Good day, thank you for standing by. Welcome to Eaton's First Quarter 2025 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a Q&A session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Yan Jin, Senior Vice President of Investor Relations. Please go ahead. Hey, good morning. Thank you all for joining us for Eaton's First Quarter 2025 Earnings Call. With me today are Craig Arnold, our Chairman and CEO; Paulo Ruiz, President and Chief Operating Officer; and Olivier Leonetti, Executive Vice President and Chief Financial Officer. Our agenda today includes the opening remarks by Paulo. He'll turn it over to Olivier, who will highlight the company's performance in the Q1. As we have done in our past course, we'll be taking questions at the end of Paulo's closing commentary. The press release and the presentation we'll go through today have been posted on our website. This presentation includes adjusted earnings per share, free cash flow, and other non-GAAP measures. They are reconciled in the appendix. A webcast of this call is accessible on our website and will be available for replay. I would like to remind you that our commentary today will include statements related to the expected future results of the company and are therefore forward-looking statements. Our actual results may differ materially from our forecasted projection due to a wide range of risks and uncertainties that are described in our earnings release and the presentation. With that, I will turn it over to Paulo. Thanks, Yan. Before we begin, I just want to take a minute to acknowledge Craig Arnold as he prepares to retire at the end of this month for his incredible leadership over the past 25 years at Eaton, but especially during the nine years as Chairman and CEO. His focus on fostering a values-based culture, strong attention to ethics, and commitment to high standards have laid a very strong foundation for our growth. The action he has taken to transform our portfolio has positioned us for faster growth, higher margins, and better earnings consistency. Under Craig's strategic guidance, we have consistently delivered strong shareholder returns, with our stock value rising from $61.65 on June 1, 2016, to $294.37 as per April 30, 2025. Thank you, Craig, for your strong leadership and the legacy you leave us with. I'm really excited and energized to be leading Eaton at such an electrifying time. On that note, let's get into the results. We'll start with some highlights on the quarter in which we've delivered another strong set of results to start the year. We generated Q1 record adjusted EPS of $2.72, up 13% from the prior year. Organic growth accelerated to 9% from 6% in the prior quarter, with particular strength in Electrical Americas, Aerospace, and Electrical Global. We also delivered Q1 record segment margins of 23.9%, which was in line with our guidance and expectations. Meanwhile, market activity remained strong, and orders remained at a very high dollar value. Total company orders increased 3% versus prior quarter. As a result, total Eaton book-to-bill ratio at 1.1, with backlog growth year over year and sequentially. With a strong start of the year, robust backlog, and strong secular trends, we are set up to deliver another year of differentiating results while we navigate through an increasingly dynamic environment. While I will go into the details on the full-year outlook, at a high level, we are raising our expectations for organic growth and reaffirming our adjusted EPS, cash flow, and share repurchases. Turning to page four now, we present this chart at our Annual Investor Conference in March. It provides an overview of the eight end markets we play in and the megatrends driving a generational growth opportunity for us. Few companies have the opportunity that is in front of us right now, with multiple paths to our growth. We remain very confident in the long-term market growth prospects for our end markets. Now turning to slide five, allow me to quickly touch on Fibrebond, an acquisition we announced at the Annual Investor Conference and which we closed on April 1 this year. Fibrebond is the right asset at the right time. Data center players are increasingly focused on capital efficiency and deployment speed to improve their competitiveness. Fibrebond's innovative and customer-focused businesses position Eaton as a one-stop shop to rapidly deploy power where it's needed. By deploying outdoor modular power enclosures, data center customers can also expand their IT area and generate more revenue per square foot inside the data center. In data center markets, we continue to see construction starts and put in place construction showing strong growth. US data center construction backlog now spans nine years based on the 2024 build rates, up from the seven years of backlog we spoke about last quarter. We are also seeing strong activity in EMEA and APAC, as well as regional and regulatory policies drive data center build-out globally. Okay, now I'll turn over to Olivier for the financial results. Thanks, Paulo. I'll start by providing a brief summary of Q1 results. We posted 9% organic sales, well above our guidance range driven by broad strength in many of our end markets. We generated record quarterly revenue of $6.4 billion and expanded margin of 80 basis points to 23.9%. Adjusted EPS of $2.72 increased 13% from a strong start to the year, above the midpoint of our guidance. Now let's move to the segment