Q4 2023 Hubbell Inc Earnings Call
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Good day and thank you for standing by welcome to Hubbell's fourth quarter 2023 earnings Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there will be a question and answer session.
To ask a question during the session you will need to press star one on your telephone.
And you're an automated message advising your hand, just raised to withdraw your question. Please press star one again.
Please be advised that today's conference is being recorded.
I would now like to hand, the conference over to your speaker today than Inamorato, Vice President of Investor Relations. Please go ahead.
Inamorato: Thanks, Debbie good morning, everyone and thank you for joining US earlier. This morning, we issued a press release announcing our results for the fourth quarter of 'twenty three the 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, Kevin Barker, Our executive Vice President and CFO Bill Sperry. Please note. Our comments. This morning may include statements related to the.
Inamorato: Expected future results of our company and are forward looking statements as defined by the private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward looking statements in our press release considered incorporated by reference to this call. Additionally comments May also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and slides.
Inamorato: Now, let me turn the call over to Garvin great.
Great. Good morning, and thank you for joining us to discuss <unk> fourth quarter and full year 2023 results.
Garvin: Oh, both delivered a strong finish to an exceptional year.
Garvin: For the full year 2023, we achieved 9% sales growth.
Over 500 basis points of operating margin expansion and over 40% growth in operating profit and earnings per share.
These results were driven not only by our strong positions in attractive markets, but also by the consistent execution of our people and maintaining industry, leading service levels for our customers, while driving price and productivity across our businesses.
Garvin: Our strong financial performance also enabled us to invest back into our business and capacity innovation and productivity initiatives.
Garvin: We invested $165 million in capital expenditures in 2023, almost double our investment levels from 2021.
Garvin: We are confident that these investments will drive future growth and productivity for our shareholders and as we will describe in more detail later, we intend to grow profitably off of a strong multiyear base of performance.
Turning to the fourth quarter, we delivered strong growth and margin expansion in both segments.
Garvin: Notably, we also returned to year over year volume growth in electrical solutions.
Garvin: As we noted on our previous call in October we were confident that the channel inventory management that we had seen earlier in the year had largely normalized.
Garvin: As a result, we saw.
Garvin: Saw stronger seasonal performance in the fourth quarter as well as continued strength across data centers and renewables verticals.
We also continue the trajectory of strong margin expansion in the electrical segment and then a year with adjusted operating margins of 16, 6%.
Garvin: We continue to see structural margin expansion opportunities as we make progress in our strategy of competing collectively as an operating segment and we plan to accelerate our restructuring investment in 2024 to drive long term productivity.
Garvin: And utility solutions fourth quarter trends were largely consistent with the third quarter.
Garvin: Transmission markets were strong and we continue to convert on past due backlog and communications and control our supply chain conditions have improved.
Garvin: Utility distribution distribution markets continued to be impacted by channel inventory normalization as anticipated, though we continue to see visible demand strength in 2024 and beyond.
Garvin: Telco markets were weak in the quarter and while our long term outlook remains positive. We are taking a cautious initial view on 2024 until we have more visibility on timing of investments.
Operator: Good day, and thank you for standing by. Welcome to Hubbell's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode.
We also executed on two important portfolio actions in the quarter as we closed on the previously announced acquisition of systems control and announced a definitive agreement to sell our residential lighting business, which we expect to close in early February.
Operator: 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 11 on your telephone. You will then hear an automated message advising that your hand is raised.
Garvin: These transactions reflect our ongoing strategy to create a focused portfolio strategically aligned around grid modernization electrification. These.
Operator: To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Innamorato, Vice President of Investor Relations. Please go ahead.
Garvin: These transactions improved our long term growth and margin profile of our portfolio and we anticipate that they will be net accretive to 2024 adjusted earnings per share.
Dan Innamorato: Thanks, Stevie. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter of 2023. The press release and slides are posted in the investor section of our website at hubble.com. I'm joined today by our Chairman, President, and CEO, Gerben Bacher, and our Executive Vice President and CFO, Bill Sperry.
We will provide more details on our 24 outlook at the end of this call, but we remain confident that Hubble is uniquely positioned in attractive markets and that we can build off the success of this last several years to drive profitable growth off this higher base of performance with.
Dan Innamorato: Please note our comments this morning may include statements related to the expected future results for our company and our forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Therefore, please note the discussion of forward-looking statements in our press release, which is considered incorporated by reference to this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to comparable GAAP measures and are included in the press release and slides. Now, let me turn the call over to Gerben.
Garvin: With that let me turn it over to Bill to walk you through the details of the quarter.
William R. Sperry: Thanks, very much Curt.
Morning, everybody.
Thank you for joining us I'm pleased to have the chance to discuss with you our.
William R. Sperry: Financial performance in the fourth quarter.
William R. Sperry: It was very strong capping a strong year and frankly.
Speaker Change: Strong two years I'm going to start my comments on page four of the slides that I hope you found.
Great. Good morning, and thank you for joining us to discuss Hubble's fourth quarter and full year 2023 results. Humboldt delivered a strong finish to an exceptional year. For the full year 2023, we achieved 9% sales growth, over 500 basis points of operating margin expansion, and over 40% growth in operating profit and earnings per share. These results were driven not only by our strong positions in attractive markets but also by the consistent execution of our people and maintaining industry-leading service levels for our customers while driving price and productivity across our business. Our strong financial performance has also enabled us to invest back into our business in capacity, innovation, and productivity initiatives. We invested $165 million in capital expenditures in 2023, almost double our investment levels from 2021.
Speaker Change: So the trends have been in place.
Speaker Change: For the last year and longer.
<unk> strong sales growth and operating profit growth.
Speaker Change: Including margin expansion.
Speaker Change: Being driven by strong markets as well as strong pricing and.
And strong cash flow is resulting in those those fundamental trends are obviously continuing here in the fourth quarter. So we reported $1 $35 billion of sales.
Speaker Change: 10% growth.
Speaker Change: 2% of that comes from acquisitions.
Speaker Change: Eight is organic.
The utilities segment, a little bit stronger than electrical but as carbon noted.
Speaker Change: Quite important for electrical volumes to return to growth as a sign that the inventory.
We are confident that these investments will drive future growth and productivity for our shareholders. And, as we will describe in more detail later, we intend to grow profitably off of a strong multi-year base of performance. Turning to the fourth quarter, we delivered strong growth and margin expansion in both segments. Notably, we also returned to year-over-year volume growth in electrical solutions. As we noted on our previous call in October, we were confident that the channel inventory management that we had seen earlier in the year had largely normalized.
Speaker Change: And the channel is normalized on that side of the house.
Speaker Change: Interesting too we sequentially.
Speaker Change: The fourth quarter.
Speaker Change: Seasonally stronger than is typical so we think thats a good sign.
The operating profit margin side C 19, 4% three points of expansion really being driven by price cost and productivity.
Speaker Change:
Speaker Change: And creating.
Speaker Change: Some source of funding for investments that Durbin had described earnings per share at $3 69.
As a result, we saw stronger seasonal performance in the fourth quarter, as well as continued strength across data centers and renewables verticals. We also continued the trajectory of strong margin expansion in the electrical segment, ending the year with adjusted operating margins of 16.6%. We continue to see structural margin expansion opportunities as we make progress in our strategy of competing collectively as an operating segment, and we plan to accelerate our restructuring investment in 2024 to drive long-term productivity. In utility solutions, fourth-quarter trends were largely consistent with the third quarter.
40% increase to prior year.
And $284 million in free cash flow.
Speaker Change: Helping to fund, our Capex and acquisition.
Speaker Change: So, let's double click on that on page five and go one layer.
Speaker Change: Deeper.
So the 10% sales, we said was 8% organic.
That was comprised of mid single digits of price, we think thats good evidence of our quality.
Speaker Change: Service and our brand positioning and low single digits of volume and welcome as I said the return to electrical volume growth.
Transmission markets were strong, and we continued to convert past-due backlog in communications and control as supply chain conditions improved. Utility distribution distribution markets continue to be impacted by channel inventory normalization as anticipated, though we continue to see visible demand strength in 2024 and beyond. Telcom markets were weak in the quarter, and while our long-term outlook here remains positive, we are taking a cautious initial view on 2024 until we have more visibility on the timing of investment.
Speaker Change: The 2% coming from acquisitions.
Speaker Change: Our all.
Speaker Change: On the utility side, and we'll talk about those more.
Speaker Change: We get to the utility page.
Speaker Change: On the upper right operating profit.
Speaker Change: Up 34% to $262 million.
Speaker Change: Margin expansion of three points really being driven by price as well as <unk>.
Speaker Change: Materials, which continued to provide.
We also executed on two important portfolio actions in the quarter as we closed on the previously announced acquisition of Systems Control and announced a definitive agreement to sell our residential lighting business, which we expect to close in early February. These transactions reflect our ongoing strategy to create a focused portfolio strategically aligned around grid modernization and electrification. These transactions improve the long-term growth and margin profile of our portfolio, and we anticipate that they will be net accretive to 2024 adjusted earnings per share. We will provide more details on our 24 outlook at the end of this call, but we remain confident that Hubble is uniquely positioned in attractive markets and that we can build off the success of the last several years to drive profitable growth off this higher base of performance. With that, I will turn it over to Bill to walk you through the details of the quarter. Thanks very much, Herb, and good morning, everybody.
Speaker Change: Tailwind as they had for each quarter in 2023.
So the inflation that we're experiencing is more on the wage and transportation side, that's where we're focusing.
Speaker Change: A lot of productivity efforts.
Speaker Change: As well as.
Speaker Change: We're absorbing there some operational productivity investment going on.
Speaker Change: The lower left you see earnings per share up 42%.
Speaker Change: Slightly higher growth rate than the operating profit so below the line, we benefited from some tax rate favorability and.
Speaker Change: And on the free cash flow side, you see $284 million, nearly 60% increase and for the full year.
Speaker Change: We generated over $700 million of cash flow.
Speaker Change: And that supported our capex of 100 around $165 million, which.
Speaker Change: Really helped drive some footprint restructuring productivity and capacity.
Speaker Change: So, let's unpack the enterprise into the two segments and we'll start with utilities on page six and you'll see.
William R. Sperry: Thank you for joining us. I'm pleased to have the chance to discuss with you our financial performance in the fourth quarter, which was very strong. I'm going to start my comments on page 4 of the slides that I hope you found. So, the trends have been in place, really for the last year and longer, strong sales growth and operating profit growth, including margin expansion, being driven by strong markets, as well as strong pricing, and strong cash flow is resulting. And those fundamental trends are obviously continuing here in the fourth quarter.
Speaker Change: Another excellent quarter from our utility team double digit sales growth and 40% operating profit growth.
Speaker Change: A 13% sales growth.
Speaker Change: Is comprised of 9% organic and 4% from acquisitions the acquisitions to remind everybody included.
Speaker Change: <unk>, which was our second quarter of ownership, there, but less stroh.
Speaker Change: And systems control systems control was closed.
Speaker Change: In the middle of December so.
Speaker Change: Didn't didn't contribute much yet.
William R. Sperry: So we reported 1.35 billion in sales, 10% growth. 2% of that comes from acquisitions, 8% is organic. The utility segment was a little bit stronger than electrical, but as Gerben noted... Quite important for electrical volumes to return to growth, a sign that the inventory in the channel is normalized on that side of the house. Interesting too, we sequentially, the fourth quarter, seasonally stronger than is typical. So we think that's a
And we are reporting both cholesterol and systems control in our T&D components.
Speaker Change: AIG is in the comms and control side.
We will talk more about acquisitions in a minute and in the last few years plus this year.
Speaker Change: As we think about the 9% organic growth.
See that it was skewed towards the communications and control side, if I start with the transmission.
Speaker Change: Transmission and distribution components.
Speaker Change: Youll see organic was at 1%.
Speaker Change: Volume was a drag on price.
Speaker Change: And if we look inside the components substation and transmission continued to be very strong.
William R. Sperry: On the operating profit margin side, you see 19.4 percent, three points of expansion, really being driven by price, cost, and productivity, and creating some source of funding for investments that Gervin had described. Earnings per share at $3.69, a 40% increase over the prior year, and $284 million in free cash flow, helping to fund our CapEx and acquisition. So let's double click on that on page five and go one layer deeper. Deepa Rag
Speaker Change: Distribution components, we continue to work through our second quarter of.
Speaker Change: Channel inventory management.
Speaker Change: I think as we had mentioned before our electrical side Ed.
