Q3 2025 Hubbell Inc Earnings Call
Speaker #1: Good day and thank you for standing by . Welcome to the third quarter 2025 . Hubbell Incorporated Earnings conference Call . At this time , all participants are in a listen only mode .
Operator: Good day, and thank you for standing by. Welcome to the third quarter 2025 Hubbell Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Daniel Innamorato, Vice President of Investor Relations. Please go ahead.
Speaker #1: 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 one on your telephone .
Speaker #1: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one . One again .
Speaker #1: Please be advised that today's conference is being recorded . I would now like to hand the conference over to your speaker today . Dan , Enamorado , VP of Investor Relations .
Speaker #1: Please go ahead .
Speaker #2: Great . Thanks . Operator . Good morning , everyone , and thank you for joining us . Earlier this morning , we issued a press release announcing our results for the third quarter .
Daniel Innamorato: Great. Thanks, Operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the third quarter. The press release and slides are posted to the Investor section of our website at hubbell.com. We're joined today by our Chairman, President, and CEO, Gerben Bakker, and our Executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and consider it incorporated by reference to this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures, which are included in the press release and slides.
Speaker #2: The press release and slides are posted to the investor section of our website at Hubbell . Com . Joined today by our chairman , president and CEO , Gerben Bakker and our Executive Vice President and CFO , Bill Sperry .
Speaker #2: Please note our comments this morning may include statements related to the expected future results of our company . These are forward looking statements as defined by the Private Securities Litigation Reform Act of 1995 .
Speaker #2: Please note the discussion of forward looking statements in our press release and considered incorporated by reference to this call . Additionally , comments may also include non-GAAP financial measures .
Speaker #2: Those measures are reconciled to the comparable GAAP measures , which are included in the press release and slides . Now , let me turn the call over to Gerben .
Daniel Innamorato: Now, let me turn the call over to Gerben.
Speaker #3: Great . Good morning , and thank you for joining us to discuss Hubbell's third quarter 2025 results . Hubbell delivered double digit adjusted earnings growth in the third quarter , driven by strong high single digit organic growth in electrical solutions and grid infrastructure .
Gerben Bakker: Great. Good morning, and thank you for joining us to discuss Hubbell Incorporated's third quarter 2025 results. Hubbell Incorporated delivered double-digit adjusted earnings growth in the third quarter, driven by strong high single-digit organic growth in electrical solutions and grid infrastructure, as well as a lower year-on-year tax rate. In utility solutions, T&D markets remain strong as utility customers invest to interconnect new sources of load and generation on the grid, while aging infrastructure continues to drive solid hardening and resiliency activity. Our grid infrastructure businesses achieved high single-digit organic growth in the quarter. While the pace of inflection in grid infrastructure growth was steadier than we anticipated in our July outlook, markets and order activity are strong, and we anticipate further improvement in year-over-year organic growth in the fourth quarter.
Speaker #3: As well as a lower year on year tax rate in utility solutions and markets remained strong as utility customers invest to interconnect new sources of load and generation on the grid , while aging infrastructure continues to drive solid hardening and resiliency activity .
Speaker #3: Our grid infrastructure businesses achieved high single digit organic growth in the quarter , while the pace of inflection in grid infrastructure growth was steadier than we anticipated in our July outlook , markets and order activity are strong , and we anticipate further improvement in year over year organic growth in the fourth quarter .
Speaker #3: While grid automation sales declined 18% in the third quarter on large project roll offs , we anticipate these headwinds to fade in the fourth quarter as business returns to more normalized comparisons in electrical solutions , we delivered high single digit organic growth with continued margin expansion and double digit adjusted operating profit growth .
Gerben Bakker: While grid automation sales declined 18% in the third quarter on large project rollouts, we anticipate these headwinds to fade in the fourth quarter as the business returns to more normalized comparisons. In electrical solutions, we delivered high single-digit organic growth with continued margin expansion and double-digit adjusted operating profit growth. Our segment unification efforts and strategy to compete collectively are driving outgrowth in key vertical markets, most notably in data center, where new product introduction and capacity additions contributed to strong performance in the third quarter, with visibility to continued strength in the fourth quarter. We continue to simplify our HES segment to drive productivity and operating efficiencies, which we are confident will drive long-term margin expansion. Turning back to overall Hubbell Incorporated, while cost inflation accelerated from the first half as anticipated, our pricing and productivity actions have been successful in more than offsetting these costs.
Speaker #3: Our segment unification efforts and strategy to compete collectively are driving outgrowth in key vertical markets , most notably in data center , where new product introduction and capacity additions contributed to strong performance in the third quarter , with visibility to continued strength in the fourth quarter , we continue to simplify our his segment to drive productivity and operating efficiencies , which we are confident will drive long term margin expansion .
Speaker #3: Turning back to overall , Hubbell . While cost inflation accelerated from the first half as anticipated , our pricing and productivity actions have been successful in more than offsetting these costs .
Speaker #3: Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price and cost productivity in the third quarter, positioning us well to drive continued profitable growth going forward.
Gerben Bakker: Our strong positions in attractive markets and our execution in proactively managing our cost structure drove positive price-cost productivity in the third quarter and positions us well to drive continued profitable growth going forward. We are raising our full-year 2025 outlook this morning. Operationally, we anticipate the impact of lower organic growth to be fully offset by stronger margin performance, while a lower full-year tax rate drives higher adjusted earnings per share relative to our prior outlook. As we look ahead to 2026, we anticipate a year of strong, broad-based organic growth across the portfolio. Hubbell Incorporated is uniquely positioned at the intersection of grid modernization and electrification, and we have driven strong performance over the last five years. As these megatrends accelerate and we exit 2025 with recent supply chain normalization dynamics behind us, we are confident in our ability to deliver continued strong performance in 2026 and beyond.
Speaker #3: We are raising our full year 2025 outlook this morning . Operationally , we anticipate the impact of lower organic growth to be fully offset by stronger margin performance , while a lower full year tax rate drives higher adjusted earnings per share relative to our prior outlook .
Speaker #3: As we look ahead to 2026 , we anticipate a year of strong , broad based , organic growth across the portfolio . Hubbell is uniquely positioned at the intersection of grid modernization and electrification , and we have driven strong performance over the last five years as these megatrends accelerate and we exit 2025 with recent supply chain normalization dynamics behind us , we are confident in our ability to deliver continued strong performance in 26 and beyond .
Speaker #3: Now turning to slide five . We announced at the beginning of October the closing of our acquisition of DMC power . We are very excited to add DMC to Hubbell's portfolio as the business is highly complementary to our utility Connector product offerings and provides a unique technical solution in high growth substation markets .
Gerben Bakker: Now turning to slide five, we announced at the beginning of October the closing of our acquisition of DMC Power. We are very excited to add DMC Power to Hubbell Incorporated's portfolio as the business is highly complementary to our Utility Connector product offerings and provides a unique technical solution in high-growth substation markets. Hubbell Incorporated has been very successful in our acquisition playbook in utilizing our industry-leading sales force and portfolio breadth to drive penetration of new solutions across our customer base, and we are confident that we can accelerate DMC Power's strong growth trajectory further over the long term. This acquisition is a continuation of our capital allocation strategy to acquire high-growth, high-margin businesses in attractive markets with strong strategic fit and product differentiation. We anticipate the acquisition of DMC Power will contribute approximately $0.20 of adjusted earnings per share accretion in 2026.
Speaker #3: Hubbell has been very successful in our acquisition playbook in utilizing our industry leading sales force and portfolio breadth to drive penetration of new solutions across our customer base , and we are confident that we can accelerate DMC strong growth trajectory further over the long term .
Speaker #3: This acquisition is a continuation of our capital allocation strategy to acquire high growth , high margin businesses in attractive markets with strong strategic fit and product differentiation .
Speaker #3: We anticipate the acquisition of DMC will contribute approximately $0.20 of adjusted earnings per share accretion in 2026 , before I turn the call over to Bill , I want to highlight our recent announcement of Bill's upcoming retirement as CFO at the end of this year .
Gerben Bakker: Before I turn the call over to Bill, I want to highlight our recent announcement of Bill's upcoming retirement as CFO at the end of this year. Bill's contributions to Hubbell Incorporated have been immeasurable over his 18-year career with the company, but let me highlight a few statistics that put his impact into perspective. He led 68 quarterly earnings calls, including more than 50 as CFO. He led the acquisition of 50 companies, averaging a double-digit ROIC for our shareholders. Most prominently, under Bill's tenure, Hubbell Incorporated has more than doubled sales, improved OP margins from low teens to over 20%, and increased our market cap from less than $3 billion to $23 billion. In short, Bill's strategic and financial leadership have helped shape Hubbell Incorporated into the company it is today. He is valued and respected by employees, customers, and shareholders alike.
Speaker #3: Bill's contributions to Hubbell have been immeasurable over his 18 year career with the company . But let me highlight a few statistics that put his impact into perspective .
Speaker #3: He led 68 quarterly earnings call , including more than 50 as CFO . He led the acquisition of 50 companies averaging a double digit ROIC for our shareholders and most prominently under Bill's tenure .
Speaker #3: Hubbell has more than doubled sales, improved operating margins from the low teens to over 20%, and increased our market cap from less than $3 billion to $23 billion.
Speaker #3: In short , bill strategic and financial leadership have helped shaped Hubbell in the company . It is today . He is valued and respected by employees , customers and shareholders alike .
Speaker #3: And on a more personal note , Bill has been a trusted partner to me and our entire leadership team . Thank you for your distinguished service to Hubbell , Bill , and we wish you all the best in well-earned retirement .
Gerben Bakker: On a more personal note, Bill has been a trusted partner to me and our entire leadership team. Thank you for your distinguished service to Hubbell Incorporated, Bill, and we wish you all the best in a well-earned retirement. One of Bill's many strengths was developing a strong bench of finance talent at Hubbell Incorporated, and I am pleased to have announced Joe Capezzoli as Bill's successor. Joe has held a wide range of leadership positions across Hubbell Incorporated and the finance organizations over his 12 years, and most recently has been the CFO of our Electrical Solutions segment, where he has worked as a close business partner to our Segment President, Mark Mikes, in implementing our strategy to transform HES as a unified operating segment.