details. On slide seven, we highlight the Electrical Americas segment. Once again, the business executed at a high level and delivered another record quarter. Organic sales growth accelerated to 13%, driven primarily by strength in data center and utility end markets. Operating margin of 30% was up 80 basis points versus the prior year, benefiting primarily from higher sales. Orders, from a dollar perspective, remained at a high level. As expected, orders versus prior year were down 4% on a holding 12-month basis to a tough comp from one large multi-year data center order in Q1 2024. Excluding this lumpiness, orders for the segment were up 4% on a holding 12-month basis, and data center orders were up 11% on the same basis. Book-to-bill remained above one, with 6% growth in our large $10.1 billion backlog, providing strong visibility for our organic growth in 2025 and beyond. Our major project negotiations pipeline in Q1 was up 18% versus the prior quarter, remaining at a high level, up 168% since Q1 2023. As Paulo discussed, we closed the acquisition of Fibrebond on April 1. The next page summarizes the results of our Electrical Global segment. Organic growth accelerated from 5.5% last quarter to 9% this quarter, partially offset by 2% FX headwind. We had strength in data center, machine OEM, and utilities end markets. We saw continued strength in APAC and a recovery in EMEA, with both regions posting double-digit organic growth. Operating margin of 18.6% was up 30 basis points over prior year, driven primarily by sales growth and operating efficiencies. Orders were flat on a holding 12-month basis, with double-digit order growth in APAC. On a sequential basis, we saw an inflection in our quarterly orders, up mid-teens in EMEA and GIS, up double digits, and APAC, up more than 30%. Backlog increased 5% over prior year and 6% sequentially, while book-to-bill remained strong, above one on a holding 12-month basis. Before moving to our industrial businesses, I'd like to briefly recap the combined electrical segments. For Q1, we posted organic growth of 11% and segment margin of 26.1%, which was up 80 basis points over prior year. On a holding 12-month basis, orders were down 2%, and our book-to-bill ratio for electrical sector remains above one. We remain confident in our positioning for continued growth with strong margins in our overall electrical business. Page nine highlights our aerospace segment. Organic growth accelerated to 13%, resulting in all-time record sales. We had growth in all end markets, and particular strength in military aftermarket, commercial aftermarket, and military OEM. Operating margin was strong at 23.1%. On a holding 12-month basis, orders increased 14%, up 10% from the prior quarter, with particular strength in military OEM and commercial aftermarket. On a holding 12-month basis, our book-to-bill for our aerospace segment remained strong at 1.1 and resulted in backlog increase of 16% year over year and 5% sequentially. We are very encouraged by the strong results from the aerospace team this quarter. Moving to our vehicle segment on Page 10, in the quarter, revenue was down 15%, including an 11% organic decline, primarily driven by weakness in both commercial and ICE light motor vehicle markets in North America and 4% in unfavorable FX. Despite top-line weakness, the team managed to deliver strong margins of 15.5%, with a decremental of less than 20%. On Page 11, we show results of our eMobility business. Revenue increased 2%, with 3% organic, partially offset by 1% in unfavorable FX. Operating margins were flat to prior year, which continues to include investments for our growth programs. We are seeing an expanding opportunity pipeline as customers are redesigning vehicles for lower cost and improved efficiencies. Now, I will pass it back to Paulo to go over our market assumptions and guidance. Thanks, Olivier. Before we walk through the details of our end market assumptions and guide, I just want to address the uncertainties arising from the dynamic global trade environment. We will fully compensate for the tariff impact through the actions described on this chart. We have maintained a localized sourcing and manufacturing strategy globally for a long time. As you know, we've recently announced large investments to increase our manufacturing presence in the U.S. Those decisions are helping us be even more resilient to the trade impacts the world is experiencing. It's also important to highlight that following COVID, we have spent the last couple of years introducing additional flexibility, resiliency, and digital tools into our supply chains. Many of those actions noted on this slide are aligned to our long-term strategy, and it will take time to fully be implemented as the global landscape continues to evolve. That is the way we run the company today. In the meantime, we have also implemented our proven playbook to control costs and limit discretionary spending. We have and will continue to take the necessary commercial actions to offset the impact of tariffs. In dynamic markets like this, we rely on a strong Eaton culture and value our strategic relationships with customers and suppliers so we can minimize disruption. Now, we are shifting our attention to 2025. On Page 13, we have a latest view on end market growth expectations. We continue to see growth across most of our end markets, with few adjustments to our assumptions, which are highlighted on