Good day, and thank you for standing by. Welcome to the Hubbell Incorporated First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Innamorato, you may begin.

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 2025. The press release and slides are posted to the Investors section of our website at hubbell.com. I'm joined today by our Chairman, President and CEO, Gerben Bakker; and our Executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release will continue to incorporate by reference of this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled for the comparable GAAP measures, which are included in the press release and slides. Now let me turn the call over to Gerben.

Great. Thanks, Dan. Good morning. Thank you for joining us to discuss Hubbell's first quarter 2025 results. Our results in the quarter were driven by continued strong operating performance in our Electrical Solutions segment and a return to organic growth in grid infrastructure, offset by anticipated softness in grid automation and the impact of increased cost inflation from higher raw material prices and tariffs. In Electrical Solutions, we delivered mid-single-digit organic growth with continued adjusted operating margin expansion and strong core adjusted operating profit growth. Our segment unification efforts and our strategy to compete collectively are driving our growth in key vertical markets, most notably evidenced by strong data center growth in the first quarter. From an operational standpoint, we continue to simplify our business to drive productivity and operating efficiencies, which we are confident will drive long-term margin expansion. In Utility Solutions, while grid automation sales were down on challenging prior year comparisons as anticipated, our grid infrastructure business returned to organic growth in the quarter. Transmission and substation markets remain strong as utility customers invest to interconnect new sources of low generation on the grid. We delivered another quarter of double-digit growth across these markets as our leading positions and premium brands position us well to capitalize on a growing funnel of project opportunities. In distribution markets, we are encouraged by recent order trends and are confident that we are emerging from the recent period of customer inventory normalization. Before I turn it over to Bill to discuss the results and our outlook in more detail, I'd like to provide some opening comments on how we are positioning Hubbell to mitigate recent cost inflation and near-term macroeconomic uncertainty. Hubbell is a U.S.-centric manufacturing company with more than 90% of our sales in the U.S. and a largely U.S.-based manufacturing footprint. Our international sales are served primarily on a local-for-local basis. While recent raw materials, inflation and tariffs implemented in February and March drove a headwind in the first quarter, we have already implemented actions to offset those impacts within 2025, and we are taking the actions necessary to offset the more recent impact of reciprocal tariffs. Cost inflation cycles are not new to Hubbell, we have successfully dealt with them before, and we have a playbook in place with several levers at our disposal to drive continued profitable growth under a range of scenarios. From a market standpoint, while the macroeconomic environment has become more dynamic over the last several months, we see no net change to our prior near-term and long-term views. We believe the current environment warrants caution and continued proactive cost management with strong recent order trends and favorable end markets can support our forward growth expectations. Additionally, our markets are not only bolstered by near and long-term growth megatrends, but they have also proven to be more resilient during periods of economic uncertainty. We are maintaining our full year 2025 outlook this morning and remain confident in our ability to achieve our financial and strategic commitments. With that, let me turn it over to Bill.

