Operator: Thank you for standing by, and welcome to the Hubbell Incorporated Second Quarter 26 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press *1 on your telephone. If your question has been answered and you would like to remove yourself from the queue, simply press *1 again. We ask that in the interest of time that you please limit yourself to 1 question and 1 follow-up. You may get back in the queue as time allows. As a reminder, today's program is being recorded. And now I would like to introduce your host for today's program, Daniel Innamorato, Vice President, Investor Relations. Please go ahead, sir.
Daniel Joseph Innamorato: 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 26. The press release and slides posted at the Investors section of our website at hubbell.com. I am 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 as defined by the Private Securities Litigation Reform Act of 2 thousand. Please note the discussion of forward looking statements in our press release, and considered incorporated by reference into this call. Additionally, we may also include non GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included are included in the press release and slides. Now let me turn the call over to Gerben.
Gerben W. Bakker: Great. Thanks, Daniel. Good morning, and thank you for joining us to discuss Hubbell's second quarter 26 results. Hubbell delivered strong financial performance, with double digit growth in sales, adjusted operating profit, and adjusted earnings per share in the second quarter as well as year-to-date through the first half of 26. Our strong positions in attractive end markets as well as continued execution on our strategy are demonstrated by our first half performance. As megatrends continue to accelerate, most notably in data center markets and load-growth-related investment in utility T and D markets, we are seeing continued strength in our order book, which gives us increased visibility into our second half outlook. Operationally, we are managing inflation effectively through price and productivity actions, investing in capacity expansion to serve our customers in high growth areas, and deploying capital to further upgrade our portfolio in high growth and margin areas within our core. We are raising our full-year 2026 guidance this morning to reflect double digit growth in organic sales, adjusted operating profit, and adjusted earnings per share at the midpoint of our range. Turning to page 4. We are pleased to have closed on the previously announced acquisition of NSI in early June. NSI is a business we know very well and have followed for a long time. It operates in end markets with common customers, similar manufacturing processes, and a broad portfolio of critical electrical components with low cost of ownership and high cost of failure. The acquisition of NSI fits squarely within our overall strategy. And enables us to double down on our attractive core while adding another high growth, high margin business to our portfolio. Strategically acquire leading electrical fittings brand in Bridgeport Fittings fills a key product line gap in our HES segment in a high value niche. While the Polaris brand complements our leading brand in electrical grounding and connectors, and NSI's exposure in network infrastructure provides opportunity to further penetrate datacom, broadband, and data center markets. We are also confident that the acquisition of NSI will further accelerate our successful HES segment unification journey. Which has resulted in market outgrowth and significant margin expansion over the last several years. Our recent sales force realignment and vertical market investment will enable enhanced cross selling and deeper penetration into high growth verticals. While the leverage of scale and best practices across the 2 strong businesses will drive long term productivity and cost savings, enhance service, and optimization of capacity and manufacturing processes. Now let me turn the call over to Joe to give you some more details on the financial impact of the NSI acquisition as well as our second quarter results.
Joseph Anthony Capozzoli: Thank you, Gerben, and good morning, everyone. From a financial standpoint, we anticipate NSI to be accretive. To both the Electrical Solutions segment and total Hubbell growth and margin profile. And we expect the acquisition to add adjusted earnings accretion of approximately $0.20 in 2026 approximately $0.80 in 2027. Looking further ahead, we are targeting attractive revenue and cost over the next 3 years. Including 2% to 3% in sales synergies from increased channel and vertical market penetration as well as approximately 3% to 5% in cost synergies from leveraging the combined scale of our respective operations, supply chains, IT systems, and back office capabilities. The $3 billion purchase price was financed with a combination of term loan, a bond offering, and commercial paper. And our pro forma leverage moves to approximately 2.9x net debt to EBITDA following the acquisition. As we continue to generate strong free cash flow in the second half of 26 and beyond, we intend to continue aggressively investing in high return CapEx to drive further growth and productivity. While also returning cash to shareholders through dividend growth, and modest share repurchases. We also intend to pay down significant portions of debt and deleverage our balance sheet over the next 24 to 30 months. Which will drive strong adjusted EPS accretion in 2027, and position our strong balance sheet for further accretive M&A investment