Speaker #3: One of Bill's many strengths was developing a strong bench of finance talent at Hubbell , and I'm pleased to have announced Joe Capezzoli as Bill's successor .
Speaker #3: Joe has held a wide range of leadership positions across Hubbell and the finance organizations over his 12 years , and most recently has been the CFO of our Electrical Solutions segment , where he has worked as a close business partner to our segment president Mark mikes , and implementing our strategy to transform HGS as a unified operating segment .
Speaker #3: You can see the success of Joe's leadership in that role through the strong growth and margin expansion of HGS over the last few years.
Gerben Bakker: You can see the success of Joe's leadership in that role through the strong growth and margin expansion of HES over the last few years. Joe and I have worked closely together over our careers, and I am confident in a seamless transition and in Joe's ability to drive further value for all of our key stakeholders in his new role as CFO starting in 2026. With that, let me turn the call over to Bill to provide some additional details on our financial results.
Speaker #3: Joe and I have worked closely together over our careers , and I am confident in a seamless transition . And in Joe's ability to drive further value for all of our key stakeholders in his new role as CFO .
Speaker #3: Starting in 2026 . With that , let me turn the call over to Bill to provide some additional details on our financial results .
Speaker #4: Good morning , everybody . Thanks for joining and thank you for those remarks , especially appreciative of the partnership you've offered me over my 18 years .
William Sperry: Good morning, everybody. Thanks for joining, and thank you, Gerben, for those remarks. I'm especially appreciative of the partnership you've offered me over my 18 years, and I think particularly the past five have been really special to me. Joe, I congratulate. I recruited him about 15 years ago, worked super closely with him. We've given him a variety of roles, as Gerben's noted, in corporate, in the field, inside of finance, operations, shared services, and I think you're going to find he's really well prepared to be our CFO and I think will be a great partner to Gerben, and I'm sure a great communicator to our shareholders. I'm going to use the slides that you found. I'm starting on page five, the third quarter results. You see sales up 4% to about $1.5 billion. OP similarly up 4% to $358 million.
Speaker #4: And I think particularly the past five years have been really special to me. And, you know, Joe, I congratulate him. I recruited him about 15 years ago and worked super closely with him.
Speaker #4: We've given him a variety of roles as noted in corporate in the field , inside of finance operations , shared services , and I think you're going to find he's really well prepared to breakfast .
Speaker #4: And I think we'll be a great partner to Gerben . And I'm sure a great communicator to our shareholders . So I'm going to use the slides that you found .
Speaker #4: I'm starting on page five , the third quarter results . You see sales up 4% to about 1.5 billion . OP similarly up 4% to 358 million .
Speaker #4: Adjusted diluted EPs up 12% . And free cash flow up 34% . Let's go through each of those measures individually . So starting with sales , those results show really strong performance across the entire electrical segment and the grid infrastructure unit within our utility segment .
William Sperry: Adjusted diluted EPS up 12% and free cash flow up 34%. Let's go through each of those measures individually. Starting with sales, those results show really strong performance across the entire electrical segment and the grid infrastructure unit within our utility segment. Those two areas, electrical and grid infrastructure, grew collectively at around high single digits, where the grid automation component of the utility segment contracted and created about a 4% drag to the overall growth. What's important about that, as we look forward, we can see that the year-over-year compare for grid automation will start to flatten, and that drag of three or four points will start to ebb away, as Gerben said, fade. The combination of growth in the electrical segment, growth in grid infrastructure, plus the flattening of grid automation is a good driver of Q4 and ultimately a good setup for 2026.
Speaker #4: Those two areas, electrical and grid infrastructure, grew collectively at around high single digits, while the grid automation component of the utility segment contracted and created about a 4% drag on the overall growth.
Speaker #4: What's important about that ? As we look forward , we can see that the year over year compare for grid elimination will start to flatten and that drag of 3 or 4 points will start to ebb away .
Speaker #4: As Gerben said, fade. So, the combination of growth in the electrical segment, growth in grid infrastructure, plus the flattening of grid automation is a good driver of Q4 and ultimately a good setup for 2026.
Speaker #4: The second column there is operating profit , 4% growth to 358 million margins , roughly comparable with effective price pulling , offsetting combination of tariffs and a higher level of restructuring spending , which we feel is really important to continue to drive productivity and to keep pushing margins up into the future .
William Sperry: The second column there is operating profit, 4% growth to $358 million. Margins roughly comparable with effective price pulling, offsetting a combination of tariffs and a higher level of restructuring spending, which we feel is really important to continue to drive productivity and to keep pushing margins up into the future. The earnings per share in the third column up 12%, more than the growth rate in operating profit, and that's driven by tailwinds below the OP line. Specifically, we had share repurchases in the first half of the year totaling about $225 million. That's helping lift EPS, and we had a lower tax rate as there was an international acquisition that gave us the opportunity for a tax-friendly restructuring and helped us drive the rate down. Helping push EPS up. The fourth is free cash flow up 34%, $254 million.
Speaker #4: The earnings per share in the third column are up 12%, more than the growth rate in operating profit. And that's driven by tailwinds below the operating profit line.
Speaker #4: Specifically , we had share repurchases in the first half of the year , totaling about 225 million . That's helping lift EPs . And we had a lower tax rate as there was an international acquisition that gave us the opportunity for a tax friendly restructuring and helped us drive the rate down .
Speaker #4: So helping push EPs up . And the fourth is free cash flow up 34% , 254 million . Most importantly , in line to deliver our 90% of net income to the full year , which continuous continues to replenish the balance sheet .
William Sperry: Most importantly, in line to deliver our 90% of net income to the full year, which continues to replenish the balance sheet. Gerben commented on the DMC Power acquisition, and even after that $825 million investment, our balance sheet is still poised for investment. Very good to see us be able to absorb an acquisition of that size and just take that in stride. Now let's unpack the performance by segment. On page six, we'll start with the utility segment results. See sales up 1% to $944 million. OP roughly comparable in dollars to $242 million. Back to sales, you see the grid infrastructure unit, which accounts for about three-quarters of the segment, grew high single digits. The good news about that strength is that it was broad across all of the end markets. Transmission was double-digit, seeing strength driven by load growth and grid interconnections.
Speaker #4: So Gerben commented on the DMC acquisition and even after that , $825 million investment , our balance sheet is still poised for investment .
Speaker #4: And so very good to see us be able to absorb an acquisition of that size and just take that in stride . So now let's unpack the performance by segment and on page six , we'll start with the utility segment results .
Speaker #4: See sales up 1% to 944 million . OPP roughly comparable in dollars to 242 million . Back to sales . You see the grid infrastructure unit , which accounts for about three quarters of the segment , grew high .
Speaker #4: Single digits . And I think the good news about that strength is that it was broad across all of the end markets . So transmission was double digit seeing strength driven by low growth and grid interconnections , substation was up mid to high single digit distribution up double digit with grid hardening and resiliency initiatives , and that's a good sign .
William Sperry: Substation was up mid to high single digit. Distribution up double digit with grid hardening and resiliency initiatives. That's a good sign. That's representing acceleration as we move past a period of inventory normalization in the distribution area. Lastly, telecom and enclosures returned to growth in the third quarter. I think you'll remember that had been dragging on us through an overstock situation there. Third quarter experiencing good breadth of sales strength in utility grid infrastructure. As we look to the fourth quarter in that area, we've got very good visibility to stronger growth rates in the fourth quarter. That's really being driven by the order book, which has really accelerated over the past two months in September and October, really releasing some pent-up spending, and I think is a good sign for Q4 and beyond.
Speaker #4: That's representing acceleration as we move past a period of inventory normalization . And distribution area . And lastly , telecom and enclosures returned to growth in the third quarter .
Speaker #4: I think you'll remember that had been dragging on us through through an overstock situation . There . So third quarter experiencing good breadth of sales strength in utility grid infrastructure , I think as we look to the fourth quarter in that area , we've got very good visibility to stronger growth rates in the fourth quarter .
Speaker #4: That's really being driven by the order book , which has really accelerated over the past two months in September and October , really releasing some pent up spending .
Speaker #4: And I think is a good sign for for Q and beyond grid automation continuing the trend from the last several quarters down double digits , driven by project roll offs that aren't being backfilled with new projects .
William Sperry: Grid automation continuing the trend from the last several quarters down double digits, driven by project rollouts that aren't being backfilled with new projects. That's being partially offset by growth in grid protection and control products. What's important here about the grid automation is we're really coming up to the point where we've had four quarters in a row now sequentially bouncing around between about $230 million to $240 million of quarterly sales. That started in the fourth quarter of 2024. As we get to the fourth quarter of 2025, we're going to start to see that sequential flatness turn into year-over-year flatness and really remove the drag on this segment that we've been experiencing. Good news there, just around the corner.
Speaker #4: And that's being partially offset by growth in grid protection and control products. I think what's important here about the grid automation is we’re really coming up to the point where we've had four quarters in a row now, sequentially bouncing around between about $230 million to $240 million in quarterly sales.
Speaker #4: And so that started in the fourth quarter of 2024 . So as we get to the fourth quarter of 2025 , we're going to start to see that sequential flatness turn into year over year flatness .
Speaker #4: And really remove the drag on the segment that we've been experiencing . So good news there . Just just around the corner on the op side , the dollars roughly comparable pricing and cost management created a nice tailwind .
William Sperry: On the OP side, dollars roughly comparable, pricing and cost management created a nice tailwind, but offset largely with higher levels of restructuring spend and decrementals from the grid automation side. Page seven, let's switch to the electrical segment. You'll see the electrical segment continuing a string of strong performance here over the last several quarters. You see double-digit sales growth of 10% and 17% OP growth with about 140 basis points of margin expansion. Returning to those sales, you'll see 8% organic fundamentally across the end markets. That lift is coming from two of those markets. One is data centers, where we're selling connectors and grounding balance of system products, as well as modular power distribution skid solutions. Very strong growth there. Also, very strong growth from the light industrial segment, where you see connectors being sold into industrial applications, providing the lift there.
