Q1 2026 Hubbell Inc Earnings Call

Speaker #1: Prince Paul. 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 participate, you will need to press star 11 on your telephone, you will then hear a message advising your hand is raised.

Speaker #1: To withdraw the question, simply press star 11 again. Please be advised that today's conference is being recorded. Now, it's my pleasure to hand the conference over to the Senior Director of Investor Relations, Dan Innamorato.

Speaker #1: Please proceed.

Speaker #2: Thanks, Operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the first quarter of 2026.

Speaker #2: The press release and slides are posted to the Investor section of our website at hubble.com. Joined today by our chairman, president, and CEO, Gerben Bakker, and our CFO, Joe Capozzoli.

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 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 in this call. Additionally, comments may also include non-gap financial measures.

Speaker #2: Those measures are reconciled to the comparable gap measures, which are included in the press release and slides. Now, let me turn the call over to Gerben.

Speaker #3: Great. Thanks, Dan. And good morning, everyone. And thank you for joining us to discuss Hubble's first quarter 2026 results. Hubble delivered strong financial performance to begin the year, with double-digit growth in sales, adjusted operating profit, and adjusted earnings per share.

Speaker #3: Organic growth of 8% in the first quarter was driven by double-digit organic growth in our electrical solution segment, as well as our grid infrastructure businesses within the utility solution segment.

Speaker #3: Our core utility T&D markets remained strong with highly visible load growth driving continued strong demand in transmission and substation markets, and aging infrastructure resiliency investments driving strong demand in distribution markets.

Speaker #3: Electrical solutions growth continues to be driven by strength in data center and light industrial markets. Enabled by our leading brands and continued success in our strategy to compete collectively in high-growth verticals.

Speaker #3: We are raising our full-year 2026 outlook for total sales growth, organic sales growth, and adjusted earnings per share this morning. As we are confident Hubble's strong position in attractive end markets and continued execution of our long-term strategy will enable us to execute through a dynamic operating environment.

Speaker #3: Before I turn the call over to Joe to walk you through our financial performance in more detail, I would like to highlight an emerging growth opportunity for Hubble in high-voltage transmission.

Speaker #3: A long-term megatrend that sits squarely in our core and we are demonstrating early success in a multi-year investment cycle. As background, 765 kV transmission represents one of the most efficient methods to move large amounts of power over long distances.

Speaker #3: In order to accommodate accelerating electricity demand from electrification and load growth. Operating transmission lines at higher voltages enables utilities to deliver more power per line with lower losses and fewer space requirements.

Speaker #3: For Hubble, high-voltage transmission represents a significant multi-year opportunity which is largely incremental to existing strength in traditional 345 kV transmission markets. Our leading position and strong customer relationships position us well to capture this opportunity and we are demonstrating early success with several key project wins supporting this initial phase of high-voltage transmission buildup.

Speaker #3: Additionally, our portfolio depth and breadth positions us as a preferred partner who customers can trust to provide a full package of critical components. This solutions offering enables high service levels and reliability while driving installation efficiency and ease of doing business for our customers.

Speaker #3: We are actively investing to support future growth in this market, including development and testing of new product offerings in collaboration with major customers as well as in capacity expansion investments.

Speaker #3: Overall, we believe 765 kV transmission represents an addressable market opportunity of approximately 1.5 billion over the next 10 years. And we believe we are well positioned to serve this attractive long-term investment cycle.

Speaker #3: With that, let me turn the call over to Joe to provide more details on our financial results.

Speaker #2: Thank you, Gerben. And good morning, everybody. I am starting my comments on slide 5. Hubble's first quarter financial performance was strong with double-digit growth across sales, adjusted operating profit, and adjusted earnings per diluted share.

Speaker #2: Net sales of $1.517 billion in the first quarter of 2026 increased by 11% compared to the prior year. Driven by 8% organic growth and acquisitions contributing 3%.

Speaker #2: Consistent with our fourth quarter 2025 performance, both electrical solution segment and grid infrastructure products within our utility solution segment delivered double-digit organic growth in the first quarter.

Speaker #2: Partially offset by anticipated softness in grid automation. Acquisitions contributed 3 points to growth in the first quarter, with DMC Power off to a strong start and integrating nicely within our T&D business.

Speaker #2: From an operational standpoint, Hubble generated $301 million of adjusted operating profit in the first quarter. Representing 18% growth versus the prior year, with adjusted operating margins expanding 110 basis points year over year.

Speaker #2: This improvement in adjusted operating profit and adjusted operating margin was primarily driven by strong volume growth in high-margin businesses. While cost inflation accelerated against 2025 exit rates, as anticipated, our pricing and productivity actions continue to keep pace more than offsetting those higher levels of inflation on a dollar-for-dollar basis in the first quarter.

Speaker #2: We also accelerated our investment levels in the first quarter as previously communicated, most notably to expand capacity in high-growth areas and generate future productivity.

Speaker #2: And as anticipated, we invested $7 million in our restructuring and related program to further streamline our operational footprint, primarily within our electrical solution segment.

Speaker #2: Which, as a reminder, R&R is included in our adjusted results. Adjusted earnings per diluted share were $3.93 in the first quarter. Representing a 16% increase versus the prior year.

Speaker #2: Driven primarily by adjusted operating profit growth. Below the line, higher interest expense associated with borrowings from the DMC acquisition and a slightly higher year-over-year tax rate were partially offset with lower share count as a result of prior repurchase activity.

Speaker #2: Additionally, we repurchased $168 million worth of shares in the first quarter at a dollar-cost average below $500 per share. We expect the net impact of these repurchases to be neutral to 2026 earnings as a lower share count will be offset by higher interest.

Speaker #2: But the repurchases of shares that attracted valuations is expected to provide us with earnings accretion in 2027. Our balance sheet remains strong and is poised to invest on behalf of our shareholders.

Speaker #2: Our primary focus remains on internal reinvestments and acquiring differentiated businesses to bolt on to attractive areas of our portfolio. The pipeline of opportunities remains healthy and active, and we continue to remain disciplined in our approach.

Speaker #2: Share repurchases represents an additional lever that we can and will utilize to return cash to shareholders over time. Turning to page 6 to review our performance by segment, utility solutions delivered another strong quarter with double-digit growth in sales and adjusted operating profit.

Speaker #2: First quarter performance overall reflected a continuation of the momentum we realized exiting 2025. With overall drivers very similar across end markets. Utility solutions generated net sales in the first quarter of $949 million which represented growth of 11% versus the prior year and includes organic growth of 7% and acquisitions contributing 3%.

Speaker #2: Organic growth of 7% in the first quarter was driven by 12% organic growth in our larger higher margin grid infrastructure business where demand strength was broad-based across T&D end markets.

Speaker #2: Utilities are investing at heavy rates and demand for Hubble solutions to serve the expanding critical infrastructure needs of our customers is driving continued momentum in orders and providing visibility to further strength over the balance of 2026.

Speaker #2: As we will highlight in a few minutes, we now anticipate our utility solution segment to deliver high single-digit organic growth on a full-year basis.

Speaker #2: Outside of our core T&D markets, telecom and gas distribution grew attractively in the first quarter. While meters and AMI markets remained weak as anticipated.

Speaker #1: Get to about flat-ish on the full-year margin for electrical.

Speaker #1: Our demand strength was broad-based across TNDN markets. Utilities are investing at heavy rates and demand for HUBBELL Solutions to serve the expanding critical infrastructure needs of our customers is driving continued momentum in orders and providing visibility to further strength over the balance of 2026.

Speaker #2: Oh, that's amazing.

Speaker #1: So that's how we see that.

Speaker #2: Yeah. That's great, Keller. Thanks. Thank you. And then just a quick follow-on maybe on the back of Jeff's question on transmission, obviously very healthy growth, very sort of vibrant end market.

Speaker #2: While grid automation organic sales declined 7% year-on-year in the first quarter, sales increased slightly on a sequential basis. We remain confident that meter and AMI markets have stabilized and we anticipate easing comparisons and continued strength in protection and controls products will enable grid automation organic sales to return to slight year-over-year growth in the second quarter.

Speaker #2: Some of the big players in that space, GE Venova's of the world, are growing strong double digits in transmission. Grid transmission. So I'm just wondering, do you see scope for that to for your business to get up to those kinds of levels?

Speaker #1: As we will highlight in a few minutes, we now anticipate our utility solution segment to deliver high single-digit organic growth on a full-year basis.

Speaker #1: Outside of our core TND markets, telecom and gas distribution grew attractively in the first quarter. While meters and AMI markets remained weak as anticipated, while grid automation organic sales declined 7% year-on-year in the first quarter, sales increased slightly on a sequential basis.

Speaker #2: And is the scope of your content increasing with time?

Speaker #2: Operationally, HUS delivered $207 million of adjusted operating profit in the first quarter, representing 21% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 190 basis points year over year.

Speaker #1: Yeah. I would say maybe on the first one, on the scope, so we continue to develop products. We continue to do acquisitions. And both the DMC and system control, like two examples where scope is increasing if you have additional product lines.

Speaker #1: We remain confident that meter and AMI markets have stabilized and we anticipate easing comparisons and continued strength in protection and controls products will enable grid automation organic sales to return to slight year-over-year growth in the second quarter.