the slide. In aggregate, broad market growth is similar to the view we shared last quarter, and we are confident in our ability to outgrow the market as we outline in our increased growth guidance. On the plus side, we are raising the defense aerospace to solid growth based on momentum we are seeing with increased government spending. However, we now expect slightly lower growth in electric vehicles with solid growth instead of strong double-digit growth. We have also lowered our forecast for internal combustion engine light vehicles from slight growth to slight decline. While we acknowledge the current economic uncertainties, we remain confident that our portfolio of businesses and end markets will enable Eaton to continue to deliver differentiated growth. Moving out to Page 14, we have our updated guidance for 2025 and Q2. One of the things we pride ourselves on here at Eaton is our ability to plan for and navigate through headwinds. Our healthy and diverse end markets, combined with our large backlog, continue to provide premium visibility to support our businesses. Our teams always target high internal plans, as you know, providing greater line of sight to additional opportunities to hedge against potential pockets of weaker growth. We are raising the 2025 organic growth outlook by 50 basis points to a range of 7.5%-9.5%. We are reaffirming our adjusted EPS guidance. For 2025, we reconfirm our adjusted EPS range of $11.80-$12.20. The $12 midpoint represents 11% growth in adjusted EPS over the prior year. We are also reaffirming our cash flow and share repurchase expectations for the year, and we provide the guidance for Q2 on this page. This reflects the net impact of the announced tariffs and assumes the current 90-day pause on reciprocal tariffs will persist to the end of the year. On the next page, we have the balance of our guidance for organic growth and operating margin. The high organic growth outlook includes increasing the Electrical Americas guidance by 150 basis points to a range of 12%-14% growth. Meanwhile, we are decreasing vehicle growth by 350 basis points to a range of minus 5.5% to minus 3.5%, which reflects the weaknesses in the light motor vehicles. For segment margins, our guidance range of 24%-24.4% is 40 basis points lower than the prior guide. Our guidance reflects the impact to margins from our commercial actions, offsetting the impact of tariffs on a dollar-for-dollar basis. As such, we are lowering the 2025 outlook for Electrical Americas by 80 basis points and in vehicle by 200 basis points. I will close with a quick summary on page 16. We are in the right markets, and the identified megatrends are creating some of the biggest opportunities we have seen in our lifetime. The growth opportunities are everywhere. We had a very strong start of the year, but there's still a lot for us to go do. We've discussed before high standards are deeply instilled in our culture, and we remain focused on delivering our commitments, and we are prepared to weather any uncertainty ahead. I will open up for your questions. Hey, thanks, Paulo, for the Q&A today. Guys, please limit your opportunity to just one question, and I'll follow up. Thanks in advance for your cooperation. With that, I will turn it over to the operator to give you guys an instruction. Thank you. Ladies and gentlemen, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. Please stand by while we compile the Q&A roster. The first question coming from the line of Chris Snyder with Morgan Stanley. Thank you. I just want to say congrats to Craig. 5x- ing the market cap of a 100-year-old company is pretty incredible. Best of luck going forward. For my question, I wanted to ask on data center, given all the market focus there. Could you just provide some color on Q1 performance? The comps are really tough, obviously, in data center this year. I think you guys had 45% organic growth last year and 75% order growth. What should we expect for data center the rest of the year as well? Thank you. Thanks, Chris, for the question. We remain very excited about this market we shared during our investor day last month because the fundamentals are there, right? We remain very strong on the marketplace. And our business did really, really well in Q1. Actually, very strong double-digit growth versus last year, actually stronger than 45% that we shared with you in our last discussion. We are really proud of the team performance there. In terms of the look forward, we expect orders to be at the high level, the high level of negotiation activity we have. As discussed before, right, we are also really excited about the Fibrebond acquisition because it is a timely one when data center operators are rethinking about their designs and how to move quicker in executing on their backlogs and how to make more revenue out of every square foot inside the data center. We are really excited about that. We remain bullish. The business is going well, and this is a key focus for us moving forward. Thank you. I appreciate that. Maybe just following up, has there been any change in the U.S. market competitive positioning here following Trump 2.0 tariffs? Obviously, you guys have a lot of big EU competitors, and we have also heard a lot about the last couple of years around Asian competitors adding a lot of capacity, whether it be transformers or switchgears, given the undersupply. Any thoughts on what that could mean? Thank you. Yeah. No, thanks