Hubbell Incorporated (HUBB) Earnings Call Transcript & Summary

So Page 3 forward-looking statements. Today's presentation is going to include forward-looking statements and certain non-GAAP financial measures. Please refer to the Appendix for those and read these forward-looking statements here on Page 3. This morning's agenda. So we've got a full morning here of presentations. We're going to kick it off with both Gerben and Bill walking you through our overall long-term strategy, how we generate cash for shareholders and deploy it on your behalf. Then we're going to do a deeper dive on 3 strategic topics within that strategy. Some folks you may not have met before. Terry Watson is going to talk to you about how we differentiate to our customer and within our channel. Alexis Bernard, our Chief Technology Officer, is going to talk to you about our innovation efforts, how we're accelerating organic growth and really looking to capitalize on some attractive megatrends that are within our industry. Katie Lane, our General Counsel, is going to talk to you about our ESG initiatives and really about how that's -- sustainability is a core part of our strategy, particularly in terms of the products that we sell on a day-to-day basis. Then we're going to take a quick break for Q&A and a break. We'll come back in the second half of the morning. Allan Connolly and Pete Lau will walk you through how to execute that strategy within each of our 2 main business segments. And then we'll wrap up with some longer-term financial targets and closing remarks with Gerben and Bill again. And finally one with a second Q&A session and lunch. We do have other folks from Hubbell in the room today as well. So hopefully, you've had a chance to mingle with them this morning and, please, during breaks and launch introduce yourselves and feel free to ask them any follow-up questions. A couple of quick things on Q&A. If you could please hold your questions until those dedicated sessions and keep your first half Q&A sessions to questions covered in the first half and second half to second half, just so we can cover all the topics efficiently. And then again, we'll break for lunch. And we do have some giveaways for you on the way out. So please stop by and get those. So with that, I'll turn it over to Gerben.

Great. Thank you, Dan. Welcome, everyone, to our 2022 Investor Day. Excited to be back in person again with everyone. And if I think about the last time we were together, March of 2020, and I think it was, certainly for us, the last event that we did in person and probably for many of you as well before our world really changed, and most of us got locked up for a little while. We've been through a lot in those couple of years. But I can't start this without saying how proud I am of our company, of our 17,000 employees who really have continued to work for our customer as an essential supplier and continue to execute for shareholders over that time. Also, a little bit on a personal note. This is my first Investor Day as the CEO of Hubbell, even though I've been with Hubbell over 30 years. And I'm extremely grateful for the successful company that I have inherited to build on. I'm also surrounded by a very, very talented leadership team. And together, we are really excited to build on the great foundation that we've been given and really look ahead to our strategy. What we'd like to outline for you today is how we're building on that base and the strategy looking forward and a journey to get that. But it really starts by what we are trying to do, what we're trying to achieve and why we exist as a business. And that's to solve critical infrastructure challenges for our customers through reliable electrical and utility solutions. We're uniquely positioned to drive value for our customers and for our shareholders to the unique positioning that we have along this energy infrastructure. And we have a couple of megatrends, clean energy megatrends of electrification and grid modernizations that are providing tailwinds for us. What you'll hear from the team over the day is the paths and the levers that we're using to build on that base and to drive value for our key stakeholders, which are our customers, our employees and our shareholders. I want to start with a little bit of a snapshot of Hubbell. And many of you know us very well, but I think it's always good to reflect on what the basis that we're building off. It's 135-year-old company with deep roots in electrical and utility markets. A little over $4 billion in sales last year, mid-teens operating margins and strong free cash flows. And the paths, the strategy that we're going to unveil to you and that we're driving is to grow in all of these 3 key financial metrics. On the revenue side, we expect our markets to outgrow GDP for the cycle. Customers and innovation initiatives as well as the acquisition playbook will drive further growth on top of that. And you will hear from Alexis, Bill and Terry about how we're going to do that. On the margins, we've executed well over the last couple of years on price cost. And certainly, we expect to continue to do that. But we also want to build on that with operational excellence and transformation as well as investment in higher growth vertical markets that are presenting higher growth and that are more profitable. And then finally, on free cash flow, we will continue to manage our working capital while making the needed investment for this strategy and convert free cash flow at about 100% of adjusted earnings per share. Looking a little bit deeper on how we run the business. We run them through 2 segments: Utility segment; and in the Electrical Solutions segment, a portfolio that is balanced across the 2 segments, about equal in size and balanced with markets across each of these segments. A clear focus on serving our customers and leading depth and breadth of mission-critical components, and we talk a lot about this with our portfolio. This applies to a lot of our portfolio, where the cost of ownership is relatively small. We represent a smaller portion of the cost of ownership of what customers are trying to solve, but the cost of failure for our customers with our product is really high. So it's an essential product in what they're trying to do. In the Utility segment, on the left, you can see a big part of that is our T&D Power Systems business, leading position in the market for transmission and distribution of components. And then more recently, in the last couple of years, we added our communications and control, the Aclara business. And we believe that combination provides a unique position for us, and you'll hear Allan talk about that later. On the right-hand side, you see the Electrical segment. And that's a combination of leading brands that we have more recently pooled together under 1 umbrella, under the leadership of Pete. Recall that 3 years ago, when we were here, we still talked about this and managed this business around 3 separate group with separate leadership. And what we found that we're able to better compete collectively, have a simplified management structure and find operational efficiencies to drive value by combining this. These businesses together serve attractive end markets. And historically, Hubbell has played, and I was joking with Jeff earlier today about our Utility business. And for a long time, we talked about that business being kind of a GDP business. It was almost like a bond, very predictable, very profitable, but it wasn't growing real fast. And what we're seeing right now that these markets are growing at rates higher than GDP. Part of it driven by the portfolio optimization that we've done over the last couple of years, and you'll hear Bill talk about the steps that we've taken there to focus on higher growth and more attractive end markets. Customer and innovation initiatives that we'll talk to you about here in a little bit to drive higher organic growth. And finally, a couple of secular energy megatrends that are providing tailwinds for our business, all of which combined to drive growth above GDP. The couple of clean energy megatrends that are affecting our business are electrification and grid modernization. And electrification, simply put, is more things like transportation, industrial and commercial building application and even home application, getting plugged into the grid. And really electrification is key to decarbonization. The second megatrend is around grid modernization. This is an area we've talked to you a lot about with our Utility business, the aged grid that we have today with a lot of assets that are near or approaching the end of their life and driving reliability issues and risk. We're reminded constantly with extreme weather events of how fragile this grid and the need to harden it. But at the same time, this grid has never been more complex to operate for utilities, with the integration of renewable power. These are intermittent loads that are coming up and down as the sunshine or the wind drives and then comes down. And it's also bidirectional. And this requires grid modernization with data insights. Both of our segments are strategically aligned around these 2 megatrends. And our products and portfolio really helped the transition to more sustainable solutions and decarbonization. And Katie will talk a little bit later about how this is also key to our strategy for our business, not just on the products that we serve, but also what we're doing within our business itself. But together, Hubbell is uniquely positioned and well positioned to capitalize on these megatrends along the energy infrastructure. And this is how we look at the infrastructure with really 3 categories: in front of the meter; at the edge; and behind the meter. And this is how we look at our business. In front of the meter, we have a leading position with our T&D components business as well as our AMI and metering business, driving reliable solutions for our customers. On the right-hand side is where the energy is consumed. We have the leading position in brands of products that really help with the electrification. And then sitting in between that, and this is really at the edge of the utility infrastructure, we have our AMI and metering business. And this is really where the capabilities, which pulls together in front of the meter and behind the meter with communications, controls and data insights. This is really a unique position for Hubbell. We're the only supplier and company with leading positions in each of these 3 segments. And we believe it has unique opportunities for us, and we'll give you some examples of how we're driving some of those opportunities. Those businesses are aligned around some key verticals that our strategy is focused on. And you can see these 6 -- you see them repeated throughout the presentation where I will show you how our different actions, whether it's in M&A or whether it's in innovation or whether it's in sales initiatives, are focused on these key verticals for us. In some of them, we have traditionally had a very strong position like the electric T&D. In others, like distribution automation and data centers, we've traditionally had a smaller position, but we have a clear right to compete and win in this market. And here, the strategy is through organic and inorganic actions to drive scale. And then yet in other markets, we've traditionally had a smaller exposure, newer to Hubbell and more developing like electric vehicles. Here, you'll hear about an example later of where we're bringing truly the capabilities in front of the meter, at the edge and behind the meter to provide a solution for our company, which we believe is differentiated. All of these markets sit at the center of grid modernization and electrification. It represents about half of our portfolio in revenue, and it's clearly growing at above-market GDP. While we're excited about our future and our strategy and the opportunities ahead, I do want to emphasize that this is not a 180-degree pivot for our company. Rather, it is building on the great legacy and the strength that's gotten up to this point. A couple of years ago, we did an investor perception study. And through that study, you highlighted for us some areas that we're really strong and then some opportunity areas. And really, these were things that were identified to us that resonated that we saw ourselves. And this is what we've worked on so hard over the last couple of years to set this strong base of which we're building off: strong brands with a reputation for quality, for service and for reliability in attractive markets; a company unified around a common strategy; and a mission succeeding as an operating company. We had come more from a holding company approach in the past and with an operational rigor to drive consistent and predictable results, and that had not always been that case as well. And with a portfolio that we've realigned, we've made some moves in our portfolio that you'll hear about again, but I think you're familiar with, to focus us on higher growth and more attractive end markets. That's the base that we're building on. And then our strategy is to become, and to drive, more of a mindset for innovation to drive organic growth, and Alexis will talk about that later. Competing collectively and investing in higher growth verticals to drive higher growth and higher margin for our business. And finally, continuing to drive operational excellence transformation to drive margin improvement and to continue to -- our service for our customers. Together this strategy, and Bill will talk about this at the end, you'll see this in a chart, but it will result in growth that will be in excess of GDP, consistent margin expansion over the cycle and double-digit earnings per share growth over this strategic cycle. To execute on this vision and mission, we use strategic pillars. It's really to focus our organization on what matters to drive this. You again see this used throughout our presentation of how this comes to life. But it's a key tool for our organization to align on what we're trying to accomplish, what our priorities are, what our actions are. It includes measures to understand how we're doing and driving the performance that we need, a critical part of how we operate our company. And finally, none of this -- and all of our ambitions are enabled by the 17,000 employees. That where I started my comments today that it requires. We've all come to appreciate this even more during the last couple of years. I'm proud of what the Hubbell team has achieved. And I'm also confident that our ambitious goals are going to be achieved with this team. You see here our leadership team, they're all here and they're joined by other key leaders from our organization. They represent a blend of people new to their role, people new to the company and people like myself, very tenured in both, and a diverse set of experiences, perspectives and capabilities. You will hear from most of them throughout this day, and we really look forward for all of you that are here, to engage with you over the breaks and for you to hear for yourself from them and the talent and what they bring to the table. So with those opening comments, let me turn it over to Bill to really start taking us into the depth of our strategy. Bill?