Speaker #4: But offset largely with higher levels of restructuring spend and decrementals from the grid automation side. Page seven. Let's switch to the electrical segment, and you'll see the electrical segment continuing a string of strong performance here over the last several quarters.
Speaker #4: So, you see double-digit sales growth of 10% and 17% operating profit growth, with about 140 basis points of margin expansion returning to those sales. You'll see 8% organic.
Speaker #4: Fundamentally cross the end markets . The that lift is coming from from two of those markets . One is data centers where we're selling connectors and grounding balance of system products , as well as modular power distribution , skid solutions .
Speaker #4: Very strong growth . There also very strong growth from the light industrial segment where you see connectors being sold into industrial applications , providing the lift there .
Speaker #4: That's where our earned brand is continuing through the markets . Heavy industrial , a little bit mixed in the quarter and Non-res remaining soft as it has been for the past few quarters .
William Sperry: That's where our EARN-D brand is. Continuing through the markets, heavy industrial, a little bit mixed in the quarter, and non-res remaining soft as it has been for the past few quarters. Basically, by market there, you see about 8% growth. Beyond market growth, we feel good that we're pushing for both organic and inorganic growth here. We've effectively realigned the sales force. We have a more geographic bent now, which creates some efficiency, and we're complementing that with some vertical market specialists, which creates some effectiveness. We're very happy about how that's working for us. New product development, which Gerben Bakker had mentioned, we continue to expand the franchise organically through those measures. On the inorganic side, we've been successfully operating an acquisition since the first quarter of 2025. Inventive provides solutions that power, protect, and connect wireless networks. Electrical really doing both organic and inorganic measures here.
Speaker #4: So basically by market there , you see about 8% growth . But beyond market growth , we feel good that that we're pushing for both organic and inorganic growth here .
Speaker #4: So we've effectively realigned the sales force . We have a more geographic bent now , which creates some efficiency . And we're complementing that with some vertical market specialists , which creates some effectiveness .
Speaker #4: And we're very happy about how how that's working for us . New product development , which Gerben had mentioned , we continue to expand the franchise organically through through those measures .
Speaker #4: And on the inorganic side , we've been successfully operating in acquisition since the first quarter of 25 . And inventive provide solutions that power , protect and connect wireless networks .
Speaker #4: So, electrical is really doing both organic and inorganic measures here on the op side. The 140 basis points of margin expansion is coming through volume growth, price, cost management, and productivity initiatives to drive efficiency.
William Sperry: On the OP side, the 140 basis points of margin expansion coming through volume growth, price-cost management, and productivity initiatives to drive efficiency, as Gerben Bakker described. Both Joe and Mark Mikes and their team putting in initiatives to compete collectively as a segment. Really nice job turned in by the Electrical Solutions segment on a continuing multi-year story there, grinding margins up. Let's pivot from describing the third quarter to looking forward on page eight. You'll see that we've adjusted our EPS guidance upward for the year, as well as narrowing the range. We had a $0.50 range from $17.65 to $18.15. We now have a $0.20 range from $18.10 to $18.30. That's a midpoint movement from $17.90 to $18.20, or a $0.30 increase. We're essentially passing through a lower expected tax rate for 2025.
Speaker #4: As Gerben described, both Joe and Mark, Mike's team, are putting in initiatives to compete collectively as a segment. So, really nice job turned in by the Electrical Solutions segment.
Speaker #4: Continuing multi-year story . There . Branding margins up . Let's pivot from describing the third quarter to looking forward on page eight . And you'll see that we've adjusted our EPs guidance upward for the year , as well as narrowing the range .
Speaker #4: So we had a 50 cent range from 1765 to 1815 . We now have a 20 cent range from 1810 to 1830 . That's a midpoint movement from 1790 to 1820 , or a 30 cent increase .
Speaker #4: And we're essentially passing through a lower expected tax rate for 2025 . And that really implies that operationally , for us , the third quarter was in line with what we needed to hit the full year target .
William Sperry: That really implies that operationally, for us, the third quarter was in line with what we needed to hit the full-year target. We're getting there with a little more weight to Electrical versus Utility, and we're getting there with a little bit more weight to margin and sales versus what we had originally expected. This outlook now can be summarized in that 3% to 4% organic growth, OP margins expanding in the 50 to 100 basis point range, good pricing, good productivity initiatives. The DMC Power acquisition, which Gerben Bakker highlighted, we're anticipating being neutral to earnings in Q4 as we set it up to contribute $0.20 next year. We've got the free cash flow driving towards 90% of adjusted income conversion. It may be instructive to comment on Q4 and talk about the Q4 that's needed to deliver this full-year guide.
Speaker #4: We're getting there with a little more weight to electrical versus utility , and we're getting there with a little bit more weight to margin than sales versus what we originally expected .
Speaker #4: But this outlook now can be summarized in that 3% to 4% organic growth, with operating margins expanding in the 50 to 100 basis point range, good pricing, and good productivity initiatives.
Speaker #4: The DMC acquisition , which Gerben highlighted , we're anticipating being neutral to earnings in Q4 as we set it up to contribute $0.20 next year , and we've got the free cash flow driving towards 90% of adjusted income , conversion .
Speaker #4: It may be instructive to comment on Q4 and talk about the Q4 . That's needed to deliver this full year guide . It's a little bit stronger than normal seasonality , and I just want to take a second to describe why we're confident and have the visibility in that .
William Sperry: It's a little bit stronger than normal seasonality, and I just want to take a second to describe why we're confident and have the visibility in that. The fourth quarter would imply 8% to 10% organic growth with contributions from both segments. If you think about the step-up in growth, if we walk sequentially, you can see we talked about the absence of the grid automation headwinds. That adds substantially. We've got incremental price in the fourth quarter, and we see strong visibility to data center projects, new capacity inside of our BERNDI business from some investments we've made in automation there, and very substantial pickup in September and October in the transmission and distribution orders of the Utility segment. We see that we've got visibility to that, and we're going to see margin expansion in both segments in the quarter.
Speaker #4: So the fourth quarter would imply 8 to 10% organic growth with contributions from both segments . And if you think about the step up in growth , if we walk sequentially , you can see we talked about the absence of the grid automation headwinds .
Speaker #4: That adds substantially . We've got incremental price in the fourth quarter , and we see strong visibility to data center projects . New capacity inside of our Burndy business from some investments we've made and automation there .
Speaker #4: And very substantial pickup in September and October in transmission and distribution orders of utility segment . So we see that we've got visibility to that .
Speaker #4: And we see margin expansion in both segments in the quarter . And so that's leading to our ability to maintain maintain that original guide with the pass through of the taxes creating the 30 cent increase .
William Sperry: That's leading to our ability to maintain that original guide with the pass-through of the taxes creating the $0.30 increase. With that, I'll pass it back to Gerben and ask him to pull back the lens from this quarterly focus to a longer-term view of our utility franchise.
Speaker #4: So with that , I'll pass it back to Gerben . And ask him to pull back the lens from this quarterly focus to a longer term view of our utility franchise .
Speaker #3: Okay , great . Before we give our preliminary thoughts on 2026 , we thought it would be instructive to set the stage by taking a closer look at the performance of our utility segment over the last five years , and how that sets us up .
Gerben Bakker: Okay. Great. Before we give our preliminary thoughts on 2026, we thought it would be instructive to set the stage by taking a closer look at the performance of our utility segment over the last five years and how that sets us up looking ahead to 2026 and over the next several years. This is on page nine. While there is a lot of information on the page, let me highlight a few key points. First, while supply chain dynamics have impacted the various pockets of our segment over the last few years, we have executed well through these dynamics, and they will be fully normalized exiting 2025. Second, the strong growth and margin expansion we have delivered has been driven by our large high-growth and margin businesses.
Speaker #3: Looking ahead to 2026 and over the next several years , this is on page nine . While there is a lot of information on the page , let me highlight a few key points .
Speaker #3: First , while supply chain dynamics have impacted the various pockets of our segment over the last few years , we have executed well through these dynamics and they will be fully normalized exiting 2025 .
Speaker #3: Second , the strong growth and margin expansion we have delivered has been driven by our large high growth and margin businesses . Most notably T&E infrastructure has grown at double digit kager over the last five years , underpinned by our strong portfolio position and secular megatrends and proactive price cost management .
Gerben Bakker: Most notably, T&D infrastructure has grown a double-digit CAGR over the last five years, underpinned by our strong portfolio, position, and secular megatrends and proactive price-cost management. While our meters and AMI performance has been more modest, we are confident that we have repositioned this business with the appropriate cost structure and a more focused strategy to deliver growth at improving margin levels moving forward. Third, our M&A and capital allocation strategy has been effective in driving outgrowth while expanding our leading utility positions, most notably in substation automation with the acquisition of Systems Control, as well as the attractive area of grid protection and controls.
Speaker #3: While our meters and army performance has been more modest , we are confident that we have repositioned this business with the appropriate cost structure and a more focused strategy to deliver growth at improving margin levels , moving forward .
Speaker #3: Third , our M&A and capital allocation strategy has been effective in driving outgrowth while expanding our leading utility positions , most notably in substation automation .
Speaker #3: With the acquisition of Systems Control, as well as the attractive area of grid protection and controls. And finally, as we look back at the last several years of performance as a whole.
Gerben Bakker: Finally, as we look back at the last several years of performance as a whole, Hubbell Incorporated has delivered organic growth in line with strong utility CapEx budgets, which are set to accelerate further over the next several years as customers increase their investment budgets to meet the demands of grid hardening, load growth, and data center interconnections. We are confident that our strong position in these attractive markets will enable our utility solutions segment to meet or exceed our long-term targets for mid-single-digit organic growth moving forward. Now turning to page 10, I'd like to provide some preliminary views on our end market for the next year before providing a more comprehensive full-year outlook in the next few months.
Speaker #3: Hughes has delivered organic growth in line with strong utility CapEx budgets , which are set to accelerate further over the next several years .