Thank you very much, Gerben. Good morning, everyone. I appreciate you joining us today. I know it's a busy morning. I'll begin my comments on Page 4, using the slides that you hopefully have. The first quarter results for Hubbell showed strong performance from the Electrical segment and grid infrastructure, although there were challenges in grid automation due to a tough comparison from the previous year. The first quarter performance positions us well for the typical seasonal ramp-up and to meet our full-year targets and expectations. On the cost side, we faced some additional pressures from rising raw material prices and tariffs, which we'll discuss more shortly. We are considering raw material inflation as we think about how to offset it through pricing and productivity. This poses a slightly unique challenge for our LIFO-based income statement, as we immediately recognize these cost increases, whereas FIFO reporters will take longer to account for them. We will highlight the gap in these timelines but are actively taking measures to offset these costs and maintain our initial targets. On Page 4, the sales amount to $1.365 billion. The decline primarily results from the divestiture of residential lighting, while growth in the Electrical segment and grid infrastructure mostly balanced out the drop in grid automation due to a challenging comparison. We also look at sales sequentially, which were up 2% with strong orders, indicating a solid seasonal ramp-up. The operating profit is down to $264 million, with margins dipping by 40 basis points. This includes a one-point benefit from pricing but was impacted by material cost increases, leading to about a $10 million drag from price and productivity challenges. Without this $10 million effect, we would have seen margin expansion. I want to break down the performance by segment, starting on Page 5 with Utility Solutions. Sales were $857 million, down 4% from the previous year, driven by low single-digit growth in infrastructure and a 15% decline in grid automation. Infrastructure represents about three-quarters of the segment, and the markets remain healthy in the transmission and substation areas, with our double-digit growth. We feel confident about our strong positioning and unique solutions in these fast-growing markets, which are driven by trends in grid modernization and electrification. Although sales in distribution decreased, both sales and orders are up sequentially, indicating inventory normalization in our grid infrastructure business unit, particularly in distribution products and telecom enclosures. We believe this destocking period is now behind us, and we expect to see robust demand moving forward. Orders across all grid infrastructure areas are up double digits sequentially. In contrast, grid automation faced a challenging comparison with a prior year growth of 30% and experienced a mid-teens decline. However, sales have stabilized sequentially, as large project drops are being replaced by smaller projects and maintenance, repair, and operations (MRO) activity. Overall, grid automation seems to be in a steadier environment now. The utility operating profit stands at $180 million, reflecting an 80 basis point decline in margin primarily due to the price-cost challenges mentioned earlier. Our Utility segment has a higher mix of LIFO units compared to our Electrical segment, resulting in these costs impacting the profit and loss statement sooner and slightly compressing the margins. Moving to Electrical on Page 6, we see another strong quarter with mid-single-digit growth, adjusting for the impact of the residential lighting divestiture. We have now passed that comparison, making it easier to report same-store sales. Margins expanded significantly, showing a 5% increase and a 70 basis point improvement. If we exclude lighting results from the prior year, the growth would be closer to double digits. Data centers were the largest contributor to this quarter’s results with double-digit growth across various systems. Healthy growth was also observed in our connectors, grounding products, and wiring devices. Additionally, our PCX business experienced robust growth. In the light industrial segment, where our Birdy brand operates, we benefited from large industrial projects and trends in reshoring. However, performance in the heavy sector was mixed, with oil and gas contributing positively while non-residential sectors showed some softness. We are pleased with the results stemming from our vertical market strategy, showcasing new product development and successful customer conversions driven by our newly aligned sales force. We see a 70 basis point margin expansion with operating profit rising 5% to $84 million, driven by volume growth, efficiency gains, and moderate price-cost productivity headwinds, which were less impactful compared to utility due to a higher FIFO mix. On Page 7, we outline our tariff exposure, clarifying that we are also considering inflationary pressure on raw materials influenced by those tariffs, even if not directly applicable. Page 7 illustrates our U.S.-centric company with a global supply chain, highlighting that Mexico accounts for about 15% of our mix, China mid-single digits, and the rest of the world under 5%. We find it useful to split the effects into two categories. The first category details the effects in Q1 from tariffs implemented in February and March, including higher raw material costs. Even if we don't have a tariff on steel/aluminum, commodities have seen inflation. We've calculated a $135 million impact on costs for 2025, with about half from raw material costs and the remainder attributed to tariffs. We have initiatives aimed at addressing this, including price increases communicated to our customers, effective in mid-April, and we have begun taking orders at these new prices. We are confident we will neutralize this $135 million impact within calendar year 2025. The second column addresses reciprocal tariffs from April, and we expect to offset these through pricing and productivity measures as well. Mitigation efforts are ongoing, and while we're optimistic about neutralizing the effects, we can't confirm timing yet regarding the complete implementation of price increases due to potential delays in recognizing costs under LIFO accounting. Moving to our outlook on Page 8, we are maintaining our adjusted EPS outlook for 2025, expecting organic growth of 6% to 8%. We believe market conditions are favorable, projecting that around half of this growth, or 3% to 4%, will come from volume, with the remainder from price. We're confident our price actions will help offset Q1 tariffs and material inflation. We indicate a $0.50 sensitivity in our guidance regarding LIFO accounting recognition timing. Free cash flow is slightly down quarter-over-quarter but remains aligned with our goal of achieving at least 90% of net income. Additional modeling considerations will be available for discussion in Q&A. We anticipate a growth ramp in Q2, which aligns with our guidance. Finally, I'd like to share thoughts beyond 2025 regarding our balance sheet, which is in excellent shape, supporting active investment and shareholder returns. Over the three-year period from 2025 to 2027, we project about $3.5 billion in operating cash flow, leading to approximately $2 billion in cash generation when factoring in capital expenditures, dividends, and share repurchases. We plan to prioritize acquisitions for enhancing our product positioning and customer relationships while also maintaining flexibility in share repurchases. As a reminder, we increased our share repurchase authorization earlier this year, with about $600 million available. In Q1, we repurchased $125 million in shares at attractive valuations, demonstrating our ability in capital deployment. I’d like Gerben to now provide comments on the importance of our T&D core business for achieving our 2025 targets and beyond.

