Q1 2023 Hubbel Inc Earnings Call

April 25, 2023

Presentation that will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if you'd like to remove yourself from the queue simply press star one again.

It will be a question and answer session to ask a question. During this session you will need to press star one on your telephone if you'd like to remove yourself from the queue simply press star one again.

IPad Turner.

I respectfully ask that analysts limit themselves to one question each.

I'll now turn the call over to your host Mr will Mcdowell, Vice President of Investor Relations. Mr. Mcdonald you may begin.

As a reminder, today's program is being recorded and now I'd like to introduce your host for today's program, Dan Amaretto, Vice President Investor Relations. Please go ahead Sir.

As a reminder, today's program is being recorded and now I would like to introduce your host for today's program, Dan Amaretto, Vice President Investor Relations. Please go ahead Sir.

Good morning, everyone and thank you for joining today's call I am will Mcdowell Vice President of Investor Relations. We're pleased to have you join us for a discussion of Tennant's first quarter 2023 results as well as the discussion of our financial outlook.

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 2023 press release. The slides are posted to the investors section of our website at <unk> Dot Com I'm joined today by our chairman President and CEO, Kevin Barker, Our executive Vice President and CFO Bill Sperry. Please note our comments this morning may.

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 2023 press release and slides are posted to the investors section of our website at <unk> Dot com and I'm joined today by our chairman President and CEO, Kevin Barker, Our executive Vice President and CFO Bill Sperry. Please note our comments this morning.

Tenant senior management participating in today's call will be Dr. <unk>, <unk>, Chief Executive Officer, and Dan can sell me executive Vice President and Chief Financial Officer.

Our webcast. This morning includes a slide presentation, which has been posted to the Investor Relations section of our website tenant health Dot com.

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.

They 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.

Listeners to this call are advised that certain statements made during our discussion today are forward looking and represent managements expectations based on currently available information actual results and plans could differ materially.

Please note the discussion of forward looking statements in our press release and consider it incorporated by reference into 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 garden.

Therefore, please note the discussion of forward looking statements in our press release and consider it incorporated by reference into this call. Additionally comments may also include non-GAAP financial measures.

Tenet is under no obligation to update any forward looking statements based on subsequent information investors should take note of the cautionary statement slide included in today's presentation as well as the risk factors discussed in our most recent Form 10-K and other filings with the Securities and Exchange Commission with that I'll turn the call over to song.

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 garden.

Great. Good morning, and thank you for joining us to discuss <unk> first quarter 2023 results.

<unk> is off to a strong start to the year, our first quarter results exceeded our expectations driven primarily by three factors stronger stick rates and realization on incremental price actions.

Pablo is off to a strong start to the year.

Our first quarter results exceeded our expectations driven primarily by three factors.

Thank you will and good morning, everyone.

To a nice start for 2023 strong volume support good results in all three business units Uspi's performance continues to accelerate given our focus on organic growth and is ahead of our expectations. So far in.

Stronger stick rates and realization on incremental price actions affair.

Effective ramp up of recent capacity investments and improved operational productivity.

In the first quarter, we delivered net operating revenues of $5 billion and consolidated adjusted EBITDA of $832 million, which translates into an attractive 16, 6% margin as.

We are raising our full year outlook. This morning to account for this outperformance, while maintaining a balanced view of risk and opportunities as we navigate a more uncertain second half.

As a result of our strong performance in the first quarter. We are now raising our full year guidance, which demonstrates the confidence we have in our operations.

Our investments in capacity innovation and productivity are yielding strong returns and enabling us to effectively serve strong customer demand for hubble's critical infrastructure solutions.

Across our businesses a post pandemic environment is taking shape COVID-19 admissions are down a wider range of acuity is returning to the hospitals deferred Gi procedures are returning and our workforce is starting to stabilize.

Most notably utilities continued to actively harden and upgrade aging infrastructure, while also investing to facilitate renewables and electrification through new interconnections and enhanced smart grid applications.

We have anticipated this for some time and our strategy operating efficiency and capital discipline enable us to deliver attractive performance in this environment.

We achieved double digit sales growth in the first quarter as improved production output enabled continued volume growth, while leading service levels supported continued demand strength and price realization.

We had a great quarter, USPI with $340 million and adjusted EBITDA, which represents 21% growth over first quarter 2022 same facility cases grew seven 9% and adjusted EBITDA margins were strong at 37, 6%.

Operationally, we achieved over 600 basis points of adjusted operating margin expansion in the quarter driven by favorable price cost and productivity. In addition to volume growth.

As I've said before the continued migration of procedural services into the ambulatory setting is a sustained and significant tailwind for our business.

While utility solutions continued to perform exceptionally well in a strong market environment. We are also very pleased with the operating performance of electrical solutions, which achieved strong margin expansion and a more modest market backdrop.

Growth in our active physician population as well as higher acuity service line expansion, especially Gi urology anti in orthopedic cases drove the first quarter volume strength.

We're executing well in our strategy to compete collectively as a unified Acs operating segments I will talk more about that later.

We are pleased to have our organic growth initiatives, gaining traction and bearing fruit.

Before I turn it over to Bill to give you more details on our financial performance in the quarter I want to highlight a few recent accomplishments, which demonstrate that our strategy and the investments we are making into our business are driving value for all our key stakeholders.

Our USPI development pipeline remains active and healthy we added three new centers in the quarter. We completed two additional post transaction by ups in the quarter at multiples unchanged from prior by ups progress continues in this area.

First hubbell power systems and burn we are proud to have been named supplier of the year by two of our largest electrical distributors in 2022.

As previously discussed USPI M&A engine under the tenant umbrella is an industry leading differentiator.

With strong demand and tight supply chains, and the utility T&D and industrial markets delivering on commitments to get customers the product they need when they need it while maintaining consistent quality reliability and service is critically important.

With strong demand and tight supply chain and the utility T&D and industrial markets delivering on commitments to get customers the product they need when they need it while maintaining consistent quality reliability and service is critically important.

We continue to drive post synergy multiples for many of our acquisitions to below five times, we intend to invest approximately $250 million in ambulatory M&A each year and have a robust pipeline to support that level of investment.

While the supply chain environment remains challenging our ability to execute and our willingness to invest in production capacity and working capital has helped strengthen our long term relationships with major customers.

The supply chain environment remains challenging our ability to execute and our willingness to invest in production capacity and working capital has helped strengthen our long term relationships with major customers.

We are also energized by the level of de Novo activity in the USPI pipeline with over 25 centers currently in syndication stages or under construction.

In our electrical segment. We're also pleased to have been recognized with product of the year Award by a major trade publication for two innovative product launches.

In our electrical segment. We're also pleased to have been recognized with product of the year Award by a major trade publication for two innovative product launches etch.

USPI is the preferred partner for high quality physicians as demonstrated by our organic growth and development pipeline.

The linkage to our hospital business creates a superior platform of management talent and significant scale benefits.

Connect screw loose termination wiring devices as a product line, we launched last year, which innovate on a 100 year old product design.

<unk> connect screw loose termination wiring devices as a product line, we launched last year, which innovate on a 100 year old product design eliminating.

Turning to our hospital segment, we generated $405 million of adjusted EBITDA in the first quarter of 2023.

Eliminating the need for installation tools and delivering 80% labor savings for installers.

Furnish quick share bolt is a new product for solar and wind markets, which eliminates the need for compression tooling and manual torque wrenches, simplifying conductor installation and saving the contract our time in the field.

Same store hospital adjusted admissions grew six 7% and ER volumes grew four 8% over the first quarter in 2022.

On a non COVID-19 basis same store inpatient admissions were up 14% acute.

These are just a couple of examples of the investments, we're making into innovation to accelerate hubbell's organic growth profile and core markets as well as strategic growth verticals.

Acuity levels remained strong as our case mix index has grown at a 3% compounded annual growth rate.

Since 2019.

And finally for the third consecutive year Hull was named one of the world's most ethical companies by Ethisphere, a distinction that recognizes all of our employees for their dedication and upholding our core values each and everyday.

We continue to expand access to high acuity specialty services across our hospitals and enable access to cutting edge clinical technologies in the first quarter. We maintained our focus on cardiovascular neurosciences specialty surgical services trauma and women's health.

