Hubbell Inc (HUBB) Q3 2026 Earnings Call Transcript

you for standing by, and welcome to Hubble's third quarter, 2026 earnings conference call. Currently, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 on the game. I would now like to hand the call over to Dan Inamorato, Investor Relations. Please go ahead.

Thanks, Operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the third quarter of 2026. The press release and slides are posted to the Investor section of our website at hubble.com. I'm joined today by our Chairman, President, and CEO, Gerben Bakker, and our CFO, Joe Capazzoli.

Please note our comments this morning may include statements related to the expected future results of our company. The forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Please note the discussion of forward-looking statements in our press release and considered incorporated by reference into this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures which are included in the press release and slides. Now let me turn the call over to Gerben.

Good morning, and thank you for joining us to discuss Hubble's third quarter 2026 results. I will start my comments by summarizing three main themes we are seeing across the business in 2026. The first is that demand for Hubble's critical infrastructure solutions remain strong. We see this clearly in our order book, year-to-date backlog build, and in long-term planning discussions with our utility and electrical end customers. Second, we are proactively investing to serve this strong demand. These investments have varying profiles across businesses, product lines, and factory footprint. Some areas, such as data center balance of system, electrical components, and certain transmission and substation product categories, are coming online quickly and are driving outperformance in 2026, while some investment in these same high-growth markets will enable us to serve longer-term visible project demand in 2027 and beyond. What is consistent across the capital investment program as a whole is a highly attractive return profile accretive to our overall ROIC, which will enable us to grow our leading position in our core end markets over the next several years. And finally, we are managing effectively through a dynamic supply chain and inflationary environment. While broad-based inflation persists, we continue to aggressively drive price and productivity actions across our portfolio. Our recent track record, our unique positions in our end markets, and our visibility on actions taken and in progress give us confidence in our ability to continue to manage the price-cost productivity equation to neutral or better through the cycle. Looking more specifically at the third quarter, Hubble delivered strong financial performance with double-digit growth in sales, adjusted operating profit, adjusted earnings per share, and free cash flow in the quarter as well as on a year-to-date basis. Third quarter performance was highlighted by 22% organic growth in electrical solutions, driven by data center sales increasing more than 80% in the quarter on an organic basis, as well as continued progress on our segment unification efforts and vertical market strategy. The NSI acquisition is off to a strong start, with performance and integration efforts trending ahead of our initial expectations. Utility solution results were solid in the quarter, with strong core T&D performance offsetting a temporary component availability headwind in our meters business. We are raising our full-year 2026 outlook this morning, primarily driven by stronger growth outlook in the electrical solutions. As we look ahead to 2027, we see an attractive growth outlook across our largest, highest margin and markets, and I'll talk further about their preliminary views on next year at the end of this call. For now, let me turn the call over to Joe to provide some details in the third quarter.

