Hubbell Q1 2026 Earnings Call Transcript

Hubbell (NYSE:HUBB) held its first-quarter earnings conference call on Thursday. Below is the complete transcript from the call. Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more. The full earnings call is available at https://edge.media-server.com/mmc/p/z66aupdq/ Summary Hubbell reported strong financial performance in Q1 2026, with double-digit growth in sales, adjusted operating profit, and EPS, driven by 8% organic growth and strategic acquisitions. The company has raised its full-year 2026 outlook for total sales growth, organic sales growth, and adjusted EPS, citing confidence in its position in key markets such as electrical solutions and grid infrastructure. Hubbell highlighted a significant growth opportunity in high-voltage transmission, estimating a $1.5 billion market opportunity over the next decade, driven by the need to efficiently transmit large amounts of power. Operational highlights include a 21% growth in adjusted operating profit for the Utility Solutions segment, and strong demand in data center and light industrial markets driving Electrical Solutions growth. Management emphasized ongoing investment in capacity expansion and productivity improvements, maintaining a strong balance sheet to support acquisitions and share repurchases. Full Transcript OPERATOR Good day and thank you for standing by. Welcome to the first quarter 2026 Hubbell Incorporated earnings Conference Call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question and answer session. To participate you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised to withdraw the question. Simply press star 1-1 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 Inamorato. Please proceed. Dan Inamorato (Senior Director of Investor Relations) 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. The press release and slides are posted to the Investors section of our website@hubble.com joined today by our Chairman, President and CEO Gerben Bakker and our CFO Joe Capozzoli. 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. 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. Gerben Bakker Great. Thanks, Dan and good morning everyone and thank you for joining us to discuss Hubble's first quarter 2026 results. Hubbell delivered strong financial performance to begin the year with double digit growth in sales, adjusted operating profit and adjusted earnings per share. Organic growth of 8% in the first quarter was driven by double digit organic growth in our electrical solutions segment as well as our grid infrastructure businesses. Within the utility solutions segment, our core utility Transmission and Distribution (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. 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. 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 Hubbell'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. 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 Hubbell in high voltage transmission, a long term megatrend that sits squarely in our core and we are demonstrating early success in a multi year investment cycle. As background, 765kV transmission represents one of the most efficient methods to move large amounts of power over long distances 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. For Hubbell, high voltage transmission represents a significant multi year opportunity which is largely incremental to existing strength in traditional 345kV 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. 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. 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. Overall, we believe 765kV 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. With that, let me turn the call over to Joe to provide more details on our financial results. Joe Capozzoli (Chief Financial Officer) Thank you Gerben and good morning everybody. I am starting my comments on slide 5. Hubbell's first quarter financial performance was strong with double digit growth across sales, adjusted operating profit and adjusted earnings per diluted share. 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%. Consistent with our fourth quarter 2025 performance, both electrical solutions segment and grid infrastructure products within our utility solutions segment delivered double digit organic growth in the first quarter partially offset by anticipated softness in grid automation. Acquisitions contributed three points to growth in the first quarter with DMC power off to a strong start and integrating nicely within our Transmission and Distribution (T&D) business. From an operational standpoint, Hubbell 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. 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 continued to keep pace more than offsetting those higher levels of inflation on a dollar for dollar basis in the first quarter. 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. And as anticipated, we invested $7 million in our restructuring and related program to further streamline our operational footprint primarily within our Electrical Solutions segment which as a reminder Restructuring and Reinvestment (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, 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. 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, but the repurchases of shares at attractive 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. 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. Share repurchases represents an additional lever that we can and will utilize to return cash to shareholders over time. Turning to page six to review our performance by segment, Utility Solutions delivered another strong quarter with double digit growth in sales and adjusted operating profit. 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%. 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 Transmission and Distribution (T&D) N 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 Transmission and Distribution (T&D) 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. 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. 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. 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 declines. 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 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 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%. 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, he's 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. 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 as you'll see in our press release financials. Within the electrical solutions 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, price realization remains strong which combined with productivity more than offset cost inflation on a dollar for dollar basis in the first quarter. 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%. 