Hubbell Incorporated : 1Q 2024 Earnings Call Presentation

Published: 2024-04-30 07:58:11 ET HUBB

First Quarter 2024 Earnings Call

April 30, 2024

Forward Looking Statements and Non-GAAP Measures

Forward Looking Statements

Certain statements contained herein may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements about expectations regarding our financial results, condition and outlook, the Company's solid start in 2024, first quarter results positioning the Company to achieve its reaffirmed 2024 outlook, utility growth, effectively navigating near-term telcom market weakness, stronger Electrical Solutions growth and margin expansion, strong T&D markets for the balance of the year, and other anticipated end market conditions, near-term volume, grid automation, carryover of prior year investments, continued channel inventory management, and all statements, including our projected financial results, set forth in the "Summary & Outlook" section in our earnings press release, or in the "Reaffirming 2024 Outlook" section in this presentation, as well as other statements that are not strictly historic in nature. In addition, all statements regarding anticipated growth, changes in operating results, market conditions and economic conditions are forward-looking. These statements may be identified by the use of forward-looking words or phrases such as "believe", "expect", "anticipate", "intend", "depend", "plan", "estimated", "predict", "target", "should", "could", "may", "subject to", "continues", "growing", "prospective", "forecast", "projected", "purport", "might", "if", "contemplate", "potential", "pending", "target", "goals", "scheduled", "will", "will likely be", and similar words and phrases. Such forward-looking statements are based on our current expectations and involve numerous assumptions, known and unknown risks, uncertainties and other factors which may cause actual and future performance or the Company's achievements to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: business conditions, geopolitical conditions (including the wars in Ukraine and the Middle East, as well as trade tensions with China) and changes in general economic conditions in particular industries, markets or geographic regions, and ongoing softness in the residential markets of Electrical Solutions, as well as the potential for a significant economic slowdown, continued inflation, stagflation or recession, higher interest rates, and higher energy costs; our ability to offset increases in material and non-material costs through price recovery and volume growth; effects of unfavorable foreign currency exchange rates and the potential use of hedging instruments to hedge the exposure to fluctuating rates of foreign currency exchange on inventory purchases; the outcome of contingencies or costs compared to amounts provided for such contingencies, including those with respect to pension withdrawal liabilities; achieving sales levels to meet revenue expectations; unexpected costs or charges, certain of which may be outside the Company's control; the effects of trade tariffs, import quotas and other trade restrictions or actions taken by the United States, United Kingdom, and other countries, including changes in U.S. trade policies; failure to achieve projected levels of efficiencies, cost savings and cost reduction measures, including those expected as a result of our lean initiatives and strategic sourcing plans, regulatory issues, changes in tax laws including multijurisdictional implementation of the Organisation for Economic Co-operation and Development's comprehensive base erosion and profit shifting plan, or changes in geographic profit mix affecting tax rates and availability of tax incentives; the impact of and ability to fully manage and integrate acquired businesses, including the recent acquisitions of EI Electronics LLC, Indústria Eletromecânica Balestro Ltda.; and Northern Star Holdings, Inc. (the Systems Control business), as well as the failure to realize expected synergies and benefits anticipated when we make an acquisition due to potential adverse reactions or changes to business or employee relationships resulting from completion of the transaction, competitive responses to the transaction, the possibility that the anticipated benefits of the transaction are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the acquired business, diversion of management's attention from ongoing business operations and opportunities, and litigation relating to the transaction; the impact of certain divestitures, including the benefits and costs of the sale of the residential lighting business; the ability to effectively develop and introduce new products, expand into new markets and deploy capital; and other factors described in our Securities and Exchange Commission filings, including the "Business", "Risk Factors", "Management's Discussion and Analysis of Financial Condition and Results of Operations", "Forward-Looking Statements" and "Quantitative and Qualitative Disclosures about Market Risk" sections in the Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Reports on Form 10-Q.

Non-GAAP Measures

Certain terms used in this presentation or in our earnings press release, including "Net debt", "Free Cash Flow", "Organic net sales", "Organic net sales growth", "Restructuring-related costs", "Adjusted EBITDA", and certain "adjusted" measures, are defined under the section entitled "Non-GAAP Definitions." See Appendix, our press releases and SEC filings for more information.

