Q3 2023 Hubbell Inc Earnings Call

October 31, 2023

Operator: Thank you for standing by and welcome to the Hubble's third quarter 2023 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. To remove yourself from the question queue, you may press star one one again. I would now like to hand the call over to VP of Investor Relations Dan Innamorato. Please, go ahead.

At this time all participants are in a listen only mode.

After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again.

I would now like to hand, the call over to VP of Investor Relations Dan Inamorato. Please go ahead.

Dan Innamorato: Thanks, operator. Good morning, everyone and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the third quarter of 2023. The press release and slides are posted to the investors section of our website at hubble.com. I'm joined today by our Chairman President and CEO, Gerben Bakker and our executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to expected future results of our company and are forward looking statements, as defined by the private Securities Litigation Reform Act of 1995.

They include statements related to expected future results of our company and are forward looking statements as defined by the private Securities Litigation Reform Act of 1995.

Dan Innamorato: 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. Those measures are reconciled to the comparable GAAP measures are included in the press release and slides. Now let me turn the call over to Gerben. Thanks, Dan and good morning, everyone.

Gerben Bakker: Thanks, Dan, and good morning, everyone. Thank you for joining us to discuss Hubbell's third quarter results. Third quarter results demonstrate continued execution off of strong first half and multiyear performance. Price realization remains strong as prior actions to offset inflation continue to stick in the marketplace, supported by our leading position and service levels in attractive markets. Additionally, improved productivity and lower year-over-year raw material costs also contributed to another quarter of significant operating margin expansion. As anticipated, we accelerated our investments in capacity, productivity and innovation initiatives in the third quarter to drive long term returns for shareholders.

Thank you for joining us to discuss <unk> third quarter results.

Third quarter results demonstrate continued execution off a strong first half and multiyear performance.

Price realization remained strong as prior actions to offset inflation continued to stick in the marketplace.

Supported by our leading position and service levels and attractive markets.

Additionally, improved productivity and lower year over year raw material costs also contributed to another quarter of significant operating margin expansion.

Gerben Bakker: Additionally, improved productivity and lower year-over-year raw material costs also contributed to another quarter of significant operating margin expansion. As anticipated, we accelerated our investments in capacity, productivity and innovation initiatives in the third quarter to drive long term returns for shareholders.

As anticipated, we accelerated our investments in capacity productivity and innovation initiatives in the third quarter to drive long term returns for shareholders.

Gerben Bakker: We expect that grid modernization and electrification will continue to drive GDP plus growth in our markets over the next several years, and Hubbell is uniquely positioned to solve these critical infrastructure needs for our customers in front and behind the meter. These investments we are making in the second half of this year will effectively position the company to capitalize on these visible growth opportunities through best-in-class quality and service, as well as through the introduction of new products and solutions. More near term, we detailed last quarter how normalizing supply chain dynamics have enabled improved manufacturing lead times and allowed our channel partners to normalize their order patterns in response to more predictable product availability.

<unk> is uniquely positioned to solve these critical infrastructure needs for our customers in front and behind the meter.

These investments were making in the second half of this year, we're effectively positioned the company to capitalize on these visible growth opportunities through best in class quality and service as well, Australia introduction of new products and solutions.

More near term, we detailed last quarter normalizing supply chain dynamics have enabled improved manufacturing lead times and allowed our channel partners to normalize their order patterns and our response to more predictable product availability.

Gerben Bakker: More near term, we detailed last quarter how normalizing supply chain dynamics have enabled improved manufacturing lead times and allowed our channel partners to normalize their order patterns in response to more predictable product availability.

Gerben Bakker: This process continued into third quarter. Bill will walk you through more of the details in a few minutes. But overall, we continue to view this as a natural outcome of supply chain normalization. Broadly, our sell through to end markets remains healthy and our positions with our customers remain strong. We anticipate that we will be mostly through this normalization process as we exit 2023. Our visibility to continued strong operating performance gives us the confidence that we can navigate effectively through the fourth quarter to deliver at the upper half of our prior guidance range. As we look ahead to 2024, we believe we are well positioned to drive profitable growth off of a strong multiyear performance base, and I will share some more color around our early planning considerations for next year at the end of the prepared remarks.

Bill will walk you through more of the details in a few minutes, but overall, we continue to view this as a natural outcome of supply chain organization.

Broadly our sell through to end markets remains healthy and our positions with our customers remained strong.

We anticipate that we will be mostly through this normalization process as we exit 2023.

Gerben Bakker: Our visibility to continued strong operating performance gives us the confidence that we can navigate effectively through the fourth quarter to deliver at the upper half of our prior guidance range. As we look ahead to 2024, we believe we are well positioned to drive profitable growth off of a strong multiyear performance base, and I will share some more color around our early planning considerations for next year at the end of the prepared remarks.

Our visibility to continued strong operating performance gives us the confidence that we can navigate effectively through the fourth quarter to deliver at the upper half of our prior guidance range.

As we look ahead to 2024, we believe we are well positioned to drive profitable growth off of a strong multiyear performance base and I will share some more color around our early planning considerations for next year at the end of the prepared remarks.

Gerben Bakker: Before I turn the call over to Bill, Hubbell announced in a press release yesterday the acquisition of Systems Control for US$1.1 billion. And you'll note in today's presentation materials that we've also closed on a bolt-on acquisition of Balestro. Both of these acquisitions are high quality businesses with strong strategic fits that enhance our industry leading platform of utility components, communications and controls. Systems Control is a leading manufacturer of mission critical substation protection and control solutions. The business is complementary to our portfolio and enhances our leading value proposition to our core utility customer base. Substation automation is an attractive space within the utility market as control and relay solutions are critical to upgrading and protecting aged infrastructure, while also enabling the integration of renewables and the electrification of the grid.

And you'll note in today's presentation materials that we've also closed on a bolt on acquisition of burlesque stroke.

Both of these acquisitions are high quality businesses with strong strategic fits that enhance our industry, leading platform of utility components communications and controls.

Systems control is a leading manufacturer of mission critical substation protection and control solutions.

Gerben Bakker: The business is complementary to our portfolio and enhances our leading value proposition to our core utility customer base. Substation automation is an attractive space within the utility market as control and relay solutions are critical to upgrading and protecting aged infrastructure, while also enabling the integration of renewables and the electrification of the grid.

The business is complementary to our portfolio and enhances our leading value proposition to our core utility customer base.

Substation automation is an attractive space within the utility market as control and <unk> solutions are critical to upgrading and protecting aged infrastructure, while also enabling the integration of renewables and the electrification of the grid.

Gerben Bakker: Systems Control has a proven business model and a demonstrated track record of delivering value for customers and financial performance that will enhance Hubbell's long term growth and margin profile. Balestro is a leading manufacturer of high quality utility arresters and insulators that bolts on well to our existing portfolio. Importantly, this acquisition also provides us with additional manufacturing capacity that will enable incremental output in a constrained US T&D market. Bill will provide more color on both of these acquisitions in a few minutes, but we are very pleased to deploy capital to acquire attractive businesses like these that will drive strong returns and strong long-term value for our customers and shareholders. With that, let me turn it over to Bill to walk you through the details of the quarter.

So <unk> is a leading manufacturer of high quality utility of restaurants, and insulators that bolt on well to our existing portfolio.

Importantly, this acquisition also provides us with additional manufacturing capacity that will enable incremental output in a constrained USD <unk> market.

Gerben Bakker: Bill will provide more color on both of these acquisitions in a few minutes, but we are very pleased to deploy capital to acquire attractive businesses like these that will drive strong returns and strong long-term value for our customers and shareholders. With that, let me turn it over to Bill to walk you through the details of the quarter.

Bill will provide more color on both of these acquisitions in a few minutes, but we are very pleased to deploy capital to acquire attractive businesses. Like these that will drive strong returns and strong long term value for our customers and shareholders.

With that let me turn it over to Bill to walk you through the details of the quarter.

William R. Sperry: Thank you very much driven. Everybody I appreciate you taking time to join us. This morning, I'm going to start my comments on page four of the materials that I Hope you found on the website and you will see here highlighted straw. Strong results for the third quarter with. With our performance broadly consistent with the themes and trends we've been discussing throughout the year, if I were to try to summarize that neatly. In a sentence I would say we have been enjoying. Broad based market strength. In our key end markets. Which has helped support. Strong margin expansion. Primarily driven by execution on the price cost front. And doing that while absorbing the. The channel managing inventories down in response to the supply chain improving from pandemic Jackson, you'll hear us talk about I think a lot of those teams.

William R. Sperry: Thanks very much, Gerben. Good morning, everybody. I appreciate you taking time to join us this morning. I'm going to start my comments on Page 4 of the materials that I hope you found on the website. And you'll see here highlighted strong results for the third quarter with our performance broadly consistent with the themes and trends we've been discussing throughout the year. If I were to try to summarize that neatly in a sentence, I would say we've been enjoying broad based market strength in our key end markets, which has helped support strong margin expansion, primarily driven by execution on the price cost front and doing that while absorbing the channel, managing inventories down in response to the supply chain improving from pandemic depths.

Everybody I appreciate you taking time to join us.

This morning, I'm going to start my comments on page four of the materials that I Hope you found on the website and you will see here highlighted straw.

Strong results for the third quarter with.

With our performance broadly consistent with the themes and trends we've been discussing throughout the year, if I were to try to summarize that neatly.

In a sentence I would say we have been enjoying.

William R. Sperry: If I were to try to summarize that neatly in a sentence, I would say we've been enjoying broad based market strength in our key end markets, which has helped support strong margin expansion, primarily driven by execution on the price cost front and doing that while absorbing the channel, managing inventories down in response to the supply chain improving from pandemic depths.

Broad based market strength.

In our key end markets.

Which has helped support.

Strong margin expansion.

Primarily driven by execution on the price cost front.

And doing that while absorbing the.

The channel managing inventories down in response to the supply chain improving from pandemic Jackson, you'll hear us talk about I think a lot of those teams.

William R. Sperry: And you'll hear us talk about, I think, a lot of those themes throughout the day, as we discuss our performance with you. So, you see sales of about US$1.4 billion, a 5% increase, 4% organic, 1% from acquisition. And again, that's basically in line with how we've been guiding you. The OP margins at 21.4% plus 440 basis points for last year, marking the third quarter in 2023 where we've had margins above 20%, again, very strong execution particularly on the price lever there. And I'd say that we - it gave us the extra margin to help invest that we think will really help us both grow in future years, as well as be more efficient. So, I think as we think about earnings and profit essentially in line with our expectations, a little bit stronger on margin, maybe a little bit lighter on sales growth.

Throughout throughout today as we discuss our performance for Q2.

So you see.

Sales of about $1 4, billion% to 5% increase 4% organic one from acquisition.

And again that.

That's basically in line with how we have been.

How we've been guiding you.

The.

<unk> margins at 21, 4% plus 440 basis points to last year, marking the third quarter in 2023, where we have had margins above 20%.

Very strong execution on particularly on the price lever there.

William R. Sperry: And I'd say that we - it gave us the extra margin to help invest that we think will really help us both grow in future years, as well as be more efficient. So, I think as we think about earnings and profit essentially in line with our expectations, a little bit stronger on margin, maybe a little bit lighter on sales growth.

Yes.

And I would say that.

We gave us the.

The extra margin to help invest that.

We think will really help us both grow in future years as well as b.

For more efficient so I think as we think about earnings and profit.

Essentially in line with our expectations.

A little bit stronger on margin, maybe a little bit lighter on sales growth.

William R. Sperry: So, maybe getting there a little bit differently, but certainly in line with our expectations. You see, US$3.95 of earnings, 28% year-over-year increase, obviously, the strong operating performance driving those results. And free cash flow of US$159 million higher income in the quarter but also higher CapEx, higher investment in trade working capital. And we are confident in the year getting to US$700 million, so, fourth quarter is a very seasonally strong, as it typically is. So, I think the way we were thinking about cash flow in Gerben's comments, he talked about multiyear trends. So, we're talking about cash flow from '21 to '22 to '23, going from US$425 million to US$500 million to US$700 million. And we're excited about the high quality earnings giving us that cash flow, because it allows us to lean into investing and making our great company even better in the future.

98% year over year increase.

Obviously, the strong operating performance driving those results and free cash flow of $159 million.

Higher higher income in the quarter, but also higher capex higher investment in trade working capital.

And we.

We are confident in the year getting to $700 million.

Fourth quarter is.

William R. Sperry: So, I think the way we were thinking about cash flow in Gerben's comments, he talked about multiyear trends. So, we're talking about cash flow from '21 to '22 to '23, going from US$425 million to US$500 million to US$700 million. And we're excited about the high quality earnings giving us that cash flow, because it allows us to lean into investing and making our great company even better in the future.

It's a very seasonally strong.

As it typically is.

So I think the way, we're thinking about cash flow in <unk> comments, he talked about multiyear trends.

So we're talking about cash flow from 'twenty, one 'twenty two 'twenty three going from 425 million to $500 million to $700 million.

And we are excited about.

Our high quality earnings, giving us that cash flow because it allows us to lean into investing and making our great company even better.

Even better in the future.

William R. Sperry: Let's go to Page 5 and we'll see performance graphically a rate against prior year here. And I'm going to start in the upper left on sales, you see 5% increase to just under US$1.4 billion. We had talked about organic being 4%, acquisitions being 1%. The acquisitions, PCX, our data center acquisition as now we've kind of lapped out of that. So, the incremental is coming from both EIG and Ripley, which were component manufacturers in the utility space, so, helping drive utility growth there mostly. On the organic 4%, price was 6% and units were down 2%. As we think about the units, there was two soft end markets that we're managing through. One is the resi side, where we've had double digit declines, I think interest rates having a big effect there.

And we will.

C performance graphically arrayed against prior year here and I'm going to start in the.

Upper left on sales you see 5% increase.

To just under $1 billion for.

We had talked about organic being 4% acquisitions being one.

The acquisitions.

<unk> our data center acquisition is as now we've kind of lapped out of that so the incrementals coming from both.

William R. Sperry: So, the incremental is coming from both EIG and Ripley, which were component manufacturers in the utility space, so, helping drive utility growth there mostly. On the organic 4%, price was 6% and units were down 2%. As we think about the units, there was two soft end markets that we're managing through. One is the resi side, where we've had double digit declines, I think interest rates having a big effect there.

Post AIG in Ripley mature.

Ponant.

Manufacturers in the utility space, so helping drive utility growth there, mostly on the organic 4%.

Rice was six and units were down too.

We think about the units.

There was.

Two soft end markets that we are managing through.

One is the resi side, where we've had double digit declines.

I think interest rates have and are having a big effect there.

There. And second is on the telecom side, and we can talk a little bit more. About that where we still have pretty strong medium term outlook expectations for telecom. The balance. Where we see units being driven down we believe is coming from channel actions to manage their inventories in a very natural response to. This kind of a multiyear cycle of having our lead times gap out or an endemic problems, where we had both material and labor shortages, we forced our customers therefore to over order and now they're managing that inventory back down to target in normal levels. Meaning they are selling through to our end market at a higher rate. They're buying from us. As Kevin said, we're starting to see that. Come to an end on the electrical side around now and we're expecting. The power. To be done by year end. So I think 24 should start to look like a much more normal order pattern year for us.

William R. Sperry: And second is on the telecom side, and we can talk a little bit more about that where we still have very strong medium-term outlook expectations for telecom. But to balance where we see units being driven down, we believe is coming from channel actions to manage their inventories in a very natural response to this kind of multiyear cycle of having our lead times gap out during pandemic problems where we had both material and labor shortages. We forced our customers, therefore, to over-order and now they're managing that inventory back down to target at normal levels, meaning they're selling through to our end market at a higher rate than they're buying from us. And as Gerben said, we're starting to see that come to an end on the electrical side around now and we're expecting the power side to be done by year end.

And second is on the telecom side, and we can talk a little bit more.

About that where we still have pretty strong medium term outlook expectations for telecom.

The balance.

Where we see units being driven down we believe is coming from channel actions to manage their inventories in a very natural response to.

This kind of a multiyear cycle of having our lead times gap out or an endemic problems, where we had both material and labor shortages, we forced our customers therefore to over order and now they're managing that inventory back down to target in normal levels.

William R. Sperry: We forced our customers, therefore, to over-order and now they're managing that inventory back down to target at normal levels, meaning they're selling through to our end market at a higher rate than they're buying from us. And as Gerben said, we're starting to see that come to an end on the electrical side around now and we're expecting the power side to be done by year end.

Meaning they are selling through to our end market at a higher rate.

They're buying from us.

As Kevin said, we're starting to see that.

Come to an end on the electrical side around now and we're expecting.

The power.

To be done by year end. So I think 24 should start to look like a much more normal order pattern year for us.

William R. Sperry: So I think 24 should start to look like a much more normal order pattern year for us. With healthy markets. On the upper right you see operating profit $295 million for the quarter. 21, 4% margin. 31% increase in dollars. And a very healthy increase in basis points of margin expansion. Interestingly as we look at trajectory. And we see sequentially those margins are down versus the. The second quarter. Thats, primarily due to investments that were making essentially on the growth side. Where we're pushing hard on new product development innovation, and also making some capacity expansions as well as on the efficiency side, where we're focusing on sourcing I think we've shared with you in the past. Hi charts of our cost structure and a lot of our costs. In the materials side, so our sourcing actually has to be very efficient and as well as supply chain efficiency. So we're happy to have the margin to make these investments because we think theyre going to make us more profitable.

William R. Sperry: So, I think '24 should start to look like a much more normal order pattern year for us with healthy markets. On the upper right, you see operating profit US$295 million for the quarter, 21.4% OP margin, 31% increase in dollars and a very healthy increase in basis points of margin expansion. Interestingly, as we look at trajectory and we see sequentially those margins are down versus the second quarter, that's primarily due to investments that we're making, essentially on the growth side, where we're pushing hard on new product development, innovation and also making some capacity expansions, as well as on the efficiency side, where we're focusing on sourcing. I think we've shared with you in the past pie charts of our cost structure and a lot of our cost in the material side.

With healthy markets.

On the upper right you see operating profit $295 million for the quarter.

21, 4% margin.

31% increase in dollars.

And a very healthy increase in basis points of margin expansion.

Interestingly as we look at trajectory.

And we see sequentially those margins are down versus the.

The second quarter.

Thats, primarily due to investments that were making essentially on the growth side.

Where we're pushing hard on new product development innovation, and also making some capacity expansions as well as on the efficiency side, where we're focusing on sourcing I think we've shared with you in the past.

Hi charts of our cost structure and a lot of our costs.

William R. Sperry: So, our sourcing actually has to be very efficient and, as well as supply chain efficiency. So, we're happy to have the margin to make these investments, because we think they're going to make us more profitable in the future as we go forward. And earnings per share on the lower left, you see a US$0.28 increase to US$3.95, basically in line with OP growth. We had some tax headwinds that were largely offset by interest income. So, one of the interesting impacts of higher interest rates where we have significant cash balances, we've been earning about 5% on that cash and even better, more towards 5.5% in the U.S. So help offset that tax headwind to keep keep earnings growth in line. And then you see the free cash flow down 18% to prior year. We obviously had more income but we have higher CapEx, higher working capital investment in inventory.

In the materials side, so our sourcing actually has to be very efficient and as well as supply chain efficiency. So we're happy to have the margin to make these investments because we think theyre going to make us more profitable.

The future as we go forward.

And earnings per share in the lower left you see a 28% increase to $3.

And 95.

<unk>.

The basically in line with AUM growth, we had some tax headwinds were largely offset by interest income so.

William R. Sperry: So, one of the interesting impacts of higher interest rates where we have significant cash balances, we've been earning about 5% on that cash and even better, more towards 5.5% in the U.S. So help offset that tax headwind to keep keep earnings growth in line. And then you see the free cash flow down 18% to prior year. We obviously had more income but we have higher CapEx, higher working capital investment in inventory.

One of the interesting impacts of higher interest rates.

Where we have <unk>.

Significant cash balances, we've been earning about 5%.

On the cash even better more towards five and a half in the U S.

Helped offset that tax had when they keep keep earnings growth in line and then you see the free cash flow.

Down 18% to prior year.

We obviously had more income.

But we have higher capex.