over the next several years. Moving to the second quarter results on Slide 5. Hubbell's second quarter financial performance was strong. With double digit growth across sales, adjusted operating profit and adjusted earnings per diluted share. Net sales of $1.712 billion in the second quarter of 26 increased by 15% as compared to the prior year. Organic growth of 10% was driven by 6% organic growth in Utility Solutions, and 18% organic growth in Electrical Solutions. An acceleration relative to our prior quarters driven primarily by strong performance in electric distribution, and data center markets, supported by capacity expansion and investments in incremental price realization. Acquisitions contributed 5 points to growth in the second quarter driven primarily by DMC Power, and a partial month of contribution from NSI. Both high growth and high margin businesses which are off to strong starts and integrating nicely within our utility solutions and electrical solutions segments. From an operational standpoint, Hubbell generated $409 million of adjusted operating profit in the second quarter. Representing 13% growth versus the prior year. With adjusted operating margins of 23.9% representing modest contraction relative to a strong comparison in the prior year. Growth in adjusted operating profit was primarily driven by strong volume growth in high margin areas, as well as the impact of acquisitions. While cost inflation continues to increase, our pricing and productivity actions are keeping pace, and we are confident in our ability to continue to manage this equation throughout the second half of 26, just as we have demonstrated very successfully over the past several years. We also continue to invest in our business throughout the second quarter to expand capacity in high growth areas and generate future productivity. Adjusted earnings per diluted share were $5.52 in the second quarter, representing a 12% increase versus the prior year. Driven primarily by adjusted operating profit growth. Below the line, higher interest expense associated with the recent borrowings for the NSI acquisition were largely offset by a lower year over year tax rate and a lower share count as a result of share repurchase investments made in the first half of 26. While second quarter free cash flow of $213 million was down relative to the prior year, on working capital and the timing of acquisition costs. First half year to date free cash flow of $259 million was up 12% year-over-year. On a full year basis, we are on track to deliver approximately 90% conversion of free cash flow to adjusted net income. Which absorbs the impact of increased capital expenditures, and acquisition costs. Turning to page 6 to review our performance by segment. Utility Solutions delivered another strong quarter with double digit growth in sales and adjusted operating profit. Utility Solutions generated net sales in the second quarter of $1.026 billion which represented growth of 10% versus the prior year and includes organic growth of 6% and acquisitions that contributed 4%. Our larger, higher margin grid infrastructure business grew 7% organically in the second quarter. Driven by strong double digit growth in distribution markets. Transmission and substation growth was solid in the second quarter, and we continue to expect double digit growth on a full year basis in these markets. As large projects ramp up in the second half and capacity investments come online. In grid automation, we were pleased to return to year over year growth in the second quarter as anticipated with continued strong growth in Protection and Controls, most notably in our substation switching products, while meters and AMI revenue grew sequentially and delivered strong orders that position us for continued recovery in the second half of 26 and into 2027. As Gerben highlighted in his opening remarks, orders were strong in the first half And while we are not typically a backlog driven business, our first half book to bill ratio of approximately 1.2x for Utility Solutions is strong. And provides high visibility into our second half outlook where we expect organic growth to improve modestly relative to first half performance. This demand is broad based across T and D markets, but with particular strength in orders and quoting activity for transmission and substation projects driven by load growth and data center build outs. We continue to believe utility T and D markets are in the early stages of a multiyear investment cycle and we are investing proactively in additional capacity to serve the long term needs of our customers. Operationally, the utility solutions segment delivered $263 million of adjusted operating profit in the second quarter. Representing 10% growth adjusted operating profit versus the prior year. With adjusted operating margins up slightly year over year on a difficult prior year comparison. Operating profit growth was primarily driven by strong volume growth and acquisitions, while we continued to drive price and productivity actions to mitigate increased cost inflation. Moving to Page 7, Electrical Solutions results were also strong in the quarter. On the top line, Electrical Solutions generated net sales of $686 million, which represented growth of 25% versus the prior year. Organic growth of 18% was driven by strength in data center, light industrial and nonresidential markets. Data center sales were up approximately 65% in the quarter as capacity additions, new product introductions and content gains drove outgrowth in a strong underlying market. Our