Thank you, Gerben, and good morning, everyone. I am going to start my comments on slide four. Hubble's overall financial performance was strong with double-digit growth across sales, adjusted operating profit, adjusted earnings per share, and free cash flow, both in the quarter and on a year-to-date. basis. Net sales of $1.873 billion in the quarter increased by 25 percent as compared to the prior year. Organic growth of 11 percent was driven by robust 22 percent organic growth in electrical solutions and solid 5 percent organic growth in utility solutions. Acquisitions contributed 13 percent to growth in the quarter, with NSI off to a strong start in the electrical segment, as Girvin indicated, and DMC Power contributing nicely to our utility segment. From an operational standpoint, Hubble generated $477 million of adjusted operating profit in the third quarter, representing 33 percent growth versus the prior year, and delivered adjusted operating margins of 25.5%, representing 160 basis points of year-over-year expansion. Growth in adjusted operating profit was primarily driven by strong volume and high-margin businesses, as well as the impact of acquisitions, which were accretive to adjusted operating margins. Price-cost productivity was approximately neutral on a dollar basis in the third quarter, including the net impact of IEPA tariff refunds. While broad-based cost inflation has persisted as 2026 has progressed, we have driven strong price and productivity realization over the last several quarters, and we are executing additional actions as we exit the year, which we are confident will position us well for 2027. Adjusted earnings per diluted share were $5.91 in the third quarter. This represented a 14% increase versus the prior year, driven by adjusted operating profit growth and a modestly lower share count as a result of prior share repurchase activity, partially offset by higher interest expense associated with the NSI and DMC power acquisitions and a higher year-over-year tax rate. Free cash flow of $280 million was up 10% relative to the prior year. We continue to anticipate approximately 90% conversion of free cash flow to adjusted net income on a full-year basis, which absorbs the impact from increased capital expenditures, acquisition costs, and working capital investments to serve strong current and future sales growth. Our balance sheet remains healthy, and we remain committed to deleveraging over the next two years, which will drive incremental adjusted EPS accretion in 2027 and position our strong balance sheet for further accretive M&A investment over the next few years. Turning to page five to review our performance by segment, utility solutions delivered 10% adjusted operating profit growth in the quarter and 9% sales growth, which was comprised of 5% organic growth and four points of contribution from the DMC Power acquisition. DMC Power's performance will be reflected in organic growth starting in the fourth quarter of 2026, which we anticipate will be accretive to the segment's organic growth rate. Grid infrastructure grew 8% organically in the third quarter, led by strong growth in distribution and transmission markets. Substation sales also grew strongly in the quarter, but modestly below our prior expectation, driven by timing of capacity expansion in our substation control house business. From a demand perspective, we continue to see broad-based order strength across substation, transmission, and distribution markets, leading to further backlog build in the quarter as utility customers plan new projects supporting load growth and continue to invest in hardening and resiliency initiatives grid automation declined four percent organically in the third quarter driven by a temporary component availability headwind in our meters business which we anticipate will be resolved by the end of the fourth quarter and results in a shift of approximately 15 million dollars in revenue from the third quarter into the fourth quarter. Protection and controls delivered strong double-digit growth in the quarter led by continued strength in substation switching products where project interconnecting load growth and recent capacity expansion investments are bolstering our performance. Operationally, utility solutions delivered $267 million of adjusted operating profit in the third quarter, representing 10% growth versus the prior year, with adjusted operating margins up 30 basis points year over year. Adjusted operating profit growth was primarily driven by strong volume growth in high-margin businesses and acquisitions, while higher cost inflation and raw material costs were largely offset by price realization, productivity, and a net tariff benefit in a quarter. We also remain focused on executing and investing in capacity expansion initiatives to serve customer demand in high growth areas of our utility business, which we are confident will drive strong organic growth and deliver attractive returns on shareholder capital, both in the near term and over the next several years. Moving to page six, electrical solution results were very strong in the quarter. On the top line, Electrical Solutions generated net sales of $845 million, which represented growth of 51% versus the prior year and ahead of our prior expectation, driven by outperformance in both our organic business and in NSI. Starting with NSI, as we highlighted at the time of the acquisition, this business is a strong strategic fit with our portfolio and enables us to double down on our attractive core critical infrastructure components with complementary products and brands similar channels to market and clear opportunities for revenue and cost synergies we are encouraged by the early integration efforts and strong performance with NSI contributing 29 points to the electrical solution segment revenue growth in the third quarter at a creative adjusted operating margins. From an organic revenue standpoint, 22% organic revenue growth was again highlighted by strength in data center and light industrial markets. Data center sales increased over 80% on an organic basis in the third quarter as content gains, new product introductions, and capacity additions drove outgrowth in a strong underlying market. Most notably, our wiring device and pin-and-sleeve product lines have driven accelerated data center penetration through our vertical market strategy, and recent product innovations and recent capacity investments in these areas are enabling us to capitalize on strong customer demand. Outside of data center, light industrial markets remain strong, bolstered by U.S. manufacturing activity, and electric T&D and renewables markets also grew strongly in the quarter. Non-residential markets were solid in the quarter, while heavy industrial markets remained relatively soft. Across our HES portfolio, our initiatives around cross-selling and channel conversions have driven broad-based commercial success, and we see further opportunities to accelerate this strategy through the integration of NSI. Operationally, Electrical Solutions delivered $210 million of adjusted operating profit in the third quarter. representing 80% growth versus the prior year, and adjusted operating margins of 24.8% expanded 400 basis points year over year. Adjusted operating profit growth was driven by strong volume growth and the NSI acquisition, while higher cost inflation and raw material costs were largely offset by price realization, productivity, and a net tariff benefit in the look. Turning to page 7 to discuss our full year outlook, we are raising our 2026 outlook this morning driven by stronger sales growth and adjusted operating profit growth. On sales, we are raising our growth outlook to plus 18 to 19 percent, reflecting an increase in organic growth expectations to 10 to 11 percent and stronger NSI contribution now expected to contribute approximately 7.5% to full-year sales growth. Our increased organic growth expectations are driven by a stronger outlook in electrical solutions, which we now expect to grow 17% to 18% organically in 2026, while we have slightly lowered our outlook in utility solutions to plus 6% to 7% on a full-year basis. Broadly, orders and end market demands have exceeded our expectations across our largest end markets in both segments as 2026 has progressed, but timing of project deployments and internal capacity expansions is driving stronger relative growth within electrical solutions segment near term. Operationally, we anticipate over 20% year-over-year growth in adjusted operating profit on a full-year basis at the midpoint of our outlook range, an increase versus our prior expectation driven largely by stronger volume growth, while the impact of incremental cost inflation, price, and productivity actions result in an anticipated adjusted operating margin range of 23.0% to 23.2% for the full year. Our expectations for below-the-line items remain unchanged, and we continue to anticipate approximately 90% free cash flow conversion on adjusted net income on a full-year basis, which includes the impact of elevated levels of inflation, increased year-over-year capital investment, and NSI acquisition costs. We are raising our full-year outlook for adjusted earnings per share to a range of $20.40 to $20.60. We are confident in our ability to deliver on this increased outlook in 2026, which represents year-over-year earnings growth of 12 to 13%. Now let me turn the call back over to Gerben to give some preliminary views on our attractive 2027 setup.

