesses and the first quarter.

And we also see our utility T&D components market performing ahead of our initial expectations.

And while our expectation for nonresidential markets remained more subdued.

And then our other end markets we hear.

<unk> steadily improving markets and believe we could start to see some recovery towards the latter half of the year.

We now expect full year sales growth of 8% to 10%.

And with acquisition is still expected to contribute three and.

And organic growth now contributing 5% to 7%.

This increase of two percentage points versus our prior expectations is driven by stronger volumes as well as incremental price to address higher inflationary headwinds, which bill just gave some color on.

On net we are raising our full year adjusted earnings per share outlook to a range of $8 20 to 860.

Which represents double digit EPS growth at the midpoint of our guidance range.

Along with 110% free cash flow conversion on our adjusted net income.

Turning to page 11, I'll give you some more context for our guidance.

You see a solid contribution from increased volumes as our expectations for market growth are higher than our initial outlook.

We're also getting strong contributions from two key drivers of our financial models and acquisitions and restructuring.

Both of which are under our control and tend to be more programmatic and consistent and nature.

On acquisitions, we continue to expect about 25 of contributions from the three deals that we closed at the end of 2020, each of which is performing well.

Well early on.

On restructuring, we continue to make good progress and driving cost savings with an incremental $15 million to $20 million of savings flowing through this year and continued savings moving forward, even as we begin to taper investment from the elevated levels of the last two years.

We'd highlight here that while we've invested and R&R consistent with the expectations, we laid out over a year ago, and our Investor day, we've over driven on savings, which had been a key contributor to operating margin resilience.

As our markets recover and our volumes ramp back up we will be able to drive sustainably higher margins performance across the company with a more efficient operating footprint.

And then as Bill walked you through earlier, we remain confident and our ability to manage price material and will continue to drive this to a net favorable outcome over the cycle.

We're taking aggressive pricing actions with further actions to come.

Price capture tends to lag commodity inflation by quarter or two and we continue to expect price material to be a net headwind for 'twenty, one consistent with our prior guidance.

And finally.

We will also see and impact from the return and for some temporary cost benefits, particularly in the second quarter as we lap the impact of compensation reduction actions, we took last year and preparation for the pandemic.

Recall that in 2020, we managed to decremental margins of approximately 15% as we aggressively control our cost structure and drove productivity.

As our markets now began to recover however, we plan on investing back into our business over the balance of 2021 to accelerate future growth.

Particularly attractive areas such as the renewable markets with Bill just spoke about along with the significant opportunity, we see for Hubbell and distribution automation, which we highlighted on our call last February.

All of this adds up to our full year earnings per share guidance of $8 20 to 860.

We remain confident and our ability to deliver on these commitments and are focused on returning to growth as we serve the critical infrastructure needs of our customers, while continuing to actively manage our costs and deliver value for our shareholders.

With that let me now turn it over to Q&A.

As a reminder to ask a question you will need to press star one on your telephone and can we drag question press the pound key please standby, while we compile the Q&A roster.

Your first question comes from the line of Jeff Brad and thank you.

Goldman Sachs.

Your line is open.

Thank you and good morning, everybody.

Good morning, Jeff Martin.

And then just maybe one on price cost thanks for all that additional detail on the chart.

And I have a little bit better understanding of what you are expecting obviously price cost was negative in Q1 going to be negative in Q2.

Do you actually see it turning positive and in the second half of the year I understand youre, saying negative for the whole year, but do you see the second half of the year flipping back into positive territory.

Yes, I think we do Jeff a lot of that depends on.

That yellow curve flattening at some point during this year, but that would be our expectation and if that happened and then we and we could catch up and start to.

Feed into the lag yes.

And you pointed out that you've been kind of.

Leading.

Price up.

Are you seeing kind of the competitive response be rational as it relates to that or any.

Kind of.

Kind of pushback from the end customer standpoint in terms of being able to absorb.

Yes, I'd say I'd say broadly speaking.

And.

It's been and understanding.

Channel.

And I think and all walks of everyone's life, they're seeing prices increase.

And we will get to.

Bigger numbers and the second quarter and so it keeps we keep pushing into that Jeff, but so far the channel understands and the end user understands.

But it feels like.

Net debt yellow spike is pretty steep right now relative to the last decade of activity or so and so that's.

Watching everybody react to that and will continue to be something we study very closely.

And maybe I'll add.