vertical market strategy and sales force alignment initiatives continue to drive commercial success in the data center markets and other high growth areas of our electrical solutions portfolio. The acquisition of NSI contributed $35 million of sales for the partial month of June. Representing approximately 7 points of sales growth at accretive adjusted operating margins, in line with our expectations. Our integration efforts are off to strong start, and early order activity has been favorable and customer response has been positive. As Gerben noted earlier, NSI is a strong strategic fit within our electrical solutions portfolio, and we are confident that this business will drive near term and long term value creation for our shareholders. Operationally, the Electrical Solutions segment delivered $146 million of adjusted operating profit in the second quarter. Representing 18% growth versus the prior year. Strong volume growth, strong price and productivity realization, and attractive profit contributions from NSI were partially offset by higher cost inflation, and increased year-over-year restructuring and related investments within the quarter. Adjusted operating margins of 21.2% were down 130 basis points versus a difficult comparison in the prior year. Largely driven by the net margin impact of price cost productivity as well as approximately 60 basis points of higher restructuring investment. However, we have continued to take pricing and productivity actions throughout the second quarter, and we are confident that the Electrical Solutions segment will return to adjusted operating margin expansion in the second half of 26. Turning to Page 8 to discuss our full year outlook. We are raising our 2026 outlook for sales growth, adjusted operating profit growth, adjusted operating margin, and adjusted earnings per share. On sales, we are raising our growth outlook from +8% to 11% to +16% to 18%. Reflecting an additional 5 points of acquisition contribution from NSI as well as an increased organic growth outlook. from +6% to 9% to +9% to 11%. We are raising our Utility Solutions organic growth outlook to +7% to 9%, largely reflecting strong visibility in T and D as a result of first half orders and we are raising our Electrical Solutions organic growth outlook to +12% to 14%, driven by our increased expectations for data center growth, of approximately 50% for the full year, as well as stronger nonresidential and light industrial markets. Our Organic growth raise is primarily driven by stronger volumes along with modest incremental price realization relative to our prior outlook, in both segments to offset increased inflation. Operationally, we anticipate adjusted operating margins of 23.1% to 23.4%, representing 40 to 70 basis points of year over year expansion. This outlook includes margin accretion from NSI, accelerated investments in service and capacity expansion to support customer needs in high growth areas of our portfolio, and increase full year restructuring investment. Additionally, we anticipate an improvement in price cost productivity relative to our prior outlook, driven by anticipated net benefit of $20 million in the fourth quarter, largely as a result of IEPA refunds net of potential customer considerations and a slight increase in underlying tariff costs from recent changes to the Section 301 tariff framework. Below the line, increased net interest expense of $170 million is driven by borrowings for the NSI acquisition. We expect a full year adjusted tax rate of 22.0% to 22.5% though we anticipate a higher tax rate of approximately 24% in the third quarter. Driven by timing of discrete items. We are raising our full year outlook for adjusted earnings per share from a range of $19.30 to $19.85 to a range of $20.25 to $20.55. Which represents an increase of approximately 4% at the midpoint and a range of 11% to 13% growth year over year. We anticipate approximately 90% free cash flow conversion on adjusted net income in 2026, which reflects the impact of increased year over year spending on capital expenditures and NSI acquisition costs. Finally, I will highlight that our full year outlook reflects Finally, approximately 20% adjusted operating profit growth at the midpoint of our range, reflecting highly attractive underlying operating performance. Now let me turn the call back over to Gerben to provide some concluding remarks.
Gerben W. Bakker: Great. Thanks, Joe. We are confident in our ability to execute over the second half to deliver on a strong 2026 financial outlook. In the near term, we are focused on driving outgrowth in our attractive end markets through product and service differentiation, executing on investments to support customer needs, and continuing to effectively manage price and productivity in an inflationary environment. Longer term, we continue to believe that our utility and electrical end markets are in the early stages of a highly attractive multiyear investment cycle, and we look forward to sharing more details with you on our long term strategy and outlook in our next investor day which we plan to hold at our utility solutions training center in Centralia, Missouri on March 4, 2027. With that, let me turn the call over to the operator.
Operator: And we ask that you please limit yourself to 1 question and 1 follow-up. Our first question comes from the line of Jeffrey Sprague from Vertical Research. Your question, please. Jeffrey Sprague, your line is open.
Jeffrey Sprague: Sorry about that. Looks like I was muted. Good morning, everyone.
Gerben W. Bakker: Hi, Jeffrey.