Speaker #3: As customers increase their investment budgets to meet the demands of grid hardening, load growth, and data center interconnections, we are confident that our strong position in these attractive markets will enable our Utility Solutions segment to meet or exceed our long-term targets for mid-single digit organic growth.
Speaker #3: Moving forward . Now , turning to page ten . I'd like to provide some preliminary views on our end market for the next year before providing a more comprehensive full year outlook in the next few months .
Speaker #3: In utility solutions , we have high visibility to robust project pipeline supporting continued strength in substation and transmission markets while ongoing hardening and resiliency activity support continued momentum in distribution markets and modernization initiatives support strong growth in grid protection and controls in our smaller end markets .
Gerben Bakker: In utility solutions, we have high visibility to robust project pipelines supporting continued strength in substation and transmission markets, while ongoing hardening and resiliency activity support continued momentum in distribution markets, and modernization initiatives support strong growth in grid protection and controls. In our smaller end markets, we anticipate a return to growth in meters and AMI, as well as telecom. In electrical solutions, we expect data center, light industrial, and T&D markets to remain strong, while macroeconomic uncertainty drives a more modest preliminary growth outlook in areas of the portfolio such as non-residential construction, heavy industrial, and renewables. We are confident that our strategy to compete collectively in HES will continue to drive above-market growth and long-term margin expansion. Overall, we see an attractive end market environment, which we believe will enable us to deliver organic growth in line with our long-term targets.
Speaker #3: We anticipate a return to growth in meters and Army , as well as telecom and electrical solutions . We expect data center , light , industrial and T&E markets to remain strong while macroeconomic uncertainty drives a more modest preliminary growth in areas of the portfolio , such as non-residential construction , heavy industrial and renewables , we are confident that our strategy to compete collectively in HGS will continue to drive above market growth and long term margin expansion .
Speaker #3: Overall , we see an attractive end market environment , which we believe will enable us to deliver organic growth in line with our long term targets , and we are confident that accelerating megatrends impacting the largest high margin areas of our portfolio will underpin strong performance in 2026 and beyond .
Gerben Bakker: We are confident that accelerating megatrends impacting the largest high-margined areas of our portfolio will underpin strong performance in 2026 and beyond. With that, let me turn the call over to Q&A.
Speaker #3: With that , let me turn the call over to Q&A .
Speaker #1: Thank you . As a reminder to ask a question , please press star one one on your telephone and wait for your name to be announced .
Operator: Thank you. As a reminder to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jeffrey Sprague from Vertical Research.
Speaker #1: To withdraw your question , please press star one one again . Please stand by while we compile the Q&A
Speaker #1: roster . Our first question comes from the line of Jeffrey Sprague from Vertical Research .
Speaker #5: Hey , thanks . Good morning everyone . Hey , thanks for Bill . Thanks for everything over the outlook years . And best of luck .
William Sperry: Hey, thanks. Good morning, everyone. Thanks for, Bill, thanks for everything over the years, and best of luck. Hopefully, we'll see you around. I just kind of appreciate on 2026, maybe you don't want to get over your skis given how frustrating this utility guide has been this year. I just want to sort of interrogate a little bit Q3 versus Q4 in utility and think about what that exit rate really means for 2026. I think there's a little bit of debate about what is, you know, what is normal seasonality. One could certainly make a case on simple arithmetic that this exit rate in, you know, for utility would actually point to maybe double-digit utility growth in 2026. I just want to get your thoughts on that. Again, I understand you don't want to get ahead of your skis here, but maybe how unusual is Q4?
Speaker #5: Hopefully we'll see you around and then just kind of appreciate on 2026 . Maybe you don't want to kind of get over your skis , given how frustrating this utility guide has been this year .
Speaker #5: But I just want to sort of interrogate a little bit: Q3 versus Q4 in utility, and think about what that exit rate really means for 2026.
Speaker #5: You know , I think there's a little bit of debate about what is what is normal seasonality , but one could certainly make a case on simple arithmetic that this exit rate in , you know , for utility would actually point to maybe double digit utility growth in 2026 .
Speaker #5: So, I just wanted to get your thoughts on that. Again, I understand you don't want to get ahead of your skis here, but maybe how unusual is Q4? Did stuff that you expected to happen in Q3 slip into Q4?
William Sperry: Did stuff that you expected to happen in Q3 slip into Q4, and therefore we need to be a little judicious about thinking about this exit rate?
Speaker #5: And therefore we need to be a little judicious about thinking about this exit rate .
Speaker #4: Yeah , I think you hit on several important points in that question , Jeff , which which we would agree with and thank you for the well wishes , by the way .
[Company Representative]: Yeah, I think you hit on several important points in that question, Jeff, which we would agree with. Thank you for the well wishes, by the way. I do think that there's a chance you could see a very strong year. I think we think, as you say, it's prudent for us to plan our resources around that sort of long-term guidance that we've had. Fourth quarter's got some easy comparison in it. You point out seasonality as a point of debate, which usually we have a head and shoulders construction where the fourth quarter is a little bit lower. We still probably have that, but your year-over-year with some easy comps help really boost that. I think you start looking at the sequentials and then apply seasonality to 2026, and you start to feel that setup's pretty good. We share your confidence.
Speaker #4: But I do think that there's a chance you could see a very strong year . I think we think as you say , it's prudent for us to plan our resources around that sort of long term guidance that we've had .
Speaker #4: Fourth quarters got some easy compares , and you point out seasonality as a point of debate , which usually we have a head and shoulders construction where the fourth quarter is a little bit lower and we still probably have that .
Speaker #4: But but your year over year with some easy comps help really boost that . So I think you start looking at the sequentials and then apply seasonality to 26 .
Speaker #4: And you start to feel that setup's pretty good . So we share your confidence . We think it's we think it's prudent to to , as you say , not not get over over the skis .
[Company Representative]: We think it's prudent to, as you say, not get over the skis.
William Sperry: Maybe one thing to add.
Speaker #4: .
Speaker #5: And then .
Speaker #3: Maybe one thing .
Speaker #6: To add .
Gerben Bakker: Go ahead.
Speaker #5: Just .
William Sperry: Yeah, just like Gerben. Sorry.
Speaker #4: Sorry .
Speaker #6: Yeah , yeah . Maybe the one thing and you know , we're .
Gerben Bakker: Yeah, maybe the one thing. You know we're certainly looking at those exit rates as well with the businesses to see what could be. I think, Bill, you said it well, that maybe going into the year and a little bit to your point of the frustration this year is that we'll take a more conservative approach going into next year and really making sure that our cost is aligned to that lower volume. If we do see the upside, and I think, Bill, you're correct that that upside could likely happen, we'll benefit from it.
Speaker #3: Certainly looking at those exit rates .
Speaker #6: As .
Speaker #3: Well with the businesses . And to see what could be . And I think you said it . Well the maybe going into the year and a little bit to your point of , you know , the frustration this year is that , well , you know , take a more conservative approach going into next year and really making sure that our cost is aligned to that lower volume .
Speaker #3: And then , you know , if we do see the upside , and I think , Bill , you're correct that that upside could likely happen , we'll benefit from it .
Speaker #3: So .
Speaker #5: Could you elaborate a little bit more on the September October order strength and and also just thinking about , you know , the up arrows here on this slide for Telecom and meters specifically .
William Sperry: Could you elaborate a little bit more on the September-October order strength and also just thinking about, you know, the up arrows here on this slide for telecom and meters specifically? Obviously, these have been nagging issues and problems all through 2025, some of it's comps, but still sort of an issue of, you know, can those businesses grow? Why will they grow? You know, should they grow? Just the confidence to put up arrows on those into 2026.
Speaker #5: Obviously these have been nagging issues and problems all through 2025 . Some of its comps . But but still sort of an issue of you know can those businesses grow .
Speaker #5: Why will they grow ? Should they grow just the confidence to put up arrows on those into 2026 .
Speaker #4: Yeah . Okay . Well , if we started with Telecom again , it's it's a function of sequential math where we got flat for more than the four quarters .
[Company Representative]: Yeah. If we started with telecom, again, it's a function of sequential math where we got flat for more than the four quarters, and the growth comes, but you know, certainly, Jeff, off of a lower level, right? That's just, that's already sort of happened. We see demand there and orders in line to support that. I think with meters and AMI, it's not dissimilar. We've seen four-ish quarters of contraction and building a franchise that's maybe led off some of the larger public utility projects and kind of getting down to a size that is based on a stronger MRO base, as well as some good repeatable business inside of the union co-op segment. I think that's, and you will note the color there of yellow maybe suggests a more, it's an up arrow, but let's call it modest, you know, Jeff.
Speaker #4: And so the growth comes . But you know , certainly Jeff off of a lower level . Right . And that's just that's already sort of happened .
Speaker #4: And we see demand there . And orders in line to support that . I think with meters and Ami . It's not dissimilar .
Speaker #4: You've seen fourish quarters of , of contraction and building of franchise . That's maybe led off some of the larger public utility projects and kind of getting down to a size that is based on stronger MRO base as well as some good , repeatable business inside of the Muni and co-op segment .
Speaker #4: So I think that's and you will note the color there of yellow , maybe suggests it's an up arrow . But let's call it modest .
Speaker #4: You know , Jeff and then the September October order strength . I think the best thing to say about it is it's very broad based inside of the TMD world , really across all of the products .
[Company Representative]: The September-October order strength, I think the best thing to say about it is it's very broad-based inside of the T&D world, really across all of the products. I don't know, Gerben, if you have anything to add.
Speaker #4: So I don't know if you have anything to add .
Speaker #7: Yeah , I would say this was the inflection . We were expecting to happen and perhaps a little bit later . And if you know , we .
Gerben Bakker: Yeah, I would say this was the inflection we were expecting to happen and perhaps a little bit later. As we think back and with some of the discussion with our customers, certainly with the tariff environment, there have been some pretty significant ongoing tariff increases and price increases over the summer. These customers are working within their budgets and assessing what this all means for their budgets. I think that perhaps influenced it a little bit. It is very hard to call exactly in timing to a specific month or quarter. The good news is we're seeing it come up. I would say this is what we've been waiting and expecting to happen.