Speaker #2: Operating profit growth was primarily driven by strong volumes in high-margin grid infrastructure products favorable price-cost productivity and acquisitions, which were partially offset by grid automation volumes decline.

Speaker #1: But also as you look at where the voltages go, so when we talk about 765, our content on that per mile would also go up slightly from the lower voltages.

Speaker #1: Operationally, HUS delivered $207 million of adjusted operating profit in the first quarter, representing 21% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 190 basis points year-over-year.

Speaker #2: Moving to page 7, electrical solution results were also strong in the quarter with double-digit growth in net sales and adjusted operating profit. For the first quarter, electrical solutions generated sales of $568 million.

Speaker #1: So I think in net, both on what we're adding to the portfolio and kind of where the investments going in, it does increase our content a little bit.

Speaker #1: So certainly, what we're seeing is double-digit growth. Our scope is broad. And we serve the majority of, right, if you think about a transmission line, 85 to 90 percent of material that goes up on that, we serve.

Speaker #2: Which represented growth of 12% versus the prior year. Organic growth of 11% was again driven by strength in data center and light industrial markets, as well as solid non-residential growth.

Speaker #1: Operating profit growth was primarily driven by strong volumes in high-margin grid infrastructure products, favorable price-cost productivity and acquisitions, which were partially offset by grid automation volumes decline.

Speaker #2: Partially offset by softer heavy industrial markets. The electrical solution segment achieved approximately 40% growth in data center markets in the first quarter. Driven by strength in both balance of system component demand as well as sales of our modular power distribution skids, data center order activity remained robust in the first quarter as build-out activity continues to accelerate across hyperscaler and colocation customers, providing enhanced visibility for us to increase our full-year outlook in data center markets to more than 25%.

Speaker #1: Moving to page 7, electrical solution results were also strong in the quarter, with double-digit growth in net sales and adjusted operating profit. For the first quarter, electrical solutions generated sales of 568 million dollars, which represented growth of 12% versus the prior year.

Speaker #1: So I would say we're going to get our fair share of that growth specifically how maybe compared to a generator asset short-term, it's maybe a little harder for me to comment on that dynamic.

Speaker #1: But I would certainly say we will participate and get our fair share of the build-out.

Speaker #1: Organic growth of 11% was again driven by strength in data center and light industrial markets, as well as solid non-residential growth, partially offset by softer heavy industrial markets.

Speaker #2: Okay. Thanks, Kevin. That's great.

Speaker #3: Thank you. Our next question comes from Joe Odio with Wells Fargo. Please proceed.

Speaker #4: Hi, good morning. Just wanted to touch on grid infrastructure growth expectations throughout the year. Is it reasonable to see something like low double-digit organic growth through the first few quarters of the year?

Speaker #2: Broader light industrial markets remain healthy as solid US manufacturing activity generated demand for electrical components and our strategy to compete collectively in vertical markets continues to drive outgrowth.

Speaker #1: The electrical solution segment achieved approximately 40% growth in data center markets in the first quarter, driven by strength in both balance of system component demands as well as sales of our modular power distribution skids.

Speaker #2: Operationally, HES delivered $93 million of adjusted operating profit in the first quarter. Representing 10% growth in adjusted operating profit versus the prior year, reflecting strong volume growth.

Speaker #1: Data center order activity remained robust in the first quarter as build-out activity continues to accelerate across hyperscaler and colocation customers. Providing enhanced visibility for us to increase our full-year outlook in data center markets to more than 25%.

Speaker #4: I think the comp gets a little bit tougher. As you get into the end of the year, so maybe that's more mid-single, high single-digit.

Speaker #4: And along with that, just any color on electrical distribution, understandably, the transmission and substation sort of driving strength, but just what you're seeing on the distribution side.

Speaker #2: Adjusted operating margins of 16.4% were down 30 basis points versus the prior year, as benefits from volume growth and the associated operating leverage were offset by higher investments in restructuring and growth initiatives.

Speaker #1: Broader light industrial markets remain healthy as solid US manufacturing activity generated demand for electrical components and our strategy to compete collectively in vertical markets continues to drive outgrowth.

Speaker #1: Yeah. Good morning, Joe. I'll take the first part of that question on the utility organic. And you are thinking about it the right way in terms of mid to high single-digit organic growth as the year progresses.

Speaker #2: As you'll see in our press release financials, within the electrical solution segment, we invested $6 million in restructuring initiatives in the first quarter of 2026 versus only $2 million in the prior year, which impacted year-over-year margins by approximately 80 basis points as we execute on footprint optimization projects which we are confident will continue to drive long-term productivity and margin expansion.

Speaker #1: Operationally, HES delivered 93 million dollars of adjusted operating profit in the first quarter, representing 10% growth in adjusted operating profit versus the prior year, reflecting strong volume growth.

Speaker #1: And that we're anticipating is going to be pretty consistent one Q2, Q3, Q4, Q5, so.

Speaker #1: Adjusted operating margins of 16.4% were down 30 basis points versus the prior year, as benefits from volume growth and the associated operating leverage were offset by higher investments in restructuring and growth initiatives.

Speaker #2: Yeah. And maybe on the distribution side of it, we've been talking for this for quite some time now. It's what's driving the need to invest there.

Speaker #2: Price realization remained strong which combined with productivity more than offset cost inflation on a dollar-for-dollar basis in the first quarter. Turning to page 8 to discuss our full-year outlook, we are raising our full-year sales growth outlook to 8 to 11 percent and/or organic sales growth outlook to 6 to 9 percent.

Speaker #2: And a lot of it is driven by just upgrading and resiliency of the grid. We dealt last year and the last couple of years, really, with a destock where we talked about that underlying demand was still solid, but we're dealing with something very specific.

Speaker #1: As you'll see in our press release financials, within the electrical solution segment, we invested 6 million dollars in restructuring initiatives in the first quarter of 2026 versus only 2 million dollars in the prior year, which impacted year-over-year margins by approximately 80 basis points as we execute on footprint optimization projects which we are confident will continue to drive long-term productivity and margin expansion.

Speaker #2: So I think that's proving out now with the destocking behind us that we're actually seeing the underlying demand and the drivers of it are really continued hardening.

Speaker #2: This represents an increase of 1 point to the lower end and 2 points to the higher end of our prior full-year outlook. And is driven by both incremental price realization to offset increased inflation relative to our initial outlook as well as enhanced visibility to continued demand strength in our T&D and data center end markets.

Speaker #1: Price realization remained strong which, combined with activity more than offset dollar basis in the first quarter. Turning to page 8 to discuss our full-year outlook, we are reading our full-year sales growth outlook to 8 to 11% and/or organic sales growth outlook to 6 to 9%.

Speaker #2: I think it is slightly lower than the transmission and substation for the reasons that we talked of getting that power that's so needed in data centers and other areas.

Speaker #2: Operationally, we anticipate double-digit growth in adjusted operating profit at the midpoint of our guidance range for 2026. Driven primarily by strong sales growth and high-margin areas of our portfolio.

Speaker #2: But we're very optimistic. And there, too, if we think about the start to the year, it's not just off to a good start in transmission and substation.

Speaker #1: This represents an increase of 1 point to the lower end and 2 points to the higher end of our prior full-year outlook. And is driven by both incremental price realization to offset increased inflation relative to our initial outlook as well as enhanced visibility to continued demand strength in our TND and data center end markets.

Speaker #2: We remain confident in managing price-cost productivity to neutral or better on a dollar-for-dollar basis over the full year, though the math on higher inflation as well as planned investments to support accelerated growth initiatives results in a slightly more modest outlook for the full-year margin expansion versus our initial outlook.

Speaker #2: But distribution as well.

Speaker #4: And then just on the timing of pricing and the impact on demand, I think that the price announcements in the quarter, were those in place middle of the quarter, in place kind of beginning of the second quarter?

Speaker #1: Operationally, we anticipate double-digit growth in adjusted operating profit at the midpoint of our guidance range for 2026, driven primarily by growth in high-margin areas of our portfolio.

Speaker #4: And really just around any influence on demand to pull forward. It sounds like no incremental pricing required to tariffs. I think over the course of kind of what we're hearing through reporting season right now, there's some debate on what kind of pull-forward dynamics there were.

Speaker #2: Below the line, we anticipate that lower share count of 53.1 million shares on a full-year basis will be fully offset by higher net interest.

Speaker #1: Main confidence in managing price-cost productivity to neutral dollar for dollar basis over the full year. So the math on higher inflation as well as planned investment support for growth initiatives results for the full-year market account of 53.1 million shares on a full-year basis for higher net interest.

Speaker #2: While our assumptions for the other expense and tax rate remain unchanged. Overall, we continue to anticipate at least 90% free cash flow conversion on adjusted net income in 2026.

Speaker #4: But broadly across industrials, but the degree to which you saw any of that in the quarter, it doesn't sound like much sort of carryover impact anticipated throughout the year.

Speaker #2: And we are raising our full-year adjusted earnings per diluted share outlook to $19.30 to $19.85 per share. Now let me turn the call back over to Gerben to give you some more color on our confidence to deliver on this increased full-year outlook as we continue to navigate a dynamic macroeconomic and geopolitical environment.

