Operator: Hello, and welcome to Hubbell's Second Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Dan Innamorato. You may begin.
Daniel Joseph Innamorato: Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the second quarter of 2025. The press release and slides are posted to the Investors section of our website at hubbell.com. Joined today by our Chairman, President and CEO, Gerben Bakker; our Executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to the expected future results of our company. These are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and 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 W. Bakker: Thanks, Dan. Good morning, and thank you for joining us to discuss Hubbell's second quarter 2025 results. Hubbell delivered double- digit adjusted earnings per share growth in the second quarter. driven by strong organic growth in Grid Infrastructure and Electrical Solutions as well as year-over-year adjusted operating margin expansion of 120 basis points. We are raising our full year outlook today, and we remain confident in our ability to deliver attractive financial performance for our shareholders over the near and long term. As detailed in this morning's press release, our results and outlook this morning are presented on a FIFO basis. Bill will provide you with some additional details in a few minutes, but this transition enables a greater consistency of cost accounting method across our businesses and better matching of expense and revenue recognition, particularly during inflationary periods. While raw material inflation and tariffs are driving incremental cost inflation relative to our initial outlook, you will see throughout today's presentation that we have been proactive in driving price and productivity across our portfolio, and we are well positioned to achieve positive price/cost productivity in 2025. In Utility Solutions, performance in the quarter was highlighted by 7% organic growth in grid infrastructure. Transmission and substation markets remain strong as our utility customers invest to interconnect new sources of load and generation on the grid, and distribution markets returned to growth as the recent customer inventory normalization cycle has run its course, and our sales growth in the quarter recoupled to reflect solid end market demand driven by grid hardening. Grid infrastructure orders remained strong, up high teens year-over-year in the first half and supporting our expectation for strong organic growth in the second half. While grid automation performance was weaker than anticipated, strong growth in our higher- margin T&D components product categories drove favorable mix dynamics in the quarter. In Electrical Solutions, we delivered mid-single-digit organic growth with continued adjusted operating margin expansion and 9% adjusted operating profit growth. Our segment unification efforts and our strategy to compete collectively are driving outgrowth in key vertical markets, most notably evidenced by strong data center growth in the second 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. While the macroeconomic and inflationary environments remain dynamic, Hubbell is well positioned in attractive markets with a leading portfolio of brands, and we are proactively managing our cost structure and pricing actions to drive continued profitable growth. Now let me turn the call over to Bill to provide some more details on our financial results.
William R. Sperry: Thanks, Gerb, and welcome, everyone. Thank you for joining us. And maybe before my comments, if I maybe just offer a personal note of support. Any of you who are in Midtown yesterday, a rifle being discharged at Park Avenue 52nd Street is a pretty disturbing day. And I just hope you and your people are all okay. So I'm going to start my comments on Page 4 of the slides that you hopefully have found and start with our adoption of a unified FIFO-based inventory accounting standard. Our previous state had been roughly in very rough terms, half LIFO, half FIFO. That was really just an outcome of companies we had bought or companies we had sold. We just brought them on in their prior standards, and we thought this was a good time to make the effort to harmonize that with maybe three specific benefits. The first being running the company under a single methodology, I think allows us to simplify our business reviews and have everybody running the same way. I think secondly, in an inflationary environment because of the fact that our pricing typically takes about a quarter to get into the revenue stream we find this creates a better match of the timing of when new higher costs are recognized and when those new prices are recognized. So previously, we created a distorting lag and asked you to be patient, and I think now we can offer you a more accurate recognition of our margin in the quarter that it's happening. And I think third, I'm hoping it puts us from your perspective on the same footing as our reporting peers. So hopefully make it easier for you all to make comparisons and contrasts and better judgment. So obviously, none of this destroys or creates profits during a cycle. It's just the timing of when the expenses are recognized. So the implications you can see on the right-hand side of the page was a $29 million decrease in COGS in the second quarter and a $20 million decrease in COGS for the first half. So you see the impact on first half of '25 was about $0.30, and that's equivalent to the range in guidance that we've made and that Gerben is going to