Our working capital investment in inventory.

William R. Sperry: But one big driver was the timing of receipts, which flooded in, in early October. And so, October has proved to be a very cash rich month, we think going to drive a very cash rich fourth quarter, which will get us over US$700 million of cash flow for the year. So again, that three year walking cash really supporting us being able to be in a net investment position. So, now I want to unpack the results between our two segments. And on Page 6, I wanted to start with the Utility segment. So, another strong quarter for our utility franchise, you see 8% growth in sales and nearly 40% growth in OP dollars with 5 points of operating profit margin expansion. So, strong performance by the franchise here. We'll focus on sales first, up 8% to US$838 million.

Which flooded in early October.

And so October has proved to be very cash rich months, we think going to drive a very cash rich.

Fourth quarter, which will get us.

Over $700 million of cash flow for the year. So again that three year walking cash really supporting us being able to be in the net investment position.

So now I want to unpack the results.

William R. Sperry: So, now I want to unpack the results between our two segments. And on Page 6, I wanted to start with the Utility segment. So, another strong quarter for our utility franchise, you see 8% growth in sales and nearly 40% growth in OP dollars with 5 points of operating profit margin expansion. So, strong performance by the franchise here. We'll focus on sales first, up 8% to US$838 million.

Tween, our two segments and on page six I wanted to start with utility segments.

So.

Another strong quarter for our utility franchise.

You see 8% growth in sales and nearly 40% growth.

<unk>.

With five points of operating profit margin expansion so.

Strong strong performance by the franchise here.

We will focus on sales first up.

Up 8% to $838 million.

William R. Sperry: 7 points of that is organic, 1 being via acquisition. The organic is essentially all price, so units effectively flat. And interesting, we're starting to really see - we report to you in these two different business units between the components for transmission and distribution versus the comms and controls business unit. And we're starting to see the portfolio effect here where for the past couple of years, the T&D components business has been outgrowing communications and controls. Last quarter, the growth was quite balanced. In this quarter, you see comps and controls outgrowing components. I think both effects being driven effectively by supply chain disruption becoming more normalized, and let's talk through that for a minute. So, on the T&D side, we'll talk about three components: first, transmission; second, distribution; and third, telecom.

<unk> is essentially all price.

So units.

Effectively flat.

<unk>.

And interesting we're starting to really see we report to you in these two different business units between the components for transmission and distribution versus the comms and controls business unit and we're starting to see the portfolio effect here where.

For the past couple of years.

T&D components business has been outgrowing communications and controls last quarter. The growth was quite balanced and this quarter, you see comms and controls outgrowing components.

William R. Sperry: Last quarter, the growth was quite balanced. In this quarter, you see comps and controls outgrowing components. I think both effects being driven effectively by supply chain disruption becoming more normalized, and let's talk through that for a minute. So, on the T&D side, we'll talk about three components: first, transmission; second, distribution; and third, telecom.

I think both both effects being driven effectively by supply chain disruption.

Coming more normalized.

Let's talk through that for a minute so.

<unk>.

On the T&D side.

We will talk about three components first transmission second distribution and third telecom.

William R. Sperry: The transmission part of the business continues to be very strong, demand strong, shipment growth strong, backlog strong, pricing strong. On the distribution side, there are elements that continue to be quite strong on backlog and growth. In particular, there's places where there's some part shortages and in particular, some of these MOV blocks, which we'll talk about a little bit later that are causing some of the insulator arrester units to have just be growth constrained essentially. But where the book-and-bill parts of distribution have come back and lead times have come way back, we're seeing again our channel managed the inventory down in some of those parts and the distribution portion bigger than transmission. Telecom is clearly weakening temporarily here.

<unk> to be very strong.

Demand strong shipment growth strong backlog strong pricing strong.

On the distribution side there are elements.

That continued to be quite strong on backlog and growth.

In particular, Theres places where.

There is some part shortages and in particular some of these MOV blocks, which we'll talk about a little bit later.

That are causing some of the.

Insulator arrester.

Units too.

<unk>.

Just peak growth constrained essentially.

William R. Sperry: But where the book-and-bill parts of distribution have come back and lead times have come way back, we're seeing again our channel managed the inventory down in some of those parts and the distribution portion bigger than transmission. Telecom is clearly weakening temporarily here.

But where the book and Bill parts of distribution have have come back and lead times have come way back.

Seeing again.

Our channel manage the inventory down and some of those parts and the distribution portion bigger transmission.

Telecom.

Is clearly weakening temporarily here.

William R. Sperry: We make primarily enclosures little bit connectors and hardware as well. But we. We make plastic fiberglass and Palmer Concreting closures. If you are crossing the street. And you look down as Youre, pushing the crosswalk button. Youll often see on those corners. And our brand would say quasi you might see the brand name. The telco. And those are those are boxes that contain the electronics. Keep them keep them safe and dry and accessible for maintenance and. Telecom has become an important customer. Of the enclosures business and we see very clear weakening there by the telcos. <unk>. <unk>. Think there is a mix of high interest rates, but we are seeing. The timing of their projects being affected by stimulus dollars were. If they wait to startup projects into next year, they will receive some stimulus and have someone else pay for it. So we're seeing that have pretty significant demand on the timing of projects. The medium term outlook for that spending is still very robust. So we still consider it a growth vertical.

William R. Sperry: We make primarily in closures, a little bit of connectors and hardware as well, but we make plastic, fiberglass and palmer concreting enclosures. If you're crossing the street and you look down as you're pushing the crosswalk button, you'll often see on those corners a lid and our brand would say, Quazite, you might see the brand name of the telco. And those are boxes that contain the electronics, keep them safe and dry and accessible for maintenance. And Telecom had become an important customer of that - of the Enclosures business and we see very clear weakening there by the telcos. I think there's a mix of high interest rates but we're seeing the timing of their projects being affected by stimulus dollars where if they wait to start a project into next year, they'll receive some stimulus and have someone else pay for it.

But we.

We make plastic fiberglass and Palmer Concreting closures.

If you are crossing the street.

And you look down as Youre, pushing the crosswalk button.

Youll often see on those corners.

And our brand would say quasi you might see the brand name.

The telco.

And those are those are boxes that contain the electronics.

Keep them keep them safe and dry and accessible for maintenance and.

William R. Sperry: And Telecom had become an important customer of that - of the Enclosures business and we see very clear weakening there by the telcos. I think there's a mix of high interest rates but we're seeing the timing of their projects being affected by stimulus dollars where if they wait to start a project into next year, they'll receive some stimulus and have someone else pay for it.

Telecom has become an important customer.

Of the enclosures business and we see very clear weakening there by the telcos.

<unk>.

Think there is a mix of high interest rates, but we are seeing.

The timing of their projects being affected by stimulus dollars were.

If they wait to startup projects into next year, they will receive some stimulus and have someone else pay for it. So we're seeing that have pretty significant demand on the timing of projects. The medium term outlook for that spending is still very robust. So we still consider it a growth vertical.

William R. Sperry: So, we're seeing that have pretty significant demand on the timing of projects. The medium term outlook for that spending is still very robust. So, we still consider a growth vertical but having this stimulus impacted, I think, weakness. So, that's up in T&D. On the comp side, similarly affected differently by the supply chain disruption, basically have been prevented from finalizing chips and AMI going into meters and so, business has been constrained. We've seen the chip supply loosen up here in the third quarter and a nice nearly 30% growth at attractive margins. And so, we see some momentum now coming on the comp side. So, basically, the portfolio, the pieces and cylinders of our portfolio are firing at different times here, but the net result is a very strong performance, especially as you look over on the operating profit side on the right side of the page, nearly 40% growth to US$200 million of profit at 24% margins.

But having this.

Stimulus impacted I think weakness.

So thats in T&D.

On the comp side.

<unk>.

Affected differently by the supply chain disruption basically have been prevented from finalizing chips.

Am I going into meters.

William R. Sperry: We've seen the chip supply loosen up here in the third quarter and a nice nearly 30% growth at attractive margins. And so, we see some momentum now coming on the comp side. So, basically, the portfolio, the pieces and cylinders of our portfolio are firing at different times here, but the net result is a very strong performance, especially as you look over on the operating profit side on the right side of the page, nearly 40% growth to US$200 million of profit at 24% margins.

And so business has been constrained.

We've seen that chip supply and loosen up here in the third quarter.

Nice nearly 30% growth.

At attractive margins.

And so.

We see some momentum now coming.

Coming on the comm side so.

Basically the portfolio of the pieces in cylinders of our portfolio are firing at different times here, but the net result.

Very strong performance, especially as you look over on the operating profit side on the right side of the page.

Nearly 40% growth $200 million of profit at 24% margins.

William R. Sperry: Price costs, still a quite a positive dynamic. We feel good about that, that the price continues to stick. The cost has all of '22, was inflationary from a materials perspective and '23 actually turned to become a tailwind. So, providing an awful lot of lift to that margin story and some momentum into our fourth quarter that gives us confidence, as Gerben mentioned, to raise our guidance for the fourth quarter. So, again, utility franchise performing really nicely, great financial performance. And we'll go to Page 7 to talk about the Electrical segment. And for them, quite strong execution on the operating profit line by Electrical Solution segments. You see the 17% growth and the attractive margin expansion there. All accomplished with a 1% decline in sales to US$538 million, a 1% decline is comprised of price being up low single digits and the volume being down mid single digits.

Still a quite a positive dynamic we feel good about that price continues to stick.

The cost.

Has all of 'twenty two was inflationary from a materials perspective in 'twenty three actually turned to become <unk>.

<unk> tailwind, so providing an awful lot of lift to that margin story and some momentum into our fourth quarter that gives us confidence is durbin mentioned two to raise our guidance for the fourth quarter.

So.

Again utility franchise performing really nicely.

Great Great financial performance.

And we will go to page seven to talk about the electrical segment.

William R. Sperry: And we'll go to Page 7 to talk about the Electrical segment. And for them, quite strong execution on the operating profit line by Electrical Solution segments. You see the 17% growth and the attractive margin expansion there. All accomplished with a 1% decline in sales to US$538 million, a 1% decline is comprised of price being up low single digits and the volume being down mid single digits.

And for them quite strong execution on the operating profit line by electrical solutions segments, you see the <unk>.

17% growth and.

The attractive margin expansion there.

All accomplished with a 1% decline in sales.

To $538 million at 1% decline is comprised of price being up low single digits and the volume being down.

Single digits.

William R. Sperry: And so, we're sort of talking about the different end market pieces there. And before breaking it down, I think important to note that the volume is up sequentially and we think that's a very good sign. You've heard me talk about the channel managing. The inventory is down that's most notable in our nonres exposure area. And with that volume up sequentially and as we see the order patterns emerging, we believe the fourth quarter will see the segment be able to grow. And we'd be able to discuss the end of the channel inventory management phase, which would be quite welcome. On the resi side, it's been soft, down double digits. The industrial is the brighter part. We see growth and healthy shipments. The reshoring tailwind, we think is real. And in particular, our verticals are doing very nicely between data centers and renewables.

And.

So were sort of talking about the different end market pieces there.

Breaking it down I think important to note.

That volume is up sequentially.

And we think Thats a very good sign you've heard me talk about.

The channel managing the inventories down that's most notable in our non res exposure area.

And with that volume up sequentially.

And as we see the order patterns emerging we believe the fourth quarter.

You'll see the segment be able to grow we'd be able to disc.

Discuss the end.

William R. Sperry: And we'd be able to discuss the end of the channel inventory management phase, which would be quite welcome. On the resi side, it's been soft, down double digits. The industrial is the brighter part. We see growth and healthy shipments. The reshoring tailwind, we think is real. And in particular, our verticals are doing very nicely between data centers and renewables.

Channel inventory management fees, which would be quite welcome on the resi side, it's been soft down double digits.

The industrial is the brighter part.

We see growth and healthy.

Shipments.

The re shoring tailwind, we think is real and in particular, our verticals are doing very nicely between.

Data centers and renewables.

William R. Sperry: And so, when we look to the right side of the page, we see the margin expansion. We see the growth of OP dollars while absorbing some of the volume impacts of the channel inventory management phase and soft resi. It's actually we think quite a successful story. But Gerben, in his opening comments mentioned a couple of portfolio moves and on Page 8, I want to walk you through a little bit more detail than he gave you in his remarks. This is really the outcome of our business development process, which is very intentional and focused on finding us high growth, high margin profile businesses that we can acquire and make more valuable on our platform than they are as stand-alone companies. And we believe we have two really good instances that that I'll talk you through and really good to see the cash flow performance of the enterprise, really enable us to comfortably do, not only two acquisitions, but one being in the US$1 billion kind of size range.

We see the growth of oki dollars while absorbing.

Some of the volume impacts of the channel inventory management fees and soft Ramsey.

It's actually we've seen quite a successful quite a successful story.

Okay.

So Gordon in his opening comments.

<unk> mentioned.

Couple of portfolio moves and on page eight I want to walk you through.

A little bit.

A little bit more detail than that he gave you in his remarks.

William R. Sperry: This is really the outcome of our business development process, which is very intentional and focused on finding us high growth, high margin profile businesses that we can acquire and make more valuable on our platform than they are as stand-alone companies. And we believe we have two really good instances that that I'll talk you through and really good to see the cash flow performance of the enterprise, really enable us to comfortably do, not only two acquisitions, but one being in the US$1 billion kind of size range.

This is really the outcome of our business development process, which is.

It is very intentional and focused on finding us high growth high margin profile businesses.

That we can acquire and make more valuable on our platform.

Then they are as Standalone companies.

We believe we have two really good instant.

Instances of that.

Talk you through and.

Really good for to see the cash flow performance of the enterprise.

Really enable.

Weighted less to comfortably do.

Not only to acquisitions, but one being in the $1 billion kind of size range. So.

William R. Sperry: So, that's good. I'm going to start at the bottom of the page with Balestro. See Balestro, an US$85 million deal with US$40 million of sales that I think looks very typical to you all. I would call it a very typical Hubbell tuck-in. We've been in contact with them on for many years. It's exciting to get this to fruition. Balestro has a very attractive local business in Latin America, making insulated arrester products. But the real attraction for us is what you see on the left of the picture, those little hockey pucks are MOV blocks. They help take insulator arrester products, which you see kind of in the spine there and prevents the conduction of electricity, which then allows our products to really protect other expensive equipment from the high voltage surges and other damaging effects.

<unk> and $85 million deal with $40 million of sales.

I think looks very typical to you all I would call. It a very typical hubbell tuck in.

<unk>.

It's we've been in contact with them for many years, so exciting to get this to fruition.

The lessor has very attractive.

Local business in Latin America.

Making.

Insulator arrester products, but.

The real attraction for US is what you see on the left of the picture.

William R. Sperry: But the real attraction for us is what you see on the left of the picture, those little hockey pucks are MOV blocks. They help take insulator arrester products, which you see kind of in the spine there and prevents the conduction of electricity, which then allows our products to really protect other expensive equipment from the high voltage surges and other damaging effects.

Little hockey Pucks are MOV blocks.

Take.

Insulator restroom products, which you see kind of in the spine there.

And prevents the conduction of electricity, which then allows our products to really.

<unk>.

Other expense of equipment from high voltage surges and other damaging effects so far.

William R. Sperry: So, effectively, our insulator arrester business in the U.S has been constrained by lack of availability of these MOV blocks. And so, it's an exciting deal for us to size of local business to really help us now get that supply chain vertically integrated, make more capacity available so we can actually grow and grab share in those businesses, which are high margin businesses. So, very strategic acquisition for us even though of typical tuck-in sort of size. Systems control being a larger size than typical for us. On this page, I may talk about the footprint of systems control and next page, I'll maybe switch to a little bit more what it does. But you see US$1.1 billion of acquisition size with US$400 million of sales, that's all in backlog essentially.

So.

It's <unk>.

Its an exciting deal for us besides local business to really help us now get that supply chain vertically integrated.

Make more.

Capacity available so we can actually grow and grab share in those businesses, which are.

High margin businesses, so very strategic strategic acquisition for us, even though typical tuck in sort of size.

William R. Sperry: So, very strategic acquisition for us even though of typical tuck-in sort of size. Systems control being a larger size than typical for us. On this page, I may talk about the footprint of systems control and next page, I'll maybe switch to a little bit more what it does. But you see US$1.1 billion of acquisition size with US$400 million of sales, that's all in backlog essentially.

And our systems control being a larger size than typical for us.

On this page I may talk about the footprint of systems control and.

Next page I'll, maybe switch to a little bit more what it does but you see a 1 billion one of acquisition size with $400 million of sales.

That's all in backlog essentially so it's.

William R. Sperry: It's kind of pre wired for that for next year. We are anticipating. Closing, we've just signed it. We are anticipating closing a pie. By year end. Normal closing conditions get satisfied. We will be anticipating. Source of funds for the acquisition coming from cash and debt. As a result of the acquisition we are anticipating. Our debt to EBITDA being around one seven times on a gross basis net basis about one five. So interesting to see how the balance sheet has grown in the cash flow has grown. To allow a $1 billion deal to be very affordable by leverage means. We are anticipating attractive accretion. From the acquisition. It may be worth, noting I think a couple of you put out some notes. And we're emphasizing synergies. And I would not describe systems control as a synergy oriented deal at least on the cost side, there certainly will be cost synergies. As always in the first year integration costs as well so the net of that doesn't tend to be a big impact.

William R. Sperry: So, it's kind of prewired for that for next year. We are anticipating closing. We've just signed it. We're anticipating closing by year end, as normal closing conditions get satisfied. We will be anticipating source of funds for the acquisition coming from cash and debt. As a result of the acquisition, we're anticipating our debt to EBITDA being around 1.7 times on a gross basis and net basis about 1.5. So, interesting to see how the balance sheet has grown and the cash flow has grown to allow US$1 billion deal to be very affordable by leverage means. We're anticipating attractive accretion from the acquisition, it may be worth noting, I think a couple of you put out some notes that were emphasizing synergies. And I would not describe systems control as a synergy oriented deal, at least on the cost side, there certainly will be cost synergies, but there's always in the first year integration costs as well.

We are anticipating.

Closing, we've just signed it.

We are anticipating closing a pie.

By year end.

Normal closing conditions get satisfied.

We will be anticipating.

Source of funds for the acquisition coming from cash and debt.

As a result of the acquisition we are anticipating.

Our debt to EBITDA being around one seven times on a gross basis net basis about one five.

So interesting to see how the balance sheet has grown in the cash flow has grown.

To allow a $1 billion deal to be very affordable by leverage means.

William R. Sperry: We're anticipating attractive accretion from the acquisition, it may be worth noting, I think a couple of you put out some notes that were emphasizing synergies. And I would not describe systems control as a synergy oriented deal, at least on the cost side, there certainly will be cost synergies, but there's always in the first year integration costs as well.

We are anticipating attractive accretion.

From the acquisition.

It may be worth, noting I think a couple of you put out some notes.

And we're emphasizing synergies.

And I would not describe systems control as a synergy oriented deal at least on the cost side, there certainly will be cost synergies.

As always in the first year integration costs as well so the net of that doesn't tend to be a big impact.

William R. Sperry: so the net of that doesn't tend to be a big impact. But the real synergy for US is with our sales force and our client base really being able to grow that business. Very effectively. And as well I think the second item on interest expense. Mentioned, our cash we've been earning about five points and borrowing. We'll probably be in the sixes. But that's all subject to market conditions at time of close so what kind of reserve. To get that organized for when we give you guidance, we'll give you more specifics on all of that and maybe on page nine I can do a better job of explaining exactly what systems control is and what it does. So you see on the bottom of the page. When you have generation, you've got a step up the voltage. Two transmitted on one of those 90 foot steel towers and when it gets to the last mile. It gets stepped down and voltage and then distributed to the user.

William R. Sperry: So, the net of that doesn't tend to be a big impact, but the real synergy for us is with our sales force and our client base really being able to grow the business very effectively. And as well, I think the second item on interest expense, we mentioned our cash. We've been earning about 5 points and borrowing will probably be in the 6s, but that's all subject to market conditions at the time of close. So, we'll kind of reserve the time to get that organized for when we give you guidance, we'll give you more specifics on all of that. And maybe on Page 9, I can do a better job of explaining exactly what systems control is and what it does. So, you see on the bottom of the page, when you have generation, you got to step up the voltage to transmit it on one of those 90-foot steel towers.