Jeffrey Sprague: Gerben, can we just dial a little bit more into the machinations, type of infrastructure? The strength in distribution, I thought, was notable. So kind of wondering there if there is some kind of inventory restock after kind of the destock you have gone through for a while there. And then on the transmission and substation side, sounds like, it was not particularly strong on the top line in the quarter. But obviously, you have all these orders. Was there some sort of timing benefit that impacted that part of the business in Q2 that is fortifying your fuel in the second half?
Gerben W. Bakker: Yeah, Jeffrey. Thanks for the question. And certainly, strong order rates, we mentioned, up, you know, 1.2x in the quarter. pretty broad-based across our business, both from grid infrastructure as well as grid automation. And within grid infrastructure, also, you know, broad between the distribution and transmission. So certainly with distribution up double digits, transmission and substation also growing very nicely in the quarter. And accelerating in the second half. And that comes through the visibility that we have with the orders and the backlog. The pipeline, certainly, the quoting activity continues to accelerate. So when we look ahead at the multiyear and cycle, we see strong momentum. You know, long term growth, so supported by data center and utility CapEx, and our position. Our position in these markets is really a leading position with, you know, with the installed base, with back position, with a reputation. We feel really good. Certainly, you know, I should think about transmission substation, which you point out perhaps being a little bit lower. We are up high single digits in the first half, and we expect to be up double digits in the second half here. And I would say there is really nothing to read into this beyond you get a little bit of project timing when sometimes these projects shift. So quarter to quarter may have a slight bit of noise in it, but again, based on what we are seeing in the market, based on our quote activity and our orders and backlog, we feel really good with the increased inorganic growth guidance that we are giving for the year in the second half.
Jeffrey Sprague: Right. And the size of the guide obviously conveys the confidence. Is there anything, though, like, the kind of the variance around that in terms of supply chain, your own capacity additions or project timing, you know, that creates sort of a variable outcome in the second half in your opinion? Yeah. I would say nothing really to say on the supply chain. You know, we are continuing to add capacity in our business. Our substation part of the business, particularly where we are adding capacity. But again, this is embedded in our in our guidance supported by the orders and the backlog. So it is know, why confident that we will see you know, growth accelerating there as we go through the second half? And then maybe just 1 final 1. Maybe it is for Joe. But just thinking about sort of the implicit margin expansion in the back half that is part of the guide here. Would you level load that across the quarters? Is it a little bit more back loaded. I mean, I guess you got the tariff refund in Q3, so maybe it is front loaded Q3 to Q4. Just a little bit of color there, I think, would be helpful.
Joseph Anthony Capozzoli: Yes. You put your finger on it there Jeffrey. We are anticipating it is going to be a little more loaded given the nature and the timing of those IEPA tariff refunds and how they roll through. But really confident in that back half margin expansion playing out.
Jeffrey Sprague: Great. Thanks. I will leave it there.
Operator: And our next question comes from the line of Christopher Snyder from Morgan Stanley. Your question please.
Christopher Snyder: Thank you. You guys talked about in utility specifically, the first half book-to-bill of 1.2 gives you guys pretty good visibility into the back half. I guess my question is, are you guys starting to build any sort of visibility into 27, or is it still too early to see that in the order book in the backlog? And then just maybe if you cannot see it there, like, how have customer conversations trended, you know, on 27? You know, does it feel like you guys could sustain maybe something at the higher end or even above the organic target? Thank you.
Gerben W. Bakker: Yeah. I would just say, Christopher, that Echo here. We are seeing orders starting to be booked into 2027. that is particularly on the transmission and substation side of the business. Again, if you look at what utilities are doing, you know, they are having to plan you know, well into the future with some of these load growth and capacity that they are bringing online as we see higher voltage systems, those tend to book out orders. So, yeah, we are we are seeing orders being booked in our transmission substation area into 2027. And, again, we feel based on both what we are seeing in the order book, the conversations we are having, And if you if you just think about with what is going on, right, with the data center build out the need to add additional load in addition to what we have been talking about for years, which is you know, a system that needs to be hardened, and it is just you know, it is multiyear and utilities are starting to look further out. Thank you.
Christopher Snyder: I appreciate that. And maybe if I could just follow-up on price. And I do not remember a much prepared commentary on this, but if I remember correct, you guys pushed through price-- I think it was in April. Can you just maybe talk about the realization of that? Has there been any push back in the channel to the action? And then should we expect more price action here into the back half just given kind of the clear inflationary pressure that is out there in the world? Thank you.