talk about more at the end of the conversation. The other implication is accelerate some tax payments to be made over the next several years, and interestingly, those payments will be more than offset by what we're expecting to be cash benefits from the new Big Beautiful Bill Tax legislation that was recently passed in early July. So all of this, we just wanted to remind on the bottom of the page. We feel the obligation to continue to put out a high-quality reporting framework. We think a more harmonized standard continues to contribute to that, and we're just calling out here, reminding everybody that we do things like fully burden our segments with corporate costs. We include restructuring costs in our results because we feel they're an important part of our ongoing performance, and we as well recognize the benefit. So enough, hopefully, on accounting. So turning to the performance. I'm on Page 5. Our sales were up in the quarter 2% to just under $1.5 billion. There was general strength in our Electrical segment, and in the utility side, the strength was on the grid infrastructure area, and in grid automation, we had a weak quarter of double-digit contraction. If you put the Electrical segment and the infrastructure side together, you'd have a mid-single-digit growth rate and that grid automation piece providing a couple of point drag to the overall sales results. Second column, you see adjusted operating profit. The dollar is up 8% in the quarter to $362 million, and the margins widened by 120 basis points to 24.4%. If we talked about the drivers there. Interestingly, we tend not to talk about mix very frequently with you all, but it so happens that the area of contraction in grid automation and Aclara is towards the lower end of the spectrum of our margin of our portfolio versus the areas of growth, namely Burndy and grounding and connectors and T&D area of utility happen to be quite high margin areas. And so there is to just the market growth, just a natural mix benefit. As well, we continue to manage price cost very well and as well the FIFO impact as we discussed on the previous page. The third column there is adjusted earnings per share. You see grew on a dollar basis 11% to $4.93 outgrowing the operating profit growth with some non-op tailwinds. Last year's tax rate was a little bit higher. And I think as we've been talking about with you all during the first half of the year, we bought some shares, about $225 million of share repurchases. So that creates a little bit of non-op lift as well. And on the fourth column, you have the free cash flow, good growth in the quarter. And importantly, we feel continuing to track to the 90% conversion that we're targeting to achieve through the operating year of 2025. So let's disaggregate the enterprise results into the 2 segments. And on Page 6, we'll start with utility. You see 1% growth there to $936 million, all of that growth being organic. That unpacks into the two pieces. One is the grid infrastructure, the more hardware side of the business. That's about 3/4 of the segment, and you see 7% growth there, and that disaggregates into double-digit growth in transmission and substation, continued very healthy demand there. And the distribution side, that last mile connecting to the house or the billing growing at a mid-single-digit rate of sales. Important to note that year-to-date, our orders are up high teens in this area. And I mentioned that importantly, when Gerben gets to our guidance and our outlook for the balance of the year, certainly, that order book is influencing very heavily how we think about providing you guys guidance here at the halfway point. So I think we continue to see the trends of grid modernization and electrification alive and well, very good news. I think additional good news and quite noteworthy to see that as the distribution products grew, we can say that the channel destock has concluded. I'm sure you are as happy as I am to not have us discuss that any longer with you all. So that feels good to emerge from that. Grid automation at a 13% contraction, about 1/4 of the total segment. We've had some roll-off of large projects that were not backfilled, and we really have the situation where we have been coming out of a heavy backlog year that was created when the chips weren't available the year prior to that. And so we've had some erratic comparisons to be made. And I think when we get to the outlook, we'll talk a little bit more about, I think, how grid automation feels to be in a stable and growing environment finally. On the operating profit side, on the right-hand side of the page, you see the dollars grow by 7% to $239 million in the quarter. Margins up 140 basis points, driven by continued price realization, managing price cost quite effectively. Again, good mix there between the infrastructure growth and the grid automation contraction. So solid bottom line performance for that segment and good growth trends inside the core piece of grid infrastructure. We'll talk about Electrical segment on Page 7. We see a solid quarter turned in by the segment, 4% sales growth to $545 million. largely organic, but there was a small contribution from the Ventev acquisition, which you'll remember, which is wireless infrastructure products. As we think about driving that mid-single-digit growth, data centers continues to be a very significant contributor to our balance of systems product portfolio that's exposed there. The light industrial markets were very strong for us for our connectors and grounding