But the real synergy for US is with our sales force and our client base really being able to grow that business.

Very effectively.

And as well I think the second item on interest expense.

Mentioned, our cash we've been earning about five points and borrowing.

We'll probably be in the sixes.

But that's all subject to market conditions at time of close so what kind of reserve.

William R. Sperry: So, we'll kind of reserve the time to get that organized for when we give you guidance, we'll give you more specifics on all of that. And maybe on Page 9, I can do a better job of explaining exactly what systems control is and what it does. So, you see on the bottom of the page, when you have generation, you got to step up the voltage to transmit it on one of those 90-foot steel towers.

To get that organized for when we give you guidance, we'll give you more specifics on all of that and maybe on page nine I can do a better job of explaining exactly what systems control is and what it does.

So you see on the bottom of the page.

When you have generation, you've got a step up the voltage.

Two transmitted on one of those 90 foot steel towers and when it gets to the last mile. It gets stepped down and voltage and then distributed to the user.

William R. Sperry: And when it gets to the last mile, it gets stepped down in voltage and then distributed to the user. And each of these substations around it's fun if you drive on the highway, you'll now start to look, I hope and see these white buildings inside of the substation, which contain these control and relay panels, which monitor and control the flow of electricity and prevent damage to any of the really expensive equipment around it. And so, this business kind of fits very nicely with Hubbell, in many ways. It's all the same customers. In fact, you're getting relationship oriented customers who like this product done on a turnkey basis, which is good for us. If you look around that substation on the upper left, we're already selling insulators, arresters, switches, bushings, hardware, connectors and the like, sprinkled around.

Each of these.

Substations around.

And it's fun when you drive on the highway you'll you'll now start to look I hope.

Cds White buildings.

Inside of the substation, which contain these control and really panels.

Which.

Monitor and.

Control the flow of electricity.

And prevent damage to any of the really expensive equipment around it.

William R. Sperry: And so, this business kind of fits very nicely with Hubbell, in many ways. It's all the same customers. In fact, you're getting relationship oriented customers who like this product done on a turnkey basis, which is good for us. If you look around that substation on the upper left, we're already selling insulators, arresters, switches, bushings, hardware, connectors and the like, sprinkled around.

And so this.

This business kind of fits.

Nicely with Hubble in many ways.

It's all the same customers.

In fact.

Youre getting relationship oriented customers like this product.

On a turnkey basis, which is good for us.

If you look around at substation on the upper left we're already selling insulators arrester switches bushings hardware connectors and alike sprinkled around.

William R. Sperry: So, this is now kind of a chunky investment here in the control building. It has the same traits as typical level power systems where the cost of our product is quite low, relative to the investment in the performance and the other equipment around it. So, the protection of that becomes very valuable. It's going to involve very close work with our customers in designing and executing these buildings. So, we're very pleased and I think it fits well. Its financial history has been very attractive. It's grown at double digits over the last eight years or so. The investment thesis on growth is really simple here. This outlook for substation spending is very robust as the 53,000 substations out there start to age. And secondly, the way these buildings are constructed, we think there's going to be a pivot from in-field construction to in factory construction.

A chunky investment here in the control building.

And it has the same trade since typical hubbell power systems, where the cost of our product is quite low relative to the investment in <unk>.

The performance and the other equipment around it.

So the protection of that becomes very valuable.

Got it.

Is going to involve very close work with our customers in designing and executing these buildings. So.

We're very.

We're very pleased and think it fits fits well its financial history has been very attractive.

William R. Sperry: It's grown at double digits over the last eight years or so. The investment thesis on growth is really simple here. This outlook for substation spending is very robust as the 53,000 substations out there start to age. And secondly, the way these buildings are constructed, we think there's going to be a pivot from in-field construction to in factory construction.

It's grown at double digits.

Or in the last eight years or so.

The investment thesis on growth is really simple here.

This outlook for substation spending is very robust.

As the 53000 Substations out there start to age and secondly, the way these buildings are constructed.

William R. Sperry: We think theres going to be a pivot from infield construction in factory construction in this turnkey solution that systems control provides fits. <unk> fits that trend, we think both of those trends are going to allow for continued double digit growth at high margins. So. Sure. I think the last part of fit worth mentioning is the management team. Brad and his team, we really enjoyed getting to know them. We think. A lot of times with private equity owned businesses, we run into a mercenary has been hired. Dress something up and sell it and Brad is a 22 year veteran of this company. It has a deep passion. To grow it. And I would say, we're really excited to partner. And provide public resources to enable Brad too to engage into the growth strategy and we welcome Brad and his team to the Hubble family. Okay. So let's talk about how the year is expected to finish and then I'll, let German tells you about how that sets up 24, but on page 10 you.

William R. Sperry: And this turnkey solution at systems control provides - fits that trend. We think both of those trends are going to allow for continued double digit growth at high margins. So, I think the last part of fit worth mentioning is the management team. Brad and his team, we really enjoyed getting to know them. We think a lot of times with private equity owned businesses we run into - a mercenary has been hired to address something up and sell it and Brad is 22-year vet at this company, he has a deep passion to grow it. And I would say, we're really excited to partner and provide Hubbell’s resources to enable Brad to engage in the growth strategy, and we welcome Brad and his team to the Hubbell family. So, let's talk about how the year is expected to finish and then I'll let Gerben tell you about how that sets up '24.

<unk> fits that trend, we think both of those trends are going to allow for continued double digit growth at high margins. So.

Sure.

I think the last part of fit worth mentioning is the management team.

Brad and his team, we really enjoyed getting to know them.

We think.

A lot of times with private equity owned businesses, we run into a mercenary has been hired.

Dress something up and sell it and Brad is a 22 year veteran of this company.

It has a deep passion.

To grow it.

And I would say, we're really excited to partner.

And provide public resources to enable Brad too to engage into the growth strategy and we welcome Brad and his team to the Hubble family.

William R. Sperry: So, let's talk about how the year is expected to finish and then I'll let Gerben tell you about how that sets up '24. but on page 10 you. Youll see that. We had. Sales growth when we talked to you last in July. 8% to 10%, we're narrowing that to the 8% range. In July we had earnings at $14 75 to $15 25. So. We're cutting that range in half and we feel good that the fourth quarter momentum will get us to the upper half of the range that we had initially shared with you back then and the cash flow. Any robust. $700 million. So the fourth quarter as all this last obviously. We think that what we should expect in our fourth quarter is typical seasonality. There is. Mid single digit fewer days, so we usually get that impact on sales sequentially. The price cost dynamic we've got momentum there. She is going to help drive margin expansion in the fourth quarter and we're going to continue to invest in both our businesses growth prospects as well as its efficiency to setup, a stronger 24 and beyond so.

William R. Sperry: So, let's talk about how the year is expected to finish and then I'll let Gerben tell you about how that sets up '24. But on Page 10, you'll see that we had sales growth when we talked to you last in July of 8% to 10%. We're narrowing that to the 8% range. In July, we had earnings at 14.75 to 15.25, so, we're cutting that range in half and we feel good that the fourth quarter momentum will get us to the upper half of the range that we had initially shared with you back then. And the cash flow, really robust at US$700 million. So, the fourth quarter is always left obviously. And we think what we should expect in our fourth quarter is typical seasonality, and there's mid single digit fewer days. So, we usually get that impact on sales sequentially. The price cost dynamic, we've got momentum there, which is going to help drive margin expansion in the fourth quarter.

Okay.

So let's talk about how the year is expected to finish and then I'll, let German tells you about how that sets up 24, but on page 10 you.

William R. Sperry: but on page 10 you.

Youll see that.

We had.

Sales growth when we talked to you last in July.

8% to 10%, we're narrowing that to the 8% range.

In July we had earnings at $14 75 to $15 25. So.

We're cutting that range in half and we feel good that the fourth quarter momentum will get us to the upper half of the range that we had initially shared with you back then and the cash flow.

Any robust.

$700 million.

So the fourth quarter as all this last obviously.

William R. Sperry: So, the fourth quarter is always left obviously. And we think what we should expect in our fourth quarter is typical seasonality, and there's mid single digit fewer days. So, we usually get that impact on sales sequentially. The price cost dynamic, we've got momentum there, which is going to help drive margin expansion in the fourth quarter.

William R. Sperry: the fourth quarter is always left obviously. And we think what we should expect in our fourth quarter is typical seasonality, and there's mid single digit fewer days. So, we usually get that impact on sales sequentially. The price cost dynamic, we've got momentum there, which is going to help drive margin expansion in the fourth quarter.

We think that what we should expect in our fourth quarter is typical seasonality.

There is.

Mid single digit fewer days, so we usually get that impact on sales sequentially.

The price cost dynamic we've got momentum there.

She is going to help drive margin expansion in the fourth quarter and we're going to continue to invest in both our businesses growth prospects as well as its efficiency to setup, a stronger 24 and beyond so.

William R. Sperry: and we're going to continue to invest in both our businesses growth prospects as well as its efficiency to setup, a stronger 24 and beyond so. Again, I think the three year walk. Again, I think the three year walk. Shows a pretty interesting pick. Picture of the pandemic contraction and <unk> expansion. With supply chain disruption in 'twenty, one 'twenty, two and 'twenty, three being normalizing supply chains and. And price cost really driving this 25% growth over that. Over that three year period. So we really feel we're coming out of the. <unk>. Bigger stronger and more profitable enterprise. And I think we're pleased with the investing we've been able to do in 'twenty three. It's really helps support 24 and beyond I'll, let curve. Sort of give you some of his preliminary thoughts on that. Great. Thanks, Bill and as we look ahead, we feel well positioned for 2024 and beyond.

William R. Sperry: And we're going to continue to invest in both our businesses growth prospects as well as its efficiency to set up a stronger '24 and beyond. So, again, I think the three year walk shows a pretty interesting picture of the pandemic contraction in '20, the expansion with supply chain disruption in '21 and '22, and '23 being normalizing supply chains and price cost really driving this 25% growth over that three year period. So we really feel we're coming out of the pandemic as a bigger, stronger, more profitable enterprise and I think we're pleased with the investing we've been able to do in '23 to really help support '24 and beyond. I'll let Gerben sort of give you some of his preliminary thoughts on that.

Again, I think the three year walk.

Shows a pretty interesting pick.

Picture of the pandemic contraction and <unk> expansion.

With supply chain disruption in 'twenty, one 'twenty, two and 'twenty, three being normalizing supply chains and.

And price cost really driving this 25% growth over that.

William R. Sperry: So we really feel we're coming out of the pandemic as a bigger, stronger, more profitable enterprise and I think we're pleased with the investing we've been able to do in '23 to really help support '24 and beyond. I'll let Gerben sort of give you some of his preliminary thoughts on that.

Over that three year period.

So we really feel we're coming out of the.

<unk>.

Bigger stronger and more profitable enterprise.

And I think we're pleased with the investing we've been able to do in 'twenty three.

It's really helps support 24 and beyond I'll, let curve.

William R. Sperry: some of his preliminary thoughts on that. Great. Thanks, Bill and as we look ahead, we feel well positioned for 2024 and beyond.

Sort of give you some of his preliminary thoughts on that.

Gerben Bakker: Great. Thanks, Bill. And as we look ahead, we feel well positioned for 2024 and beyond. Grid modernization, electrification megatrends remain intact and we continue to believe our utility markets can deliver mid single digit organic growth over the next several years. Our industry leading utility franchise is uniquely positioned to enable us to serve our utility customers as they invest to make the grid infrastructure more reliable, resilient and renewable. While we anticipate telecom markets to remain weak through the first half of next year, strong demand in T&D markets, particularly transmission and substation support visible growth. We also anticipate that the deployment of infrastructure stimulus funding will drive further demand for Hubbell Utility Solutions in the second half of next year.

Great. Thanks, Bill and as we look ahead, we feel well positioned for 2024 and beyond.

Grid monetization electrification megatrends remain intact, and we continue to believe our utility markets can deliver mid single digit organic growth over the next several years.

Our industry, leading utility franchise is uniquely positioned to enable us to serve our utility customers as they invest to make the grid infrastructure more reliable resilient and renewable.

Gerben Bakker: While we anticipate telecom markets to remain weak through the first half of next year, strong demand in T&D markets, particularly transmission and substation support visible growth. We also anticipate that the deployment of infrastructure stimulus funding will drive further demand for Hubbell Utility Solutions in the second half of next year.

While we anticipate the telecom markets to remain weak through the first half of next year strong demand in T&D markets, particularly transmission and substation support visible growth.

We also anticipate that the deployment of infrastructure stimulus funding will drive further demand for Hubbell utility solutions in the second half of next year.

Gerben Bakker: In Electrical Solutions, we continue to see significant opportunity to drive further value across the portfolio by competing collectively and operating more efficiently as we bring these businesses closer together. We've made good progress in reshaping this portfolio over the last several years with 25% of segment revenues now tied to growth verticals aligned to mega trends like data centers, renewables and utility T&D and we expect continued growth in these areas next year. Industrial markets have been solid with support from U.S industrial nearshoring and manufacturing project activity and nonresidential markets have remained stable. We've yet to see the signs of macroeconomic uncertainty or higher interest rate impact in these markets, but this is something we are closely monitoring as we build out contingency scenarios for planning into next year.

Made good progress in reshaping this portfolio over the last several years with 25% of segment revenue is now tied to growth verticals aligned to mega trends like data centers renewable and utility T&D.

And we expect continued growth in these areas next year.

Gerben Bakker: Industrial markets have been solid with support from U.S industrial nearshoring and manufacturing project activity and nonresidential markets have remained stable. We've yet to see the signs of macroeconomic uncertainty or higher interest rate impact in these markets, but this is something we are closely monitoring as we build out contingency scenarios for planning into next year.

Industrial markets have been solid with support from U S industrial near shoring and manufacturing project activity and nonresidential markets have remained stable.

We've yet to see the signs of macroeconomic uncertainty our higher interest rate impact in these markets. But this is something we are closely monitoring as we built out contingency scenarios for planning into next year.

Gerben Bakker: From an operational perspective, the price cost productivity equation will be more dynamic to navigate as we enter a more normalized environment, but we have levers at our disposal to manage this effectively. We expect that execution on productivity initiatives will become more important focus area for us moving forward to enable us to offset persistent inflation, while maintaining a strong pricing levels. We have achieved over the last several years. We will provide additional color along with our 24 outlook early next year, but overall, we remain confident in our ability to deliver continued profitable growth off of a strong multi year base of performance with that let me turn it over to Q&A. As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.

Gerben Bakker: From an operational perspective, the price/cost productivity equation will be more dynamic to navigate as we enter a more normalized environment, but we have levers at our disposal to manage this effectively. We expect that execution and productivity initiative will become a more important focus area for us moving forward to enable us to offset persisting inflation while maintaining the strong pricing levels we have achieved over the last several years. We'll provide additional color along with our '24 outlook early next year, but overall, we remain confident in our ability to deliver continued profitable growth off of a strong multiyear base of performance. With that, let me turn it over to Q&A.

We expect that execution on productivity initiatives will become more important focus area for us moving forward to enable us to offset persistent inflation, while maintaining a strong pricing levels. We have achieved over the last several years.

Operator: As a reminder, to ask a question you will need to press star one one on your telephone. To remove yourself from the queue, you may press star one one again. Please standby while we compile the Q&A roster. Our first question comes from the line of Jeff Sprague of Vertical Research.

As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Jeff Sprague of vertical research.

Jeffrey Todd Sprague: Thank you good morning. First, just thinking about Q4 implied kind of a nice acceleration in organic growth. Obviously, the comp is easier. But I just wonder if you could give us a sense of how you see volume progressing in Q4? It sounds like you would expect it to inflect positive in EP and backing into probably a decent volume quarter in utility also. But would love your perspective on just some granularity on the organic as Part 1 here?

First just thinking about Q4 implied.

Have a nice acceleration in organic growth, obviously the comp is easier.

Just wondering if you could give us a sense of how you see volume progressing in Q4. It sounds like you would expect it to inflect positive in E&P.

Backing into probably a decent volume quarter in utility also but would love your perspective on just some granularity on the organic.

Part one here.

William R. Sperry: Jeff, I think you almost answered your own question, but it is significant to us that the electrical side has been facing some of this overstock situation for a few quarters now. So, we think that’s nice to see that inflecting into a growth position and sort of getting that period back to a normal book and bill sort of fourth quarter and really ’24, and I think that’s that’s kind of the story.

That the electrical side has been facing some of this.

Overstock situation for a few quarters now.

So we think thats nice to see that inflicting into a growth position in sort of getting that period back too.

Back to a normal book and bill sort of fourth quarter and really 'twenty four.

And I think that's kind of that's kind of the story.

Jeffrey Todd Sprague: And then, just thinking about margins into next year, Bill or Gerben, obviously, we’re coming off a high level. So, it sounds like you expect price to be positive. You still have inflation in aggregate, maybe not so much in materials. But maybe just kind of talk about roughly how you would bridge us on an incremental or however you want to frame it, because we’re also trying to dial in these investment headwinds? I would assume you’re going to continue to invest for growth going forward, but it sounds like maybe it’s a headwind in 2023, but is more kind of maybe just in the base than part of sales growth in 2024. But maybe you could just give us a little bit more color on how to think about bridging the margins.

Obviously, we're coming off a high level.

It sounds like you expect price to be positive you still have inflation.

In aggregate, maybe not so much in materials.

Maybe just kind of talk about roughly how you would bridge us on an incremental or however, you want to frame it.

Jeffrey Todd Sprague: I would assume you’re going to continue to invest for growth going forward, but it sounds like maybe it’s a headwind in 2023, but is more kind of maybe just in the base than part of sales growth in 2024. But maybe you could just give us a little bit more color on how to think about bridging the margins.

Because we're also trying to dial on these.

<unk> headwinds I would assume youre going to continue to invest for growth going forward, but it sounds like maybe it's a headwind in 2023, but is more kind of maybe just in the base.

Part of sales growth in 2024, but maybe you could just give us a little bit more color on.

How to think about bridging the margins.

William R. Sperry: Yes, I think look I think we're frankly will be much more. Give you much more granularity when we're together in January and we give you our guidance, but I think youre, putting your finger on some important things. Basically <unk> got. The expectation that volumes. <unk> will be positive and in those cases. The. Fixed cost absorption and the incrementals, helping push margins up. I think the. Investment point. We are still calibrating exactly how much we're going to do I think from garbage in my perspective. The great news is to see how creative and aggressive our teams have been in coming up with investment ideas. It's more a function of carbonite regulating that and as opposed to Gee, we don't have any ideas as to how to improve the franchise I think on the.

William R. Sperry: I think, frankly, we’ll be much more, give you much more granularity when we’re together in January, and we give you our guidance. But I think you’re putting your finger on some important things. Basically, you’ve got the expectation that volumes will be positive. And in those cases, it’s the fixed cost absorption and the incrementals helping push margins up. I think the investment point, we’re still calibrating exactly how much we’re going to do. I think, from Gerben’s and my perspective, the great news is to see how creative and aggressive our teams have been in coming up with investment ideas. So, it’s more a function of Gerben and I regulating that and as opposed to, gee, we don’t have any ideas as to how to improve the franchise.

Give you much more granularity when we're together in January and we give you our guidance, but I think youre, putting your finger on some important things.

Basically <unk> got.

The expectation that volumes.

<unk> will be positive and in those cases.

The.

Fixed cost absorption and the incrementals, helping push margins up.

William R. Sperry: I think the investment point, we’re still calibrating exactly how much we’re going to do. I think, from Gerben’s and my perspective, the great news is to see how creative and aggressive our teams have been in coming up with investment ideas. So, it’s more a function of Gerben and I regulating that and as opposed to, gee, we don’t have any ideas as to how to improve the franchise.

I think the.

Investment point.

We are still calibrating exactly how much we're going to do I think from garbage in my perspective.

The great news is to see how creative and aggressive our teams have been in coming up with investment ideas.

It's more a function of carbonite regulating that and as opposed to Gee, we don't have any ideas as to how to improve the franchise I think on the.