Great. Thanks, Bill. And before we turn the call over to Q&A, let me provide some more context on T&D trends as we are beginning to see evidence of acceleration in areas of the portfolio, which face customer inventory normalization throughout 2024. Grid infrastructure orders were up double-digits year-over-year in the first quarter and up solidly versus the fourth quarter, and order trends were strong across each of the end markets. More importantly, underlying end market dynamics are strong and forward outlooks for major customers have recently increased. On average, over the past six months, multi-year capital plans from a representative group of our top investor-owned utility customers have revised upwards by approximately 10% from prior multi-year plans. As we have previously communicated, we believe T&D markets are at the early stages of a long-term investment cycle, underpinned by secular trends in grid modernization and electrification. We are confident that we are emerging from the recent period of customer inventory normalization with leading positions, solutions, and service levels that will enable Hubbell to effectively capitalize on this visible long-term opportunity. And to conclude this morning's prepared remarks and turning my comments back to all of Hubbell, we are confident in our ability to execute through near-term uncertainties and deliver on our financial commitments in 2025. We are focused as a management team to drive the needed actions to navigate this dynamic environment, and we view it as our obligation to manage the short term. We have a demonstrated track record over the last several years of executing effectively through a wide range of macroeconomic and inflationary environments, and we will continue to do so moving forward. But we are also not losing sight of the long-term opportunities ahead of us, and we are increasingly confident that our utility and electrical customers will do significantly more business with Hubbell over the next several years. This confidence is underpinned by our unique leading positions in markets supported by visible megatrends as well as recent customer insights and order trends. We anticipate that our attractive long-term growth outlook, combined with structural opportunities in our operating model and capital deployment levels, will continue to drive consistent shareholder value creation. With that, let me turn the call over to Q&A.

Thank you. Our first question comes from Jeffrey Sprague with Vertical Research. Your line is open.

Hey, thank you. good morning everyone. Maybe just to start on guidance, if we could. Coincidentally, your guide range is $0.50, right? And you're talking about this $0.50 kind of sensitivity. Just to be totally crystal clear, you're suggesting a negative outcome here relative to your plan is a year that looks like $16.85, $17.35. $0.50 on the top and bottom.

Yes, I think that's correct, Jeff.

Okay. And then just on Q2, Bill, it'd be really great if you could give us some additional help here. Obviously, you don't guide quarters. Maybe this is the exception to the rule this quarter with all this LIFO hit likely to be coming through, right, and your price actions delaying. So you told us the top line will be strong a seasonal lift. But just help us think about really what's going to happen with the margins and sort of the cost mitigation in the quarter?