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 Transmission and Distribution (T&D) and data center end markets. Operationally, we anticipate double digit growth and 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. So 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. 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 Gervin 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. Gerben Bakker Okay, thanks Joe. Turning to page nine 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 2016 and beyond. From an end market standpoint, our largest and most profitable businesses are exposed to end markets such as utility Transmission and Distribution (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 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. Hubble's portfolio is well positioned with more than 90% sales exposure to the US and over 2 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 Hubble's leading position in attractive end markets as well as continued execution on our long term strategy and 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 and A. Operator. OPERATOR 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. 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 it comes from Jeffrey Sprague with Vertical Research. Please proceed. Jeffrey Sprague (Equity Analyst) Hey, thank you. Good morning everyone. I just wonder 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. And is that 1.5 billion cam all incremental relative to your prior view on the market? Gerben Bakker Maybe we could start there. Yeah, maybe I'll start overall Jeff, with transmission and then substation. I'd probably categorize in that same area is that's continued to do really well for us. You know we're you know 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 they need. It's 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. There just wasn't a need for it. And I think that's becoming very clear right now that the ability to 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 and these are, you know, just taking it to the next higher voltages. You know, we were able to do that with our capability, certainly with our labs. 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. You know, anytime you have a 765, you need off ramps for that. Right. Where you take the power down, think highways and you know, offshoots of that, off ramps with substations and then you step the voltages down. So we think it's an upside profit and we think it can drive a point of growth above what we're currently projecting with transmission already. Jeffrey Sprague (Equity Analyst) 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 and D spending, calling the kind of the core distribution side of the business also growing at a stable rate. Gerben Bakker Yeah, you needed both, Jeff. That's why we don't see it crying out. Certainly we're not seeing that in the projects that are ahead of us, the orders that we're winning. I mean, it's a logical question certainly to ask is that how far can budget flex up? But you see too that utilities are continually increasing their capex budgets. And I think that's a reflection of acknowledging and realizing that you really need to spend it on all these areas to. To get the outcome you need. Jeffrey Sprague (Equity Analyst) Okay, great. Thank you. I'll leave it there. OPERATOR Thank you. Our next question comes from Julian Mitchell with Barclays. Please proceed. Julian Mitchell (Equity Analyst) 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. Joe Capozzoli (Chief Financial Officer) Good morning, Julian. Yes, as far as the operating margin goes for the year, you know, we're really looking at the full year with a. With a 20 basis point margin expansion 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. And certainly on the electrical side 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. 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. 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. Julian Mitchell (Equity Analyst) 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? Is it still mid high 40s? And so we're looking at kind of a 520ish EPS for Q2. Any pointers on second quarter or halves phasing please? Thank you. Joe Capozzoli (Chief Financial Officer) 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 we would anticipate a second quarter step up like we would normally see high single digits organic growth 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 2Q. Julian Mitchell (Equity Analyst) That's great. Thank you. OPERATOR Thank you. Our next question is from Tommy Moll with Stephens. Please proceed. Tommy Moll (Equity Analyst) Good morning and thanks for taking my questions. Hi Tommy. Hey Tommy. 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. How much of that is price versus volume and how do those compare to what you provided last quarter? Thank you. Joe Capozzoli (Chief Financial Officer) So coming into the year we were anticipating about 2 points of price and the majority of that was coming from wraparound from actions that we had implemented last year. 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 and that added about a point to our full year price outlook. So Our full year 6 to 9% organic has about 3 points price 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 Q3Q. So we would anticipate that that our contribution from price fades as the year progresses and our contribution from volume growth increases as we step through the year sequentially. Tommy Moll (Equity Analyst) Thank you, that's very helpful. I wanted to follow up on dmc. What update can you provide for us there? And in particular are there Any elements that you're seeing unfold better versus worse than the original plan. Thank you. Gerben Bakker Yeah, I would say, Tommy. Dmc, as we stated, I think in our last call off to a really good start. I mean this is 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. 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. I think our ability to get more out of that factory this year and next year is perhaps more a function of our ability to get capacity in place because orders are really supportive. So we're very, very pleased with it. And as we are with the systems control was another acquisition we did last year also in this space and with very similar dynamics of good demand and need to add capacity. We're very pleased with them. Tommy Moll (Equity Analyst) Thank you, Gerben. I'll turn it back. OPERATOR Thank you. Our next question comes from Nigel Koh with Wolf. Please proceed. Nigel Koh (Equity Analyst) Thanks. Good morning. Just want to go back to the margins. Good morning. How are the Section 232 tariffs sort of changing the landscape and maybe talk about both businesses And I believe that you were utilizing U.S. 