William R. Sperry: I think on the. The price comment that you made. There is a little bit of wraparound. Embedded. From the timing of price increases in 'twenty, three but thats. Pretty small certainly compared to last two years and. B, whether there is any new price beyond that. We will remain to be seen and we'll share that with you as we get to year end I think. We do expect productivity, because because you mentioned the inflation side. And we've been pretty Simplistically trying to maintain. A balance between price and material cost on the one hand and productivity and non material inflation on the other. When the non material inflation gets. Five ish percent right, it's a little bit harder to rely on just productivity to do that that being said. We have a lot of this investment that we've been talking about is aligned towards being more productive. So we're going to continue to target that price cost productivity to be balanced.

William R. Sperry: I think on the price comment that you made, there is a little bit of wrap around embedded from the timing of price increases in ’23, but that’s pretty small, certainly compared to the last two years. And will be whether there’s any new price beyond that will remain to be seen, and we’ll share that with you as we get to year end. I think we do expect productivity because you mentioned the inflation side and we’ve been pretty simplistically trying to maintain a balance between price and material cost on one hand and productivity and nonmaterial inflation on the other. When a nonmaterial inflation gets 5%-ish , right, it’s a little bit harder to rely on just productivity to do that. That being said, we have a lot of this investment that we’ve been talking about is aligned towards being more productive.

The price comment that you made.

There is a little bit of wraparound.

Embedded.

From the timing of price increases in 'twenty, three but thats.

Pretty small certainly compared to last two years and.

B, whether there is any new price beyond that.

We will remain to be seen and we'll share that with you as we get to year end I think.

We do expect productivity, because because you mentioned the inflation side.

And we've been pretty Simplistically trying to maintain.

A balance between price and material cost on the one hand and productivity and non material inflation on the other.

William R. Sperry: When a nonmaterial inflation gets 5%-ish , right, it’s a little bit harder to rely on just productivity to do that. That being said, we have a lot of this investment that we’ve been talking about is aligned towards being more productive. So, we’re going to continue to target that price/cost productivity to be balanced. But again, I think we’ll be a lot more clear with you and granular with you, Jeff, when we’re together next time.

When the non material inflation gets.

Five ish percent right, it's a little bit harder to rely on just productivity to do that that being said.

We have a lot of this investment that we've been talking about is aligned towards being more productive. So we're going to continue to target that price cost productivity to be balanced.

William R. Sperry: So we're going to continue to target that price cost productivity to be balanced.

But again I think it will be a lot more clear with.

You and granular with you Jeff when we're together next time.

Jeffrey Todd Sprague: And maybe just a quick one for Gerben. Nice deal here, obviously, on the utility side. I just wonder if you could give us a little bit more color on how you can leverage it internally, either for growth or margin expansion? And what kind of — Bill kind of tried to dial us back a little bit on cost synergies. I’m sure there are some, though, like how do you integrate this into your footprint, leverage purchasing, that sort of thing to fully maximize the value here?

Garvin.

Nice deal here, obviously on the utility side I, just wonder if you could give us a little bit more color on.

You can.

Leverage it internally either either for growth or margin expansion, what kind of bill kind of tried to dial this back a little bit on cost synergies I'm sure. There are some though like how do you integrate this into your footprint leverage purchasing that sort of thing.

To fully maximize the value here, yes.

Gerben Bakker: Yes sure. We're obviously very excited too. Both deals. Obviously, the systems control the size and the scale that it adds to the franchise. We're really excited but the good news with this business coming in. Historically been. High growth and it's very profitable. As you can see so that certainly in a nice position coming into the portfolio as we looked and we diligence this business. There's some really nice trends that I think we'll serve surface business right. One is that they have been for 60 year. <unk> control panel manufacturer, but over the last. 10, or 20 years, Dave Dave moved into a more turnkey systems and in essence, what that does is stake labor of putting the systems together. Traditionally in the field to a more controlled environment in the factory, where they where they can not only have a better control environment. They test them. A lot of time out of the field. So this is a trend that we're actually seeing in debased issue.

Gerben Bakker: Yeah, sure. And we’re obviously very excited to bug deals, but obviously, the systems control, the size and the scale that it adds to the franchise we’re really excited about. The good news with this business coming in that it’s historically been high growth and it’s very profitable, as you can see. So, that’s certainly a nice position coming into the portfolio. As we look and we diligence this business there’s some really nice trends that I think will serve this business right. One is that they’ve been for 60 year a relining control panel manufacturing, but over the last 10 or 20 years, they’ve moved into more turnkey systems. And in essence, what that does is take labor of putting these systems together traditionally in the field to a more controlled environment in the factory where they can not only have a better control environment, they test them and it takes a lot of time out of the field.

We're obviously very excited too.

Both deals.

Obviously, the systems control the size and the scale that it adds to the franchise.

We're really excited but the good news with this business coming in.

Historically been.

High growth and it's very profitable.

As you can see so that certainly in a nice position coming into the portfolio as we looked and we diligence this business.

There's some really nice trends that I think we'll serve surface business right. One is that they have been for 60 year.

Gerben Bakker: One is that they’ve been for 60 year a relining control panel manufacturing, but over the last 10 or 20 years, they’ve moved into more turnkey systems. And in essence, what that does is take labor of putting these systems together traditionally in the field to a more controlled environment in the factory where they can not only have a better control environment, they test them and it takes a lot of time out of the field.

<unk> control panel manufacturer, but over the last.

10, or 20 years, Dave Dave moved into a more turnkey systems and in essence, what that does is stake labor of putting the systems together.

Traditionally in the field to a more controlled environment in the factory, where they where they can not only have a better control environment. They test them.

Gerben Bakker: So, this is a trend that we’re actually seeing in the business started when we acquired PCX, that similar dynamics, some of the new products that we’re developing have those features in place. So, it’s an area that we believe will see outsized growth coming in. What we can add to it is, we looked at who their customers are, it aligns extremely well with where some of our customers are with the exception that they still have a much smaller share of those customers. And I think this is where we really see that with our sales or with our people, we can add to complementing that. So, I do believe it’s more about the sales growth than probably typical cost synergies that we would see smaller tuck-ins coming in, but really excited about having this in the portfolio on what we can do with it.

A lot of time out of the field. So this is a trend that we're actually seeing in debased issue.

When we acquired PC exit at similar dynamics some of the new products that we're developing those features in place. So it's an area that we believe will see outsized growth.

Coming in what what.

Where we can add to it as we looked at who their customers are it aligns extremely well with with some of our customers are with the exception that they still have a much smaller.

Share with those customers and I think this is where we really see that with our sales for with our <unk>.

Gerben Bakker: And I think this is where we really see that with our sales or with our people, we can add to complementing that. So, I do believe it’s more about the sales growth than probably typical cost synergies that we would see smaller tuck-ins coming in, but really excited about having this in the portfolio on what we can do with it.

People, we can we can add.

Two two.

Complementing that so I do believe it's more about the sales growth than probably typical cost synergies that we would see in a smaller tuck ins coming in.

But really excited about having this in the portfolio and what we can do it.

Jeffrey Todd Sprague: Great. Thank you very much.

Operator: Thank you. Our next question comes from the line - Please standby. Our next question comes from the line of Steve Tusa of JPMorgan.

Our next question comes from the line.

Please standby.

Our next question comes from the line of Steve Tusa of Jpmorgan.

C. Stephen Tusa: Hi, guys. Good morning. So, just on the - can you update us on the price cost productivity numbers? And then Bill, you always have like a pretty good balanced view of the macro here. I remember back in the day, you would talk about how things were either kind of trending as you would expect with a rhythm to it or whether things were kind of choppy in a low growth world. How would you kind of characterize the demand you’re seeing today into ’24, like just from a consistency and visibility perspective across your portfolio?

Good morning.

Hi.

So just on the can you update us update us on the price cost productivity.

<unk> and then.

Bill you always have like a pretty good.

Balanced view of the macro here I remember back in the day, you would talk about how things are either.

Kind of trending.

As you would expect with a rhythm to it or whether things are kind of choppy in a low growth world.

How would you kind of characterize the demand youre seeing today in the 'twenty four like just from a consistency and visibility perspective across your portfolio.

Gerben Bakker: Yes, I would say. The hard part about your question is I think you were asking about out the door demand from our channel to the end user and I think that has been a nice stable demand I'd point out. Two weak areas between telco and <unk>. And together they are each on one side of our segment and they're each about 10%. So there's 80% of the company I would say Steve that seeing. Nice healthy markets. From the out the door sales side I think the. The part that's. It makes it a little more challenging is. How much of that is coming out of inventory in the channel versus how much is coming out of our factory shipping new stuff and that's where we. We're sort of in this inflection phase. That. I think our electrical side was probably a quarter earlier and so I think there.

William R. Sperry: I would say the hard part about your question is, I think you’re asking about out the door demand from our channel to the end user, and I think that has been a nice stable demand. I’d point out two weak areas between telco and resi. And together, they’re each on 1 side of our segment and they’re each about 10%. So, there’s 80% of the company, I would say, Steve, that’s seeing nice, healthy markets from the out the door sales side. I think the part that makes it a little more challenging is how much of that’s coming out of inventory in the channel versus how much is coming out of our factory shipping new stuff. And that’s where we’re sort of in this inflection phase that I think our electrical side was probably a quarter earlier.

The hard part about your question is I think you were asking about out the door demand from our channel to the end user and I think that has been a nice stable demand I'd point out.

Two weak areas between telco and <unk>.

And together they are each on one side of our segment and they're each about 10%.

So there's 80% of the company I would say Steve that seeing.

Nice healthy markets.

From the out the door sales side I think the.

The part that's.

It makes it a little more challenging is.

How much of that is coming out of inventory in the channel versus how much is coming out of our factory shipping new stuff and that's where we.

We're sort of in this inflection phase.

That.

I think our electrical side was probably a quarter earlier and so I think there.

William R. Sperry: And so, I think they’re out of it and our power side has another quarter or so to go. And so, that disconnect is just makes it a little less smooth. And I think from a - I think you’re using a good word of predictability and visibility, I think we’re looking forward to ’24 being a little more straightforward of, if demand gets an order to get a shipment.

Out of it and our power side has another quarter or so to go and.

So.

It's.

That that disconnect is just makes it a little less smooth and I think from a.

Thank you used a good word of predictability and visibility.

I think we're looking forward to 'twenty four being a little more straightforward.

Demand to get to in order to get some shipment.

C. Stephen Tusa: And then is price cost and productivity for the year, like what that new number is, if there’s an update to it [inaudible] yes, price cost productivity.

If there's an update to it.

Alright.

Yes price cost productivity.

William R. Sperry: Yes. So, when you look at it on a year-over-year basis, this is kind of - we got this eight quarter ’22 and ’23 very positive picture. ’22, I would characterize as really strong price pull with material inflation. ’23 has been a little bit less price pulled but with material tailwind. So, it created an even bigger net. And as you look at it quarterly, it’s stepping down in the second half. So, third and fourth quarter, a little bit less, but still I mean, on an absolute basis, a really big contributor to our margin expansion story.

When you look at it a year over year basis.

This is kind of we got this eight quarter 'twenty, two and 'twenty three very positive picture.

22, I would characterize as really strong price pull with material inflation 23 has been a little bit less price pull but with material tailwind. So it created an even bigger net.

And as you look at it quarterly.

Stepping down in the second half, so third and fourth quarter.

A little bit less but still.

I mean on an absolute basis really big contributor to our margin expansion story.

C. Stephen Tusa: Can you get an absolute number?

Dan Innamorato: Driving the majority of the margin expansion, Steve.

C. Stephen Tusa: Ok, great. Thanks a lot, guys.

Operator: Thank you. I would like to remind analysts to limit your questions to one question and one follow up. Again, that's one question and one follow up, then return to the queue. Please standby for our next question, which comes from the line of Nigel Coe of Wolfe Research.

Please standby for our next question, which comes from the line.

Nigel Coe.

Research.

Nigel Coe: Thanks. Good morning, guys. So, we only get one question and one follow up, ok. Can you just maybe just give us kind of your thinking on what gives you confidence that this utility destock is sort of going to be finished by year end, because I think that’s the key for a lot of folks here, so, any metrics on kind of selling the sellouts, backlog burn or days on hand, any intel there would be helpful?

Fair enough.

Can you maybe just give us.

Of your thinking on what gives you confidence.

But this utility destock as is sort of going to be finished by year end because I think that's the key for a lot of folks here, so any metrics on kind of seller selling.

Selling the sellout.

Backlog burn off.

Based on hand, any any any intel that'd be helpful.

William R. Sperry: So, we’ve been using backlog, Nigel, let’s say that to simplify your question, Electrical is already in the position of being kind of book and bill, okay? So, we’ve used backlog in the second and third quarters of this year, and we still have more backlog than we traditionally do. I would say, pre-pandemic, we would think about backlog being in the six week range as being very normal and typical of our book-and-bill kind of enterprise. I’d say we’re sort of in the quarter and half of backlog now, so, it’s maybe 2.5 times typical size. So, we still have the backlog on the power side. And I think that the models that we’ve built and the way that we’re looking at those specific businesses who have gone to a much more normal lead time and we see those are the areas where we think they’re shipping more than they’re receiving from us.

To simplify your question electrical is already in the position of being kind of book and Bill Okay. So.

We've used backlog in the second and third quarters of this year.

And we still have.

More backlog than we traditionally do I would say pre pandemic, we would think about backlog being in the six week range as being very normal and typical of our book and Bill kind of enterprise.

I'd say, we're sort of in the quarter and a half backlog now so it's maybe two five times typical size. So we still have.

William R. Sperry: I’d say we’re sort of in the quarter and half of backlog now, so, it’s maybe 2.5 times typical size. So, we still have the backlog on the power side. And I think that the models that we’ve built and the way that we’re looking at those specific businesses who have gone to a much more normal lead time and we see those are the areas where we think they’re shipping more than they’re receiving from us.

The backlog on the power side.

And I think that.

The models that we've built.

And the way that we're looking at those specific businesses, who have gone to.

Much more normal.

Lead time.

And we see those are the those are the areas where we.

We think.

They're shipping more than they're receiving from us.

William R. Sperry: As we talk to our customers and the models that we’ve created, it feels to us like that burns off, that whole phase burns off by the end of the year. And we’re kind of using what we saw in Electrical because that’s a good precursor, we think. And so those, all that stuff combines but I do appreciate I think there’s maybe some art and some science mixed together in that answer.

And the models that we've created it feels to us like that burns off that whole phase burns off by the end of the year and we kind of using what we saw in electrical because it's that's a good precursor we think and so those two all of that stuff combines but I do appreciate I think there is maybe some some art.

And some science mixed together in that answer.

Gerben Bakker: And maybe I’ll provide an additional comment here, Nigel, is that while I think Bill correctly points out, there’s a lot of moving parts. The good part is we have very strong tie-ins with not just our electrical channel partners, but with our utility and customers. So, through those discussions, we can have discussion where the inventory sits in that channel because it sits in both places. And we see clearly in certain product lines, supported by the order rate and the shipment rates that the inventories come down, and they’re telling us when they’re getting towards that end of where they want to be. But I’ll also remind you that the demand in the utility sector is still very, very strong. And in those same conversations, customers are very optimistic about the increased higher levels of spend. If you look at our CapEx plans going forward, elevated. So, while certainly a little bit uncomfortable managing through this time, as we look out a little bit, we feel really good about the end demand and that we can continue to grow our business through the cycle.

Good part is we have very strong tie ins with not just our electrical.

Channel partners, but with our utility end customers.

Discussions we can we can have discussion where the inventory sits in that channel because it sits in both places.

And we see clearly in certain product line supported by the order rate in the shipment rates.

That inventory has come down and theyre, telling us when they are getting towards that end of where they want to be but I'll also remind you that the demand in the utility sector is still very very strong.

Gerben Bakker: But I’ll also remind you that the demand in the utility sector is still very, very strong. And in those same conversations, customers are very optimistic about the increased higher levels of spend. If you look at our CapEx plans going forward, elevated. So, while certainly a little bit uncomfortable managing through this time, as we look out a little bit, we feel really good about the end demand and that we can continue to grow our business through the cycle.

In those same conversation customers are very optimistic about.

The increased higher levels of spend if you look at the Capex plans going forward elevated so while it's certainly a little bit uncomfortable managing through this.

Time, as we look out a little bit we feel really good about the end demand and that we can continue to grow our business through the cycle.

Nigel Coe: Okay. That's helpful, thanks. And then, just on the Electrical Solutions margins, I think, with all this noise in the utility, I think we’re forgetting that these are continuing to like inflate to record levels, especially when we consider the residential business would be obviously well below that the average. So, when volumes inflect, I think you’re calling for volume to reflect in the fourth quarter and then obviously into 2024. Do you think you can actually build on these margins or is there going to be some offsets that I can’t think of any, but are you confident you can push margins into maybe the [inaudible] levels?

I think with all this noise in utility I think we're forgetting that diesel continuing till I can play too to record levels, especially when you consider the residential business with BMC well below that.

The average so.

When volumes inflect.

I think it deployments to inflect in the fourth quarter.

And then I will say into 2024.

Do you think you can actually build on these margins or is that going to be some offsets that I can't think of any but are you confident you can push margins and so maybe the upper teens level.

William R. Sperry: Yes. I think you’re looking at it the same way we are, which is that this is a new base and that new volumes should drop at incrementals. And I think the one overlay to all that, that gives me maybe even more confidence than you is Mark Mikes spent seems like a lifetime making our Power Systems multi-brand platform compete collectively and act really efficiently. And he really is at the early days of him adding what I would just call overall segment efficiencies to how those different silos are running. And so, there’s both the math of growth and incrementals but also Mark’s experience with us and track record of finding just structural ways to make it cheaper to operate and more efficiently, I should say.

And that new volumes should drop at Incrementals.

And I think the.

The one overlay to all of that that gives me maybe even more confidence in you.

As you know.

Mark Mics spent seems like a lifetime, making our power systems multi brand platform compete collectively and accurately efficiently and he really is at the early days of him, adding what I would just call.

William R. Sperry: And he really is at the early days of him adding what I would just call overall segment efficiencies to how those different silos are running. And so, there’s both the math of growth and incrementals but also Mark’s experience with us and track record of finding just structural ways to make it cheaper to operate and more efficiently, I should say.

<unk> segment efficiencies to how those different silos are running and so there is both the massive growth in incrementals, but also marks.

Experience with us and track record of finding.

Just structural ways to make it cheaper to operate more efficiently.

Yes.

Nigel Coe: Okay. Thanks, Bill.

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

Our next question.

Comes from the line of Brett Linzey of Mizuho.

Brett Logan Linzey: Hey, good morning, all. I wanted to come back to comm and controls up 28% and other strong quarters you catch up on supply chain. I know at one point, you had a US$1 billion backlog, US$6 billion of pipeline of projects in the funnel. Just curious what the conversion of that funnel has been looking like? And then, do you think you can build off some of this catch-up growth this year as we flip the calendar ’24?

Hi, Brian.

Yes, I wanted to come back to common controls up 28% another strong quarter as you catch up on supply chain I know at one point you had a $1 billion backlog 6 billion a pipeline of projects in the funnel.

Just curious what the conversion of that funnel has been looking like and then do you think you can build off some of this catch up growth. This year as we as we flip the calendar 'twenty four.

William R. Sperry: Let me start with the first one - or, sorry, the second one, I’ll let Gerben comment maybe on the overall picture. But yes, we think the momentum of having the chip supplies saw is really helping us get some backlog from the meter side out and as well on the AMI side. So, it’s a welcome surge of momentum that certainly will carry us through fourth quarter, Brett, maybe I’ll let Gerben talk back really about the positioning.

The momentum of having the chip supplies.

Is really helping us get some backlog from the meter side out in as well on the <unk> on the Ams side.

So.

It's been it's a welcome surge.

Momentum that certainly will carry us through fourth quarter, Brett maybe.

Maybe let Curt and Todd will naturally about the positioning.

Gerben Bakker: And now, regarding the backlog, it still sits around that US$1 billion-ish mark. As we look forward, especially with some of the technologies that we are developing to serve some of those new applications of distribution, automation, we feel well positioned in this market over the next several years out, and we see it in our quotation activity that’s picking up. These are big projects that timing of which tends to be a little more unpredictable than the regular stock and flow part of our business. But we’re quite optimistic and bullish about what this business can contribute over the next few years.