Speaker #3: Think back and with some of the discussions with our customers , certainly with the , with the tariff environment , and , you know , there have been some pretty significant ongoing tariff increases and pricing increases over the summer .
Speaker #3: You know , these customers are working within their budgets and assessing what what this all means for , for their budgets . And I think , you know , that perhaps influenced it a little bit .
Speaker #3: And but but it's very hard to call exactly timing to a specific month or quarter . But the good news is we're seeing it come up .
Speaker #3: And I would say this is what what what we've been waiting and expecting to happen .
Speaker #5: I'm sorry . Just one quick one . Is this tax rate sustainable into 26 ?
William Sperry: I'm sorry, just one quick one. Is this tax rate sustainable into 2026?
Speaker #4: Yeah . It's driven by an international acquisition , restructuring . So I'd say it's project driven . Jeff . And we're anticipating tax rate normalizing next year .
[Company Representative]: Yeah, it's driven by an international acquisition restructuring. I'd say it's project-driven, Jeff, and we're anticipating tax rate normalizing next year.
Speaker #5: All right . Thanks .
William Sperry: All right, thanks.
Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Tommy Mao from Stephens.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Tommy Mao from Stephens.
Speaker #8: Good morning and thank you for taking my questions .
[Analyst]: Good morning, and thank you for taking my questions.
Speaker #4: Good morning Tommy .
William Sperry: Oh, good morning, Tommy.
Speaker #8: I want to make sure I'm hearing you here on the the pace of recovery for utility . Is it is it a fair characterization that in reducing the organic guidance for this year ?
[Analyst]: I want to make sure I'm hearing you here on the pace of recovery for utility. Is it a fair characterization that in reducing the organic guidance for this year, revenue guidance, it was entirely within the utility segment, but that the shape of the recovery is as expected, the timing has shifted?
Speaker #8: Revenue guidance , it was entirely within the utility segment , but that the shape of the recovery is as expected , the timing has shifted .
Speaker #4: I would say both both your points are accurate . Yes .
[Company Representative]: I would say both your points are accurate, yes.
Speaker #8: Okay, thank you. And that would be true as well of the distribution piece of that business.
[Analyst]: Thank you. That would be true as well of the distribution piece of that business?
Speaker #2: Yeah , I think we saw good inflection in distribution in the third quarter , Tommy . But I think that's a similar comment as well .
[Company Representative]: Yeah, I think we saw good inflection in distribution in the third quarter, Tommy. I think that's a similar comment as well. Yes.
Speaker #8: Okay . Thank you . Thank you . And I'll , I'll move to a housekeeping type item here on your early commentary for 2026 , which is appreciated .
[Analyst]: Okay, thank you.
[Company Representative]: The pace has shifted a little bit.
[Analyst]: Thank you. I'll move to a housekeeping type item here. On your early commentary for 2026, which is appreciated as always, you indicated the organic growth is in line with long-term targets. We've heard from you before on the sales piece of that 4% to 6%. Have you commented explicitly on what your organic earnings algorithm is? I know you've communicated a double-digit pace, but I think that includes some acquisitions. If there's anything you could do to tighten it up, that would help.
Speaker #8: As always . You indicated the organic growth is in line with long term targets . We've we've heard from you before on on the sales piece of that 4 to 6 .
Speaker #8: Have you commented explicitly on what your organic earnings algorithm is ? I know you've communicated a double digit pace , but I think that includes some acquisitions .
Speaker #8: And so if there's anything you could do to tighten us up that would help .
Speaker #4: What we've talked about is 4 to 6 from the top line , we've talked about incrementals in the 25 to 30 range . That gets you a loan into high single digits .
[Company Representative]: What we've talked about is 4% to 6% from the top line. We've talked about incrementals in the 25% to 30% range that gets you alone into high single digits, and we're talking about buttressing that inorganically, Tommy. That's kind of mathematically how we build to double digits for kind of mid-cycle sustainable earnings growth, you know.
Speaker #4: And then we're talking about buttressing that in organically . Tommy . So the that's kind of mathematically how we how we build to double digits for kind of mid cycle sustainable earnings growth .
Speaker #4: You know .
Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Steve Tusa from J.P. Chase & Company.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Steve Toussaint from JPMorgan Chase & Company.
Speaker #9: Hey good morning .
[Analyst]: Hey, good morning.
Speaker #4: Hey Steve . .
[Company Representative]: Hey, Steve.
Speaker #9: I'm not a big management tire pumper here , but thanks a lot for for all the , the interactions over the years , Bill and I think , you know , you're not only a really good and honest CFO , but a great guy .
[Analyst]: I'm not a big management tire pumper here, but thanks a lot for all the interactions over the years, Bill. I think you know you're not only a really good and honest CFO, but a great guy. It's been a pleasure working with you and hopefully see you around the golf course in the future.
Speaker #9: So it's been a pleasure working with you and hopefully see you around the golf course in the future .
Speaker #4: Thank you Steve . Likewise . Back at you .
[Company Representative]: Thank you, Steve. Likewise, back at you.
Speaker #9: So just on on the quarter pricing , what was what's kind of the breakout by the two segments ?
[Analyst]: On the quarter pricing, what's kind of the breakout by the two segments?
Speaker #4: Yeah , we were talking about pricing for the year being in the three point range and the quarter was in line with that .
[Company Representative]: Yeah, we were talking about pricing for the year being in the 3% range, and the quarter was in line with that. I'd say reasonably balanced between the segments, you know, Steve.
Speaker #4: And I'd say reasonably balanced between the segments . You know , Steve .
Speaker #9: Okay. And then, can we just talk about the puts and takes on the margins for next year? Anything moving around?
[Analyst]: Okay. Can we just talk about the puts and takes on the margins for next year? Anything moving around, you know, on the PCP front for next year?
Speaker #9: You know , on the PCP front for next year ?
Speaker #4: Yeah , I mean I think I'd rather wait and let my esteemed colleague Joe give you those guidances and our January call . But I do think if you take the long term setup that we're referring to , which goes back to Investor Day , the incrementals that we cite are are below what I would call maybe harvesting incrementals and that implies that we would anticipate continuing to make investments along the way .
[Company Representative]: Yeah, I mean, I think I'd rather wait and let my esteemed colleague, Joe, give you those guidances in our January call. I do think if you take the long-term setup that we're referring to, which goes back to Investor Day, the incrementals that we cite are below what I would call maybe harvesting incrementals. That implies that we would anticipate continuing to make investments along the way. As you know, there's a little bit of wraparound price embedded. We could, we'll talk through all that in detail in January. That's kind of how that long-term framework really plays out.
Speaker #4: You know , as you know , there's a little bit of wrap around pricing embedded . And we'll talk through all that in detail in January .
Speaker #4: But that's kind of how that long term framework really plays out .
Speaker #3: Maybe the only thing to .
Gerben Bakker: Yeah, maybe the only thing to add is we certainly will continue to manage the price-cost-productivity equation to a net neutral or better.
Speaker #10: We certainly will continue to manage the price, cost, and productivity equation to ensure that it remains neutral or better.
Speaker #9: All right . And then Jeff , Jeff I'd like I think three and a half questions . So I'll just I'll just do three .
[Analyst]: All right. Jeff, I have, I think, three and a half questions, so I'll just do three. On this drag from the meters and the other kind of infrastructure, more infrastructure-type businesses, how much visibility do you think you have on that bottoming? Do you get the sense that some of your businesses are getting crowded out from an investment perspective with such a significant focus from the utilities on T and G as opposed to the D side of the equation?
Speaker #9: The I guess just on this you know drag from the the meters and and the other kind of infrastructure more infrastructure type businesses .
Speaker #9: How much visibility do you think you have on that bottoming ? And do you just get the sense that some of your businesses are getting like , you know , crowded out from an investment perspective with , with such a significant focus from the utilities on , on TNG as opposed to the D side of the equation .
Speaker #3: Yes . So the first question , remind me again , sorry , Steve , I was thinking about the .
[Company Representative]: Yes. The first question, remind me. Yes, sorry, Steve. I was thinking about the second and third.
Speaker #9: Second I did . I snuck in three and a half , maybe four . But the first one is just how much visibility do you have on on this aclara on this aclara and grid infrastructure drag like like how confident are you in the bottom ?
[Analyst]: Sorry, I did. I snuck in three and a half, maybe four. The first one is just how much visibility do you have on this Aclara and grid infrastructure drag? How confident are you in the bottom?
Speaker #10: Yeah , and I would say yep , yep .
[Company Representative]: Yeah. I would say, yep, yep, thanks, Steve. I would say it's generally longer dated than certainly our distribution side of the business. It's after this big project rollout, this business now has more of a component of MRO. We see future projects actually being less lumpy. We're refocusing this business on more of the public power. Those projects tend to be smaller, and they tend to be implemented over a longer period of time as well. I would say what was much longer visibility is now much smaller. I think it's also going to be more predictable for that business. Certainly, distribution is still going to be very good, very good growth. The crowding out point, I think, is one we debate a lot, you know, Steve.
Speaker #3: Thanks , Steve . I would say it's it's generally longer dated than , than our , our certainly our distribution side of the business .
Speaker #3: But it's after these big project roll up this business now has more of a component of MRO . And and we see future projects actually being less lumpy .
Speaker #3: You know , we're we're refocusing this business on more of the public power . Those projects tend to be smaller and they tend to be , you know , implemented over a longer period of time as well .
Speaker #3: So I would say what was much longer visibility is now much smaller . But I think it's also going to be more predictable for that business .
Speaker #3: And certainly , you know , this the distribution is is still going to be very good , very good growth .
Speaker #4: Yeah . The crowding out point I think is one we debate a lot . You know , Steve and I think given the way he was asking is , is a heavy amount of T and S spending going to for by definition drive D kind of down a little bit and you know , we've seen a very healthy D and even though there's some logic in there's a fixed number of dollars , it just feels like there's going to be growth across those three markets .