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? Joe Capozzoli (Chief Financial Officer) 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. We also saw the repeal of IPA. 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. So that impact was not significant. We were paying 232 going back to Liberation Day. So 232 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. So overall not significant. On your question about margins quarter to Nigel Koh (Equity Analyst) quarter, we have that 20 basis points of expansion embedded in the guide at the midpoint for the full year, 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. Electrical is a little bit of 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. So that's how we see that. Yeah, that's great, 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. Some of the big players in that space, G venovas of the world are growing strong double digits in transmission, grid transmission. So I'm just wondering, do you see scope for that for your business to get up to those kinds of levels? And is the scope of your content increasing with time? Gerben Bakker Yeah, I would say maybe on the first one on the scope. So we continue to develop products, we continue to do acquisitions and you know both the DMC and System Control are two examples where scope is increasing if you, if you have additional product lines but also as you look at where the voltages go. So you know when we talked about 765, our content on that per mile would also go up slightly from, from the lower voltages. 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, you know. So certainly what we're seeing is double digit growth. Our scope is broad, you know and we serve, we serve the majority of. Right. If you think about a transmission line, you know 85 to 90% of material that goes up on that we source. So I would say we're going to get our fair share of that growth. Specifically how maybe a generator asset short term it's maybe a little harder for me to comment on that dynamic but I would certainly say we will participate and get our fair share of the build out. Nigel Koh (Equity Analyst) Okay, thanks Kevin, that's great. OPERATOR Thank you. Our next question comes from Joe Odea with Wells Fargo. Please proceed. Joe Odea 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? 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 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. Joe Capozzoli (Chief Financial Officer) 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. And that we're anticipating is going to be pretty consistent. 1q2q3q4q Gerben Bakker yeah, maybe on the distribution side. Of it. We've been talking for this for quite some time now is what's driving the need to invest there. And a lot of it is driven by just upgrading and resiliency of the grid. We dealt last year, in the last couple of years really with that destock where we talked about that underlying demand was still solid, but we're dealing with something very specific. So I think that's proving out now with the destocking behind us that we're actually seeing the underlying demand and you know, the drivers of it are really, you know, continued continued hardening. You know, I think it is slightly lower than the transmission and substation for the reasons that we talk of, you know, getting that power that's so needed in data centers and other areas. But we're very optimistic and there too, you know, if we think about the start to the year, it's not just off to a good start in transmission and substation, but distribution as well. Joe Odea 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 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, but broadly across industrials. But the degree to which you saw any of that in the quarter, it doesn't sound like much carryover impact anticipated throughout the year. Joe Capozzoli (Chief Financial Officer) 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 the run rate of that new price. So that all sets in the course of second quarter and we did not see any significant impacts or unusual behavior with pull forward on demand. 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 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 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. Joe Odea That's helpful. Thank you. OPERATOR Thank you. Our next question is from Chris Snyder with Morgan Stanley. Please proceed. Chris Snyder (Equity Analyst) Thank you. I wanted to ask about data center, obviously came through really good 40% in Q1 and you guys did raise the full year data center guide now I think over 25% previously up 15. So I guess my question is, is this new 25% plus, is that, you know, basically all of your available capacity or if demand strength is sustained, you know, is there opportunity to ship more this year? Thank you. Joe Capozzoli (Chief Financial Officer) Yeah, we spend a lot of time and. Good morning Chris. On that topic, with all the activity and the significant demand that's out there in data center, you'd recall that we've got roughly half of our data center exposure is 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 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. On the short cycle book and bill side, we do continue to see strong order demand coming through. We continue to add capacity in that space. You know, 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, you know, that short cycle book and bill side of products that are needed for data center. 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 so as to increase our capacity and serve that growing demand. Chris Snyder (Equity Analyst) 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 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. But I guess the question is, should we expect the same thing into this next round of price increases? Like you guys will lead a little bit off the bat because you're now fifo and then it catches up a little bit in maybe two, three quarters out. Thank you. Joe Capozzoli (Chief Financial Officer) 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. And we continue to run positive on PCP in each of the quarters. 2q3, q4q. Last year we were positive PCP on a dollar basis to start this year. 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 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. Chris Snyder (Equity Analyst) Thank you. OPERATOR Thank you. Our next question is from the line of Chad Dillard with Bernstein. Please proceed. Chad Dillard Hey, good morning guys. My question for you is on Aclara. Can you talk about the sales in the quarter and how that's trended sequentially 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? Gerben Bakker Yeah, and maybe I'll start. As you know, Clara is part of the grid automation business. And you know, that business, you know, continues to inflect up. You know, we're down, the decline started to shrink and you know, while we Chad Dillard still are a little bit down year over year in the first quarter as we communicated, we expect that to start turning to growth. But if you then feel that a part, and specifically to your question of Aclara versus the rest, clearly Aclara had been declining higher while the other part of the business was growing. 