Yes. So without giving guidance, I do think we can give you some insights that we have, Jeff, that hopefully would be helpful. So on the top line, a typical seasonal sequential would be in the high-single digits. And certainly, we'll have some price being pulled in there. And so I think, thinking of getting sales growth year-over-year in that mid-single-digit range is certainly a valid expectation. I think to your point on the LIFO lag, we're anticipating an order of magnitude of $20 million. Again, that's going into a recovery bucket in the second half. But the timing of that, we would have $10 million of that in the first quarter and $20 million in the second, Jeff. So I think those are the kind of primary drivers in the quarter.

And Jeff, if I may make a comment back to your first question, I think you're correct to interpret both sides of the guidance to be down $0.50. I would say, though, that at this point is merely a sensitivity analysis rather than a guide. And the actions that we have in place are to neutralize this. And there’s a lot of uncertainty still even on the tariffs, right? There's a lot of discussions about how these tariffs are going to be pulled back, we're starting to take action. We're early in this action in the market. I would say, in announcing that we're going, but a lot can change here. And this is why we wanted to merely provide some sensitivity around it, that we'll continue to update you on rather than this should be assumed in the guide at this point.

Great, I appreciate that. Gerben, could you elaborate on your thoughts regarding utilities? Given the discussions about their budgets, do you anticipate a shift in how they allocate funds between price and volume? Or do you think they are focused on achieving certain volume metrics, which might indicate a potential for growth, even if we have to contend with the current pricing?

Yes, yes. And it's probably a little of both, Jeff, because that's indeed the tension that you have, right? If you have budgets, you have CapEx budgets, are you limited by the spend, and then you're going to just buy less to do it. I would say, on the one hand, there's pressure to do the work, both on the need for hardening, load growth to support. So I think that puts attention to it. The prices are higher, you have to spend more to still get the same work done. But I'm sure there will be some decisions made. The other thing that you tell to the customer, because they can shift to work between CapEx and OEM, they can focus on grid hardening versus expansion. So I would say, it's really hard to call truthfully. But we feel good that utilities are spending more budgets are going up. And that's just good for us, right? And then could it be better for us, perhaps, but we feel pretty good about utility. It's resilient. And even in a more challenged macroeconomic environment, history we have proven that utilities tend to be more resilient.

Great, thank you. I will leave it there.

One moment for our next question. Our next question comes from Charles Tusa with JPMorgan. Your line is open.

Hey, good morning.

Good morning, Steve.

So I think I've got a problem with my autofill on these registrations this morning at several different names called out. The pricing in 2Q, like how do you expect that to kind of feather into 2Q on the way to it being half for the year on an organic basis?

Yes. I think we're expecting nice sequential price realization based on the actions we implemented. I think it will probably come a little bit quicker in electrical, just given there's a shorter backlog there, and it's a little bit more book and ship. So I think you'll see a couple of points of incremental contribution from 1Q to 2Q on that.

And then I assume with your commentary around the sequential increase that you're seeing a pretty good April. Any signs of pre-buys or pull-forwards that you guys have seen in your shorter cycle business?

Yes, that's a good question. When we speak with our channel customers, they share anecdotes about isolated occurrences, but no one recognizes it as a widespread trend. End customers, on the other hand, report that they are not engaging in those practices. Analyzing SKU data reveals some fluctuations. Therefore, while it wouldn’t be unreasonable to assume that some activity is taking place, we don’t have evidence to suggest that it is part of a broader trend or impacting it.

And just one last thing back to Jeff's point. So basically, what you're doing with the sensitivity is just saying, but you're just identifying that the difference between the high and the low end of the range is the tariff dynamic. But is that basically what you're saying?

No. We are indicating that we expect to offset and neutralize the reciprocal tariffs. The question for guidance is whether we can achieve this by 2025, and we believe we can. We’re treating that as our target. However, we feel it’s prudent to mention that due to the LIFO lag, there could be some sensitivity, but we aim to mitigate that. We just wanted to bring that to your attention. That's it.