Thanks, Joe. We see an attractive end market setup for Hubble in 2027. Our standing long-term outlook targets mid-single-digit organic growth through the cycle. And as we have indicated throughout this year, everything we see in our end markets, order trends, and conversations with customers has given us incremental confidence in the strength and duration of the long-term investment cycle ahead of us given the shorter cycle nature of many of our products we intend to remain conservative as we update both our annual and long-term growth targets next year but we will be exiting 2026 with stronger than typical backlog visibility and we are confident in our ability to deliver an attractive year of organic growth in 2027. in utility solutions We continue to see broad-based strength across distribution, substation, and transmission markets. Orders throughout 2026 have continued to exceed our initial expectations, with particular strength in transmission and substation project activity, driving backlog build in excess of $500 million year-to-date. We continue to believe utility T&D markets are in the early stages of an attractive multi-year investment cycle, driven by aging infrastructure and bolstered by load growth and data center interconnections. connections. We have strong specified positions with our end customers, along with leading brands and installed base. And our primary focus as a management team is on executing the capacity expansion required to serve this broad-based demand for our utility customers. In our smaller end markets, we anticipate more modest growth in the approximately 20% of our portfolio exposed to gas, telecoms, and meters and AMI. In electrical solutions, we expect data center markets to remain strong in 2027, and we are confident in our ability to continue to drive outperformance through content gains, capacity initiatives, and a vertical market strategy to capture more of our available balance of systems component opportunity. More broadly, conversations with distributor partners on large project activities have been constructed, as electrification, U.S. reshoring, and data center build-outs drive tailwinds across the broader industrial economy. We also anticipate continued strength in electric T&D and renewable markets in 2027, while our expectations for non-residential and heavy industrial remain more modest. Finally, I'll highlight that we expect the addition of NSI to further accelerate our strategy to compete collectively in HES with a broad portfolio of leading brands and critical infrastructure solutions, driving continued commercial success across our portfolio. With that, we will turn the call over to Q&A.

Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. To remove yourself from the queue, you may press star 1-1 again. Please limit yourself to one question and one follow-up to allow everyone the opportunity to participate. Please stand by while we compile the Q&A roster. Our first question comes from the line of Steve Tusa, Wells Fargo. Your question, please, Steve.

Hi. Good morning, guys. Hi, Steve. Steve. Can you just provide a little bit of color, I guess, on just the 27 bridge dynamics? I know you guys gave the usual slide talking about the year forward, which looks like it implies something above your long-term algo, first of all, but then anything that you'd want to highlight moving forward on the bridge outside of, obviously, the tariff stuff?

Sure. Good morning, Steve. So, just a little more color on 27 bridge. So, certainly, we'll provide a little more color as we get out into January on 27. But at this point, we've got a little more visibility than we typically would heading into 27, just given the incoming order rate, the backlog build. So we'd like the visibility into 27 at this point. And we're confident that 27 sees organic of at least our mid-single-digit standing long-term framework. So we feel really good about that. We're anticipating PCP to be in the neutral to dollar positive next year with incrementals in line with our long-term ALGO at 25% to 30%. Okay. I'd say that's probably the anchor of the construct, Steve, for 27.