for the question. Again, very, very important one. It's no surprise for anyone. You know that we are by far the biggest player in the US in terms of our footprint historically, but also that we made record announcements in terms of expanding that footprint and that capacity starting already last year. We have a head start. We had a head start, and all those projects are undergoing gradually. I think we feel really good about that position, the head start we had. I would say this in terms of the competitive advantages we have. We do do a lot in the US, so we depend very little on the external world to serve this big market here. Also, globally, our other businesses in Europe and Asia, they don't depend on the U.S. Some other competitors we have, they serve the U.S. out of Europe. We do not have that. We have a local-for-local, I'd say, strategy and implementation. On that, although we are not advocating for tariffs here, on that is a positive effect for Eaton's competitiveness. Thank you, Paulo. Appreciate that. Thank you. Thank you. The next question coming from the line of Andrew Obin from Bank of America, your line is open. Yes, good morning, and congratulations to Craig Arnold. Thanks, Andrew. Appreciate that. I will turn over to Paulo. First question on Electrical America's order outlook. Look, you had a tough comp in the Q1, but how should we think about your Electrical America's orders going forward for the balance of 2025? Okay. Thanks, Andrew, for the question. I would say this. We should expect orders to remain strong at the dollar value. Based on the record backlogs we have and the visibility into 2025, we feel good about Electrical Americas' performance and execution. That is why we raised our guidance for the full year in terms of growth. As we discussed before, and you pointed out, those orders can be lumpy, especially when you have a very large multi-year order in a single quarter. It is also important for us to track the pipeline in terms of negotiations. I would say our negotiation pipeline remains very strong, similar to past quarters. To give you a little more color since the last time we met for earnings, we see sequential momentum. The sequential momentum is about 18% higher than last quarter. I give you more detail inside this because we really work really hard on this pipeline with our team. For larger businesses, think about data centers and think about industrial, both up, data centers 18% up, industrial over 40% up. We also have increases in smaller businesses in terms of healthcare, education, water, wastewater, etc. On the flip side, to be balanced here and give you a big balanced view, the only markets we see decline in negotiation pipeline are in commercial buildings and transportation, but they are smaller than the other markets before, and they are down around 20%. Overall, the number is 18% up. That gives strong confidence in our future order pipeline. To complement, Andrew, you saw the guide. ESA at the midpoint is going to grow at 13% in revenue, and we expect for the company and ESA included our book-to-bill to be over one. Okay. Thank you. Just to follow up on the Electrical Americas, maybe Q1 utilities performance. We attended Distributech several weeks ago. That seemed to be pretty optimistic, and your utility business has continued to post strong revenue growth over the last several years. Can you give us some color about your performance in the Q1? Thank you. Yeah. As we shared in our investor day, this is another market that we have very strong growth potential. We feel really good about utilities. We highlighted that in March. I think here, again, the teams are doing a fantastic job, not only in North America, as you mentioned, but globally. I would say this, if we were already very well positioned with our very, very vast and comprehensive portfolio, we're going to be even more prepared as we continue to invest in leading technology. We have a full commitment here to this end market. As I said before as well, we have a differentiated portfolio, not a commoditized utility portfolio. That's why our performance is differentiated here. To give you some color on the development year over year, our whole electrical business globally for the electrical sector grew mid-teens over last year, which is a very strong performance with high single digit in global and high teens in America. Very, very strong performance. Thank you. Thank you. The next question coming from the line of Nigel Coe from Wolfe Research, your line is open. Good morning, everyone. Thanks for the question. Electrical Global has been lagging but had a nice acceleration this quarter, 9% organic growth and pretty strong orders. I think you called out APAC orders up 30% and machine OEM also up, I think, double digits. Just curious, maybe just a bit more color in terms of what you've seen in those two verticals. Yeah. No, thanks for the question, Nigel. We had a very strong performance in global this quarter. You saw the growth around 9%. If you look at individual businesses, APAC, fantastic performance, meetings, and also low double digits for EMEA. Very good story here. What we're seeing in terms of the market development, utility markets are on fire globally, as I said before. Data center markets really strong as well over the globe. For the short cycle businesses, we see MOEM as stabilizing and start to grow again. Resi is the market that where we do not see recovery globally. That