[Company Representative]: I think, Gerben, the way he was asking is, is a heavy amount of T and S spending going to, by definition, drive D kind of down a little bit. We've seen a very healthy D. Even though there's some logic and there's a fixed number of dollars, it just feels like there's going to be growth across those three markets.
Speaker #3: And , and maybe the one thing to add , if it did drag it out and we saw the upside in in substations , which we will you know , we're a little bit agnostic .
Gerben Bakker: Maybe the one thing to add, if it did drag it out, and we saw the upside in substation markets, which we will, we're a little bit agnostic, we're in a very strong position in all three of those markets. I would say equally strong position. If a dollar, an additional dollar, goes to substation and transmission, that just delays the investments that need to be made in distribution. We'll probably extend that cycle of investment that will benefit. We see our position to benefit equally if some of that happens, and it could.
Speaker #3: We're in a very strong position in all three of those markets. I'd say we have an equally strong position. So, if an additional dollar goes to substation and transmission, that just delays the investments that need to be made in distribution.
Speaker #3: So we'll probably extend that cycle of investment that that will benefit . So you know we see our position to benefit equally . If some of that that happens and it could .
Speaker #9: Okay . Great . Thanks a lot .
[Analyst]: Okay, great. Thanks a lot.
Speaker #1: Thank you . We ask that you please limit yourself to one question and one follow up . Our next question comes from the line of Chris Snyder from Morgan Stanley .
Operator: Thank you. We ask that you please limit yourselves to one question and one follow-up. Our next question comes from the line of Chris Snyder from Morgan Stanley.
Speaker #11: Thank you . I just wanted to follow up on on , I guess the softer back half utility organic growth . I guess maybe relative to three months ago .
William Sperry: Thank you. I just wanted to follow up on, I guess, the softer back half utility organic growth. Maybe relative to three months ago, is this a function of a clearer maybe softening a little bit versus that Q2 kind of expectation? Is distribution turning just maybe not as sharp as previously expected? What specifically is causing the utility back half to come in below? Thank you.
Speaker #11: Is this like a function of a clear or maybe softening a little bit versus that Q2 kind of expectation is distribution turning , just maybe not a sharp as previously expected ?
Speaker #11: I guess just kind of, you know, what specifically is, you know, kind of causing the utility back half to come in below.
Speaker #11: Thank you .
Speaker #4: Yeah . Chris , it's it's not a Clara . Clara's been kind of as expected . There is just a little less from the T and D side .
[Company Representative]: Yeah, Chris, it's not clear. Clear has been kind of as expected. There is just a little less from the T&D side. Now, we say that and it's growing 8%, right? It's not like that's a low growth rate, but we were expecting kind of this sharper snapback that the September and October orders are suggesting. You know, I think Gerben described it as a more steady improvement rather than maybe that third quarter snapback. I think we're going to see a little snap in the fourth quarter here. It's within T&D, just I'd say 90 days delayed, you know, Chris, is really what I would say.
Speaker #4: Now , we say that , and it's growing 8% , right ? It's not like that's a low growth rate . But we were expecting kind of this sharper snapback that the September and October orders are suggesting .
Speaker #4: And so you know I think Gerben Bakker Gerben described it as a more steady improvement rather than maybe that that third quarter snapback .
Speaker #4: But I think we're going to see a little snap in the fourth quarter here . So it's it's within tend just I'd say 90 days delayed .
Speaker #4: You know , Chris is really what I would say .
Speaker #11: Thank you . I appreciate that . And then I mean , it seems like the full year guide kind of calls for pricing to exit .
William Sperry: Thank you. I appreciate that. It seems like the full-year guide kind of calls for pricing to exit maybe in the 5% range versus I think you guys said 3% in Q3. Is that right? Any commentary you would have on price realization, any pushback on price in the market, any elasticity you're seeing tied to that? Thank you.
Speaker #11: Maybe in like the 5% range versus I think you guys said 3% in Q3 . So I guess . Is that right ? And then just any commentary you would have on price realization , any pushback on price in the market , any elasticity you're seeing tied to that ?
Speaker #11: Thank you .
Speaker #4: Well , yeah , let's start with kind of the timing of pricing . And you know , we've recognized tariff costs increasing throughout the year .
[Company Representative]: Let's start with kind of the timing of pricing. We've recognized tariff costs increasing throughout the year, and similarly, pricing to match that has increased throughout the year. I think you're right to say if we end the year in the ballpark of 3%, you do a little bit better in the fourth quarter, and then I think some of that would wrap around. In terms of stickiness, I think the stickiness has been quite good. In terms of pushback, maybe ask Gerben to comment, but I would say so far, we're talking about very constructive discussions with our channel partners, very constructive discussions with our end market partners. I don't know, Gerben, if you had anything to say on stickiness and/or.
Speaker #4: And similarly , pricing to match that as increased throughout the year . So I think you're right to say if we end the year in the ballpark of 3% , you do a little bit better in the fourth quarter .
Speaker #4: And then I think some of that would wrap around in terms of stickiness . I think the stickiness has been quite good in terms of pushback .
Speaker #4: Maybe ask Gerben to comment , but I would say so far , you know , we're talking about very constructive discussions with our channel partners , very constructive discussions with our end market partners and but I don't know if you'd add anything to say on stickiness and or .
Speaker #3: Yeah , yeah . No , I'd say our price realization has been quite strong . This this year . And I'd say not much different from what it has been the last couple of years .
Gerben Bakker: Yeah. No, I'd say our price realization has been quite strong this year. I'd say not much different from what it has been the last couple of years. If you remember, certainly in the market, some of the markets that we operate in, their demand is pretty strong. If you look at utility and data centers, the other thing to remember, we're generally a small part of the total cost of systems that go in, but critical in the use. Usually, quality, service, availability is the leading conversations and questions. We have strong specified positions in many of the markets that we deal in. That all works in our favor for why you would have a strong stick. Right now, the conversations have been more frequent, I would say, as some of these tariffs came through.
Speaker #3: And if you remember our certainly are in the market , some of the markets that we operate in , the demand is pretty strong .
Speaker #3: You know, if you look at utilities and data centers, the other thing to remember is that we're generally a small part of the total cost of systems getting going.
Speaker #3: But critical in the U.S. So usually quality service availability is the leading conversation and question, you know, with strong specified positions in many of the markets that we deal in.
Speaker #3: So that that all works in our favor for why you would have strong stake right now in the conversations . Have been . You know , more frequent , I would say , as some of these stairs came through .
Speaker #3: But a big part of that was just helping our customers understand where some of these costs were coming from, how this affected our product lines, and what we're doing about it to partially offset it.
Gerben Bakker: A big part of that was just helping our customers understand where some of these costs were coming from, how this affected our product line, what we're doing about it to partially offset it. I would say that combination of those two things has caused us to have pretty good stick rates here.
Speaker #3: And I would say that combination of those two things has , has caused us to to have pretty , pretty good stick rates here .
Speaker #11: Thank you . I appreciate that .
William Sperry: Thank you. I appreciate that.
Speaker #1: Thank you . One moment for our next question . Our next question comes from the line of Joe Odia from Wells Fargo .
Operator: Thank you. One moment for our next question. Our next question comes from the line of Joe O'Dea from Wells Fargo.
Speaker #12: Hi . Good morning . Thanks for taking my questions . Can you just touch a little bit on behind the meter infrastructure investments and what that means from a content perspective for you on on both the utility and and the electrical side , how that would compare to the an alternative of in front of the meter , any perspective on sort of dollars per megawatt in a data center , and how to think about that from the different kind of angles of investment .
[Analyst]: Hi. Good morning. Thanks for taking my questions. Can you just touch a little bit on behind-the-meter infrastructure investments and what that means from a content perspective for you on both the utility and the electrical side, you know, how that would compare to an alternative of in front of the meter? Any perspective on sort of dollars per megawatt in a data center and how to think about that from the different kind of angles of investment?
Speaker #2: You're talking about data center investment , Joe , or .
Gerben Bakker: You're talking about data center investment, Joe, or?
Speaker #12: Specifically data center investment . But whether that's being supported from kind of behind the meter or in front of the meter and how to think about what it might mean for differences in your content opportunity .
[Analyst]: Specifically data center investment, whether that's being supported from kind of behind the meter or in front of the meter, and how to think about what it might mean for differences in your content opportunity.
Speaker #3: Yeah , I would say probably immediately on the data center , it's it's directly more on the electrical side , you know , with , with some of the burndy businesses , with the grounding system .
Gerben Bakker: Yeah. I would say probably immediately on the data center, it's directly more on the electrical side, you know, with some of the BURNDY businesses, with the grounding system. I mean, tremendously strong position with some of our electrical connectors that are going into the data centers. As a matter of fact, a lot of NPD that we're doing to continue to support data centers with higher amperages that are going through it, as well as our PCX business. I would say there we feel the direct impact of it. I think what you're pointing out, which is clearly a benefit for us as well on the utility side, is how do we support the data centers with the power that they need. That comes in various forms. I would say the primary way that a data center wants to be served is by utility companies for that power.
Speaker #3: I mean , tremendously strong position with , with some of our electrical connectors that are going into the data centers . As a matter of fact , a lot of NPD that we're doing to to continue to support data centers with higher amperage that that are going through it , as well as our PC business .
Speaker #3: So I would say there we feel the direct impact of it , but I think what you're pointing out , which is clearly benefit for us as well on the utility side of how do we support the data centers with the power that they need and that comes that comes in in various forms ?
Speaker #3: I would say the primary way that a data center wants to be served is served by utility companies . For that power . And there's a lot of investment going in there .
Gerben Bakker: There's a lot of investment going in there, not just in new generation, but in how you can interconnect the grid better to provide that load. Also, we have a very strong relationship with the independent power producers, the EPCs. In some cases, you see data centers maybe looking in the short term to fulfill some of that generation more directly. I'd say we would benefit from that as well when you interconnect these data centers too with substations and with the short lines that you would need to bring into the data centers as well. I think our position is good to benefit from this. I would say generally, a data center would have a preference to have utilities provide that power.