Regarding the backlog it still sits around $2 billion ish.

Mark.

As we look forward, especially with some of the technologies that we are developing too.

So to serve some of those new applications.

Of.

<unk> automation, so we feel well positioned in this market over the next several years out.

We see it in our on our quotation activity picking up these are big projects that the timing of which.

Tends to be a little more unpredictable than the regular stock inflow part of our business.

But we're quite optimistic and bullish about what this business can contribute over the next few years.

Brett Logan Linzey: That's helpful, thanks. And then, just a follow-up, I think you noted the additional manufacturing capacity, the two recent deals could be favorable. I guess, how does this change your current capacity plans or what you’re thinking in terms of ’24 budgeting? And can you absorb some of the acquired capacity, any context there?

Could it be favorable I guess, how does this change your current capacity plans or whats your thinking in terms of 24 budgeting absorbed some of the acquired capacity.

Any context there.

William R. Sperry: I think on the Balestro side, it’s really adding to the capacity of our North American insulator arrester business. I think on the systems control side, as I was mentioning, Brad has some ambitious growth plans that we really embrace, so, I think we’ll be looking to add capacity. As we mentioned, they’ve been growing double digits for eight years in a row, and so we’re looking to help buttress that.

Insulate our rescue business I think on the <unk>.

Systems control side.

As I was mentioning Brad as some ambitious growth plans that we really embrace so I think we will be looking to add capacity.

As we mentioned they are going to be growing double.

Double digits for eight years in a row and so so we're looking to help buttress that yeah.

Gerben Bakker: And I’d say, on the kind of specific to Balestro, helps with the investment needs even into next year because that was one of the areas we were contemplating having them make investments in to grow that block or this capacity, but it’s not the only one why not constraints in other areas. If you look at our transmission business and other parts of the businesses, we clearly still need to invest into next year to be able to capture that growth over the next few years. It helps but it’s not unique.

Yes.

Specific to the lifestyle helps helps with the investment needs even into next year because that was one of the areas that we were contemplating having to make investments and to grow that that block or disk capacity.

But it's not the only one local constraints in other areas. If you look at our transmission business and other parts of the businesses, but we're.

Clearly still need to invest into next year to be able to capture that growth over the next few years.

Hotels, but it's not.

Nick.

Brett Logan Linzey: Understood. Thanks for the questions.

Operator: Our next question comes from the line of Chris Snyder of UBS. Please, go ahead Chris.

Our next question.

It comes from the line of Chris Snyder of UBS. Please go ahead Chris.

Christopher M. Snyder: I wanted to just ask about confidence and the ability to hold utility margins at around these levels into next year. Obviously, up a lot year-on-year, and it felt like a big piece of that expansion was obviously on price cost. So, kind of just talk about expectations there into next year.

Obviously on price cost so kind.

Can you just talk about expectations there into next year.

Gerben Bakker: Maybe I’ll start, and Bill will fill in. And if you look at the margins, particularly to the utility, but I think it’s across our business that in ’23 we are looking to expand our margins there by 700 basis points, that’s quite attractive. And our view is going into ’24 is that we can grow profitably on that base. And one of the drivers is going to be volume next year. We do expect that business to grow in volume. We expect to manage through this price cost productivity equation that we talked about earlier and we’ll continue to invest in the business. So, I think as a set up to think of profitable growth on top of this base is the right way in the experience. And certainly, we’ll come back in January to provide more color on the different moving pieces and where that may fall with margins more specifically.

Yes, particularly for utility, but I think it's across our business that in 'twenty three.

We are looking to expand our margins there by 700 basis points.

Quite attractive in our view, it's going into 'twenty four is that we can grow profitably on that base.

One of the drivers it's going to be volume next year, we do expect that business to grow in volume, we expect to manage through this price cost productivity equation that we talked about earlier.

Gerben Bakker: We expect to manage through this price cost productivity equation that we talked about earlier and we’ll continue to invest in the business. So, I think as a set up to think of profitable growth on top of this base is the right way in the experience. And certainly, we’ll come back in January to provide more color on the different moving pieces and where that may fall with margins more specifically.

And we will continue to invest in the business. So I think.

Is setup to think of profitable growth on top of this base is the right way in defense and certainly we will come back in January to provide more color on the different moving pieces and where they fall.

Margins more specifically.

Christopher M. Snyder: I appreciate that. And then, maybe just on the price side of utility. It seems like, obviously, there’s been a lot of price the past couple of years. It seemed like the drivers of that was obviously metal - raw materials inflating higher? And then also just supply couldn’t keep up with the strong demand, but now with deflation and it seems like some supplies in a better place, allowing the channel to destock. Any change around price push back in the channel?

There's been a lot of price the past couple of years. It seemed like the drivers of that was obviously metal inflate our raw materials complaining higher and then also just supply couldn't keep up with the strong demand.

But now with deflation and it seems like supply is in a better place, allowing the channel destock any any.

Any change around.

Rice pushback in the channel. Thank you.

Gerben Bakker: I would say on the utility, we’re not seeing it. And you mentioned a couple of things that caused the price, but I’d say beyond metals, just general inflation we’ve seen over the last year, just incredible nonmaterial inflation. And I think we talked in the past of what the pure commodities is and it’s actually a relatively small part of it. The bigger part is the purchase components, the labor and all that has inflated pretty well. The other thing that we continue to have discussions with our customer around is the investments that we’re making back in our business. And you don’t always see that reflected in our operating performance or EPS, but the level of CapEx and the elevation that we’ve done in CapEx and other areas is an area that clearly benefits our customers short term and long term.

A relatively small part of it the bigger part is the purchase components the labor and all of that that has inflated.

Very well the other thing that we continue to have discussions with our customers around is the investments that we're making back in our business and you don't always see that reflected in our operating performance, our EPS, but the level of Capex.

Gerben Bakker: The other thing that we continue to have discussions with our customer around is the investments that we’re making back in our business. And you don’t always see that reflected in our operating performance or EPS, but the level of CapEx and the elevation that we’ve done in CapEx and other areas is an area that clearly benefits our customers short term and long term. So, I think much more of the discussion continues to be around the value that we can add by the product and the services that we deliver than price first as a lever, not unimportant but it’s not the leading part of the discussion.

The elevation that we've.

And Capex and other areas is an area that clearly benefits our customers.

Short term and long term so.

Gerben Bakker: So, I think much more of the discussion continues to be around the value that we can add by the product and the services that we deliver than price first as a lever, not unimportant but it’s not the leading part of the discussion.

The value that we can add by the product and the services that we deliver than than price first as a as a lever not unimportant, but.

It's not the leading.

Part of the discussion.

Christopher M. Snyder: I appreciate that, thank you.

Operator: Our next question comes from the line of Joe O'dea of Wells Fargo.

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

Joseph John O'Dea: Hi, good morning. First question, I just wanted to ask if you’re seeing higher funding costs factor in the conversations with utilities and their spend plans at all in your sort of comments around ongoing mid single digit growth, doesn’t really seem like it. And then just related to that, I think your kind of outlook for the transmission and substation growth to outpace distribution growth, maybe a little bit more context on sort of what’s behind in driving that.

Good morning.

First question I, just wanted to ask if you're seeing higher funding cost factor in the conversations with utilities in their spend plans at all in your sort of comments around ongoing mid single digit growth doesn't really seem like it.

William R. Sperry: Yes, I mean I think on. Let me take the second question first. Transmission and substation growth. I think as being. Being impacted quite a bit by renewables. As well as electrification trends so. You need a new substation. Youre doing. Utility sized solar farm. It needs. That needs to be generated and then transmitted and then stepped down again. To extent you had some kind of massive data center or battery factory. So electrification impacts like that. Kind of increases the demand on Substations and. In addition, you just have. And those 53000 Substations you just have some aging equipment that. Needs to be needs to be. Upgrade update so. <unk>. It's not that it. It's not the distribution has bad growth outlook. The projects on the T and substation signed it we just think are going to outgrow a little bit we did have.

William R. Sperry: I think, let me take the second question first. Transmission and substation growth, I think is being impacted quite a bit by renewables as well as electrification trends. So, you need a new substation if you’re doing a utility size solar farm that needs to be generated and then transmitted and then step down again, to the extent you had some kind of massive data center or battery factory, so, electrification impacts like that. That kind of increases the demand on substations. And in addition, you just have those 53,000 substations, you just have some aging equipment that needs to be updated. So, it’s not that that distribution has bad growth outlook. It’s just that the projects on the T and substation side, we just think are going to outgrow a little bit.

Let me take the second question first.

Transmission and substation growth.

I think as being.

Being impacted quite a bit by renewables.

As well as electrification trends so.

You need a new substation.

Youre doing.

Utility sized solar farm.

It needs.

That needs to be generated and then transmitted and then stepped down again.

To extent you had some kind of massive data center or battery factory.

So electrification impacts like that.

William R. Sperry: That kind of increases the demand on substations. And in addition, you just have those 53,000 substations, you just have some aging equipment that needs to be updated. So, it’s not that that distribution has bad growth outlook. It’s just that the projects on the T and substation side, we just think are going to outgrow a little bit.

Kind of increases the demand on Substations and.

In addition, you just have.

And those 53000 Substations you just have some aging equipment that.

Needs to be needs to be.

Upgrade update so.

<unk>.

It's not that it.

It's not the distribution has bad growth outlook.

The projects on the T and substation signed it we just think are going to outgrow a little bit we did have.

William R. Sperry: We did a little deep dive last quarter on that, because we think it’s an interesting little subset of the space. As far as interest rate impact on project management, I think, it obviously is weighing on people’s consideration of cost of capital. And I just think the returns on their projects are just higher than the cost of capital. So, we just haven’t seen the dialog step down because of interest rates but that means - I don’t know, we’re not - we just haven’t seen that yet.

We did a little deep dive last quarter on that because we think it's we.

We think it's an interesting little subset of the space as far as interest rate impact on project management.

I think.

It obviously is weighing on people's consideration of cost of capital in.

I just I just think the returns on their projects.

Or just higher than the cost of capital. So we just we.

Haven't seen the dialogue.

Step down because of interest rates.

Okay.

But that maybe I don't know that we're not we just haven't seen that yet.

Gerben Bakker: And the other thing that will help is the infrastructure bills that are starting to come out. We’re seeing some of those being released right now. We just recently saw money being released in those areas. A good bit of those are going into transmission projects that we’ve been following. So that gives us confidence that certainly over the more near term, that area is a little stronger. But possibly, even to your interest rate question, I think bodes well for us going into next year, particularly the second half.

It's the infrastructure.

Bill.

You are starting to commodity we're seeing some of those being released right now we're just here recently saw.

Being being released in those areas a good bit of those are going into transmission projects that we've been following so that gives us confidence that certainly over the near term that area is a little stronger but.

The effects, possibly even to your interest rate question.

I think bodes well for us going.

Going into next year, particularly the second half.

Joseph John O'Dea: That's helpful. And then, just on the sequential margin trends in utility. I think clearly a mix impact with the comms and control strength within the power side and anything from a mix side there to be mindful of, in terms of the sequential move, or was it really just the comps and controls mix?

Just on the sequential margin trends and utility.

Yeah, I think clearly a mix impact with the comps and controls strength within the power side and anything from a mix side there to be mindful of in terms of the sequential move or was it really just the comps and controls mix.

William R. Sperry: Yes, I would say nothing inside of Power Systems would create sequential issues.

Joseph John O'Dea: Got it. Thanks very much.

William R. Sperry: Thanks, Joseph.

Operator: Thank you. I would now like to turn the conference back to Dan Innamorato for closing remarks. Sir?

I would now like to turn the conference back to Dan and the Morado for closing remarks, Sir.

Dan Innamorato: Great. Thank you, everyone, for joining us, and we’ll be around all day for calls. Thank you.

Gerben Bakker: Thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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Thank you for standing by and welcome to <unk> third quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session to ask a question. During necessity you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again I would now like to hand, the call over to VP of Investor Relations Dan Inamorato. Please go. Ahead. Thanks, operator, good morning, everyone and thank you for joining US earlier. This morning, we issued a press release announcing our results for the third quarter of 2023 press release and slides are posted to the investors section of our website at <unk> Dot Com I'm joined today by our chairman President and CEO Urban <unk>, and our executive Vice President and CFO Bill Sperry. Please note our comments this morning.

After the speaker presentation, there will be a question and answer session to ask a question. During necessity you will need to press star one one on your telephone to remove yourself from the question queue. You May Press Star one one again I would now like to hand, the call over to VP of Investor Relations Dan Inamorato. Please go.

Ahead.

Thanks, operator, good morning, everyone and thank you for joining US earlier. This morning, we issued a press release announcing our results for the third quarter of 2023 press release and slides are posted to the investors section of our website at <unk> Dot Com I'm joined today by our chairman President and CEO Urban <unk>, and our executive Vice President and CFO Bill Sperry. Please note our comments this morning.

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. 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. Those measures are reconciled with the comparable GAAP measures are included in the press release and slides now let me turn the call over to Kevin Thanks, Dan and good morning, everyone. For joining us to discuss <unk> third quarter results. Third quarter results demonstrate continued execution off a strong first half and multi year performance. Price realization remained strong as prior actions to offset inflation continued to stick in the marketplace. Supported by our leading position and service levels and attractive markets.

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. Those measures are reconciled with the comparable GAAP measures are included in the press release and slides now let me turn the call over to Kevin Thanks, Dan and good morning, everyone.

For joining us to discuss <unk> third quarter results.

Third quarter results demonstrate continued execution off a strong first half and multi year performance.

Price realization remained strong as prior actions to offset inflation continued to stick in the marketplace.

Supported by our leading position and service levels and attractive markets.

Additionally, improved productivity and lower year over year raw material costs also contributed to another quarter of significant operating margin expansion. As anticipated, we accelerated our investments in capacity productivity and innovation initiatives in the third quarter to drive long term returns for shareholders. We expect that grid modernization and electrification will continue to drive GDP plus growth in our markets over the next several years and <unk> is uniquely positioned to solve these critical infrastructure needs for our customers in front and behind the meter. These investments we are making in the second half of this year, we're effectively positioned the company to capitalize on these visible growth opportunities through best in class quality and service as well, Australia introduction of new products and solutions. More near term, we detailed last quarter, how normalizing supply chain dynamics have enabled improved manufacturing lead times and allowed our channel partners to normalize their order patterns in response to more predictable product availability.

As anticipated, we accelerated our investments in capacity productivity and innovation initiatives in the third quarter to drive long term returns for shareholders.

We expect that grid modernization and electrification will continue to drive GDP plus growth in our markets over the next several years and <unk> is uniquely positioned to solve these critical infrastructure needs for our customers in front and behind the meter.

These investments we are making in the second half of this year, we're effectively positioned the company to capitalize on these visible growth opportunities through best in class quality and service as well, Australia introduction of new products and solutions.

More near term, we detailed last quarter, how normalizing supply chain dynamics have enabled improved manufacturing lead times and allowed our channel partners to normalize their order patterns in response to more predictable product availability.

This process continued in the third quarter Bill. Bill will walk you through more of the details in a few minutes, but overall, we continue to view this as a natural outcome of supply chain organization. Broadly our sell through to end markets remains healthy and our positions with our customers remained strong. We anticipate that we will be mostly through this normalization process as we exit 2023. Our visibility to continued strong operating performance gives us the confidence that we can navigate effectively through the fourth quarter to deliver at the upper half of our prior guidance range. As we look ahead to 2024, we believe we are well positioned to drive profitable growth off of a strong multiyear performance base and I'll share some more color around our early planning considerations for next year at the end of the prepared remarks. Before I turn the call over to Bill Hubbell announced in a press release yesterday, the acquisition of systems control for $1 1 billion. And you'll note in today's presentation materials that we've also closed on a bolt on acquisition of <unk>.

Bill will walk you through more of the details in a few minutes, but overall, we continue to view this as a natural outcome of supply chain organization.

Broadly our sell through to end markets remains healthy and our positions with our customers remained strong.

We anticipate that we will be mostly through this normalization process as we exit 2023.

Our visibility to continued strong operating performance gives us the confidence that we can navigate effectively through the fourth quarter to deliver at the upper half of our prior guidance range.

As we look ahead to 2024, we believe we are well positioned to drive profitable growth off of a strong multiyear performance base and I'll share some more color around our early planning considerations for next year at the end of the prepared remarks.

Before I turn the call over to Bill Hubbell announced in a press release yesterday, the acquisition of systems control for $1 1 billion.

And you'll note in today's presentation materials that we've also closed on a bolt on acquisition of <unk>.

Both of these acquisitions are high quality businesses with strong strategic fit that enhance our industry, leading platform of utility components communications and controls. Since dust control is a leading manufacturer of mission critical substation protection and control solutions. The business is complementary to our portfolio and enhance our leading value proposition to our core utility customer base. Substation automation is an attractive space within the utility market as control and <unk> solutions are critical to upgrading and protecting aged infrastructure, while also enabling the integration of renewables and the electrification of the grid. Systems control has a proven business model and a demonstrated track record of delivering value for customers and financial performance that will enhance <unk> long term growth and margin profile. But <unk> is a leading manufacturer of high quality utility of restaurants, and insulators that bolt on well to our existing portfolio. Importantly, this acquisition also provides us with additional manufacturing capacity that will enable incremental output in a constrained USD <unk> market.

Since dust control is a leading manufacturer of mission critical substation protection and control solutions.

The business is complementary to our portfolio and enhance our leading value proposition to our core utility customer base.

Systems control has a proven business model and a demonstrated track record of delivering value for customers and financial performance that will enhance <unk> long term growth and margin profile.

But <unk> is a leading manufacturer of high quality utility of restaurants, and insulators that bolt on well to our existing portfolio.

Importantly, this acquisition also provides us with additional manufacturing capacity that will enable incremental output in a constrained USD <unk> market.

Bill will provide more color on both of these acquisitions in a few minutes. We are very pleased to deploy capital to acquire attractive businesses. Like these that will drive strong returns and strong long term value for our customers and shareholders. With that let me turn it over to Bill to walk you through the details of the quarter. Thanks, very much durbin. Everybody I appreciate you taking time to join us. This morning, I'm going to start my comments on page four of the materials that I hope you found on the website and Youll see here highlighted. Strong results for the third quarter with. With our performance broadly consistent with the themes and trends we've been discussing throughout the year, if I were to try to summarize that neatly. In a sense I would say we have been enjoying. Broad based market strength. And our key end markets. Which has helped support. <unk> margin expansion. Primarily driven by execution on the price cost front.

With that let me turn it over to Bill to walk you through the details of the quarter.

Thanks, very much durbin.

Everybody I appreciate you taking time to join us.

This morning, I'm going to start my comments on page four of the materials that I hope you found on the website and Youll see here highlighted.

Strong results for the third quarter with.

With our performance broadly consistent with the themes and trends we've been discussing throughout the year, if I were to try to summarize that neatly.

In a sense I would say we have been enjoying.

Broad based market strength.

And our key end markets.

Which has helped support.

<unk> margin expansion.

Primarily driven by execution on the price cost front.

And doing that while absorbing the. The channel managing inventories down in response to the supply chain improving from pandemic Jackson, you'll hear us talk about I think a lot of those teams. Throughout throughout today as we discuss our performance with you. You see <unk>. Sales of about $1 4, billion% to 5% increase 4% organic one from acquisition. And again. That's basically in line with how we have been. How we've been guiding you. The. <unk> margins at 21, 4% plus 440 basis points to last year, marking the third quarter in 2023, when we've had margins above 20%. Very strong execution on particularly on the price lever there. <unk>. And I would say that. We gave us the. The extra margin to help invest that we think will really help us both grow in future years as well as be more. Or more efficient so I think as we think about earnings and profit. Essentially in line with our expectations. A little bit stronger on margin.

The channel managing inventories down in response to the supply chain improving from pandemic Jackson, you'll hear us talk about I think a lot of those teams.

Throughout throughout today as we discuss our performance with you.

You see <unk>.

Sales of about $1 4, billion% to 5% increase 4% organic one from acquisition.

And again.