Couple of comments to that Jeff is one as bill talked about the curve of that incline is so steep so while and.

And in many instances, we're leading to price we see.

Quick follow ons on the other side that is encouraging is that our stick rate of price increases is actually running ahead of budget with historically low for our business and I.

I can speak even going back a few years when I ran the power business and I think it was in 2018 timeframe. When we saw commodities go up and we saw tariffs go up.

And our approach was perhaps a little more cautious and hesitant.

With those customers.

We are currently it's April and we're going on our third price increase and the utility business. So it's just a sign of how we've learned and how we work.

Go and much more aggressively after when we see commodities go up that we that we go up with price.

And maybe just one other one from me just thinking about.

And you manage the positive margins despite price cost and it gets a little tougher in Q2, I guess, but.

I would imagine you get some help on the M&A and how you're thinking about margins in Q2.

And have a fight to hold them flat or is flat actually ambitious do you think.

Yes, I think flat would be ambitious so I think the simple way we're looking at it Jeff is.

Volume and restructuring are going to give us.

A decent tailwind.

But price cost is kind of kind of continue at the same drag right.

Percentage wise and second quarter, and then we get as well and really the absence of the furloughs. So all the cost management initiatives that we are sort of temporary roll back and I think that gives us a temporary margin headwind and <unk> Jeff.

Understood makes sense alright, thanks, a lot guys I appreciate it.

Your next question comes from the line of Steve Tusa with Jpmorgan. Your line is open.

Hello.

Hey, Steve.

Okay.

Alright.

I thought I did something wrong, there for a second given the silent treatment gap.

Yes.

Yeah.

[laughter].

And the non res outlook.

You are seeing out there the activity I mean, some companies that have reported so far have actually had some pretty good results. When it comes to their non res business. Obviously the data remains reasonably weak I mean, what are you guys seeing out there when it comes to U S. Non res when you think about it from the.

And the difference between kind of like the core commercial side and then maybe institutional.

Yes, we we changed our outlook up a little Steve we still have it down.

Down I think maybe one of the elements.

That continues to color us is half of our non res is commercial industrial lighting.

And they had.

Our first quarter and kind of down 7%, so that kind of weighs a little bit but.

Outlook, which is I think the emphasis of your question does feel better than when we started the year and the other kind of commercial products are showing.

And some order patterns that would suggest some good firming so upfront.

For us, it's a little bit mixed I think because of that.

Got it Okay, and then just the outlook for for the.

The T&D side.

Yes, So I think we continue to see.

Strong growth despite having a.

First quarter compare empower though was actually impressive last year and.

And.

We see the demand.

Really pulling through.

I think the drivers.

Are pretty solid, namely <unk>.

<unk> got.

Grid hardening against environmental problems.

<unk> got this renewable trend.

And you've got just and aging infrastructure that needs to be updated and so we continue to see.

Pretty healthy demand, there and have a pretty positive outlook for that.

Got it okay. Thanks, a lot I appreciate it.

Thank you Steve.

Your next.

And comes from the line of Tommy Moll with Stephens. Your line is open.

Good morning, and thanks for taking my questions.

Good morning, Tim.

And I wanted to start on a Clara maybe make sure I heard a couple of these data points correctly I think you said.

And you booked about $200 million of orders and the first quarter.

And that revenue should be up starting in second quarter.

But then more broadly I am just curious what anecdotes you could share does it feel like.

Planning is back to business as usual for customers there is still some hesitancy.

200 number was an impressive one I'm just trying to think about if there is.

And you're continuing headwind to customer planning.

And it is.

If you run all that through with mid singles on the revenue side is still the right way to frame up the full year I know that was a market.

But yes no no.

Let me, let me, let me respond to some of them fit.

Financial questions and Lee curve and talk on the operating side a little bit so.

200 of bookings, we thought was good as well against essentially a $600 million revenue days and how that looks like like a pretty strong situation there backlog, which we report on to you all periodically is up at $1 billion.

Again relative to a 600 million revenue base you've got.

Year.

And the half's worth of visibility there so that all.

Feels good and maybe let curve and comment a little more on the access issue and how we see that evolving.

Yes.

Look from a order and then and activity market activity perspective, the underlying fundamentals are still very much there for growth right.

Project planning is there so it comes down to what you alluded to is during the pandemic.

And I'll re managing through quoting these big project work and which utilities to spectrum.