products. Heavy industrial, certainly more mixed than nonres, a little bit soft. As you look to the right side of the page on the operating profit, 9% growth in dollars to $124 million, margins up 1 point to 22.5%, they are dropping through incrementals on their volume, managing price cost and they continue to push productivity. So I think you all remember Mark Mikes leading this segment, doing a good job on competing collectively on the top side, working around some sales force realignments that we think have been successful in vertical market selling and cross-selling and continuing to work some channel conversions and on the cost side, continuing to become more and more efficient as we create a real segment rather than a series of vertical businesses. So what I think Mark is pulling off here and his team is consistent multiyear momentum in the Electrical segment and we see it continuing to grind upwards and improve. And we're very pleased with his results and I think he's got still years to go on that improvement side. On Page 8, I'm going to talk about the markets as a setup, and Gerben is going to come back and talk about our outlook and guidance and kind of have these market perspectives maybe as input into the top line of his guidance comments that he'll share. So what you see in the inside of both of the circles is roughly 4% to 6% organic sales growth. It's roughly equal between the segments and it's roughly equal contributions from price and volume, though, a little bit price skewed versus volume skewed there, and so if we start with Electrical on the right, we think the second half will be quite similar to the first half. You'll see from around 10:00 to around 3:00 there in the circle. We're a little more cautious around heavy industrial and nonres, contemplating flat contributions for the year. But as you work down, you start to see light industrial, renewables, you're seeing low and mid-single-digit contributions. Clearly, the star of the show continues to be data centers, and we're anticipating 30% growth there. On the left side, you've got our utility markets, and what you see from about 10:00 to 4:00, you see the grid protection and the electrical distribution, high singles and mid-singles. Again, I'll just note that electrical distribution of mid-singles, it maybe looks modest next to the transmission and substation, but that is an inflection, just to remind us, coming off of its destocking, and so that's quite good for us to see that rebounding. The mid- and high teens performance of substation and transmission markets we just see continued strength there. Our positioning is very good, and I think our sales growth is going to continue to be strong. Telecom is worth mentioning as another inflection point. I think you all recall us going through last year with some significant contractions there in the Enclosures business driven by telecoms. And again, quite encouraging to see them finish out any of the overstocking situation plus potentially any market weakness that was combining with that to return to growth. So that's quite good. You see the Aclara piece of meters and AMI down 20%. And I think that's worth maybe some comments clearly, the large projects and a lot of the backlog that we were fulfilling from that point in time when in the previous year, the chips have become unavailable, it was difficult for us to ship. Those got fulfilled and created quite a difficult compare for last year. We've, in response, managed cost, really working to moderate the decrementals there. And I think if I were to describe the position that Aclara is in, I would say the last 3 quarters have been quite flat sequentially. We think that's a -- we're kind of down to that stable base of smaller projects, MRO, good business with muni and co-ops and the more public utilities, and we think we're expecting that in the fourth quarter Aclara will return to growth and be able to have a steadier operation moving forward as we sort of absorbed this reaction to that heavy backlog here in the prior year. So with those pieces, I'm going to turn it to Gerben and have him synthesize that into our outlook for you.
Gerben W. Bakker: Great. Thanks, Bill. We are raising our full year adjusted earnings per share outlook to a range of $17.65 to $18.15. This represents a raise of $0.30 at both the low and high end of our prior outlook range. We anticipate 4% to 6% organic growth and full year adjusted operating margin expansion to drive high single-digit adjusted earnings per share growth at the midpoint of our range. This outlook is consistent with our long-term financial framework, which we believe will deliver differentiated returns for our shareholders over time. We are confident in our ability to navigate through near-term macroeconomic and inflationary uncertainties to deliver on these increased financial commitments in 2025. We are seeing strong evidence of secular growth megatrends in the largest, highest margin areas of our portfolio, which we believe will underpin strong performance in the second half of 2025 and over the next several years. We are confident that Hubbell's unique leading positions at the intersection of grid modernization and electrification, combined with structural opportunities in our operating model and capital deployment potential will continue to drive long-term shareholder value creation. With that, let me turn the call over to Q&A.
Operator: [Operator Instructions] Our first question comes from the line of Jeffrey Sprague with Vertical Research Partners.