That's basically in line with how we have been.

How we've been guiding you.

The.

<unk> margins at 21, 4% plus 440 basis points to last year, marking the third quarter in 2023, when we've had margins above 20%.

Very strong execution on particularly on the price lever there.

<unk>.

And I would say that.

We gave us the.

The extra margin to help invest that we think will really help us both grow in future years as well as be more.

Or more efficient so I think as we think about earnings and profit.

Essentially in line with our expectations.

A little bit stronger on margin.

Maybe a little bit lighter on sales growth, so maybe getting there a little bit differently. Certainly in line with our expectations you see $3.95 of earnings. 98% year over year increase. Obviously, the strong operating performance driving those results and free cash flow of $159 million. Higher higher income in the quarter, but also higher capex higher investment in trade working capital. And we. We are confident in the year getting to $700 million. The fourth quarter. It's a very seasonally strong. As it typically is. So I think the way we are thinking about cash flow in <unk> comments, he talked about multiyear trends. So we're talking about cash flow from 'twenty, one 'twenty two 'twenty three going from 425 million to $500 million to $700 million. And we are excited about. Quality earnings, giving us that cash flow because it allows us to lean into investing and making our great company even better.

Certainly in line with our expectations you see $3.95 of earnings.

98% year over year increase.

Obviously, the strong operating performance driving those results and free cash flow of $159 million.

Higher higher income in the quarter, but also higher capex higher investment in trade working capital.

And we.

We are confident in the year getting to $700 million.

The fourth quarter.

It's a very seasonally strong.

As it typically is.

So I think the way we are thinking about cash flow in <unk> comments, he talked about multiyear trends.

So we're talking about cash flow from 'twenty, one 'twenty two 'twenty three going from 425 million to $500 million to $700 million.

And we are excited about.

Quality earnings, giving us that cash flow because it allows us to lean into investing and making our great company even better.

Even better in the future. Let's go to page five. And we will. C performance graphically arrayed against prior year here and I'm going to start in the. Upper left on sales <unk>, 5% increase. To just under $1 four. We had talked about organic being 4% acquisitions being one the. The acquisitions. <unk> our data center acquisition is as now we've kind of lapped out of that so the incrementals coming from both. Both AIG in Ripley mature. Ponant. Manufacturers in the utility space, so helping drive utility growth there, mostly on the organic 4%. Rice was six and units were down too. We think about the units. There was. Two soft end markets that we are managing through. One is the resi side, where we've had double digit declines. I think interest rates have and are having a big effect there. There. And second is on the telecom side, and we can talk a little bit more. About that where we still have pretty strong medium term outlook expectations for telecom. The balance.

Let's go to page five.

And we will.

C performance graphically arrayed against prior year here and I'm going to start in the.

Upper left on sales <unk>, 5% increase.

To just under $1 four.

We had talked about organic being 4% acquisitions being one the.

The acquisitions.

<unk> our data center acquisition is as now we've kind of lapped out of that so the incrementals coming from both.

Both AIG in Ripley mature.

Ponant.

Manufacturers in the utility space, so helping drive utility growth there, mostly on the organic 4%.

Rice was six and units were down too.

We think about the units.

There was.

Two soft end markets that we are managing through.

One is the resi side, where we've had double digit declines.

I think interest rates have and are having a big effect there.

There.

And second is on the telecom side, and we can talk a little bit more.

About that where we still have pretty strong medium term outlook expectations for telecom.

The balance.

Where we see units being driven down we believe is coming from channel actions to manage their inventories. And a very natural response to. This kind of multiyear cycle of having our lead times gap out during pandemic problems, where we had both material and labor shortages, we forced our customers therefore to over order and now they're managing that inventory back down to target a normal level. Meaning they are selling through to our end market at a higher rate. And they're buying from us. Urban said. Starting to see that. Come to an end on the <unk>. Electrical side around now and we're expecting. The power. To be done by year end. So I think 24 should start to look like a much more normal order pattern that year for us. With healthy markets.

And a very natural response to.

This kind of multiyear cycle of having our lead times gap out during pandemic problems, where we had both material and labor shortages, we forced our customers therefore to over order and now they're managing that inventory back down to target a normal level.

Meaning they are selling through to our end market at a higher rate.

And they're buying from us.

Urban said.

Starting to see that.

Come to an end on the <unk>.

Electrical side around now and we're expecting.

The power.

To be done by year end. So I think 24 should start to look like a much more normal order pattern that year for us.

With healthy markets.

On the upper right you see operating profit $295 million for the quarter. 21, 4% <unk> margin. 31% increase in dollars. And a very healthy increase in basis points of margin expansion. Interestingly as we look at trajectory. And we see sequentially those margins are down versus the. The second quarter. That's primarily due to investments that were making essentially on the growth side. Where we're pushing hard on new product development innovation, and also making some capacity expansions as well as on the efficiency side, where we're focusing on sourcing I think we've shared with you in the past. Hi charts of our cost structure and a lot of our costs. In the materials side, so our sourcing activity. To be very efficient and as well as supply chain efficiency. So we're happy to have the margin to make these investments because we think theyre going to make us more profitable. The future as we go forward. And earnings per share in the lower left you see a 28% increase to $3. 95. <unk>.

21, 4% <unk> margin.

31% increase in dollars.

And a very healthy increase in basis points of margin expansion.

Interestingly as we look at trajectory.

And we see sequentially those margins are down versus the.

The second quarter.

That's primarily due to investments that were making essentially on the growth side.

Hi charts of our cost structure and a lot of our costs.

In the materials side, so our sourcing activity.

To be very efficient and as well as supply chain efficiency. So we're happy to have the margin to make these investments because we think theyre going to make us more profitable.

The future as we go forward.

And earnings per share in the lower left you see a 28% increase to $3.

95.

<unk>.

The basically in line with AUM growth. <unk> had some tax headwinds that were largely offset by interest income so. One of the interesting impacts of higher interest rates. Where we have. Significant cash balances, we've been earning about 5% on the on that cash and even better more towards five five in the U S. Helped offset that tax headwind to keep keep earnings growth in line. Then you see the free cash flow. Down 18% to prior year. We obviously had more income but. But we have higher capex higher. Our working capital investment in inventory. One big driver was the timing of receipts. Which flooded in early October. So October is proved to be very cash rich months, we think going to drive a very cash rich.

<unk> had some tax headwinds that were largely offset by interest income so.

One of the interesting impacts of higher interest rates.

Where we have.

Significant cash balances, we've been earning about 5% on the on that cash and even better more towards five five in the U S.

Helped offset that tax headwind to keep keep earnings growth in line.

Then you see the free cash flow.

Down 18% to prior year.

We obviously had more income but.

But we have higher capex higher.

Our working capital investment in inventory.

One big driver was the timing of receipts.

Which flooded in early October.

So October is proved to be very cash rich months, we think going to drive a very cash rich.

Fourth quarter, which will get us. Over $700 million of cash flow for the year. So again. Three year walking cash really supporting us being able to be in the net investment position. So now I want to unpack the results. Tween, our two segments and on page six I wanted to start with the utility segments. So. Another strong quarter for our utility franchise. You see 8% growth in sales and nearly 40% growth and op dollars. With five points of operating profit margin expansion so. Strong strong performance by the franchise here. We'll focus on sales first up 8% to $838 million. Seven points of that is organic one. <unk>. Acquisition. Organic is essentially all price so units effectively flat. <unk>. And interesting we're starting to really see we report to you in these two different business units between the components for transmission and distribution. The comms and controls business unit, and we're starting to see the portfolio effect here where. For the past couple of years. T&D components business has been outgrowing communications and controls last quarter. Both was quite balanced and this quarter, you see Tom's and controls outgrowing components. I think both both effects being driven effectively by supply chain disruption. Becoming more normalized and. Let's talk through that for a minute so. <unk>. On the T&D side. We'll talk about three components first transmission second distribution and third telecom.

Over $700 million of cash flow for the year. So again.

Three year walking cash really supporting us being able to be in the net investment position.

So now I want to unpack the results.

Tween, our two segments and on page six I wanted to start with the utility segments.

So.

Another strong quarter for our utility franchise.

You see 8% growth in sales and nearly 40% growth and op dollars.

With five points of operating profit margin expansion so.

Strong strong performance by the franchise here.

We'll focus on sales first up 8% to $838 million.

Seven points of that is organic one.

<unk>.

Acquisition.

Organic is essentially all price so units effectively flat.

<unk>.

And interesting we're starting to really see we report to you in these two different business units between the components for transmission and distribution.

The comms and controls business unit, and we're starting to see the portfolio effect here where.

For the past couple of years.

T&D components business has been outgrowing communications and controls last quarter.

Both was quite balanced and this quarter, you see Tom's and controls outgrowing components.

I think both both effects being driven effectively by supply chain disruption.

Becoming more normalized and.

Let's talk through that for a minute so.

<unk>.

On the T&D side.

We'll talk about three components first transmission second distribution and third telecom.

Transmission part of the business. <unk> to be very strong. Demand strong shipment growth strong backlog strong pricing strong. On the distribution side. There are elements. They continue to be quite strong on backlog and growth. In particular, Theres places where. There is some part shortages and in particular some of these MOV blocks, which we'll talk about a little bit later. That are causing some of the. Insulator arrester. Units too. <unk>. Peak growth constrained essentially. But where the book and build parts of distribution have have come back and lead times have come way back. Seeing again. The our channel manage the inventory down and some of those parts and the distribution portion bigger than transmission. Telecom. Is clearly weakening temporarily here. We make primarily in closures, a little bit of connectors and hardware as well. But we. We make plastic fiberglass and Palmer Concreting closures. If you are crossing the street. And you look down as you're pushing the crosswalk button. Youll often see on those corners. And our brand would say quasi you might see the brand name. The telco. And those are those are boxes that contain the electronics. Keep them keep them safe and dry and accessible for maintenance and <unk>. Telecom and become an important customer. Of that of the enclosures business and we see very clear weakening there by the telcos. I think theres a mix of high interest rates, but we are seeing.

<unk> to be very strong.

Demand strong shipment growth strong backlog strong pricing strong.

On the distribution side.

There are elements.

They continue to be quite strong on backlog and growth.

In particular, Theres places where.

There is some part shortages and in particular some of these MOV blocks, which we'll talk about a little bit later.

That are causing some of the.

Insulator arrester.

Units too.

<unk>.

Peak growth constrained essentially.

But where the book and build parts of distribution have have come back and lead times have come way back.

Seeing again.

The our channel manage the inventory down and some of those parts and the distribution portion bigger than transmission.

Telecom.

Is clearly weakening temporarily here.

We make primarily in closures, a little bit of connectors and hardware as well.

But we.

We make plastic fiberglass and Palmer Concreting closures.

If you are crossing the street.

And you look down as you're pushing the crosswalk button.

Youll often see on those corners.

And our brand would say quasi you might see the brand name.

The telco.

And those are those are boxes that contain the electronics.

Keep them keep them safe and dry and accessible for maintenance and <unk>.

Telecom and become an important customer.

Of that of the enclosures business and we see very clear weakening there by the telcos.

I think theres a mix of high interest rates, but we are seeing.

The timing of their projects being affected by stimulus dollars were. If they wait to startup projects into next year. <unk>, some stimulus and have someone else pay for it. So we're seeing that have pretty significant demand on the timing of projects. Medium term outlook for that spending is still very robust. So we still consider it a growth vertical. Having this. This impacted I think weakness. So that's up in T&D. On the comm side similarly. Affected differently by the supply chain disruption basically have been prevented from finalizing chips and am I going into meters. And so business has been constrained we've seen that chip supply loosen up here in the third quarter. Nice nearly 30% growth. At attractive margins. And so we. We see some momentum now coming. Coming on the comm side so. Basically the portfolio of the pieces in cylinders of our portfolio are firing at different times here, but the net result. As a very strong performance, especially as you look over on the operating profit side on the right side of the page. Nearly 40% growth $200 million of profit at 24% margins. Price cost. Still quite a positive dynamic we feel good about that price continues to stick. Cost.

If they wait to startup projects into next year.

<unk>, some stimulus and have someone else pay for it. So we're seeing that have pretty significant demand on the timing of projects.

Medium term outlook for that spending is still very robust. So we still consider it a growth vertical.

Having this.

This impacted I think weakness.

So that's up in T&D.

On the comm side similarly.

Affected differently by the supply chain disruption basically have been prevented from finalizing chips and am I going into meters.

And so business has been constrained we've seen that chip supply loosen up here in the third quarter.

Nice nearly 30% growth.

At attractive margins.

And so we.

We see some momentum now coming.

Coming on the comm side so.

Basically the portfolio of the pieces in cylinders of our portfolio are firing at different times here, but the net result.

As a very strong performance, especially as you look over on the operating profit side on the right side of the page.

Nearly 40% growth $200 million of profit at 24% margins.

Price cost.

Still quite a positive dynamic we feel good about that price continues to stick.

Cost.

Has all of 'twenty two was inflationary from a materials perspective in 'twenty three actually turned to become <unk>. Tail tailwind, so providing an awful lot of lift to that margin story and some momentum into our fourth quarter that gives us confidence as Jeremy mentioned two to raise our guidance for the fourth quarter. So. Again, the utility franchise performing really nicely. Great Great financial performance. And we'll go to page seven to talk about the electrical segment. For them quite strong execution on the operating profit line by electrical solutions segments, you see the <unk>. 17% growth and. The attractive margin expansion there. All accomplished with a 1% decline in sales. To $538 million at 1% decline is comprised of price being up low single digits and the volume being down. Mid single digits. Yes. And. So were sort of talking about the different end market pieces, there and before breaking it down I think important to note that the volume is up sequentially. And we think Thats a very good sign you've heard me talk about. The channel managing the inventories down that's most notable in our non res exposure area. And with that volume up sequentially. And as we see the order patterns emerging we believe the fourth quarter, we will see the segment be able to grow we'd be able to. Discuss the end. Channel inventory management phase, which would be quite welcome on the resi side, it's been soft down double digits.

Tail tailwind, so providing an awful lot of lift to that margin story and some momentum into our fourth quarter that gives us confidence as Jeremy mentioned two to raise our guidance for the fourth quarter.

So.

Again, the utility franchise performing really nicely.

Great Great financial performance.

And we'll go to page seven to talk about the electrical segment.

For them quite strong execution on the operating profit line by electrical solutions segments, you see the <unk>.

17% growth and.

The attractive margin expansion there.

All accomplished with a 1% decline in sales.

To $538 million at 1% decline is comprised of price being up low single digits and the volume being down.

Mid single digits.

Yes.

And.

So were sort of talking about the different end market pieces, there and before breaking it down I think important to note that the volume is up sequentially.

And we think Thats a very good sign you've heard me talk about.

The channel managing the inventories down that's most notable in our non res exposure area.

And with that volume up sequentially.

And as we see the order patterns emerging we believe the fourth quarter, we will see the segment be able to grow we'd be able to.

Discuss the end.

Channel inventory management phase, which would be quite welcome on the resi side, it's been soft down double digits.

The industrial is the brighter part. We see growth and healthy. Shipments. The re shoring tailwind, we think is real and in particular, our verticals are doing very nicely between data centers and renewables. And so when we look to the right side of the page we see the margin expansion we. We see the growth of oki dollars while absorbing. Some of the volume impacts of the channel inventory management fees and soft Ramsey. It's actually we see quite a successful quite a successful story. Yeah. So Gordon in his opening comments. <unk> mentioned. A couple of portfolio moves in on <unk>. Page eight I want to walk you through. A little bit. A little bit more detail than that he gave you in his remarks. This is really the outcome of our business development process, which is. He is very intentional and focused on finding us high growth high margin profile businesses. That we can acquire and make more valuable on our platform. Then they are as Standalone companies. We believe we have two really good instance. Instances of that. Talk you through and. Really good for to see the cash flow performance of the enterprise. Really enable. Weighted less to comfortably do not. Not only to acquisitions, but one being in the $1 billion kind of size range. So. That's good I'm going to start at the bottom of page with <unk>. <unk> and $85 million deal with $40 million of sales that. I think looks very typical to you all I would call. It a very typical hubbell tuck in. <unk>.

We see growth and healthy.

Shipments.

The re shoring tailwind, we think is real and in particular, our verticals are doing very nicely between data centers and renewables.

And so when we look to the right side of the page we see the margin expansion we.

We see the growth of oki dollars while absorbing.

Some of the volume impacts of the channel inventory management fees and soft Ramsey.

It's actually we see quite a successful quite a successful story.

Yeah.

So Gordon in his opening comments.

<unk> mentioned.

A couple of portfolio moves in on <unk>.

Page eight I want to walk you through.

A little bit.

A little bit more detail than that he gave you in his remarks.

This is really the outcome of our business development process, which is.

He is very intentional and focused on finding us high growth high margin profile businesses.

That we can acquire and make more valuable on our platform.

Then they are as Standalone companies.

We believe we have two really good instance.

Instances of that.

Talk you through and.

Really good for to see the cash flow performance of the enterprise.

Really enable.

Weighted less to comfortably do not.

Not only to acquisitions, but one being in the $1 billion kind of size range. So.

That's good I'm going to start at the bottom of page with <unk>.

<unk> and $85 million deal with $40 million of sales that.

I think looks very typical to you all I would call. It a very typical hubbell tuck in.

<unk>.

It's we've been in contact with them for many years, so exciting to get this to fruition, but. The lessor has very attractive. Local business in Latin America. Making. Insulator investor products, but. The real attraction for US is what you see on the left of the picture. Little hockey Pucks are MOV blocks. I'll take it. Insulator restroom products, which you see kind of in the spine there. And prevents the conduction of electricity, which then allows our products to really protect. Other expense of equipment from <unk>. Voltage surges and other damaging effects so far. <unk>, our insulate our rescue business in the U S has been constrained by lack of availability of these MLP blocks. So. It's <unk>. Its an exciting deal for us besides local business to really help us now get that supply chain vertically integrated make. More. Capacity available so we can actually grow and grab share in those businesses, which are high. High margin businesses, so very strategic strategic acquisition for us even though. Typical tuck in sort of size. And our systems control being a larger size than typical for us. On this page I may talk about the footprint of systems control and. Next page I'll, maybe switch to a little bit more what it does but you see a 1 billion one of acquisition size with $400 million of sales. That's all in backlog essentially so it's. It's kind of pre wired for that for next year. We are anticipating. Closing, we've just signed it. We are anticipating closing a pie.

The lessor has very attractive.

Local business in Latin America.

Making.

Insulator investor products, but.

The real attraction for US is what you see on the left of the picture.

Little hockey Pucks are MOV blocks.

I'll take it.

Insulator restroom products, which you see kind of in the spine there.

And prevents the conduction of electricity, which then allows our products to really protect.

Other expense of equipment from <unk>.

Voltage surges and other damaging effects so far.

<unk>, our insulate our rescue business in the U S has been constrained by lack of availability of these MLP blocks.

So.

It's <unk>.

Its an exciting deal for us besides local business to really help us now get that supply chain vertically integrated make.

More.

Capacity available so we can actually grow and grab share in those businesses, which are high.

High margin businesses, so very strategic strategic acquisition for us even though.

Typical tuck in sort of size.

And our systems control being a larger size than typical for us.

On this page I may talk about the footprint of systems control and.

Next page I'll, maybe switch to a little bit more what it does but you see a 1 billion one of acquisition size with $400 million of sales.

That's all in backlog essentially so it's.

It's kind of pre wired for that for next year.

We are anticipating.

Closing, we've just signed it.

We are anticipating closing a pie.

By year end. Normal closing. <unk> conditions get satisfied. We'll be anticipating. Source of funds for the acquisition coming from cash and debt. As a result of the acquisition, we are anticipating our debt to EBITDA being around one seven times on a gross basis net basis about one five. So interesting to see how the balance sheet has grown in the cash flow has grown. To allow a $1 billion deal to be very affordable by leverage means. We're anticipating attractive accretion. From the acquisition. It may be worth, noting I think a couple of you put out some notes that we're emphasizing synergies. And I would not describe systems control as a synergy oriented deal at least on the cost side. There certainly will be cost synergies, but there is always in the first year integration costs as well. So the net of that doesn't tend to be a big impact. But the real synergy for US is with our sales force and our client base really being able to grow that business. Very effectively. And as well I think the second item on interest expense. We mentioned our cash we've been earning about five points in fall. Growing. We'll probably be in the sixes. But that's all subject to market conditions at time of close so what kind of reserve. To get that organized for when we give you guidance, we'll give you more specifics on all of that and maybe on page nine I can do a better job of explaining exactly what systems control is and what it does. So you see on the bottom of the page. When you have generation, you've got a step up the voltage.