One aspect of those core values is our commitment to sustainability and as many of you will have seen in March we released our annual sustainability report with refreshed multiyear goals to substantially reduce greenhouse gas emissions.

A few examples include a new noninvasive focused ultrasound technology to treat Alzheimer's patients at our Delray Medical Center certification of our Resolute Baptist Hospital as a joint Commission advanced primary stroke Center and the achievement of a level one trauma designation at our desert Regional Medical center, which enables us.

Water usage and hazardous waste by 'twenty three.

These new Gold's supersede our initial 2025 goals, which we achieved ahead of schedule.

Sustainability is a core component of our business strategy not just in our own manufacturing and operations, but through the impact of our products and making critical infrastructure safer more reliable and more efficient.

To provide total care for nearly every aspect of injury across a broad region of the southwestern United States.

Our workforce is getting stronger investments in 2022, and pay and benefits of reduced turnover and the pace of first quarter 2023 nurse hiring continues to accelerate.

We continue to accelerate our investments in areas like T&D infrastructure renewables utility automation electric vehicles and broadband communications.

This helped to further reduce our contract labor costs in the first quarter of 2023.

Each of which offer attractive growth opportunities for our shareholders, while enabling humbled to further its mission to energize and electrify our economy and our communities in front and behind the meter.

All in all our hospitals have had a nice start to the year.

Conifer continues to perform well for its clients and deliver strong margins ongoing technology automation and offshoring initiatives support that performance third party revenue was up three 8% in the quarter and cash collection performance was strong in the quarter, helping to drive tenants days outstanding.

Now, let me turn it over to Bill to give you some more details on our performance.

Thank you <unk> and good morning, everybody I appreciate your interest in Hubbell.

Wanted to start by reminding us when we were together in January talking about our full year outlook.

<unk> and accounts receivable down by two days from year end <unk>.

We established a couple of them.

Conifer continues to ramp up commercial activities with a strong sales pipeline for 2023.

The important components of our framework of that outlook.

First is that we were confident in our end markets that they would outgrow GDP function of some of the key electrification megatrends we.

First is that we were confident in our end markets that they would outgrow GDP function of some of the key electrification megatrends.

Looking forward, we are raising our full year 23, adjusted EBITDA guidance by $50 million at the midpoint to a range of $3. Two 1 billion to $3 four 1 billion, our management discipline operational excellence and ongoing investments in talent have enabled a strong start to the year and we remain focused on axa.

We are confident that we were well positioned in those end markets with brands and solutions and people processing technology to continue to satisfy and service the customer.

We were confident that we were well positioned in those end markets with brands and solutions and people processing technology to continue to satisfy and service the customer.

<unk> performance across our businesses.

We felt that our pricing, which is in response to a couple of year impact of some inflation.

At USPI strong margins organic growth tailwind and inherent capital efficiencies generate significant free cash flow.

Had a set up well for 2023 with a couple of points of wrap around.

<unk> to add centers with strong margins and attractive post synergy multiples remains a great use of cash for investments to enhance tennant's free cash flow. These.

And we also stated that.

Our visibility to the first half was better than the second half and so it was important for us to get off to a good start.

Our visibility to the first half was better than the second half and so it was important for us to get off to a good start in.

These cash flows will enable us to further grow deleveraged, the balance sheet and return capital to shareholders in the future.

And with that Dan will provide a more detailed review of our financial results Dan.

We were trying to be explicit that we had a front half loaded.

We were trying to be explicit.

We had a front half loaded.

Thanks, Tom and good morning, everyone. Our financial results in the first quarter were strong with our USPI and hospital as adjusted EBITDA and same store volumes and revenues well above our expectations.

Outlook as a result of that second half uncertainty and as carbon in my comments I'm starting on page five of the materials.

Outlook as a result of that second half uncertainty and as <unk> said in my comments I'm starting on page five of the materials.

We exceeded our expectations significantly in the quarter.

In the quarter, we generated consolidated adjusted EBITDA.

Sales of $1 $2 9 billion.

$832 million above the high end of our first quarter guidance range.

11% growth.

Was the sixth consecutive quarter of double digit growth in sales for us I think pretty good indication.

Our results were driven by strong same store revenues and volumes continued high patient acuity for non COVID-19 patients and effective cost control.

Solid demand out there.

Now I'd like to highlight a few key items for each of our segments, let's start with USPI, which delivered strong growth and continues to provide high quality care to our patients.

As a front half loaded.

Right now that demand has notably.

Outlook as a result of that second half uncertainty and as <unk> said in my comments I'm starting on page five of the materials.

Skewed towards the utility side of our business versus the electrical and we'll talk a little bit more about that as we impact the results.

Skewed towards the utility side of our business versus the electrical and.

We'll talk a little bit more about that as we impact the results.

We exceeded our expectations significantly in the quarter.

In the quarter USPI produced a seven 9% increase in same facility surgical cases compared to last year.

<unk> margin of 27% that 20% level.

You see sales of $1 $2 9 billion.

Kind of a milestone achievement for us.

With strong growth in Gi urology, E&P and orthopedic cases.

Kind of a milestone achievement for us.

11% growth.

And really driven by some of the price cost drivers that.

Was the sixth consecutive quarter of double digit growth in sales for us I think pretty good indication.

Surgical cases were 107% of prepaying demick levels in the quarter.

Productivity that curve and had mentioned.

And productivity that curve and had mentioned.

<unk> adjusted EBITDA grew 21% compared to the first quarter of 'twenty, two and its margins continue to be very strong at 37, 6%.

Earnings up 70% to $3 61.

Solid demand out there.

Right now that demand has notably skewed towards the utility side of our business versus the electrical and we'll talk a little bit more about that as we impact results.

Nearly $1 50, almost of new earnings generated versus the prior year period end.

Nearly $1 50, almost of new earnings generated versus the prior year period.

We are pleased with Uspi's excellent start to the year. This strong performance is a testament to the attractiveness of the portfolio and value that we provide to our stakeholders.

Cash flow. This is typically a seasonal low for us at the very beginning first quarter.

<unk> margin of 27%.

<unk> got a nice amount of cash being generated because.

But a nice amount of cash being generated because.

That 20% level.

Turning to our acute care hospital business.

Kind of a milestone achievement for us.

The income.

That would be generated.

First quarter same hospital adjusted admissions increased six 7% compared to the first quarter of last year.

So on page six.

And really driven by some of the price cost drivers that.

So on page six.

Drill down a layer into that to that strong.

Drill down a layer into that into that strong performance starting in the upper left with sales the.

Productivity of that curve and Ed mentioned.

<unk> performance starting in the upper left with sales.

Total same hospital inpatient admissions increased four 3%.

Earnings up 70% to $3 61.

The 11% growth.

While non COVID-19 admissions increased 14%.

Is comprised of high single digit price increase and low single digit volume increase.

Comprised of high single digit price increase.

Nearly $1 50, almost of new earnings generated versus the prior year period and <unk>.

And low single digit volume increase.

Our labor management continues to be very effective despite the cost pressures, especially temporary contract nurse staffing costs.

The volume varied by segment, where that was quite flat and electrical end and very strong growth in utility.

The volume varied by segment where that was.

Cash flow. This is typically a seasonal low for us at the very beginning first quarter.

Quite flat and electrical end and very strong growth in utility.

On a consolidated basis contract labor costs were 6% of SWM B, a significant decline from seven 3% in the fourth quarter 2022.

But a nice amount of cash being generated because.

The LP on the upper right.

The income.

You see an increase to $267 million of op.

That we generated.

So on page six.

Total hospital costs were well managed in the quarter as these costs were two 7% lower than first quarter 2022 on a per adjusted admission basis. When you exclude the impact in the prior year from a $69 million gain on sale of medical office buildings.

66% increase over the prior year.

Drill down a layer into that into that strong performance starting in the upper left with sales the.

66% increase over the prior year.

And again at that 20% benchmark level.

The 11% growth.

Earnings per share grew just a little bit more than the operating profit driven obviously by that profit, but also taxes were just slightly.

Comprised of high single digit price increase.

And low single digit volume increase.