Turn off the WiFi password 'till after I finish. You don't browse until after I'm done, thanks. I really appreciate the chance to be with you all this morning. It does feel -- when we were together in March, the first week of March of 2020, right, the week that New York City closed, feels like a long 2.5 years ago. So it feels like a breath of fresh air to be here with you all. The really simple framework that we want to establish with you all this morning starts with we believe we've got a set of products and solutions that have earned the right to grow as our end markets grow. As Gerben said, with some megatrends, the end markets we happen to be exposed to, we believe, are going to grow in excess of GDP. But we feel that's the table stakes of our legacy and our history and the management team that you see and are sitting with you today and you'll hear from, we are united in our commitment that our job is to outgrow those end markets. And we're going to describe for you several management levers that we think are in our control that will help us achieve that. I'm going to first talk about acquisitions, which is a lever that you're quite familiar, that we've deployed over decades. You're going to hear from Terry about new initiatives in the channel, cross-selling, how we staff, how we organize around verticals, and that's going to create some share opportunities. Then you're going to hear from Alexis who's talking about a real lean-in on innovation on our part. It's at a higher level of spending and with bigger ideas than we have in the past. And with those 3 growth levers, we think we'll outgrow our markets. We'll also talk about, at the end, some margin expansion initiatives around restructuring as well as price cost and inflation management. And together, we're going to outgrow markets, expand margins. And I'll share with you the financial implications of all that. But that's the simple construct, and I'm hoping each one of us, kind of, you feel us contributing to essentially that story. So I wanted to start with capital allocation. And really, we've got a strong balance sheet to start with. At a point in time, cash flow generation has been a really strong point of emphasis. We are willing to manage the portfolio. We've had some dispositions over the last few years that we'll remind you of and show you that we are willing to call when businesses aren't meeting our ownership criteria, but we do expect to be net investors and add strategically to the portfolio in high-growth, high-margin markets. And I want to just kind of remind you all of our process around that, which we think is quite proven to have a program that invests as kind of a portfolio rather than episodic investments once every 5 years and a company equal to our size. That's not what we're talking about. So let's really start with the cash generation and where we see it going. The chart I'm sharing with you encompasses 4 years of economic activity. Starts on the left with cumulative operating cash flow, which we anticipate, in the 4-year period, will average in the $700-ish million per year. So you're getting up towards $2.8 billion of operating cash flow. So our first call on capital is capital expenditures. You'll see that we're anticipating dedicating about $500 million over this 4-year period. That's about $125 million a year. And those of you who followed us would sort of recognize that as being a little bit higher than our typical average where we've maybe been closer to $100 million. So this is a lever that we are expecting to invest in, in the next 4-year period. We think we need CapEx for capacity on the power side, and you'll hear from Allan talk about that. We're going to need CapEx to support the electrical business in terms of restructuring efforts. There's automation involved in there on the electrical side. And so we think there's some levers to help us drive value for you by increasing our amount of CapEx. You'll see I put the divestiture. We raised $350 million of gross proceeds from the disposal of C&I Lighting at the end of January, which you all know about. That cash goes into our investment kitty here. And then dividends, we're anticipating about order of magnitude $1 billion of dividends. We target to have our dividend payout ratio at about 40% to 50% of net income. So as our net income grows, we're anticipating dividends to grow as well. So we have baked in here a growing dividend to be returned to shareholders. Share repurchase is the smallest bar on here. We tend to do it annually just to offset any dilution that would come from option exercises. That tends to be in the $50-ish million a year ballpark. You'll see this number is larger than that. And it's because when we started this year of '22, of the $350 million of proceeds we got from the disposal of C&I Lighting, we bought 150 million of shares in the first quarter of this year. So this 4-year period will have a little bit more on the share repo side. So that leaves us with about $1 billion left over for acquisitions that, again, we intend to do in an intentional and programmatic way. And I've added to the right, just to remind that beyond our operating cash flows and what's left after these allocation decisions, we have a balance sheet that to the extent larger opportunities avail themselves, we have plenty of dry powder inside of the balance sheet that can complement what we'll generate in cash flow. So we feel we've got a cash flow profile and a balance sheet that's really poised to invest, and you'll hear a lot about that from my partners here this morning. As part of our portfolio management, we deploy a quite simple array on the right side. And when we review operations with our management team monthly and quarterly, we use this simple construct to look at growth rates versus margin. And we were -- are obviously trying to get businesses in the upper right of this chart. And when we've had them to the lower left, we have been committed to pruning. The C&I Lighting we've talked about. Those of you who know us will maybe remember the Haefely high-voltage test equipment business, which was quite volatile as well as a line of business inside of the Aclara that we sold as well. So that's something we remain committed to doing if businesses fall out. And I'd say this has been a quite useful construct for us to use as a management team. We've arrayed here our business units, but we also will look at lines of product lines and maybe a product line inside a business unit, might fall to the lower left. And we push it down as well even to individual SKUs, where we're looking to see are there low-moving SKUs and try to really prevent SKU proliferation that might clog up our operations. And so this simple construct works at all 3 of those levels, right, the business unit; the product line; and the SKU level, and really, I think, is something we're trying to deploy to make sure we continue to be exposed to the attractive lines of business that you all would demand of us. I'm using the same 6 verticals that Gerben introduced you to in his section to show you how intentional our last 5 years of acquisitions has been in terms of really adding to and investing in those verticals. This represents about $1.5 billion of activity. And you can see Gerben highlighted that the EV charging is really a product development opportunity. You'll hear about that from Allan. But Terry is focused on this page and where can we develop new customer initiatives. Alexis is focused on this page, where can we do new product development. And I'm focused on this page, where can we buy companies and increase our exposure. So maybe a couple are just worth mentioning that are on here. You see Armorcast, the second on the left. Armorcast makes fiberglass and polymer concrete enclosures that house some of the electronics for the utility industry that's -- you see it also appear on the far right in communications because those same boxes have applications inside the telecom world. So that was an area where Hubbell already was a strong player. There was another strong player available in the market. That's about $130 million acquisition for us. And you're going to hear from Allan that in addition to us making this acquisition and putting it together with our existing business, there's actually still investment opportunity to add capacity in this area. And so it's proven to be a really high-growth area and very attractive. I think the second one I wanted to call to your attention is Beckwith which you see under DA just to the right of Armorcast. And Beckwith is a company that has asset protection systems and grid automation controls. It's a company that we had known very well. We were cooperating with them and selling bundled sales to our customers. And so adding them through acquisition was very natural and got us, again, into very high-growth, high-margin area. I also wanted to draw your attention, thirdly, underneath renewables and data center. You'll see that we have, happy to say, just signed a deal in the data center space. It's still subject to normal closing conditions, and we expect we'll close that in July. So I'm not going to jinx it by saying too much about it other than an example of redeploying the proceeds from the divestiture of Lighting to get us into high-growth, high-margin area. And that's really been our first bolt-on since we announced that in January. So happy to show that the machine is -- continues to thrive for us. We go about this very intentional, very organized level of process around our acquisitions. And I want to take just a minute to introduce you to our dedicated business development leadership team, who are in the room today. So Erik Christian is with us. He is with me thinking about enterprise business development. Lily Ho is in the front. She is in the utility segment dedicated to business development. And Melissa is in the back, in the corner and she is dedicated to electrical. So if you're interested in our acquisition process and you see those folks, you can say hi to them. But we're coordinated and integrated as to how we target companies. They tend to be private. They tend to be companies that we know. They tend to be -- have something technology or a product line that we don't have. They tend to be known with their brand, and they tend to come with some talent that we need. And all that column is to say we're looking for good companies rather than fixer-uppers. I think there'll probably be a way to have -- make a great living buying broken companies and fixing them up. But we are trying to buy good companies and making them better. And that middle column is how we add value. It's not super intellectual or splitting atoms, how we do it. It can start with the front end and Terry can tell you more about it, but most of these smaller companies have agents or reps that they pay 500 basis points. We fire those folks the day we close, and we give it to our sales force and add 5 points of margin to the profile. This is a simple example. Often, they come with subscale inefficient manufacturing operations, and we can close those down and incorporate that into our existing footprint and have a much more efficient operating scale. And so it's -- again, I recognize those are just kind of simple value levers, but they're also reliable and dependable. And that's in addition to the fleets of cars and the aunts and sisters in law who are on the payroll that we don't need anymore. So that results in strong ROICs for us. And we think we're helping you all by basically being an investment arm of yours and getting access to small private companies, who are not raising capital, right, and they don't -- they're not publicly traded. So not available to you all, but we think we can invest in those companies on your behalf and add value to them. So we think that's a major part of how we'll go forward. Thought it'd be instructive to look at our scorecard and show that this is not a new initiative, and it has been going on for decades. I think the middle column of 10 years is the most instructive column to look at because it's easier for me to divide by 10 and see that you're basically talking about 3-plus acquisitions per year. You're talking about $120 million or so invested per year. You can see our average purchase price has been modest-sized company, bolt-on of $40 million. I think maybe the bad news on that second to last column is valuation multiples. Have ground themselves upward over this time line. And even the past 5 years, you see 10x. If you did it from the most recent, that's more in the 11 and 12x range. So it will be interesting if these multiples kind of ease off in sympathy with the public markets right now. But this is something that we analyze closely. We review, with our Board and ourselves, the performance of each of our acquisitions. We tend to lump them into vintages of 5 years and look at it as a portfolio of investments. And the returns in the low teens are pretty consistent. When we look at a 5-year vintage, not all of the acquisitions are ahead of the amount of the amount of OP they promised, Gerben. But as a whole and as a portfolio, they always do. So again, it speaks to the portfolio approach rather than the episodic approach. And we intend, as we said, to continue this investing on your behalf or through the 2025 period. So using the same pillars that Gerben use, which helps us work with our employees. Obviously, we think acquisitions will be a very important part of how we grow the enterprise. We do expect to be active portfolio managers, though. If things need to be sold, we will, but we expect to be net investors and adders, net adders over time. We need to operate with discipline. We have a playbook. We stick to it. We don't break from that. We do things the right way, in the same way. We irritate some of my friends in the field who are with you today, claim we maybe go too slowly or too disciplined. And there's others who are willing to compete in terms and at speeds and foregoing rights to visit plants, for example, that we don't cut those corners, but we'll continue to operate with discipline. And as we serve our customer, we think we're serving both our channel and end-user customers by adding new products and technologies that they need but also you, an important customer of our investors, by adding growth and returns that will help differentiate us from just what our end markets are able to do. So that's capital allocation and acquisition lever. And the next lever we wanted you to hear is from Terry Watson, my partner, who'll talk to you about the front end and the customer.

Thanks, Bill. Again, my name is Terry Watson, VP of Customer Experience, been with the company now 16 years. I've been in this current role for the last 2. So just as a follow-up in an effort to support shareholder value creation and elevate our customer experience, I'm going to talk to you guys about 3 main things today. And that is how do we drive differentiation in our channel through our combination of scale and agility; and how we drive differentiation to our customers and end users through the value of our brands and the strength of our service; and how we are leveraging the depth and breadth of our portfolio to accelerate growth in attractive key verticals and with our channel partners. So we're going to set the stage a little bit in terms of where we compete in the market and how we compete in the market with our sales force and our channel. We have a differentiated value chain with our go-to-market strategy and focus on serving our customer with a broad brand portfolio. Dimensionally, we are well positioned to achieve above GDP growth. It starts with our decision on where we compete in the electrical products market, which we size at about $115 billion. And that decision partially stems from where we don't want to compete. We don't want to compete with products that are commoditized and less differentiated. We also don't want to compete at the peak of the pyramid, where the nature of the competition relies on global access as well as low cost of capital. Likely, this still leaves the middle of the pyramid, which is roughly about half of the overall market, encompassing things like utility components, wire and devices, electrical connectors, industrial controls and enclosures. Not only is it the largest section of the pyramid, but it's also the one that's the most profitable, both for us and our distributor partners. Pete is going to give you a little bit more context on that later when he breaks down the electrical contractor bid package. But the key takeaway is that we're focused on playing where we can win and earn attractive returns. And while we're focused on the middle of the pyramid, we do think we have a right to play further up the pyramid. And that is in distribution automation, and Allan will talk a little bit about that later on today as well. So how do we go to market? We do that with leading brands and mainly our direct sales force that's deeply knowledgeable and focused on Hubbell. Rather than relying solely on reps and agents to push our product, we have over 600 people that's in the field that's focused on talking, selling, promoting Hubbell every day, creating and driving preference. This sales force has long-term relationships with our end users, specifiers, contractors and channel partners. And about 2/3 of our business is transacted through distribution. The distribution channel is critical for us in effectively reaching a fragmented electrical contractor base and efficiently serving our utility customers. The channel is also extremely fragmented. As you can see by the graph here, the top 10 customers for us make up almost half of our overall sales, but that also leaves a lot of smaller players out there that represent about 1/4 of the market. As you can see, about 5,000 of those smaller players. This means that competing effectively in the channel both requires scale to partner with the larger ones and agility to be able to support and/or compete with the smaller ones. Playing in the middle of the pyramid, with strong brands, a knowledgeable sales force and leading products positions us well to accomplish this. While the channel was critical in our success, where we really drive and command the premium is through the customers demanding our products and pulling them through the channel. We have aligned our sales force to our customers and end markets. It's also important to note that we're executing on the same core strategy across both segments, even though the drivers may be somewhat different. In utility, while we still utilize our channel partners for efficient and cost-effective distribution, we've also been very successful in building long-term relationships with our core utility customers through a relentless focus on quality, service, reliability and driving solutions and our underlying service as a key differentiator for us as we believe that has enabled us to take share. Allan is going to talk a little bit about some of the challenges that the utilities are facing today around renewables transition, storms and aging infrastructure. But the key to all of that is being able to have a supplier that the utilities can rely on to provide product when they need it in that manner. In Electrical, brand value is key in a fragmented electrical contractor base, who tend to stick to products that they are aware of and that they know and that they are familiar with, which helps drive spec positions and repeating demand. Depth and breadth of product offering is also critical. And I'm going to highlight that on the next page, and Pete is going to elaborate on that as well. And so you see the common elements of our core strategy on the COGS running across the top of the page. But probably the most important one that runs across all of our businesses and is critical to our success is the first one. And Gerben mentioned this earlier as well. But our products represent a small percentage of our customers' cost but have a high cost of failure for our customers. And just think about a $5 to $10 connector, not being there on time, failing lights on the line and drops the line. That outage could cost anywhere from $100,000 to millions of dollars to a commercial organization or to a utility. And so extremely impactful that way. This means our customers value quality, reliability and service. And they're willing to pay a premium for best-in-class brands and experience. Coming back to the strategic growth verticals that was mentioned by Bill and Gerben earlier. We're supporting our growth strategy in these areas with dedicated direct sales forces focused solely on those end markets. Some of these have been in place for a long time. We have an industry-leading utility sales force. And we continue to double down on our strengths here by increasing our service levels and investing in further capacity to support the growth needs of our customers. Others are newer. And two, I'd highlight that Pete is going to detail later our renewables and data centers. One of the COGS on the previous page reference depth and breadth of product portfolio. And this is an area that we have not utilized effectively as we could have in the past. Historically, we've been more siloed, sales teams that were focused just on their brand or a specific product line. What we have done recently is put together a dedicated sales force team focused on strategic end markets, where those teams now wake up every day focused on pooling our products together across the Hubbell portfolio to market and sell bundled solutions to a solar EPC or data center customers. That's enabling us to accelerate our growth in those markets while making it easier for our customers to do business with us through our partner relationships. This also has us aligned with where our channel partners are also investing. Earlier, I mentioned our top 10 partners making about 40% of our sales. I wanted to give you a more tangible example of how we all pull this together to drive incremental sales. If you look at the chart on the right, this breaks down our sales by segment through our largest channel partners. And you'll notice that in most cases, we aren't really balanced between segments. The blue bar represents utility and the gray bar displays electrical penetration. In a lot of cases, there's good reasons for this. A distributor may be just focused in one specific area on the electrical side and nothing on utility, and that makes all the sense in the world. But we believe that there are significant cross-selling and conversion opportunities embedded in the channel, where we can do a better job of penetrating. And even if we looked at the Electrical segment by itself, you may have a particular partner that's doing business with 2 or 3 brands but not the other 20 brands that we actually have in that space that we can then, again, penetrate a little bit further. We see significant opportunity over the next few years to go to market in a more coordinated way, both within the unified Electrical segment and across utility and electrical. So how do we capitalize on that? One lever is organizational structure, both across the segments as well as within the teams. Pete is going to talk a little bit more about that as regards to the unified Electrical segment. But within the sales organization, we have dedicated strategic account executives to each of the top partners. And with a more coordinated and unified business structure, we're finding that we can do a better job of allowing this team to sell across Hubbell. We're already seeing accelerated growth with these accounts versus the others. Another lever is the vertical market strategy that we just talked about. As an example, if you're a distributor who typically carries Burndy connectors, but not Hubbell wiring devices and now we're bundling and marketing these products together for EPCs to ease installation for the end customer, you're going to want to be a distributor that wants to carry all of our products to be able to support that market and support that end customer. This allows us to continue to exercise our scale and agility, supported by our marketing activities. And that brings us to the last page. We think about the combination of the customer initiatives we're driving, will allow us to outgrow end markets by 0.5 point over the next 3 years. Our objective as a sales organization is to be the partner of choice to our customers. And we do that by focusing on the customer experience and intimacy, developing solutions and strategic growth verticals and more effectively utilizing the depth and breadth of our product offering to go deeper and wider with our channel partners and end customers, serving our customer where they want to do business with a continued investment in our digital capabilities. Now Alexis will share how innovation plays a critical role in differentiating Hubbell's customer experience. Thank you.