provides a good picture, but I am glad to see the results. I think you pointed out, you all, the analysts and investors, that we had opportunities in improving our aerospace and our Electrical Global businesses. Although there is a ton for us to go do, for me to go do, I'm encouraged by the green shoots we start to see here with the teams. That's great. Paulo, it looks like you're leaning at the slide pack. There's a few slides that are missing from what we normally see. I'm just curious, the mega project slide has always garnered a lot of attention. I'm just curious what you're seeing on mega projects in the U.S. I think the last time we saw that slide is about $1.7 trillion, but I think 17% had kind of been tended. Just a mark-to- market there would be helpful. No, thanks for the question. Now, in retrospect, I think I should have added that slide back on. I give you the information. We track that very rigorously. Q1 was another strong quarter for announcements, actually 42 projects, and in dollar amounts, $169 billion. Very, very high announcement rate, over 40% versus last year. If you look back, we did that exercise here with our leadership team. If you look back, the announcement rate monthly increased to $57 billion. Again, very impressive set of numbers. You think about starts, most of those projects have not started. It is just 15% of them started. The message we always emphasize and we are going to continue to emphasize is of a long tail of businesses coming into the U.S. from those mega projects. In terms of starts, Dodge Data, Dodge forecast sees that there will be around $300 billion in starts for this year versus $135 billion last year. Even if we do not believe all those projects will start as planned, there is plenty of room to show still strong growth year- over- year. We are tracking Nigel also. You do too. The level of cancellation, and we haven't seen any change. It's still in the 11% range. Yeah. Just to give another data point on momentum here, think about this. We track this since 2021, I guess. We booked a little less than $2 billion, I'd say, in orders from those projects. We have $3.6 billion in negotiation pipeline today. There is definitely acceleration, definitely takes time, is a long tail for the business. That's great, Paulo. Thank you. Thank you. The next question coming from the line of Jeffrey Sprague from Vertical Research, your line is open. Hey, thank you. Good morning, everyone. In respect to. Hey. How's it going? Good to connect. Could you share with us what the gross tariff impact is that you're wrestling with here and give us some sense of how much of it is price versus cost and other actions? Certainly, price must be an important part in the margin friction, but help us size that up, please. Yeah. First of all, I want to give you and everyone around the call the reassurance that we take tariffs really, really seriously, and we meet frequently with the team. The teams meet every second day. I personally meet with the team every week. I think I should also say, and I hope you appreciate, it is a rather very dynamic environment with announcements coming every single week. We decided not to disclose that number because we will be wrong in a week's time. What you can expect of us is that we will continue to run this with the biggest rigor possible, trying to mitigate the cost pressure. At whatever cost pressure we get, we are going to recover on a dollar-by-dollar basis in terms of pricing. Maybe Olivier, if you want to add some quarters. No, I mean, we had a slide on this. We're going to use three levers. It's quite intuitive. One, we're going to manage our cost. Two, we're going to implement supply chain actions. Three, pricing will be one of the elements. The three levers would be at play for us to mitigate on a dollar-by-dollar basis the impact of tariff. Now, we would see how the tariff evolves. We expect over time to recover from a margin standpoint, but not this year. Understood. Okay. Maybe as a separate question, not a follow-up per se, but Paulo, you mentioned kind of the focus on global, right? That is one of your to-do list items here is just step into the leadership role. Obviously, nice to just see this market tailwind starting to kick into gear. How quickly can you sort of action kind of organic initiatives there or start to tuck in with some of the bolt-ons that you must be thinking about to kind of round out your position in some of these growth verticals internationally? Yeah. Thanks for the question. I think there are many elements to Global's improvement, and most, if not all of them, are also applicable to aerospace. First of all, operationally, we can do better based on the business we already have in hand. We are working on that, strong leadership in place, support of the whole company. That is something that is in our full control in self-help. The other element is about the portfolio. We have an organic strategy. We are dealing with this new environment of project business. We decided to invest in Dubai. We launched that. We broke ground. Here, not only are we investing for the region in terms of being a player to produce locally so we can win more business in this very fast-growing market, but we're also going to have a front-end group of engineers developing project business for the overall region, not only for the Middle East. That is something that we are committed to do, and we are doing it. It is part of the