<unk> cost per adjusted admission were down five 4% compared to first quarter last year.

The volume varied by segment, where I was quite flat and electrical end and very strong growth in utility.

Slightly lower this period ends on the net interest expense line, we have our.

Slightly lower this period ends on the net interest expense line, we have our <unk>.

Our <unk> costs as a percent of revenue were 45% in the quarter.

The LP on the upper right.

Interest costs in the form of our bonds are fixed versus the cash we have earns variable rates and with rates rising we earned more income so reduced net interest expense. So it got a little bit favorability below the line inside of earnings.

Interest costs in the form of our bonds are fixed versus the cash we have earns variable rates.

You see an increase to $267 million of op.

<unk> to 46% in the first quarter of 'twenty, two and 46, 2% in fourth quarter of last year.

66% increase over the prior year.

With rates rising.

We earned more income so reduced the net interest expense. So it got a little bit favorability below the line and inside of earnings.

And again at that 20% benchmark level.

Our case mix and revenue yield remained strong as we continue our strategic focus on investments and higher acuity higher margin service lines.

Earnings per share grew just a little bit more than the operating profit.

The cash flow there you can see the compare to last year.

The cash flow there you can see the compare to last year right above it youll see the amount of income becoming more cash flow.

Our case mix index in the quarter has grown at a 3% CAGR since 2019 before the pandemic.

Right above it youll see the amount of income becoming more cash flow.

Driven obviously by that profit, but also taxes were just slightly.

And <unk>.

Slightly lower this period and on the net interest expense line, we have our <unk>.

Quite important for us to have the cash to leave us in a position where we are poised to support our investment.

Our hospitals first quarter results included $27 million of insurance proceeds received related to last year's cyber security incident.

Interest costs in the form of our bonds are fixed versus the cash we have earns variable rates and.

We are keen to.

As we previously disclosed our guidance reflected $10 million of these recoveries in the quarter.

Continued to increase Capex, we think there's excellent growth opportunities for us on the utility side and continues to be good productivity opportunity on the electrical side.

With rates rising.

Which were received in January .

We earned more income so reduced net interest expense so it got a little bit favorability below the line and inside of earnings.

As a reminder, in the first quarter of last year, we recorded a $69 million gain on the sale of medical office buildings, as well as $31 million of Texas Medicaid revenue that related to 2021.

As well as to half.

More capital to support investing in acquisitions, and we will talk about a couple of the acquisitions, we've done and how they are doing since we brought them on.

More capital to support investing in acquisitions, and we will talk about a couple of the acquisitions, we've done and how theyre doing since we've brought them on.

The cash flow there you can see the compare to last year right above it you'll see the amount of income becoming more cash flow.

Let's now turn to conifer, which again delivered a solid quarter.

Yes.

And <unk>.

Quite important for us to have the cash to leave us in a position where we are poised to support our investment.

Unpack those results by.

Pack those results by.

By segment and you will see different profile here as we go through.

By segment and Youll see different profile here as we go through.

Conifer produced first quarter, adjusted EBITDA of $87 million and a strong margin of approximately 27%.

Utility right now is the engine driving the Hubble enterprise.

We are keen to.

Also conifer generated three 8% growth in revenue from external clients compared to the first quarter last year.

Continue to increased Capex, we think there's excellent growth opportunities for us on the utility side and continues to be good productivity opportunity on the electrical side.

We find ourselves with a very constructive set of market dynamics, coupled with a really excellent positioning.

Overall, we're off to a good start to the year in each of our businesses.

And our best in class, leading franchise that we've constructed.

As well as to half.

More capital to support investing in acquisitions, and we will talk about a couple of the acquisitions, we've done and how they are doing since we brought them on.

Now, let's review, our cash flows balance sheet and capital structure.

Over the decades here.

At the end of the quarter, we had $766 million of cash on hand, and no borrowings outstanding under our $1 5 billion line of credit facility.

With components communications.

Yes.

And controls really from the backbone to the edge.

Pack those results by.

By segment and Youll see different profile here as we go through.

We generated $214 million of free cash flow in the quarter.

A really really strong franchises performing really well in these market conditions, so starting with sales the 20% growth in sales to $782 million.

Utility right now is the engine driving the Hubble enterprise.

As a reminder, the first quarter is oftentimes, our softest cash flow generating quarter due to certain annual working capital requirements, such as our annual 401, K matching contributions for our employees and annual incentive compensation payments.

We find ourselves with a very constructive set of market dynamics coupled with.

Is comprised.

Really excellent positioning.

Roughly half from price increase.

And our best in class, leading franchise that we've constructed.

Half from volume gains.

Conifer produces strong cash collection performance in the first quarter, which resulted in a two day improvement in our days in AR.

<unk>.

The volume was skewed more towards the transmission and distribution component side versus the comms and control side.

Over the decades here.

With components communications.

Also during the quarter, we repurchased approximately 906000 shares of our stock for $50 million as part of our $1 billion share repurchase program.

And controls really from the backbone to the edge.

We feel that the.

We feel that the capex that we've been investing to add capacity has allowed us.

Capex that we've been investing to add capacity has allowed us.

A really really strong franchises performing really well in these market conditions, so starting with sales the 20% growth in sales to $782 million.

To grow sequentially and year over year.

Since the inception of the program in the fourth quarter last year, we have repurchased approximately six 8 million shares or about 6% of our then outstanding shares.

And that's been really helpful. I think besides helping us grow it has helped us manage service levels and the feedback we keep getting from customers is that service level is beating that of the competition and I think those service levels in turn.

<unk> is comprised.

Roughly half from price increase.

For $300 million at an average price of about $44 per share.

Half from volume gains.

Sure.

The volume was skewed more towards the transmission and distribution component side versus the comms and control side.

Our March 31 leverage ratio was four nine times EBITDA slightly up from four one times at year end 'twenty two.

Our reinforcing our value proposition in helping us support our pricing.

Ah reinforcing our value proposition in helping us support our pricing.

Environment as well as we believe leading to some share gains.

We feel that the capex that we've been investing to add capacity has allowed us.

Environment as well as we believe leading to some share gains.

And as a reminder, we have no significant debt maturities until the third quarter of 2024 and have approximately $1 6 billion of secured debt borrowing capacity available if needed.

On the volume side.

On the communications and controls you see 4% growth there.

To grow sequentially and year over year.

And that's been really helpful. I think besides helping us grow it has helped us manage service levels and feedback we keep getting from customers is that service level is beating that of the competition and I think those service levels and turn.

Youll recall that through much of last year.

Let me now turn to our outlook for this year.

As Tom mentioned, we are raising our 2023 adjusted EBITDA outlook by $50 million to $3, two 1 billion to $3 four 1 billion.

Bumping along flat.

And so we may be starting to see a little bit of buying in the supply of chips, allowing those meters.

Or $3 billion $310 million at the midpoint, reflecting the strong start to the year.

Our reinforcing our value proposition in helping us support our pricing.

To get.

Build 10 installed.

And we're looking forward to more of that as we go forward.

Environment as well as we believe leading to some share gains.

This $50 million increase includes a $20 million raise for USPI and a $30 million raise for our hospitals.

On the operating profit side, 87% growth to $191 million.

On the volume side.

On the communications and controls you see 4% growth there.

Additionally, we now expect 90 operating revenues to be in the range of $19 8 billion to $20 2 billion.

You see almost $90 million of new profit generated by this segment just a really impressive.

Youll recall that through much of last year.

<unk> financial performance for them.

Also we expect full year adjusted diluted earnings per share from continuing operations to.

As bumping along flat.

You have <unk>.

And so we may be starting to see a little bit of thawing in the supply of chips, allowing those meters.

Lots of things going right.

To now be in the range of $4 92.

Have.

Price and material being positive.

To $6 nine.

To get.

On the pricing side Thats.

Built and installed.

Regarding our second quarter outlook.

And we're looking forward to more of that as we go forward.

Multi quarter trends that you all have seen.

We expect consolidated adjusted EBITDA to be in the range of 765 million to $815 million.

On the material side.

On the operating profit side, 87% growth to $191 million.

Actually.

And we anticipate that USPI is EBITDA.

A little bit new to see.