Good morning. My name is Alexis Bernard, Hubbell's inaugural Chief Technology Officer. I joined in March 2020, you referred to just before COVID hit, and have been working extensively with the leadership team and across the entire organization to see how we can reignite Hubbell's taste and ambition towards innovation and organic growth. Why might you ask? Gerben mentioned the company has been successful for over 100 years. Our strategy is strong with amazing people, products and brands to execute on our vision, on behalf of the shareholder. However, historically, our markets have moved slowly with relatively few disruptions. Today, we face a once-in-generation confluence of megatrends and market disruptions to present both challenges and opportunities for Hubbell. My role is to help Hubbell capitalize on such opportunities. Simply put, we're optimizing our organizations, our processes, our portfolio, our talent across the company and reinvest resources towards a higher-return, higher-purpose innovation. Let us walk through this journey together. As we noticed, many megatrends are tailwinds for the organization: grid modernization, electrification amongst others. They're likely to drive disruptions and growth. Question is how do we capitalize on such opportunities. My partner, Bill, highlighted our historical lever of inorganic growth. It's been a core part of our strategy for multiple decades with a well-proven capital allocation model. What we want to commit to today is the same level of dedication and commitment towards organic growth and innovation. Despite Hubbell's innovative routes for over 130 years and since the down of electricity, today Hubbell relies more on bottom-up, sometimes siloed and tentative innovation, leading to relatively small, reactive and conservative projects. However, the math doesn't grow -- doesn't combine to grow a $5 billion company over time with small projects. We need bigger innovation. With the creation of 2 strong segments, strong leadership and strong strategies at the segments, with the emergence of this coordinating technology innovation position within Hubbell, we're shifting innovation towards a more proactive and strategic innovation, including better product ideation, better product selection, product execution, stage-gating processes, organizational alignment, across BU collaboration and overall talent management. This enables us to link the megatrends directly to the segment strategy as well as to the project, technology and talent portfolio road map to drive these strategic innovation investments. This page summarizes our innovation principle. It's better absorbed bottom-up. At the foundation of Hubbell's R&D is the new product development process. It's a mix of 2 things. On the bottom, you see are more customer-responsive, made-to-order project, which is core bread and butter of the corporation, as well as just above or low-risk BU-specific, typically product line extensions. They form the basis of Hubbell and the foundation because those 2 layers sustain and maintain our strong market share in existing markets. It's been the core of our success. We commit today to execute on these 2 layers in a more efficient, effective and cost-conscious manner. We're well on our path to achieve a 20% productivity gains on the NPD foundation. However, the goal is now to cost reduce NPD. The goal is to meet our new organic growth aspirations. And we will co-fund the NPX portion of the pyramid, which is above at least 50% with its newly created engineering headroom. And now we're proud to announce that we have now introduced a separate, distinct, fast-track innovation process called NPX to identify and commit to a few, carefully selected large-scale strategic innovation programs with attractive returns and margins. By design, the NPX pyramid mandates higher purpose innovation at all levels of the corporation; at the business unit level, leveraging the brands; at the segment level, leveraging the business units within the segment; as well as at the enterprise level, leveraging the unique position we have on both sides of the meter, as mentioned earlier. We're pleased to announce that within 1 year of the launch of the NPX program, we've already identified and committed 15 exciting projects. The scale and the scope of this 15 NPX project is literally 10x, 100x, 1,000x bigger than our traditional NPD project, hence, the name X in NPX, accelerated in orders of magnitude bigger innovation aspirations. So enough about the process. What are those 15 projects? Here, they are organized against the 6 strategic growth levers that we've presented a few times today. Some projects are generically labeled for IP and competitive reasons. Allan and Pete, in their presentation, will talk about the project shown here in bold. Allan will talk about Distribution Automation and EV within HES and Aclara. Pete will talk about data center verticals, balance of system renewables and screwless terminations within HES. Allan and Pete presents the project as the NPX programs reside entirely within the segments and over 200 people that are already working on such NPX projects. For now, let's take a step back and look at the portfolio nature of our NPX, which is also a good process for risk mitigation. First, you can see it's a good balance between Utilities and Electrical segment. It's a good balance between the BU level, 9 bets; the segment levels, 4 bets; and the enterprise level with 2 programs. The innovation horizon, many of them, most of them are within our core, a few towards adjacencies and 1 towards breakthrough innovation. The value levers are also balanced between primarily product innovation, but also go-to-market and inorganic. The technology portion of these bets are primarily hardware but coupled towards controls, communications and software. The risk type is also well balanced between commercial risk and technical risk, low, medium and high risk, which also then means that the time to market of the bets is from within 12 months to up to 5 years. The economics of the existing funnel is strong. Even including a 50% success rate, these bets are in a highly promising, above-average gross margin profile of portfolio. We feel great about those 15 bets in the portfolio that we have today, but we feel even better about the sustainable and affordable innovation mindset and capabilities that we're bringing towards Hubbell. NPX is rapidly becoming a brand, a name, a verb to allow everyone in the organization to think big, take risk and be bold, bold regarding both investments and promising returns. Taking a step back again, Hubbell is now 2 years into its 5-year innovation transformation journey, shifting innovation from being reactive to being more proactive and over time, strategic. We accelerate organic growth profile by investing on our core, our core markets, our core customer, our core businesses, without doubling R&D projects or time lines and budgets or becoming a software company. We focus on 2 things: number one, being very proactive about managing our NPD funnel and portfolio in an efficient and effective manner; and number two, by augmenting the NPD innovation with NPX innovation that matches megatrends with segment strategy and road maps. Together, we are confident that we can execute on both NPD and NPX while keeping our overall investment in RD&E at 3% of sales. In closing, we have developed our innovation strategy, again, fully reflecting the 4 key pillars of Hubbell: number one, we serve our customer by providing innovative solutions to existing customers facing new disruptions and pain points; number two, we develop our people by providing exciting new projects to work on with nice initiatives in megatrends-backed opportunities; number three, we operate with discipline by optimizing our organization processes and resource allocation; most importantly, we grow the enterprise by joining inorganic growth with organic growth, and we're well on path to increase our growth profile by 50 points yearly. I look forward to reporting back on the progress of our innovation journey frequently. In the meantime, I'm pleased to invite Katie to the stage. Thank you for your interest in Hubbell.

Thanks, Alexi. Good morning, everybody. My name is Katie Lane. I'm Hubbell's Senior Vice President and General Counsel. I've been with Hubbell for 12 years, and I've been GC for the last 3. I'm pleased to speak with everyone today about Hubbell's sustainability programs and to highlight how ESG is an inherent part of our business, one that is attractive for all of our stakeholders. Our focus on ESG is a reflection of our existing business model. The products we sell, the customers we serve and the markets within which we play are already geared around the sustainability-focused megatrends of grid modernization and electrification. You've heard a few of us talk about that already today. Hubbell can provide sustainable solutions for our customers in front of and behind the meter while continuing to deliver value to our shareholders and ensuring our employees are supported and developed. I also will discuss Hubbell's progress on establishing sustainability-focused metrics, how we outperform these goals and our plans going forward on the reporting side of ESG. But before I get into the reporting and programmatic parts of our ESG strategy, let's start with the foundation of it all, our products and our business. Our products make critical infrastructure stronger, our grids safer and more functional and help drive the growth and success of renewables while also bringing electrical efficiency to our customers. You'll hear later this morning from Allan about our Utility Solutions segment. Our Utility Solutions legacy Power Systems business has a storied history as a leading provider of critical grid hardware and components. As power grids age over time and are further weakened by the impacts of climate change, our Power Systems products help strengthen the grid infrastructure and its functionality. Our products help the grid run reliably and efficiently while protecting it from the increased frequency and severity of storms. With the advancement of clean energy and renewables, our Power Systems products also facilitate the transition to renewable energy. Our products help utility customers ensure that renewable energy solutions can be safely integrated onto the grid while providing the product requirements that these customers need. As more and more renewables are added to the grid, our utility segment also solves for the increased communications and controls technology needed for 2-way grid power flow. Our Distribution Automation business brings together the durability of our Power Systems products with the technological strength of our Aclara business. And collectively, Distribution Automation helps offer data-driven solutions to predict, plan and respond to system conditions such as increased renewable energy generation across electrical and gas distribution networks. Finally, our Aclara smart meters and AMI solutions help utilities and buildings track energy and water use and detect overages or potential methane leaks. We're facilitating the transition to renewables not just by our Utility Solutions segment but also via our Electrical Solutions segment. Our HES segment has had strong success in selling products into the renewable space with its products in high demand by EPCs and contractors for wind and solar farms. You'll hear from Pete later this morning about how HES is investing and focused on renewables as a high-growth vertical and HES' balance of system approach. This means not just selling existing HES products in areas like solar and wind but pulling more of Hubbell's enterprise products through to this growing segment. Terry walked through that earlier today. Beyond renewables, HES further makes products that increase the energy efficiency of buildings and homes while also supporting the electrification of everything. Overall, Hubbell manufactures products that make our infrastructure stronger, our grid safer and help drive renewables and electrical efficiency. To us, this is the core of our ESG strategy, producing products with impact. Sustainability is clearly ingrained in our business strategy from a commercial and product standpoint, but we are also committed to sustainability from an operational perspective. Over the last few years, we have focused on establishing sustainability goals and implementing the programs and processes to achieve these goals. As a manufacturer, we believe it is important to be responsible stewards on this front while recognizing that environmental reduction goals can also make us a more efficient enterprise. In 2019, we baselined our enterprise greenhouse gas and water usage. This baselining exercise was to help us establish multiyear goals for targeted reductions in these areas. We paired the baseline work we did with an enterprise-wide materiality assessment that we conducted in 2020. Then also in 2020, we issued our first ever multiyear environmental reduction goals, targeting a 10% reduction in our Scope 1 and Scope 2 greenhouse gas usage by 2025 and a 10% reduction in our water usage also by 2025. At the end of 2021, we satisfied both our greenhouse gas and water reduction goals. Our ahead-of-schedule achievements are the direct result of both certain footprint restructuring projects we completed and CapEx investments we made in HVAC, lighting and other systems to make our plants more energy efficient. We do not intend to rest on our laurels, though, for the next few years and instead are in the process of establishing new multiyear reduction targets for greenhouse gas and water reduction. We will issue these new goals in Q1 of next year after we have completed our second enterprise materiality assessment later this year. In addition to the refreshed greenhouse gas and water goals, we also will release, for the first time, multiyear waste reduction goals later this year. These waste goals will be tied to the enterprise waste usage baseline review that we conducted last year. We are proud of the work that we've done to bolster our ESG programs and to establish various environmental reduction targets over the last few years. As we did this, we also increased our disclosures around our sustainability efforts, most significantly by publishing our inaugural sustainability report in 2021. We then issued our latest report reflecting our 2021 numbers and investments earlier this year. These reports illustrate some of our important achievements, programs and areas of focus and also provide more granular details about our ESG commitments and performance. After touching on how important our products and environmental commitments are to our ESG strategy, now I want to broaden the lens a bit and focus on Hubbell's robust programs in the areas of S and G. These are typified by our strategic pillars of operate with discipline and develop our people, 2 of the 4 strategic pillars that you heard Gerben discuss earlier. Whether it is our safety culture, our employee development programs and inclusion groups or our Board of Directors' ongoing focus on strategy, enterprise risk oversight and governance, Hubbell has programs in place well dedicated to the social and governance sides of sustainability. I'll now highlight a few of our accomplishments in the S and G space. So for the first time ever, in early 2021, Hubbell published EEO-1 level diversity data for our U.S. employees while also continuing to report Hubbell's gender diversity in both the U.S. and globally. We led many of our manufacturing peers in providing this level of transparency, and we'll update this information annually. In addition, to provide greater transparency to our employees, we further committed to give internal updates on this data on a more regular quarterly basis. Hubbell's charitable foundation, the Hubbell Foundation, supports education, STEM and diversity initiatives. The foundation facilitates match opportunities for charities based on Hubbell employees' donations or volunteerism. Hubbell itself offers employees a paid day off to volunteer for a charity of their choice annually. We were also pleased to be named one of the World's Most Ethical Companies by Ethisphere for the second year in a row. This award is a reflection of our employees' commitment to doing the right thing and our continued focus on driving an ethical culture at Hubbell. The foundation of Hubbell's compliance culture is our code of conduct for Hubbell employees and directors and our third-party code of conduct applicable to our various business partners. As part of our sustainability journey, we've had conversations with our shareholders, customers, suppliers and employees on our ESG areas of focus and programs. We will continue to actively engage with our stakeholders on this topic and how it is part of Hubbell's overall strategy. You can learn more about our programs and disclosures via our hubbell.com website, which has a dedicated ESG sustainability section, and our sustainability reports. Both our 2021 and '22 reports are posted there. We welcome your input and thoughts as we continue to evolve and drive our ESG strategy going forward. Thank you very much. And we will now move to Q&A.