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. 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 Jeff's very first question of how our utility managing budgets and our view and certain indications with conversation is that, that they are deselecting this a little bit over the other areas of investments while we've seen lesser projects come through. But the challenge for utility is going to be this equipment is going to fail at some point. The lifespan of this is not in the range of what our components, our typical components are. So what we're seeing is more projects, discussions right now we're quoting more projects. You know, we recently, you know, won a pretty nice piece of business that's multi year. So you know, I think from where we sit today where this business decline, you know, we should expect going forward to start seeing, you know, this business realizing modest growth. But you know, we feel it's been, it's stabilized and maybe that's another, you know, really important that we've seen the bottom. We're now starting to come up, we're not super expecting, you know, great growth Rates, but, you know, the dynamics are such that this business should grow from here. Great, that's helpful. And then moving over to grid infrastructure, I know in the past you guys have talked about your order within distribution. I was hoping you 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 restock in the channel versus just like pure sell through into the end market? Gerben Bakker Yeah, maybe start with the second one. Our view is that the demand is what's going up on infrastructure and not going to stock. And, you know, we talked. We're 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, but particularly to tmd, also up, you know, 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 a more short cycle business. You know, our orders were up, you know, over one that's not atypical in the first quarter where, you know, people are starting to get their orders in to get ready for construction season. And that's typically a little bit over one where we're up stronger over that. We're, you know, 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 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 and it's what's driven us to raise our organic guidance. I realized there's a piece of that, that's price, but there's a piece of that's volume as well. 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. So nothing unusual in it. Chad Dillard Thank you. OPERATOR Thank you. Our next question comes from the line of Scott Graham with Seaport Research Partners. Please proceed. Scott Graham (Equity Analyst) Yeah, hi, good morning. Thank you for taking my question. I was just wondering, you've got a global manufacturing footprint, global company, you know, with inflation higher, with some of this geopolitical uncertainties, 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 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 and Then I'm hoping to the follow up would be how is your acquisition pipeline? Is there anything. It looks like your pretty balance sheet is very lean right now and just wondering what the outlook was for 2026. Anything you can say. Thanks. Joe Capozzoli (Chief Financial Officer) Good morning Scott. Maybe I'll take the first one and I'll hand it to Kervin for the second. So on the supply chain front, so we're not seeing any significant impacts or constraints on the supply chain side, 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, 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. 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. 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. Gerben Bakker And let me take the second one on M and A. You're right to point out that our balance sheet certainly supports, you know, doing acquisitions at larger scale than perhaps we were able to afford in the past. And if we look at the, maybe even before we look at the pipeline, we are focused clearly around the core areas of our business. So if you think you know anything in T and D, if you think about things around the data center, if you think you know, lines around the light industrial markets, those are all areas that we find very attractive. 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, 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 an other attractive area to deploy our capital. Of course our 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. The second one being ma and I'd say there's a good pipeline there, both of what we'd call maybe the bolt ons, even the sales are getting larger 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. Scott Graham (Equity Analyst) Thanks a lot. OPERATOR Thank you. And our last question comes from the line of Neil Burke with ups. Please proceed. Neil Burke (Equity Analyst) 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 opportunity relative to Hubble's 4 or $500 million transmission business today. I just want to get a sense of how to think about the growth opportunity. Yeah. So if you think about that math a little bit, I'll help you. It represents about 7,000 miles of, of high voltage transmission. How we get to the billion and a half with our content and that's over 10 years and you know, who knows if that's longer or shorter. But if you use that as a basis and then, you know, we, you know, we're not the only participant in that. So, you know, we, you know, certainly have, you know, a very good position in that market with our customers. 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 in the absence of it. Gerben Bakker That's helpful. And yeah, the RCO 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. So I mean, could that be more market opportunity if there's increasing, you know, content of 765 kilovolt in the US like on top of that 1.5 billion, or is it sort of too early to say? I think the 1.5 was related to high voltage transmission overall, Neal. And so obviously there's a baseline market of transmission that's, that's also growing strongly, as we've said. Neil Burke (Equity Analyst) And so not sure what the question was driving that, but. No, no, no, that's clear. That's clear. Thank you. OPERATOR Thank you. Ladies and gentlemen. This concludes our Q and A session. I will turn the call back to Dan Inamorato for closing remarks. Great. Thanks, operator. Thank you everyone for joining us. We'll be around all day for follow ups. Thank you. And this will conclude our conference. Thank you for participating. And you may now disconnect. Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.