There was actually some tailwind that came from materials.

In the second quarter at the midpoint.

You see almost $90 million of new profit generated by this segment just a really impressive.

There was actually some tailwind that came from materials.

Will be approximately 23% to 24% of our full year 2023, USPI EBIT guidance of a $1.465 billion at the midpoint of our range.

As opposed to we had been facing inflation all of last year on that side. So both of those contributing tailwind, which as you see pushed up margins impressively.

As opposed to we had been facing inflation all of last year on that side. So both of those contributing tailwind was which as you see pushed up margins impressively.

<unk> financial performance for them.

You have.

Lots of things going right you have.

Price and material being positive.

The volume that we enjoyed drops through at attractive incrementals that helps push the margin up.

The volume that we enjoyed drops through at attractive Incrementals that helps push the margin up and we've been talking to you about the impact of disrupted supply chains on.

Turning to our cash flows for 2023.

On the pricing side Thats.

From a cash flow.

Perspective, we are targeting another strong year free cash flow generation and now expect free cash flow in the range of $1 1 billion to $1. Three 5 billion for 2023, an increase of 25 million over our previous expectations.

Our multi quarter trends that you all have seen.

We've been talking to you about the impact of disrupted supply chains on.

On the material side.

And pairing our productivity last year.

And pairing our productivity last year, and we're seeing some return to normalcy in some of those dimensions, where that productivity is starting to come back and be positive. So.

Actually.

A little bit new to see.

We're seeing some return to normalcy in some of those dimensions, where that productivity is starting to come back and be positive. So.

But there was actually some tailwind that came from materials.

Okay.

As opposed to we had been facing inflation all of last year on that side. So both of those contributing tailwind, which as you see pushed up margins impressively.

Our free cash flow generation has improved substantially over the past several years, we have significantly reduced our leverage and pushed out debt debt maturities and we expect our business to continue to drive strong cash flows while executing on our growth plans.

A lot of drivers really helping lift the margin and propel the results.

A lot of drivers really helping lift the margin and propel the results of the utility segment.

The utilities segment.

We thought it would be helpful on page eight.

The volume that we enjoyed drops through at attractive Incrementals that helps push the margin up and we've been talking to you about the impact of disrupted supply chains on.

So maybe give a multiyear view.

To maybe give a multiyear view of how the demand pattern has looked and we've shared with you here.

As we've mentioned previously these cash flows provide us with significant financial flexibility to effectively deploy capital for the benefit of shareholders.

How the demand pattern has looked and we've shared with you here.

Picture of the backlog.

A picture of the backlog.

And pairing our productivity last year.

And what you can see is starting really at the beginning of 2021, a very significant and sustained increase.

As a reminder, our capital deployment priorities have not changed.

And what you can see is starting really at the beginning of 2021.

We're seeing some return to normalcy in some of those dimensions, where that productivity is starting to come back and be positive. So.

First we continued planning on allocating approximately $250 million of capital annually to grow our USPI surgery Center business.

Very significant and sustained increase.

And the backlog on the utility side of <unk>.

A lot of drivers really helping lift the margin and propel the results of the utility segment.

Distribution and transmission components.

Second enhancing our hospital growth opportunities, including the continued focus on higher acuity service offerings.

This is obviously driven by the fact that the demand.

We thought it would be helpful on page eight.

<unk> exceeded our ability to be able to make and ship.

Third evaluating further opportunities to retire <unk> refinanced debt.

So maybe give a multiyear view of how the demand pattern has looked and we've shared with you here.

The amount of material.

And finally share repurchases, depending on market conditions and other investment opportunities.

And.

One of the reasons, we wanted to show you the pages, we feel that that level of demand is not the norm.

A picture of the backlog.

And with that we're ready to begin the Q&A operator.

And what you can see is starting really at the beginning of 2021.

Would not be sustainable level over the long time.

Thank you, we'll now be conducting a question and answer session. As a reminder, we please ask that you limit yourselves to one question if you will.

Would not be sustainable level over the long time.

Very significant and sustained increase.

Essentially I think we see the order pattern was responding to longer lead times and the fact that we were in an increasing price environment. Both of those phenomena I think caused people to put their orders in earlier than they otherwise might and thats evidenced and supported by the facts.

To be placed into the question queue. Please press star one at this time.

And the backlog on the utility side of <unk>.

First question today is coming from Brian <unk> from Jefferies. Your line is ally.

Distribution and transmission components.

This is obviously driven by the fact that the demand.

Hey, good morning, guys and congrats on a good quarter.

Yes.

Exceeded our ability to be able to make and ship.

My question is how much.

<unk> do you think you have left to bring down.

There is quite a bit of content in this backlog.

<unk> amount of material.

But there is quite a bit of content in this backlog.

Temp labor I know, you're reinvesting some of that in <unk>.

And.

Pages for your permit employees, but as we think about temp labor and maybe <unk> as a whole.

David longer than 90 days.

One of the reasons, we wanted to show you the page as we feel that that level of demand is not the norm.

And so what we expect is that as we start to get the supply chain normalized get our lead times normalized.

What do you think is the remaining opportunity for that embedded in your guidance and even as we look into next year. Thanks.

Would not be sustainable level over the long time.

Hey, Brian It's Dan good morning.

Essentially I think we see the order pattern was responding to longer lead times and the fact that we were in an increasing price environment. Both of those phenomena I think cause people to put their orders in earlier than they otherwise might and thats evidenced and supported by the facts.

And bring those factors down we think will be enabling our customers.

We do expect some additional moderation in our contract labor spend as we move through the year.

And bring those factors down we think will be enabling our customers.

To get their orders.

The operators have done a really phenomenal job managing this obviously very difficult environment, our recruiting and retention.

Put in.

With the anticipation that get the material much faster.

With the anticipation that kept the material much faster.

So our anticipation is that.

Measures have been improving which is helping to mitigate some of the incremental costs associated with contract labor. So we are expecting some additional moderation as we move through the year, but as we as we've said when we.

The order rate can come down and we will be reducing this backlog to get it back into balance and what we feel over the medium and long term as a mid single digit sustainable book.

The order rate can come down and we will be reducing this backlog to get it back into balance and what we feel over the medium and long term as a mid single digit sustainable booking.

But there is quite a bit of content in this backlog.

Dated longer than 90 days.

And so what we expect is that as we start to get the supply chain normalized get our lead times normalized.

<unk> released our guidance in February for this year, we are not expecting our contract labor to get back to pre pandemic levels certainly.

Book, and Bill order and ship right.

And so we.

And bring those factors down we think will be enabling our customers.

We really wanted to show you. This page it's part of what gives us the conviction to raise our guidance of turbine mentioned at the top.

We really wanted to show you. This page it's part of what gives us the conviction to raise our guidance a turbine mentioned at the top.

That won't happen this year.

To get their orders.

We think this this momentum you start to create visibility through the better part of this year.

Put in.

Thank you next question is coming from Peter Chickering from Deutsche Bank. Your line is now live.

With the anticipation that get the material much faster.

And so our anticipation is that.

Good morning, guys. Thanks for taking my questions great quarter.

And so it gave us the confidence that that.

And so it gave us the confidence that we could give you that increase in guidance.

The order rate can come down and we will be reducing this backlog to get it back into balance and what we feel over the medium and long term as a mid single digit sustainable.

The guidance you beat the midpoint of first quarter guidance by $57 million. He raised to EUR $50 million above the street, but only raised the full year by about $50 million. So I'm just curious.

We could give you that increase in guidance.

On page nine.

We switch to the electrical segment.

And Youll see very strong profit performance an increase of 30%.

Book, and Bill order and ship right.

We reached our into the implied back half of your guidance reduction is just conservatism is only at the street is missing or is simply.

15% margins $76 million of op.

And so we.

We really wanted to show you. This page it's part of what gives us the conviction to raise our guidance a turbine mentioned at the top.

On flat sales.

Did the street misunderstand the seasonality for the back half here refer certain here.

On flat sales.

That flat sales.

Includes.

Hey, payouts, Dan good morning.

We think this this momentum you start to create visibility through the better part of this year.

The acquisition of <unk>, which just to remind you was.

Acquisition of <unk>, which just to remind you was.