We've got a couple of mics wandering around, so just raise your hand, and we'll get to you.

Looks like I might have it here Gerben. I guess I'll keep the questions on the part of the presentation we've done so far, right? I was skipping to the last slide. I was actually curious on the EV effort. You've got Aclara on the slide, so my gut is you're looking at some kind of metering, grid interaction, kind of live feedback in terms of what the demand is and what the demand response needs to be. But could you maybe then elaborate a little bit on how you would compete effectively in that space against the broader electrical players that might have all the apparatus and switchgear and other kind of balance of electrical plant and the building that perhaps you don't have?

Yes. So this -- I'm giving a little bit away of what we're going to talk about here in a second. But this application really starts with our utility customer. It's through our engagement and through voice of customer discussion. What we asked them is what really is the challenge that you see with EV, and indeed, what the feedback to that is the stress that, that will put on their grid. And if you think about the distribution transformers that have and the capacity for them to absorb large-scale EV, and it's not so much that it can't handle it at all, it can't handle it at certain times. So what utilities are trying to already manage through is peak load shaving. And this application has a real opportunity for us with a utility grade metering solution to give utility companies the ability to manage that load for their system. So different than where electrical applications and EV chargers. I mean we thought a lot about, too, do we want to be an EV charging and just a regular -- and there's not such a term as irregular, but if it's the more traditional EV chargers, it's not of interest. We believe that's more in the bottom of that pyramid. We see this as a very specialty application of EV meter that has a big potential. But we'll talk a little bit about that when we get to that and how particular this application applies.

So I just want to come back to the specification and the service comments. You mentioned you're growing the differentiation of the service capabilities but also the specification within the portfolio. What percent is now specified project? And do you have any standing targets for how much you want to grow the service piece for the next 3 years here?

Terry, you want to...

Yes, sure. In terms of spec position, I would tell you, it's probably about 50% of that's spec-ed in to some degree. And that goes around whether it's old spec or preferred spec when you start to look at that. And then you start to look at the balance of that just being around how we are well positioned from a quality and a brand perspective to be able to then drive the service component of that and then takes that next step, right? So when you start thinking about having that spec position at 50% and then start thinking about the quality and the brand and the service that can complement that, that's where we are putting our focus on.

Right. And maybe to your second question, I'm not sure if you -- your question on service was related to literally becoming more of a certain service provider. Mostly when we talk about solutions, it's bundling the applications of our products together to provide solutions for our customers rather than pure service business. We do have a component of that in our -- in Kumi's AMI business. And really, there, we use it to bundle again a solution. And really, it's almost like one throat to choke when you're putting these AMI systems in that we can provide the meter, we can provide the AMI infrastructure, we can install it and hand it to them and particularly effective with -- in the co-op and municipal markets.

Another piece of that will be on-time performance. And I think that's -- when we talk about service, it's about our on-time performance to the distributor, to the end user and being able to provide that and making sure that we're hitting certain levels with that.

I have to say, that is a passion and a focus of our organization to do, and it served us well through this pandemic. We're not nearly at the service levels we want to be in. We would operate traditionally in the mid- to high 90s on-time delivery we're talking now. This is living up to the commitments we make to our customer. At the height of the pandemic and the low of our service, we're probably under 80 in that metric. We're back in the high 80s right now. Our customers tell us that we're outperforming in that 2,and it's the best way to gain share and to maintain share in this market. So it's -- we're passionately focused on serving our customers.

I wanted to come back to the NPX pipeline a little bit and sort of how you balance maintaining a robust pipeline with not overwhelming the system and what's underway. And then the second part of it is just if you could elaborate a little bit more on the cost side. Is this not cost additive? Are you borrowing costs from other parts of the business? But how do you manage the costs attached with this kind of focused energy on the innovation pipeline?

Sure. I can talk about the pipeline. Maybe I'll let you handle the investments. We do have targets at each level, BU, enterprise, in the segment to really promote innovation, promote ideation, making sure you cannot just not submit a bet. But also, there's a limit on not too many bets. So they're few and carefully selected. It's more of a subjective discussion than a very purely math driven. We've set up a separate NPX Board with a few of us here in the management team to make that subjective goal. But really, the goal is not to exceed a certain number where we start diluting management attention, investment dollars and focus by also go to market over time as well as potentially inorganic if we need to. So it's a balance. We'll manage it over time. I would say it's somewhere between the 15 to 25 that we expect to have at the same time. We will manage it carefully. Today is the first arrival of projects. Also, we've already deselected 2 projects based on early voice of customers and technological returns that we see from the team. So the goal is to accept that a bet may not pan out and then leave room for the next bet while only keeping a certain number of bets in the pipeline. On the investments?

Yes. Before switching to investments, I think an interesting part of not overwhelming the system is we are pulling some people off their day jobs to now take on a supposedly riskier project that has a chance of failure. And so in our first couple of instances, we're having to promise those people they'll fail upward if they do, right, so that they don't feel overwhelmed like, geez, I'm just going to stick to my nice, safe day job. And we're kind of in a bit of a cultural revolution to make these jobs high-profile, desirable exposure to the people in this room and whatnot and I think preventing the expense from being overwhelming. We're talking about adding about $10 million of incremental cost, which I think is quite affordable, and the returns on that are great. But below the surface, Alexi has done a really good job on productivity and actually repurposing cost from much smaller kind of incremental projects that maybe changed in off-white to an ecru, and now we can take those people and put them on to these bigger things. And so there's much more effort than the incremental $10 million, and that's what I find is going to be powerful here as we go through.

Question for Bill on M&A priorities. I think you mentioned it's $1 billion or more in cash deployed through 2025 and maybe 2 to 3 points of top line growth as a result. Can you get there from here with the bolt-on playbook? Or should we take away from your parameters that there are some chunkier deals that you'd like to pursue as well?

Yes. So if you break it down, Tommy, by year, that would be doing $250 million a year as opposed to that 10-year slice where it was kind of $125 million. So yes, I mean, I think we could do $550 million a year. That would be possible. But I think you're right that it's more likely they'll be a couple of hundreds, maybe at $250 million. And so I do think maybe something of the chunkier variety probably in this 4-year horizon, I think, is you're right to expect something like that.

Chris Glynn, Oppenheimer. Bill, I wanted to pick up on something you talked about. You alluded a couple of times to the divestitures you've done, indicating you have a couple other things maybe you're under consideration. But you also kind of brought it down to the product family and SKU level. So I'm wondering how new or robust that process is around SKU. What are some other benefits besides mix that you might be targeting through that process? You talked about reallocating as well bandwidth, people and such.

Yes. So we've had a tool in place, Chris, at the SKU level for several years now. And again, in the spirit of trying to keep it simple, we're putting SKUs in buckets and where something hasn't been sold for a couple of years or its margins are low...

Will food be ready if we end early? Will food be ready by like 1:45 if we ended early?

Sorry, his live mic's out there. And -- but that is good news. There's food coming. So that's good. And so that really puts -- that puts the onus Gerben, in particular, leans hard on that Southwest bucket of SKUs. Is it really -- do we need to keep continuing that? Can we discontinue that? It clogs up warehouses. It clogs up factories. It makes getting to long runs inside of planning a factory harder. And so we've been -- just again, it's that same simple 2x2 at a SKU level, and you just put the numbers up. And it almost put the onus on Pete and Allan and their teams to say, do we really need to keep some of that Southwest stuff? And so I think it's -- we've moved the needle on that quite a bit. And it's just, to me, important to have the mindset of let's try to have our SKUs, our product lines and our business units always pushing to the upper right, Chris. And so that -- I feel like it's a journey, but we've -- I think we've made good progress so far.

Yes. Maybe I add to it because I think back, as Bill say, when I was part of running the utility business, and you will see that business as certainly an attractive margin business. But if you look at what we did over the years, it goes back to the point that you say of product lines. So that business is made up maybe of -- when it was the Power Systems business. And at the time, it was maybe $800 million of about 10 product lines. And those product lines had a variety of margins. They had very high ones, and they had lower ones, and we're really focused on driving improvement on the underperforming business units there. And it's through relentless cost takeout, through pricing actions, through simplification of the structure or through getting out of certain product lines. And by taking the bottom up, we're able to take the whole portfolio up. So it's a mindset that I know works. It's been successful for us in that business, and we're bringing that across the portfolio. So looking at entire business segments, and you saw that when we got out of the C&I lighting business, doing it at product lines and doing it at the SKU level as well. So it's a -- if you work that, and you have to work it as a continual action, it can't be episodic that you do that, you will drive improvement in the entire portfolio over time -- margin improvement.

There's some interesting trade-offs going back to the question of do you overwhelm the system, right, Chris? If we try to sell every little million-dollar business, it would overwhelm the business development effort in trying to run sell sides. So you got to balance where it makes sense.

Maybe just a quick one on the data center acquisition you did. Any color you can provide on -- it said bolt-on, I think, on the slide. Any color on kind of size or type of business in data center, a multiple you're paying? And then also kind of the strategy there to build a bigger business and compete more effectively over time with the players who were much more established in that market would be helpful.

Yes. So just because it's signed and not closed, I really don't want to go into any of those details. We'll be, I'm hoping, closed in July. So on our call in July, we'll be able to tell you more about that. But I think you're absolutely right to think about what is the implication for us inside the data center. And when Pete talks through the Electrical business, he's going to describe a balance of system kind of principle. I think Pete's using a renewable example, but the analogy of inside the data center -- I don't know, Erik, if you can get Pete even a microphone. But just thinking about inside the data center, we're not obviously doing servers, but there's a whole balance of system around that, that I think we have ambitions to be able to provide.

Yes. I think, Bill, you said it right. It's a fast market -- fast-growing market. It's a profitable market for us. We have a really nice collection of important brands, reliable, proven that we've just not gone to market in a cohesive way in the past. And so as we think about putting those brands together and delivering a solution that may be a balance of system and not one of the big systems in the data center, we would look to continue to add to the balance of system solution and make sure we build it out. But I could see our data center business over the next 5 years being in the double-digit percent of our total sales, and that's what we're looking to do.