Speaker Change: <unk> that quicker than sooner earlier release.
Speaker Change: Utility side, so we've emerged on the electrical side still in.
Speaker Change: Distribution side.
Speaker Change: And then telecom has been weak.
Speaker Change: A function of <unk>.
Speaker Change: Some overstocked inventories as well as potential demand impacts from <unk>.
William R. Sperry: So the 10% sales, we said was 8% organic, that was comprised of mid-single digits of price. We think that's good evidence of our quality of service and our brand positioning and the lowest single digits of volume and welcome, as I said, the return to electrical volume. The 2% coming from acquisitions, we're all on the utility side, and we'll talk about those more when we get to the utility page. On the upper right, operating profit is up 34% to 262 million. The margin expansion of three points was really driven by price as well as materials, which continued to provide a tailwind as they had for each quarter in 2023. So the inflation that we're experiencing is more on the wage and transportation side.
Speaker Change: Combination of high interest rates.
Some customers who are waiting for stimulus dollars to kick off their projects.
Speaker Change: You see on the communications and controls <unk>.
Speaker Change: <unk> growth there, we've got both the Clara and Beckwith businesses, there on a claris side.
Speaker Change: Yes.
<unk> chips.
Speaker Change: Supply chain opening up because really allowed them to satisfy some existing backlog and so we see some great growth. There also to remind there was that we have an easy compare there.
Speaker Change: Last year, we had a commercial settlement that was a conscious sales item and beckwith as well which makes.
Speaker Change: Protective relays and controls up double digits in sales so.
Speaker Change: Very strong.
Speaker Change: Top line performance by segment.
Speaker Change: And even better on the op side.
Speaker Change: Growth of 40% to $174 million.
William R. Sperry: That's where we're focusing a lot of productivity efforts, as well as absorbing there some operational productivity. On the lower left, you see earnings per share up 42%, a slightly higher growth rate than operating profit, so below the line, we benefited from some tax rate favorability. And on the free cash flow side, you see $284 million, a nearly 60% increase. And for the full year, we generated over $700 million in cash flow, and that supported a CapEx of around $165 million, which really helped drive some footprint restructuring, productivity, and capacity. So let's unpack the enterprise into the two segments, and we'll start with utilities on page 6.
Speaker Change: Over 21% margins and the price cost story.
Speaker Change: Is the same volume growth contributing.
And we continued to make investments so.
From a full year. This is obviously our fourth quarter performance just at the bottom of the page a full year comment on profit growth of about 60%. So congratulations to Greg and his team on.
Speaker Change: Just a really outstanding at year.
Speaker Change: On page seven.
We've got the electrical segments.
And you see mid single digits sales growth with.
Speaker Change: Two points.
Speaker Change: Margin expansion strong performance from the electrical team.
Speaker Change: That 6% sales growth.
Speaker Change: It's comprised of about half of that is price and half volume.
Speaker Change: And that volume as we said.
Speaker Change: We thought in October.
William R. Sperry: And you'll see another excellent quarter from our utility team, double-digit sales growth and 40% operating profit growth. Um, 13% of sales growth is comprised of 9% organic and 4% from acquisitions. The acquisitions, to remind everybody, included EIG, which was our second quarter of ownership there, Balestro, and Systems Control. Systems Control was closed in the middle of December, so it didn't contribute much yet. And we are reporting both Bolestro and systems control in our T and D components, and EIG is on the comms and control side. We'll talk more about acquisitions in a minute, and the last few years plus this year. But as we think about the 9% organic growth..., see the rules.
Speaker Change: Channel inventories would be normalized and rebalanced and that did occur in the fourth quarter, which is which is good news.
Speaker Change: Volume came from.
Speaker Change: Some important verticals data centers was a big one.
Recall last year, we bought <unk>, which is performing really strongly serving serving that segment burndy as well as serving that segments, but R&D is also benefiting from the renewable vertical.
Speaker Change: And a little bit of U S re shoring on the industrial side, so some favorable trends there, allowing for that volume growth and on the profit side, you see 20% growth two points of margin expansion is.
Speaker Change: Operating profit reached $88 million.
Again.
Speaker Change: <unk> costs really helping as well as the return to volume growth.
Speaker Change: And.
Speaker Change: Full year comment I'll make on electrical like I did.
Speaker Change: On the utility side, we saw <unk>.
Speaker Change: <unk> percent growth in operating profit in the segment.
Speaker Change: With two five points of margin expansion. So I think very successful year for the electrical.
William R. Sperry: And if we look inside the components, substation and transmission continue to be very strong, while distribution components continue to work through our second quarter of Channel Inventory Management. I think, as we mentioned before, our electrical side experienced that quicker and sooner, really than the utility side. So we've emerged on the electrical side, still in on the distribution side. And then telecom has been weak, a function of some overstocked inventories, as well as potential demand impacts from a combination of high interest rates and some customers who are waiting for stimulus dollars to kick off their projects.
Looking forward to Mark Mike and his team continuing to.
Speaker Change: Pushed the segment to compete collectively where we think there is there is more growth and more margin available to us there.
Speaker Change: I mentioned that I wanted to talk about the portfolio management and on page eight.
Speaker Change: We've laid out the last few years of activity.
Just to remind ourselves of our intentions here.
Speaker Change: And I'll start with the divestitures were.
Speaker Change: We have three companies divested in our force under definitive agreement that we are open to close it.
Speaker Change: In early February.
Speaker Change: And you see those businesses netted us $500 million.
Proceeds.
Speaker Change: And our intention here is to make sure we're investing in higher growth higher margin.
William R. Sperry: You see, on the communications and controls side, we've got both the Eklera and Beckwith businesses there on the Eklera side, and the CHIPS supply chain opening up has really allowed them to satisfy some existing backlog. And so we see some great growth there. Also, to remind ourselves, there was, we have an easy comparison there as last year we had a commercial settlement that was a contra sales item. And Beckwith as well, which makes sense.
Speaker Change: Businesses, and you'll see that that that 500, we rolled into 1 billion seven of acquisitions numbering about 10 over the last few years.
Speaker Change: And.
You can see them in the large blue bubble of T&D components.
Speaker Change: We added continue Ripley armor cast electro and in the.
Yellow bubble there of connection and bonding, adding connector products. So those vary.
William R. Sperry: —output relative relays and controls up double digits in sales. So, very strong, the up line performance by the segment, and even better on the OP side, a growth of 40 percent to $174 million, over 21 percent margins. And the price-cost story is the same, volume growth is contributing, and we continue to make investments. So from a full-year perspective, this is obviously all fourth-quarter performance, just at the bottom of the page, a full-year comment on profit growth of about 60 percent. So congratulations to Greg and his team on just a really outstanding year.
We intentionally adding businesses to a higher high margin high growth areas as well as in.
Speaker Change: Specific growth verticals.
Speaker Change: Like subs.
Speaker Change: Substation systems like grid automation data centers <unk> that I mentioned.
Speaker Change: And wireless communications in the South Texas So.
Speaker Change: We think we are enhancing the.
The growth in margin profile of the company.
Speaker Change: I did want to pause because of systems controls recent closing as well as its size.
Speaker Change: The impact on capital structure.
Speaker Change: So that was 1 billion one purchase price that we funded with some cash as well as some CPE and a term loan a provided by our supportive Bank group.
Speaker Change: As a result of that.
William R. Sperry: On page 7, we've got the electrical segments, and you see mid-single-digit sales growth with two points of margin expansion, a strong performance from the electrical team. And of that six percent sales growth, it's comprised of about half of that is price and half volume, and that volume, as we said, we thought in October that the channel inventories would be normalized and rebalanced, and that did occur in the fourth quarter, which is good news. You know, the volume came from some important verticals; data centers were a big one. Recall last year we bought PCX, which is performing really strongly, serving that segment. Burndy as well as serve that segment.
Speaker Change: As a flexible and pre payable capital structure.
Speaker Change: Which we think gives us some optionality.
Speaker Change: And results in a.
Speaker Change: Very manageable debt levels of one eight times debt to EBITDA on a net debt basis around one and a half so we feel like.
Speaker Change: Sure.
Speaker Change: We're improving the portfolio.
Speaker Change: I'll talk about the specific impacts.
Speaker Change: Of the acquisitions on our guidance.
Speaker Change: In another couple of pages.
Speaker Change: So as we switch to outlook, let's start on page 10 with with the markets.
And then we will talk about how those markets roll through our earnings expectations. So we've got the utility segment on the left electrical segment on the right.
Speaker Change: You can see the different pieces of the pie here.
Speaker Change: Starting with electrical distribution.
William R. Sperry: Bernie's also benefiting from the renewable vertical and a little bit of U.S. reshoring on the industrial side. So some favorable trends there, allowing for that volume growth. And on the profit side, we see 20% growth and two points of margin expansion. Operating profit reached $88 million. Again, the price cost is really helping, as well as the return to volume growth and full year comment I'll make on electrical, like I did on the utility side. We saw 20% growth in operating profit in the segment with two and a half points of margin expansion. So I think it was a very successful year for electrical and looking forward to Mark Mikes and his team continuing to push the segment to compete collectively, where we think there's more growth and more margin available to us.
Speaker Change: They have been.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: Really two quarters now of managing their inventory is relative to the backlog and we.
Speaker Change: We think that's normalizing quickly and expecting a healthy mid single digit growth rate, there transmission substation and distribution automation, which is up around noon.
The pie, we think those are both high single digits.
Speaker Change: Meters and gas in the mid single digits.
Speaker Change: <unk> talked about telecom.
Speaker Change: <unk>, a very cautious outlook.
Speaker Change: <unk> four orders to restart there.
Speaker Change: I'll just comment that's a short term outlook, we do have very attractive.
Speaker Change: <unk> medium and long term outlook for telecom. So the result on the utility side as is the mid single digit growth rate on the electrical you see.
Thats out at three to four so low to mid <unk>.
Speaker Change: I think the.
William R. Sperry: I mentioned that I wanted to talk about portfolio management, and on page eight, we've laid out the last few years of activity just to remind ourselves of our intentions here, and I'll start with the divestitures, where we have three companies divested and a fourth, under a definitive agreement that we're open to close in early February. And you know, those businesses netted us money.
Industrial outlook, you see both light and heavy is low to mid single digits.
We have mid single digit growth rates in our verticals.
Speaker Change: And I think non res we.
We maybe have a bit of caution at flat to low single digit so a constructive market outlook for 2024, and let's go to page 11, and see how that rolls through.
Speaker Change: Our earnings outlook, So you see.
Speaker Change: The organic of three to five in our sales growth.
Combined with 5% net from M&A, one going out one coming in.
Speaker Change: To create 8% to 10% sales growth.
That generates.
Speaker Change: 10% growth in operating profit.
Results in 6% earnings.
Speaker Change: And free cash flow at about 90% of net income.
Speaker Change: Affording.
Speaker Change: The increase in Capex.
Let's just walk through the bridge to give you a feel for it so.
We're under contract.
Speaker Change: To sell residential lighting.
Speaker Change: And that will lose $20 million of op.
Speaker Change: Systems control.
Speaker Change: <unk> and <unk>, adding about $90 million.
Speaker Change: So you can see almost almost a dollar.
Speaker Change: Coming from those before we pay the interest expense, which we have over on the right.
Speaker Change: We had four organic three to five so we've comprised out of two to four volume and one point of price, which is in the next column.
Speaker Change: That's providing a nice lift and we have continued investment.
Speaker Change: Particularly on the electrical segment side.
Speaker Change: As we compete collectively there and continue to consolidate the footprint under our <unk>.
Speaker Change: Restructuring programs.
You see on the far right below.
Speaker Change: An increase in interest expense as a result of the borrowings that we outlined to close on systems control.
Speaker Change: And the result is.
Speaker Change: About 6%.
Speaker Change: Our earnings growth to the midpoint of $16 25.
Speaker Change: You see some modeling considerations listed there and I might just add another one on seasonality for those of you who are modeling.
Speaker Change: We're anticipating 2024 being quite normal seasonality.
For the first and fourth quarters.
Speaker Change: Be it a little bit below the second and third quarters, which are seasonally stronger and.
Speaker Change: And that just compares to last year, where the first quarter.
Which was very strong in contributing.
Speaker Change: To the full year.
Speaker Change: We think.
Speaker Change: The very constructive year in front of us, we feel well positioned.
Speaker Change: We're happy to have the return and volumes.
Speaker Change: And we're happy to have made some portfolio net addition.
To continue to push.
Speaker Change: Profitable growth at Hubbell, and with that I'd like to turn it back to Europe.