Normal closing.

<unk> conditions get satisfied.

We'll be anticipating.

Source of funds for the acquisition coming from cash and debt.

As a result of the acquisition, we are anticipating our debt to EBITDA being around one seven times on a gross basis net basis about one five.

So interesting to see how the balance sheet has grown in the cash flow has grown.

To allow a $1 billion deal to be very affordable by leverage means.

We're anticipating attractive accretion.

From the acquisition.

It may be worth, noting I think a couple of you put out some notes that we're emphasizing synergies.

And I would not describe systems control as a synergy oriented deal at least on the cost side. There certainly will be cost synergies, but there is always in the first year integration costs as well. So the net of that doesn't tend to be a big impact.

But the real synergy for US is with our sales force and our client base really being able to grow that business.

Very effectively.

And as well I think the second item on interest expense.

We mentioned our cash we've been earning about five points in fall.

Growing.

We'll probably be in the sixes.

But that's all subject to market conditions at time of close so what kind of reserve.

So you see on the bottom of the page.

When you have generation, you've got a step up the voltage.

Two transmitted on one of those 90% with steel towers and when it gets to the last mile. It gets stepped down and voltage and then distributed to the user. Each of these. Substations around. And it's fun when you drive on the highway you'll you'll now start to look I hope. Cds White buildings. Inside of the substation, which contain these control and really panels. Which. Monitor and. Control the flow of electricity. And prevent damage to any of the really expensive equipment around it. And so. This business kind of fits. Very nicely with Hubble in many ways. It's all the same customers. In fact youre. Getting relationship oriented customers like this product. Dan on a turnkey basis, which is good for us. If you look around at substation on the upper left. We're already selling insulators arrester switches bushings hardware connectors and alike sprinkled around so this is now kind of. A chunky investment here in the control building. It has the same trade since typical hubbell power systems, where the cost of our product is quite low relative to the investment in the. Performance in the other equipment around it. So the protection of that becomes very valuable. It's going to involve very close work with our customers in designing and executing these buildings. So. Sure. We are very. We're very pleased and think it fits fits well its financial history has been very attractive it has grown at double digits.

Each of these.

Substations around.

And it's fun when you drive on the highway you'll you'll now start to look I hope.

Cds White buildings.

Inside of the substation, which contain these control and really panels.

Which.

Monitor and.

Control the flow of electricity.

And prevent damage to any of the really expensive equipment around it.

And so.

This business kind of fits.

Very nicely with Hubble in many ways.

It's all the same customers.

In fact youre.

Getting relationship oriented customers like this product.

Dan on a turnkey basis, which is good for us.

If you look around at substation on the upper left.

We're already selling insulators arrester switches bushings hardware connectors and alike sprinkled around so this is now kind of.

A chunky investment here in the control building.

It has the same trade since typical hubbell power systems, where the cost of our product is quite low relative to the investment in the.

Performance in the other equipment around it.

So the protection of that becomes very valuable.

It's going to involve very close work with our customers in designing and executing these buildings. So.

Sure.

We are very.

We're very pleased and think it fits fits well its financial history has been very attractive it has grown at double digits.

Or in the last eight years or so. The investment thesis on growth is really simple here. This outlook for substation spending is very robust as. As the 53000 Substations out there start to age and secondly, the way these buildings are constructed. We think theres going to be a pivot from infield construction in factory construction and this turnkey solution that systems control provides fits. Fits that trend, we think both of those trends are going to allow for continued double digit growth at high margins. So. I think the last part of fit worth mentioning is the management team. Brad and his team, we really enjoyed getting to know them. We think. Lot of times with private equity owned businesses, we run into a mercenary has been hired. Dressed something up and sell it and Brad is a 22 year veteran of this company he has a deep passion. To grow it. And I would say, we're really excited to partner. And provide resources to enable Brad too to engage and then the growth strategy and we welcome Brad and his team to the Hubble family. Okay. So let's talk about how the year is expected to finish and then I'll, let German telling about how that sets up 24, but on page 10. Youll see that. We had. Sales growth when we talked to you last in July of 8% to 10%, we're narrowing that to the 8% range. In July we had earnings at $14 75 to $15 25. So. We're cutting that range in half and we feel good that the fourth quarter momentum will get us to the upper half of the range that we had initially shared with you back then and the cash flow.

The investment thesis on growth is really simple here.

This outlook for substation spending is very robust as.

As the 53000 Substations out there start to age and secondly, the way these buildings are constructed.

We think theres going to be a pivot from infield construction in factory construction and this turnkey solution that systems control provides fits.

Fits that trend, we think both of those trends are going to allow for continued double digit growth at high margins. So.

I think the last part of fit worth mentioning is the management team.

Brad and his team, we really enjoyed getting to know them.

We think.

Lot of times with private equity owned businesses, we run into a mercenary has been hired.

Dressed something up and sell it and Brad is a 22 year veteran of this company he has a deep passion.

To grow it.

And I would say, we're really excited to partner.

And provide resources to enable Brad too to engage and then the growth strategy and we welcome Brad and his team to the Hubble family.

Okay.

So let's talk about how the year is expected to finish and then I'll, let German telling about how that sets up 24, but on page 10.

Youll see that.

We had.

Sales growth when we talked to you last in July of 8% to 10%, we're narrowing that to the 8% range.

In July we had earnings at $14 75 to $15 25. So.

We're cutting that range in half and we feel good that the fourth quarter momentum will get us to the upper half of the range that we had initially shared with you back then and the cash flow.

Any robust. $700 million. So the fourth quarter as all this last obviously. We think that what we should expect in our fourth quarter is typical seasonality. And there is a <unk>. Mid single digit fewer days, so we usually get that impact on sales sequentially. The price cost dynamic we've got momentum there. Which is going to help drive margin expansion in the fourth quarter and we're going to continue to invest in both our businesses growth prospects as well as its efficiency to setup, a stronger 24 and beyond so. Again, I think the three year walk. Shows a pretty interesting pick. Picture of the pandemic contraction and <unk> expansion. With supply chain disruption in 'twenty, one and 'twenty, two and 'twenty, three being normalizing supply chains and. And price cost really driving this 25% growth over that. Over that three year period. So we really feel we're coming out of the. <unk>. Bigger stronger and more profitable enterprise. And I think we're pleased with the investing we've been able to do in 'twenty three. It's really helps support 24 and beyond I'll, let curve and sort of give you some of his preliminary thoughts on that. Great. Thanks, Bill and as we look ahead, we feel well positioned for 2024 and beyond grid. Grid modernization electrification mega trends remain intact, and we continue to believe our utility markets can deliver mid single digit organic growth over the next several years. Our industry, leading utility franchise is uniquely positioned to enable us to serve our utility customers as they invest to make the grid infrastructure more reliable resilient and renewable.

$700 million.

So the fourth quarter as all this last obviously.

We think that what we should expect in our fourth quarter is typical seasonality.

And there is a <unk>.

Mid single digit fewer days, so we usually get that impact on sales sequentially.

The price cost dynamic we've got momentum there.

Which is going to help drive margin expansion in the fourth quarter and we're going to continue to invest in both our businesses growth prospects as well as its efficiency to setup, a stronger 24 and beyond so.

Again, I think the three year walk.

Shows a pretty interesting pick.

Picture of the pandemic contraction and <unk> expansion.

With supply chain disruption in 'twenty, one and 'twenty, two and 'twenty, three being normalizing supply chains and.

And price cost really driving this 25% growth over that.

Over that three year period.

So we really feel we're coming out of the.

<unk>.

Bigger stronger and more profitable enterprise.

And I think we're pleased with the investing we've been able to do in 'twenty three.

It's really helps support 24 and beyond I'll, let curve and sort of give you some of his preliminary thoughts on that.

Great. Thanks, Bill and as we look ahead, we feel well positioned for 2024 and beyond grid.

Grid modernization electrification mega trends remain intact, and we continue to believe our utility markets can deliver mid single digit organic growth over the next several years.

Our industry, leading utility franchise is uniquely positioned to enable us to serve our utility customers as they invest to make the grid infrastructure more reliable resilient and renewable.

While we anticipate telecom markets to remain weak through the first half of next year strong demand in T&D markets, particularly transmission and substation support visible growth. We also anticipate that the deployment of infrastructure stimulus funding will drive further demand for Hubbell utility solutions in the second half of next year. And electrical solutions, we continue to see significant opportunity to drive further value across our portfolio by competing collectively and operating more efficiently as we bring these businesses closer together. Made good progress in reshaping this portfolio over the last several years with 25% of segment revenue is now tied to growth verticals aligned to mega trends like data centers renewables and utility T&D. And we expect continued growth in these areas next year. Industrial markets have been solid with support from U S industrial near shoring and manufacturing project activity and nonresidential markets have remained stable. We've yet to see the signs of macroeconomic uncertainty our higher interest rate impact in these markets. But this is something we are closely monitoring as we built out contingency scenarios for planning into next year. From an operational perspective, the price cost productivity equation will be more dynamic to navigate as we enter a more normalized environment, but we have levers at our disposal to manage this effectively. We expect that execution on productivity initiatives will become more important focus area for us moving forward to enable us to offset persistent inflation, while maintaining a strong pricing levels. We have achieved over the last several years.

We also anticipate that the deployment of infrastructure stimulus funding will drive further demand for Hubbell utility solutions in the second half of next year.

And electrical solutions, we continue to see significant opportunity to drive further value across our portfolio by competing collectively and operating more efficiently as we bring these businesses closer together.

And we expect continued growth in these areas next year.

Industrial markets have been solid with support from U S industrial near shoring and manufacturing project activity and nonresidential markets have remained stable.

From an operational perspective, the price cost productivity equation will be more dynamic to navigate as we enter a more normalized environment, but we have levers at our disposal to manage this effectively.

We will provide additional color along with our 24 outlook early next year, but overall, we remain confident in our ability to deliver continued profitable growth off of a strong multi year base of performance with that let me turn it over to Q&A. As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again. Please standby, while we compile the Q&A roster. Our first question comes from the line of Jeff Sprague of vertical research. Thank you good morning. First just thinking about Q4 implied. Have a nice acceleration in organic growth, obviously the comp is easier. I just wonder if you could give us a sense of how you see volume progressing in Q4. It sounds like you would expect it to inflect positive in E&P and. Backing into probably a decent volume quarter in utility also but would love your perspective on just some granularity on the organic. Part one here. Yes, Jeff I think I think you almost answered your own question, but it is significant to us. That the electrical side has been facing some of this. Overstock situation for a few quarters now. So we think thats nice to see that inflicting into a growth position in sort of getting that period back too. Back to a normal book and bill sort of fourth quarter and really 'twenty four. And I think that's kind of that's kind of the story. And then just thinking about margins into next year Bill or Durbin. Obviously, we're coming off a high level.

As a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.

Please standby, while we compile the Q&A roster.

Our first question comes from the line of Jeff Sprague of vertical research.

Thank you good morning.

First just thinking about Q4 implied.

Have a nice acceleration in organic growth, obviously the comp is easier.

I just wonder if you could give us a sense of how you see volume progressing in Q4. It sounds like you would expect it to inflect positive in E&P and.

Backing into probably a decent volume quarter in utility also but would love your perspective on just some granularity on the organic.

Part one here.

Yes, Jeff I think I think you almost answered your own question, but it is significant to us.

That the electrical side has been facing some of this.

Overstock situation for a few quarters now.

So we think thats nice to see that inflicting into a growth position in sort of getting that period back too.

Back to a normal book and bill sort of fourth quarter and really 'twenty four.

And I think that's kind of that's kind of the story.

And then just thinking about margins into next year Bill or Durbin.

Obviously, we're coming off a high level.

It sounds like you expect price to be positive you still have inflation. In aggregate, maybe not so much in materials. Maybe just kind of talk about roughly how you would bridge us on an incremental or however, you want to frame it. Because we're also trying to dial on these <unk>. <unk> headwinds I would assume youre going to continue to invest for growth going forward, but it sounds like maybe it's a headwind in 2023, but is more kind of maybe just in the base. Part of sales growth in 2024, but maybe you could just give us a little bit more color on. How to think about bridging the margins. Yes, I think look I think we're frankly will be much more. Give you much more granularity when we're together in January and we give you our guidance, but I think youre, putting your finger on some important things. Basically <unk> got. The expectation that volumes. We will be positive and in those cases. The. Fixed cost absorption and the incrementals, helping push margins up. I think the. Investment point. We are still calibrating exactly how much we're going to do I think from garbage in my perspective. The great news is to see how creative and aggressive our teams have been in coming up with investment ideas. It's more a function of carbonite regulating that and as opposed to Gee, we don't have any ideas as to how to improve the franchise I think on the. The price comment that you made. There is a little bit of wraparound. Embedded. From the timing of price increases in 'twenty, three but thats.

In aggregate, maybe not so much in materials.

Maybe just kind of talk about roughly how you would bridge us on an incremental or however, you want to frame it.

Because we're also trying to dial on these <unk>.

<unk> headwinds I would assume youre going to continue to invest for growth going forward, but it sounds like maybe it's a headwind in 2023, but is more kind of maybe just in the base.

Part of sales growth in 2024, but maybe you could just give us a little bit more color on.

How to think about bridging the margins.

Yes, I think look I think we're frankly will be much more.

Give you much more granularity when we're together in January and we give you our guidance, but I think youre, putting your finger on some important things.

Basically <unk> got.

The expectation that volumes.

We will be positive and in those cases.

The.

Fixed cost absorption and the incrementals, helping push margins up.

I think the.

Investment point.

We are still calibrating exactly how much we're going to do I think from garbage in my perspective.

The great news is to see how creative and aggressive our teams have been in coming up with investment ideas.

It's more a function of carbonite regulating that and as opposed to Gee, we don't have any ideas as to how to improve the franchise I think on the.

The price comment that you made.

There is a little bit of wraparound.

Embedded.

From the timing of price increases in 'twenty, three but thats.

Pretty small certainly compared to last two years and. B, whether theres any new price beyond that. We will remain to be seen and we'll share that with you as we get to year end I think. We do expect productivity, because because you mentioned the inflation side. And we've been pretty Simplistically trying to maintain. A balance between price and material cost on the one hand and productivity and non material inflation on the other. When the non material inflation gets. Five ish percent right, it's a little bit harder to rely on just productivity to do that that being said. We have a lot of this investment that we've been talking about is aligned towards being more productive. So we're going to continue to target that price cost productivity to be balanced. But again I think it will be a lot more clear. With you and granular with you Jeff when we're together next time. And maybe just a quick one for garden. Nice deal here, obviously on the utility side I, just wonder if you could give us a little bit more color on how you can leverage it internally either either for growth or margin expansion, what kind of bill kind of tried to dial this back a little bit on cost synergies I'm sure. There are some though. How do you integrate this into your footprint leverage purchasing that sort of thing. To fully maximize the value here. Yes sure. We're obviously very excited too. Both deals.

B, whether theres any new price beyond that.

We will remain to be seen and we'll share that with you as we get to year end I think.

We do expect productivity, because because you mentioned the inflation side.

And we've been pretty Simplistically trying to maintain.

A balance between price and material cost on the one hand and productivity and non material inflation on the other.

When the non material inflation gets.

Five ish percent right, it's a little bit harder to rely on just productivity to do that that being said.

We have a lot of this investment that we've been talking about is aligned towards being more productive. So we're going to continue to target that price cost productivity to be balanced.

But again I think it will be a lot more clear.

With you and granular with you Jeff when we're together next time.

And maybe just a quick one for garden.

Nice deal here, obviously on the utility side I, just wonder if you could give us a little bit more color on how you can leverage it internally either either for growth or margin expansion, what kind of bill kind of tried to dial this back a little bit on cost synergies I'm sure. There are some though.

How do you integrate this into your footprint leverage purchasing that sort of thing.

To fully maximize the value here.

Yes sure.

We're obviously very excited too.

Both deals.

Obviously, the systems control the size and the scale that it adds to the franchise. We're really excited but the good news with this business coming in. Historically been. The high growth and it's very profitable. As you can see so that certainly in a nice position coming into the portfolio as we looked and we diligence this business. There's some really nice trends that I think we'll serve surface business right. One is that they have been for 60 year. <unk> control panel manufacturer, but over the last. 10, or 20 years, Dave Dave moved into a more turnkey systems and in essence, what that does is stake labor of putting the systems together. Traditionally in the field to a more controlled environment in the factory, where they not only have a better control environment. They test them and it takes a lot of time out of the field. So this is a trend that we're actually seeing in debased issued sorry. So I think when we acquired PC exit at similar dynamics some of the new products that we're developing have those features in place. So it's an area that we believe will. See outsized growth. Coming in but where we can add to it as we looked at who their customers are it aligns extremely well with with some of our customers are with the exception that they still have a much smaller. There are those customers and I think this is where we really see that with our sales for with our. People, we can we can add. Two two.

We're really excited but the good news with this business coming in.

Historically been.

The high growth and it's very profitable.

As you can see so that certainly in a nice position coming into the portfolio as we looked and we diligence this business.

There's some really nice trends that I think we'll serve surface business right. One is that they have been for 60 year.

<unk> control panel manufacturer, but over the last.

10, or 20 years, Dave Dave moved into a more turnkey systems and in essence, what that does is stake labor of putting the systems together.

Traditionally in the field to a more controlled environment in the factory, where they not only have a better control environment. They test them and it takes a lot of time out of the field. So this is a trend that we're actually seeing in debased issued sorry.

So I think when we acquired PC exit at similar dynamics some of the new products that we're developing have those features in place. So it's an area that we believe will.

See outsized growth.

Coming in but where we can add to it as we looked at who their customers are it aligns extremely well with with some of our customers are with the exception that they still have a much smaller.

There are those customers and I think this is where we really see that with our sales for with our.

People, we can we can add.

Two two.

Complementing that so I do believe it's more about the sales growth and then probably a typical cost synergies that we would see in a smaller tuck ins coming in. But really excited about having this in the portfolio and what we can do it. Great. Thank you very much. Thank you. Our next question comes from the line. Please standby. Our next question comes from the line of Steve Tusa of Jpmorgan. Hi, guys good morning. Good morning. So just on the can you update us update us on the price cost productivity. <unk> and then. Bill you always have like a pretty good. Balanced view of the macro here I remember back in the day, you would talk about how things are either. Kind of trending. As you would expect with a rhythm to it or whether things are kind of choppy and a low growth world. How would you kind of characterize the demand youre seeing today in the 'twenty four like just from a consistency and visibility perspective across your portfolio. Yes, I would say. The hard part about your question is I think you were asking about out the door demand from our channel to the end user and I think that has been a nice stable demand I'd point out to week areas between telco and <unk>. And together they are each on one side of our segment and they're each about 10%. So there's 80% of the company I would say Steve that seeing. Nice healthy markets. From the out the door sales side I think the. The part that's. It makes it a little more challenging is.

But really excited about having this in the portfolio and what we can do it.

Great. Thank you very much.

Thank you.

Our next question comes from the line.

Please standby.

Our next question comes from the line of Steve Tusa of Jpmorgan.

Hi, guys good morning.

Good morning.

So just on the can you update us update us on the price cost productivity.

<unk> and then.

Bill you always have like a pretty good.

Balanced view of the macro here I remember back in the day, you would talk about how things are either.

Kind of trending.

As you would expect with a rhythm to it or whether things are kind of choppy and a low growth world.

How would you kind of characterize the demand youre seeing today in the 'twenty four like just from a consistency and visibility perspective across your portfolio.

Yes, I would say.

The hard part about your question is I think you were asking about out the door demand from our channel to the end user and I think that has been a nice stable demand I'd point out to week areas between telco and <unk>.

And together they are each on one side of our segment and they're each about 10%.

So there's 80% of the company I would say Steve that seeing.

Nice healthy markets.