Speaker #1: Yeah. Price increases went in for us in the beginning of the second quarter. And that typically takes 30 to 60 days to kind of work its way through the backlog and to kind of get to a point of fully realizing that the run rate of that new price.

Speaker #1: Our assumptions for the other expense and tax rate remain unchanged. Overall, we continue to anticipate at least 90% free cash flow conversion for adjusted net in 2026.

Speaker #1: So that all sets in in the course of second quarter. And we did not see any significant impacts or unusual behavior with pull forward on demand.

Speaker #1: Okay. Thanks, Joe. Turning to page 9 then and concluding our prepared remarks while the current operating environment poses macroeconomic and geopolitical uncertainty, as well as dynamic inflationary and supply chain conditions, we are confident in our ability to deliver on an increased organic growth outlook while continuing to manage price and productivity in 2026 and beyond.

Speaker #1: And we are raising our full-year adjusted earnings per diluted share outlook to 19 dollars and 30 cents to 19 dollars and 85 cents per share.

Speaker #1: That order momentum that we've kind of seen continue going back to the fourth quarter, throughout the first quarter and into the second quarter here—nothing unusual.

Speaker #1: Now let me turn the call back over to Gerben to give you some more color on our confidence to deliver on this increased full-year outlook as we continue to navigate a dynamic macroeconomic and geopolitical environment.

Speaker #1: In terms of how that sets up around our price increases that we have implemented. Price increases, so far, have have been very constructive. And the basis for our price increase has been around metals.

Speaker #2: Okay. Thanks, Joe. Turning to page 9 then and concluding our prepared remarks while the current operating environment poses macroeconomic and geopolitical uncertainties, as well as dynamic inflationary and supply chain conditions, we are confident in our ability to deliver on an increased organic growth outlook while continuing to manage price and productivity in 2026 and beyond.

Speaker #1: From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as utility T&D and data center CapEx, where secular growth is being driven by long-term investment cycles.

Speaker #1: And that metals inflation has been very visible and very well accepted in the channel, so.

Speaker #1: Our recent order patterns and key project wins along with customer conversations around long-term investment planning are providing us enhanced visibility to continued strength in these end markets.

Speaker #4: That's helpful. Thank you.

Speaker #3: Thank you. Our next question is from Chris Snyder with Morgan Stanley. Please proceed.

Speaker #2: From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as utility TND and data center CapEx, where secular growth is being driven by long-term investment cycles.

Speaker #1: From a price-cost standpoint, while inflation has increased relative to our initial full-year outlook, we have implemented additional price and productivity actions which we are confident will offset.

Speaker #5: Thank you. I wanted to ask about data center. Obviously, it came through really good 40% in Q1. And you guys did raise the full-year data center guide.

Speaker #5: Now, I think over 25%. Previously, up 15. So I guess my question is, is this new 25% plus? Is that basically all of your available capacity?

Speaker #2: Our recent order patterns and key project wins along with customer conversations around long-term investment planning are providing us enhanced visibility to continued strength in these end markets.

Speaker #1: And we anticipate that recent updates to various tariff frameworks are largely neutral to existing tariff cost structure. Overall, we have demonstrated our ability to manage through an inflationary environment successfully over the last several years.

Speaker #5: Or if demand strength is sustained, is there opportunity to ship more this year? Thank you.

Speaker #2: From a price-cost standpoint, while inflation has increased relative to our initial full-year outlook, we have implemented additional price and productivity actions which we are confident will offset.

Speaker #1: And we are confident in our ability to continue to do so in 2026 and beyond. While we are closely monitoring macroeconomic and geopolitical conditions, our short-cycle demand is holding up solidly.

Speaker #1: Yeah, we spend a lot of time on Good Morning, Chris, on that topic with all the activity and the significant demand that's out there in data center.

Speaker #2: And we anticipate that recent updates to various tariff frameworks are largely neutral to existing tariff cost structure. Overall, we have demonstrated our ability to manage through an inflationary environment successfully over the last several years.

Speaker #1: And price and productivity actions are being realized. Hubble's portfolio is well-positioned with more than 90% sales exposure to the US and over two-thirds of our portfolio exposed to secular growth markets in data center and utility.

Speaker #1: You'd recall that we've got roughly half of our data center exposures in our long cycle power distribution modular skid business, for which we've got good visibility to demand, orders are booked out through the year, and there's little incremental capacity.

Speaker #2: And we are confident in our ability to continue to do so in 2026 and beyond. While we are closely monitoring macroeconomic and geopolitical conditions, our short-cycle demand is holding up solidly.

Speaker #1: And that feels pretty well situated. And that was well situated in our original guide. So no real change on how we're thinking about the long cycle piece.

Speaker #1: Which we anticipate will continue to perform well through a broad range of economic environments. In short, we are confident that Hubble's leading position in attractive end markets as well as continued execution on our long-term strategy will enable us to deliver attractive financial performance over both the near-term and long-term.

Speaker #2: And price and productivity actions are being realized. Hubble's portfolio is well positioned with more than 90% sales exposure to the US and over two-thirds of our portfolio exposed to secular growth markets in data center and utility.

Speaker #1: On the short-cycle book and bill side, we do continue to see strong order demands coming through. We continue to add capacity in that space.

Speaker #1: Every quarter, we're adding more and more capacity. And we continue to add inventory to every extent possible so that we've got stock on the shelf for that short cycle book and bill side of products that are needed for data center.

Speaker #1: With that, let's turn the call over to Q&A. Operator.

Speaker #2: Which we anticipate will continue to perform well through a broad range of economic environments. In short, we are confident that Hubble's leading position in attractive end markets as well as continued execution on our long-term strategy will enable us to deliver attractive financial performance over both the near-term and long-term.

Speaker #2: Thank you, sir. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

Speaker #1: So we think we've got a little more capacity. And again, we continue to invest in that productive capacity coming online. And we'll continue to do that as the year unfolds.

Speaker #2: To remove yourself, press star 11 again. We ask that you please limit yourself to one question and one follow-up. One moment for our first question.

Speaker #1: So as to increase our capacity and serve that growing demand.

Speaker #2: With that, let's turn the call over to Q&A.

Speaker #5: Thank you. I appreciate that. And then I wanted to follow up on price cost. It seems like a year ago, you guys led on price cost.

Speaker #2: It comes from Jeffrey Sprague with vertical research. Please proceed.

Speaker #3: Hey, thank you. Good morning, everyone. I was wondering if you could provide a little more color on the high-voltage transmission outlook. Just the level of project rollout there how you see that pacing in gave a little bit of color there, obviously.

Speaker #5: And then over time, into Q1, the cost inflation caught up. And that was kind of maybe netting you closer to neutral. I mean, I guess let me know if that's wrong.

Speaker #1: Thanks. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To remove yourself, press star 11 again.

Speaker #5: But I guess the question is, is that should we expect the same thing into this next round of price increases? You guys will lead a little bit off the bat because you're now FIFO.

Speaker #3: And is that 1.5 billion CAM all incremental relative to your prior view on the market? Maybe we could start there.

Speaker #5: And then it catches up a little bit. And maybe two, three quarters out. Thank you.

Speaker #1: We ask that you please and follow up. One moment for our first question. It comes from Jeffrey Sprock with vertical research. Please proceed.

Speaker #1: Yeah. Maybe I'll start at overall, Jeff, with transmission and substation. I'd probably categorize in that same area is that's continuing to do really well for us.

Speaker #1: You're definitely right in your first comment in terms of how last year played out. We were ahead of price versus cost dating back to liberation day tariffs and that benefit of being ahead kind of situated in the second quarter of last year.

Speaker #3: Hey, thank you. Good morning, everyone. I was wondering if you could provide a little more color on the high-voltage transmission outlook. Just the level of project rollout there how you see that pacing in.

Speaker #1: We're communicated high single-digit growth there and certainly I would say we're off to a very good start against that background. Particularly the comments around 765, it's the ability for utilities to bring more bulk power into areas where there need is a very efficient way to do that.

Speaker #1: And we continue to run positive on PCP in each of the quarters to Q3, Q4, Q last year. We were positive PCP on a dollar basis to start this year.

Speaker #3: You gave a little bit of color there, obviously. And is that 1.5 billion CAM all incremental relative to your prior view on the market?

Speaker #1: And we're anticipating to manage that equation on a dollar neutral or better basis. That does have an impact on margins as you know that math.

Speaker #3: Maybe we could.

Speaker #2: Overall, Jeff, with transmission and substation, I'd probably categorize in that same area is that well for us. We're communicated high single-digit growth there and certainly I would say we're off to a very good start against that background.

Speaker #1: We have some lines in the US that were built I think over 20 years ago that were 765. They're just wasn't the need for it.

Speaker #1: Well, so do we think we can continue to hold the line on margin neutral on price cost? No, I think that was a little beneficial to us last year, but we're very focused on managing to positive or better and driving that double-digit operating profit growth for this year.

Speaker #1: And I think that's becoming very clear right now that the ability to drive more bulk power is actually a very efficient way to do so.

Speaker #1: We're very well positioned we have products today that can serve it already. We've won a couple of orders already. In this, we're continuing to develop products.

Speaker #2: Particularly the comments around 765—it's the ability for utilities to bring more bulk power into areas where there is need. It's a very efficient way to do that.