Maybe if I can add, Pete. As a vertical, it's 1 of our 6 verticals. It's a very established framework now to look at what we have today but we did not sell in a cohesive manner, as you mentioned, what we do not have, what we do not have, what should we have organically or inorganically, and of course, area we shouldn't play into because we have the right to play. So now it is a clearly well-established data center need that is looking at organic and inorganic opportunity. And this is the first inorganic opportunity that we saw. But it's also a very strong organic focus. And together, including go-to-market, it looks as a very organized one Hubbell perspective towards data center.

One on -- well, sort of 2 parts on go-to-market. I think one, with a focus on strategic verticals, just talk about the time line of that a little bit. How far along are you? Is that kind of fully implemented and up and running at this point? Or is there more work to do? And then the other part is when you think about bundling solutions, what are the margin implications of that? Is there a pricing element of trying to bundle? Or is it really just a volume piece for you?

Yes. Maybe on -- I'm trying to take the first question, sorry.

How far along?

How far along, yes. I would say depending on the market, it's vary -- so one of the key growth verticals is T&D. We're very well established in that market, and we'll continue to build scale in it. And other ones, like data centers, like Distribution Automation, I would say it's earlier inning. We're organized around it right now, both with our organizations, both with our strategy. And I would say that, that still needs to play out. And then the other ones yet like the EV, it's early, early innings. We're brand new in it. It's part of the NPX, so there is no guarantee of success in this even. So I would say it really varies throughout which of these verticals we're talking about. But overall, and that's the thing I want to reiterate, these verticals today already represent half of our portfolio that's benefiting from the secular above-GDP growth trends.

I think on the pricing half of your question, I don't think we're looking at it as a chance per se to raise price. I think it's more the convenience of -- to our customer and the more efficient S&A from our perspective of we'll make it profitable but we're not looking at it as specifically a price lever.

And I wasn't sure if the nature of bundling meant price down to try to get that extra volume.

No. Actually, Joe, I think quite the contrary. I think we can use the breadth of all of our brands across Hubbell to make the buying experience for those customers easier such that they can consolidate their suppliers. And so the more we can offer a single customer and the more they can consolidate their spend, we know that there's a terrific amount of value to those customers by us being able to do that.

Yes. We have a lot of discussions. We have the fortune of our size and the prominence that we play in our markets to have strong relationships with our partners. Terry talked about the 10 top partners that make up 40%. We engage with them at the specification, at the engineering level, at the sales level and at the executive level. So I meet with the CEOs at least annually and sometimes more with our leadership team, and we talk about where they are basically. And one of the key themes in addition to what they're telling us that we're outperforming and outservicing during this time is their desire to cut off the tail of their supply chain. They're realizing much more during this time, during these challenging times where they're having a fight for supply and having to do that with thousands and thousands of suppliers, there's a real desire by them to cut that down. And that's the unique position we have by being able to bundle our solutions to cut some of that deal for them off.

And we're aligned with where they're investing as well. And I kind of mentioned that when you start thinking about some of these verticals, whether it's communications or data centers or renewables, a lot of the work that we're looking at doing is around specification work. And we're working that through the end user back through the channel, right? But the channel is also making investments specifically in those areas so we can be aligned collaborative in regards to how we actually support the end customer at that end.

Thanks. So you might have heard of a rumor. We're running slightly ahead of schedule. But [ stick on ] and take a 15-minute break. We'll come back at about 10:20 with the second half of the morning. So there's coffee and drinks outside, and feel free to filter around. [Break]

All right. We're going to get started with the second half of the morning here and kick it back off of with the segment discussion, starting with Allan for Utility Solutions.

Thanks, Dan. I'm Allan Connolly. I'm the President of Hubbell Utility Solutions. Good morning. So in summary, we continue to build out a world-class Utility Solutions platform, covers not just electric, but water and gas utilities. We're in a really good position to exploit the secular trends in the space. And again, that applies to electric, water and gas. The issues that have been driving the lives of utilities difficult over the last couple of decades continue to become more and more complex. And that puts us in a really unique position because while life is tough for utilities, we're in a position where we can really provide solutions and technology to really help them. And to do that, we're investing across the board. As you heard from Alexi this morning, we've got a much greater focus on innovation and internal development as well as continued -- continuing our history of successful M&A. And we're now looking at significant capital investments to provide better capacity, better productivity and better performance. So the business. I'm going to go through the columns: Power Systems, run by Mark Mikes, who's sitting over here to my right; our Aclara business, which is predominantly AMI and meters, Kumi runs our AMI business and our utility automation business; we have a Distribution Automation business, which is a significantly bigger presence than it's been primarily through some acquisition; and our Gas Connectors business, which looks a lot like the distribution side of our electric business, this is a business that provides all of the connectors and all of the pieces you need to distribute gas from the main distribution lines into homes and businesses. So today, I'm going to take you through some detail in the Power Systems sector, within Aclara, really want to spend some time on Distribution Automation because it's an important space for us, and then on to the Gas Connectors. This is a really interesting set of brands and companies. Hubbell itself dates back to 1888. Coincidentally, our electric meters business is founded in the same year. Ohio Brass, Anderson tools, both have histories of over a century. And then you've got brands like Aclara that have only been around for 15 years. So we have a full spectrum of heritage and brand. Within Power Systems, it's really focused on the components, the mechanics that keep the grid together. Aclara is looking at the metering, the controls and the sensing. Distribution Automation, we like to think as in between the book ends. You've got the components and the hard core materials produced by Mark. You got the software sensing solutions and metering produced by Kumi. Distribution Automation, we view as a really great space for us to expand into because it comes in from both sides. This is the first time you've seen this slide, but you're going to see it a few more times this afternoon. This is our playbook. It's essentially how we do a one-page summary of how we expect to execute within a specific business unit. Most of the stuff to the left is what we control. That's choosing what markets we play in. And for us, that's obviously not just utilities but specifically grid modernization, the infrastructure, dealing with T&D and electrification. It's a sustainable GDP-plus growth in all of those segments. What is it going to take for us to be successful with our customers? And for us, as you're going to see, it is really about quality and service, and that's throughout all of HUS. That's the big part of how we win. As we discussed, innovation's taking on a bigger thread. Parts of HUS have already had a deep technical event like Aclara, but there's other parts that haven't had that experience. And I think Alexi is doing a great job adding that strength and putting it across all of HUS. All I want to say on price, cost, inflation and productivity is I'm glad we are where we are. It's been an interesting 2 years getting through this environment. But we now feel like we're in a really good position with price where it needs to be, and we'll continue to manage that. Footprint has been a big part of this business and optimizing it for years. And I think the team, particularly in Mark's area, have done a phenomenal job maximizing that efficiency. But we're seeing real growth. So I know there's some people who are talking about temporary growth because of supply chain, because of other concerns, and there is some of that. But the underlying business has seen significant growth across the board that we have to make sure that we manage. It's a critical decision to balance what's temporary demand versus long-term growth. But I think we've got the right structure in place to assess that, and I'll take you through some of the examples. And last but very important for us is M&A, continue to look for targets. Now though, we're doing it in a much more combined way with the innovation piece. What do we want to develop ourselves versus source? And I think we're doing a really nice job taking the innovation piece and tying it up with the M&A to make sure we get the best bang for the buck. So with that, we're looking for 7% to 8% CAGR out to '25 and a high-teens OP business. So what are the megatrends? What is really good for our position is there are very few players in this industry that have the breadth of offering that we do. We're covering everywhere from transmission to electrical distribution, telco, into the substations, gas distribution, meters, utility comms, all interconnected, nicely connected, but it gives us a great opportunity for a full suite across the customer base. Each one of these sectors is experiencing the same sort of growth, again, greater than GDP, typically 2x. Externalities such as government funding, other opportunities are there. We're not counting on them. But if they come forward, that's an additional upside. I want to spend a bit of time on this. We've seen many versions of this chart. It's really focusing on what makes life tough if you're running a utility. The issues driving grid modernization are listed across the top, and they're somewhat chronological. So aging infrastructure has been an issue within the U.S. for a very long time, decades, identified and known but not addressed. Safety has always been a concern, and I'm not talking about just employee safety. I'm talking about preventing fires and safety risk to the community. This industry has a brain drain with aging workforce starting to retire. They've been around for a long time. But now you start to get into environmental concerns, climate, grid hardening, prevalence of renewables, extra focus on electrification, literally moving from gas to electric and now, of course, cybersecurity. The graph on the -- the table on the bottom left is the latest survey results. Every year, a detailed survey is done on electric utilities about what is it that keeps you awake at night, what are the biggest issues. Obviously, it moves around year-by-year. But over the last decade, there's been a very consistent trend tied in towards at the top of this page. The top 4 issues on this chart, if you went back 10 years ago, 3 of them were not in the top 10 and one of them was at the bottom. They've all moved up, and they're all around reliability of the grid, renewables, distributed energy, et cetera. I'd like to point out, for the first time, EVs have made the list. Might be at #10 today, but I guarantee you, it's going to slowly move up this list over the next few years. Graph on the right comes from Bloomberg. It's a really interesting way to look at not just aging infrastructure but the sheer volume of material. So the top plot shows the current estimated age of assets, major assets throughout the grid. And you can see the stuff we nominally call 50 years. That's end of life. What happens over the next 30 years? So the graph at the bottom is a projection of what we think the asset distribution will be in its age. I'll point out the 2 peaks you see between 1 and 10 on the top plot become the 2 peaks between 30 and 40 at the bottom. So you can see 2 things. Obviously, end-of-life issues we do not think are going to go away. There's going to be end-of-life asset as an issue for some time to come, but the sheer volume of material that's going to get added to the grid is significantly higher when you start to compare the size of those peaks in the top and how they start to shrink by the bottom. So this is not an issue and the story about just replacing old infrastructure. It's about putting infrastructure in today to deal with issues and concerns like cybersecurity, renewables, environmental, et cetera. So starting with Mark's business. How do we win? How do we lead? What do we offer? We've often joked in this business that if you look at a power pole, transmission or distribution, we make everything on that pole except the pole. And that's pretty close. We've got a very broad array of offerings on the transmission side and not just the actual components, the tools needed to install. Same applies to the distribution side where we're particularly strong. We've got an 85% product portfolio. Again, not just the actual mechanical equipment that goes on to the grid but the tools, the enclosures, the anchors, everything else you need around it. So a great combination of the 2. Gas distribution, nice business for us, been growing smaller, newer for us, but does very similar things with gas. So these are ways of tapping into main distribution lines, safely laying runners, putting in excess flow meters, putting in meter sets, nice business, same dynamics we see in the electric side. We look at our value offering. And we like to say we provide essential components that are a low cost of ownership but a huge cost of failure. Putting up power lines is not cheap. You can see the typical average breakdown of where the money is spent on the left, and you can see huge amount spent on real estate, installation, materials, project management. The piece we provide, the hardware, is that sliver on the right. That sliver is the sliver that has to work. You don't have that piece, then you don't have a transmission line. So for us, how we go to play, utilities really care about 2 things far more than price, and that is the quality of the product and the service levels. If the product fails, all that other money goes to waste. And if they don't have our components at the right time, they can't repair or manufacture the lines. So our focus is on quality, service levels, delivery. We've had a tough time for the last couple of years, as is everyone, with the supply chain. But we've been consistently told from our distributors and end users that while we've dropped our service levels, we've consistently done better than our competitors. So we're happy with that. And now we're starting to get them back up. But adding capacity and capability is key for the next few years. And this is an example of one of those areas. This is a large CapEx project for us. Enclosures seems simple enough. These are cement plastic or cement resin enclosures that are designed to be strong, weatherproof. And they're used by electric, water, gas, telco companies to either bury or secure above-ground connections and equipment. They're very heavy, and there's a lot of air. So shipping these things, the logistics is a really big part of the economics. This business is doing well and continues to do well. And with the 5G rollout and all of the stuff we see around transmission line development for renewables, we continue to see -- we expect its growth to continue for some time. We need to add capacity. And this will be an interesting case study for us on the HUS side. For the first time in a long time, we're actually going to add some footprint. And we're going to do that because the capacity we can get out of the existing plants is starting to get to the end. And the logistics and the transportation and access to skilled labor made Oklahoma a really attractive spot for us because logistically, it's filled in a gap from a supply chain ship out point of view. And the talent we need in that space is there. So it's been a great place to add bodies. It's a $40 million investment. It's a greater than 30% ROIC. And it's also a hedge. It gives us some functionality and optionality that we can use in the future. So moving on to the communications side of it. We're now going back to Kumi's side. The fundamental core of what we offer here is ubiquitous, secure, private communications that utilities can use their own network. It is our core capability on the Aclara side. We have spent a lot of time and effort developing a really robust RF product solution. It actually started with a product we developed several decades ago in our water/gas base, and we've now poured it over into the electric. It is designed not like a traditional AMI system to just read a meter. It's designed to do a lot more. So for us right now in this space, we cover the full gamut from electric meters, electric AMI, water and gas AMI, installation services and distribution automation. We've had a great record with the co-ops and the munis but less success other than with the meters in the big IOUs. So a big part of the design for the RF system was to allow us to have a system to penetrate that space. We've built that system, and it's going well. So today, we're up to 43 utilities that are using it. And not only is the number of utilities growing but the size of the utilities is growing. We've got a pipeline of $4 billion qualified, $6 billion in total if you count early-stage projects, and it's a big opportunity. The average system is designed to last 15 years. The first generation -- that's the design life. That's not a warranty or guarantee. That's the targeted design life. So the first IOUs to start to use this technology, their systems are now 15-plus years old. We're just kissing on that 15-year mark, and we're starting to see rate cases pulled together. It's still a little unclear as to when the first replacements will happen, but it's close. We've got our first pilot with an IOU about to start. The contract is done, we'll get started next year, but it's a good setup for our first big IOU. So while we're so focused on the comms, it's really about where the grid is going. So today, you can think of the grid as hardware, the metering and the AMI piece, a bit of sensing and control, but not interconnected. It's, I think, not well understood that within the U.S., the vast majority of the electric network is what we call dark. It has no intelligence, no communications, no ability to monitor anything. Almost half the substations have nothing. And when you start to get out into the transmission and distribution network, it becomes even smarter. There's a little bit of data that comes up to the utility, but very little goes out. So if you really want to start to deal with the issues we discussed earlier around renewables, EV, cybersecurity, grid stability, you need a lot more data coming in so that you can see the network. And more importantly, you need to be able to push a lot of data out to actually start to control and regulate what's happening, particularly in situations like storms. So the focus of our network development, the next generation of RF, is to maximize our ability to deliver on this. So there's 2 things at play here. We've got our own major NPX working with Alexi's team, and this is the next generation of our RF product. Our existing product is great. We can do a lot of the things we've always said we want to do with it. But this is about expanding its capabilities, its robustness, its latency, the amount of data it can move in and its resilience. We want to take this comms from Aclara working with Mark's hardware. We want to bring them together. But there's a piece that's missing in the middle or was missing for us until recently, and that is the actual intelligence that goes out in the field. We purchased Beckwith, and that's exactly what they do. Aclara's comms are now talking to Beckwith's control systems out on distribution poles that are then making changes to [ cap banks ] and switches. Before they were connected to a network, you had to send out a truck. So a truck would have to go up a pole with a linesman, reconfigure the controller, come back. You also didn't know what was happening. The controller in the field had to be autonomous and do everything on its own. Now we're in a situation where we've implemented this in setups. We can talk to all of those controllers. We can configure them. We can change them. If you go into a fire season, you can make them more reactive. There's a lot you can do to proactively manage it. And now they can put this equipment anywhere in the field. So this is something we've been looking at for many years, and they're all finally coming together. We've got Mark's hardware, Kumi's software and communications and all this Distribution Automation equipment. I think [ I also want to ] spend a bit of time on what I think is very different to Distribution Automation. I would argue that it's exactly the same. So dealing with utility-scale EV is a Distribution Automation problem. We are not talking about chargers for residential consumers. We are talking about helping utilities resolve and manage the EV load that is coming. This actually started with questions we were getting from utility customers that were becoming more consistent and more broadly held. The first driver for this was utilities asking us, how can we encourage the adoption of EV? So from their perspective, they obviously see EVs as a way to grow the top line by growing actual sale of generation power. And they've had lots of different concepts. We've heard lots of different business cases as to how they would structure this. But they all sort of circle around providing cheaper power for EVs than for regular use, which means you're now going to be able to measure and monitor what goes in the car versus the home. They also, though, want some controls. As we started to talk to more and more utilities, there was the upside they see, which is selling more power. The downside is the grid is not ready for it. So how do you play those tools? We're putting together a solution which combines all of Hubbell's offering. So we've got a lot of stuff from Hubbell Wiring System who are developing the charger, which is all coming from Pete's side. There's components from both Pete's part of the business and mine. We've got to have a utility grade metering if you want to charge. So it means putting our metering into the charger, but more importantly, put in to a charger that can be controlled. And the whole idea is to start to be able to throttle back when it makes sense. You then take our AMI communication systems, and we can talk to every single one of those in real time. So we know exactly where EVs are connected, how much they're pulling. And this is critical. Like I said, the first contact we had with utilities was about encouraging adoption. The second actually came from a series of utilities that are in areas where the adoption rate is high, and they're starting to have their first issues with managing what happens. So this is the case. We're not talking about cities with 20% or 30% adoption. We're talking about some cities with 4% or 5% adoption. So what's happened is they're starting to see pinch points. It's not the whole network in problem but pinch points where there happen to be a lot of EVs and they need a way to manage it. And that's the idea of about -- go out to them and slow them back, but not everywhere, just where you need to. It's early days for this, but we've had really good response talking to a variety of utilities across the country and across size and scope, lots of IOUs, lots of co-ops and everything in between. We've started developing our first 4 pilots, which we expect to put out in the field this year. And it's a learning game. It's learning about the mechanics. It's learning about the infrastructure. It's working with the utilities to help them work on the various business options and how you would implement it. But we can provide a full utility scale solution from a software innovation, the utility showing where every single EV is and how much power it's drawing to going out into the field and actually controlling them and measuring them. I think it's an exciting opportunity, but I think some did well that this is an area we probably know the least about because it is the newest, but it [ would be a bet ] that we're all in that same boat in the industry because it is so new. So in short, we're going to continue to make investments in the [ 3 peers ] innovation, CapEx to improve our footprint and capacity and obviously, with the M&A. We're going to continue to expand out the space. We're really happy with the position we're in with the connection. And now from the Hub Utility Solutions side, it's great after now 6 or 7 years of laying all this out to start to see it all come together. So exciting times. With that, I will hand it over to Mr. Lau.

