Hubbell Incorporated (NYSE:HUBB) Q1 2024 Earnings Call Transcript

Hubbell Incorporated (NYSE:HUBB) Q1 2024 Earnings Call Transcript April 30, 2024

Hubbell Incorporated misses on earnings expectations. Reported EPS is $ EPS, expectations were $3.54. Hubbell Incorporated isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2024 Hubbell Incorporated 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. [Operator Instructions] Please be advised that today’s conference is being recorded. I would like now to turn the conference over to your speaker today, Dan Innamorato, Vice President of Investor Relations. Please go ahead.

Dan Innamorato: Thanks, Michelle. 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 2024. 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, and Our Executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to the expected future results of our company and 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 and are included in the press release and slides. Now, let me turn the call over to Gerben.

Gerben Bakker: Great. Good morning, and thank you for joining us to discuss Hubbell’s First Quarter 2024 Results. Hubbell is off to a solid start to ’24 and we are well on track to deliver on our full year outlook, which contemplates double-digit adjusted operating profit growth at the midpoint. Performance in the quarter was highlighted by strong organic growth and margin expansion in Electrical Solutions. Electrification and US manufacturing activity is driving broad-based strength across our markets, most notably in renewables and data centers which continued to grow double digits in the quarter. Our connectors and grounding business, which is strategically positioned in these verticals as well as in broader industrial markets, realized double-digit sales growth in the quarter.

We also continued to make progress in our HES segment unification strategy with 80 basis points adjusted operating margin expansion in the quarter despite increased restructuring investment in footprint optimization. With the completion of our residential lighting divestiture in February, we are confident that our Electrical Solution portfolio is aligned to structurally higher growth and margins going forward. In our Utility Solutions segment, performance in our core Utility T&D markets was solid, driven primarily by strength in our grid automation businesses and transmission markets. As anticipated, utility distribution markets continue to be impacted by channel inventory normalization, though end-market demand remains solid. We’re also pleased with the positive contributions from our acquisitions in the quarter.

Systems Control is off to a good start and the integration is running smoothly, while Balestro and EIG delivered strong results in the quarter. Telcom markets were weak in the quarter, driving significant sales and margin declines in our utility enclosures business. While we continue to have a positive outlook on the long-term growth prospect of fiber deployment and broadband access, we expect this weakness to persist in the second quarter and are taking additional targeted actions in response. Bill will walk you through the details within the quarter in a few minutes, but overall we are confident in the setup for Utility Solutions over the balance of 2024 as our leadership in attractive Utility T&D markets positions us well to meet the grid modernization and electrification needs of our customers.

From an operational standpoint, we executed well in the quarter against a challenging prior year comparison. We’re very pleased with our early traction on price realization, which continues to be supported by a strong position and leading service levels. While the operating environment remains inflationary, we achieved positive price/cost/productivity in both segments in the quarter. As we highlighted throughout 2023, we accelerated our investment levels as the year progressed in areas such as innovation and engineering, capacity and lean, as well as sourcing and procurement. These investments continued in the first quarter and we are confident they will deliver attractive payback through higher long-term growth and productivity levels. Before I turn it over to Bill, I wanted to share some insights from our Hubbell Utility Connect Customer Conference a few weeks ago.

We hosted over 400 utility customers to showcase our solutions across each of our brands, product lines and end markets. This was the first time Hubbell held a customer event of this magnitude across the entire Utility Solutions franchise, and I’d like to thank Greg Gumbs and his leadership team for creating a unique forum for us to engage with our customers to educate and collectively problem solve to make our critical infrastructure more reliable and resilient. Key takeaways from several days of discussions with our largest customers were clear. Utilities are in investment mode. Our customers anticipate a multi-year T&D investment cycle as the combined effects of aging infrastructure, renewables, electrification and load growth will require more hardened infrastructure as well as unique solutions to emerging challenges.