Europe: Great. Thank you Bill and before we turn it over to Q&A.
Think it is helpful. On the last page to look at our 2023 performance in 'twenty four outlook and a longer term context.
Europe: The results, we delivered for shareholders not only in 2023, but over the last few years have been very strong most notably we have doubled our adjusted operating profit and adjusted earnings per share over a three year period, while growing sales at double digit CAGR in expanding adjusted operating margins from the.
Europe: Mid teens to over 20%.
Europe: We have also doubled our capital expenditures over the last three years to further differentiate our service levels to customers and support attractive long term growth expectations.
As grid modernization and electrification drive the need for a more reliable resilient and renewable energy infrastructure Hubbell is uniquely positioned with the right people solutions and strategy to meet the evolving needs of our customers and deliver continued value to our shareholders.
Europe: Im extremely proud of our over 18000 employees, whose hard work and dedication have enabled us to achieve a new baseline of performance.
And I am confident that we will built off of the success with continued attractive profitable growth in 'twenty four and beyond.
Europe: We look forward to hosting an investor day later this year on June 4th while we will provide more details on our long term strategy with updated financial targets with that let's turn the call over to Q&A.
Europe: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we ask that you. Please limit your questions to one question and one follow up.
Europe: These standby, while we compile the Q&A roster.
Okay.
Europe: And our first question comes from Stephen Tusa of Jpmorgan.
Stephen Tusa: Hey, guys good morning.
Stephen Tusa: Morning, Steve.
Stephen Tusa: Can we just get a little more color on the bridge, maybe what youre expecting on price cost and then any.
Stephen Tusa: Segment margin color for the year and how you expect that the trend see Italy.
Stephen Tusa: Yes, so price cost, we've got as flat Steve.
Stephen Tusa: We have.
Effectively one point of rollover on price embedded in there.
Stephen Tusa: Which.
Stephen Tusa: We are using effectively to offset.
Commodity inflation.
Stephen Tusa: And then we've got productivity program that we think can help offset non material inflation in places like transportation.
Wages and things like that so.
Stephen Tusa: It's quite.
Yeah.
Stephen Tusa: Quite a flat expectation.
And I think the way segments.
Stephen Tusa: I think.
Stephen Tusa: As a result of that PC P assumption.
Our margins by segment are reasonably flat ish.
Stephen Tusa: And I would say that applies to.
Stephen Tusa: Both segments I would say maybe.
Stephen Tusa: But it would be.
Yes go ahead, yes.
Does the ish on utility kind of skew one way or the other.
Stephen Tusa: Positive or negative.
Stephen Tusa: Yes.
Stephen Tusa: Say flat.
Stephen Tusa: I should think about.
Okay.
Speaker Change: Okay great.
Speaker Change: Maybe the moving pieces on that I'll give you. If you think about the addition of systems control.
Actually a little bit dilutive to margin, even though we provided those numbers.
Speaker Change: Very attractive addition, and if you think about volume, it's a little bit accretive and if you think of net of those with PCP.
Speaker Change: Got it.
Speaker Change: It's roughly flat if you look at it maybe a little bit color on the electrical because the electrical I think it's just slight expansion.
Speaker Change: But that is with a pretty good step up on the restructuring. So if you take that out it's actually a nice expansion of that and bill referred to it earlier the opportunity still in that segment that they as they work through.
Speaker Change: The organizing that better competing collectively there is more room for margin expansion there.
Speaker Change: Got it alright, thanks, guys I appreciate it.
Thank you one moment for our next question.
Speaker Change: Okay.
Speaker Change: And our next question comes from Jeffrey Sprague of vertical research. Please go ahead.
Thank you and good morning, everyone.
Speaker Change: Yes.
Jeffrey Todd Sprague: Good morning.
Jeffrey Todd Sprague: Just a little more color on the utility margins.
Jeffrey Todd Sprague: So thinking about the comms declare a business.
Jeffrey Todd Sprague: I'm not sure where the margins are at in that business, but that feels like it's a friction point also to some degree from a mix standpoint. So I wonder if you can address that I guess square can you said flattish so youre powering through all that but still love some context on the on the mix effect of of Clara and.
Jeffrey Todd Sprague: Can you just give us a little color on how much telecom was down in 2023.
Jeffrey Todd Sprague: We're looking for a weak 2024, but we do have sort of at least a half a weakness in the base here for 2023 I believe.
Speaker Change: Yes so.
Speaker Change: Maybe let's start with utility.
Speaker Change: Margins first.
Speaker Change: And I would say for Clara.
You are right to say.
Speaker Change: Their margins are below.
Speaker Change: The transmission and distribution component margins largely because of the amount of R&D investing that we're doing.
Working on developing.
Speaker Change: The nexgen comps package so.
Speaker Change: I would say in.
Speaker Change: 2003, and particularly in this fourth quarter, where you saw them outgrowing.
Speaker Change: I think where you're going is that does that create a mix drag and it did in the fourth quarter.
Speaker Change: I think growth rates next year.
Speaker Change: We'd maybe anticipate more balanced Jeff. So I don't think we will have a big mix.
Speaker Change: Effect and utility margins in 'twenty four and your second question was on Telecom, Yes, maybe provide a little context there Jeff.
Speaker Change: We really saw that slowing down.
Speaker Change: Towards the latter part of the year, particularly the fourth quarter more specifically was down 20%.
Speaker Change: For the first quarter, we still expect that to be down double digits.
Speaker Change: And would have earlier in the year, we were still working through a lot of backlog in that which kind of shielded us a little bit.
So we certainly expect.
Speaker Change: After the first quarter second quarter sales to be down and then we expect it to rebound in the second half as some of that stimulus funding frees up.
Speaker Change: And <unk> can you also just address.
Kind of your ability on just kind of factory through put here is.
Speaker Change: As the industry, particularly on the utility side seem to want to compound out here pretty healthy.
Speaker Change: Growth rates.
Speaker Change: Everything kind of buttoned up on the factory work you've been doing or are there is there more to do there.
Maybe just to look at the.
Speaker Change: Skyline on what to expect on Capex.
Speaker Change: Yes, I would say more to do Jeff.
Some of those projects take time to get some of that equipment and online so.
Speaker Change: If you think about for example, our transmission and substation.
Speaker Change: Markets, particularly strong last year and this coming year as well as you saw.
Speaker Change: And that requires some capital thats still needing to come online now I feel good.
Speaker Change: Our ability to do that we've done that very well.
Speaker Change: Over the last year or so.
Speaker Change: Yes.
Speaker Change: It's going to support some of that growth that we have embedded in our in our guidance.
Speaker Change: And then last.
Go ahead.
Speaker Change: I'm sorry.
Speaker Change: Got done go ahead I just had one last little follow up if I could.
Speaker Change: Please go.
Speaker Change: I just wanted to do all kind of come back to the seasonality comment and everything totally get it and that's sort of what I've been modeling out.
But given that given the margin comp in the beginning of the year and in particular.
Speaker Change: Are you expecting EPS to actually grow year over year in Q1.
Speaker Change: Yes, I think that.
Speaker Change: We just don't we don't do EPS in <unk>.
By the quarterly guide basis.
Speaker Change: I would say I would anticipate our Q1.
Speaker Change: Earnings to be in line with contributing to the full year at our typical seasonality.
Speaker Change: More so than it did last year so.
Speaker Change: Great. Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from Tommy Moll of Stephens. Please go ahead.
Tommy Moll: Good morning, and thank you for taking my questions.
Tommy Moll: Thanks Tommy.
Tommy Moll: I wanted to start on the utility side of the business. It seems like for most of last year. It was more a discussion around availability rather than price.
Tommy Moll: With that said given some of the <unk>.
Inventory destocking, particularly around distribution has that conversation conversation changed at all as price a bigger factor at this point.
Speaker Change: I would not say so Tommy now.
Tommy Moll: Good to hear thank you.
Speaker Change: I guess that then begs a follow up.
And your full year outlook you contemplate.
Thank you said Bill a point of wraparound price, but you did highlight some uncertainty in certain pockets.
Speaker Change: What are those pockets you were referencing there.
Speaker Change: Yes, so I think telecom would be the first.
Speaker Change: <unk>.
Speaker Change: To see a market down.
Speaker Change: <unk>.
I think just puts a little pressure on that.
Speaker Change: And so that's really the most noteworthy one I think.
Speaker Change: Yes.
Speaker Change: Other areas, where things are overstocked can put a little pressure, sometimes so we.
Speaker Change: We've had a very successful.
Speaker Change: Pricing.
Speaker Change: Tactic over the last.
Speaker Change: Really two years and.
Speaker Change: So it's something that we are.
Speaker Change: A very focused on b.
Speaker Change: We are in very close conversations with our big customers Garvin and I happen to be visiting with a few of our largest customers over the course of the last couple of weeks.
Speaker Change: Just here.
Speaker Change: Your point.
None of them.
Speaker Change: Are asking about price other than to make sure.
Speaker Change: We're coordinating with them give them enough time to implement price increases and let them manage that through their systems, but it's.
I will describe the price as of this moment.
Speaker Change: He is still quite constructive.
But to your point.
Speaker Change: There may be some headwinds I would also say that we.
Speaker Change: Built into the guidance the carryover, but we also announced price increases early this year too early to tell.
Speaker Change: Stage.
A few weeks in.
Speaker Change: On the stick rates, but again the conversations that we're having.
Speaker Change: Very positive two to dose.
Those taken hold so we have levers against potential headwinds bye bye taken.
Speaker Change: <unk> taken price too.
Speaker Change: Thank you both I appreciate it and we will turn it back.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah.
Speaker Change: And our next question comes from Nigel Coe of Wolfe Research. Please go ahead.
Nigel Coe: Thanks, Good morning, everyone.
Nigel Coe: So good morning, it's bill just wanted to be a bit more.
Nigel Coe: Typical seasonality for <unk> it looks like about 20% of full year is that about the right zone for Yamana, Yeah, a little I would have said 'twenty. One if you asked me.
Nigel Coe: Okay. That's great. Thanks for the clarification, there and then just the electrical performance. This quarter is obviously outstanding.
Nigel Coe: I think it's been organic growth.
Nigel Coe: Pretty flat Q over Q in both revenues and margins. So is that mainly channel impact you're seeing.
Nigel Coe: I know you called out strength electrification.
Nigel Coe: And data center I'm, just curious in terms of the end market demand what you saw.
During the quarter being because.
Nigel Coe: Specific.
Nigel Coe: Yes.
Speaker Change: Yes, Im not sure.
Not sure I'm getting at the essence of what you are asking we did find that vertically Dave.
Speaker Change: Data centers and renewables were both good that benefited.
Speaker Change: Our <unk> business and our Burndy business and I do think we saw from our big customers. If that's if that's where you're pushing.
Speaker Change: In areas, where they had been.
Speaker Change: Managing their inventories we saw a return to growth.
In those as well so I'm not sure if youre getting that customer behavior end markets, there, but we had a kind of a little bit of a mix of a mix of both.
Speaker Change: Yeah, I mean, it wasn't a straightforward question I know, but.
Do you think the channel impact was fairly neutral so sell in versus sell out pretty similar I guess, that's sort of the essence of my question, but really then when we think about the margin exit rate for <unk> into 2024, I know you said flattish.
Speaker Change: Packed in 'twenty for restructuring is picking up so that's obviously a headwind in 'twenty four but just curious about the lighting impact because that's coming out. So I think that that would probably drive more of a bias toward expansion and electrical so just curious.
Speaker Change: If you agree with them.
I do agree.
Speaker Change: I do agree they were sort of that double digits versus.
Versus what you see is a better margin at the segment. So I do agree.
Speaker Change: And then set in the Senate.
Speaker Change: Yes, it's pretty consistent in the quarter Nigel.
Nigel Coe: Okay, great. Thank you.
Nigel Coe: Yes.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next questions comes from Julian Mitchell of Barclays. Please go ahead.
Julian Mitchell: Hi, good morning.
Maybe just.
Julian Mitchell: Just trying to understand and fully comprehend that you don't give sort of detailed quarterly guidance, but you've got the 4% organic growth guide for the year in revenue and you have the color around <unk>.
Start to the year in telecom a bit of extra utility destock and maybe the last drags of.
Julian Mitchell: Non resi electrical destock, so all of that seems to suggest a stronger second half organic growth rates.
Just wanted to how much of an improvement year on year are you dialing in through the year as we go to get to that 4% for the year as a whole.