Okay. Thank you, and welcome to the 2022 Hubbell Investor Day. I appreciate the opportunity for us to talk about the Electrical segment. My name is Pete Lau. I've been at Hubbell for a little under 2 years when Gerben made the decision to bring the Electrical segment together, and we're really excited to talk to you about our journey today, our transformational journey. Been a lot of fun, a lot of hard work and still a little bit of work left to go. But there's 4 key messages that I want this community to take away from today. The first is we believe in the electrical market that we're very well positioned for the electrification megatrends. We are investing in high-growth verticals to drive our weighted average exposure to those megatrends. The third is that, as a segment, we're competing collectively to drive efficiency across our operations and our supply chain, scale in every part of our business, and speed, speed in innovation, speed in solution, speed of delivery to our customers. And last, we think that there's significant opportunity for long-term margin expansion in this business by operating more collectively, operating better and driving real productivity in the business. So here is an overview of the Electrical segment, $1.9 billion in 2021 sales. This does exclude the $0.5 billion of the C&I lighting business that we announced that we were divesting in October of last year and we closed on in Q1 of this year. We are organized around 4 businesses in the Electrical segment that are really organized around how our customers bid, how our customers buy, how our customers transact and how our customers install. The first one is our electrical products business, run by my colleague, Peter Fehl. Over there, he's got wiring systems, enclosures, industrial enclosures, electrical rough-in, boxes and fittings. The next one is connection and bonding run by my colleague, Kevin Ryan. Over there, he's got connectors and lugs, bonding and grounding specialty tooling. The third one is industrial controls, run by my colleague, Christoph Vogel. Over there, Christoph's got our most global business and arguably, our most complex business, power quality solutions, industrial controls, reels, transformers and the like. And the last, residential lighting, run by my colleague, Sean Veit. And we do fixtures and fans in the residential lighting space. You'll notice under those 4 umbrellas, we've got 24 brands that we call out here, 24 brands really well known for quality, really well known for reliability, really well known for service over their history. And we believe that the power of bringing those brands together and delivering solutions is something that really sets us apart and is unique for us, not just in the channel, as Terry explained, but also in our high-growth verticals. We talked about our opportunity to consolidate customer spend, make it easier for our customers to do business with us with one supplier. And so we're really excited about how well positioned we are, really excited to deliver differentiated solutions in very, very attractive industries. And we think that will prove out over the strat horizon in growth and predictable margin expansion. The last time we were together, Gerben alluded to this earlier. We were 3 businesses operating really in the same end markets: Hubbell Lighting; Hubbell Construction and Energy; and Hubbell Commercial, Industrial. And today, we are a unified operating segment, Hubbell Electrical Solutions. We feel that the benefits of doing this are very much similar to the benefits that you would expect in an integration, synergies around people, putting our world-class talent in jobs that deliver the most value for our employees and for our shareholders, providing meaningful career pathing for our people and making this company a destination company for the industry's best talent. The second is product -- process and productivity. We believe that by bringing this segment together -- we know that by bringing this segment together that we can offer more resources to tackle our toughest problems in the aggregate. We believe that we can consolidate our spend and drive productivity and our sourcing. And we know that we can deliver on things like better pricing, and Bill will show you a little chart later today about our history and pricing. And what we've done as an Electrical segment in the last year has far outpaced anything that we've done to combat inflation on the pricing side. And we do that by harmonizing our processes. We do that by harmonizing our organizations. We do that by better connecting our back end to our front end, so that we know what's ahead of us in the coming days, in the coming weeks, in the coming months, in the coming quarters. And we can price -- we can plan appropriately. Again, we believe that this operating segment is well positioned and poised for growth and margin expansion in the long term. There are 6 key levers in our operating strategy. The first is markets. We believe -- we know that the infrastructure bill is coming. We know that we're well positioned for electrification, and we also know that, as Bill talked about, we have a lever of portfolio management to help us drive our weighted average mix towards a more positive end market and help us deliver greater than GDP growth, 1.5x GDP growth for a business that's historically been GDP or a little bit less than GDP. The second is customers. We're investing, and I'll talk a little bit about it in a few slides, in high-growth verticals, vertical-type businesses that allow us to take advantage of the breadth of the product portfolio that we have to offer and consolidate spend. Terry talked to you about that same strategy just in the channel. We have a lot of different sales forces selling those brands, who when they pick up their eyes and ask about other opportunities of the contractor at the end user and the distributor, we know that we can do a better job and will do a better job cross selling our brands, which will allow us to grow faster. Innovation, Alexis talked about our harmonized NPD and NPX process, and we're really excited about the opportunities for us to not just deliver a better customer experience but also help us fill holes in our gaps and our offerings to our customers through the value chain. And then lastly, our operations. I talked a little bit about pricing and productivity. By consolidating our backroom, we've been able to deploy lean manufacturing resources, people that specialize in sourcing of metals to go drive cost out of our system but also give us advanced intelligence around what pricing we need to get. And also, those 24 brands that I referenced on the previous page, many of them have their own manufacturing and distribution center footprint. We know that we can take footprint square footage out of our system while also allowing for this growth over the strategy horizon. And we believe that there's a lot of productivity and ability for us to get closer to our customers and deliver more quickly for our customers. Here's a look at how we're exposed in the end markets. This has significantly changed since the disposition of C&I Lighting. We are now more exposed to the industrial end markets than we ever have been before, which we've told you in the past is a really good thing for us from a growth perspective but also a profitability perspective. Our industrial businesses are more profitable, faster growing, and we really like this mix where we are today, but that's not saying that we can't use things like innovation, things like portfolio management to continue to drive ourselves to a better and more attractive end market. We know there's a lot of opportunity on the right-hand side of the page. The trick for us is going to be where and how and quickly we deploy our capital over the strategy horizon, but we know there's lots of opportunities there, and we know that we're poised to go take share. So Terry used this pyramid a little earlier in his presentation, and I really like it. I want to bring to life really kind of what this means for the electrical business. Our businesses are organized, as I told you earlier, around how our customers bid, buy, transact and install. We do not play in apparatus switchgear. We do not play in the commodities, the lighting, the pipe and the wire. And we believe that benefits us. We know that benefits us because, ultimately, we provide components that are mission critical, high cost of failure into any project anywhere in the world. And so when customers make decisions on whose product they're going to use, it's generally around quality. It's generally around service. It's generally around reliability, and it's not so much around price. So we believe that the profitability in this component sector and the opportunity to drive profitability in this component sector is really greater than if we had participated at the top or the bottom of the pyramid. We know that with our collection of brands, we can out-breadth a lot of our competitors in the industry, but we also know that by staying in this space, in the connector space that we can out-nimble, we can out-service, we can out-quality a lot of our competitors. And so that's where we feel our niche is, and we're really excited about that. We talked a little earlier in the Q&A session and in Terry's section about verticals. In the businesses I showed you before are horizontal product businesses and what we're creating in Hubbell are vertical businesses that look across not just the entire Electrical segment but all of Hubbell, the entire enterprise, to deliver solutions that consolidate spend and make us an easier place to do business with and make our customers come to less suppliers to do a job. A couple of these high-growth verticals are here on the left-hand side, but I wanted to use the example of the solar system because I just -- I really think this is a really nice example of what we're doing. So the products there in red are electrical products. The ones denotated in yellow are utility products. And we have a team, a business, a vertically aligned business that works on the selling and the specification, but we also have engineers and product resources and fulfillment resources that are dedicated to understanding what a solar or a wind farm looks like, what we have in our product basket, what we need to introduce organically, what we need to go get inorganically to end up filling out this package. And when we reference ourselves back to that pyramid, we can say for this solar field installation that Hubbell provides over 80% of the components, the bill of material in a solar field, which again speaks to the fact that we can consolidate our customers' spend and make us an easy place for them to do business with. But it's also less than 15% of the total cost of the solar field, which, again, gets back to the point that we are high cost of failure, mission critical. Safety, quality, reliability is what's important for the products that we sell and deliver into these markets. And we know that we can copy and paste this strategy into other high-growth verticals and have a lot of success doing that. And that's where we'll spend a bunch of our time moving forward over the strategy horizon. Want to talk a little bit about innovation and our focus on innovation. We focus really in 4 main areas as we look out and understand who uses our products, the users of our products, generally, the people that are installing. And so we think about installation efficiency. No secret that the skilled workforce is declining and declining fast, and that's one of the biggest problems that we can solve for our customers, reliable and protected connections, reducing the amount of callbacks to job sites; regulatory compliance in an ever-tightening regulatory environment; and IoT, limited participation in connected products, participation nonetheless, but we also know that we can build out and we can help build out the infrastructure that's required for IoT. So I wanted to bring one project that I really like to the forefront and talk about what we're doing here. This is a product that Hubbell was essentially built on the wiring device. And in any wiring device, in any application, in an industrial application, commercial or residential application, when installing a wiring device, you need to terminate the connection. And generally, that's done with screws. And it's done with 4 or 6 screws somewhere and installers in there turning a screwdriver, tightening a screw against the wire. What we've come up with is an innovation on an over 100-year-old product that is screwless termination. If you look at the pictures below, you'll see those red plungers and what will happen now is instead of using a tool to tighten the screws, you simply take your thumb and depress the plunger and it terminates the wire. What that means is 80% labor reduction for those installing. What it means is there's no tool required anymore. What it also means is, if you've ever turned a screw and you know that vibration or movement generally over time loosens the screw, which makes it for a less reliable connection. On the back of our plungers, we have teeth that dig into the copper wires that, ultimately, when that vibration or movement happens, that connection then becomes stronger because it digs into the wire and makes it a grittier connection. We also know that this has improved field safety over time and again, just a wonderful example of how we're innovating and how innovation can mean a lot of different things. It doesn't have to mean a new market. Doesn't have to mean a totally new product, but it can mean a meaningful innovation on something that's proven and reliable for over 100 years. Last, I want to talk about operational performance. As we've come together as a segment, we have a very intensified operating cadence and operating system. Again, we talked about how we've done on pricing and productivity in the last year, and we're able to get pretty quickly last year once commodities spiked into a price/cost-positive space within 2.5 quarters, which Bill will show you over time was a record time for us. We know that by combining our backroom organizations, we have productivity in the supply chain. We can send out teams to solve our toughest problems. We have productivity in our company code structure. We have productivity in our human resources and our people. I talked to you a little bit earlier about footprint. Many of these brands have their own footprint, manufacturing sites, distribution centers. We can take 20% of the cost or 20% of the square footage out of our manufacturing footprint and still have enough capacity to deliver on our growth targets over the strategy horizon. But also, we can take the footprint that we already have today at the end points or the distribution points; and instead of distributing all over the country or all over North America from one point per brand, we can use that footprint and leverage that footprint to put multiple brands in many different distribution centers such that we're getting our products to our customers faster than we ever have before. And lastly, Bill talked about it earlier today. From an investment standpoint, we've been investing in automation for a few years now. We absolutely see some of the synergies that we're going to get back to invest in 2x the automation over the next couple of years. So if you think about our story, we are very well aligned to the Hubbell strategic pillars that Gerben laid out earlier today, a unified operating system that's driving in ease of doing business, above-market growth, using cross-selling in the channels but delivering solutions to our verticals and an ease of experience, customer experience, operating with discipline, which is going to help us expand our margins consistently and predictably over the strategy horizon and a world-class talent base from which to draw upon and continue to drive and make sure that Hubbell is a destination company for the best talent in our industry. So thanks very much. I hope you're as excited about the Electrical business as we are, myself and my team, and we look forward to sharing more with our journey over the next couple of years. And now I'm going to hand it back to Bill to close it up for us.