Speaker #4: Thank you.

Speaker #3: Thank you. Our next question is from the line of Chad Dillard with Bernstein. Please proceed.

Speaker #1: And these are just taking it to the next higher voltages we're able to do that with our capability certainly with our labs. So I'd say very well positioned.

Speaker #2: We have some lines in the US that were built I think over 20 years ago that were 765. They're just wasn't the need for it.

Speaker #6: Hey, good morning, guys. My question for you is on a Clara. Can you talk about the sales and the quarter and how that's trended sequentially?

Speaker #2: And I think that's becoming very clear right now that the ability to drive more bulk power is actually a very efficient way to do so.

Speaker #1: And we look at this truthfully as incremental, Jeff. We see this. As upside to what's already needed. Anytime you have a 765, you need off-ramps for that, right, where you take the power down to think highways and offshoots of that off-ramps with substations and then you step the voltages down.

Speaker #6: And then just more broadly, how that business is positioned for AMI 2.0, and how should we think about when that cycle kicks off?

Speaker #2: We're very well positioned we have products today that can serve it already. We've won a couple of orders already. In this, we're continuing to develop products and these are just taking it to the next higher voltages we're able to do that with our capability certainly with our labs.

Speaker #5: Yeah. And maybe I'll start. As you know, Clara is part of the grid automation business, and that business continues to inflect up. We're down.

Speaker #1: So we think it's an upside for us. And we think it can drive a point of growth above what we're currently projecting with transmission already.

Speaker #2: So I'd say very well positioned. And we look at this truthfully as incremental, Jeff. We see this. As upside to what's already needed. Anytime you have a 765, you need off-ramps for that, right, where you take the power down to think highways and offshoots of that off-ramps with substations and then you step the voltages down.

Speaker #5: The client started to shrink. And while we still are a little bit down year over year, in the first quarter, as we communicated, we expect that to start turning to growth.

Speaker #3: And it sounds like you don't see this squeezing out spending elsewhere. There's obviously been a little bit of concern that all the generation spending may eat into T&D spending.

Speaker #5: But if you've then peeled that apart and specifically to your question rest, clearly a Clara had been declining higher while the other part of the business was growing.

Speaker #3: You're calling the kind of the core distribution side of the business also growing at a stable rate?

Speaker #1: Yeah. You need it both, Jeff. That's why we don't see it growing out. Certainly, we're not seeing that in the projects that are ahead of us that the orders that we're winning.

Speaker #5: And I think what you have seen is that the Clara decline is just starting to get smaller and smaller. And we still, in the first quarter, saw a decline in that business.

Speaker #2: So we think it's an upside for us, and we think it can drive a point of growth above what we're currently projecting, with transmission already.

Speaker #1: I mean, it's a logical question. Certainly to ask is how far can budget flex up? But you see too that utilities are continually increasing their CapEx budgets.

Speaker #3: And it sounds like you don't see this squeezing out spending elsewhere. There's obviously been a little bit of concern that all the generation spending may eat into T&D spending.

Speaker #5: And as you look ahead, that is an area that's been more challenged. As utility and it maybe goes back a little bit to just very first question of how our utility managing budgets and our view and certainly indications with conversation is that they are deselecting this a little bit over the other areas of investments while we've seen lesser projects come through.

Speaker #1: And I think that's a reflection of acknowledging and realizing that you really need to spend it on all these areas to get the outcome you need.

Speaker #3: You're calling the kind of the core distribution side of the business also growing at a stable rate?

Speaker #3: Okay. Great. Thank you. I'll leave it there.

Speaker #1: Thank you.

Speaker #2: Our next question comes from Julian Mitchell with Barclays. Please proceed.

Speaker #4: Oh, yes. Hi. Maybe just a question, please, around how we should think about operating margins through the balance of the year and the operating leverage kind of cadence if that's changed at all versus prior thinking, please.

Speaker #5: But the challenge for utility is going to be, this equipment is going to fail at some point, right? The lifespan of this is not in the range of what our components, or typical components, are.

Speaker #5: So what we're seeing is more projects discussions right now. We're quoting more projects. We recently won a pretty nice piece of business that's multi-year.

Speaker #1: Yeah. Good morning, Julian. Yeah. As far as the operating margin goes for the year, we're really looking at the full year with a 20-basis point margin expansion.

Speaker #5: So I think from where we sit today, where this business declined, we should expect going forward to start seeing this business realizing modest growth.

Speaker #1: And that's going to lean a little heavier towards utility with more expansion and about flattish on electrical. As the year progresses, I think we see the utility side of margin expansion being pretty consistent.

Speaker #5: But we feel it's been stabilized. And maybe that's another really important that we've seen the bottom. We're now starting to come up. We're not super expecting great growth rates.

Speaker #1: And certainly on the electrical side, what we see a little bit of headwind just on the year-over-year comp from last year's second quarter in electrical and the back half probably flattish.

Speaker #1: So that's kind of how we're thinking about margin for this year. Keep in mind, there's a lot of inflation that's come on. And as we cover that inflation with price and productivity, that is certainly margin dilutive.

Speaker #5: But the dynamics are such that this business should grow from here.

Speaker #2: Great. That's helpful. And then moving over to grid infrastructure, I know in the past you guys have talked about your order rates within distribution.

Speaker #1: So in our 20-basis point of margin expansion at the midpoint of the guide, there's about a point of dilution just from that price-cost math.

Speaker #2: I was hoping you could give an update on how those trended for the quarter, and then can you maybe break down how much of the demand that you're seeing is restocking the channel versus just pure sell-through into the end market?

Speaker #4: That's helpful. Thank you. And then maybe just my follow-up on the thoughts on sort of first half and sort of second quarter. Maybe I missed it, but did you clarify the sort of share of earnings in the first half?

Speaker #5: Yeah, maybe start with the second one: that our view is that the demand is what's going up on infrastructure and not going to stock.

Speaker #4: Is it still mid-high 40s? And so we're looking at kind of a 520-ish EPS for Q2. At any point is on second quarter or halves phasing, please.

Speaker #5: And we talked off to a good start on revenue. And that's, of course, driven by order rates. And that's on both the electrical and utility side.

Speaker #4: Thank you.

Speaker #1: Yeah. So second quarter. So we would think about normal seasonal setup for this year. And let's think about that on the sequential. So typically, with our strong orders coming through first quarter, what we would anticipate a second quarter step up like we would normally see high single digits organic growth.

Speaker #5: But particularly to TNB, also up nicely in the quarter. And for us, I mean, we generally don't talk about book and bill a lot because it's about order rates because we're more short-cycle business.

Speaker #1: And add to that, we're looking at price-cost productivity at about neutral on the dollars. And so that's really the constructive way to think about Q2.

Speaker #5: Our orders were up over one. That's not atypical in the first quarter where people are starting to get their orders in to get ready for construction season.

Speaker #5: And that's typically a little bit over one. We were up stronger over that. We're closer to 1.2 to start off the quarter. I'd say that's both a mix of short cycle or book and bill that was solid.

Speaker #4: That's great. Thank you.

Speaker #2: Thank you. Our next question is from Tommy Moll with Stephens. Please proceed.

Speaker #5: Good morning and thanks for taking my questions.

Speaker #1: Hi, Tommy.

Speaker #3: Hey, Tommy.

Speaker #5: Sounds like versus last quarter we're expecting more pricing for the year, perhaps also better volumes than originally expected. So I was hoping you could unpack that 6 to 9 organic for us.

Speaker #5: As well as projects, we talked a little bit earlier about some of these projects. So we feel really good about the start to the year.

Speaker #5: And it's what's driven us to raise our organic guidance. I've realized there's a piece of that that's priced, but there's a piece of that's volume as well.

Speaker #5: How much of that is price versus volume, and how do those compare to what you provided last quarter? Thank you.

Speaker #5: So we feel really good about how we started the year and we don't see as a matter of fact, we see a continuation certainly of this.

Speaker #1: So coming into the year, we were anticipating about a two points of price. And the majority of that was coming from wraparound, from actions that we had implemented last year.

Speaker #5: So nothing unusual in it.

Speaker #1: And as we saw some of that inflation, mostly on the metals side, copper, aluminum, steel in the first quarter, we went out with price actions in the second quarter.

Speaker #2: Great. Thank you.

Speaker #3: Thank you. Our next question comes from the line of Scott Graham with Seaport Research Partners. Please proceed.

Speaker #5: Yeah. Hi. Good morning. Thank you for taking my question. I was just wondering, you've got a global manufacturing footprint, global company. With inflation higher on some of the geopolitical uncertainties, how is your supply chain behaving?

Speaker #1: And that added about a point to our full year price outlook. So our full year 6 to 9 percent organic has about three points of price.

Speaker #1: But with the rest being volume. If you think, Tommy, about the way that price rolled on last year, the year-over-years are going to start to wrap here to Q3, Q2.

Speaker #5: Are you getting what you need? Are you getting any pushback in any corners? I think I heard Joe say no, not yet, on pricing. But we are starting to hear 'enough is enough'—some corners are pushing back on pricing in different markets.

Speaker #1: So we would anticipate that our contribution from price fades as the year progresses. And our contribution from volume growth kind of increases as we step through the year.

Speaker #1: Sequentially.