Hubbell’s leading quality and service levels, together with our proactive investments in capacity and innovation, will position us well to grow with our customers as their investment levels accelerate in the coming years. In particular, utility customers are focused on the impact of load growth driven by data center power consumption. While this phenomenon is still early days, the impact to our customers is real and will require incremental investment over a period of many years as large projects progress and require grid interconnections. Higher load growth and more specifically, higher peak load growth, will require more transmission and substation infrastructure, areas where Hubbell has recently doubled down and will be well positioned to serve.

It also means novel solutions and grid modernization will be required to solve the emerging problems. And Hubbell’s unique leadership across utility components, communications and control will enable us to partner with our customers for continued long-term success. With that, let me turn it over to Bill for more details in the quarter.

Bill Sperry: Thank you, Gerb. Good morning, everybody. We’re well aware that you’re all over schedule. There’s a lot of releases today. So we appreciate you taking time to discuss Hubbell’s performance. My comments are starting on Page 5 of the slides that you hopefully found. And overall, the enterprise performed solidly, a little bit better than we anticipated. The net had some puts and takes, but very consistent with our full year outlook and our expectations of normal seasonality. Our sales for the quarter were $1.4 billion, a high single-digit growth. Organic was about 2% of that, inorganic about 6%. So we’ll talk about the inorganic story quickly. Three acquisitions contributing in the quarter, Systems Control, which is a substation turnkey solution business, Balestro, which is helping our arresters business; and EIG, which is power control components, all three in the Utility segment, contributing about 8.5 points of growth in the quarter.

And we closed on residential lighting disposition in very early February. So we lost two months of sales in the first quarter, and that cost us about 2 points. So I think that’s the quantitative side of the inorganic. But qualitatively, we feel we meaningfully added to the growth and margin profile of the enterprise. Operating profit at attractive levels of 19.7%, down 1 point. Better than expected performance on price/cost/productivity was more than offset by decremental and our enclosures business, which is where the telcom exposure is, and higher investment levels in growth and productivity, including some restructuring spending, which we’ll talk more about when we get to the segment review. Earnings per share was $3.60, flat to last year, and operating profit dollar growth was offset by interest expense.

And free cash flow on track to deliver our full year outlook of $800 million. We’ll dig down on Page 6 a little bit deeper into the performance and specifically, we’re showing the year-over-year compares. And as we do that, it’s worth a mention of the first quarter of 2023 was — it’s quite a difficult compare. Really, really strong performance last year, where price/cost was a particularly strong tailwind. It was pre-destock and pre-investments that we made. Maybe just to remind everybody, we had OP and earnings per share up 70% and margins up 7 points. So I think that context is important as we look to the year-over-year compares. Sales were up, as we said, 9% to $1.4 billion. 2% of that was organic, which is comprised of 3 points of price, really driving the top line.

Volume was slightly down. And we’re quite pleased with that price performance, showing real strength of our franchise. The operating profit is up 3% in dollars to $275 million. And as we talked about the difficult compare year-over-year, because you see it’s down a point, it’s worth commenting on the sequential, where we see margins up 30 basis points sequentially. So we think that’s quite positive to setting up a normal seasonal year. Earnings per share at $3.60 flat to last year, the OP was offset by interest expense from the three companies that we bought. I mentioned those. The combined value of that investment was about $1.25 billion. And it’s worth maybe a comment on how the balance sheet absorbed that level of investment. We financed those three acquisitions with a combination of debt and cash, and also sold a business, as we mentioned.

So the balance sheet impact of all that, we went from 1.3 times gross debt to EBITDA, we increased a half turn to 1.8 times. So after investing $1.25 billion a quarter, still a very, very solid balance sheet, very easily absorbed and very well positioned to continue to invest in acquisitions and CapEx, which I’ll talk about in a second. When you see free cash flow at $52 million, and I did want to highlight that that’s absorbing a 20% increase in capital expenditures to $40 million. And I really think that our confidence in our short and medium-term outlook, you can see that when we’re ramping up CapEx at the 20% level. So I think we’ll learn a lot as we dig into the segments. We’ll start with the Utility segment on Page 7. I see sales up 14% and OP up 2%.