Thank you, Pete. So I'm going to try to synthesize everything you've heard this morning into some dollars and cents, but I am going to make some comments on the short term in addition to the medium term. And it really starts with reminding you all that in April when we reported, we had raised our guidance. That was a result of volumes being stronger than we had thought by about 1 point, and incremental price had added to the wraparound that we had guided on. And that had caused us to raise the midpoint of our guidance by about $0.20. And we now have the benefit of having April and May in the books, and we are certainly heading towards the top half of this range rather than the midpoint. And that's being driven by continued high sales, very healthy order intake. The price traction continues to be really strong. We need all of it because the inflation side of the story continues to push up, and that's not just material inflation, which I'm going to share you a little analysis but also nonmaterial inflation. So we're happy to let you know that, from the short term, i.e. the next 6 months, we're expecting to be at the top half of this range rather than at the midpoint based on what we're seeing. Our -- we have a really virtuous cycle that -- where our strategy and our business model drives our performance and our cash cycle. As I get into this chart, I wanted to kind of introduce you to a couple more folks on the team who really provide us with keen insights into the future. First is Joe Capozzoli, who's seated to the right over here. Joe has been looking after operations and all of our functions and the insights that come from that. And Jay Penn is at the extreme left over there, who does our planning and analysis, and our view of the future would be incomplete without knowing how Jay and Joe are thinking of things. But it really starts with where our growth is and allowing that increase in sales to drop through at attractive incremental margins. We're then focused on expanding margins. You heard Pete talk about managing price/cost as well as restructuring and related footprint optimization initiatives. And I think we had a decent discussion earlier this morning on some of the portfolio moves and SKU rationalizations. So that increased sales and widened margins give us more cash. We are focused on the working capital part of that equation as well. It's been a challenging time right now. I think you heard both Pete and Allan talking about our service delivery and meeting our on-time promises has been harder with some of the supply chain disruptions. As a result, we've invested more in inventory this year than we ordinarily would, make sure we can support the customer. I would tell you, the feedback we're getting from our customers that we are -- while we're not at our level, we are outperforming the competition. And so I think that investment in inventory, while it eats a little bit into cash flow, has gotten us some share here and certainly built relationships for the future. And that cash flow then, in turn, creates the ability to invest in the CapEx, the dividends, the share repo and the acquisitions that we all talked about. Those acquisitions then, in turn, come back and cycle through and create new growth. And so this virtual cycle informs how we think about the business. I thought, because I had mentioned the short term, that I should give you a little bit of insight into our sales and orders and a little bit of a picture of how the backlog is growing here. So on the top in blue, you see our order pattern. We smoothed this a little bit as a 30-day average, and the yellow line on the top is our shipments. So you can kind of see -- before December of '20, you can see the illustration of a book-and-bill business, taking orders and we're shipping. Now you see the last 6 quarters, a pretty dramatic buildup of strong orders with strong billings growth, shipments growth, but the bottom depicts the creation of an ever-growing backlog. We spent a lot of time fielding questions from you all about how sustainable the order pattern is, our customers ordering ahead, so I thought I would add maybe for some illustration purposes the orders on the bottom that are in gray are meant to be delivered 90 days from now. And I thought that would give you a sense of are customers expecting future price increases, are they expecting longer lead times, and therefore, do they need to put in orders that are longer dated than typical. And the answer to all of that is yes. And so I thought this would give you at least a little bit of insight into how our year is shaping up and how to the extent customers were to pull back in orders that we've got a substantial backlog to live off of for a while. I also thought the price material equation is important for us to share some granularity with you all. So this data goes back to the Great Recession of '08 and '09. And I found that period to be reasonably dramatic, and you can see how the yellow is the material price and the blue is our price to customers. And it really illustrates, I hope you can see, kind of the lag effect. So back in September of '08 as Lehman went bankrupt, you saw the economy go into a contraction. You see the material prices go down, and you see our price to customers lag that. Yes, it comes down. But the area of the blue above the yellow represents margin that's dropping through for us. And as you go through really the last 11 years or so, you can see that relationship being maintained where material costs inflate. We get price within a couple of quarters. Then as it rolls over, we hang on to the price for a while. So we do create some distortion for you, where during an inflationary period, we're typically lagging and our margins are a little thin. During times of rollover, our margins are going to be a little bit wider. But I just really find that this chart kind of illustrates the order of magnitude of what we've been through inflation wise in this COVID period and to show you how quickly the blue line of Hubbell responding with price much faster and preventing getting too far behind there. So I'm not here to predict when that yellow line will roll over. I'm assuming that it will. We're seeing signs of steel, which is our single largest commodity, is showing some rollover in it but other areas of aluminum, copper, certainly areas of fuel and derivatives of fuel that's not showing those signs. So what I'm here to tell you is we'll manage -- with the blue line, we'll manage with price. And as it turns around, we'll hold on to price and get some more margin. And I wish I could do a better job of predicting this for you, but we'll do just fine from our end. The third leg that I thought would be important to go through is our restructuring. And you heard Pete more refer to some footprint optimization. So our program is several years old. It's unfortunate that, in 2021, you see our expense come down a little bit unnaturally. That was not a lack of commitment on our part to continue to want to optimize our footprint. That's really a sign of all hands on deck, all engineers needed to build product and get customers satisfied. And so now you'll see a ramp-up back to the sustained run rate in '22 of about $20 million of restructuring. And the really good news about that is what happens on the right is just accumulation of a better cost run rate. We've been seeing and continue to see kind of 2- to 3-year paybacks. I get pushed back from some of you that, that seems a little slow. But from our perspective, that's a really good return and order of magnitude. We feel that, that $20 million run rate of R&R expense can give us about 20 basis points a year of margin expansion. You see we have, over the last several years, improved our sales per square foot by greater than 20%, and you heard Pete talk about an additional potential to take 20% of the square footage out on the electrical side. So I get asked a lot, is the restructuring program dry of ideas, and it really feels like in the middle innings. And I think this also illustrates -- I know a lot of our peers out there like to add this back, like it's extraordinary. We put this cost into our results, as you know, and that's because we view it as an ongoing investment that we're going to continue to make. And we believe the savings justify that and pay very good returns on that spending. So I wanted to synthesize what Pete and Allan showed you, this stairstep, and it starts with markets. And we believe that through '25, we're going to see 6% to 8% organic growth rate. Now that starts with the fact that from '21 and '22, we're in double digits, and we're envisioning more of a mid-single digits for '23 and beyond. But netting out to mid- to high single digits from the markets, we believe that's going to be a half turn to a full turn above GDP. The second lever, you heard Terry talk about our customer and how we're going to market and where we can make investments in cross-selling, where we can make investments in vertical market selling and becoming more important to our customers. We think the outcome of all of those initiatives that Terry described should contribute about 0.5 point of growth above markets, which is really -- I would use the phrase share gain around those initiatives. Alexis described NPD and NPX processes to you. We've got that extra investment into innovation, and we believe as well that, that innovation can create a 0.5 point of outgrowth from the markets to our total growth rate. I just showed you a decade plus of our price/cost productivity. We're factoring that in as neutral or better through the cycle. It'll have distortions in it, as I said, as things inflate or deflate. But through the cycle, we will do neutral or better from the results of that. And I frankly think we and our customers together learned a lot about pricing during these last couple of years, and I think we're better for it. Our relationships are stronger, and we're communicating better. And the 2-segment structure, I think, really enables us to do that in a more coordinated and constructive way from our customers' perspective. The footprint optimization is going to be more centered on Pete's side, the electrical side of the business. And we are anticipating 20 basis points of margin expansion each year from that, and that creates kind of our organic expectation for the future. The result of that is margins increasing about 250 basis points from last year's level to just under 17% and our cash flow in our historical around onetime adjusted EPS. So that leaves the portfolio work and the $1 billion of M&A to invest. We think that will result in 2 to 3 points of extra growth. So what we're aiming to do on behalf of you, our investors, is grow the top line by double digits and see some margin expansion resulting from that, and I'll synthesize this into earnings per share on the next page. And you'll see that we're anticipating from '20 to '22 mid-teens compound growth rate of EPS from the low $7 range to this $9.20 to $9.40 type range we're anticipating now for '22. As you lengthen the lens from '22 to '25, we think we're going to see good contribution from our markets. And we quite recognize here that we've got strong tailwinds. We've got big backlog. We've got really strong order book. We're obviously quite well aware that the consumer is facing significant challenges from higher interest rates, higher inflation and that it's quite likely that, that consumer will be forced to contract their spending in the not-too-distant future. And so we're actually finding it, frankly, easier to talk about '25 than probably talking about '23. That's kind of counterintuitive, but to the extent the consumer goes through a rough patch here, we think this gives us another couple of years. And frankly, one of the reasons we like having the 6 levers is we can make decisions and trade-offs between them to try to deliver this level of performance to you. So the customer initiatives and innovation, nice green bar of contribution. You see that investment that we talked about and as it was asked, not an overwhelming amount of investment. R&R giving us savings to get to really an operational $12 a share, which would be double digits between the '22 and '25 period; and then deploying $1 billion in M&A in that 4-year time frame, roughly $250 million a year from '22 on gives us another $1 to take it up to $13. So again, I think I've known most of you a long time. We've probably traditionally together talked about Hubbell as a GDP grower and trying to get something in the high single digits towards double digits. So this is meaningfully different than that. This is a sign that we believe that there are some megatrends out there that through pruning our portfolio, we're much better exposed to those megatrends and that we have a number of levers and capital at our disposal to make smart investments and to manage and navigate through some challenging markets and environments to deliver this good double-digit performance for you all. It will be my privilege to deliver these results for everybody. So I know there will be no questions on this, and so I'm super happy to hand it back to Gerben.