Jeffrey Todd Sprague: Just on electrical distribution, the return to mid-single-digit growth. I'm just wondering if that is your view of what the underlying market is growing, and we should view that as sort of a steady-state growth rate from here? Or do, in fact, you think even though you're not talking about inventory in the channel, it still might be an issue and it's perhaps muting the growth rate. So you grew through it this quarter, right? But the question is, is mid-single-digit growth really kind of the sustainable growth rate from here?
Gerben W. Bakker: Yes, Jeff, maybe I'll start with it. I think the short answer is yes. Mid-single digit is the underlying growth rate, what we see reflected of end user demand is what they're actually hanging on the infrastructure. It does improve on the second half, though, based on just easier comps, right, compared to last year. But yes, we believe fundamentally, longer term, this is a mid-single-digit growth area with a combination of MRO replacement and grid hardening.
Jeffrey Todd Sprague: And then on the return of growth in Aclara in the fourth quarter, I guess that would also mostly just be a comp issue. Putting aside comps, do you actually see a pickup in activity there, project or otherwise that would create a situation where we could expect some growth out of that business in 2026?
William R. Sperry: Yes, Jeff, the trajectory in the last few quarters has been quite flat sequentially. So that's the start to get flat. And as you look out and you see pipeline, I think it's not at all unreasonable to think of it as a low single to mid-single-digit growth from this kind of new lower base.
Jeffrey Todd Sprague: And just on tariffs, I'm sorry if I missed it, but can you share with us what the tariff impact embedded in your results are, how much pricing you're getting against that? And maybe just a little bit more color on price in the 2 segments.
William R. Sperry: Yes. So we got a couple of points of price, Jeff, in the first half. And we are in the second quarter, slightly ahead of tariffs on a price/ cost basis. We have expecting more tariffs to hit third quarter and more price to hit. So we feel that we acted pretty early, and we feel that the market kind of accepted those increases based on the tariff logic and that those prices have stuck reasonably well. So we're feeling we're feeling good about our ability. There's no question it's a challenging environment and having the regime change quickly and with quite little notice, maybe something being put on and being delayed. But nonetheless, I think we're managing that quite well using price, and we feel we're ahead at this split second.
Operator: Our next question comes from the line of Tommy Moll with Stephens.
Thomas Allen Moll: Wanted to start with a conversation on copper specifically and commodities more broadly. But copper has obviously had a big move here and the question arises, what, if any, impact do you contemplate for this year's earnings? And if I can just make it a 2-parter maybe more broadly, where are you exposed versus well covered just in terms of the hedge strategy across all the commodities that would be meaningful here?
William R. Sperry: Yes, Tommy. So I would say if I answered it backwards, we use the price lever as the way to hedge against commodities and metals, and so we feel not exposed. We actually feel well covered. when we introduced this framework last quarter, we're taking your question about the commodities, and even though we may not be paying tariffs, we were considering that metal inflation to be tariff related because a lot of it was caused by producers being able to take advantage of a price umbrella. So there's been movements. Our exposure is copper, steel, aluminum, all of those, and I hear you on copper, there is maybe some uncertainty going forward, and yet we continue to be confident that we can use price there, Tommy, and we've got very active ongoing dialogue with all of our customers and distributors talking about that, and I think that dialogue is being well informed by analytics and price charts and all of that. So I think the raise to guidance, you should assume from us to mean we feel confident that we can cover that kind of inflation with price.
Gerben W. Bakker: Yes. Maybe more specifically say, right, if copper is up more recently, if that rebates a fact, it will require additional pricing. But under the new construct of FIFO, we got the time, right? You'll see a delayed impact of that copper cost coming through and it gives us the time to price for it. And I'd say copper is one example, but we continue to see, right, whether it's reciprocal tariffs or whether it's steel and aluminum here recently that went up, just a very dynamic environment, and it starts for us on the cost side and what we can do to mitigate these actions. This is supplier negotiation, both of sharing some of this cost or delaying the impact the supplier moves or reshoring, it's trade organizations that we use to help with exemptions. It's just all-out effort, and it's truthfully a responsibility that we have for our customers to offset some of these costs with cost actions and productivity. And then, of course, as well using prices where needed to be price cost neutral. So I would say very dynamic. Copper, for example, is just one of, I would say, various areas that we're looking at and proactively managing too.