You shouldn't read into anything that listen we were off to a good start.

A very intentional increase in our exposure to the data center space.

To the year.

We beat by $57 million, and we raised our guidance by $50 million. So.

And so it gave us the confidence that.

That business is based in Raleigh in carbon and I and some of our partners had.

That business is based down in Raleigh in carbon and I and some of our partners had.

That we could give you that increase in guidance.

We're optimistic.

On page nine.

The opportunity to go visit the team last week and Raleigh and.

We're encouraged by the trends that we've seen.

We switch to the electrical segment and.

And that Shouldnt read anything into it.

And Youll see very strong profit performance an increase of 30%.

It's great to see them flying the Hubble flag.

It's great to see them flying the Hubble flag at their facility and see how excited they are to be part of the Hubbell family.

Great. Thanks, so much.

15% margins $76 million of op on flat sales.

<unk> facility and see how excited they are to be part of the Hubbell family.

Thank you next question is coming from Justin Lake from Wolfe Research. Your line is now live.

And the greater resources that we have which they believe is going to enable them.

The greater resources that we have which they believe is going to enable them.

That flat sales.

Hey, guys. Thanks for the question is Austin on for Justin really strong quarter on the volume side, both in USPI and in the hospital. Just curious you guys had kind of talked previously.

Includes.

On the acquisition of <unk>, which just to remind you was.

To be a more capable competitors so welcome those folks.

To be a more capable competitors so welcome those folks too.

A very intentional increase in our exposure to the data center space.

To our family.

Our family.

The counter is that the organic part of electrical was down a little bit.

Some service line flexing in the hospitals and then some COVID-19 driven interruptions in USPI, where any of those still present in the <unk> year or are we kind of at a clean comp going forward. Thanks.

The counter is that the organic part of electrical was down a little bit.

That business is based down in Raleigh.

We saw.

We saw <unk>.

And I and some of our partners had.

Softness in residential.

The opportunity to go visit the team last week and Raleigh and.

At the double digit level.

Okay.

On the hospital side is as Dan was just talking about with the prior one of the prior questions.

We had strength in our industrial markets and notably some of the verticals, we have been calling out in renewables.

We had strength.

In our industrial markets and notably some of the verticals, we have been calling out in renewables.

It's great to see them flying the Hubble flag at their facility and see how excited they are to be part of the Hubbell family.

As the contract labor rates come down and I indicated a little bit in my comments it opens up the ability to.

Data center and telecom.

And the greater resources that we have which they believe is going to enable them.

And I think.

Improve access for services.

One way at a time like this besides the the compare to prior year is to also look at the sequential trend in demand and sales.

One way in a time like this besides the the compare to prior year is to also look at the sequential trend in demand and sales.

To be a more capable competitors so welcome those folks.

The demand we know the demand has been there.

Always been a bit about whether that demand at scale with serviceable with very high contract labor costs and I think in particular as the contract labor rates come down.

To our family.

The counter is that the organic part of electrical was down a little bit.

And typical seasonality for us is to have the fourth quarter.

We saw.

Lead to a slight decline in the first quarter of a couple of points that would be typical seasonal.

Lead to a slight decline in the first quarter of a couple of points that would be typical seasonal pre.

Softness in residential.

At the double digit level.

It makes it easier to make decisions about utilizing contract labor versus.

We had strength.

Progression.

In our industrial markets and notably some of the verticals, we have been calling out in renewables.

And the fact that it's flat this year is a favorable compare to that typical season leads us to believe that demand is it.

And the fact that it's flat this year is a favorable compare to that typical season leads us to believe that demand is in.

The full time labor from from the perspective of <unk>.

Data center and telecom.

Opening up that hospital capacity.

<unk>.

To take in more volume and obviously imperative in that is that we continue to have discipline in our overall cost structure productivity length of stay things that we've talked about for the past few years during the pandemic continuing to remain focused on that so that we can generate strong margins as we open up the capacity even if <unk>.

And fairly healthy shape there.

Fairly healthy shape there but.

And I think.

But I think more impressive for us on the electrical side was the margin performance and similar to utility.

I think more impressive for us on the electrical side was the margin performance and similar to utility.

One way in a time like this besides the the.

Compared to prior year is to also look at the sequential trend in demand and sales and typical seasonality for us is to have the fourth quarter.

Very good price material performance.

Same improved productivity, where the plants are becoming more.

Same improve productivity, where the plants are becoming more.

Lead to a slight decline in the first quarter of a couple of points that would be typical seasonal progression.

Efficient after dealing with some of the inefficiencies forced on them by the pandemic.

Some of the work that returns is lower acuity on the USPI side I'm really pleased with the volume strength. This is not we've talked over the last couple three quarters about things that were going on in the business certain types of low acuity business that we were strategically and otherwise having.

We also thought on page 10, it would be worthwhile.

We also thought on page 10.

And the fact that it's flat this year is a favorable compare to that typical season in <unk>.

Be worthwhile.

To show you.

How we are building around some of these identified verticals and Youll remember.

How we are building around some of these identified verticals and Youll remember at Investor Day, and Kevin mentioned in his comments.

Leads us to believe that demand is fairly.

Fairly healthy shape there but.

<unk> at Investor Day, and Kevin mentioned in his comments.

But I think more impressive for us on the electrical side was the margin performance and similar to utility.

Reductions in that affected this quarter.

We're trying to compete collectively in the electrical segment.

Trying to compete collectively in the electrical segment in.

<unk> demonstrated growth in the services that we want to grow.

Very good price material performance.

At Investor Day, we shared some of the benefits of <unk>.

At Investor Day, we shared some of the benefits of.

Strong return of GI services orthopedic strength was strong and in particular I've commented about pain before the volume strength is not coming from pain, it's that business was flat year over year. So.

Transitioning from a three.

Same improved productivity, where the plants are becoming more.

Transitioning from a three.

Three vertical silo.

Efficient after dealing with some of the inefficiencies forced on them by the pandemic.

Segment, two single segment.

We think there is efficiency gains, but also importantly effectiveness gains. This is an example of the ability to be more effective so we organized around.

We think there is efficiency gains, but also importantly effectiveness gains. This is an example of the ability to be more effective.

It's this isn't a volume recovery based upon kind of so to speak engineering certain service lines that we were <unk>.

We also thought on page 10, it would be worthwhile.

To show you how.

So we organized around.

How we are building around some of these identified verticals and you'll remember at Investor Day, and <unk> mentioned in his comments.

Dampening our interest in but it is actual strength in many of the areas that I think most importantly, breaking through significantly the pre pandemic volume levels is a really important marker for USPI and the ASC industry because it suggests that there will be strength going forward.

The renewable in this example, the renewable vertical and again to remind you.

The renewable.

This example, the renewable vertical and again to remind you.

So this is solar and wind applications, we're not making solar panels were not making wind turbines are approaches around the balance of system components.

As solar and wind applications, we're not making solar panels were not making wind turbines are approaches around the balance of system of components.

Trying to compete collectively in the electrical segment.

At Investor Day, we shared some of the benefits of.

Transitioning from a three.

Those applications require and those balance of systems can come from different business units across our electrical segment. So the trick is to get the sales force to be very effective at cross selling.

Those applications require.

Three vertical silo.

And those balance of systems can come from different business units across our electrical segment. So the trick is to get the sales force to be very effective at cross selling.

Segment, two single segment.

Thank you next question is coming from Calvin starting from Jpmorgan. Your line is now live.

We think there is efficiency gains, but also importantly effectiveness gains. This is an example of the ability to be more effective.

Yes, hi, good morning.

I wanted to ask about the <unk> centers and how the integration is progressing there I know you talked about slower decision by us last year and the ramping of some of the de Novo and developing centers just curious how that's trended so far just as sort of understand some of the progress. Thanks, Yes, no. Good question good update as I indicated the biopsy.

To get the marketing team focused on helping to solve customer problems.

So we organized around.

The renewable.

This example, the renewable vertical and again to remind you this.

To get the capital flowing towards new product development that can come out of that improved voice of customer that.

Yet.

The capital flowing towards new product development that can come out of that improved voice of customer that the.