Speaker #3: Not not just in New generation , but in how you can connect , interconnect the grid better to to provide that load . But then , also we have , you know , very strong relationship with the independent power producers .
Speaker #3: The EPC . So , you know , in some cases you see data centers , maybe looking on the short term to fulfill some of that .
Speaker #3: Generation more directly . And I'd say we would benefit from that as well . When you interconnect these data centers to with substations and you know , with short lines that you would need to bring into the data centers as well .
Speaker #3: So I think our position is , is good to to benefit from this . But but I would say generally a data center would have a preference to have utilities provide that power .
Speaker #4: And I think , Joe , maybe one of the things you're pointing out when we talk explicitly about our data center exposure , we are talking about that behind the meter piece .
[Company Representative]: I think, Joe, maybe one of the things you're pointing out when we talk explicitly about our data center exposure, we are talking about that behind-the-meter piece. I think you're pointing out that in front of the meter, there's quite a bit driving growth that doesn't exactly, we don't call that data center because it's going into our utility customer. I agree with you. There's a driver there too, for sure.
Speaker #4: And I think you're pointing out that in front of the meter , there's quite a bit driving growth that doesn't exactly . We don't call that data center because it's going into our utility customer .
Speaker #4: But I agree with you. There's a driver there too, for sure.
Speaker #12: Great . Exactly that . Just trying to understand kind of those different phases of of investment and , and opportunities and appreciating the direct kind of data center exposure within electrical that you're reporting .
[Analyst]: Right. No, exactly. Just trying to understand those different phases of investment and opportunities and appreciating the direct kind of data center exposure within electrical that you're reporting. Then just thinking about the grid automation piece, where that sort of CAGR has been relative to target over the past couple of years, and trying to think through any perspective that you can add on meters and AMI, maybe sort of growth not performing to what those targets would be, but whether there's broader value within the portfolio that maybe is underappreciated. Is there synergy value that that business is bringing that remains attractive to you?
Speaker #12: And then just just thinking about the the grid automation piece , you know , where that sort of kegger has been relative to , to target over the past couple of years .
Speaker #12: And , and trying to think through like any perspective that you can add on , on meters and army , maybe sort of growth not performing to what those targets would be , but whether there's broader value within the portfolio that maybe is underappreciated .
Speaker #12: And so is there is there synergy value that that that business is bringing that remains attractive to you ?
Speaker #3: Yeah , yeah , I would say the the short answer to that is yes . And you're right to point out that the financial performance of it , you know , has been below our expectations .
Gerben Bakker: Yeah. Yeah. I would say the short answer to that is yes. You're right to point out that the financial performance of it has been below our expectations. Now, we've not sat still on that, and we've pivoted that business to where we believe we can compete, we can win, and we can get a margin that's more closely in line with the rest of our portfolio. Yes, it's actually one of the strategic reasons we acquired that business in 2018 when we assessed our portfolio and we have a tremendously strong position in the component side, and that continues today. That continues to be needed for tomorrow. As we saw the grid modernizing, we really didn't have the right resources or portfolio to do that. We acquired Aclara in it. Initially, it was just Aclara. Today, it's grid automation.
Speaker #3: Now , you know , we've we've not set still on that and we've pivoted that business to where we believe we can compete .
Speaker #3: We can win , and we we can get a margin that's more closely in line with with the rest of our , portfolio .
Speaker #3: But but yes , it's it's actually one of the strategic reasons we , we acquired that business in 2018 . When , you know , we we assessed our portfolio and we , we have we have a tremendously strong position in the component side .
Speaker #3: And that continues today . That continues to be needed for tomorrow . But as we saw the grid modernizing , we really didn't , you know , have have the right resources or portfolio to do that .
Speaker #3: And so we acquired a Clara in it . And initially it was just the Clara . Today it's great automation . So half of the revenues of this business today is not not a Clara for products that we've since acquired , that we have developed and that are growing at the high end of our of our portfolio growth .
Gerben Bakker: Half of the revenues of this business today is not Aclara, for products that we've since acquired, that we have developed, and that are growing at the high end of our portfolio growth. I would say it's absolutely contributed to the whole of grid automation. We're also focused, as we are in the rest of our portfolio, that the individual businesses have to perform and contribute to the whole. That's where our focus right now is with Aclara.
Speaker #3: So I would say it's absolutely contributed to the whole of grid automation . But we're also focused , as we are in the rest of our portfolio , that the individual businesses have to perform and contribute to the whole .
Speaker #3: And that's where our focus right now is with with Clara .
Speaker #12: Thank you . I appreciate it .
[Analyst]: Thank you. I appreciate it.
Speaker #1: Thank you . One moment for our next question . Our next question comes from the line of Julian Mitchell from Barclays .
Operator: Thank you. One moment for our next question. Our next question comes from the line of Julian Mitchell from Barclays.
Speaker #13: Thanks very much . And I wish you all the best , Bill . Thank you for the help and congratulations to Joe . Maybe just my first question would be around operating margins .
[Analyst]: Thanks very much. I wish you all the best, Bill. Thank you for the help and congratulations to Joe. Maybe just my first question would be around operating margins. I just wanted to try and understand, as we think about next year, I understand there'll be more flavor or color in three months' time. If there was anything to highlight in terms of the effect from restructuring costs not repeating, or higher savings, any kind of carryover to margin effects next year from self-help measures this year, and whether there would be any effect on the year-on-year margin progression from the accounting change earlier this year, just to see if you could flesh out a little bit the comments around incrementals next year.
Speaker #13: I just wanted to try and understand as we think about next year , understand there'll be more flavor or color in three months time .
Speaker #13: But if there was anything to highlight in terms of the effect from restructuring costs , not repeating or higher savings , you any kind of carry over to margin effects next year from self-help measures .
Speaker #13: This year and whether there would be any effect on the year on year margin progression from the accounting change earlier this year . Just just to see if you could flesh out a little bit the comments around Incrementals next year .
Speaker #4: Yeah , I think I think restructuring , you know , Julian , we we've tried to put it into this virtuous cycle where we spend roughly the same amount every year .
[Company Representative]: Yeah, I think restructuring, you know, Julian, we've tried to put it into this virtuous cycle where we spend roughly the same amount every year. Maybe it bumps around a little bit quarter by quarter, but then you don't notice it annually in terms of the margins. We continue to believe that restructuring program is important in driving future productivity. We might call that productivity with a capital P, lots of smaller productivity initiatives with a lowercase p, obviously. I think that part is something we hope not to whipsaw you with margin-wise, and that we feel I know a lot of our competitors would exclude that number from their margin and say that it's a discretionary item. We just feel it's going to be part of our year-in and year-out modus operandi. Therefore, we include the cost because we expect you to experience it every year.
Speaker #4: Maybe it bumps around a little bit quarter by quarter , but then you don't notice it annually in terms of the margins and we continue to believe that restructuring program is important in driving future productivity .
Speaker #4: And we might call that productivity with a capital P , lots of smaller productivity initiatives with a lower case P , obviously , and so I think that part is something we hope not to whipsaw you with margin wise .
Speaker #4: And that we feel I know a lot of our competitors would exclude that number from their margin and say that it's a discretionary item and we just feel it's going to be part of our year end and year out modus operandi , and therefore we include the cost because we expect you to experience it every year .
Speaker #4: Plus , it's not just an expense , you know , it's it's basically an investment to get margins up . So that's why we included and hoping that you don't see a lot of distortion from that .
[Company Representative]: Plus, it's not just an expense. It's basically an investment to get margins up. That's why we include it and hoping that you don't see a lot of distortion from that. The accounting change, I don't think would change the margins % next year either.
Speaker #4: And the accounting change, I don't think would change the margins percentage next year either.
Speaker #13: That's great . Thank you . And then just maybe on the top line for a second , a lot of explanation , understandably , around the utility market .
[Analyst]: That's great. Thank you. Maybe on the top line for a second, a lot of explanation, understandably, around the utility market, but switching to electrical and the commentary around, I think, non-residential and also kind of heavy industry into next year is quite muted per slide 10, I think. Maybe sort of flesh out any movement you've seen there. I know some other companies have sort of talked up U.S. non-residential in the past month or two. Seems like you're a bit more cautious.
Speaker #13: But maybe switching to electrical, and the commentary around non-residential and also kind of heavy industry into next year is quite muted, per Slide 10.
Speaker #13: I think maybe sort of flesh out any movement you've seen there . I know some other companies have sort of talked up . Non-residential in the past month or two .
Speaker #13: Seems like you're a bit more cautious .
Speaker #4: I think we are probably a little cautious . It's been reasonably mixed and soft for us , but I wouldn't be surprised if you see , you know , a decent rebound .
[Company Representative]: I think we are probably a little cautious. It's been reasonably mixed and soft for us. I wouldn't be surprised if you see a decent rebound. Our exposure in that space has gotten smaller as a result of some of our business development work, both in terms of what we bought and what we sold. The heavier industrial, you know, it's always interesting to look at steel prices and the like to see if you start to see some output increase there. That will certainly true that up, you know, Julian, by the time we get to our January guidance. I think you'll find I don't think we'll be an outlier from the general market expectations there.
Speaker #4: Our exposure in that space has has gotten smaller as a result of our some of our business development work , both in terms of what we've bought and what we've sold .
Speaker #4: And the heavier industrial , you know , it's always interesting to look at steel prices and the like to see if you start to see some output increase there .
Speaker #4: But that will certainly true that up . You know , Julian , by the time we get to our January guidance , I think you'll find I don't think we'll be an outlier from the general market expectations .
Speaker #4: There .
Speaker #13: That's great . Thank you .
[Analyst]: That's great. Thank you.
Speaker #1: Thank you. One moment for our next question. Our next question comes from the line of Nigel Coe from Wolfe Research.
Operator: Thank you. One moment for our next question. Our next question comes from the line of Nigel Koh from Wolfe Research.
Speaker #14: Oh , thanks for the question . Good morning , everyone . And Bill , you look forward to youthful to be retiring . But I know you've you've had a long career .