Joseph Anthony Capozzoli: Sure. Good morning, Christopher. So, yeah, on the price equation, we did push price through in April. And the expectation of that price increase, which was broadly across utility and electrical, were anticipating about a point of price to come out of that action. And at that point was raising our full year price expectation to about 3 points. And since then, we have experienced a little more inflation, and we have gone out with additional price in July. And our expectation for that most recent price increase is about another half a point in the back half of the year. So coming into the year, we were anticipating 2 points. We had the April price increase at a point, and now we are adding roughly another half a point or so. So think about it like 3 to 4 points for the full year, Christopher. Thank you very much.
Christopher Snyder: I appreciate that. Thank you.
Operator: And our next question comes from the line of Chad Dillard from Bernstein. Your question please.
Chad Dillard: Hey, good morning, guys. Just a question for you guys on your expansion. Can you give us a little bit more color? What verticals are you expanding? How do you think about the revenue unlock? And when do you think that will be completed?
Joseph Anthony Capozzoli: So good morning, Chad. So the capacity expansion story is a really important part of our growth initiatives here. As we continue to service strengthening demand out in the markets. And so our CapEx investment this year, we are anticipating roughly $175 million to $190 million of CapEx. And that is up from our $155 million last year. A lot of our CapEx spend is going towards adding capacity and to adding productivity initiatives, but largely focused on capacity. Over the last couple of years, we continue to bring new capacity online. And every quarter, as that gets turned on, we continue to absorb new revenues into that capacity. it is hard to say exactly how much that translates to every quarter. But if you think about on a go forward basis, bringing on roughly $25 million in new capacity ish. it is not always linear, but we will continue to do that as we progress back half 26 and as we work our way through 2027.
Chad Dillard: Gotcha. that is super helpful. And then just secondly, it sounds like you are seeing a larger slug of projects flowing through. So I would be just curious, you know, how does your win rate on those larger projects compare versus the corporate average? And then maybe you can talk a little bit more about your modular approach and then how that helps you win.
Gerben W. Bakker: Yeah. So maybe, starting on the modular, and then come back to the win rate here, Chad, is it is actually a trend that we are seeing broadly in our business and I think in the market, and it is a lot driven by labor availability. And by quality control of something that you can build in a, a factory setting versus doing it on-site. So you know, if you think about, you know, our business--our businesses in the electrical side, like, data center and the PCX business where we do power skids. Or if you think about the substation business with system control where you do the control houses, and you are basically building these in a factory environment. With good quality control that you then plug and play into a system. But you are also seeing it on more on a SKU level and component and these DMC. Sorry. Is a really good example of a connector where you are crimping the connector onto the bus bar and the traditional way of that would have been to do a weld in the field. And now, you know, you can do a crimp in the field with less skilled labor requirement quicker. So there is absolutely a trend going on where you are bundling more. And we have a great position We have if you if you think about our portfolio and the breadth of our SKUs, there is a lot of opportunities for us to either bundle things together or find solutions, how 1 component can integrate each with the other. So surely a trend in the market. As it relates to project and project flow, and I would say this has accelerated. And if you look for example, in our transmission and substation business, the project quotes have about doubled in the last couple of years, and that is driven in part by these higher voltage projects where utilities are just looking further out. They are planning these further out And by, you know, the strength of our portfolio to be able to win some of those projects. So you know, I would say the win rate on those is probably similar to what we have seen traditionally, but there is just more of those coming through right now. Great. Thank you.
Operator: Thank you. And our next question comes from the line of Tommy Moll from Stephens. Your question please.
Thomas Moll: Morning and thank you for taking my questions. Gerben, I wanted to start with the recent trends in distribution. Great to see you up double digits this quarter, but that is clearly above the trend line for that business. So what more can you tell us about what is driving that strength, and what are you embedding for your assumption in the second half there?
Gerben W. Bakker: Yep. Thanks. So distribution is off to a good start, I would say. It is a reflection of the strong underlying markets. But also, if you recall, the destock of the last couple of years and then a year ago, I would say, you know, the comps are still somewhat easy to lap. You know, there is a lot of investment going on into transmission and substation market, and that is great to see. But underlying distribution markets also remain very strong. And the foundation of that strength and you know, I see that as a long term positive. Is the age of that infrastructure and the need to harden and the resilience And that still remains even though it is it is oftentimes overshadowed right now by the need for load growth. The need to do. And there is, you know, a good support for that. You see that embedded in CapEx budgets as well. So you know, we believe the underlying we see the underlying market to be strong, but a little bit of comps. So you know, longer term, we see this continue to be, you know, attractive and certainly going into the second half and going into 2027. And we continue to see over longer term for this to be a mid single digit plus mark.