And do you have to go get more price between now and then to make that happen, or are you pretty comfortable with the way things stand today?

So we are accelerating price for 27 on the electrical side, pulling that forward into the fourth quarter here in November, and we'll be out at the end of the year, the beginning of the year, with utility price. And that's generally for two key purposes. One is to address the cost inflation, the higher levels of inflation we've been seeing come through the last couple of months, and also in line with our normal annual price increase cycle.

Awesome. Great detail. Thank you.

Thanks, Steve.

Thank you. Our next question comes from the line of Chad Dillard of Bernstein.

Your line is open, Chad. hey good morning guys um i was hoping you could dig more into uh hey good morning um i was hoping you could dig more into uh the guidance cut on on utility can you talk through like what what some of the steps um drove uh the more conservative outlook yeah i think uh two two main things that are that are driving um uh slightly uh below uh what we're expecting uh here in the in the third quarter and and you know as we look for the balance of this year the first one is as we highlighted a component shortage that we had in our meters business and this is a very discreet and unforeseen situation and it has to do with our contract manufacturer of meters who was unable to source a component from a supplier that led to a production slowdown. And, you know, this took several weeks to resolve. You know, the good news is we're back in full production right now and, you know, looking to start that recovery, you know, have that recovery here in the fourth quarter. So that was one. The second one has to do with our substation and particularly the control houses in our substation market. This is our systems controls businesses. And if you look at this market in total, it represents about 20% of the HUS segment with about half being the components and half being this modular control house. And as a whole, this portfolio grew very attractively, I would say in line with what transmission and distribution in the high, single, low, double digit. And if you break that down, the components actually grew even better. This is stuff like connectors and bushings and arresters and switches, and that was an axis of 20% growth. And it's also areas where we've been successfully adding capacity here this year. We were expecting stronger growth in those control houses, going from the first half to the second half. And this is a business that's grown very attractively over the last couple of years. We've been adding capacity and continue to add capacity. And that just proved a little harder here in the third quarter to continue to ramp it up. So as a result of continued growth, we were actually flat sequentially from the second quarter to the third quarter. um you know there's actions in place um um to to continue to grow that um but it's just taken us a little bit longer so you know i would expect this part to to ramp up as we go into next year but just at a little bit slow pace so if you look at those two events it's really what caused us to pull back a little bit on the organic growth this year but i would say it's a really really solid set up for next year as we continue to add capacity to our portfolio.

Gotcha. That's super helpful. And maybe just on that capacity ramp point, can you give more detail in terms of just broadly across the whole business, the product lines, any way to frame just like the revenue unlock as we go into 27?

And then just timing and how much you're investing to unlock that revenue yeah yeah and if you look at capacity broadly i would put it in in a few buckets the primary buckets and where we're most adding capacity is what we've been talking about it's it's adding the next machine adding the next uh assembly line we're a very skew uh broad uh company and portfolio so generally our capacity adds take that form and if you think about burn connectors. If you think about the pin and sleeve where we've been able to grow 80%, it's adding more machines under existing roof lines, similar to those components in the substation that I talked about. And that's the primary way that we add capacity still today. The next level of capacity add is extending roof lines. And you can only keep adding so many machines before you run out of the roofline. And so, you know, adding more roofline, adding more square footage around those existing factories is the next level. And we're seeing areas where we're doing that right now. Our systems control business is one of those that we're doing that as well. So, those are primarily the areas how we're adding capacity into our business. What we talked about this year is about 25 million a quarter of that that additional capacity coming in line and that's to serve the growth that we're seeing in these markets and as we look into next year we anticipate that to about double to about 50 million per quarter as we go into next year so so i would say you know our capacity ads have been very successful the return on on these projects It's the highest returns we get of our investment, so we feel generally really, really good. It's an area where we're focused as a management team to execute, to serve this visible demand that we're seeing in our markets.

And, Chad, I might just add a lot of that capacity going into, you know, key markets where we see durable, high growth, high margin, and that continues to be in transmission, substation, and data center market. So certain areas we've been adding, you know, as we go along, we were doing it last year, we're doing it this year, and you see that coming through in the data center growth rate in particular, but also happening in transmission substation as well. So long-term, a lot going on there, but really excited about the opportunities. Great. Thanks, guys. I'll pass it on.

Thank you. Our next question comes from the line of Julian Mitchell of J.P. Morgan. Please go ahead, Julian.