Speaker Change: Yes, Julian first of all welcome to the call are nice to have you.
Speaker Change: And.
Speaker Change: I would say.
Debt.
Speaker Change: The utility Destock you know.
Speaker Change: We'll see but we could.
Speaker Change: If you we could.
Could be.
Speaker Change: At the point of kind of having be done with that as well and I would say on the electrical side.
Feel more confident that we are.
Your Telecom point is is right I think we.
Speaker Change: We do anticipate a weaker start.
Speaker Change: And as you think about.
Youre sort of introducing sequential seasonality and how thats going to look VP why compare.
Speaker Change: And I think what on the VP wide basis.
Some of the <unk>.
Speaker Change: Second half compares because of the destocking could actually be.
Speaker Change: A little bit easier.
Speaker Change: For example, first quarter last year was actually quite strong.
Speaker Change: And.
Speaker Change: I think seasonality wise.
Speaker Change: We upped our investments at the second half of last year as those wrap around.
Speaker Change: That creates.
Speaker Change: A more consistent.
Speaker Change: Easy your second half so I think I think.
Speaker Change: As those things.
Speaker Change: <unk> net against each other that's kind of how we're getting to a more typical seasonal year, even though I hear you. There's obviously puts and takes and forces at work here and maybe Julien I'll provide maybe a little more context.
Julien: On that and you're right to point out there is still some headwinds.
Julien: But one way to look at it and I realize it's an early data point, but as we look at how we're starting off the year and we look at our order patterns and trends here in January.
It's actually a supportive to what bill is somewhat hesitantly, saying that it could be exiting or destocking. It's constructive for us I'd say early read into the year is that as constructive too to kind of this just profile of seasonal guidance.
Speaker Change: Thanks, very much and then just a quick follow up that slide 10, the nonresidential.
Speaker Change: Within electrical the flat to plus low single guide for the year.
Speaker Change: I understand fully on the channel stocking largely having run its course, but maybe just the market outlook.
Speaker Change: Use that would uncertain.
Speaker Change: Any sort of color you could you could put around that what youre seeing in different verticals in that non resi bucket.
Speaker Change: Just think maybe the pressure on office.
Speaker Change: Just.
Speaker Change: Feels like it puts a little bit less certainty I mean, it's quite a constructive pie so.
Speaker Change: I guess by I.
Speaker Change: I think less certainty puts you in still a growth position, but.
Speaker Change: It just it just I think the institutional side probably be stronger.
Speaker Change: But maybe some of that office could be weaker. So I think there is some that makes effect just just puts it in a low growth rather than.
The rest of the pie, which is more medium growth.
Speaker Change: Yeah.
Speaker Change: That's great. Thank you.
Thank you one moment for our next question.
Speaker Change: And our next question comes from Brett Linzey of Mizuho. Please go ahead.
Brett Logan Linzey: Hey, good morning, all Hey, Brad.
Brett Logan Linzey: I wanted to come back to the to the investments and you talked about some of the carryover in the first half just wanted to clarify are these these embedded within the volume portion of the bridge and separate from the footprint just trying to understand if you could quantify the investment versus restructuring and what those paybacks might look like.
Yes, so if last year. It was an investment that continues I E. If you added head count.
Brett Logan Linzey: It would show up in margins in volume so.
Brett Logan Linzey: As we step things up in the areas last year for example, like new product development.
Brett Logan Linzey: Or people to work on productivity initiatives.
Brett Logan Linzey: Would wrap around and with higher cost wouldn't be a new investment right. It would show up as Youre, saying Brett in March in that volume.
Brett Logan Linzey: Yes.
Speaker Change: And then anything you can share in terms of the paybacks on these footprints as something embedded this year or is that a little bit longer term.
Speaker Change: Yes, I think the.
New.
I think there is order of magnitude another $10 million of R&R in that in that bucket that.
Speaker Change: We will be invested this year, it's of a footprint.
Speaker Change: Sure.
Speaker Change: And I think the paybacks are that we have good ROIC on that the paybacks tend to be.
Speaker Change: Three ish year range.
Speaker Change: And so we're sort of investing today in those cases with benefits.
Thats, probably start a year or two from now.
Maybe the other thing that I would say as an embedded some of those expense will drive a higher level of productivity.
Speaker Change: Embedded in our guidance so when you look at.
Speaker Change: The concept of flat price cost productivity. It has a higher level of productivity and higher level of inflation to offset it. So that's where some of those investments are going.
Speaker Change: Okay, great yeah. Thanks for the color there and then just a follow up on the price expectations. So it sounds like no incremental actions embedded in the planning I'd imagine you are seeing some raw material inflation, maybe just a little context as to maybe what that potential hedge could look like if.
Speaker Change: You do see sticking or some of these actions that you are out in the marketplace with.
Speaker Change: Okay.
Yes, I mean.
Speaker Change: You'd be kind of maybe a little bit about speculative sensitivity analysis right. So.
Speaker Change: You could see.
Speaker Change: Each point.
Speaker Change: Each point of price.
Speaker Change: It gets us north, obviously, a $50 million of price and if that.
That's a lot of leverage if there is no corresponding inflation to that.
Conversely, if you have to give a little it equally as kind of this 100% sort of drop through and so as kervin.
Speaker Change: Sort of outline I think we have.
Speaker Change: Because of the investments we made last year, we have a more ambitious productivity target level.
Speaker Change: We certainly see some inflation on the.
Speaker Change: Wage transportation area.
Speaker Change: As well as in.
Kind of a material related area, so I think getting.
Speaker Change: The rigor that we need to focus on all of those levers to come out.
Even our ahead is sort of a.
It's an obsession.
Speaker Change: We review it really carefully every every month that carbons and my level.
Speaker Change: Continue to push enough initiatives to make sure we stay stay even are ahead.
Speaker Change: Okay.
Speaker Change: Got it appreciate the insight.
Speaker Change: Thank you one moment for our next question.
Speaker Change: And our next question comes from Joe O'dea of Wells Fargo. Please go ahead.
Hi, good morning, Thanks for taking my questions.
Joe O'dea: First just wanted to focus on the 2020 for bridge and if we think about it I guess in three buckets would be organic piece. The M&A piece and then some of the restructuring.
Is it is it fair to think about a 25% incremental on the organic piece.
Joe O'dea: And then on the M&A side of things can can you add any detail on what you think interest expenses in 'twenty four just so we get that right and the model.
Joe O'dea: And does that interest expense contemplate the deployment of <unk> lighting proceeds thanks.
Speaker Change: Yes, So I think you could put in about 40 million of incremental interest expense.
Speaker Change: Yeah.
Speaker Change: And I think the drop through of 25 <unk>.
Speaker Change: Volume is reasonable.
Speaker Change: I'd, rather see that more like 30%, but somewhere in that high 20 is reasonable I think.
Speaker Change: And in the resi lighting proceeds.
Speaker Change: Yes, so we've.
Speaker Change: You see we have interest income there as a plus and interest expense as a minus so.
Speaker Change: We sort of built to construct that it's either cash that's going to earn or it's yes, it's going to be available to pay down.
Speaker Change: And I guess so.
Speaker Change: The one thing I'd say is it's explicit that we're not.
Speaker Change: Modeling in our guidance any new acquisitions, and so that that would be incremental to this to the sky.
Speaker Change: Okay.
Got it.
And then on the electrical side.
Speaker Change: Can you size roughly what the destock headwind was to topline growth in in 'twenty, three and so just kind of the non repeat of that.
Speaker Change: What we should think about is that kind of contribution to the plus three or four.
For 24.
Speaker Change: Yeah overall I would say.
Speaker Change: Sell through volumes were down kind of in the high single to low double digits most of the year and I think sell through was.
Speaker Change: Flattish to slightly up.
Speaker Change: So it got better in the fourth quarter, but overall I think you can think about about mid single digit impact on a full year basis.
Speaker Change: Okay, and then just a clarification that the fourth quarter, 9% organic and utility can you did you gave the price and volume split of that.
Speaker Change: Yes.
Speaker Change: The volume was.
<unk> was negative rates so the it ate into the price slightly.
Speaker Change: Slightly positive Joe sorry.
Speaker Change: Volume was slightly positive yes.
Joe O'dea: Yes, Im sorry, youre asking for whole of utility sorry, I thought you're talking about yes, yes, sorry, just that that 9% all organic so slightly positive volume.
Speaker Change: Got it alright, great. Thanks very much.
Speaker Change: Yeah.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Okay.
Speaker Change: And our next question comes from Nicholas Herman Coochie of TD Cowen. Please go ahead.
Speaker Change: Hey, good morning, guys.
Speaker Change: Good morning.
Speaker Change: Just had just had a couple.
Speaker Change: Wanted to hone in on the electrical solutions segment. So obviously.
Speaker Change: Got it and going to benefit somewhat this year from from the footprint optimization just wanted to see.
Speaker Change: How much I mean, how much more headroom do you guys have from an optimization perspective.
Within that segment.
Speaker Change: Okay.
Yes, I mean the.
I'd say that debt.
Speaker Change: We still have projects that are.
This year there'll be consolidating locations.
Speaker Change: So you'll be absorbing volume in existing location.
Speaker Change: And then after you get.
Speaker Change: Theres always the chance to keep putting in bigger more scaled facilities. So you can answer your question with a very long perspective, but.
Speaker Change: If you took it a little bit more narrowly I would say in the next few years.
Speaker Change: We'd be at a stage, where we'd be quite happy.
Speaker Change: With.
Speaker Change: With the optimization process.
Speaker Change: You'll probably never done I guess point, but I think we will we could.
Go along into achieving sort of our desired goals.
Speaker Change: Just a few years.
Speaker Change: Sure Sir.
<unk>.
Speaker Change: And then did want to touch upon two so I think the guidance.
Speaker Change: Within the within the press release.
About $1 60.
Speaker Change: The amortization.
Speaker Change: That's been going on adjusted EPS and so if you do the math roughly $86 million for the year.
Speaker Change: We did it within utility.
Speaker Change: Understand that.
A significant step up in <unk>, probably related to the systems control, but just wanted to get a better sense of that.
The timing of that amortization.
Speaker Change: Breakdown between utilities and electrical solutions.
Yes, so the increments so we've been running at a dollar for a while so the 60 <unk>. That's new is all in utilities, so as you separate them.
And when you think about the amortization.
A lot of it is going to customer value in places that have quite a long.
Speaker Change: <unk>.
Speaker Change: By law I mean like 20 year. So it's.
Speaker Change: It's a pretty stable.
Speaker Change: Pretty stable run rate.
Speaker Change: Got it perfect.
Speaker Change: Yes, that's all I got thanks, guys.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Yeah.
Speaker Change: And our next question comes from Chris Snyder of UBS. Please go ahead.
Chris Snyder: Thank you I wanted to ask on utility margins.
Chris Snyder: And specifically I guess the expectation that on an organic margins will be flattish for 2024 analyst asking because you guys are exiting the year.
Well below where you started and maybe M&A in a bit of a headwind in Q4, but it feels like organic.
Chris Snyder: In Q4 down a good deal versus the first half. So is it fair to does the guide assume that.
Utility organic margins are down year on year in the first half and then returned to growth into the back half or should we expect them up year on year throughout the year.
Yes, I would.
Chris Snyder: I would assume they're kind of flattish.
Chris Snyder: Through like I.
I don't think Theres anything.
Chris Snyder: Think I look maybe the shape of 'twenty three.
Cause I know exactly what you are observing right you see.
Sequential step down in margins some of that.
Chris Snyder: Is attributable to some spending investing that we're doing some of it is attributable to.
Chris Snyder: The Eclair a mix effect some of it is attributable to the fact that the volumes inside of power systems.
Chris Snyder: We're going through other destocking work with with our.
Chris Snyder: Customer channels partners.
Speaker Change: So I think.
Speaker Change: Again, we just see that Chris returning.
To a more normal shape.
Speaker Change: And so I think the volume piece of power systems.
Speaker Change: Becomes quite important to that I think we see the mix with the claris starts.
Speaker Change: Balance to equal more equal contributions.
Speaker Change: And so I think.
Speaker Change: In a balanced world, we would expect margins in Q1 and Q4 to be below the margins in Q2 and Q3.
Speaker Change: And that that shape.
Speaker Change: In 'twenty four.
Speaker Change: Should feel quite quite normal.
Speaker Change: Thank you I appreciate that and then just as a follow up on utility margins. So I know there are always down sequentially into Q4, just lower revenue. This quarter came in quite a deal sharper than we expected.