Thomas Moll: Yeah. Yeah. Thank you for that context, Gerben. I also wanted to ask about the recent trends you called out in meters and AMI. I think you said you started to see steadily improving market there and maybe some orders suggesting continued growth. Second half this year, even into next year. that is a very different tone than what we have heard recently. And so any gaps you can fill in would be appreciated.
Gerben W. Bakker: Yeah. A little bit. And if you think back on what we have said, right, so grid automation had gone through, you know, some declines for several quarters. You know, led by the Aclara business that we talked a lot about. And what we had said, last quarter that we expected grid automation to return to slight growth in the second quarter, and that indeed happened. The book to bill also there was above 1.0. So that gives us confidence that what we also called for, which was you see continued growth into the second half, and this provides us certainly confidence on that. If you then go specifically, I think your question was on the Aclara 1. You know, we are seeing improvement in the project flow there, particularly in the muni and co op space. And if you recall, this is really an area we refocused on last year to really, you know, pivot the investment more to that, to take some of the investments prior investment that we were making out and rightsize the business a little bit, and we are starting to see that pay off right now. So small and medium projects, I mean, international projects, that we are seeing that sets us up for growth in the second half even in the Aclara business right now. So but, yeah, it is a little bit what we expected to see here, Tommy. But it is you know, we are certainly happy that it is, that it is, unfolding that way. Thank you, Gerben.
Thomas Moll: I will turn it back.
Operator: Thank you. And our next question comes from the line of Christopher Glynn from Oppenheimer. Your question please.
Christopher Glynn: Hey. On the accelerated data center growth, talked about the impact of low aggregates capacity adds, new products, as well as content. I want to drill into the content component there. Is that a change in you know, the allocations you are getting for certain product categories? Or really an expansion of the scope of your design wins.
Joseph Anthony Capozzoli: Yeah. I would call it more of the same. And so as we continue to add capacity on core products, lines that are going into the data center, But what is really important in a lot of this, we call it our short cycle data center support business, is if you have got the inventory available, you know, right time, right place, they are pulling it pretty quickly. And we have been very aggressive in adding and making sure we are investing in the inventory on the shelf. So that is really fully supporting our vertical market strategy, which is putting us in the position to swipe that business, but that is a big piece of it.
Gerben W. Bakker: Yeah. And maybe the only thing I would add there, as you see data centers evolve or they are you know, they are certainly you know, higher capacity data centers. You know, we are adapting some of our products for those. So I would say there is a decent bit of new product development if you think about our new pin and sleeve devices that are going to higher amperage to the 800 volt infrastructure It contributes as well.
Christopher Glynn: Great. Thanks for that. And then just the seasonality at Electrical was pretty pronounced, even if you strip out NSI, it was up about 15%. Sequentially. Wondering if June was really killer and in particular. it is often the pull factor in the seasonal strength, I think. And you know, if the nonres acceleration, was that just kinda you know, normalizing on project releases? Because I think the trend in those markets where project releases were just gummed up, but now tariffs and different factors have become normalized in the baseline.
Joseph Anthony Capozzoli: Yeah. I would highlight that there was nothing noteworthy of June relative to the second quarter that being particularly pronounced, we saw really solid growth over the course of the quarter. within Electrical. And then in terms of in terms of some of the products and projects that we have got slated we see continued growth visibility on the side, although it continues to remain short cycle, a lot of book and bill And we have got good momentum both on non res and on data center and light industrial. I would highlight that we have seen non res you know, starting to click up over the last couple of quarters. And we were we saw that in the fourth quarter signs of an uptick. We saw that continued in 1Q, and we really saw that gaining momentum. We are a little cautious to say that is going to continue to accelerate, but non res has been has been pretty solid. Thanks for all that color, Joe.
Operator: Thank you. And our next question comes from the line of Nigel Coe from Wolfe. Your question, please.