The 14% growth in sales is essentially all acquisitions. The organic is neutral where there’s 3 points of price and offset by a similar size decline in volume. You’ll see with the bold words on the lower left that we’ve reclassified the businesses into these two units to be consistent with the way Greg has organized his operating team. So, grid infrastructure versus grid automation. In grid infrastructure, we have our traditional T&D business. We have the new acquisition that’s in substation turnkey solutions. And we have some specialty infrastructure businesses, namely enclosures and gas components. That’s all in the grid infrastructure area. And then in automation, we have Aclara, which is the meters and the communications products, as well as protection and control products.

You’ll recall the name Beckwith with the controls, as well as switching and fusing products, which are providing the protection. So we’ll show you on the next page all the sizes and what to expect from those. But the infrastructure business, it was — and the core utility business performed very, very well. Transmission up double digits. Distribution still going through their channel inventory normalization. We’re getting near the end of that, persisting a little longer than we expected as we think the channel has worked, largely worked its way through, but we think the end customers are still holding some inventory. So we’re getting closer to putting that behind us. And when we get to the Electrical segment next, you’ll see that they went through the same last year and have emerged very healthily.

So really good PCP performance in that T&D business and set it up very constructively for its financial performance. Grid automation, likewise, double-digit growth both in the meters and comm area, but also in the control and protection area. So really strong contribution there. The headwind is really coming from the telcom sector, which is inside that specialty infrastructure business and are really enclosures that we make for the telcom segment. They are navigating both channel and customer inventory normalization period, creating a significant headwind with 40% decline in volumes. The business line is very profitable and so it’s creating an op drag. So the effect of that is about 4 points on the segment top line and as you can see about 1.5 points on the OP line.

So the OP for the segment is up 2%. Again, to remind you of the compare, last year the utility OP was up 87%. So growing off of that is very impressive. A decline of 2.5 points of margin being led by the decrementals in telcom. And to be clear, our medium-term outlook for telcom business is quite positive. And we’ve also made — continue to make investments in the long-term growth and productivity of the segment. Those created about 1 point of drag. And the acquisitions that we mentioned, which are all doing really well and are all performing very profitably, but against that mid-20s level actually created a 0.5 point of drag essentially in the first quarter of Systems Control being part of Hubbell. So still, I think, very good performance there.

And the price/cost/productivity equation was positive. So again, we’re showing you the year-over-year compares. I do want to highlight sequentially from the fourth quarter of last year, the margins are up 40 bps. So we’re feeling again like what we’re setting up for a successful normal seasonality year here. I wanted to add a page, on Page 8, just to make sure we’re being clear about our nomenclature and where we have the different business units. So on the left, you can see the grid infrastructure comprising 75% of the segment and the balance is grid automation. You can see from about noon to about 06:00 there on the pie. that’s the traditional T&D businesses between substation, transmission and distribution. Then from about 06:00 — or 07:00 to 09:00, you can see the telcom and gas, which represents the specialty.

And then from 09:00 to noon, you see the Aclara utility meters and then the protection products. So hopefully, that gives some clarity to the relative sizes of those different businesses. And we just added a little bit because they’re not all performing exactly the same, so we wanted to lay out first quarter trends against what we’re expecting for the balance of the year. And distribution, we’re expecting that sequential improvement, Transmission, substation very strong. Telcom was weak, as we said, and we’re anticipating some softness, but again, where — the rebound will come in the medium term. And so balancing our cost-cutting there against being able to serve when demand comes back is representing interesting challenge. Meters has been successful on its backlog conversion.