Right. So the range reflects fundamentals and if the fundamentals are weaker and they're at the low end of the range and you can't cover this tariff, then that's downside to the low end of the range effectively?

Yes, those two things, both of those happen, you'd be below, yes.

Yes, okay. Great, thanks a lot guys.

One moment for our next question. Our next question comes from Nigel Coe with Wolfe Research. Your line is open.

Thanks guys. So just wanted to maybe home in on the second quarter. if we've taken the $20 million of PTP headwinds in 2Q, does that suggest that EPS is sort of flat to slightly down year-over-year, Bill?

I think if everything unfolds as expected, you would be in a similar range. I believe that's the case, yes.

So flattish overall, yes, okay. And then how do you think about price elasticity? And maybe just talking about that into kind of the feedback from the customers on the price increases announced so far. Some companies have factored in elasticity. I don't think you are, but just curious kind of what the reaction has been and then when you think about the mix between surcharging versus price increases, I think historically, you've gone with price increases, but any sort of merit on surcharging just given the volatility in these tariffs?

I can start, and then Bill can add to this. Regarding the first round of tariffs, we have seen a significant inflationary impact across our entire portfolio. More than half of this is driven by commodities like steel, copper, and aluminum, which are widely used. We are implementing broader pricing actions, and early indications on order rates suggest that demand is holding up well, showing low elasticity. The second round of tariffs is primarily driven by China and is more focused on specific product lines. In some of these lines, we might be slightly disadvantaged, while in others, we could be slightly advantaged. We're not just raising prices; we're actively negotiating with suppliers and realigning our supply chains to manage costs. We are also mindful of the impact of these tariffs on pricing. Overall, while we are preparing for these changes and expect to pass on costs, this phase is more targeted at certain products. There is potential for elasticity in some areas, and we are considering this, but overall, we believe we are in a strong position compared to our competitors.

I would like to clarify that we have taken price elasticity into consideration in our guidance. As Gerben mentioned, we don't anticipate significant changes in the first category. The second category does include some potential changes, which is factored into our sensitivity analysis. Regarding your mention of surcharging, you are correct that we have typically avoided that approach in the past and have relied on price increases instead. We prefer this method and believe it is beneficial for us. For instance, we are currently facing increased costs for steel and aluminum, even though we are not subject to tariffs. Therefore, a surcharge wouldn’t apply in this case. This situation is different from being able to adjust prices for other factors such as freight or wage inflation, where we can incorporate those costs into our pricing strategy. Overall, we have focused on price increases rather than surcharges.

And just one quick follow-up there. Gerben, you mentioned you don't think you're disadvantaged. I would have thought the other way around actually. So I'm just curious, especially in the electrical SKUs. I would think you're still seeing a lot of imported products and some of the more, I don't know, lower value commoditized SKUs. So I'm just curious, if you see an opportunity to gain share from some of that imported products?

Yes, I would generally say no, although we recognize that there are specific product lines where we do have some advantages. We are considering ways to mitigate this issue not just for individual product lines but across our entire portfolio. As a whole, I wouldn't claim that our company is particularly disadvantaged compared to others in terms of exposure to offshore supply chains, but there are specific areas in the supply chain where we do have advantages.

Okay, thanks.

One moment for our next question. Our next question comes from Christopher Snyder with Morgan Stanley. Your line is open.

Thank you. I just wanted to ask about the price cost dynamics. So it seems like in the first half of the year, the company will be about $30 million price cost negative. And it seems like you guys see a chance to be price cost neutral for the year, if 0 of that $0.50 sensitivity comes through. So I mean, is that implying that you guys are actually price/cost positive in the back half to offset the negative $30 million in the first half? And what would that mean about the exit rates as we kind of think about that into '26? Thank you.

Yes, Chris, you're correct. We expect to have a surplus that compensates for the deficit in the second half compared to the first. As you've seen in previous inflationary conditions, we experience a lag period, which acts as a headwind for a couple of quarters. However, as that situation improves, we anticipate the benefit of a tailwind, and we agree with your analysis.