Nigel Coe: Good morning, everyone. A lot of ground already, but I did want to try and unpack the 40 bps increase in the operating margin for the full year. My wonky math gets 30 bps from tariff I am guessing about 40 bps from NSI. Maybe that is-- maybe you can clarify that. And what I am trying to get at here is, you know, how is the kind of the core price cost productivity kind of trended from your initial view? You talked about the price increase in the back half of the year. Just wondering how that is all playing out together.
Joseph Anthony Capozzoli: Yes. Nigel, Definitely, you are right on the 30 bps from net tariff the 40 bps on NSI squares up with our math. And then we have got we have got we will call it operational, which is really volume. Growth, which is coming primarily from the electrical side. Non res, light industrial, data center uptick. that is being partially offset by higher levels of investment. That we are anticipating making back into supporting all of this growth. And so that investment which is partially offsetting that volume growth, is really the other piece of the equation there.
Nigel Coe: Okay. Understood. And then the tariff, $20 million does that land disproportionately within electrical versus utility? And then looking beyond Q3 and into Q4, do you think electrical will be back to margin growth in 4Q?
Joseph Anthony Capozzoli: So first off, the tariff we would split that roughly half and half between electrical and utility. And that is going to be concentrated in the third quarter. And the second piece of your question around electrical margin, we do see electrical margin returning to expansion in the back half, both in 3Q and in 4Q. 3Q will see the surge, you know, with that IEPA refund dynamic. But we are anticipating continued margin expansion year over year in the fourth quarter. In Electrical.
Nigel Coe: And I am sorry. If I am annoying and just deduct that tariff in Q3, would electrical still be expansion?
Joseph Anthony Capozzoli: Yeah. I mean, that is that is hard to reconcile right now, Nigel. We can take that offline. We are still dealing with, thanks, a lot of. The price. For the year as well.
Nigel Coe: Right. Thank you.
Operator: Thank you. And our next question comes from the line of Alexander Virgo from Evercore ISI. Your question please.
Alexander Virgo: Yeah. Thanks very much. Morning, gentlemen. I appreciate you taking my call. Wonder if I could dig into the book-to-bill just that little bit more. So 1.2 times book to bill implies what about $2.4 billion in the first half. I am guessing that not all of it is expected to be delivered in the second half. So I wonder if you could just expand that a little bit for us. And maybe help us with any color on duration and, I guess, any changing dynamics in terms of customer projects, the duration, to, I guess, keep building that into the into the end of the year and building up for 2027. Thank you.
Gerben W. Bakker: Yeah. Thanks, Alexander. And it is hard to exactly do all the math for you, but let me try to just broadly talk about it. So you know, we are a short cycle business. So part of that book and bill, we will see in the second half. it is the reason why we are taking our organic growth guidance up for the second half. But as the question came earlier as well of, you know, "Are you seeing bookings into 2027? And I would say part of this specifically, if you if you look at the longer cycle product lines, like in transmission and in substation, there is part of that is booking into 2027, but I would say there too, it gives us a lot of confidence on our longer term framework that we have been talking about, the this investment cycle is really multiyear and, you know, that we expect to continue to, you know, to have attractive performance and results longer term. So it is a little bit of both you know, more confidence and increase expectations for the second half and a good setup for 27.
Alexander Virgo: Okay. Thank you. And then could I follow-up with just a question on the 60 bps of headwinds from restructuring in HES year-over-year? Is that something we need to think about for the second half as well? Or is it more to do with the NSI acquisition and integration costs and therefore it is more of a 1 off? Thank you.
Joseph Anthony Capozzoli: Yeah. Not really related to the NSI acquisition. That just is part of our ongoing electrical segment transformation program. And so we are anticipating, as our guidance implied, approximately $20 million of restructuring related in the full year. For which roughly half of that, maybe slightly more than half, was spent in the first half. And a lot of that was in electrical. We continue to invest in that program in electrical, so we are anticipating the back half is also pretty heavily loaded with restructuring related investments to set us up and continue to position for efficiency and margin expansion in 2027 and beyond. Related to that program among other things. But I think that is the most constructive way to think about that restructuring investment in electrical.
Alexander Virgo: Right. Thank you very much.
Operator: And our next question comes from the line of Steve Tusa from JPMorgan. Your question please.