We expect that to continue. We’re noting the comps get a little more difficult for them, and the protection and controls product is very strong. So in sum in utility, very pleased with the pricing of these segments. We’ve got strong visibility in the majority of our markets and we’re expecting the normal seasonality and a nice healthy setup, really, we think, a uniquely positioned business. So I want to switch to — on Page 9 to the Electrical segment, a little bit more straightforward to explain to everybody. You see flat sales at about $500 million. You take out the effect of the divestiture of residential lighting, we were up 6 points organically, 2 points of price, which we’re pleased about, 4 points of volume, which we’re also pleased about as they emerge from their destocking and helps give us confidence that, that will be quick on the Utility side as well.

There’s strength in industrial markets, but also specifically in what we describe as our growth verticals of renewables as well as data centers. which are up to over 20% each. So great to see Electrical Solutions performing so well on the top line and that’s translating nicely at the Op level, you see a 6% increase to $80 million and 80 basis point expansion of margin on both the volume and price/cost performance. We would call out that Mark and his team, as we’ve discussed with you all, are continuing to execute on the playbook that he so successfully implemented at Power Systems to create a more compete collectively mindset in the segment, really emphasizing cross-selling, optimizing the footprint, simplifying the structure. So there’s some R&R spending to be done and we would have added another 5 points of OP growth, i.e., being double digits and another 80 bps of margin expansion if we were to adjust out that restructuring as many of our peers do.

But great to see Electrical having such a solid quarter. And with that, I’ll turn it back to Gerben on our outlook for the balance of the year.

Gerben Bakker: Great. Thanks, Bill. So to sum it up, our performance in the first quarter puts Hubbell well on track to achieve our full year 2024 outlook for double-digit adjusted operating profit growth, which we are reaffirming today. Relative to our prior outlook, our electrical markets are off to a stronger start and we have better visibility to positive price traction across both of our segments, which we believe will enable us to absorb the near-term impact of weaker telcom markets. Additionally, we are increasing our expectations for full year restructuring investments from $0.25 to $0.35 as we proactively manage our cost structure in certain areas of the business while continuing to invest in the long-term growth and productivity initiatives.

Looking further ahead, the acceleration of grid modernization and electrification megatrends, together with our unique leading positions in front of and behind the meter, will enable Hubbell to continue to deliver differentiated performance for our shareholders over the long term. We look forward to sharing more details on our long-term strategy and outlook with you at our upcoming Investor Day on June 4. With that, let me now turn it back to Michelle to begin our Q&A session.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from Jeffrey Sprague with Vertical Research Partners. Your line is now open.

Jeffrey Sprague: Thank you. Good morning, everyone.

Gerben Bakker: Hey, Jeff.

Jeffrey Sprague: Two questions from me. Hey, good morning. First, just on — and I’m sorry if I missed it. Just hopping between calls. Did distribution actually grow for Hubbell in the quarter? And if so, can you size it? And then whether the answer is yes or no, can you kind of triangulate that to what your view of end demand or sell-through might have been in the quarter in the channel?

Bill Sperry: Yeah. So I think the second half of your question is we’ll get to first. I mean I think where we have the most visibility through our customer base and Gerben referred to being with 400 of them as recently as a week or two ago. It’s — we believe the distribution markets are growing, but it’s also clear to us that their — the end customer, the actual utilities have a decent amount of inventory that in addition to what the channel had. And so I think that’s causing the order patterns, Jeff, and the book and bill piece to be just extended period of a little bit softer and so while we got good price, net D did not grow in the quarter. But we think it’s going to bounce back strongly, and we feel very confident in that.

Gerben Bakker: And maybe I’ll add some context as what we see through — even through the first quarter and maybe coming even into April is the good news is we are seeing a sequential, as you look from February to March into April, increase in order rate. And I think that’s a reflection of that channel inventory, the distribution channel inventory normalizing. And that — our visibility into that is clearly better. I would say that if you look at it through the traditional uptick as we go into construction season, it’s a little bit delayed and a little bit slow with that ramp-up for the comments that Bill made that feedback from the end user is that they’re still working through it. And that’s also happening at different magnitude.