Thank you. I appreciate that. I guess maybe just on the second point, sometimes I feel like there's confusion in the market around, who you guys are competing against. So could you just maybe kind of talk about, who are the main competitors, whether it's utility T&D, I guess, most specifically, but anything else is a call out on just, who is the competitive base here?

Yes. In terms of Utility T&D, the Cooper division of Eaton competes directly with Thomas & Betts, now part of ABB, which is also a direct competitor. Additionally, there is a private company in Chicago called MacLean Power Systems. These are the primary competitors in the T&D space.

Thank you. I appreciate that.

One moment for our next question. Our next question comes from Julian Mitchell of Barclays. Your line is open.

Hi, good morning. I just wanted to push a little bit more on the sort of volume assumption dialed into the organic sales guide for the year. So it looks like on Slide 8, you've got sort of 3% plus volumes growth dialed in for the year. And it seems like the first half is sort of guided for flattish volume, down a bit Q1, up a bit Q2. So it's a pretty strong volume growth in the second half. And so just maybe help us understand that a little bit. There is some elasticity aspect that you mentioned already, but also easier comps. So maybe help us understand the confidence in that volume acceleration, please.

Yes, I think you're pointing out, Julian, the intersection between kind of sequential and VPY analysis, right? So if we start with the sequential and look at orders, we think that kind of indicates where the volume will be and when you do it again. So first of all, we agree with your first half analysis that you're talking about. And so you've got to get double the 3% to 4% basically in the second half. And it's driven by strong order book supporting strong seasonal ramp and having easier comps that allow that sort of mid- to higher single-digit growth rates in the back half. Yes, there are a couple of key turning points contributing to this situation. The distribution side of T&D has returned to growth, which is beneficial. Additionally, the decline in telecom enclosures has shifted from contraction to growth. There are several products that are showing positive momentum, which supports what might seem like an overly optimistic outlook, but when analyzed mathematically, it becomes evident that's the direction we are heading.

That's great. Thank you. And just my second one...

Yes, so we anticipate a little bit of small gains in telecom as we go forward.

One moment for our next question. Our next question comes from Tommy Moll with Stephens. Your line is open.

Good morning and thank you for taking my questions.

Good morning, Tommy.

I appreciated the insight regarding the long-range outlook for the large IOU budget. The message seems to reaffirm what has been communicated previously. My question is whether there have been any changes or new learnings. Specifically, what are you hearing about priorities among transmission, distribution, and generation? Also, what insights do you have about financial adjustments as we approach the latter part of the decade? Are we moving some funding forward or pushing it out? There seems to be some flexibility in the five-year range you provided. Is there anything else that appears different now, whether it is an improvement or a setback?

Yes, I'll start and Bill can add his thoughts. It’s definitely encouraging that budgets are increasing. The large IOUs we discussed represent a substantial amount and are well-distributed geographically, indicating what we are witnessing overall. As we've mentioned, transmission and substation sectors are notably strong. This is supported by the new interconnections and substations serving data centers and additional loads. We also view the distribution sector positively, with ongoing hardening projects. Typically, we notice that spending in these areas can experience peaks followed by periods of stability or decline. In our transmission experience, budget revisions happen every few years, which can shift the peak spending timeline. We started observing this in 2012, and the need for infrastructure investment remains clear. We are pleased that spending levels are elevated and increasing. Regardless of budget shifts between categories, our portfolio is prepared to support expenditures in any area. Thus, we feel we are well-positioned.

Thank you, Gerben. And Bill, I wanted to talk about the M&A environment here. You reminded us of the upsized budget that you've established, I think at the Investor Day, last Investor Day. So a lot of dollars to deploy there. Your preference is clearly M&A. But in this particular environment, I'm just curious what your discussions look like given the uncertainty?