And those take time, so I think.

And what you see here in the first quarter is a little bit the effect of projects that we're working through even pre pandemic with our utility customer that we've continued to work through.

That are now coming through.

And orders and we talked earlier about the dip we saw when the pandemic happened in in our proposal and quote activity. So I think dose we'll start see coming back later and so there's definitely demand out there we're.

C and more.

Activity back and taken up these project, but there is a lag of diamond is and that's what we've.

And also talk about these tends to be lumpy. So I certainly wouldn't take the 200 for a quarter and multiply that by every future quarter, but I will say, we are continuing to be positive.

The space and again your bottom line I think of mid single growth is very much what we see and this business.

Great. Thank you that's all helpful.

As a follow up I wanted to talk about the disruptive storms in Texas.

Earlier this year and maybe maybe you could just share any anecdotes.

Observations you have anecdotes you can share from customers on the utility side of the business.

Yes.

The world's attention with focus there or certainly.

Within the U S attention with focus there and specifically your customers is there any takeaway there in terms of the.

Fundamentals.

And any potential tailwind you might see.

And Texas or elsewhere.

Thing.

And placed there.

Yes, I think Tom Youre right that if you look at the utility side.

These environmental challenges continue to.

Place a valuable premium and.

The eyes and utilities on on grid hardening and making sure they can operate.

And whether it's through wind or ice or.

And this case unexpected real freezing and Texas.

And so I do think ultimately.

It reinforces the value proposition of grid hardening.

And.

And I think Thats I think thats to hubbell's benefit I think if you.

Go on the industrial side.

The resin supply side.

It seems to US went through a challenge with the freezing there and that's kind of.

Disrupted their supply chain, a little bit and so I think.

Between the utility may be a favorable impact on the industrial side with that that resin production being disrupted I think thats to the negatives.

Great. Thank you Bill I'll turn it back.

Your next question comes from the line of Josh from Queens Lynskey with Morgan Stanley. Your line is open.

Hey, good morning, Good morning, Bill Hey.

Good morning, John and good morning, Josh.

And just maybe ask the margin question with a little bit finer point on it and if theres a lot of moving pieces.

And when do you expect to get to kind of normal incremental margins again, it sounds like <unk> definitely not.

And it might be flat to down year over year, but.

And more third quarter or are we really talking about next year, because you have the temporary costs yet some of the price cost actions and investment just trying to put all those pieces together when folks should start to expect kind of a normal operating leverage.

Start to filter and that business yet.

Yes, Josh I think our view it would be fourth quarter and then into next year.

And once you get urban kind of described the aggressive pull off price that we've made.

So you sort of really need that flatten out and.

And if and even were to come down and some of the spiky activity suggests that it could.

And then you start to actually get some super normal activity, because you are actually getting kind of a tailwind, but I think it's.

You are talking ultimately about fourth quarter and into next year.

Got it thats helpful and.

And I understand we still have some bottlenecks on the acquirer side or I guess communications and controls now health.

How fast can that business really grow when folks are able to go out and the field and new installations again I would imagine there's a labor component like can this business grow double digits.

And when we're out in the wild again or are there kind of bottlenecks that and say that $1 billion of backlog Inc.

And could take a while to get out and the way.

Yes, I think if you would.

Just put it in perspective of what we talked about before that we think it's mid single digit growth, but even if you look at the first quarter that it's still down if you just do that math.

We're in that range of what you just talked about around the double digit growth.

There is a lot of labor and I talked about that and the last.

Paul.

That's not an unlimited resource and that.

Challenging as a matter of fact right now.

So I would say, that's probably the biggest constraint, but yes.

And we definitely expect a ramp up.

Even in the second quarter from that business.

Got it that's helpful and I'm, just going to try and squeeze one more and I really appreciate slide nine there bill would that price material spread.

Hard not to notice that GAAP was super wide over the past couple of years.

Is there some sort of philosophical change in pricing behavior and a strategy that you guys have had that couldnt still kind of a wider range. Once we normalize here on the material side.

Yes, I think Gerber and made some reference to.

And that period.

And when tariffs were pushing the spike up.

And there may have been a little bit of caution on the part of our sales and customer service teams.

And.

There is a lot to this this pricing actions right.

<unk> with the.

And the brand quality and standing for quality.

It continues to service levels.

And it extends further to customer relationships and communication with customers because ultimately.