Thomas Allen Moll: And then for my follow-up question, I wanted to ask on the EPS guidance you provided. There are some moving pieces this quarter. The LIFO/FIFO discussion has gotten sufficient airtime, but also there was the $0.50 contingency or sensitivity from last quarter that's no longer part of the conversation today. So my question is, if you think purely from an operational perspective, would you say things have gotten better, worse, same in terms of the earnings expectations for this year?
William R. Sperry: Yes. I think I would say that we continue to be on track to deliver the operational performance that we had promised at the beginning of the year, Tommy. And I would say that implies overcoming some new costs from tariffs, and it involves overcoming some slightly more challenging first half volumes. So we view that as a bit of an accomplishment operationally to be able to do that. And to your point of removing that contingency, we also feel is good and removing that uncertainty from our investors' expectations.
Operator: Our next question comes from the line of Chris Snyder with Morgan Stanley.
Tobenna Benedict Okwara: This is Toby Okwara on for Chris. I wanted to ask for a little bit more color around the end markets. I know that data center seems like it's remaining strong. We haven't really seen anything negative there. But any other areas of green shoots that have shown up, particularly on the electrical side?
William R. Sperry: Yes. Certainly, I think for us, green shoots wise this -- we've been talking, I think, for the better part of this year and probably extending into last, how we thought demand was always in reasonably good shape, and yet we were seeing some channel overstocking that was creating us making kind of fewer shipments than was being ultimately installed. And so that started for us in wiring device, and that's -- we worked our way through that now fully a year plus ago. It felt like the distribution, that last mile of utility product kind of was still working against us, and we feel really happy to say we think we're through that. So it's not a green shoot in that demand has changed, and it's just a green shoot in the amount of shipments we'll be able to make to replenish the fact that the channel has kind of rightsized itself. And by channel, I'm extending through a distribution customer to the end Q2. I also would point out the enclosures area where telecom had been creating some static, and we've seen that area revert to growth and year-over-year was flat in the second quarter, but sequentially up from the first quarter, and so we're quite confident that bottomed in Q1. So there are some nice green shoot improvements in our -- where we'll be able to ship, which aren't the exact same as that there's been market inflection, right? It's just the demand needed by the end customers. So we do think things have changed meaningfully here at the midway point of '25.
Gerben W. Bakker: And maybe the only thing I would add to that is on the light industrial side of electrical, that's continued to be very resilient with some of the projects, some of the reshoring there with the specific product, the grounding connectors is holding up really nicely.
Christopher M. Snyder: This is Chris. I wanted to follow up on price. So last quarter, you guys kind of planned for 2 price increases. I believe the first was in April, and there was a second one that was expected later in the quarter. I'm assuming that second one maybe didn't go through or got pushed out. So can you just kind of remind us on that second price increase? When is it coming? And I guess, how material could it be when we think about the organic guide into the back half?
William R. Sperry: Yes. So Chris, you broke up a little, but what we heard was a question about the price that was pulled in the second quarter and was there price pulled maybe towards the middle or end that hasn't yet been seen in shipments, and that is true. I think I might have heard you say, was that price increase delayed? I would say it was not delayed. It was implemented, but it hasn't yet shown up. So the 2 points of price that we're seeing in the second quarter should actually grow incrementally in the second half due to the phenomenon that you're describing.
Christopher M. Snyder: And just any -- could you kind of tell us like where that price ultimately will go to in Q4 as we look out about a fully realized basis?
William R. Sperry: Yes. I mean I think -- so we're describing 4% to 6% of sales in the full year. We're anticipating maybe 3 points of price in the full year with 2 in the first half, and that's kind of the construct, Chris, that we've got.
Operator: Our next question comes from the line of Julian Mitchell with Barclays.
Julian C.H. Mitchell: I think my first question, I just wanted to understand better perhaps the moving parts around operating margin expansion in the second half. It looks like there's not much of an expansion, I think, year-on-year dialed in, and that's presumably that sort of FIFO-related tariff hit coming through. But just wondered if you could confirm that. And is the -- sort of when thinking about Q3 versus Q4 dynamics, anything to call out there? I noticed R&R spend a bit higher in Q3. So should we expect a sort of better year-on-year margin performance in the fourth quarter because of price and less R&R spend?