Yes, Tommy. The pipeline is quite active, and we are actively exploring several opportunities. Each situation is unique. There is an interesting discussion about long-term trends, which as you've mentioned, we are keeping in mind, as well as the potential volatility due to rising interest rates, inflation, and the recent news of a contraction in GDP in the first quarter. However, we are not experiencing any uncertainty that is impacting our specific M&A market. While it might affect larger public mergers and acquisitions, the conversations we are having regarding the opportunities we are pursuing are continuing positively.

Great. Thank you, Bill. I'll turn it back.

One moment for our next question. Our next question comes from Joe O'Dea with Wells Fargo. Your line is open.

Hi, good morning. I wanted to discuss the organic growth dynamics between the first and second halves of the year. It appears that the total company may achieve around 10% growth in the latter half. However, there seems to be some tariff pressure affecting the utility segment. Could you elaborate on how we should view this across the segments? Specifically, will the utility segment see low double-digit growth in the second half while the electrical segment experiences high single-digit growth, or could the difference be greater due to the tariff impact?

Yes. I think the math you're doing would imply a ramp-up in the second half, certainly, Joe, and part of that's again price realization kicking in. And again, that takes a little bit longer on the utility side, just given the backlog. I wouldn't say that tariff exposure is more utility weighted, though it's probably a little bit more electrical weighted when you look at it that way. So I think both sides will sort of see a similar kind of price contribution.

And therefore, somewhat similar back half of the year organic growth rates based on the framework you have?

Yes. I mean, again, volume will be a little bit different at that sort of ramps up as utility progresses throughout the year.

One moment for our next question. Our next question comes from Nicole DeBlase with Deutsche Bank. Your line is open.

Yes, thanks. Good morning, guys.

Good morning, Nicole.

Good morning, Nicole.

Just kind of piggybacking on, I think it was Julian's question earlier about margins for the full business and you guys kind of acknowledge like probably down year-on-year. Is that the case in both segments? Because electrical still saw a little bit of margin expansion in the first quarter despite the tariff headwinds, curious if that can kind of continue throughout the year? Thank you.

Yes, Nicole, you're right to note that margins are increasing, but the impact of pricing that just offsets costs is what would create a challenge. I believe the electrical segment would experience this as well.

Yes. And we see some margin expansion happening in electrical still, even with the effects we described. Okay, Nicole, we agree that margins could come in some. It's just a function of how the items wash out.

One moment for our next question. Our next question comes from Brett Linzey with Mizuho. Your line is open.

Hey, good morning all.

Good morning.

I wanted to come back to grid automation. So down 15%, I guess, how did that track versus the internal expectation? And then implicitly, the utility meters business was down much more than that. You had guided that business down high singles for the year. How has the outlook changed relative to the original expectation?

Yes. So I'd say the quarter for that was softer than we had anticipated. But I do think there's encouraging signs of smaller project wins and the MRO portion of the business is starting to create, Brett, a floor where they can operate at a level now and not be, for example, some kind of falling knife. And so we're actually encouraged as thinking about the sequential is actually flattening now and being able to kind of run it from here, but a little more modest probably than we originally thought as the year started.

Yes. Maybe the additional context on that is, as Bill said, a little softer, but offset by stronger T&D than we had initially anticipated. And both of these are embedded in our guide for the full-year.

All right. Yes, that's helpful. And then just one more on utility distributions on the strong orders up double-digits. I guess are there any other indicators or anecdotes from large utilities or inventory data from distributors that gives you more confidence that the destocking has really run its course here?

I would agree that discussions with both distributor customers and end customers suggest that inventories are now much more aligned with our original targets. While there may still be some specific instances in certain regions or with certain customers where they want to reduce their stock further, we believe these will not impact our overall growth. We feel ready to grow now, and while we understand we’ve been asking for your patience over the past several quarters, we believe we are finally in a position to make significant progress, which is great news.

Appreciate the insight.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Dan for any closing remarks.

Great. Thanks, operator. Thanks everybody for joining us. I'll be around all day for follow-ups.

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.