Key Messages

1 Strong Electrical Solutions organic growth and margin expansion

2 Utility growth driven by acquisitions and grid automation; telcom markets weak

3 Price | Cost | Productivity positive

4 Reaffirm 2024 outlook

Customer Spotlight: Hubbell Utility Connect Conference

Background

Key Takeaways

 HUS customer conference in April 2024

 Customers planning for robust, multi-year T&D investment cycle

 >400 utility customers across electric, water and gas

 Electrification requires more transmission and substation infrastructure



Solutions Center showcase



Datacenter and AI-driven load growth impact is significant, but early innings



Customer training and collaborative problem solving



Continued investment in capacity and service critical

Partnering with utility customers to provide solutions to emerging grid modernization challenges

1Q 2024 Results

$1.40B

Sales

(Organic +2%, Net M&A +6%)

19.7%

Adj. OP Margin

(-100bps y/y)

$3.60

Adj. Diluted EPS

(flat y/y)

$52M

Free Cash Flow

Organic growth driven by price realization

Electrical and industrial markets strong; Utility T&D end demand solid; telcom weak

Telcom-driven volume declines in utility enclosures business

Higher y/y investment in long-term growth and productivity initiatives Favorable Price | Cost | Productivity

Solid adjusted operating profit growth Higher y/y interest expense

Higher y/y CapEx investment

On track to deliver full year outlook of ~$800 million

1Q 2024 Results

NET SALES

ADJUSTED OPERATING PROFIT

$ millions

+9%

$ millions

+3%

1,399

275

267

1,285

20.7%

19.7%

1Q 20231Q 20241Q 20231Q 2024

ADJUSTED DILUTED EPS

FREE CASH FLOW

$ per share

flat

$ millions

-35%

$3.61

$3.60

1Q 2023

1Q 2024

1Q 2023

1Q 2024

Solid operating results versus strong prior year comparison

1Q 2024 Hubbell Utility Solutions (HUS) Segment Results

UTILITY SOLUTIONS NET SALES

UTILITY SOLUTIONS ADJ. OPERATING PROFIT

$ millions

+14%

$ millions

+2%

894

195

191

782

24.4%

21.8%

Organic flat

Acquisitions +14%

1Q 2023

1Q 2024

1Q 2023

1Q 2024

Grid Infrastructure +9% (organic -8%)

 Solid price realization and utility end market demand



Enclosures volume declines driven by telcom (~150bps impact)

 Transmission up double digits



Investments for long-term growth and productivity

 Continued inventory normalization in Distribution as anticipated



Acquisitions

 Telcom markets weak (down ~40%)

Mix

Grid Automation +28% (organic +22%)



Price | Cost | Productivity positive

 Continued AMI/meters backlog conversion

 Double digit growth in grid protection & controls

Solid performance in core utility T&D markets

Utility Solutions End Market Considerations

Grid

Trends

Considerations

Solid demand

Automation

Infrastructure

DISTRIBUTION

Inventory normalization

Sequential improvement

Easing y/y comparisons

TRANSMISSION

Strong demand

Sales by

& SUBSTATION

Capacity improvement

End

Planning conservatively

Market

TELCOM

Weak

Similar to 1Q

Easing y/y comparisons

METERS & AMI

Strong growth on

Solid demand

backlog conversion

Challenging y/y comps

GRID PROTECTION

Strong demand

& CONTROLS

Key

Takeaways

Continue to anticipate HUS full year 2024 organic growth of +4-5%

1Q 2024 Hubbell Electrical Solutions (HES) Segment Results

ELECTRICAL SOLUTIONS NET SALES

ELECTRICAL SOLUTIONS ADJ. OPERATING PROFIT

$ millions

Flat

$ millions

+6%

505

504

Organic +6%

15.8%

15.0%

Divestiture -6%

1Q 2023

1Q 2024

1Q 2023

1Q 2024

 Broad-based strength on electrification and US project activity



Solid price realization



Volume growth



Industrial markets strong

 Price | Cost | Productivity positive

 Double digit growth in Renewables and Datacenter verticals



Higher y/y restructuring investment (-80bps)

 Recovery in electrical products markets

Continued execution driving structural organic growth and margin improvement

Reaffirming 2024 Outlook

Markets

Operations

 Electrical markets off to strong start



Strong price traction

 Utility T&D end markets solid

 Driving productivity to offset inflation



Channel inventory mostly normalized



Increased restructuring investment



Telcom weaker than anticipated

 Service and capacity improvement

Reaffirming

+8-10%

2024 Outlook

Total Sales Growth y/y

(+3-5% Organic; +5% Net M&A)

$16.00-$16.50

Adjusted EPS

$800M

Free Cash Flow

Solid start to 2024; on track to achieve ~10% adjusted Operating Profit growth at midpoint

Disclaimer

Hubbell Inc. published this content on 30 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 April 2024 11:57:08 UTC.