This is solar and wind applications, we're not making solar panels were not making wind turbines are approaches around the balance of system of components.

The newly organized sales force can get Durbin mentioned, a couple of these products, but good examples of us.

Newly organized sales force can get driven mentioned a couple of these products, but good examples of us.

Continue the progress in the buy ups continue.

At multiples that are.

Those applications require and those balances systems can come from different business units across our electrical segments. So the trick is to get the sales force to be very effective at cross selling.

That changed from any of the prior multiple so.

Being able to serve a vertical more capably when we compete collectively as an electrical segment.

That's good.

And the.

Centers that were in development.

We thought a noteworthy to show you that in just three years at the bottom we've been able to double.

Describe them somewhere from the point of having broken ground to just having opened we expect all of them from that original transaction number two to be opened up this year.

To get the marketing team focused on helping to solve customer problems.

Our performance in the.

Vertical to about $100 million of exposure and we anticipate similar amount of growth as we move forward.

To get the capital flowing towards new product development that can come out of that improved voice of customer that.

And that's a good thing those partnerships are still strong and intact.

I think also think of this as.

So I think I think we will see positive movement like I said.

The newly organized sales force can get an urban mentioned a couple of these products, but good examples of us.

As a model of other verticals that we're intending to.

Last night, we were about a year behind the original plan, but the original plan is still the original plan.

To become more vertically oriented around including data centers.

Being able to serve a vertical more capably when we compete collectively as an electrical segment.

Yeah.

Telecom and electric vehicles, all of which we.

Thank you next question is coming from Kevin Fischbeck from Bank of America. Your line is now live.

We're using similar techniques to become better more effective.

We're using similar techniques to become better and more effective.

We thought a noteworthy to show you that in just three years at the bottom we've been able to double.

Great. Thanks.

Wanted to ask about your views about the volumes in the quarter.

So how does how does this performance and all that we're doing how does it compare to what we said when we were together in January and where does it take us.

Our performance in the.

Sounds like.

Vertical to about $100 million of exposure and we anticipate similar amount of growth as we move forward.

The volumes were stronger than we were looking for it sounds like maybe they were even stronger than you guys were looking for is there something that you would point to as to why all of a sudden 2023.

As we look out.

I think also think of this.

To us important for us to share with you where do we see improvement where do we see things the same and what is still uncertain.

Beginning of of this volume.

As a model of other verticals that we're intending to.

[noise] rebound.

To become more vertically oriented around including data centers.

And maybe to go back to that earlier question about the guidance because it is kind of you raised for the beat it sounds like it's conservatism, but is there any reason to believe either based upon how volumes progressed through Q1 or so far in Q2 that these higher volume numbers wouldn't persist.

And on the improvement side, it's clearly it starts with the pricing actions.

Telecom and electric vehicles, all of which.

So actions that we were contemplating at the end of the year.

We're using similar techniques to become better more effective.

And implemented in the new year.

Head stick rates far above historical averages and far above our expectations.

So how does.

Yes. This is Tom so a couple of things.

How does this performance and all that we're doing how does it compare to what we said when we were together in January and where does it take us.

I think I think the volume strength.

I think it's an example of the channel really.

At this point.

We really we really have our information and what we've read.

As we look out.

Endorsing and embracing these pricing.

Endorsing and embracing.

And to us important for us to share with you where do we see improvement.

These pricing actions.

<unk> actions.

Publicly about HCA is information I think I think there is some.

And that created a big improvements.

And that created a big improvement.

Where do we see things the same and what is still uncertain.

<unk>.

Italy.

You'll recall our capex.

Industry recovery going on is as we kind of enter this post COVID-19 post pandemic anyway environment, where people are getting more comfortable returning to health care, we know that from our physicians offices Theyre now all the ones that we employ and Ron are now all running at full throughput in.

And on the improvement side, it's clearly it starts with the pricing actions.

<unk> gone from about 100.

Gone from about 100.

Two the ballpark of $1 30 last year, we're anticipating taking it up to 160. This year those big improvements in Capex are paying off and our ability to ship more volume.

So actions that we were contemplating at the end of the year.

And implemented in the new year.

Had stick rates far above historical averages.

And certainly the productivity.

In the outpatient environment, obviously that helps to create demand.

And far above our expectations.

That was impaired a little bit last year by.

Demand I think that we've in our case gotten much more effective and efficient with our ER throughput and operations across the board that was a big focus area last year that we didn't talk much about but with the staffing shortages, having adequate throughput having fast track.

I think it's an example of the channel really.

Our labor being.

Not available on a consistent basis materials, not being available on a consistent basis and transportation likewise not.

Endorsing and embracing these.

Pricing actions.

And that created a big improvements.

Not being available on a consistent basis has made it very difficult.

Additionally.

You'll recall our capex.

To plan and execute inside our plants and we're seeing those conditions improve and we're seeing as a result.

Gone from about 100.

Setups in our <unk> and things to improve that throughput is important to be able to service the demand and then for us in particular, I think that as we get into this post pandemic environment.

Two the ballpark of $1 30 last year, we're anticipating taking it up to $1 60. This year those big improvements in Capex are paying off and our ability to ship more volume.

Productivity improvement so all of that is causing us to raise our sales and margin outlook whats the same as utility demand in the market strength, we see continuing.

And certainly the productivity.

Hospitals are going to naturally be able to hold on to and deliver.

That was impaired a little bit last year by.

Showed you evidence of that order pattern in the backlog page.

Our labor being.

The electrical markets.

When they have put in the right infrastructure doctors and technology for higher acuity services that don't have a substitute location to go to and for US that is that's an important.

Not available on a consistent basis materials, not being available on a consistent basis and transportation likewise not.

Continue to trend and as we said, having a favorable compare sequentially in the fourth quarter.

Not being available on a consistent basis has made it very difficult.

We think is a good sign of demand.

To plan and execute inside our plants and we're seeing those conditions improve and we are seeing as a result.

And.

Piece of the recovery puzzle occur.

We still believe that we have a significant part of the portfolio.

Across the board look the other thing from a tenant portfolio perspective, as we indicated in our portfolio has a pretty broad range of exposure to markets that handled states that handled COVID-19 differently and we always had a little bit more recovery to go in some of the states that were more locked down.

Productivity improvement so all of that is causing us to raise our sales and margin outlook whats the same as utility demand in the market strength, we see continuing.

Is it going to show resistance to consumer led recession effects that includes.

<unk>.

Utility side transitioning distribution components.

Showed you evidence of that order pattern in the backlog page.

It also includes elements on the electrical side.

And I am pleased to see that we're seeing some volume strength in those.

The electrical markets.

Both industrial and some of those verticals inside renewable telecom and data centers, we expect to.

Continue to trend and as we said, having a favorable compare sequentially the fourth quarter.

In those markets as well at USPI.

To grow through any macro but on the uncertain side on the right. We still have uncertainty in the second half we think we see good momentum to the second quarter, which gives us some confidence.

There's a couple of things one is.

We think is a good sign of demand.

We put a lot of focus and reengineered some of our processes incentives as well as service line priorities.

And.

We still believe that we have a significant part of the portfolio.

Is she going to show resistance to consumer led recession effects that includes.

Still are working through channel inventory levels and making sure.

In the third quarter of last year.

Third quarter and fourth quarter of last year going into this year.

That what our customers have on the shelves is aligned with what they know they can move and making sure. They have the confidence to keep putting orders in with us that sell through.

Both.

To focus a bit more on some of the things that we wanted to grow rather than just some of the things that we were trying to optimize out as the low acuity service and I think getting that balance right is helped create some momentum at USPI with respect to organic growth and yes. There is really no reason that.

Utility side transition and distribution components.

It also includes elements on the electrical side.

Both industrial and some of those verticals inside renewable telecom and data centers, we expect to.

I think the non resin markets, whether they're impacted by.

Any any macro uncertainty again.

To grow through any macro but on the uncertain side on the right.

We don't see signs of that yet.

I see looking forward.

But we read that.

But we read the.

Still have uncertainty in the second half, we think we see good momentum to the second quarter, which gives us some confidence.

At this point that that should change.