Neal Burk: Hey, good morning. Thank you. So last quarter, you provided some commentary on the high voltage transmission opportunity, the $1.5 billion over 10 years. And maybe this was part of some of the strength that you saw in the book-to-bill in the quarter, but any update you can provide on these projects and the size of the opportunity as I think some of these projects should be starting around now in the second half of the year?
Gerben W. Bakker: Right. Yeah. So, indeed, you are right. it is pretty broad based, I would say. And we see it where load growth and data centers are going in. that is where the request for interconnections are the highest And you know, our first 765, which we talked about, winning, will start shipping, in 2027. We are also seeing 550 kV, which is similarly an application used for these interconnects that we are shipping this year and the second half of this year. So you are right to point out that it is you know, about happening at later part of this year and then certainly in into next year. The growth and pipeline activity is strong. I mentioned earlier, you know, we are we are quoting about twice the volume that we were a couple of years ago, and a lot of this is driven by those higher KV projects. And you know, just a reminder of our position in this market. I mean, we have the leading installed base of transmission and substation infrastructure We have the relationships and the capabilities to innovate these higher voltage projects. We are doing this in concert with our customers to specify it in that process. We have very capable lab that we used to test and inspect these products. We are. So it is it is a very attractive area, and we are well positioned. And as far as the growth rate, what we talked about, about $1.5 billion opportunity over the next 10 years And if you think about that for our business given, you know, our position our win rate, it is about a point of additional growth over the next several years. Thank you.
Neal Burk: And just 1 follow-up question on the growth outlook for this year. In Grid Infrastructure, I believe you said it was expected to be up double digits. In the back half of the year. Please let me know if that is correct. But you know, the comp gets a lot harder in 4Q. So curious about how to think about revenues sequentially in the Grid Infrastructure business. Is there any reason revenues in this business cannot be up in 4Q given the momentum you have seen in book to bill, Or is there some seasonality that will limit growth from 3Q to 4Q?
Joseph Anthony Capozzoli: Yeah. Grid infrastructure revenue pacing around double digits for the year. We would anticipate that continues. You are right to highlight there is tough comp in the fourth quarter, but grid infrastructure continues. With its momentum. So that is about the right way to think about the back half of the year, including the fourth quarter.
Neal Burk: Thanks.
Operator: Thank you. And our next question comes from the line of Brett Linzey from Mizuho. Your question please.
Brett Linzey: Hey, good morning, all. My question is on price cost productivity. So the improvement, the net $20 million in Q3, sounds like that is all refund. what is implied for Q4 in terms of the refund impact, if any, And then I guess, is there any benefit that is more structural from the recent changes on February or 03/2001 that might be embedded in the guide or potentially incremental.
Joseph Anthony Capozzoli: Yeah. So I will I will take those 2. The first 1 on refund The refund we are anticipating is in the guide is all in the third quarter. If there is any more that sprinkles over, we would certainly update and transparent about that. But it is all third quarter. And then in terms of any structural changes 03/2001 or February, I would say over the course of this year, there is been there is been minor changes along the way.
Brett Linzey: Thing of any substance 1 way or another. there is been some minor pluses and minuses. And I would say that continued right on up through last week as the 2018-2022 sunset and were replaced with a new framework for 301.9,000% of adjusted net this year. Imagine there is some 1-timers on M&A and things running through there. How are you thinking about the, you know, the progression and the ability to get back to the 100% plus over the next 12 plus months as maybe some of those items roll off.
Joseph Anthony Capozzoli: Yeah. I think over the next, let's say, 12 to 24, we are anticipating continuing pace at elevated levels of CapEx. So if CapEx you know, used to be less than 2% of sales when we were converting at 100% of net income. What we are now pacing at 2.5 to 3% of sales, which is going to have a natural, you know, headwind to that conversion rate, which is why we are anticipating kind of pacing around 90% for the next couple of years. As we do continue to invest to support all of this growth. that is out there in the market that we are talking about. That we do need to add capacity. The other dynamic, obviously, when we have got when we have got growth ahead, we have to invest certain amounts in working capital, and that is a another part of the equation, a smaller part of the equation, but that is another part of the equation there on our conversion rate.
Brett Linzey: Alright. Thanks. Best of luck. Thanks.
Operator: Thank you. This does conclude the question-and-answer session of today's program. I would like to hand the program back to Daniel Innamorato for any further remarks.
Daniel Joseph Innamorato: Great. Thanks, everyone, for joining us. We will be here all day for calls. Thank you.
Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