Hi, this is Shigusa Kotoku on for Julian. Thanks for taking my question. My first question is on the Q4. Good morning. My first question is on the Q4 operating margins. I think they're implied down year over year in the guide. So is this both segments, and can you just provide some color to what's the big headwind here?

So the margin impact is primarily you're seeing in utility, and that is a couple of things, and we'll touch on each of these. First, we're seeing an anticipating price-cost productivity neutral in the fourth quarter in utility. We are seeing higher levels of inflation come through in the back half here. We are seeing higher levels of price realization of the utility business implemented price in July. And as they work their way through the backlog, that price realization is ramping up as the back half is progressing, and that is serving to offset that cost inflation that we're seeing. But it does have price, you know, it has an impact on the margin, just trading price cost dollars there. Number two is we've got some investments. As Gerben was just talking about, capacity expansion in key areas. Some of that is CapEx dollars. Some of it shows up in OpEx dollars, but really important that we're investing for our future in these growth initiatives. Some of that is also beyond CapEx and capacity is also targeted at new product introductions, and those new products are serving, you know, things like 765 and data center products and things of that nature. So investments are also included in there. And then we also have some spillover. We talked about our expectations of IEPA refunds coming through in the third quarter of about $30 million of refunds with about $10 million of partial offsets of customer considerations. And this kind of straddles 3Q. We did receive the $30 million of IEPA refunds in the quarter as anticipated, and while we were expecting about $10 million of customer considerations and other, we realized about $5 million of that in 3Q, and about $5 million of that is going to spill over into 4Q. So that's also part and parcel to that margin dynamic that you're seeing in utility in the fourth quarter.

Okay, thanks. Just to be clear, electrical, you're expecting it to be up year over year, or it's also down?

Yeah, I'd say we haven't given by segment margin, but I think electrical's got tailwinds from, obviously, the NSI acquisition and then a lot of the same dynamics that Joe just outlined.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Chris Glenn of Oppenheimer. Please go ahead, Chris.

Yeah, thank you. Good morning, everybody. A little bit on HUS, curious on the $500 million or more year-to-date backlog build, if that's pretty much all grid infrastructure, if there's any kind of advance or green shoots at the grid automation besides the P and C. And also if there's any update on the high-voltage transmission sort of next-gen architecture.

Yeah, Chris, it's in both areas of both grid infrastructure and grid automation that we're seeing that. And to give maybe some context to that, it's about up 30 percent from where we were at the beginning of the year. And this is what gives us more confidence as we go into 2027 with just higher visibility to some of that demand. And as far as the 765, it's an area that so far we've been successful at. It's actually what we do for a living is, you know, the products that go into the transmission and substation for 765. We've been continuing to build that up to higher voltages over the years. So 765 is just a natural progression for us. We talked about in the past having one project that will start shipping here as we go to the end of the year and into next year. I'd say the pipeline for that is growing, and we have products that we're working with our customers with to specify. These are all specified products, so we feel really good. It does require investment, and Joe talked a little bit here in the fourth quarter. So, you know, before you can get these products up on the line, you're doing a lot of design testing on it. We have some of those capabilities in-house, but some also go to third parties. So there's an investment that's required to get these products specified and ready to go, you know, on the lines. But I would say that's progressing, you know, very well, and we believe, you know, over the next years. you know, will benefit from those voltages coming online.

Yeah, is that something that pulls your share even higher, at least nominally, directionally?

Yeah, I mean, I don't know that it would be materially higher. I mean, we're, you know, clearly very well positioned for it. I think if we look generally in these kind of materials, you know, we're a leading supplier to the market in it, and I would expect that to be similar here.

Yeah, makes sense. And then last one, just comments, latest thoughts on the fit for the ECLARA portion.

Yeah, I would say, as we've talked in the past, this is a business that we've, you know, changed the direction in a little bit, you know, focused on, you know, electric meters, muni co-ops on the AMI side and the installed base of wax. You know, we've taken structural costs out of this business, and from here, you know, our expectations of it is to, you know, have more modest growth and improve the margins. And, you know, just as a reminder, this is less than 10% of HUS revenue exiting this year and well below that on an OP basis. So, you know, we would expect it to stabilize and, you know, drive less volatility going Great.

Thanks, Gerben.

Thank you. Our next question comes from the line of Tommy Maul of Stevens. Your line is open, Tommy.