<unk> just like you all in and know there are concerns out there. So that's causing us to have some conservatism as we think about the second half in other words, our guidance that carbon is about to talk through us is not the first quarter.

<unk> just like you all in and know there are concerns out there so thats, causing us to have some conservatism as we think about the second half in other words, our guidance that carbon is about to talk through us is not the first quarter.

My commentary to the to the guidance look we're pleased to have delivered a good quarter and we're pleased to have raised our guidance at this point in time.

Still are working through channel inventory levels and making sure.

We're optimistic about the future and we'll revisit as we look forward depending on what the results look like.

That what our customers have on the shelves is aligned with what they know they can move and making sure. They have the confidence to keep putting orders in with us that sell through.

Seasonally extrapolated through the year and involves good momentum into the second and then.

Some caution around the second half so I will turn it to go into.

Thank you. Your next question is coming from AJ Rice from Credit Suisse. Your line is now live.

I think the non resin markets, whether they're impacted by.

To quantify our outlook for you.

Hi, everybody I wanted to just ask.

Any any macro uncertainty again.

Yeah.

<unk>.

Two other areas that have been touched on.

Thanks, Bill for those additional insights on our results.

We don't see signs of that yet.

You've done your analysis on.

Hubble is raising our 2023 outlook to an adjusted earnings per share range of $13 to $13 50, representing approximately 25% adjusted earnings growth at the midpoint.

But we read the papers just just like you all in and know there are concerns out there so thats, causing us to have some conservatism as we think about the second half in other words, our guidance that carbon is about to talk through us is not the first quarter.

Ready determinations were getting sort of different views as to as people roll off of Medicaid you picked up on public exchanges are hopefully on the commercial roles, whether thats a neutral event for you guys or a positive how have you factored that into guidance and then any update on your generally on your managed care contracting.

This outlook now assumes 8% total sales growth and 7% to 9% organic growth for the full year, consisting of approximately equal contributions from price realization and volume growth.

<unk> extrapolated through the year and involves good momentum into the second and then.

I know this year, you've got a little help.

Some caution around the second half so I'll turn it to go into to quantify our outlook for you.

It seemed like from labor rates.

And labor pressures rather is that following through in your discussions 424, do you think youll get.

We continue to expect full year free cash flow conversion of 90% to 95%.

Great. Thanks.

Thanks, Bill for those additional insights on our results.

Yes.

This updated outlook incorporates a continuation of strong fundamental performance from the first quarter, while also maintaining a balanced view of risk and opportunities.

Some help on the labor side.

Hubble is raising our 2023 outlook to an adjusted earnings per share range of $13 to $13 50, representing approximately 25% adjusted earnings growth at the midpoint.

They're in rates for 2004.

Hey, Jay it's Dan.

Let me try to address those in terms of the Medicaid Redetermination.

It also enables us to accelerate our investment levels to support high return capacity full.

It also enables us to accelerate our investment levels to support high return capacity footprint and innovation projects over the balance of 2023.

I would say at this point, we haven't seen anything any substantive impact.

This outlook now assumes 8% total sales growth and 7% to 9% organic growth for the full year, consisting of approximately equal contributions from price realization and volume growth.

Sprint and innovation projects over the balance of 2023.

From the Redetermination, which really just began but I would tell you that we have conifer in our hospitals, we have dedicated resources.

We believe this balanced view should enable us to achieve our outlook in a range of macroeconomic scenarios.

To address this as the Redetermination occur state by state, we have communications across the enterprise through all levels of conifer and the hospitals, we're doing other types of communications.

Not only is this updated outlook well ahead of our expectations coming into 2023.

We continue to expect full year free cash flow conversion of 90% to 95%.

But it also puts us on the path to achieve our 2025 targets, which we laid out for you during Investor Day last summer two years ahead of schedule.

This updated outlook incorporates a continuation of strong fundamental performance from the first quarter, while also maintaining a balanced view of risk and opportunities.

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All while accelerating investments back into our business and without substantial benefit from capital allocations.

We've been going through and revising our.

It also enables us to accelerate our investment levels to support high return capacity.

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I am proud of our employees for the results that they are driving for our customers our shareholders and we remain committed to delivering differentiated results over the near and long term.

Proud of our employees for the results that they are driving for our customers our shareholders and we remain committed to delivering differentiated results over the near and long term.

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Sprint and innovation projects over the balance of 2023.

We believe this balanced view should enable us to achieve our outlook in a range of macroeconomic scenarios.

Messaging, a registration point of entry.

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

Let me turn it over to Q&A.

And broader messaging campaigns.

Not only is this updated outlook well ahead of our expectations coming into 2023.

Certainly ladies and gentlemen, if you have a question at this time simply press star one on your telephone one moment for our first question.

Cross across our facilities and then also working with community members.

It also puts us on the path to achieve our 2025 targets, which we laid out for you during Investor Day last summer two years ahead of schedule.

Tenant community members on the community in and working with them and tracking some of those statistics so.

And our first question comes from the line of Jeffrey Sprague from vertical research. Your question. Please.

So far nothing significant but we're we think we're on top of it and we're monitoring it closely in terms of your question in terms of the guidance for the year.

All while accelerating investments back into our business and without substantial benefit from capital allocations.

Hey, Thank you good morning, everyone.

Thank you and good morning, everyone.

Good morning, Jeff Good morning, Hey, just a couple of things first just on utility.

Jeff Good morning.

Hey, just a couple of things first just on utility.

I am proud of our employees for the results that they are driving for our customers our shareholders and we remain committed to delivering differentiated results over the near and long term.

Is your remark about mid single digit.

As we said in February we haven't assumed any significant.

Kind of a continuation off this new higher base or.

Kind of a continuation off this new higher base or do.

Upside or downside from the Redetermination that we think it's premature at this point.

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

Do you foresee a time frame.

Pick a year, maybe next year, where.

Certainly ladies and gentlemen, if you have a question at this time simply press star one on your telephone one moment for our first question.

Obviously, the exchange enrollment statistics were very encouraging.

Our revenues actually half the sag a bit to kind of normalize things.

Our revenues actually have to sag a bit to kind of normalize things.

I mean, we're anticipating it's off of the new base Jeff.

In terms of the growth.

Some of the individuals who may.

But it's certainly something where we will continue to be watching that graph, we shared with you compare in orders to shipments.

And our first question comes from the line of Jeffrey Sprague from vertical research. Your question. Please.

Transition off of Medicaid rules.

So you would expect that many of those would potentially reach out and try to obtain exchange coverage, but again, we haven't.

Hey, Thank you good morning, everyone.

But there does appear to be adequate backlog too.

Good morning, Jeff Good morning, Hey, just a couple of things first just on utility.

<unk>.

In order to continue to grow off that base level.

Factored anything significant into our guidance this year in terms of the commercial.

In order to continue to grow off that base level.

Is your remark about mid single digit.

And then just on electrical margins are are we beginning to see also some of the kind of restructuring and plant realignment coming to bear here in these margins or is it just really more kind of very favorable price cost dynamics.

Kind of a continuation off this new higher base or.

Contracting I would say is consistent with our previous messages on this.

Do you foresee a time frame.

We think we're very well positioned.

The year, maybe next year, where.

From a contracting perspective, we're essentially 95% contracted this year.

<unk> actually have the sag a bit to kind of normalize things.

I mean, we're anticipating it's off of the new base Jeff.

Yes, I would say I would say Jeff.

Yes, I would say I would say Jeff it is.

And.

Around 85% next year and even.

But it's certainly something where we will continue to be watching that graph, we shared with you compare in orders to shipments.

Its more the ladder and the foreign I E more of the price cost and productivity that I would call being driven by the normalizing.

More of the ladder and the foreign I E more of the price cost and productivity that I would call being driven by the normalizing.

In 2005.

<unk>.

A fair amount of our business is already contracted and that'll listen the terms.

But there does appear to be adequate backlog too.

Of operations inside the plants.

<unk> been clear, it's not like we've been getting CPI type of increases in every contract negotiations, but what we have seen.

In order to continue to grow off that base level.

I think that.

Some of the efficiency.

And then just on electrical margins are are we.

That we will get through.

Getting to see also some of the kind of restructuring and plant realignment coming to bear here in these margins or is it just really more kind of very favorable price cost dynamics.