organic play. If you look at the rest of the global segment, it is no surprise to you that the GIS business continues to perform well, but the market has been flattish over time. We have opportunity as well on that side of the business to come back up if you follow other competitors in the same space. We have that in our favor. I think the strategy that the Asian team implemented over the years through JVs has proven to be the right one because they're consistently beating the competitors locally, and growing double digits in an environment like this is a testament to the leadership of our leaders down there. There is a bit of execution. There is a lot of leadership and discussion around organic growth we can do. We are not close to the right deals if they pop up, but we do not depend on them for the near future and for a long-term plan. Great. Thank you, Paulo. Best of luck, Craig. Thank you. Appreciate it. Thank you. Next question coming from the line of Nicole DeBlase from Deutsche Bank, your line is open. Yeah. Thanks. Good morning, guys. Craig, congrats on your retirement. Maybe just starting with, I know this is a bit nitpicky, but the guidance now implies kind of like 47% EPS in the first half of the year. I think it was about 48% as of last quarter. Can we just talk about the puts and takes of what might have shifted between the first half and the second half? Yes. Thank you for your question, Nicole. Good morning. You're right. Initially, we had indicated 48% for the first half and now about 47%. If you do the math, that's about 10 cents. Six of the 10 relates to corporate items. That includes higher interest rate associated with the financing of Fibrebond. The second element of increasing corporate cost is also the timing of equity compensation for some of our executive requirements. I don't need to mention names here on this call. That's six cents. Four cents is the timing delay on the recovery of the tariff. We will recover tariff on a dollar-for-dollar basis over the year, but we have a headwind of about $20 million, five cents in Q2, Nicole. I give you another number, and I'm sorry to mention so many statistics. Historically, first half is about 46% of the earnings. At 47%, we're slightly better. Thanks, Olivier. That was really helpful. I appreciate all the detail. This question's kind of hard to ask because I know you guys don't like to give a lot of color on price, and that's totally understandable. Just trying to understand the moving pieces with respect to price and volume in your guidance. Did you guys actually maybe take a little bit of a haircut to the volume expectations in the second half to embed some potential macro uncertainty in the more short-cycle businesses? Yeah. Let me start, and then Olivier can add color if he feels like. The overall market, when we talk about the end markets, is at the same level as we saw before, around 7% for the overall end markets we see. With a little change of we see a little bit more pricing because of the tariffs and a little more volume, but it's already embedded in the 7%. Having said that, we are highly confident based on our backlog position that we can outgrow that market. That's why we then increased our organic growth for the year. That's a way to think about it. In terms of leveraging the cost base with tariffs, we are fully committed. The teams are on it, and we're going to take action. We've done that in the past. We have a playbook. If we need to go for pricing, we'll get the pricing. Thank you, Paulo. I'll pass it on. Yeah. Thank you. The next question coming from the line of Deane Dray from RBC Capital Markets, your line is open. Thank you. Good morning, everyone. Hey, Deane. Good morning. Special congrats to Craig. I do want to note that Olivier was so polite not to name any names on retirement packages, but congrats. Hey, I want to audit that number, Olivier. I'm not sure if my retirement package is as big as what you suggested, but we'll move on. All right. Yeah, let's move on. Can we dive a little deeper into the implications on data center backlog going from seven years to nine years for the industry? Because that's really significant. Just talk about implications and opportunities. Are there opportunities for Eaton to increase the share of wallet in particular? Where might those be? How do you pull those levers? Related, talk about those five-year supply agreements. I would imagine if it's being pushed out to nine years, you're being asked to do these more and kind of touch on the economics. Thanks. Yeah. No, thanks. Very, very, very good question here. If you think about the implications, that it's not going to take nine years for them to build this. The industry will continue to find ways to build faster and to get things done in a more, I'd say, productive and competitive way. What you should expect is that modular solutions in the likes of the JV we made in Europe, but also the acquisition we made with Fibrebond in North America, are to be more relevant. One, because you take a lot of engineering requirement away from the data center operators, is largely used already today by multi-tenant data center builders and with very much interest from hyperscalers to adapt as well. This is one big conclusion we can derive from. Another one is that data center operators and investors are much more open for solution discussions with providers like Eaton that have a very broad portfolio and that can sit on the