Speaker Change: Is the company starting to feel the impact of higher metal prices I know steel has been up a lot over the last three or four months.
Is that starting to come through in Q4 on those utility margins or is that.
Still more of a maybe a 24.
Speaker Change: Dynamic.
Speaker Change: Yes, I mean, we certainly saw starting November December steel move.
Speaker Change: And I would say the way.
<unk>.
Speaker Change: The way that works through the supply chain is usually.
A couple of months lag on when we as a LIFO company.
Speaker Change: Those most recent prices so I think we will feel.
Speaker Change: Those prices are those costs, if you will.
Speaker Change: In the first quarter.
Speaker Change: And maybe the.
Speaker Change: Mid to end of the first quarter.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Okay.
Yeah.
Speaker Change: And our next question comes from Scott Graham of Seaport Research Partners. Please go ahead.
Yes, Hey, good morning, Thanks for squeezing me in just really the question I have is about the portfolio management slide and.
Particularly now with systems control in the fold you have a couple of nice sized bubbles under which to acquire what is the outlook. There for you know what does the pipeline look like I mean, you've got a one four net leverages a really good number to work off of sort of what are your aspirations in 'twenty four maybe.
By telling us it would you be disappointed without another good sized deal this year.
Speaker Change: Yes, it's an interesting way to phrase the question I'd come at it from.
Speaker Change: From two perspectives. The first you already raised switches.
Speaker Change: We are very comfortable with our leverage levels. So.
Speaker Change: So we think financially we.
Speaker Change: We certainly can afford to invest in acquisitions.
Speaker Change: And I would say secondly.
Speaker Change: Is kind of the integration perspective and.
Speaker Change: We'd like to make sure.
Speaker Change: We have systems control well integrated we've got.
Speaker Change: Uh huh.
Speaker Change: A healthy amount of people kind of working together so off to a great start and our customers are happy with it feels like a good cultural fit but it still takes still it takes work to make sure that it's integrated and we don't want to.
Speaker Change: Have too many plates spinning so your question maybe.
Well revisited.
Speaker Change: Three months from now.
Speaker Change: But I.
Speaker Change: I agree with you that strategically we'd love to add businesses in the northeast and financially northeast of this two by two matrix of higher growth higher margin.
Speaker Change: <unk>.
Speaker Change: And yes, we feel we have.
Capacity both in test.
Speaker Change: Cash flow generation will be up in the $800 million range. This year plus as you pointed out I think balance sheet capacity. So.
We are.
Speaker Change: We are.
Speaker Change: So I think let's let's just revisit that question maybe in <unk>.
Speaker Change: Three months and see how do we feel that it's a good one it's a good question.
Speaker Change: Fair enough fair enough I guess I was just wondering also what the pipeline itself looked like and you can move people off a little bit.
Speaker Change: Yes. There is there is there is a pretty decent pipeline and there is quite a few things we're expecting.
Speaker Change: Two at least.
Speaker Change: Probe the market.
Speaker Change: In the second half of the year, so that doesn't mean, we'll buy any of those or that there'll be attractive, but there is there is an interesting amount of.
Speaker Change: It appears to be.
Inventory may be coming to market. So.
Speaker Change: Thanks, so much.
Speaker Change: Yes.
Speaker Change: Thank you at this time I would like to turn it back to Garvin Parker for closing remarks.
Garvin Parker: Great. Thank you I appreciate it.
Garvin Parker: All the questions to quite robust time, we put out for that in this call to focus on our outlook.
Garvin Parker: Maybe I'll close by saying that I feel really good about.
Garvin Parker: The year and our ability to deliver on our commitments to you to drive profitable growth. After a few years of really outperformance. So.
Garvin Parker: Look forward to our Investor day later in the year and two.
Our first quarter call, let's talk about how we're doing so far this year. So thanks so much.
Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.
Yeah.
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Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Good day, and thank you for standing by and welcome to <unk> fourth 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 this session you will need to press.
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Speaker Change: Be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Dan Inamorato Vice President of Investor Relations. Please go ahead.
Dan Innamorato: Thanks, David Good morning, everyone and thank you for joining US earlier. This morning, we issued a press release announcing our results for the fourth quarter of 2023 press release and slides are posted to the investors section of our website at <unk> Dot com.
Dan Innamorato: Joined today by our Chairman President and CEO, Kevin Barker, our executive Vice President and CFO Bill Sperry. Please note. Our comments. This morning may 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 1095. Therefore, please note the discussion of forward looking statements in our press release considered incorporated by reference to this.
Dan Innamorato: Additionally comments May also include non-GAAP financial measures those measures are reconciled to the comparable GAAP measures and are included in the press release and slides now let me turn the call over to Griffin.
Griffin: Great. Good morning, and thank you for joining us to discuss <unk> fourth quarter and full year 2023 results.
Griffin: <unk> delivered a strong finish to an exceptional year.
Griffin: For the full year 2023, we achieved 9% sales growth.
Griffin: Over 500 basis points of operating margin expansion and over 40% growth in operating profit and earnings per share.
Griffin: These results were driven not only by our strong positions in attractive markets, but also by the consistent execution of our people and maintaining industry, leading service levels for our customers, while driving price and productivity across our businesses.
Griffin: Our strong financial performance also enabled us to invest back into our business and capacity innovation and productivity initiatives.
We invested $165 million in capital expenditures in 2023, almost double our investment levels from 2021.
Griffin: We are confident that these investments will drive future growth and productivity for our shareholders and as we will describe in more detail later, we intend to grow profitably off of a strong multiyear base of performance.
Griffin: Turning to the fourth quarter, we delivered strong growth and margin expansion in both segments.
Griffin: Notably, we also returned to year over year volume growth in electrical solutions.
Griffin: As we noted on our previous call in October we were confident that the channel inventory management that we had seen earlier in the year had largely normalized.
Griffin: As a result.
Griffin: Saw a stronger seasonal performance in the fourth quarter as well as continued strength across data centers and renewables verticals.
Griffin: We also continue the trajectory of strong margin expansion in the electrical segment and then a year with adjusted operating margins of 16, 6%.
Griffin: We continue to see structural margin expansion opportunities as we make progress in our strategy of competing collectively as an operating segment and we plan to accelerate our restructuring investment in 2024 to drive long term productivity.
Griffin: And utility solutions fourth quarter trends were largely consistent with the third quarter.
Griffin: Transmission markets were strong and we continue to convert on past due backlog and communications and control our supply chain conditions have improved.
Griffin: Utility distribution distribution markets continued to be impacted by channel inventory normalization as anticipated, though we continue to see visible demand strength in 2024 and beyond.
Griffin: Telco markets were weak in the quarter and while our long term outlook remains positive. We are taken a cautious initial view on 2024 until we have more visibility on timing of investments.
We also executed on two important portfolio actions in the quarter as we closed on the previously announced acquisition of system control and announced a definitive agreement to sell our residential lighting business, which we expect to close in early February.
Griffin: These transactions reflect our ongoing strategy to create a focused portfolio strategically aligned around grid modernization in electrification.
Griffin: Transaction improved our long term growth and margin profile of our portfolio and we.
Griffin: The fate that they will be net accretive to 2024 adjusted earnings per share.
Griffin: We will provide more details on our 24 outlook at the end of this call, but we remain confident that <unk> is uniquely positioned in attractive markets and that we can build off the success of this last several years to drive profitable growth off this higher base of performance.
With that let me turn it over to Bill to walk you through the details of the quarter.
William R. Sperry: Thanks, very much <unk> and <unk>.
Morning, everybody.
William R. Sperry: Thank you for joining us I'm pleased to have the chance to discuss with you are.
Financial performance in the fourth quarter, which was very strong capping.
William R. Sperry: Strong year and frankly.
William R. Sperry: Strong two years I'm going to start my comments on page four of the slides that I hope you found.
William R. Sperry: So the trends have been in place.
<unk> for the last year and longer.
William R. Sperry: Strong sales growth and operating profit growth.
William R. Sperry: Including margin expansion.
William R. Sperry: Being driven by strong markets as well as strong pricing and.
And strong cash flow is resulting in those those fundamental trends are obviously continuing here in the fourth quarter. So we reported a 135 billion of sales.
William R. Sperry: 10% growth.
William R. Sperry: 2% of that comes from acquisitions.
William R. Sperry: <unk> is organic.
William R. Sperry: This utility segment, a little bit stronger than electrical but as carbon noted.
William R. Sperry: Quite important for electrical volumes to return to growth as a sign that the inventory.
William R. Sperry: And the channel is normalized on that side of the house.
William R. Sperry: Interesting too we sequentially.
William R. Sperry: The fourth quarter.
William R. Sperry: Seasonally stronger than is typical so we think thats a good sign.
On the operating profit margin side C 19, 4% three points of expansion really being driven by price cost and productivity.
William R. Sperry:
William R. Sperry: And creating.
William R. Sperry: Some source of funding for investments that Durbin had described earnings per share at $3 69.
William R. Sperry: 40% increase to prior year.
And $284 million in free cash flow.
Helping to fund, our Capex and acquisition.
William R. Sperry: Investment so let's double click on that on page five and go one layer.
William R. Sperry: Deeper.
So the 10% sales, we said was 8% organic.
William R. Sperry: That was comprised of mid single digits of price, we think thats good evidence of our quality.
William R. Sperry: Service and our brand positioning and low single digits of volume and welcome as I said the return to electrical volume growth.
William R. Sperry: The 2% coming from acquisitions.
William R. Sperry: Our all.
On the utility side, and we will talk about those more.
We get to the utility page.
On the upper right operating profit.
William R. Sperry: Up 34% to $262 million the.
William R. Sperry: The margin expansion of three points really being driven by price as well as materials, which continued to provide a tailwind as they had for each quarter in 2023.
So the inflation that we're experiencing is more on the wage and transportation side.
William R. Sperry: Where we're focusing a lot of productivity efforts.
William R. Sperry: As well as.
William R. Sperry: We're absorbing there some operational productivity investments going on.
On the lower left you see earnings per share up 42%.
Slightly higher growth rate than the operating profit so below the line we benefited from some tax rate favorability.
William R. Sperry: And on the free cash flow side, you see $284 million, nearly 60% increase and for the full year.
We generated over $700 million of cash flow and that supported our capex of 100 around $165 million, which.
William R. Sperry: Really helped drive some footprint restructuring productivity and capacity investing.
So, let's unpack the enterprise into the two segments and we'll start with utilities on page six and you'll see.
Another excellent quarter from our utility team double digit sales growth and 40% operating profit growth.
A 13% sales growth.
William R. Sperry: <unk> is comprised of 9% organic and 4% from acquisitions the.
William R. Sperry: The acquisition is to remind everybody included.
William R. Sperry: G, which was our second quarter of ownership, there, but less stroh.
William R. Sperry: And systems control systems control was closed.
In the middle of December so.
William R. Sperry: Didn't didn't contribute much yet.
William R. Sperry: And we are reporting both cholesterol and systems control and our T&D components and AIG is in the comms and control side.
William R. Sperry: We'll talk more about acquisitions in a minute and in the last few years plus this year.
William R. Sperry: As we think about the 9% organic growth you'll see that it was skewed towards the communications and control side, if I start with the.
Transmission and distribution components, you'll see organic was at 1%.
William R. Sperry: Where volume was a drag on price.
And if we look inside the components substation and transmission continued to be very strong.
Distribution components, we continue to work through our second quarter of.
Channel inventory management.
William R. Sperry: I think as we had mentioned before our electrical XI ahead.
Experienced that quicker than sooner earlier.
William R. Sperry: And utility side. So we've emerged on the electrical sides still in on that.
William R. Sperry: The distribution side.
William R. Sperry: And then telecom has been weak.
A function of.
William R. Sperry: Some overstocked inventories as well as potential demand impacts from.
Combination of high interest rates and some customers who are waiting for stimulus dollars to kick off their projects.
William R. Sperry: You see on the communications and controls <unk>.
William R. Sperry: Surging growth there.
Got both the Clara and Beckwith businesses, there on a claris side.
William R. Sperry: The chips.
William R. Sperry: Supply chain opening up has really allowed them to satisfy some existing backlog and so we see some great growth. There also to remind there was that we have an easy compare there is last year, we had a commercial settlement that was a conscious sales item and beckwith as well.
Which makes.
Protective relays and controls up double digits in sales so.
Very strong.
William R. Sperry: Top line performance by segment, and even better on the op side or a growth of 40% to $174 million.
William R. Sperry: Over 21% margins.
And the price cost story.