Some are going at it more aggressively, some are going at it looking for that inventory to just be utilized in their growth. But the encouraging news is we are seeing it come up. This is exactly what happened in the Electrical segment. And it’s a little bit — if you’re nervous while you’re going through it, but we clearly went through that there. We saw the rebound in the first quarter. And we think that will happen in the Utility as well, particularly in that distribution more book-to-bill part of the business.

Jeffrey Sprague: And then Bill noted, I think that some additional price has allowed you to kind of offset telcom in the guide, but cost is also going up, right? Comp is up, some other stuff is moving. So are you now — you’ve got a better price, but are you actually in a better price/cost position than you were thinking three months ago? Or we’re in a similar place?

Bill Sperry: Yeah. So we’ve got productivity levers too. And I think you’re right to point out that we’re looking at price kind of against material cost and then productivity against non-material inflation. And you’re right, that inflation persists. So I think important, Jeff, for us to keep our eye on the productivity ball as well as make sure we’re being as surgical on price as we can be.

Jeffrey Sprague: So your price/cost equation really hasn’t changed that much then.

Bill Sperry: No, I mean we — it was stronger in the quarter than we had originally anticipated. But also, I think, as the year unfolds, when we told you that we had started our outlook with about 1 point of price, we obviously had 3 points in the quarter. So we’re sort of off to a good start there. But I think very specifically in telcom, we may need to use price surgically to build back some volume there. So it’s a dynamic equation, I would say.

Jeffrey Sprague: Great. And then just one more for me, if I could. What was the sequential impact on Utility Solutions’ margins from the telcom weakness? It was encouraging to see the margins move up sequentially. And I think you have certainly mix headwinds between grid infrastructure and grid automation, relative growth rates. But telcom specifically sequentially, was that a meaningful headwind in the quarter?

Bill Sperry: Yeah, Jeff, it’s still a headwind, less than the $150 million year-over-year, I’d say, though.

Jeffrey Sprague: Yeah. Okay. Thanks. I’ll leave it there.

Operator: One moment for the next question. Our next question comes from Steve Tusa with JPMorgan. Your line is now open.

Steve Tusa: Hi, good morning.

Gerben Bakker: Hey, Steve.

Bill Sperry: Good morning, Steve.

Steve Tusa: Can you guys just give us a little bit of color on the second quarter on EPS just relative to normal seasonality, any kind of sequential color there and then how you expect the utility margins to trend throughout the year?

Bill Sperry: Yeah. So it’s a little bit of a — first of all, nice sweep by the way, but it’s a little bit of a tough question just because we don’t give quarterly guidance. But I think the way we’re looking at it, the first half of the year to be normally seasonal, should be in that 47-ish percent range of contribution and we feel good that we’ll be delivering at that level to get to our range on the full year guide. So — and as you — I think maybe that’s a macro way. I’m not sure if that’s getting exactly at what you want, but.

Steve Tusa: No, that’s perfect. That’s absolutely perfect. [Technical Difficulty] over the course of the year.

Bill Sperry: Yeah. I think that as we get — normal seasonality for us is to pick up volume and margin in second and third quarters, Q4 kind of steps back. So to be thinking about quarter compares can get tricky. But if you extend your question to the full year, we’re expecting margins to be reasonably flattish over the course of the whole year on a year-over-year basis.

Gerben Bakker: But the second quarter will be up from the first. Sequentially expect up margins in the second quarter over the first and stay elevated and — that stays in the third quarter and then declines a little bit in the fourth.

Steve Tusa: Got it. Okay. Great. Thanks, guys.