Speaker #5: Thank you. That's very helpful. I wanted to follow up on DMC. What update can you provide for us there in particular? Are there any elements that you're seeing unfold better versus worse than the original plan?

Speaker #5: How is your supply chain behaving overall? And then I'm hoping to the follow-up would be, how is your acquisition pipeline? Is there anything it looks like you're pretty balance sheet is very lean right now and is just wondering what the outlook was for 2026.

Speaker #5: Thank you.

Speaker #1: Yeah. I would say, Tommy, DMC, as we stated, I think in our last calls, off to a really good start. I mean, this squarely in the area of where the highest investment is going on in the utility, which is transmission and particularly this is a substation application.

Speaker #5: Anything you can say. Thanks.

Speaker #4: Yeah. Good morning, Scott. Maybe I'll take the first one and I'll hand it to Gerben for the second. So on the supply chain, upfront, so we're not seeing any significant impacts or constraints on the supply chain side.

Speaker #1: So I would say so far it's meeting and even exceeding a little bit our expectations. It's also an area where we're really focused in adding capacity.

Speaker #4: I'd say what would be more noteworthy is over the course of the last couple of months with some of the disruption over in the Middle East.

Speaker #4: We did have a little bit of aluminum that we were purchasing out of that region. Would be a noteworthy area. We do have other qualified sources of supply around the globe.

Speaker #1: I think our ability to get more out of that factory this year and next year is perhaps more function of our ability to get capacity in place because orders are really supporting.

Speaker #4: We were able to move that to other suppliers and we weren't at the end of the day impacted by that. But it was something we had to address.

Speaker #1: So we're very, very pleased with it. And as we are with the systems control, it was another acquisition we did last year, also in this space.

Speaker #4: We're not seeing constraints in other areas yet, chips or metals or component parts of any substance. So I would say the supply chain, as we see it right now, is holding up well and supporting what we need to do to service our customer demand.

Speaker #1: And with very similar dynamics of good demand and need to add capacity. We're very pleased with them.

Speaker #5: Thank you, Gerben. I'll turn it back.

Speaker #5: And let me take the second one on M&A. You're right to point out that our balance sheet certainly supports doing acquisitions at a larger scale than perhaps we were able to afford in the past.

Speaker #2: Thank you. Our next question comes from Nigel Coe with Wolf. Please proceed.

Speaker #6: Thanks. Good morning. I just want to go back to the margins. I guess good morning. How are the section 232 tariffs sort of changing the landscape and maybe talk about both businesses?

Speaker #5: And if we look at the and maybe even before we look at the pipeline, we are focused clearly around the core areas of our business.

Speaker #6: And I believe that you were utilizing US steel down in Mexico just any more color there would be helpful. And any thoughts on how to think about margins by segment as well?

Speaker #5: So, if you think anything in TNB, if you think about things around the data center, if you think lines around our light industrial markets, those are all areas that we find very attractive.

Speaker #5: And there's still, based on our pipeline of deals that we're looking at, plenty of opportunity to deploy our capital there. Of course, timing isn't always very predictable.

Speaker #1: Sure. So starting with the tariff, I'd probably start just answering it maybe more broadly with the events of tariff changes in the first quarter, of which, yes, 232 was a piece of what changed.

Speaker #1: We also saw the repeal of IEPA. We saw 122 come online and we saw some of those changes in 232. The sum of all of that is about neutral to us for the year.

Speaker #5: But you've also seen and Joe highlighted what we did in share buyback in the first quarter, that in periods, where perhaps there is a little bit of a void in acquisition, we think utilizing our balance sheet to do buybacks is another attractive area to deploy our capital.

Speaker #1: So that impact was not significant. We were paying 232 going back to liberation day. So 232 with that with product lines that would have had US melted steel the changes there were entirely offset by some other impacts on some other product lines.

Speaker #5: Of course, our preference, highest preference goes to CapEx. And we're certainly have increased that. And based on some of my comments of areas where we're investing, you should expect to continue to see that elevated.

Speaker #1: So overall, not significant. On the your question about margins, quarter to quarter, we have that 20 basis points of expansion embedded in the guide at the midpoint for the full year.

Speaker #5: The second one being M&A. And I'd say there's a good pipeline there, both of what we'd call maybe the bolt-ons, even though Dave's getting larger.

Speaker #5: As well as larger deals. And then we have buyback as an option. So we see within those areas that we could fully deploy our balance sheet.

Speaker #1: The margin expansion is going to lean more heavy towards utility. And that utility is looking margin expansion pretty radically across each of the four quarters.

Speaker #2: Thanks a lot.

Speaker #3: Thank you. And our last question comes from the line of Neil Burke with UBS. Please proceed.

Speaker #1: Electrical is a little bit a headwind on the margin in the first half of the year. And that normalizes in the second half of the year to get to about flattish on the full-year margin for electrical.

Speaker #6: Thank you. I wanted to come back to the high-voltage opportunity through 2035. Apologies if I missed this, but is the $1.5 billion opportunity relative to Hubbell for the $500 million transmission business today?

Speaker #1: So that's how we see that.

Speaker #6: Yeah. That's great kind of. Thank you. And then just a quick follow-on maybe on the back of Jeff's question on transmission. Obviously, very healthy growth, very sort of vibrant end market.

Speaker #6: I just want to get a sense of how to think about the growth opportunity.

Speaker #4: Yeah. So if you think about that math a little bit, I'll help you. It represents about 7,000 miles of high-voltage transmission, how we get to the billion and a half with our content.

Speaker #6: Some of the big players in that space, GVNOB of the world, are growing strong double digits in transmission. Group transmission. So I'm just wondering, do you see scope for that to for your business to get up to those kinds of levels?

Speaker #4: And that's over 10 years. And who knows if that's longer or shorter, but if you use that as a basis, and then with we're not the only participant in that.

Speaker #6: And is the scope of your content increasing with time?

Speaker #1: Yeah. I would say maybe on the first one, on the scope, so we continue to develop products. We continue to do acquisitions. And both the DMC and systems control are two examples where scope is increasing if you have additional product lines.

Joe: Where demand strength was broad-based across T&D end markets. Utilities are investing at heavy rates and demand for Hubbell solutions to serve the expanding critical infrastructure needs of our customers is driving continued momentum in orders and providing visibility to further strength over the balance of 2026. As we will highlight in a few minutes, we now anticipate our Utility Solutions segment to deliver high single-digit organic growth on a full year basis. Outside of our core T&D markets, telecom and gas distribution grew attractively in Q1, while meters and AMI markets remained weak as anticipated. While Grid Automation organic sales declined 7% year on year in Q1, sales increased slightly on a sequential basis.

Joe Capozzoli: Where demand strength was broad-based across T&D end markets. Utilities are investing at heavy rates and demand for Hubbell solutions to serve the expanding critical infrastructure needs of our customers is driving continued momentum in orders and providing visibility to further strength over the balance of 2026. As we will highlight in a few minutes, we now anticipate our Utility Solutions segment to deliver high single-digit organic growth on a full year basis. Outside of our core T&D markets, telecom and gas distribution grew attractively in Q1, while meters and AMI markets remained weak as anticipated. While Grid Automation organic sales declined 7% year-on-year in Q1, sales increased slightly on a sequential basis.

Speaker #4: So we certainly have a very good position in that market with our customer. But if you add all those things up, we believe it can drive a point of growth above the high single digits that we provided for transmission substations.

Speaker #1: But also as you look at where the voltages go, so when we talked about 765, our content on that per mile would also go up slightly from the lower voltages.

Speaker #4: In the absence of it.

Speaker #1: So I think in net, both on what we're adding to the portfolio and kind of where the investments going in, it does increase our content a little bit.

Speaker #2: That's helpful. And yeah, the RTO, ISO recommendation for 7,000 miles, I mean, I think there are a few hundred thousand miles of high-voltage transmission in the US overall.

Speaker #2: So I mean, could that be more market opportunity if there's increasing content of 765 kilovolt in the US, like on top of that 1.5 billion?

Speaker #1: So certainly, what we're seeing is double-digit growth. Our scope is broad. And we serve the majority of, right, if you think about a transmission line, 85 to 90 percent of material that goes up on that, we serve.

Speaker #2: Or is it sort of too early to say?

Joe: We remain confident that meter and AMI markets have stabilized. We anticipate easing comparisons and continued strength in protection and controls products will enable Grid Automation organic sales to return to slight year-over-year growth in Q2. Operationally, HUS delivered $207 million of adjusted operating profit in Q1, representing 21% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 190 basis points year over year. Operating profit growth was primarily driven by strong volumes in high-margin Grid Infrastructure products, favorable price, cost productivity, and acquisitions, which were partially offset by Grid Automation volumes decline. Moving to page 7. Electrical Solutions results were also strong in the quarter, with double-digit growth in net sales and adjusted operating profit.

Joe Capozzoli: We remain confident that meter and AMI markets have stabilized. We anticipate easing comparisons and continued strength in protection and controls products will enable Grid Automation organic sales to return to slight year-over-year growth in Q2. Operationally, HUS delivered $207 million of adjusted operating profit in Q1, representing 21% growth in adjusted operating profit versus the prior year, with adjusted operating margins expanding 190 basis points year-over-year. Operating profit growth was primarily driven by strong volumes in high-margin Grid Infrastructure products, favorable price, cost productivity, and acquisitions, which were partially offset by Grid Automation volumes decline. Moving to page 7. Electrical Solutions results were also strong in the quarter, with double-digit growth in net sales and adjusted operating profit.