William R. Sperry: Is the same volume growth contributing.
William R. Sperry: And we continued to make investments so.
Our full year, but this is obviously our fourth quarter performance just at the bottom of the page a full year comment on profit growth of about 60%. So.
William R. Sperry: Congratulations to Greg and his team on on and just a really outstanding at year.
William R. Sperry: On page seven.
William R. Sperry: We've got the electrical segments.
And you see mid single digits sales growth with.
William R. Sperry: Two points.
William R. Sperry: Margin expansion strong performance from the electrical team and.
That 6% sales growth.
William R. Sperry: It's comprised of about half of that is price and half volume.
And that volume as we said.
William R. Sperry: We thought in October.
Channel inventories would be normalized and rebalanced and that did occur in the fourth quarter, which is which is good news.
William R. Sperry: Volume came from.
William R. Sperry: Some important verticals data centers was a big one.
William R. Sperry: Recall last year, we bought <unk>, which is performing really strongly serving serving that segment burndy as well as serving that segment, but R&D is also benefiting from the renewable vertical.
William R. Sperry: And a little bit of U S re shoring on the industrial side, so some favorable trends there, allowing for that volume growth and on the profit side, you see 20% growth two points of margin expansion is.
William R. Sperry: Operating profit reached $88 million.
William R. Sperry: Again.
William R. Sperry: <unk> costs really helping as well as the return to volume growth.
William R. Sperry: And.
Full year comment I'll make on electrical like I did.
William R. Sperry: On the utility side, we saw <unk>.
William R. Sperry: <unk> percent growth in operating profit in the segment.
William R. Sperry: With two five points of margin expansion. So I think very successful year for the electrical.
William R. Sperry: Looking forward to Mark Mike and his team are continuing to.
Pushed the segment to compete collectively where we think there is there is more growth and more margin available to us there.
William R. Sperry: I mentioned that I wanted to talk about the portfolio management and on page eight.
William R. Sperry: We've laid out the last few years of activity.
William R. Sperry: Just to remind ourselves of our intentions here.
William R. Sperry: And I'll start with the divestitures were.
William R. Sperry: We have three companies divested at a force under definitive agreement that we're open to close it.
William R. Sperry: In early February.
William R. Sperry: And you see those businesses netted us $500 million.
William R. Sperry: Proceeds.
William R. Sperry: And our intention here is to make sure we're investing in higher growth higher margin.
William R. Sperry: Businesses, and you'll see that that that 500, we rolled into 1 billion seven of acquisitions numbering about 10 over last few years.
William R. Sperry: And.
William R. Sperry: You can see in the in the large blue bubble of T&D components.
William R. Sperry: We added continue Ripley armor cast electro and in the.
William R. Sperry: Yellow bubble there of connection and bonding, adding connector products. So those vary.
Intentionally adding businesses to a higher high margin high growth areas as well as in.
Specific growth verticals.
William R. Sperry: Like subs.
William R. Sperry: Substation systems like grid automation data centers <unk> that I mentioned.
William R. Sperry: And wireless communications are a sell tech so we.
William R. Sperry: We think we are enhancing.
The growth in margin profile of the company.
William R. Sperry: I did want to pause because of systems controls recent closing as well as its size.
William R. Sperry: On the impact on capital structure.
William R. Sperry: So that was 1 billion one purchase price that we funded with some cash as well as some CPE and a term loan a provided by our supportive Bank group.
William R. Sperry: The result of that is a flexible and pre payable capital structure.
William R. Sperry: Which we think gives us some optionality.
William R. Sperry: And results in a very manageable debt levels of one eight times debt to EBITDA on a net debt basis around one and a half so we feel like.
William R. Sperry: <unk>.
William R. Sperry: We're improving the portfolio.
William R. Sperry: I'll talk about the specific impacts.
William R. Sperry: The acquisitions on our guidance.
William R. Sperry: In another couple of pages.
William R. Sperry: So as we switch to outlook, let's start on page 10 with with the markets.
William R. Sperry: And then we'll talk about how those markets roll through our earnings expectations. So we've got the utilities segment on the left electrical segment on the right.
Can see the different pieces of the pie here.
William R. Sperry: Starting with electrical distribution.
William R. Sperry: They have been.
William R. Sperry: In the <unk>.
William R. Sperry: Really two quarters now of managing their inventories relative to the backlog and we.
William R. Sperry: We think that's normalizing quickly and expecting a healthy mid single digit growth rate, there transmission substation and distribution automation, which is up around noon.
William R. Sperry: The pie, we think those are both high single digits.
Meters and gas in the mid single digits.
<unk> talked about telecom.
<unk>, a very cautious outlook.
William R. Sperry: <unk> four orders to restart there.
William R. Sperry: I'll just comment that sort of short term outlook, we do have very attractive medium and long term outlook for telecom. So the result on the utility side as is the mid single digit growth rate on the electrical you see.
William R. Sperry: It's out at three to four so low to mid.
William R. Sperry: I think the.
William R. Sperry: Industrial outlook, you see both light and heavy.
William R. Sperry: Is low to mid single digits.
William R. Sperry: We have mid single digit growth rates in our verticals.
William R. Sperry: And I think non res, we maybe have a bit of caution at flat to low single digit so.
William R. Sperry: Constructive market outlook for 2024.
William R. Sperry: And let's go to page 11, and see how that rolls through.
William R. Sperry: Our earnings outlook, So you see.
William R. Sperry: The organic of three to five in our sales growth.
Combined with 5% net from M&A, one going out one coming in.
William R. Sperry: To create 8% to 10% sales growth.
That generates.
William R. Sperry: 10% growth in operating profit.
William R. Sperry: Results in 6% earnings.
William R. Sperry: And free cash flow at about 90% of net income.
Affording a continued increase in capex.
Let's just walk through.
William R. Sperry: The bridge to give you a feel for it so.
William R. Sperry: We're under contract.
William R. Sperry: To sell residential lighting.
That will lose $20 million of op.
Systems control.
William R. Sperry: AIG and balestra, Ob, adding about $90 million.
William R. Sperry: So you can see almost almost a dollar coming.
William R. Sperry: Coming from those.
William R. Sperry: Before we pay the interest expense, which we have over on the right.
William R. Sperry: We had four organic three to five so we've comprised out of two to four volume and one point of price, which is in the next column.
William R. Sperry: That's providing a nice lift and we have continued investment.
William R. Sperry: Particularly on the electrical segment side.
As we compete collectively there and continue to consolidate the footprint under our <unk>.
Restructuring programs.
William R. Sperry: You see on the far right below okay.
William R. Sperry: The increase in interest expense as a result of the borrowings that we outlined to close on systems control.
William R. Sperry: And the results.
William R. Sperry: It's about 6%.
William R. Sperry: Our earnings growth to the midpoint of 16 25.
William R. Sperry: You see some modeling considerations listed there and I might just add another one on seasonality for those of you who are modeling.
William R. Sperry: We're anticipating 2024 being quite normal seasonality.
William R. Sperry: For the first and fourth quarters.
Being a little bit below the second and third quarters, which are seasonally stronger.
William R. Sperry: And that just compares to last year, where the first quarter.
William R. Sperry: Which was very strong in contributing.
William R. Sperry: To the full year.
William R. Sperry: No.
William R. Sperry: We think.
A very constructive year in front of us we feel well positioned.
William R. Sperry: We're happy to have the return and volumes.
William R. Sperry: And we're happy to have made some portfolio net addition.
William R. Sperry: To continue to push.
William R. Sperry: Profitable growth at Hubbell and.
Speaker Change: With that I'd like to turn it back to you.
Speaker Change: Great. Thank you Bill and before we turn it over to Q&A.
Speaker Change: Think it is helpful. On the last page to look at our 2023 performance in 'twenty four outlook and a longer term context the.
Speaker Change: The results, we delivered for shareholders not only in 2023, but over the last few years have been very strong most notably we have doubled our adjusted operating profit and adjusted earnings per share over a three year period, while growing sales at double digit CAGR in expanding adjusted operating margins from the.
Speaker Change: Mid teens to over 20%.
Speaker Change: We have also doubled our capital expenditures over the last three years to further differentiate our service levels to customers and support attractive long term growth expectations.
Speaker Change: As grid modernization on electrification drive the need for a more reliable resilient and renewable energy infrastructure Hubbell is uniquely positioned with the right people solutions and strategy to meet the evolving needs of our customers and deliver continued value to our shareholders.
Speaker Change: I am extremely proud of our over 18000 employees, whose hard work and dedication have enabled us to achieve a new baseline of performance and I am confident that we will built off of the success with continued attractive profitable growth in 'twenty four and beyond.
Speaker Change: We look forward to hosting an investor day later this year on June 4th while we will provide more details on our long term strategy with updated financial targets with that let's turn the call over to Q&A.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, we ask that you. Please limit your questions to one question and one follow up please standby, while we compile the Q&A Ross.
Sure.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: And our first question comes from Stephen Tusa of Jpmorgan.
Hey, guys good morning.
Good morning, Steve.
Stephen Tusa: Can we just get a little more color on the bridge, maybe what youre expecting on price cost and then any segment margin color for the year and how you expect that the trend seasonally.
Stephen Tusa: Yes, so price cost, we've got as flat Steve.
Stephen Tusa: We have.
Stephen Tusa: Effectively one point of rollover on price embedded in there.
Stephen Tusa: Which.
Stephen Tusa: We are using effectively to offset.
Stephen Tusa: Commodity inflation and then we've got productivity program that we think can help offset non material inflation in places like transportation.
Stephen Tusa: Wages and things like that so.
It's quite.
Stephen Tusa: Okay.
Stephen Tusa: Quite a flat expectation.
And I think the way segments.
Stephen Tusa: I think as.
Stephen Tusa: As a result of that P. C P assumption.
Our margins by segment are reasonably flat ish.
Stephen Tusa: And I would say that applies to.
Stephen Tusa: Both segments I would say Steve.
Stephen Tusa: Yes.
Steve: Yeah go ahead, yeah. It does.
Does the ish on utility kind of skew one way or the other.
Positive or negative.
Steve: Yes, I would say flat.
Steve: Think about that.
Steve: Okay.
Speaker Change: Okay great.
Speaker Change: Maybe the moving pieces on the I'll give you. If you think about the addition of systems control, that's actually a little bit dilutive to margin, even though it's <unk>.
<unk> those numbers.
Speaker Change: Very attractive addition, and if you think about volume, it's a little bit accretive and if you think the net of those with PCP flat. It's roughly flat. If you look at it maybe a little bit color on the electrical because the electrical I think it's just slight expansion.
Speaker Change: But that is with a pretty good step up on restructuring. So if you take that out it's actually a nice or expansion of that and then bill referred to it earlier the opportunity still in that segment as they as they work through that.
Organizing that better competing collectively there is more room for margin expansion there.
Got it alright, thanks, guys I appreciate it.
Thank you one moment for our next question.
Speaker Change: Okay.
Speaker Change: And our next question comes from Jeffrey Sprague of vertical research. Please go ahead.
Thank you and good morning, everyone.
Jeffrey Todd Sprague: Hey, Jeff good.
Jeffrey Todd Sprague: Good morning.
Little more color on the utility margins just also thinking about the comms Clara business.
Not sure where the margins are at in that business, but that feels like it's a friction point also to some degree from a mix standpoint. So I wonder if you can address that I guess scrubbed and you said flattish failure you are powering through all that but still love some context on that on the mix effect of of Clara and.
And can you just give us a little color on how much telecom was down in 2023, we're looking for a weak 2024, but we do have sort of at least a half a weakness in the base year for 2023 I believe.
Speaker Change: Yes, so maybe let's start with utility.
Speaker Change: Margins first.
Speaker Change: And I would say for Clara.
Speaker Change: You're right to say.
Speaker Change: Their margins are below.
The transmission and distribution component margins largely because of the amount of R&D investing that we're doing.
Working on developing.
Speaker Change: The nexgen comps package so.
I would say in.
'twenty, three and particularly in this fourth quarter.
Speaker Change: Saw them outgrowing.
Speaker Change: I think where you're going is that does that create a mix drag it in it and it did in the fourth quarter I think growth rates next year.
Speaker Change: We'd maybe anticipate more balanced Jeff. So I don't think we will have a big mix.
Effect.
Speaker Change: Utility margins in 'twenty four and your second question was on Telecom, Yes, maybe provide a little context, there, Jeff and you know, we really saw that slowing down.
Speaker Change: Towards the latter part of the year, particularly the fourth quarter more specifically was down 20%.