Okay. Maybe we'll go to [indiscernible]. Let's open up the mics again.

[indiscernible]

That's why Gerben stands. Fire away, Tommy.

Let's talk about some of the algebra underneath those bars. I appreciate the insight on the organic outlook versus inorganic and then basing off 2022. So if we just look at the organic 2022 to 2025, I think you're looking at, on the revenue side, low to mid-singles and then double digits on earnings, which would imply some pretty healthy incrementals through that period.

Yes.

And so maybe 2 ways to unpack that. Some of it potentially is just mix with your higher-margin segment growing at a higher rate, so maybe we could talk through that. But I also wanted to hit on the gross margin side. Is there -- we don't have an explicit range on it. But is there an embedded assumption that, that should trend higher as well and drive some of those incrementals?

Yes. So the gross margin, we think, is going to be impacted, Tommy, from a couple of areas. One is the innovation itself. So that outgrowth is coming in at higher gross margins. Two is the restructuring that we're talking about really is going to affect gross rather than S&A. And so with those 2 levers, we do think the gross margins are coming up. We also are anticipating that the M&A will be in the higher growth, higher-margin areas. So we've got quite a bit. And as you saw for us to get towards that 17% OP, to your point, there's about 60 basis points a year of margin expansion embedded in that, pretty lofty, but I do appreciate you pointing out mix because I was talking to Jeff beforehand. There's -- we don't think of mix as cheating, but there is quite a bit of mix that's just math lift as opposed to operational lift.

Just coming around the -- to price. What are you assuming for price in that '23 to '25 window? And then also just thinking about '23, and I appreciate -- I guess, Yogi Berra said predictions are hard to make, especially those about the future, right? But if you think about 2023 now, we're starting to get in the wrap-around price for '23, right, as opposed to kind of flat lining into '23. So the question really is what are you expecting for '23 to 25. And what does the wraparound look like now into '23?

Yes. So you'll see close to a couple of points of wraparound. But we've kind of punted on your question by lengthening the lens to really a 3.5-year period, and we've said that price will go up, a little to your point, in '23 but should come back down in sympathy with materials if that happens. And so we kind of just put that bucket and described it as neutral without actually making an explicit price assumption inside those organic growth rates. So if the sales growth is lower because price is lower, we think that just means the margin expansion will still let us get to the $13. So we've kind of finessed your question, unfortunately.

Yes. Yes. And it's a really dynamic environment because while there was price wraparound, as you point out, there's still a lot of inflation, right? And we see steel coming down and then going up again. We see other metals at the highest point they've ever been, fuel and fuel related to resins and spiking. So it's really that. I think the important thing for us and where we're focused is don't let that lag be on top of it, right? And that's where those charts are coming much closer together of when costs go up that we generally lagged it on a longer period to catch up, and now we're much more focused on being behind it quickly.

And just on the guide tweak, is it -- would you point out one lever more than another? Is it volume? Is it incremental price/cost? And is it mostly in Q2 when we're still kind of assuming the back half looks the same?

Yes. The -- it's more on the volume side. The -- while price is good, as Gerben said, the inflation continues to eat away at that. So it's kind of neutralizing the earnings effect of that price, but the volume has been better in April and May, and that I think we thought clear enough through 2/3 of the month that we need to share with you that it feels like it's trending towards that top half rather than midpoint from -- so you're right to say that's basically new information for us since April.

Is it mostly in Q2? Or do we think the whole [indiscernible]?

Yes, I think it's -- we'll see. We'll talk to you about that in 1.5 months or so.

Maybe this one's for Allan. Back to Aclara. Just curious what the service -- or excuse me, the software attachment rate is on new project deployments today. And is there a target you want to get to? And then specific around organic and inorganic investment, I mean, do you think you need to do more there on the software side inorganically?

No, not inorganically. So we have, I think, a very competent internal software development team, and we've now got them in 4 different countries, and they've given us the skills we need. Our attachment rate is every system that we sell. We're selling the whole system [ going ] with software. So it's 100% what is essentially a bundled system. The biggest change we've seen over the last couple of years, and I can't quote the number off the top of my head, but the number of utilities who are willing to take a SaaS model as opposed to on-premises hosting is going up. And we obviously have a revenue stream associated with that, and we expect that to continue. But like everything with utilities, they're conservative. It's a slow adoption but steady.

And so you think you're able to monetize the software versus it being a cost of doing the business right now?

We already monetize it today. So we have licensing fees as well as hosting fees, and that is becoming a bigger piece. But it's slow at this point. We expect it to continue.

Maybe just quickly back on pricing. Can you just remind us what you expect for the year now for this year on price in total? And then the Slide #78, I think, which showed the orders and the revenue history, just it doesn't show May orders in backlog. Maybe Dan forgot to extend the chart. Was that a plot in May given buying ahead of the June price increase I think you guys put through? Any color on that would be helpful.

Yes. So let's start with price. So there's been -- we started, to Jeff's question, with 5 points of wraparound from last year to this year. That's how we initiated our guide. There's about 2 incremental points of price coming in with a decent amount of that, as you said, in June. And so that's up to 7 of price in there. And I don't know why Dan didn't have May, but it's -- that may be a printing error. I don't know. But May trends are doing fine. Yes.

Was there any time you had an increase there?

I was trying to say, I think there's buying ahead of a lot of things. So I think that fact that, that 90-day order bar that you say getting more significant implies that orders are being put in, in anticipation of price increases and just lead time extensions, both of those factors, I think, are driving that. Yes.

Two questions. First, how would you characterize or quantify your historical level of outgrowth over the last 5 or 10 years versus what you're envisioning over the next 3 years? And then secondly, it looks like on the margin, you're expecting a little bit more outgrowth in the utility-oriented businesses and the electrical businesses. Is that part of the model? And if so, what underlies that?

Yes. So if outgrowth you're using that phrase to imply what's outgrowing GDP or what's outgrowing end markets. So we happen to believe -- if you looked at us going back, I think you'd see some modest 0.5 point maybe of outgrowth from our perspective. What's happening now is through the exit of C&I Lighting, which would have been an anchor to that equation, is now creating uplift to the balance of the portfolio. That, which is exposed to utility, again, I think utility used to be an MRO GDP-type business, and we've seen that really step up towards the mid-single digits. I think that's market, so it's outgrowing GDP. But it's market and I think we are earning our full share of that market there. So I think the real drivers of your question of why we're anticipating more outgrowth than we have over the last decade is a function of, one, the portfolio shifted to more attractive areas; two, we do think some of these megatrends are creating growth rates of where we're exposed to be significantly above GDP, and that's -- I think that's quite good news. So we're preparing ourselves to have to invest in that. And the good news is this virtual financial model that we have, we keep kicking out more and more cash flow that allows us to make more acquisitions and is going to keep our business development team pretty busy here.

I just wanted to ask again about price/cost, and I'm trying to understand, it was a very impressive chart showing the price/cost sort of catching up with each other more recently. I thought there was just a natural lag between -- with LIFO costs versus when you can implement the prices. So wondering what changed there. But then more specifically on the backlog, which is going up a lot, are you able to reprice that? How are you -- because that should be a hit in price/cost just because you're fulfilling older orders eventually. So I'm just wondering how you're able to sort of get in front of that as well.

So let's start with your first question on the lag, which I think the way you described it is accurate. There is a natural lag. When we see a sustained move in the commodity, we analyze that. These guys and their customer service teams put together analysis and respond with a price increase that has a couple of months' lead time to put that in, and so you end up with these natural lags. I think the response in '21 to that steep rise in the yellow curve was a function of seeing how relentless it was. It was quarter after quarter, right? We saw that just really push up, and we saw Pete, frankly, reacted -- the electrical side reacted actually a little bit quicker. Utility side, a little slower, but as Allan mentioned, utilities now are creating that line. So it's good news that we've matched the height of the yellow. It is, though, when you look at it, you can see a significant area between the blue and the yellow as it inflected. That was headwind in margin for us. And so we still have work to do to kind of analyze where our price levels are versus where cost levels are. I would tell you that we used to rely on a nice quaint formula where our price would pay for our commodity costs and our productivity would pay for non-commodity inflation. And we find that productivity initiatives, when we add them up across the enterprise, they get you kind of in the 2.5% range. So with inflation at 8.3, that gap, it's just not possible for us to do enough productivity to do that. So we've kind of taken that excess and put the burden back on price. And so what you're describing is a really, really important kind of operational relationship and financial kind of skill that we've got to get it just right or risk either losing customer relationships or underperforming financially. So we get that we have to stay intensely focused on what you're describing.

Yes. And maybe to add to your question, what changed, and I think in the utility business, we've had this in place, where we have a pricing discipline. We have a pricing group that drives that. The lag there is more a function of the longer-term view that we take with utility customers in that -- than we've traditionally taken. We saw the hit of that [ lag ]. You are clearly seeing the benefits of how we do capture that price. I'd say in the electrical side, the opportunity was more that pricing was deeper into the business. It was inconsistently applied. There wasn't strong data science behind it. And I think what Pete and his group have put together is that discipline, so not only are we able to react quicker to it, but we are able to react better to what price do we really need to offset those costs. I think we have made structural changes to our business to address this better and quicker.

It was interesting. We were just out with Pete at the NAED out West, and so we had the chance together, between Gerben and Pete and I, to meet with maybe our top 15 or so customers. And it's a pretty unique time when each one of those meetings started with is there more price increases to come. Just tell us because we need to process them. It wasn't pushback on don't give us more. It was get us the material and communicate price. That's a pretty unique point in time where we are, where that's -- and Pete, that's just a pretty unique kind of customer perspective right now.

Great. And then just on the backlog and sort of how you're handling older orders that are lower priced?

Do you want to -- you and Allan [ work ] on that?

You guys both have and...

So we have selectively repriced backlog even in places where we thought it would be incredibly problematic just in terms of the nature of the Ts and Cs we had in place. Parts of our business like gas connectors have done this in the past. They set up for it. It's sort of almost mechanical. So we've learned from them. The enclosures business, in Mark's business, has done this very well, and it's simply a case of that industry, not us, the industry's out of capacity. So it's a little easier to manage that side of it. So -- and the meters business, because of the price in electronics, which was the toughest one, the sales team working directly with the customers has managed to get pricing on a backlog that we've never been able to do in the past. So I think it's an acknowledgment from the utilities that we're not making this up. They know it's real. Everyone is pushing it through to them. And again, they're far more interested in delivery assurance than price at the moment. And so long as we keep executing on the delivery side of it, they've been remarkably understanding. I would also add from the utilities, we've spoken with -- our biggest supply constraint right now is still electronics, but they've been remarkably understanding. They'll look at us and say we don't like it, but we know you're doing everything about it, and we've kept them informed. So between -- the information going out, I think has, given us a lot of opportunity to manage the backlog.

Yes. I think on our side, we're pretty well caught up. We go through blips where maybe we get a little behind. Maybe we get a little ahead. But it's not so material that we would cut off our nose to spite our face if that makes sense. We talk all the time that we're in this business for the next 10 years and not the 10 months. And if we got really behind, we would talk about doing something about it, but repricing backlog is a 2-way street, right? And so on the way down, where we think the worst is probably behind us and the best is still ahead of us, we don't want to invite that sort of scrutiny into our business.

Well, the facts are the electrical has maintained a much more book-and-bill kind of relationship. So the bulk of that backlog that I showed you is on the utility side.

Okay. Great. With that, I'd just like to close this by expressing that I hope that we've been able to provide you with a clearer picture of how we're building on a very successful base of a company that serves attractive electrical and utility markets. We're benefiting from some secular tailwinds of megatrends of electrification and grid modernization, and we're focused on a set of strategic priorities and levers that can drive value for our key stakeholders, our customers, our employees and you, our investors. So we look forward -- I certainly look forward to continue to update you throughout our quarterly earnings call, throughout other engagements that we have together on the progress that we're making. And with that, we'll close our 2022 Investor Day. Thank you all.