Good morning, and thank you for taking my questions. Hi, Tommy. Gerben, I wanted to start with a question on your electrical solutions margin approaching 25% for the quarter. You did call out NSI integration as a head of plan, so that's got to be part of it. But if you pull that away, what other factors were favorable this quarter? And as we think toward next year, before we all put 25 in our model for 2027, is there any temporary benefit you have this quarter that we should be mindful may fall away going forward?

Yeah, good morning, Tommy. So I would say the anchor of that margin performance in the quarter was strong organic volume contribution. and that strong volume has come in in key product lines, high-margin product lines that are serving data center, in addition to the contribution and the nice contribution we were anticipating from NSI. So certainly third quarter is seasonally the strongest, you know, revenue and margin performance quarter of the year for us. We're very pleased with the margin performance of electrical in the quarter, but certainly this isn't the ongoing run rate performance. It certainly is the seasonal performance. But we do continue to see a strong margin in electrical. And, Tom, we've talked about this long-term margin expansion program that Mark Mikes and the electrical segment team have been driving, which is really multifaceted and includes the segment unification strategy, our go-to-market strategy with our broad electrical solutions-focused commercial team. We've talked about portfolio management. We've talked about business simplification and management delayering and consolidation, new product intros and key areas. So a lot of variables driving this long-term margin expansion program through electrical. and we really see us in the middle innings and continuing that margin expansion program. So while you are seeing a real strong third quarter margin, we think about it more broadly that the electrical solution segment will continue to drive margin expansion in 2027 and beyond for all those reasons.

Thank you, Joe. And as a follow-up, I wanted to ask about the capacity adds, particularly in your transmission and substation businesses. I noted that it should unlock some revenue for you into next year, but assuming that occurs, are you in that case fully meeting the demand, or should we still think of this as a capacity-constrained market?

Yeah, I would say this, I mean, this is not taken in the form of, you know, you add a huge plant, you have an incremental step and then you're done or you're planning for, you know, multi years out. I mean, some areas of this market, if you think about some of the other equipment, that's exactly how you have to plan capacity. add for us still the capacity add are incremental even when we do roof line extensions so it's it's it's a question of staying ahead of it so certainly the capacity that we're adding next year isn't to solve for multi-year we're going to have to continue to add capacity in 27 for 28 and 28 for 29 and and you know we view that actually as as a good thing because it it it limits you a little bit from getting too far ahead of yourself, but I would see it in that kind of construct of how we're thinking about capacity at multi-year.

Thank you, Urban. I appreciate it. I'll turn it back.

Thank you. Once again, to ask a question, please press star 11 on your telephone. Our next question comes from the line of Alexander Virgo of Evercore ISI. Your line is open. Alexander.

Great. Thanks very much, gentlemen. Good morning. I wondered if you could just talk a little bit about two things for me. The first one, the $15 million in grid automation, if I adjust that back, it looks like automation was kind of flat year on year instead of building on something of the momentum that you saw in Q2 against an easier comp. So I'm just wondering why we should be feeling better about that as we go forward uh in into next year uh and then secondly the the data center business um you're obviously very strong um and and your comments on backlog are helpful uh and and the 27 um sort of initial view is helpful but obviously a dark green arrow masks a lot of potential growth uh next year so i wonder if you could just give us a little bit of a hand on what that might end up looking like in HES. Again, in the interest of putting a sensible sort of number into the model to start with. Thank you.

Good morning, Alexander. So yeah, I'll start with your first question. That's a $15 million flip in grid automation and normalizing 3Q, 4Q. You're thinking about that the right way. And that $15 million flip would have been very consistent with our expectation for the back half, you know, 90 days ago. So just that movement from 3Q to 4Q normalizes the expectation of grid auto that would have been positive in the third quarter. And we're anticipating now with that 15 million falling into the fourth quarter that we see double digit growth in grid auto in the fourth quarter because of it. The second question on the data center business and the backlog, certainly data center has been really strong for our electrical business, and we're anticipating that we exit the year with about 30 percent, sorry, 15 percent of our electrical segment revenues tied to data center. And we will provide more color and insight on our 2027 guidance on data Center come January, but at this point, we're anticipating that Data Center continues to grow at very attractive levels in 2027, off of a higher base for us as we exit this year.

Okay, great.

I would now like to turn the conference back to Dan Inamorato for closing remarks, sir.

Great. Thanks, everybody, for joining us.

I'll be around all day for follow-up calls. this concludes today's conference call thank you for participating you may now disconnect