We're implementing a price increase that goes through a distributor to the user so we need kind of this two step coordination and.

And I do think perhaps that 18 period that curve and had reference may be made that dynamic.

And now function, a little bit more smoothly, that's allowing us to be a little more aggressive during this the spike I would say, yes, maybe just to add to that I would also say that one of the things that we continue to invest and work on is the discipline around the analytics of pricing and the organization.

Around our pricing discipline with.

People that.

And that solely focus on pricing.

And so I think it's a combination of just learning from the past being a little more aggressive and having better tools to manage it.

Great. That's helpful. That's all cash.

Your next question comes from the line of Christopher <unk> with UBS. Your line is open.

Thank you so I guess, starting with the updated guidance if I take the mid point.

On the res and Embeds just around high single digit margins on the incremental 200 bps of topline if my math is right.

So is this all just more challenging price cost relative to the Q4 guidance or are there other headwinds here.

Potentially yes, our installation ramp or just did Q1 come in softer than maybe you guys thought weighing down the full year.

No, Chris I think youre, putting your finger on the math there.

Right way, which is.

If you got a point of extra point of price and all that does is offset cost and it puts a.

It alters the incremental math, which is what youre pointing out.

Okay. Appreciate that and then I guess just following up on that point. So of the 200 bps organic growth guidance would you look to separate volume and price because it does seem like the pricing increases have been more meaningful and maybe on the Q4 call.

Yes, that's about half and half and say attribute.

One point of the rise in price and the other to volume.

Thank you.

Alright.

And your next question comes from the line of Jonathan <unk> with G. Research. Your line is open.

Hi, good morning.

Good morning.

Thanks for taking my question.

<unk> carbon and bill.

Bill I guess first off.

The infrastructure Bill that was just proposed.

How do you see the framework and the numbers.

Yeah.

Potentially increasing or extending.

The.

T&D cycle.

Yes.

Yes.

This isn't going to sales.

I think that.

We can affect.

Both halves of our business in front of the meter and behind the meter.

I think it suggests there would be investment and buildings.

To make them more efficient.

But certainly on the front of the meter seems to be a lot of attention.

To promote.

Renewable energy and as we said I think that really benefits us on the transmission side and.

And.

It's not exactly clear to us.

When some of the spending really starts if it's.

The middle of next year that almost feels optimistic so.

The flavor of the stimulus seems we seem to be well poised to benefit from but I'm not I'm not sure I have great visibility as to when that would start to benefit us yes.

Yes, and then maybe just to add because.

Clear one that to everybody.

Yes.

Is the renewables and net clearly is positive for our utility business, but as bill alluded to right there as proposals to invest and the telecom infrastructure there is.

Proposals to investing transportation roads, and we'd play and dose verticals as well, whether it's with our enclosures business for four.

Fiber installations or with our grounding and connectors and.

And products that we used for rail and Roche. So it's a net positive for us it's more what as bill alluded to is what's the timing.

Around the spend.

Okay. That's helpful and then one other.

And just big picture question I mean, you did a few acquisitions at the end of last year and they seem to be tracking well how do you view the M&A landscape as you look throughout the rest of 2021, obviously you may see some tax code changes valuations are expensive.

What are sort of the puts and takes and how does eager does that make you to do more deals this year.

Yes, I think.

Our enthusiasm is driven by a couple of things I think one is where we might have a white spot and our offering where we can extend our brands.

The growth rate and the vertical the margin potential.

And.

I do agree with you that.

Prices and multiples can start to look.

Like and inhibitor, if especially if you get into areas maybe like software.

And it seems to larger transactions seem to have a larger multiple associated with them.

And average Hubbell deal.

Which is about $50 million and size our business development teams.

Continue to be quite.

Quite hopeful and are in active dialogue.

With a pretty robust pipeline of appropriately multiples and valued situations that can extend our franchise. So I would.

I would hope that we can continue.

To do a programmatic level of acquisition investing year in and year out at reasonable valuations that.

And ultimately will contribute quite a bit of value to our shareholders. So that.

Even though I do agree there is some pricing this and certain places.

We still have our eyes on some appropriate appropriate targets.

Great. Thank you.

Alright, there are no further questions at this time I would like to turn the call back over to the presenters for their final remarks.

Alright, Thanks, operator, and thank you everyone for joining us I'll be around for questions and the rest of the day. Thank you.

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