Speaker #4: Yeah. I think the 1.5 is related to high-voltage transmission overall, Neil. And so obviously, there's a baseline market of transmission that's also growing strongly, as we've said.

Speaker #1: So I would say we're going to get our fair share of that growth specifically how maybe compared to a generator asset short term, it's maybe a little harder for me to comment on that dynamic.

Speaker #4: And so I'm not sure what the question was driving at, but.

Speaker #2: No, no. No, that's clear. That's clear. Thank you.

Speaker #3: Thank you, ladies and gentlemen. This concludes our Q&A session. I will turn the call back to Dan Innamorato for closing remarks.

Speaker #1: But I would certainly say we will participate and get our fair share of the build-out.

Speaker #6: Okay. Thanks, Kevin. That's great.

Speaker #4: Great. Thanks, operator. Thank you, everyone, for joining us. We'll be around all day for follow-ups. Thank you.

Speaker #2: Thank you. Our next question comes from Joe O'Dea with Wells Fargo. Please proceed.

Speaker #5: Hi. Good morning. Just wanted to touch on grid infrastructure growth expectations throughout the year. Is it reasonable to see something like low double-digit organic through the first few quarters of the year?

Speaker #5: I think the comp gets a little bit tougher. As you get into the end of the year, so maybe that's more mid-single, high-single digit.

Joe: For Q1, Electrical Solutions generated sales of $568 million, which represented growth of 12% versus the prior year. Organic growth of 11% was again driven by strength in data center and light industrial markets, as well as solid non-residential growth, partially offset by softer heavy industrial markets. The Electrical Solutions segment achieved approximately 40% growth in data center markets in Q1, driven by strength in both balance of system component demand as well as sales of our modular power distribution skids. Data center order activity remained robust in Q1 as build-out activity continues to accelerate across hyperscaler and colocation customers, providing enhanced visibility for us to increase our full-year outlook in data center markets to more than 25%.

Joe Capozzoli: For Q1, Electrical Solutions generated sales of $568 million, which represented growth of 12% versus the prior year. Organic growth of 11% was again driven by strength in data center and light industrial markets, as well as solid non-residential growth, partially offset by softer heavy industrial markets. The Electrical Solutions segment achieved approximately 40% growth in data center markets in Q1, driven by strength in both balance of system component demand as well as sales of our modular power distribution skids. Data center order activity remained robust in Q1 as build-out activity continues to accelerate across hyperscaler and colocation customers, providing enhanced visibility for us to increase our full-year outlook in data center markets to more than 25%.

Speaker #5: And along with that, just any color on electrical distribution, understandably, the transmission and substation sort of driving strength, but just what you're seeing on the distribution side.

Speaker #1: Yeah. Good morning, Joe. I'll take the first part of that question on the utility organic. And you are thinking about it the right way in terms of mid to high single-digit.

Speaker #1: Organic growth as the year progresses. And that we're anticipating is going to be pretty consistent one Q2, Q3, Q4, Q. So yeah.

Speaker #6: And maybe on the distribution side of it, we've been talking for this for quite some time now. It's what's driving the need to invest there.

Speaker #6: And a lot of it is driven by just upgrading and resiliency of the grid. We dealt last year and the last couple of years, really, with that D-stock where we talked about that underlying demand was still solid, but we're dealing with something very specific.

Joe: Broader light industrial markets remain healthy as solid US manufacturing activity generated demand for electrical components, and our strategy to compete collectively in vertical markets continues to drive out growth. Operationally, ATS delivered $93 million of adjusted operating profit in Q1, representing 10% growth in adjusted operating profit versus the prior year, reflecting strong volume growth. Adjusted operating margins of 16.4% were down 30 basis points versus the prior year, as benefits from volume growth and the associated operating leverage were offset by higher investments in restructuring and growth initiatives.

Joe Capozzoli: Broader light industrial markets remain healthy as solid US manufacturing activity generated demand for electrical components, and our strategy to compete collectively in vertical markets continues to drive out growth. Operationally, ATS delivered $93 million of adjusted operating profit in Q1, representing 10% growth in adjusted operating profit versus the prior year, reflecting strong volume growth. Adjusted operating margins of 16.4% were down 30 basis points versus the prior year, as benefits from volume growth and the associated operating leverage were offset by higher investments in restructuring and growth initiatives.

Speaker #6: So I think that's proving out now with that D-stocking behind us that we're actually seeing the underlying demand and the drivers of it are really continued hardening.

Speaker #6: I think it is slightly lower than the transmission and substation for the reasons that we talked of getting that power that's so needed in data centers and other areas.

Joe: As you'll see in our press release financials, within the Electrical Solutions segment, we invested $6 million in restructuring initiatives in Q1 2026 versus only $2 million in the prior year, which impacted year-over-year margins by approximately 80 basis points as we execute on footprint optimization projects, which we are confident will continue to drive long-term productivity and margin expansion. Price realization remained strong, which combined with productivity more than offset cost inflation on a dollar-for-dollar basis in Q1. Turning to page eight to discuss our full year outlook. We are raising our full-year sales growth outlook to 8% to 11% and our organic sales growth outlook to 6% to 9%.

Joe Capozzoli: As you'll see in our press release financials, within the Electrical Solutions segment, we invested $6 million in restructuring initiatives in Q1 2026 versus only $2 million in the prior year, which impacted year-over-year margins by approximately 80 basis points as we execute on footprint optimization projects, which we are confident will continue to drive long-term productivity and margin expansion. Price realization remained strong, which combined with productivity more than offset cost inflation on a dollar-for-dollar basis in Q1. Turning to page eight to discuss our full year outlook. We are raising our full-year sales growth outlook to 8% to 11% and our organic sales growth outlook to 6% to 9%.

Speaker #6: But we're very optimistic. And there, too, if we think about the start to the year, it's not just off to a good start in transmission and substation.

Speaker #6: But distribution as well.

Speaker #5: And then just on the timing of pricing and the impact on demand, I think that the price announcements in the quarter, were those in place middle of the quarter, in place kind of beginning of the second quarter?

Speaker #5: And really just around any influence on demand pull forward. It sounds like no incremental pricing required to tariffs. I think over the course of kind of what we're hearing through reporting season right now, there's some debate on what kind of pull forward dynamics there were.

Speaker #5: But broadly across industrials, but the degree to which you saw any of that in the quarter, it doesn't sound like much sort of carryover impact anticipated throughout the year.

Joe: This represents an increase of 1 point to the lower end and 2 points to the higher end of our prior full-year outlook and is driven by both incremental price realization to offset increased inflation relative to our initial outlook, as well as enhanced visibility to continued demand strength in our T&D and data center end markets. Operationally, we anticipate double-digit growth in adjusted operating profit at the midpoint of our guidance range for 2026, driven primarily by strong sales growth in high-margin areas of our portfolio. We remain confident in managing price cost productivity to neutral or better on a dollar-for-dollar basis over the full year. The math on higher inflation as well as planned investments to support accelerated growth initiatives results in a slightly more modest outlook for the full-year margin expansion versus our initial outlook.

Joe Capozzoli: This represents an increase of 1 point to the lower end and 2 points to the higher end of our prior full-year outlook and is driven by both incremental price realization to offset increased inflation relative to our initial outlook, as well as enhanced visibility to continued demand strength in our T&D and data center end markets. Operationally, we anticipate double-digit growth in adjusted operating profit at the midpoint of our guidance range for 2026, driven primarily by strong sales growth in high-margin areas of our portfolio. We remain confident in managing price cost productivity to neutral or better on a dollar-for-dollar basis over the full year. The math on higher inflation as well as planned investments to support accelerated growth initiatives results in a slightly more modest outlook for the full-year margin expansion versus our initial outlook.

Speaker #1: Yeah. Price increases went in for us in the beginning of the second quarter. And that typically takes 30 to 60 days to kind of work its way through the backlog and to kind of get to a point of fully realizing that the run rate of that new price.

Speaker #1: So that all sets in in the course of second quarter. And we did not see any significant impacts or unusual behavior with pull forward on demand.

Speaker #1: That order momentum that we've kind of seen continue going back to the fourth quarter throughout the first quarter and into the second quarter here, nothing unusual.

Speaker #1: In terms of how that sets up around our price increases that we have implemented. Price increases, so far, have been sticking. Conversations with customers have been very constructive.

Speaker #1: And the basis for our price increase has been around metals. And that metals inflation has been very visible and very well accepted in the channel, so.

Joe: Below the line, we anticipate that lower share count of 53.1 million shares on a full-year basis will be fully offset by higher net interest, while our assumptions for the other expense and tax rate remain unchanged. Overall, we continue to anticipate at least 90% free cash flow conversion on adjusted net income in 2026, and we are raising our full-year adjusted earnings per diluted share outlook to $19.30 to $19.85 per share. Now let me turn the call back over to Gerben to give you some more color on our confidence to deliver on this increased full-year outlook as we continue to navigate a dynamic macroeconomic and geopolitical environment.