[Analyst]: Thanks for the question. Good morning, everyone. Bill, you look far too youthful to be retiring, but I know you've had a long career, so congrats, and hope you enjoy retirement. You're not commenting on that, so I'll move on. Just a couple of quick modelling items, and then I've got a.
Speaker #14: So congrats and hope you enjoy retirement . So you know comment on that . So I'll move on . So so a couple of quick things a couple of quick modeling items .
Speaker #14: And then I've got a.
Speaker #4: My backup today. So.
[Company Representative]: My back is up today. I feel older than I look, I guess. It's all good.
Speaker #14: I feel .
Speaker #4: Older than I look, I guess. So.
Speaker #14: It's all yeah yeah . No definitely have that youthful sort of , you know , kind of look . But a couple a couple of quick modeling items and then I've got a bit more of a strategic one just , just on DMC , you know , we understand , you know , the margins there are really rich in north of 40% EBITDA margins .
[Analyst]: Yeah, you definitely have that youthful sort of, you know, kind of look. A couple of quick modeling items, and then I've got a bit more of a strategic one. Just on DMC Power, we understand the margins there are really rich, in north of 40% EBITDA margins. Is that the case? Maybe just comment on the three-key utility performance. Was there any impact from the storm activity? It seemed like there weren't any big storms down in the Gulf Coast area. I know that can swing things a little bit. Just wondering if that was an impact as well.
Speaker #14: Is that is that the case . And then maybe just comment on the three key utility performance . Was there any impact from the storm activity ?
Speaker #14: It seemed like there weren't any big storms down in the Gulf Coast area . I know that can swing things a little bit .
Speaker #14: So just just wondering if that was an impact as well .
Speaker #3: Yeah , maybe . Maybe I'll start with the second first storm impact there . There was none . It was quite a calm season , although there is a big one right now that's hitting Jamaica .
Gerben Bakker: Yeah, maybe I'll start with the second first, sort of storm impact. There was none. It was quite a calm season, although there's a big one right now that's hitting Jamaica. That generally, we would say in the overall scope of Hubbell Incorporated, is not a big driver of revenue, but within a quarter, certainly that could have a couple of points if there's storm activity. On the first question on DMC Power, that's indeed a quite attractive margin business. If you think about the application of this, it's in substation, you know, very high stakes, I would say, environment of power with a very unique solution of a swage technology to put these crimpers on these connectors onto the conductors, what traditionally would be a specialized welding application in a substation. You can imagine both the application of something like this and the savings or the efficiency in installation.
Speaker #3: But yeah , that that's and that generally we would say in the , in the overall scope of Hubble is not a big driver on revenue , but within a quarter , certainly that that could , you know , have a couple of points if there is if there's storm activity on the first question , on DMC , that that's indeed a quite attractive margin business .
Speaker #3: And if you think about the application of this , it's a it's in substation , you know , very high stakes . I would say environment of of power with a very unique solution of , of assuage technology to put these crimpers on , on these , these connectors onto the conductors .
Speaker #3: What traditionally would be a specialized welding application in a substation? So, you can imagine both the application of something like this and the savings or the efficiency in installation.
Speaker #3: That's what drives really nice margin . And you know , when you put that then in our portfolio and I would say this is about as down the fairway as you can get for fitting in in our portfolio , because we do a lot of connectors .
Gerben Bakker: That's what drives a really nice margin. When you put that then in our portfolio, I would say this is about as down the fairway as you can get for fitting in our portfolio because we do a lot of connectors, and this is yet another solution of that. We generally are able to add and to boost what, you know, and privately or a single line player can get with our sales force, with our relationships. We're really excited when we are able to fold in businesses like that into the portfolio.
Speaker #3: And this is yet another solution of that . We generally are able to add and to to boost what , what you know and privately or single line can player can get with with our sales force , with our relationships .
Speaker #3: So we're really excited when we are able to fold in businesses like that into the portfolio .
Speaker #14: Run DMC and then my , my , my follow on question is , is really it seems like there's a huge market for control house applications in data center .
[Analyst]: DMC Power. My follow-on question is really, it seems like there's a huge market for control house applications in data centers. My understanding is systems control, certainly the sort of the history of systems control, is very much in the substation for utilities. I'm actually wondering if there's a sales channel opportunity into the data center for that business.
Speaker #14: And my understanding is systems control . Certainly the the the sort of the history of system control is very much in the substation for utilities .
Speaker #14: So, I'm actually wondering if there's a sales channel opportunity into the data center for that business.
Speaker #4: Yeah , we bought a company a little while ago called PQ , which does the control house to data centers and we do think Nigel , the application has got a lot of growth in it .
[Company Representative]: Yeah, we bought a company a little while ago called PCX, which does control house to data centers. We do think, Nigel, the application has got a lot of growth in it. We do agree there's some interesting best practices to be shared between data centers and the utility side on the substation. I think we would agree with your premise.
Speaker #4: And we do agree there's some interesting best practices to be shared between data centers and and utility side on the So I think we would agree with your premise .
Speaker #3: The only thing I may say is we are very busy trying to serve our utility customers at this point , we're adding capacity in this business , but we see like you , an opportunity to expand it in those other areas .
Gerben Bakker: The only thing I may say is we are very busy trying to serve our utility customers at this point. We're adding capacity in this business, but we see, like you, an opportunity to expand it in those other areas.
Speaker #14: Okay . Thanks a lot .
[Analyst]: Okay, thanks, Bill.
Speaker #1: Thank you . One moment for our next question . Our next question comes from the line of Christopher Glynn from Oppenheimer and Company .
Operator: Thank you. One moment for our next question. Our next question comes from the line of Christopher Glein from Oppenheimer & Company.
Speaker #15: Yeah . Thanks . A lot of ground been covered , but Bill's been a pleasure to work with you . And observed the excellence you brought to Hubble for a long time .
William Sperry: Yeah, thanks. A lot of ground uncovered, but Bill, it's been a pleasure to work with you and observe the excellence you brought to Hubbell for a long time. Thanks for all the work together.
Speaker #15: So thanks for all the work together .
Speaker #4: Thank you . Chris , very .
[Company Representative]: Thank you, Chris.
Speaker #15: Much . Yeah . Just
William Sperry: Yeah, just, you know, looking at data center, I don't know if we got a particular call out on the growth rate there, but I think that's kind of the spearhead of your vertical market strategy. Light industrials, obviously, a little more diversified, but I think you're probably seeing some of that there. I'm just curious if you could comment on that as we think about the vertical market strategy being, you know, a bigger than a data center theme for Hubbell Incorporated.
Speaker #15: , you know , looking at data center , I don't know if we got a particular call out on the growth rate there , but I substation .
Speaker #15: think that's kind of the spearhead of your vertical market strategy . Light industrial is obviously a little more diversified , but I think you're probably seeing some of that there .
Speaker #15: Just curious if you could comment on that, as we think about the vertical market strategy being, you know, a bigger than a data center theme for us.
Speaker #4: Yeah , it's I would say you're right . The data center is driving a lot of notable growth inside of the electrical segment .
[Company Representative]: Yeah, I would say you're right. The data center is driving a lot of notable growth inside of the electrical segment, and some of it is a dedicated unit, PCX, and some of it is the connectors and grounding solutions. I agree. I also agree with you that there are other verticals besides data centers where we've tried to add sales and marketing specialists to do a better job of cross-selling across different units. We're finding those efforts to be well worth it. It's not just the data center vertical, as you say. It just happens to be a very high-growth pointed one right now.
Speaker #4: And some of it is is a dedicated unit and some of it is the connectors and grounding solutions . So I agree , but I think I also agree with you that there are other verticals besides data centers where we've tried to add sales and marketing specialists .
Speaker #4: Do a better job of cross-selling across different units , and we're finding those efforts to be well worth it . And it's it's not just the data center vertical , as you say , just happens to be very high growth point at one right now .
Speaker #15: Okay . And then just wondering if you have the DNA numbers for DMC and in particular , maybe the depreciation since the amortization backs out anyway .
William Sperry: Okay. Just wondering if you have the D&A numbers for DMC in particular, maybe the depreciation since the amortization backs out anyway.
Speaker #4: Yeah , I don't have it off the top of my head , but the math right . You're talking about sales growth in the in the 20 ish percent range .
[Company Representative]: Yeah, I don't have it off the top of my head, but the math, right, you're talking about sales growth in the 20% range. You're talking about EBITDA, as we said, in the 40% range. You should assume DAA. I may be guessing here, but it's a couple of points of sales. We'll be doing some investing in that business. We'll be ramping those margins up over our ownership time, I would think, Chris.
Speaker #4: You're talking about EBITDA . As we said in the 40 ish percent range . And you should assume Da , I may be guessing here , but it's a couple of points of sales .
Speaker #4: And then , you know , we'll do . We'll be doing some investing in that business . So it's it we'll be ramping those margins up over our ownership time .
Speaker #4: I would think Chris .
Speaker #15: Great , thanks . That's all I've got .
William Sperry: Great. Thanks. That's all I've got.
[Company Representative]: Okay.
Speaker #4: Okay .
Speaker #1: Thank you . At this time I would now like to turn the conference back over to Dan Innamorato for closing remarks .
Operator: Thank you. At this time, I would now like to turn the conference back over to Daniel Innamorato for closing remarks.
Speaker #3: Great . Let me take the call here . And I just want to make a comment of thanks to all of you for the , you know , well-deserved well wishes for Bill .
Daniel Innamorato: Great. Let me take the call here. I just want to make a comment of thanks to all of you for the well-deserved well-wishes for Bill. I'm sitting here across from him, and while he's not always reacting verbally, I can tell what it means to him. I think we set the bar for Joe coming in of beating 50 earnings calls as CFO. I'll make sure to relay that to him. Thanks, and look forward to connecting in the first quarter. Thank you much.
Speaker #3: I'm sitting here across from him. And while he's not always reacting verbally, I can tell what it means. Means to him.
Speaker #3: And also , I think we've set the bar for Joe coming in . Of beating 50 earnings calls as CFOs . I'll make sure to relay that to him .
Speaker #3: But but thanks . And look forward to connecting in the first quarter . Thank you much .
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.