Speaker Change: For the first quarter, we still expect that to be down double digits.
Speaker Change: And would have early in the year, we were still working through a lot of backlog in that which kind of shielded us a little bit.
Speaker Change: So we certainly expect.
After the first quarter.
Speaker Change: Second quarter sales to be down and then we expect it to rebound in the second half as some of that stimulus.
Speaker Change: Funding frees up.
Speaker Change: And <unk> can you also just address.
Speaker Change: Kind of your ability on just kind of factory through put here is.
Speaker Change: As the industry, particularly on the utility side seem to want to compound out here pretty healthy.
Growth rates.
Speaker Change: Everything kind of buttoned up on the factory work you've been doing or are there is there more to do there.
Maybe just.
Speaker Change: Although the skyline on what to expect on Capex.
Speaker Change: Yes, I would say more to do Jeff.
Speaker Change:
Speaker Change: Some of those projects take time to get some of that equipment and in an online so.
If you think about for example, our transmission and substation.
Speaker Change: Markets, particularly strong last year and this coming year as well, it's just you saw.
Speaker Change: And that requires some capital that's still needing to come on line I feel good about our ability to do that we've done that very well over.
Speaker Change: Over the last year or so.
Speaker Change: That's that's going to support some of that growth that we have embedded in our in our guidance.
Speaker Change: And then thanks very much.
Speaker Change: Washington.
Speaker Change: Thanks.
Speaker Change: I'm sorry, if youre not done go ahead I just had one last little follow up if I could.
Speaker Change #100: Please please go.
Speaker Change #100: I just wanted to kind of come back to the seasonality comment and everything totally get it and that sort of what I've been modeling.
Speaker Change #100: But given that given the margin comp in the beginning of the year and you in particular.
Speaker Change #100: Are you expecting EPS to actually grow year over year in Q1.
Speaker Change #101: Yes, I think that is.
We just don't we don't do EPS in the.
Speaker Change #101: By the quarterly guide basis.
I would say I'd anticipate our Q1.
Speaker Change #101: Earnings to be in line with contributing to the full year at our typical seasonality.
Speaker Change #101: More so than it did last year so.
Speaker Change #102: Great. Thank you.
Speaker Change #103: Thank you one moment for our next question.
Speaker Change #103: Yeah.
Speaker Change #103: And our next question comes from Tommy Moll of Stephens. Please go ahead.
Good morning, and thank you for taking my question.
Tommy Moll: Thanks Tommy.
Tommy Moll: I wanted to start on the utility side of the business. It seems like for most of last year. It was more a discussion around availability rather than price.
Tommy Moll: With that said given some of the inventory.
Tommy Moll: <unk> destocking, particularly around distribution has that conversation conversation changed at all as price a bigger factor at this point.
Speaker Change #104: I would not say so Tommy now.
Tommy Moll: Good to hear thank you.
Speaker Change #105: I guess that then begs a follow up where.
Speaker Change #105: And your your full year outlook you contemplate.
Speaker Change #105: Thank you said Bill a point of wraparound price, but you did highlight some uncertainty in certain pockets.
Speaker Change #105: What are those pockets you were referencing there.
Speaker Change #106: Yes, so I think telecom would be the first.
Speaker Change #106: <unk>.
William R. Sperry: To see a market down.
Speaker Change #107: I think just puts a little pressure on that.
And so that's really the most noteworthy one I think.
Uh huh.
Other areas, where things are overstocked can put a little pressure, sometimes so we.
We've had a very successful.
Speaker Change #107: Pricing.
Speaker Change #107: Tactic over the last.
Speaker Change #107: Really two years and.
Speaker Change #107: So it's something that we are.
Speaker Change #107: A very focused on b.
Speaker Change #107: We are in very close conversations with our big customers Garvin and I happen to be visiting with a few of our largest customers over the course of the last couple of weeks and.
Speaker Change #107: Just your to your point.
Speaker Change #107: None of them.
Speaker Change #107: Are asking about price other than to make sure.
We're coordinating with them give them enough time to implement price increases and let them manage that through their systems, but it's.
Speaker Change #107: I've described price as of this moment Tommy is still quite constructive.
Speaker Change #107: To your point.
Speaker Change #107: There may be some headwinds I would also say that we.
Speaker Change #107: Built into the guidance to carryover, but we also announced price increases early this year too early to tell.
Speaker Change #107: At this stage.
Speaker Change #107: Few weeks in.
Speaker Change #107: On the stick rates, but again the conversations that we're having are very positive two to those.
Those taken hold so we have levers against potential headwinds bye bye taken.
<unk> taken price too.
Speaker Change #108: Thank you both I appreciate it and we'll turn it back.
Speaker Change #109: Thank you one moment for our next question.
Speaker Change #109: Yeah.
Speaker Change #109: And our next question comes from Nigel Coe of Wolfe Research. Please go ahead.
Nigel Coe: Thanks, Good morning, everyone.
Nigel Coe: So good morning, it's bill just wanted to be a bit more sporadic.
Nigel Coe: Typical seasonality for <unk> it looks like about 20% of full year is that about the right zone for Yamana, Yeah, a little I would've said 'twenty one if you asked me.
Nigel Coe: Okay. That's great. Thanks for the clarification, there and then just the electrical performance. This quarter is obviously outstanding.
Nigel Coe: I think it's been organic growth.
Nigel Coe: Pretty flat Q over Q in both revenues and margins. So is that mainly channel impact you're seeing there and I know you called out strength electrification.
Nigel Coe: And datacenter system I'm, just curious in terms of the end market demand what you saw.
Nigel Coe: During the quarter being because you know specific specific there.
Speaker Change #110: Yes, Im not sure Im not sure Im getting at the essence of what you are asking we did find that vertically.
Data centers and renewables were both good that benefited.
Speaker Change #110: Our <unk> business and our Burndy business.
Speaker Change #110: And I do think we saw from our big customers. If that's if that's where you're pushing.
Speaker Change #110: In areas, where they had been.
Speaker Change #110: Managing their inventories we saw a return to growth in that.
Speaker Change #110: Those.
Speaker Change #111: Well, so I'm not sure if youre getting that customer behavior end markets, there, but we had a kind of a little bit of a mix of a mix of both.
Speaker Change #112: Yeah, I mean, it wasn't a straightforward question I know, but.
Speaker Change #112: Do you think the channel impact was fairly neutral so sell in versus sell out pretty similar I guess, that's sort of the essence of my question, but really then when we think about the margin exit rate for <unk> into 2024, I know you said flattish impact.
Speaker Change #112: Impact in 'twenty for restructuring is picking up so that's obviously a headwind in 'twenty four but just curious about the lighting impact because that's coming out. So I think that that would probably drive more of a bias toward expansion and electrical so just curious if you agree with them.
I do agree.
Speaker Change #112: I do agree they were sort of that double digits versus.
Okay.
Speaker Change #112: Versus what you see is a better margin at the segment. So I do agree.
Speaker Change #112: And then set in the Senate.
Yes, it's pretty consistent in the quarter Nigel.
Great. Thank you.
Okay.
Speaker Change #113: Thank you one moment for our next question.
Speaker Change #113: And our next questions comes from Julian Mitchell of Barclays. Please go ahead.
Julian Mitchell: Hi, good morning.
Maybe just.
Just trying to understand and fully comprehend that you didn't give sort of detailed quarterly guidance, but you've got the 4% organic growth guide for the year in revenue and you have the color around <unk>.
Start to the year in telecom a bit of extra utility destock and maybe the last drags of.
Julian Mitchell: Non resi electrical destock, so all of that seems to suggest a stronger second half organic growth rates.
Julian Mitchell: Just wondered how much of an improvement year on year are you dialing in through the year as we go to get to that 4% for the year as a whole.
Yes, Julian first of all welcome to the call are nice to have you.
Julian Mitchell: And.
Speaker Change #114: I would say.
Debt.
Speaker Change #115: The utility Destock you know.
Speaker Change #115: We'll see but we could.
Speaker Change #115: If you we could be.
Speaker Change #115: At the point of kind of having be done with that as well and I would say on the electrical side you feel more confident that we are.
Speaker Change #115: Your Telecom point is is right I think we.
Speaker Change #115: We do anticipate a weaker start.
Speaker Change #115: And as you think about.
Youre sort of introducing sequential seasonality and how that's going to look VP why compare.
Speaker Change #115: And I think what on the VP wide basis.
Some of the <unk>.
Speaker Change #115: Second half compares because of the destocking could actually be.
Speaker Change #115: A little bit easier.
Speaker Change #115: For example, first quarter last year was actually quite strong.
Speaker Change #115: And.
Speaker Change #115: I think seasonality wise.
Speaker Change #115: We upped our investments at the second half of last year as those wrap around that creates.
Speaker Change #115: A more consistent and.
Speaker Change #115: An easier second half so.
Speaker Change #115: I think I think.
As those things.
Speaker Change #116: <unk> net against each other that's kind of how we're getting to a more typical seasonal year, even though I hear you. There's obviously puts and takes and forces at work here and maybe Julien I'll provide maybe a little more context.
Julien: On on that and you're right to point out that theres still some headwinds.
Julien: But one way to look at it and I realize it's an early data point, but as we look at how we're starting off the year and we look at our order patterns and trends here in January.
Julien: It's actually a supportive to what bill is is somewhat hesitantly, saying that it could be exiting or destocking. It's constructive for us I'd say early read into the year is that as constructive too to kind of this this profile of seasonal guidance.
Speaker Change #117: Thanks, very much and then just a quick follow up on that slide 10, the nonresidential.
<unk> within electrical the flat to plus low single guide for the year.
Speaker Change #117: I understand fully on the channel stocking largely having run its course, but maybe just the the market outlook.
Use that would uncertain.
Any sort of color you could you could put around that what you're seeing in different verticals in that non resi bucket.
Speaker Change #117: Just think maybe the pressure on office.
Speaker Change #117:
Speaker Change #117: It just feels like it puts a little bit less certainty I mean, it's quite a constructive pie so.
I guess by I think less certainty puts you in still a growth position but.
It just it just I think the institutional side probably be stronger.
Speaker Change #117: But maybe some of that office could be weaker so I think there is some.
Speaker Change #117: That makes effects just just puts it in a low growth rather than the.
Speaker Change #117: The rest of the pie, which is more medium growth.
Speaker Change #117: Yeah.
Speaker Change #118: That's great. Thank you.
Thank you one moment for our next question.
Speaker Change #118: And our next question comes from Brett Linzey of Mizuho. Please go ahead.
Brett Logan Linzey: Hey, good morning, all Hey, I.
Brett Logan Linzey: I wanted to come back to the to the investments and you talked about some of the carryover in the first half just wanted to clarify are these these embedded within the volume portion of the bridge and separate from the footprint just trying to understand if you could quantify the investment versus restructuring and what those paybacks might look like.
Brett Logan Linzey: Yes, so if last year. It was an investment that continues I E. If you added head count.
Brett Logan Linzey: It would show up yes in margins in volume so.
Brett Logan Linzey: As we step things up in the areas last year for example, like new product development.
Brett Logan Linzey: Or people to work on productivity initiatives.
Would wrap around and with higher cost wouldn't be a new investment right. It would show up as Youre, saying Brett in March in that volume.
Brett Logan Linzey: Yes.
Speaker Change #119: And then anything you can share in terms of the paybacks on these footprints as something embedded this year or is that a little bit longer term.
Speaker Change #120: Yes, I think.
New I.
I think there is order of magnitude another $10 million of R&R in that in that bucket that will be invested this year it's of a footprint.
<unk> nature.
Speaker Change #120: And I think the paybacks are that we have good ROIC sees on that the paybacks tend to be.
Speaker Change #120: And that three ish year range.
Speaker Change #120: And so we're sort of investing today in those cases with benefits.
Speaker Change #120: Probably start a year or two from now.
Speaker Change #120: Maybe the other thing that I would say is embedded in some of those expense will drive a higher level of productivity.
Speaker Change #120: In our guidance so when you look at.
The concept of flat price cost productivity. It has a higher level of productivity and higher level of inflation to offset it. So that's where some of those investments are going.
Speaker Change #121: Okay, great yeah. Thanks for the color there and then just a follow up on the price expectations. So it sounds like no incremental actions embedded in the planning I'd imagine you are seeing some raw material inflation, maybe just a little context as to maybe what that potential hedge could look like if you do see it sticking or some of these actions that.
Speaker Change #121: You are out in the marketplace with.