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

Nigel Coe: Thanks for the question, guys. Appreciate it. So just going back to the utility inventory levels. So where are we in terms of the channel inventories? I think six weeks is historically where they’ve been in the past. Just wondering if we get them down to those levels. And then any intel on the amount of inventory still held, like the shadow inventory held by the customers. And I guess my kind of broader question is when do you expect sell-in and sell-out to equalize?

Gerben Bakker: Yeah. Maybe I’ll start, Bill, fill in. But I would say in the distribution channel, and that’s where we have better visibility, right, because we sell in and we see their sell out in a fairly good amount of them, especially our stronger partners there, I would say typically, and that varies, of course, by product line. But if you think about 90-ish days of inventory, they’re pretty much back there. I mean, they’re pretty much done with inventory destocking of our materials, particularly distribution materials, where it’s more stock and flow. It gets harder when you look at the end customers. And we do have very close relations with some of them, where we get direct feedback with events like we were at a couple of weeks ago, where you have a lot of them, we triangulate and it’s elevated, but it’s by varying degrees of elevation.

It’s really, really hard to say there, Nigel, of exactly what the level is. What makes it even more interesting is that when you talk with them, some say they clearly have and are working that down, whereas others are saying it’s not our focus right now. We’re looking to serve the needs out there, and perhaps it’s a thought for down the road. So this is where that gets really hard. So for us, what we look at is that ramp up what we would normally see seasonally happening and to what extent. And as I stated in my earlier comment, that’s coming a little later than we would typically see it and the magnitude of the ramp-up is a little slower. But the good news, it is coming up, and that’s what you expect when your distributor has done destocking, you would expect it to come up and it has come up.

So it’s really, as we even stated in the first quarter, the last time we said we thought we would be mostly through it in the first quarter. I think that’s probably still the case, but to exactly pinpoint when I’ll be done, it’s just very hard.

Nigel Coe: Okay. So, thinking about the sequencing of the full year for the Utility Solutions segment, 4% or 5% for the full year. So second quarter still below that bar, I’m assuming. And then second half above on easier comps.

Bill Sperry: Yeah. And again, I think as we try to put in that little box, we think the T&D compares get a little bit easier and some of the automation compares get a little harder. But the larger part of the business is the infrastructure piece and that’s where we think you’ll see the back-end growth, Nigel.

Nigel Coe: Okay. And then a quick one on Utility margins. Obviously recognizing that the bulk of the year-over-year was driven by the telcom headwinds, so that the balance, the roughly 100 basis points outside of that headwind, would that be mainly volume deleverage or was there an M&A impact from Systems Control?

Bill Sperry: Yeah, the M&A impact from Systems Control was very modest, given that it — right, was 14% of sales and the margins were in the mid-20s that it was kind of comping against. So it did very nicely in its margin, but it had a slightly — it had a slight drag to it from there. But I think if you think about operationally, the investments that we made, ultimately created a point of drag as we went through. So that is something we’re very intentionally not harvesting quarterly margin. We believe that we’re going to add capacity to this business for this kind of very immediate and multi-year growth that’s in front of us. So that’s — but I think we were encouraged by the sequential pickup as well.

Nigel Coe: Great. Okay. Thanks, Bill. Thanks, Gerben.

Gerben Bakker: Thank you, Nigel.

Operator: One moment for the next question. The next question comes from Tommy Moll with Stephens. Your line is open.

Tommy Moll: Good morning, and thank you for taking my questions.

Gerben Bakker: Good morning, Tommy.

Bill Sperry: Good morning, Tommy.

Tommy Moll: I wanted to start on the topic of the supply environment for your utility business. You’ve invested in response to significant demand and in expanding your supply base, but others in the market have as well. So I’m just curious at a high level, how would you characterize that supply-demand environment today? Has it shifted at all?