William R. Sperry: Yes, Julian, that's -- you made a number of good points. And first of all, we are expecting our mix to continue to be favorable in the second half. We are anticipating, as you mentioned, several things you mentioned. One is the -- some of those tariff costs coming through, being offset by price dollar for dollar. Unfortunately, that's not always -- that's not margin friendly, it's OP neutral, but not margin friendly. And thirdly, we are anticipating some extra investing in the third quarter, both in restructuring and other investment areas. So you actually called out a number of the drivers there. And your -- I agree with your analysis, is exactly how I see it.
Gerben W. Bakker: Yes. It's actually a very good representation of exactly what's going to happen. Maybe the only point I'd make a comment on is on the investment because clearly, we're very, very focused on our cost to manage through this dynamic environment. But I'd also say we're not losing focus on our long-term needs and ambitions and the investments that we're making. So whether it's in restructuring, whether it's in new product development, whether it's in some of the areas of AI where we're looking at how can we gain efficiencies in our business longer term, we're really balancing areas where we're taking cost out of this system, both structurally and shorter-term actions against where we need to continue to make investments, and so you'll see some of those in the second half.
Julian C.H. Mitchell: That's helpful. And then just maybe looking out a little bit further. I think you mentioned just now the full year organic sales guide embeds a low single-digit volume increase and a sort of faster pace of volume growth in the second half of the year. As we sort of look out beyond this year, is that low single-digit volume increase the right sort of placeholder? Or do you think that you can sort of sustain that second half exit rate for some time into 2026?
Gerben W. Bakker: Yes. I would say -- think about it as consistent with what we provided in the Investor Day framework, which is kind of mid-single digit for our portfolio longer term.
Operator: Our next question comes from the line of Joe O'Dea with Wells Fargo.
Joseph John O'Dea: Could you just talk about the trajectory of growth within grid infrastructure as we move from first half to second half and you're coming off of first half orders up high teens, and so as we look at what, I guess, easier comps in distribution and the order strength, just how you're thinking about the back half growth rates and things like transmission, substation, distribution to get to something that seems like it would be a low double-digit organic growth rate in the back half of the year for utility?
William R. Sperry: Yes, Joe, I think it starts with continued strength, and we showed you those pie slices on Page 8. But transmission and substation has been growing, and we just see that just continuing through the balance of the year. So you've got a really nice contribution in the mid- and high teens there from a very substantial part of the business. I think secondly, as you noted, for distribution to now have started growing, and because of the destock dynamic, they're starting to face some easier comps, and so that will -- if it gets to mid-single digits for the year, it's going to have above that in the second half of the year, and I think the more wildcard is Aclara and the third quarter will be -- not to confuse, third quarter will be the fourth quarter of its contraction. So as it hits the fourth quarter of '25, it's the point in time, and that was what Jeff Sprague was asking about, right? But that now allows it to return to growth even on sequentially kind of flat, and so all of those things are coming together where you see teens order book and you start to see easier compares for Aclara and it starts to create, Joe, that kind of second half trajectory that you cited.
Joseph John O'Dea: Got it. That's helpful. And then I just wanted to shift to capital deployment. We see continued activity on the repo front. But just in terms of the M&A pipeline side of things, any characterization of how that looks, how you think about likelihood of any activity there in the back half of this year?
William R. Sperry: Yes. And your question is timed to the hour or so. We just closed this morning on a small bolt-on acquisition. It's in the utility space. It makes enclosures for water utilities and helps them collect and sends data and communicate that data, small, but a good sign to your question. We also, in the quarter, we sold a small business that was not really contributing to the growth and margin profile that we aspire to and so I use those as 2 small examples of us continuing to tend to the portfolio and weed out and add even if it's small, we think those are good moves to make. They end up not creating a huge financial contribution to this year, but we think are good for us in the long run. I think maybe more generally, the pipeline continues to be quite active. There are a number of private equity firms who have invested in our space, and one thing we probably can all count on is as soon as they buy something in that, whether it's 3-, 4-year time frame, they'll be looking to sell, and so that creates some opportunity for us, and I would say our business development teams are quite busy looking at things. And obviously, to the extent we have something to talk about, we would. But it certainly is our intention to continue to invest in acquisitions. We -- the pipeline has businesses and assets that we find attractive. And at the same time, I think our cash flow continues to grow. And so you did see us, I think, to prevent the balance sheet from getting a little lazy, you did see us buy $225 million of shares in the first half of the year. So you probably would have seen that average more in the $40-ish, $50-ish a year range. So it's a slightly maybe more balanced capital allocation than in the past, but we continue to be quite interested in acquisitions, Jeff.