From the out the door sales side I think the.

The part that's.

It makes it a little more challenging is.

How much of that is coming out of inventory in the channel versus how much is coming out of our factory shipping new stuff and that's where. We're sort of in this inflection phase. That. I think our electrical side was probably a quarter earlier and so I think there. Out of it and our power side has another quarter or so to go and. So. It's. That that disconnect is just makes it a little less smooth and I think from a. Thank you used a good word of predictability and visibility. I think we're looking forward to 'twenty four being a little more straightforward. Demand to get to in order to get some shipment. And that is price cost and productivity for the year like what that new number is. If there's an update to it. Alright. Yes price cost productivity. Yes, so we. When you look at it a year over year basis. This is kind of we got this eight quarter 'twenty, two and 'twenty three very positive picture. 22, I would characterize as really strong price pull with material inflation 23 has been a little bit less price pull but with material tailwind. So it created an even bigger net. And as you look at it quarterly. Stepping down in the second half, so third and fourth quarter. A little bit less but still. I mean on an absolute basis, a really big contributor to our margin expansion story. Can you maybe an absolute number. Driving the majority of the margin expansion. Great. Thanks, a lot guys.

We're sort of in this inflection phase.

That.

I think our electrical side was probably a quarter earlier and so I think there.

Out of it and our power side has another quarter or so to go and.

So.

It's.

That that disconnect is just makes it a little less smooth and I think from a.

Thank you used a good word of predictability and visibility.

I think we're looking forward to 'twenty four being a little more straightforward.

Demand to get to in order to get some shipment.

And that is price cost and productivity for the year like what that new number is.

If there's an update to it.

Alright.

Yes price cost productivity.

Yes, so we.

When you look at it a year over year basis.

This is kind of we got this eight quarter 'twenty, two and 'twenty three very positive picture.

22, I would characterize as really strong price pull with material inflation 23 has been a little bit less price pull but with material tailwind. So it created an even bigger net.

And as you look at it quarterly.

Stepping down in the second half, so third and fourth quarter.

A little bit less but still.

I mean on an absolute basis, a really big contributor to our margin expansion story.

Can you maybe an absolute number.

Driving the majority of the margin expansion.

Great. Thanks, a lot guys.

Thank you to sound, we would like to remind analysts to limit your questions to one question and one follow up again Thats. One question and one follow up then return to the queue. Please standby for our next question, which comes from the line. Nigel Coe. Aqua research. Thanks, Good morning, guys. So I only get one question one follow on okay. Fair enough. Can you maybe just give us. Of your thinking on what gives you confidence. But this utility destock as is sort of going to be finished by year end because I think that's the key for a lot of folks here, so any metrics on kind of seller. Selling the sellout. Backlog burn. Based on hand, any any any intel that'd be helpful. Yes, so we've been using backlog and a nice let's say that. To simplify your question electrical is already in the position of being kind of book and Bill Okay. So. We've used backlog in the second and third quarters of this year. And we still have. More backlog than we traditionally do I would say pre pandemic. Think about backlog being in the six week range as being very normal and typical of our book and Bill kind of enterprise. I'd say, we're sort of in the quarter and a half of backlog now. So it's maybe two five times typical size. So we still have. The backlog on the power side. And I think that. The models that we've built. And the way that we're looking at those specific businesses, who have gone to. Much more normal.

Please standby for our next question, which comes from the line.

Nigel Coe.

Aqua research.

Thanks, Good morning, guys. So I only get one question one follow on okay.

Fair enough.

Can you maybe just give us.

Of your thinking on what gives you confidence.

But this utility destock as is sort of going to be finished by year end because I think that's the key for a lot of folks here, so any metrics on kind of seller.

Selling the sellout.

Backlog burn.

Based on hand, any any any intel that'd be helpful.

Yes, so we've been using backlog and a nice let's say that.

To simplify your question electrical is already in the position of being kind of book and Bill Okay. So.

We've used backlog in the second and third quarters of this year.

And we still have.

More backlog than we traditionally do I would say pre pandemic.

Think about backlog being in the six week range as being very normal and typical of our book and Bill kind of enterprise.

I'd say, we're sort of in the quarter and a half of backlog now. So it's maybe two five times typical size. So we still have.

The backlog on the power side.

And I think that.

The models that we've built.

And the way that we're looking at those specific businesses, who have gone to.

Much more normal.

Lead time. And we see those are the those are the areas where we. We think. They're shipping more than they're receiving from us. As we talk to our customers. And the models that we've created it feels to us like that burns off that whole phase burns off by the end of the year and we kind of using what we saw in electrical because it's that's a good precursor we think and so those two all of that stuff combines but I do appreciate I think there is maybe some some art. And some science mixed together in that answer. Yes, maybe ill provide an additional commentary Nigel is that while I think built correctly points out there's a lot of moving parts. Good part is we have very strong tie ins with not just our electrical. Channel partners, but with our utility end customers through those discussions we can we can have discussion where the inventory sits in that channel because it fits in both places. And we see clearly in certain product line supported by the order rate in the shipment rates. That inventory has come down and they're telling us when they are getting towards that end of where they want to be but I'll also remind you that the demand in the utility sector is still very very strong. In those same conversations customers are very optimistic about. The deep increased. Increased higher levels of spend if you look at the Capex plans going forward elevated so while it's certainly a little bit uncomfortable managing through this. Time, as we look out a little bit we feel really good about the end demand and that we can continue to grow our business through the cycle. Okay. That's helpful. Thanks, guys and then just on the electrical solutions margins.

And we see those are the those are the areas where we.

We think.

They're shipping more than they're receiving from us.

As we talk to our customers.

And some science mixed together in that answer.

Yes, maybe ill provide an additional commentary Nigel is that while I think built correctly points out there's a lot of moving parts.

Good part is we have very strong tie ins with not just our electrical.

Channel partners, but with our utility end customers through those discussions we can we can have discussion where the inventory sits in that channel because it fits in both places.

And we see clearly in certain product line supported by the order rate in the shipment rates.

That inventory has come down and they're telling us when they are getting towards that end of where they want to be but I'll also remind you that the demand in the utility sector is still very very strong.

In those same conversations customers are very optimistic about.

The deep increased.

Increased higher levels of spend if you look at the Capex plans going forward elevated so while it's certainly a little bit uncomfortable managing through this.

Time, as we look out a little bit we feel really good about the end demand and that we can continue to grow our business through the cycle.

Okay. That's helpful. Thanks, guys and then just on the electrical solutions margins.

I think with all this noise in the utility I think we're forgetting that diesel continuing CLEC inflate too to record levels, especially when you consider the residential business at BMC well below that. The average so. When volumes inflect. I think the appointment to inflect in the fourth quarter. And then I will say into 2024. Do you think you can actually build on these margins or is that going to be some offsets I can't think of any but are you confident you can push margins and so maybe the upper teens level. Yes, I think I think youre looking at the same way, we are which is that this is a new base. And that new volumes should drop at Incrementals. And I think the. The one overlay to all of that that gives me, maybe even more confidence than you. Is. Mark Mics spent seems like a lifetime, making our power systems multi brand platform compete collectively and accurately efficiently and he really is at the early days of him, adding what I would just call. Overall segment efficiencies to how those different silos are running and so there is both the massive growth in incrementals, but also marks. Experience with us and track record of finding. Just structural ways to make it cheaper to operate more efficiently. Right. Okay. Thanks Bill. Thank you. Our next question. Comes from the line of Brett Linzey of Mizuho. Hey, good morning, all. Hi, Brian. Yes, I wanted to come back to calm and controls up 28% another strong quarter as you catch up on supply chain I know at one point you had $1 billion backlog 6 billion a pipeline of projects in the funnel.

The average so.

When volumes inflect.

I think the appointment to inflect in the fourth quarter.

And then I will say into 2024.

Do you think you can actually build on these margins or is that going to be some offsets I can't think of any but are you confident you can push margins and so maybe the upper teens level.

Yes, I think I think youre looking at the same way, we are which is that this is a new base.

And that new volumes should drop at Incrementals.

And I think the.

The one overlay to all of that that gives me, maybe even more confidence than you.

Is.

Overall segment efficiencies to how those different silos are running and so there is both the massive growth in incrementals, but also marks.

Experience with us and track record of finding.

Just structural ways to make it cheaper to operate more efficiently.

Right.

Okay. Thanks Bill.

Thank you.

Our next question.

Comes from the line of Brett Linzey of Mizuho.

Hey, good morning, all.

Hi, Brian.

Yes, I wanted to come back to calm and controls up 28% another strong quarter as you catch up on supply chain I know at one point you had $1 billion backlog 6 billion a pipeline of projects in the funnel.

Just curious what the conversion of that funnel has been looking like and then do you think you can build off some of this catch up growth. This year as we as we flip the calendar 'twenty four. Let me start with the first one I'm sorry, the second one on like urban comment maybe on the on the overall picture, but yes, we think the. The momentum. Having the chip supply saw. Is really helping us get some backlog from the meter side out in as well on the M&A on the Ams side. So. It's been it's a welcome surge. Some of that certainly will carry us through fourth quarter, Brett maybe. Maybe let Curt and Todd will naturally about the positioning of <unk>. Claire. Regarding the backlog it still sits around that $1 billion ish. Mark. As we look forward, especially with some of the technologies that we are developing too. So serve some of those new applications. Distribution automation, so we feel well positioned in this market over the next several years out. We see it in our on our quotation activity picking up these are big projects that the timing of which. To be a little more predictable than the regular stock and flow part of our business. But we're quite optimistic and bullish about what this business can contribute over the next few years. Yeah. That's helpful. Thanks, and then just a follow up I think you had noted the additional manufacturing capacity the two recent deals.

Let me start with the first one I'm sorry, the second one on like urban comment maybe on the on the overall picture, but yes, we think the.

The momentum.

Having the chip supply saw.

Is really helping us get some backlog from the meter side out in as well on the M&A on the Ams side.

So.

It's been it's a welcome surge.

Some of that certainly will carry us through fourth quarter, Brett maybe.

Maybe let Curt and Todd will naturally about the positioning of <unk>.

Claire.

Regarding the backlog it still sits around that $1 billion ish.

Mark.

As we look forward, especially with some of the technologies that we are developing too.

So serve some of those new applications.

Distribution automation, so we feel well positioned in this market over the next several years out.

We see it in our on our quotation activity picking up these are big projects that the timing of which.

To be a little more predictable than the regular stock and flow part of our business.

But we're quite optimistic and bullish about what this business can contribute over the next few years.

Yeah. That's helpful. Thanks, and then just a follow up I think you had noted the additional manufacturing capacity the two recent deals.

It could be favorable I guess, how does this change your current capacity plans or whats your thinking in terms of 24 budgeting can you absorb some of the acquired capacity. Any context there. Yes, I think on the <unk> side, it's really adding to the capacity of our North American. Insulate our rescue business I think on the. Systems control side. As I was mentioning Brad as some ambitious growth plans that we really embrace so I think we will be looking to add capacity. As we mentioned they've been growing double. Double digits for eight years in a row and so so we're looking to help buttress that yes. Yes, and then stay on the list. Specific to the lifestyle helps helps with the investment needs even into next year because that was one of the areas that we were contemplating making having to make investments and to grow that. Block or disk capacity. But it's not the only one local constraints in other areas. If you look at our transmission business and other parts of the businesses, but we're clearly still need to invest into next year to be able to capture that growth over the next few years. Hotels, but it is not unique. Understood. Thanks for the questions. Thank you. Our next question. Comes from the line of Chris Snyder of UBS. Please go ahead Chris. Thank you. Wanted to just ask about confidence in the ability to hold utility margins at around these levels. For next year.

Any context there.

Yes, I think on the <unk> side, it's really adding to the capacity of our North American.

Insulate our rescue business I think on the.

Systems control side.

As I was mentioning Brad as some ambitious growth plans that we really embrace so I think we will be looking to add capacity.

As we mentioned they've been growing double.

Double digits for eight years in a row and so so we're looking to help buttress that yes.

Yes, and then stay on the list.

Specific to the lifestyle helps helps with the investment needs even into next year because that was one of the areas that we were contemplating making having to make investments and to grow that.

Block or disk capacity.

But it's not the only one local constraints in other areas. If you look at our transmission business and other parts of the businesses, but we're clearly still need to invest into next year to be able to capture that growth over the next few years.

Hotels, but it is not unique.

Understood. Thanks for the questions.

Thank you.

Our next question.

Comes from the line of Chris Snyder of UBS. Please go ahead Chris.

Thank you.

Wanted to just ask about confidence in the ability to hold utility margins at around these levels.

For next year.

Obviously up a lot year on year and it felt like a big piece of that expansion. It was obviously on price cost. Can you just talk about expectations there into next year. Yeah, maybe I'll start and bill fill in if you look at the margins. Particularly for utility, but I think it's across our business that in 'twenty three. We're looking to expand our margins there by 700 basis points. Quite attractive in our view, it's going into 'twenty four is that we can grow profitably on that base in. One of the drivers it's going to be volume next year, we do expect that business to grow in volume, we expect to manage through this price cost productivity equation that we talked about earlier. And we will continue to invest in the business. So I think. Setup that think of profitable growth on top of this base. Is the right way of defense and certainly will come back in January to provide more color on the different moving pieces and where they fall with margins more specifically. I appreciate that and then maybe just on on the price side of utility. It seems like obviously theres been a lot of price. The past couple of years. It seemed like the drivers of that was obviously metal inflate our raw materials complaining higher and then also just supply couldnt keep up with the strong demand. But now with deflation and it seems like supply is in a better place, allowing the channel destock. Any change around. Pushback in the channel. Thank you.

It was obviously on price cost.

Can you just talk about expectations there into next year.

Yeah, maybe I'll start and bill fill in if you look at the margins.

Particularly for utility, but I think it's across our business that in 'twenty three.

We're looking to expand our margins there by 700 basis points.

Quite attractive in our view, it's going into 'twenty four is that we can grow profitably on that base in.

One of the drivers it's going to be volume next year, we do expect that business to grow in volume, we expect to manage through this price cost productivity equation that we talked about earlier.

And we will continue to invest in the business. So I think.

Setup that think of profitable growth on top of this base.

Is the right way of defense and certainly will come back in January to provide more color on the different moving pieces and where they fall with margins more specifically.

I appreciate that and then maybe just on on the price side of utility. It seems like obviously theres been a lot of price. The past couple of years. It seemed like the drivers of that was obviously metal inflate our raw materials complaining higher and then also just supply couldnt keep up with the strong demand.

But now with deflation and it seems like supply is in a better place, allowing the channel destock.

Any change around.

Pushback in the channel. Thank you.

Yes, I would say on the utility we're not seeing it and you mentioned a couple of things that caused the private I'd say beyond metals, just general inflation, we've seen over the last year, just just incredible non material inflation and I think we've talked in the past of what the pure commodities isn't it actually. A relatively small part of it the bigger part is the purchased components the labor and all of that that has inflated. Very well the other thing that we continue to have discussions with our customer around is the investments that we're making back in our business and you don't always see that reflected in our operating performance, our EPS, but the level of Capex. The elevation that we've. And Capex and other areas is an area that clearly benefits our customers. Short term and long term, so I think much more of a discussion continues to be around. The value that we can add by the product and the services that we don't deliver than than price first as a as a lever not unimportant, but. It's not the leading. Part of the discussion. I appreciate that thank you. Thank you. Our next question comes from the line of Joe O'dea. <unk> Fargo. Hi, good morning. Good morning. First question I just wanted to ask if you are seeing higher funding cost factor in the conversations with utilities in their spend plans at all in your sort of comments around ongoing mid single digit growth doesn't really seem like it.

A relatively small part of it the bigger part is the purchased components the labor and all of that that has inflated.

Very well the other thing that we continue to have discussions with our customer around is the investments that we're making back in our business and you don't always see that reflected in our operating performance, our EPS, but the level of Capex.

The elevation that we've.

And Capex and other areas is an area that clearly benefits our customers.

Short term and long term, so I think much more of a discussion continues to be around.

The value that we can add by the product and the services that we don't deliver than than price first as a as a lever not unimportant, but.

It's not the leading.

Part of the discussion.

I appreciate that thank you.

Thank you.

Our next question comes from the line of Joe O'dea.

<unk> Fargo.

Hi, good morning.

Good morning.

First question I just wanted to ask if you are seeing higher funding cost factor in the conversations with utilities in their spend plans at all in your sort of comments around ongoing mid single digit growth doesn't really seem like it.

And then just related to that I think your kind of outlook for the transmission and substation growth to outpace distribution growth, maybe a little bit more context on sort of what's behind and driving that. Yes, I mean I think on. Let me take the second question first. Transmission and substation growth. I think as being. Being impacted quite a bit by renewables. As well as electrification trends so. You need a new substation. If youre doing. Okay. Utility sized solar farms. It needs. That needs to be generated and then transmitted and then stepped down again. To the extent you had some kind of massive data center or battery factory. So electrification impacts like that. That kind of increases the demand on Substations and. In addition, you just have. And those 53000 Substations you just have some aging equipment set. Needs to be needs to be. Upgrade update so. It's not that. It's not the distribution has bad growth outlook. The projects on the T and substation signed it we just think are going to outgrow a little bit we did. We did a little deep dive last quarter on that because we think it's we. We think it's an interesting little subset of the space as far as interest rate impact on project management. I think. It obviously is weighing on people's consideration of cost of capital.

Yes, I mean I think on.

Let me take the second question first.

Transmission and substation growth.

I think as being.

Being impacted quite a bit by renewables.

As well as electrification trends so.

You need a new substation.

If youre doing.

Okay.

Utility sized solar farms.

It needs.

That needs to be generated and then transmitted and then stepped down again.

To the extent you had some kind of massive data center or battery factory.

So electrification impacts like that.

That kind of increases the demand on Substations and.

In addition, you just have.

And those 53000 Substations you just have some aging equipment set.

Needs to be needs to be.

Upgrade update so.

It's not that.

It's not the distribution has bad growth outlook.

The projects on the T and substation signed it we just think are going to outgrow a little bit we did.

We did a little deep dive last quarter on that because we think it's we.

We think it's an interesting little subset of the space as far as interest rate impact on project management.

I think.

It obviously is weighing on people's consideration of cost of capital.

I just I just think the returns on their projects. Or just higher than the cost of capital. So we just we. Haven't seen the dialogue. Step down because of interest rates. But that maybe I don't know that. We're not we just haven't seen that yet. Other thing that helps is the infrastructure. Sales. You are starting to come out and we're seeing some of those being released right now we just recently saw. Being being released in those areas a good bit of those are going into transmission projects that we've been following so that gives us confidence that certainly over the near term that area is a little stronger. Thanks, possibly even to your interest rate question. I think bodes well for us. Going into next year, particularly the second half. That's helpful and then. Just on the sequential margin trends and utility. Yeah, I think clearly a mix impact with the comps and controls strength within the power side and anything from a mix side there to. To be mindful of in terms of the sequential move or or was it really just the comps and controls mix. Yes, I would say nothing inside of power systems would create would create sequentially. Got it thanks very much. Thanks, Joe.

Or just higher than the cost of capital. So we just we.

Haven't seen the dialogue.

Step down because of interest rates.

But that maybe I don't know that.

We're not we just haven't seen that yet.

Other thing that helps is the infrastructure.

Sales.

You are starting to come out and we're seeing some of those being released right now we just recently saw.

Thanks, possibly even to your interest rate question.

I think bodes well for us.

Going into next year, particularly the second half.

That's helpful and then.

Just on the sequential margin trends and utility.

Yeah, I think clearly a mix impact with the comps and controls strength within the power side and anything from a mix side there to.

To be mindful of in terms of the sequential move or or was it really just the comps and controls mix.

Yes, I would say nothing inside of power systems would create would create sequentially.

Got it thanks very much.

Thanks, Joe.

Yes. Thank you. I would now like to turn the conference back to Dan and the Morado for closing remarks, Sir great. Thank you everyone for joining us and we'll be around all day for calls. Thank you. Thank. Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Thank you.

I would now like to turn the conference back to Dan and the Morado for closing remarks, Sir great. Thank you everyone for joining us and we'll be around all day for calls. Thank you. Thank.

Thank you.

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

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