Joe Capozzoli: Below the line, we anticipate that lower share count of 53.1 million shares on a full-year basis will be fully offset by higher net interest, while our assumptions for the other expense and tax rate remain unchanged. Overall, we continue to anticipate at least 90% free cash flow conversion on adjusted net income in 2026, and we are raising our full-year adjusted earnings per diluted share outlook to $19.30 to $19.85 per share. Now let me turn the call back over to Gerben to give you some more color on our confidence to deliver on this increased full-year outlook as we continue to navigate a dynamic macroeconomic and geopolitical environment.

Speaker #5: That's helpful. Thank you.

Speaker #2: Thank you. Our next question is from Chris Snyder with Morgan Stanley. Please proceed.

Speaker #7: Thank you. I wanted to ask about data center. Obviously, it came through really good 40% in Q1. And you guys did raise the full-year data center guide.

Speaker #7: Now, I think over 25%. Previously, up 15. So I guess my question is, is this new 25% plus is that basically all of your available capacity?

Speaker #7: Or if demand strength is sustained, is there opportunity to ship more this year? Thank you.

Gerben: Okay. Thanks, Joe. Turning to page nine, and concluding our prepared remarks. While the current operating environment poses macroeconomic and geopolitical uncertainty, as well as dynamic inflationary and supply chain conditions, we are confident in our ability to deliver on an increased organic growth outlook while continuing to manage price and productivity in 2026 and beyond. From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as Utility T&D and data center CapEx, where secular growth is being driven by long-term investment cycles. Our recent ordering patterns and key project wins, along with customer conversations around long-term investment planning, are providing us enhanced visibility to continued strength in these end markets.

Gerben Bakker: Okay. Thanks, Joe. Turning to page nine, and concluding our prepared remarks. While the current operating environment poses macroeconomic and geopolitical uncertainty, as well as dynamic inflationary and supply chain conditions, we are confident in our ability to deliver on an increased organic growth outlook while continuing to manage price and productivity in 2026 and beyond. From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as Utility T&D and data center CapEx, where secular growth is being driven by long-term investment cycles. Our recent ordering patterns and key project wins, along with customer conversations around long-term investment planning, are providing us enhanced visibility to continued strength in these end markets.

Speaker #1: Yeah. We spend a lot of time on good morning, Chris, on that topic with all the activity and the significant demand that's out there in data center.

Speaker #1: You'd recall that we've got roughly half of our data center exposures in our long cycle power distribution modular skid business, for which we've got good visibility to demand, orders are booked out through the year, and there's little incremental capacity.

Speaker #1: And that feels pretty well situated. And that was well situated in our original guide. So no real change on how we're thinking about the long cycle piece.

Speaker #1: On the short cycle book and bill side, we do continue to see strong order demands coming through. We continue to add capacity in that space.

Speaker #1: Every quarter, we're adding more and more capacity. And we continue to add inventory to every extent possible so that we've got stock on the shelf for that short cycle book and bill side of products that are needed for data center.

Gerben: From a price cost standpoint, while inflation has increased relative to our initial full-year outlook, we have implemented additional price and productivity actions which we are confident will offset, and we anticipate that recent updates to various tariff frameworks are largely neutral to existing tariff cost structure. Overall, we have demonstrated our ability to manage through an inflationary environment successfully over the last several years, and we are confident in our ability to continue to do so in 2026 and beyond. While we are closely monitoring macroeconomic and geopolitical conditions, our short cycle demand is holding up solidly, and price and productivity actions are being realized.

Gerben Bakker: From a price cost standpoint, while inflation has increased relative to our initial full-year outlook, we have implemented additional price and productivity actions which we are confident will offset, and we anticipate that recent updates to various tariff frameworks are largely neutral to existing tariff cost structure. Overall, we have demonstrated our ability to manage through an inflationary environment successfully over the last several years, and we are confident in our ability to continue to do so in 2026 and beyond. While we are closely monitoring macroeconomic and geopolitical conditions, our short cycle demand is holding up solidly, and price and productivity actions are being realized.

Speaker #1: So we think we've got a little more capacity. And again, we continue to invest in that productive capacity coming online. And we'll continue to do that as the year unfolds.

Speaker #1: So as to increase our capacity and serve that growing demand.

Speaker #7: Thank you. I appreciate that. And then I wanted to follow up on price cost. It seems like a year ago, you guys led on price cost.

Speaker #7: And then over time, into Q1, the cost inflation caught up. And that was kind of maybe netting you closer to neutral. I mean, I guess let me know if that's wrong.

Speaker #7: But I guess the question is, is that should we expect the same thing into this next round of price increases? You guys will lead a little bit off the bat because you're now FIFO.

Gerben: Hubbell's portfolio is well-positioned with more than 90% sales exposure to the US and over two-thirds of our portfolio exposed to secular growth markets in data center and utility, which we anticipate will continue to perform well through a broad range of economic environments. In short, we are confident that Hubbell's leading position in attractive end markets as well as continued execution on our long-term strategy will enable us to deliver attractive financial performance over both the near term and long term. With that, let's turn the call over to Q&A. Operator?

Gerben Bakker: Hubbell's portfolio is well-positioned with more than 90% sales exposure to the US and over two-thirds of our portfolio exposed to secular growth markets in data center and utility, which we anticipate will continue to perform well through a broad range of economic environments. In short, we are confident that Hubbell's leading position in attractive end markets as well as continued execution on our long-term strategy will enable us to deliver attractive financial performance over both the near term and long term. With that, let's turn the call over to Q&A. Operator?

Speaker #7: And then it catches up a little bit. And maybe two, three quarters out. Thank you.

Speaker #1: You're definitely right in your first comment in terms of how last year played out. We were ahead of price versus cost dating back to liberation day tariffs and that benefit of being ahead kind of situated in the second quarter of last year.

Speaker #1: And we continue to run positive on PCP in each of the quarters to Q3, Q4, Q last year. We were positive PCP on a dollar basis to start this year.

Speaker #1: And we're anticipating to manage that equation on a dollar neutral or better basis. That does have an impact on margins as you know that math.

Speaker #1: Well, so do we think we can continue to hold the line on margin neutral on price cost? No, I think that was a little beneficial to us last year, but we're very focused on managing to positive or better and driving that double-digit operating profit growth for this year.

Operator: Thank you, sir. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. We ask that you please limit yourself to one question and one follow-up. One moment for our first question. It comes from Jeffrey Sprague with Vertical Research. Please proceed.

Operator: Thank you, sir. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. We ask that you please limit yourself to one question and one follow-up. One moment for our first question. It comes from Jeffrey Sprague with Vertical Research. Please proceed.

Speaker #5: Thank you.

Speaker #2: Thank you. Our next question is from the line of Chad Dillard with Bernstein. Please proceed.

Speaker #8: Hey, good morning, guys. My question for you is on a Clara. Can you talk about the sales in the quarter and how that's trended sequentially?

Jeffrey Sprague: Hey, thank you. Good morning, everyone. I was wondering if you could provide a little more color on the high voltage transmission outlook. Just the level of project rollout there, how you see that pacing, you gave a little bit of color there, obviously. Is that $1.5 billion CAM all incremental relative to your prior view on the market? Maybe we could start there.

Jeffrey Sprague: Hey, thank you. Good morning, everyone. I was wondering if you could provide a little more color on the high voltage transmission outlook. Just the level of project rollout there, how you see that pacing, you gave a little bit of color there, obviously. Is that $1.5 billion CAM all incremental relative to your prior view on the market? Maybe we could start there.

Speaker #8: And then just more broadly, how that business is positioned for AMI 2.0 and how should we think about when that cycle kicks off?

Speaker #7: Yeah. And maybe I'll start, as you know, Clara is part of the grid automation business. And that business continues to inflect up. We're down.

Gerben: Yeah. Maybe I'll start overall, Jeff, with transmission. Then substation, I'd probably categorize in that same area, that's continuing to do really well for us. You know, we're communicated, high single digits growth there, certainly I would say we're off to a very good start against that background. Particularly the comments around 765 kV, it's the ability for utilities to bring more bulk power into areas where there needs a very efficient way to do that. We have some lines in the US that were built, I think over 20 years ago that were 765 kV.

Gerben Bakker: Yeah. Maybe I'll start overall, Jeff, with transmission. Then substation, I'd probably categorize in that same area, that's continuing to do really well for us. You know, we're communicated, high single digits growth there, certainly I would say we're off to a very good start against that background. Particularly the comments around 765 kV, it's the ability for utilities to bring more bulk power into areas where there needs a very efficient way to do that. We have some lines in the US that were built, I think over 20 years ago that were 765 kV.

Speaker #7: The client started to shrink. And while we still are a little bit down year over year, in the first quarter, as we communicated, we expect that to start turning to growth.

Speaker #7: But if you've done peel that apart and specifically to your question of a Clara versus the rest, clearly a Clara had been declining higher while the other part of the business was growing.

Speaker #7: And I think what you have seen is that the Clara decline is just starting to get smaller and smaller. And we still, in the first quarter, saw a decline in that business.