Speaker Change #121: Okay.
Speaker Change #122: Yes, I mean, you'd be kind of maybe add a little.
Speaker Change #122: But about a speculative sensitivity analysis right. So.
Speaker Change #122: You could see.
Each point.
Speaker Change #122: Each point of price.
Speaker Change #122: It gets us north, obviously, a $50 million of price and if that.
Speaker Change #122: That's a lot of leverage if there is no corresponding inflation to that.
Speaker Change #122: Conversely, if you have to give a little it equally as kind of this 100.
Speaker Change #122: <unk> sort of drop through and so as kervin.
Sort of outline I think we have.
Speaker Change #122: Because of the investments we made last year, we have a more ambitious productivity.
Speaker Change #122: Target level.
<unk>.
Speaker Change #122: We certainly see some inflation on the.
Wage transportation area.
Speaker Change #122: As well as in.
Speaker Change #122: Kind of a material related area, so I think getting.
Speaker Change #122: The rigor that we need to focus on all of those levers to come out.
Even our ahead is sort of.
Speaker Change #122: It's an obsession.
Speaker Change #122: We review it really carefully every every month fed carbons and my level.
Continue to push enough initiatives to make sure we stay stay even are ahead.
Speaker Change #122: Okay.
Speaker Change #123: Got it I appreciate the insight.
Speaker Change #124: Thank you one moment for our next question.
Speaker Change #124: And our next question comes from Joe O'dea of Wells Fargo. Please go ahead.
Joe O'dea: Hi, good morning, Thanks for taking my questions.
Joe O'dea: First just wanted to focus on the 2020 for bridge and if we think about it I guess in three buckets would be organic piece. The M&A piece and then some of the restructuring.
Joe O'dea: Is it is it fair to think about a 25% incremental on the organic piece.
Joe O'dea: And then on the M&A side of things can can you add any detail on what you think interest expenses and 24, just so we get that right and in the model.
And does that interest expense contemplate the deployment of resi lighting proceeds.
Speaker Change #125: Yes, So I think we you could put in about 40 million of incremental interest expense.
And I think the drop through of 25 <unk>.
Speaker Change #125: Volume is reasonable.
Speaker Change #126: I'd, rather see that more like 30, but somewhere in that high Twenty's is reasonable I think.
Speaker Change #126: And in the resi lighting proceeds.
Yes, so we've.
You see we have interest income there as a plus and interest expense as a minus so.
Speaker Change #126: We sort of built to construct that it's either cash that's going to earn or it's yes, it's going to be available to pay down.
Speaker Change #127: And I guess so.
Speaker Change #127: The one thing I'd say is it's explicit that we're not.
Speaker Change #127: Modeling in our guidance any new acquisitions, and so that that would be incremental to this to the sky.
Speaker Change #127: Okay.
Speaker Change #128: Got it.
Speaker Change #128: And then on the electrical side.
Speaker Change #128: Can you size roughly.
Speaker Change #128: Roughly what the destock headwind was to topline growth in in 'twenty three.
Speaker Change #128: So just kind of the non repeat of that.
Speaker Change #128: What we should think about is that kind of contribution to the plus three or four.
For 24.
Speaker Change #129: Yeah overall I would say.
Speaker Change #129: Sell through volumes were down kind of in the high single to low double digits most of the year and I think sell through was.
Speaker Change #129: Flattish to slightly up.
So it got better in the fourth quarter, but overall I think you can think about about mid single digit impact on a full year basis.
Speaker Change #130: Okay, and then just a clarification that the fourth quarter, 9% organic and utility can you did you gave the price and volume split of that.
Speaker Change #130: Yes.
Speaker Change #131: The volume was.
Speaker Change #131: It was negative serve right. So the it ate into the price decline was.
Speaker Change #132: Slightly positive Joe sorry.
Speaker Change #132: Volume was slightly positive yes.
Speaker Change #133: Yes, Im sorry, youre asking for whole of utility sorry, I thought you're talking about.
Speaker Change #134: Yes, sorry, just that that 9% organic so slightly positive volume.
Speaker Change #135: Got it alright, great. Thanks very much.
Speaker Change #136: Thank you one moment for our next question.
Speaker Change #136: Okay.
And our next question comes from Nicholas Herman Coochie of TD Cowen. Please go ahead.
Speaker Change #137: Hey, good morning, guys.
Good morning, good morning.
Speaker Change #138: Just had a just had a couple.
Speaker Change #139: Wanted to hone in on the electrical solutions segments, though obviously.
Speaker Change #140: Got it and going to benefit somewhat this year from from the footprint optimization just wanted to see.
Speaker Change #140: How much I mean, how much more headroom do you guys have from an optimization perspective.
Within that segment.
Speaker Change #140: Okay.
Speaker Change #141: Yes, I mean the.
Speaker Change #141: I'd say that debts.
Speaker Change #141: We still have projects that are.
Speaker Change #141: This spirit will be consolidating locations.
Speaker Change #141: So you'll be absorbing volume in existing location.
Speaker Change #141: And then after you hit today Theres always the chance to keep putting in bigger more scaled facilities. So you can answer your question with a very long perspective, but.
If you took it a little bit more narrowly I would say in the next few years.
Speaker Change #141: We'd be at a stage, where we'd be quite happy with.
Speaker Change #141: With the optimization process.
You'll probably never done I guess point, but I think we will we could go along into achieving sort of our desired goals in just a few years.
Speaker Change #142: Sure Sir.
Speaker Change #142: Then did want to touch upon two so I think the guidance.
Speaker Change #142: Within the within the press release, it indicated about $1 60 of the amortization.
Speaker Change #142: That's been adjusted EPS and so if you do the math, that's roughly $86 million for the year we.
We did it within utility.
Speaker Change #143: Understand that.
Speaker Change #143: A significant step up in <unk>, probably related to the systems control, but just wanted to get a better sense of.
Speaker Change #143: The timing of that amortization.
Speaker Change #143: The breakdown between utilities and electrical solutions.
Speaker Change #144: Yes, so the increments so we've been running at a dollar for a while so the 60 cents. That's new is all in utilities, so as you separate them.
And when you think about the amortization.
Speaker Change #144: A lot of it is going to customer value in places that have quite a long.
By law I mean like 20 year. So it's.
Speaker Change #144: It's a pretty stable.
Speaker Change #144: Pretty stable run rate.
Speaker Change #145: Got it perfect.
Yes, that's all I got thanks, guys.
Speaker Change #146: Thank you.
Speaker Change #147: Thank you one moment for our next question.
Speaker Change #147: And our next question comes from Chris Snyder of UBS. Please go ahead.
Chris Snyder: Thank you I wanted to ask on utility margins.
Chris Snyder: And specifically I guess the expectation that on an organic margins will be flattish for 2024 analyst asking because you guys are exiting the year.
Chris Snyder: Well below where you started and maybe M&A at a bit of a headwind in Q4, but it feels like organic is.
Chris Snyder: In Q4 down a good deal versus the first half. So is it fair to does the guide assume that utility organic margins are down year on year in the first half and then returned to growth into the back half or should we expect them up year on year throughout the year.
Speaker Change #148: Yes, I would.
I would assume there are kind of flattish.
Through like.
Speaker Change #148: I don't think Theres anything.
Speaker Change #148: I think I look maybe set the shape of 'twenty three.
Speaker Change #149: Because I know exactly what you are observing right you see.
Speaker Change #149: Sequential step down in margins some of that.
Speaker Change #149: Is attributable to some spending investing that we're doing some of it is attributable to.
Speaker Change #149: The Eclair a mix effect some of it's attributable to the fact that the volumes inside of power systems were.
Speaker Change #149: <unk> through <unk>.
They're destocking work with with our.
Speaker Change #149: Customer channels partners.
Speaker Change #150: So I think.
Speaker Change #150: Again, we just see that Chris returning.
Speaker Change #150: To a more normal shape.
Speaker Change #150: And so I think the volume piece of power systems.
Speaker Change #150: Becomes quite important to that I think we see the mix with the claris starts.
Speaker Change #150: Balance to equal more equal contributions.
Speaker Change #150: And so I think.
Speaker Change #150: In a balanced world, we would expect margins in Q1 and Q4 to be below the margins in Q2 and Q3.
Speaker Change #150: And that that shape.
Speaker Change #150: In 'twenty four.
Speaker Change #150: Should feel quite quite normal.
Thank you I appreciate that and then just as a follow up on utility margins. So I know there are always down sequentially into Q4, just lower revenue. This quarter came in quite a deal sharper than we expected.
Speaker Change #150: Is the company starting to feel the impact of higher metal prices I know steel has been up a lot over the last three or four months.
Is that starting to come through in Q4 on those utility margins or is that.
Still more maybe at a 24.
Speaker Change #150: Dynamic.
Speaker Change #151: Yes, I mean, we certainly saw starting November December steel move.
Speaker Change #151: And I would say the way.
Speaker Change #151: <unk>.
Speaker Change #151: The way that works through the supply chain there is usually.
Speaker Change #151: A couple of months lag on when we as a LIFO company to pay those most recent prices. So I think we will feel.
Speaker Change #151: Those prices are those costs, if you will.
Speaker Change #151: In the first quarter.
Speaker Change #151: And maybe <unk>.
Mid to end of the first quarter.
Speaker Change #152: Thank you.
Speaker Change #152: Yeah.
Speaker Change #153: Thank you one moment for our next question.
Okay.
Speaker Change #153: And our next question comes from Scott Graham of Seaport Research Partners. Please go ahead.
Scott Graham: Yes, Hey, good morning, Thanks for squeezing me in just really the question I have is about the portfolio management slide and.
Particularly now with systems control in the fold you have a couple of nice sized bubbles under which to acquire what is the outlook. There for you know what does the pipeline look like I mean, you've got a one four net leverages a really good number to work off of sort of what are your aspirations in 'twenty four maybe.
Speaker Change #155: By telling us it would you be disappointed without another good sized deal this year.
Speaker Change #156: Yes, it's an interesting way to phrase the question I'd come at it from.
From two perspectives. The first you already raised switches.
Speaker Change #156: We are very comfortable with our leverage levels. So.
So we think financially we certainly can afford to invest in acquisitions.
Speaker Change #156: And I would say secondly.
Speaker Change #156: You know is kind of the integration perspective and.
Speaker Change #156: We'd like to make sure.
Speaker Change #156: We have systems control in a well integrated we've got.
Speaker Change #156: Uh huh.
Speaker Change #156: A healthy amount of people kind of working together so off to a great start and our customers are happy with it feels like a good cultural fit but it still takes still it takes work to make sure that it's integrated and we don't want to have.
Speaker Change #156: We have too many plates spinning so your question maybe.
Speaker Change #156: Well revisit it you know three months from now.
Speaker Change #156: But I agree with you that strategically we'd love to add businesses in the northeast and financially northeast of this two by two matrix of higher growth higher margin.
And.
Speaker Change #156: And yes, we feel we have a <unk>.
Speaker Change #156: Capacity, both in terms of cash.
Speaker Change #156: Cash flow generation.
Speaker Change #156: We'll be up in the $800 million range. This year plus as you pointed out I think balance sheet capacity. So.
Speaker Change #156: We are.
Speaker Change #157: So I think let's let's just revisit that question maybe.
Three months and see how we feel but it's a good one it's a good question.
Well fair enough fair enough I guess I was just wondering also what the pipeline itself look like and you can let people off a little bit.
Speaker Change #157: Yes. There is there is there is a pretty decent pipeline and.
Speaker Change #157: There is quite a few things we're expecting.
Speaker Change #157: Two at least.
Speaker Change #157: Probe the market.
Speaker Change #157: In the second half of the year, so that doesn't mean, we'll buy any of those or that there'll be attractive, but there is there is an interesting amount of.
Speaker Change #157: It appears to be inventory may be coming to market. So.
Speaker Change #158: Thanks, so much.
Speaker Change #158: Yes.
Speaker Change #158: Thank you at this time I would like to turn it back to Garvin backer for closing remarks.
Great. Thank you I appreciate all.
Garvin Backer: All the questions to quite robust time, we put out for that in this call to focus on our outlook.
Garvin Backer: Maybe I'll close by saying that I feel really good about the year and our ability to deliver on our commitments to you to drive profitable growth. After a few years of really outperformance. So.
Look forward to our Investor day later in the year into our first quarter call, let's talk about how we're doing so far this year. So thanks so much.
Garvin Backer: Yeah.
Speaker Change #160: This concludes today's conference call. Thank you for participating and you may now disconnect.