Gerben W. Bakker: Yes. And maybe the only thing I would add, our focus for these deals is in the higher growth areas of our portfolio that we've aligned on. So think T&D, think data centers, think light industrial, all those markets that are growing higher. There is a good pipeline of deals. I think there's reasonably good availability of deals. They're both on the bolt-on as well as some larger ones in there. So I feel good that we're -- we have availability of these deals and that it continues to be focused on becoming more important, increasing our portfolio to the customers we serve in these attractive markets.
Operator: Our next question comes from the line of Brett Linzey with Mizuho.
Brett Logan Linzey: Yes, I just wanted to follow up on the grid automation and specifically the meter side. So encouraging to see that sequential improvement. But I guess, as you think about that stability you're pointing to, is it mostly just the MRO side? Or are you beginning to see some RFPs start to ramp back up on new projects that could be slated for next year?
Gerben W. Bakker: Yes, I'd say where the business is now, it's mostly on the MRO and smaller projects, I would say. This business is very highly focused and has always been on the more public power market, the co-ops and the munis. So I would say both in MRO as well as the more traditional projects. We are seeing some larger projects in the pipeline right now, we're quoting those. So that remains to be seen if -- whether we win these or when they will hit. But I think as we provide certainly the guidance here for the balance of the year and our comments into next year, it's a much more stable business. It's more the ongoing MRO and projects that we're seeing.
Brett Logan Linzey: Great. And then just shifting back over to the electric transmission and the substation piece, very strong growth. You talked about the good run rate into the back half. But thinking about the bouncing off point, as you assess some of the project queues and then your win rate separately on these projects, can you sustain that double-digit growth range into next year based on your current visibility in those businesses?
Gerben W. Bakker: Yes. Maybe I'll start with just our position in these markets, right? If you think about our portfolio in transmission and substation, I mean, this is where some of our core strength come from both the offering that we have, the portfolio that we have, the relationship and the specifications that we have. So we see these projects. I mean we've won some of the largest transmission projects that are being built in the U.S., Hubbell as a supplier. So the visibility, I would say, is good, and it's out there. It's multiyear that we're seeing there. So this concept of high single- digit growth that we said at Investor Day, we see visibility to that certainly in the next few years.
Operator: Our next question comes from the line of Chad Dillard with Bernstein.
Charles Albert Edward Dillard: So I was hoping you could bridge the old versus new earnings guidance. I think you had $0.50 of tariff before. Where does that go? How much is the FIFO versus LIFO transition? And anything you can call out on the core business or anything else?
William R. Sperry: Yes. So let's just use Page 9 as the way to bridge. So at the very beginning of the year in January, we had a 4% to 5% growth rate with 1 point of price. So there was 3 to 4 of volume. Now we're 4% to 6% of growth with kind of 3 points of price, so kind of 2 points of volume. So we're getting to our goal with a little bit less volume, Chad, right? So that's really the first point of note. Secondly, all that contingency from tariff risk has been removed. I think that's important to note. Thirdly, there's been $0.30 in the first half of the year of benefit to switch to FIFO, and that's been added to the guidance. So I think the way I would bridge it is saying we're operationally getting to the same point in January, as we said. We've overcome the tariffs in doing that through getting a little more price. That's come at the expense perhaps of a little bit of volume, but the margin and price cost management is allowing us to get there, and so I think that's how I would bridge the pieces.
Charles Albert Edward Dillard: Great. That's really helpful. And then with the change in tax laws, I think one of the offshoots is that there's going to be a lot more manufacturing construction. So I think you've talked about your content as a share of the project being, I think, somewhere around like mid-single digits. So how does that change if you're going to be moving into more manufacturing versus, I guess, like the baseline?
Daniel Joseph Innamorato: I'm not sure we understand the question there, Chad. You're talking about like systems control type applications?