Obviously the levels of inflation are top of mind, they always have been but certainly more pronounced now in the conversations obviously youre being held with the plans.

Integrating into a single segment is actually.

Still still in front of us.

And I'll leave the utility question and someone else Durbin.

And I'll leave the utility question and someone else Girvan.

And I would say some of our more recent negotiations.

Lighting.

Yes, I would say I would say, Jeff that it's more of the ladder.

This would seem like an ideal time.

It's a little bit better than what maybe we historically would have.

To execute an exit of lighting, while youre, just crushing it and utility.

And the foreign I E more of the price cost and productivity that I would call being driven by the normalizing of.

Negotiate it.

Okay. Thanks, a lot.

I just wonder your thoughts on that how important the businesses is there kind of a way to at least make it less important even even less so important and it's been recently.

I just wonder your thoughts on that how important the businesses is there kind of a way to at least make it less important even less so important and it's been recently.

Thank you next question is coming from Josh Raskin from Nephron Research. Your line is now live.

Operations inside the plants.

I think that.

Hi, Thanks, Good morning, just wanted to get back to USPI and that at 9% plus same store revenue growth number I was wondering if you give us some more color on maybe perhaps geographies and whether these were legacy centers or some of the newer ones that are ramping up and then did you give a number for the buy ups for the second FCB transaction, and then lastly, I hate to.

Some of the efficiency.

That will get through.

Yes.

A lot of thoughts in that one and let me just maybe difficult.

A lot of thoughts in that one and let me just maybe give a couple of comments on that first maybe you could just set that.

Integrating into a single segment is actually.

Comments on the first maybe just set the perspective on that business.

Still still in front of us.

Spec on that business.

And I'll leave the utility question that someone else girvan.

<unk> single digits.

Single digits.

Revenue.

Lighting.

Revenue.

This would seem like an ideal time.

I keep harping on this guidance, but the guidance for USPI, specifically sort.

Florida bar business so quite.

Small it operates at the lower end of our margins and margin expectation, it's been particularly challenged the last.

Small it operates at the lower end of our margins and margins expectation, it's been particularly challenged the last.

To execute an exit of lighting, while youre, just crushing it and utility.

Sort of implies a lower growth rate for EBITDA over the next three quarters than what you saw in the first quarter any any changes to seasonality anything to think about that or just sort of consistent with the overall message on guidance.

I just wonder your thoughts on that how important the businesses is there kind of a way to at least make it less important even even less so important and it's been recently.

Year plus.

When container rates, which this business depends heavily on.

Container rates, which this business depends heavily on.

Hey, Josh its Dan Let me, let me start now in terms of the guidance. So we obviously yesterday is off to a great start to the year.

Escalated at $3 45 ex the.

Escalated at 345 X.

Yes.

A lot of thoughts in that one and let me just maybe a couple of comments on that first maybe Joe just said.

The good news is.

Good news is.

While while volumes are down in the markets.

We increased the guidance 2000 $20 million.

Spec on that business.

For EBITDA.

Leon and resi are down the business is still recovering.

And Rajeev are down the business is still recovering.

Strong volumes, we also increased our volume.

<unk> single digits.

Quite well with.

<unk> assumptions from 2% to 3% to 3% to 4%.

Revenue.

Florida var business so quite.

Cost coming coming back in line, but.

Small it operates at the lower end of our margins and margin expectation, it's been particularly challenged the last.

All of that said, we take the responsibility to look at our portfolio.

All that said, we take the responsibility to look at our portfolio.

So we're obviously encouraged.

Again.

Mentioned too.

Another question.

Quite quite seriously and you saw that we executed the C&I lighting business I would say that in our portfolio was much more of a challenge than what our strategy was going forward.

But seriously you saw that we executed the C&I lighting business I would say that that's in our portfolio was much more of a challenge than what our strategy was going forward.

Nothing to read into this it's early in the year and we like what we're seeing and we will.

Year plus.

When container rates, which this business depends heavily on.

<unk> two.

Obviously reevaluate.

Escalated at 345 X.

Where things stand at the end of the second quarter and make any guidance changes if appropriate.

But we are active on this Jeff not just an example that you may give of resi lighting, but other product lines SKU.

Our active on this Jeff not just in the example that you may give of a resi lighting, but other product lines SKU.

Good news is.

While while volumes are down in the markets.

At that point in time the bid the USPI business continues to generate incredible margins.

Leon and resi are down the business is still recovering.

Action and as a matter of fact part of what drove the electrical margins slightly better. This quarter was a conscious decision to exit some low margin business switch that partially to higher so it had a net revenue hit by the net margin accretion so.

Action and as a matter of fact part of what drove the electrical margins slightly better this quarter was.

So we're <unk>.

Very pleased with the start to the year.

Quite well with.

Cost coming coming back in line, but.

A conscious decision to exit some low margin business switch that partially to higher so it had a net revenue hit by the net margin accretion so.

All of that said, we take the responsibility to look at our portfolio.

Thank you next question is coming from Ann Hynes from Mizuho Securities. Your line is now law.

Quite seriously and you saw that we executed the C&I lighting business I would say that in our portfolio was much more of a challenge than what our strategy what's going forward.

Hi, Thanks, I just want to talk about that no surprise billing act is that having any negative impact on surgery volume.

I don't ever.

Just kind of considerations off the table, we talked about some of the areas that it does that was helpful, particularly with our digital strategy.

USPI.

Yes, Sam.

But we are active on this Jeff not just been <unk>.

And then I have seen in check suggests that maybe in the future.

But this business is more valuable to somebody else.

<unk> that you may give of resi lighting, but other product lines SKU.

Sure Jeff.

King as much money. So they are gravitating more towards inpatient or outpatient departments that reimbursement is higher. So I guess this is having an impact and if so what do you think there is a drag on volumes.

We would certainly consider.

Our options.

Great. Thanks.

Much appreciated.

Thank you one moment for our next question.

Just a couple of comments there I'm not I'm not sure that.

And our next question comes from the line.

And our next question comes from the line of Steve Tusa.

<unk>.

Tusa from Jpmorgan your question please.

Im not sure I could credibly answer that question with data.

<unk> from Jpmorgan your question please.

Yes.

It's an interesting question and something that we'll look into.

Hi, guys good morning.

Hey, guys good morning.

I don't ever.

Good morning Stan.

Just kind of considerations off the table, we talked about some of the areas that it does help us, particularly with our digital strategy.

To see if we can identify any trends there.

Can you just maybe give us a lot.

Can you just maybe give us.

So an update on some of the absolute numbers embedded in the bridge for the year price cost and productivity are.

An update on some of the absolute numbers embedded in the bridge for the year price cost and productivity or anything else that on a quarter. Maybe just just this quarter just the absolutes.

But what I would say is that the pressures.

That we've talked about before in the staffing arena for.

But this business is more valuable to somebody else.

Anything else that on a quarter, maybe just just this quarter just absolutes.

I would certainly consider.

Hospital based store ASC based physicians in particular in anesthesia.

Our options.

Well, let's so let's start maybe with your first half, which was thinking about the bridge to the year.

Great. Thanks.

Much appreciated.

Certainly an area that is requiring a lot of work I mean.

Thank you one moment for our next question.

We had started.

We had started in January I think in that.

Your commentary about.

January I think in that.

The activity in revenue intensity for anesthesiologists in hospitals versus afcs.

And our next question comes from the line of Steve Tusa.

There would be about two points of wraparound price.

<unk> from Jpmorgan your question please.

Thats, obviously improved and as carbon said about half of.

It is certainly true.

Obviously improved and as carbon said about half of.

Hi, guys good morning.

But again remember our payer mix in the ASC is significantly better and that creates a draw to the ASC environment and in particular in <unk> the way, they're set up so while while theres some pressure there we're managing through it.

Good morning Stan.

Can you just maybe give.

Half of our new sales guide is price. So that's that's a step up from from a couple two.

Half of our.

So an update on some of the absolute numbers embedded in the bridge for the year price cost and productivity are.

New sales guide as price. So that's that's a step up from from a couple two more.

Anything else that on a quarter, maybe just just this quarter just the absolutes.

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