Gerben: There just wasn't a need for it. I think that's becoming very clear right now, that the ability to drive more bulk power is actually a very efficient way to do so. We are very well-positioned. You know, we have products today that can serve it already. We've won a couple of orders already in this. We're continuing to develop products. These are, you know, just taking it to the next higher voltages. You know, we're able to do that with our capabilities, certainly with our labs. I'd say very well-positioned. We look at this truthfully as incremental, Jeff. We see this as upside to what's already needed. You know, anytime you have a 765 kV, you need off-ramps for that, right, where you take the power down.

Gerben Bakker: There just wasn't a need for it. I think that's becoming very clear right now, that the ability to drive more bulk power is actually a very efficient way to do so. We are very well-positioned. You know, we have products today that can serve it already. We've won a couple of orders already in this. We're continuing to develop products. These are, you know, just taking it to the next higher voltages. You know, we're able to do that with our capabilities, certainly with our labs. I'd say very well-positioned. We look at this truthfully as incremental, Jeff. We see this as upside to what's already needed. You know, anytime you have a 765 kV, you need off-ramps for that, right, where you take the power down.

Speaker #7: And as you look ahead, that is an area that's been more challenged. As utility and it maybe goes back a little bit to just very first question of how our utility managing budgets and our view and certainly indications with conversation is that they are deselecting this a little bit over the other areas of investments while we've seen lesser projects come through.

Speaker #7: But the challenge for utility is going to be this equipment is going to fail at some point, right? The lifespan of this is not in the range of what our components or typical components are.

Speaker #7: So what we're seeing is more projects discussions right now. We're quoting more projects. We recently won a pretty nice piece of business that's multi-year.

Gerben: Think highways and, you know, offshoots of that, off-ramps with substations, and then you step the voltages down. We think it's an upside for us, and we think it can drive a point of growth above what we're currently projecting with transmission already.

Gerben Bakker: Think highways and, you know, offshoots of that, off-ramps with substations, and then you step the voltages down. We think it's an upside for us, and we think it can drive a point of growth above what we're currently projecting with transmission already.

Speaker #7: So I think from where we sit today, where this business declined, we should expect going forward to start seeing this business realizing modest growth.

Speaker #7: But we feel it's been stabilized. And maybe that's another really important that we've seen the bottom. We're now starting to come up. We're not super expecting great growth rates.

Jeffrey Sprague: It sounds like you don't see this squeezing out spending elsewhere. There's obviously been a little bit of concern that all the generation spending may eat into T&D spending. You're calling the kind of the core distribution side of the business also growing at a stable rate?

Jeffrey Sprague: It sounds like you don't see this squeezing out spending elsewhere. There's obviously been a little bit of concern that all the generation spending may eat into T&D spending. You're calling the kind of the core distribution side of the business also growing at a stable rate?

Speaker #7: But the dynamics are such that this business should grow from here.

Gerben: Yeah, you need it both, Jeff. That's why we don't see it drawn out. Certainly, we're not seeing that in the projects that are ahead of us, that the orders that we're winning. I mean, it's a logical question, certainly how far can budgets you see increasing their CapEx.

Gerben Bakker: Yeah, you need it both, Jeff. That's why we don't see it drawn out. Certainly, we're not seeing that in the projects that are ahead of us, that the orders that we're winning. I mean, it's a logical question, certainly how far can budgets you see increasing their CapEx.

Speaker #8: Great. That's helpful. And then moving over to grid infrastructure, I know in the past you guys have talked about your order rates within distribution.

Speaker #8: I was hoping you'd give an update on how those trended for the quarter. And then can you maybe break down how much of the demand that you're seeing is restocking the channel versus just pure sell-through into the end market?

Speaker #7: Yeah. Maybe start with the second one that our view is that the demand is what's going up on infrastructure and not going to stock.

Speaker #7: And we talked off to a good start on revenue. And that's, of course, driven by order rates. And that's on both the electrical and utility side.

Speaker #7: But particularly to TND, also up nicely in the quarter. And for us, I mean, we generally don't talk about book and bill a lot because it's about order rates because we're more short-cycle business.

Speaker #7: Our orders were up over one. That's not atypical in the first quarter where people are starting to get their orders in to get ready for construction season.

Speaker #7: And that's typically a little bit over one. We were up stronger over that. We're closer to 1.2 to start off the quarter. I'd say that's both a mix of short cycle or book and bill that was solid.

Speaker #7: As well as projects, we talked a little bit earlier about some of these projects. So we feel really good about the start to the year.

Speaker #7: And it's what's driven us to raise our organic guidance. I realize there's a piece of that that's priced, but there's a piece of that's volume as well.

Speaker #7: So we feel really good about how we started the year and we don't see as a matter of fact, we see a continuation certainly of this.

Speaker #7: So nothing unusual in it.

Speaker #8: Great. Thank you.

Speaker #2: Thank you. Our next question comes from the line of Scott Graham with Seaport Research Partners. Please proceed.

Speaker #7: Yeah. Hi. Good morning. Thank you for taking my question. I was just wondering, you've got a global manufacturing footprint, global company. With inflation higher, what's some of the geopolitical uncertainties?

Speaker #7: How is your supply chain behaving? Are you getting what you need? Are you getting any pushback in any corners? I think I heard Joe say no, not yet.

Speaker #7: On pricing, but we are starting to hear enough is enough. Some corners are pushing back on pricing in different markets. How is your supply chain behaving overall?

Speaker #7: And then I'm hoping to the follow-up would be, how is your acquisition pipeline? Is there anything it looks like you're pretty balance sheet is very lean right now and is just wondering what the outlook was for 2026.

Speaker #7: Anything you can say. Thanks.

Speaker #9: Yeah. Good morning, Scott. Maybe I'll take the first one and I'll hand it to Gerben for the second. So on the supply chain, upfront, so we're not seeing any significant impacts or constraints on the supply chain side.

Speaker #9: I'd say what would be more noteworthy is over the course of the last couple of months with some of the disruption over in the Middle East.

Speaker #9: We did have a little bit of aluminum that we were purchasing out of that region. Would be a noteworthy area. We do have other qualified sources of supply around the globe.

Speaker #9: We were able to move that to other suppliers and we weren't at the end of the day impacted by that. But it was something we had to address.

Speaker #9: We're not seeing constraints in other areas yet, chips or metals or component parts of any substance. So I would say the supply chain, as we see it right now, is holding up well and supporting what we need to do to service our customer demand.

Speaker #7: And let me take the second one on M&A. You're right to point out that our balance sheet certainly supports doing acquisitions at larger scale than perhaps we were able to afford in the past.

Speaker #7: And if we look at the and maybe even before we look at the pipeline, we are focused clearly around the core areas of our business.

Speaker #7: So if you think anything in TND, if you think about things around the data center, if you think lines around our light industrial markets, those are all areas that we find very attractive.

Speaker #7: And there's still, based on our pipeline of deals that we're looking at, plenty of opportunity to deploy our capital there. Of course, timing isn't always very predictable.

Speaker #7: But you've also seen and Joe, highlighted what we did in share buyback in the first quarter, that in periods, where perhaps there is a little bit of a void in acquisition, we think utilizing our balance sheet to do buybacks is another attractive area to deploy our capital.

Speaker #7: Of course, our preference, highest preference goes to CapEx. And we're certainly have increased that. And based on some of my comments of areas where we're investing, you should expect to continue to see that elevated.

Speaker #7: The second one being M&A. And I'd say there's a good pipeline there, both of what we'd call maybe the bolt-ons, even though Dave's getting larger.

Speaker #7: As well as larger deal. And then we have buyback as an option. So we see within those areas that we could fully deploy our balance sheet.

Speaker #9: Thanks a lot.

Speaker #2: Thank you. In our last question comes from the line of Neil Burke with UBS. Please proceed.

Speaker #10: Thank you. I wanted to come back to the high-voltage opportunity through 2035. Apologies if I missed this, but it's the 1.5 billion dollar opportunity relative to Hubble for 500 million dollar transmission business today.

Speaker #10: I just want to get a sense of how to think about the growth opportunity.

Speaker #9: Yeah. So if you think about that math a little bit, I'll help you. It represents about 7,000 miles of high voltage transmission, how we get to the billion and a half with our content.

Speaker #9: And that's over 10 years. And who knows if that's longer or shorter, but if you use that as a basis, and then with we're not the only participant in that.

Speaker #9: So we certainly have a very good position in that market with our customer. But if you add all those things up, we believe it can drive a point of growth above the high single digits that we provided for transmission substations.

Speaker #9: In the absence of it.

Speaker #10: That's helpful. And yeah, the RTO, ISO recommendation for 7,000 miles, I mean, I think there are a few hundred thousand miles of high voltage transmission in the US overall.

Speaker #10: So I mean, could that be more market opportunity if there's increasing content of 765 kilovolt in the US, like on top of that 1.5 billion?

Speaker #10: Or is it sort of too early to say?

Speaker #9: Yeah. I think the 1.5 is related to high-voltage transmission overall, Neil. And so obviously, there's a baseline market strongly, as we've said. And so I'm not sure what the question was driving that, but.

Speaker #10: No, no. No, that's clear. That's clear. Thank you.

Speaker #2: Thank you, ladies and gentlemen. This concludes our Q&A session. I will turn the call back to Dan Innamorato for closing remarks.

Speaker #9: Great. Thanks, operator. Thank you, everyone, for joining us. We'll be around all day for follow-ups. Thank you.