Gerben Bakker: Yeah. I think where we’re adding capacity is in the areas where we see visible longer-term growth, right? So if you think about transmission and substation, it’s actually an area of the business that our orders are very strong, our backlog has continued to grow. Discussions with our customer, it’s clear that they need these materials. And so we’ve invested in those areas. I think if you look across the industry, you see perhaps different peers investing in different areas. Of course, I would also expect those that compete in the same areas to invest in that. Our level, though, of increase I think is supportive of the supply and demand characteristic rather than that we’re somehow over-investing in there.

Bill Sperry: A couple of metrics that support, I think, Gerben, is I think our service levels are reaching very good levels and our lead times are in most areas, Tommy, back to normal. And those two facts or outcomes I would say, are pretty demonstrative of an improving supply chain environment.

Gerben Bakker: Yeah. And maybe I’ll go on that again, Bill, because what our customers want most from us is that we service them well with quality products. And again, in the discussion that we have with them, that’s what they’re really concerned about. So the fact that we’re — we’ve been able to take our lead times down and we have, the fact that we’ve been able to increase our service levels is all — and that we’re investing in the business in capacity with areas of [business] (ph), that’s what our customer want us to do. Now, one of the outcomes is that, that when you do that, your supply chain normalize, you can actually destock. They can take comfort in the fact that we’re going to deliver for them. So it’s a very natural outcome and it’s actually a good thing for the business long term to do this.

Tommy Moll: I wanted to follow up on the comment you made regarding pricing for telco. Just clarify a bit what you meant. I think, Bill, that was a comment you made in the context of a broader pricing discussion.

Bill Sperry: Yeah, I mean, I think we’re really pleased generally with the pricing construct. We had about 1 point of wraparound price from our last year actions. So for us to garner 3 points in the first quarter implies success at getting some new price. And I would say generally, Tommy, while Electrical did very well in that regard, Utility did even better. And so across the enterprise, we think that pricing is in very good shape and I think we’re going to be quite surgical about it. And there may need to be instances in the enclosures area where we need to use price a little bit. But overall, net-net, as an enterprise, we feel quite good about overall pricing, and I think that’s a function of kind of the quality of the product, the quality of the relationships that we have, the positions that we have, but maybe most importantly, the relative service levels that we have and being able to supply our customers with the critical infrastructure solutions that they need.

So that’s been a very good story net-net, Tommy, for us.

Tommy Moll: Thank you, Bill. I’ll turn it back.

Operator: One moment for the next question. The next question comes from Julian Mitchell with Barclays. Your line is open.

Julian Mitchell: Hi, good morning.

Gerben Bakker: Hi, Julian.

Julian Mitchell: Hi. Jus — apologies, but wanted to circle back to telcom. Just to — I see the color on sort of Slide 8, and clearly that exposure was down 40% in the first quarter. But just to try and understand full year as a whole, kind of, what are you dialing in for that telcom business in terms of year-on-year trends in telcom?

Bill Sperry: We’re anticipating, Julian, double digits down for the full year. We see the second quarter kind of continuing from the first quarter. The comps in the second quarter get easier because this started as we went through the second half and accelerated as we went towards the end of the year. But yeah, our view right now is for it to be down double-digit. And we contemplated some of this in our — as we presented the guidance to you for that, that there’s some thoughts in the industry that we could see a second half rebound. We were a little perhaps more conservative in that view, and I think that’s proven out to be right.

Julian Mitchell: That’s helpful. Thank you. And then just my second question would be around Utility margins and the trajectory there. I understand that the pricing sounds pretty good there. And you’ve now got the Systems Control effect in that Q1 margin already. So as we’re thinking sort of the balance of the year in Utility margins, do we think about a sort of steady sequential increase through the year, and then you end up at that sort of flattish margin for the year as a whole?

Gerben Bakker: I think that’s the right way to think about it, indeed. And the only, I would say, clarification to that, typically in the fourth quarter, we’ll see it come down again. So you’ll see it go up second and third, down a little bit. But your construct over year-over-year for — particularly for that Utility T&D component is right.