Charles Albert Edward Dillard: Yes, systems control.
Daniel Joseph Innamorato: Yes. I mean, traditionally, we said it's a low single-digit percentage of cost in terms of components and what we traditionally make a systems control type business would be higher than that, obviously. I'm not sure it changes the overall blended rate for the segment, but certain businesses, yes, will be at the higher end of that. So you're looking at the substation space, for instance, we make up more than that low single digit if you include systems control.
Operator: Our next question comes from the line of Christopher Glynn with Oppenheimer.
Christopher D. Glynn: Curious about an HES question. You talked about continued progress with the sales force alignments and some channel conversions with years to go. Just looking to elaborate on that a little bit. And specifically, are you suggesting that channel share and distribution pickup runway is -- has several years of progression there?
William R. Sperry: Yes. Just I think starting with sort of the journey that we're on, Chris. So Mark, as you'll recall, helped us really take the utility segment and take a number of acquisitions and really create a business out of it rather than a series of verticals. And he's now had a couple of years in the Electrical segment leadership role, and he's really doing the same thing. And one of the things that he -- first initiatives that was pretty important was realigning the sales force. So rather than have sales force dedicated by product, it's now dedicated by geography. And so there's more cross-selling and we think that's leading to a really good customer response. And they find it easier to do business with us, and it's better for us because we get more selling time in front of the customer that's kind of cross-selling. Part of that also included creating some vertical teams around specialty verticals, data centers being the most obvious. And we found those to have been successful rather than us selling a product through distribution to data centers, we're now more aware and can sell a broader basket of products. And so to us, that initiative on the commercial end has, a, has been successful to date, and I'm saying it's still immature in its implementation and will get better and will improve, I think. And that's why I said I do think there's years ahead. And my years ahead also implied some of the efficiency things that Mark is doing, taking out redundancies in staffing and the like. So there's both kind of a commercial front-facing element to what he's doing as well as a back-end infrastructure overhead kind of element to what he's doing. And we're sort of -- it's just not a silver bullet boom. It's kind of a -- we grind it upward. And that's -- I think you've seen example. You've seen it in evidence already over the last year or 2.
Daniel Joseph Innamorato: Can we take one more question and then close it out? Sorry, I had some technical difficulties on my end. So take one more and then close it out.
Operator: Our final question comes from the line of Patrick Baumann with JPMorgan.
Patrick Michael Baumann: On the second half of the year, I was wondering if you could help me think through how to envision organic volumes ramping at the Utility segment. Does it go from like, I don't know, low single-digit organic volume growth in the third quarter to something in the double digits in the fourth quarter year-over-year?
Daniel Joseph Innamorato: Certainly not on a volume basis, Pat. If you're talking organically, again, you can kind of do the math on first half, second half. But volumes will ramp through the year and particularly again in the fourth quarter on some easier compares and then price will be a steady incremental contributor as the year progresses.
Patrick Michael Baumann: Okay. So volumes in the fourth quarter don't get up to double digit?
Daniel Joseph Innamorato: Yes, that wouldn't be reflected in guidance, no.
Patrick Michael Baumann: Okay. Maybe I'm just doing the math wrong on the price and organic growth stuff. Sorry if I missed this, this is a cleanup. I'm just backing into a margin guide for the year expansion of 50 basis points. Is that in the ballpark? And then on the segments, should we think about Electrical being above that rate and utility below that?
Daniel Joseph Innamorato: Yes, you're in the ballpark for the full year. And again, the segment drivers are going to be both impacted by the FIFO and LIFO transition. But yes, probably a little bit more in Electrical and utility.
Patrick Michael Baumann: And then maybe just last one, sorry, another cleanup. So I think the EPS is a little bit shifted last year and with the accounting changes this year, any way to think about the EPS growth in the back half of the year split between third quarter, fourth quarter? Any color you want to give on that?
Daniel Joseph Innamorato: Not really. Again, it's going to be based on the volume discussion we just had. It will probably be the biggest driver.
Operator: At this time, I would like to turn the call back over to Dan for closing remarks.
Daniel Joseph Innamorato: Great. Thanks, Lawanda. I'll be around all day for follow-up calls. Thanks, everybody, for joining us.
Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