table and help them make their designs better. We welcome that. We are, by far, the company that keeps investing the most. We are hiring also experts that can have this dialogue in the designs of our customers and how to accelerate their produce. The other part of it is not only about speed. It is about efficiency of capital. Think about making best returns out of the dollar, not only because of timing. We are going to talk about removing equipment from inside the data center so they can have more revenue from their racks. We are there. We are at the table. We are discussing with our biggest customers in how to help them. There are consequences, and I think they are positive for Eaton. Five-year supply agreements? We have those long-term agreements, of course. I do not see a change there. I do not see people going for nine years. I think it is too long and too speculative for me to say that. I have not seen that so far. Great. Just a related question. Chris's earlier question touched on this. Can you address barriers to entry? See lots and lots of new competitors like at Supercompute. I know being on an approved vendor list is extremely important, but what are the other barriers to entry? Can you repeat the beginning of your question? I didn't get the beginning of it. Yeah. Just the idea that with this kind of growth, there's more competitors coming into the market. Chris Snyder mentioned it in his first question. Just the idea of how is Eaton positioned already? I know you're on a number of approved vendor lists and the hyperscale players, but where else are there barriers to entry because this market is attracting lots of new competitors? A very good question. Of course, the designs of the future is when you put your name on the table and then you become relevant. We have the fortune to be present all the way from the utility feeder all the way down to the server rack, right? That gives us a tremendous advantage there. To your point, of course, it is a big market. It attracts interest from many players. We also need to work with the chip manufacturers today. That is the difference. In the past, we only worked with the data center hyperscalers and multi-tenant. Today, the collaboration is much more intensive, is much deeper. Therefore, you need to have open discussion with the likes of the chip manufacturers here, Nvidia, and so on. Not many companies, especially foreign companies, can have the dialogue with them. Once again, this is another entry barrier that creates naturally by the way the market is developing. Thank you. Thank you. The next question coming from the line of Joe Ritchie from Goldman Sachs, your line is open. Thanks. Good morning, guys. And congrats. Good morning. Congratulations, Craig. Yeah. So. Thanks, Joe. Appreciate it. My first question. Yeah. My first question. I know that you do not want to give the exact tariff impact, and there are a couple of ways to maybe just parse this out. If I take a look at just the change in your segment margins in the two segments, Electrical Americas and then vehicle, it is like roughly a $150 million impact for the given based on the original guidance versus this guidance. I fully appreciate that the vehicle markets are a little bit worse, but that does not fully explain it. I am just trying to understand maybe even outside of the one-for-one tariff and pricing impact, what else? Has anything else really changed on the margins, fully recognizing that vehicle has probably gotten a little bit worse? Joe, if you were to look, we haven't changed our guide. $0.12 at the midpoint of EPS. Fibrebond is neutral from an EPS standpoint. You have to conclude that tariff neutral from a dollar standpoint as well. We have said this. Largely, the guide excluding tariff and Fibrebond isn't changed relative to what we had at the start of the year. You could then give a bit of a, you could size a bit what is going on through the P&L with what I've just said. Largely unchanged. Prior Fibrebond and the impact of tariff on the P&L. Top and bottom line. Okay. All right. Thanks. I'll walk through some of the math maybe offline. Also, just on the change that you guys have on the top line. Some of it sounds like better growth. Some of it's a little bit of an impact from pricing, but it does also appear like there's a lag. You've got this $0.05 impact that you called out for the second quarter. I guess my question is on the pricing side, given that you have a portion of your business going through distribution, but you also have projects that you've now booked into your backlog, how easy is it going to be for you to get the pricing that you need to cover the tariff impact? Does it impact the margin profile of some of the projects that you've already booked into your backlog? Thank you. Yeah. Good question. I'll get started here. First of all, we definitely will take care of backlog as needed as well. It's not off the table, of course. In terms of the pricing approach here, there's a little lag in Q2 because for price realization to sales, it takes a little time for us to see in the bottom line. That explains why not only the below-the-line $0.06 that Olivier talked about, but also the operational margin has a little lag that, as we said before, we fully compensate during the fiscal year, and we're going to recover the margin structurally moving forward according to a long-term plan. That's the way to think about it. Okay. Thank you very much. Thank you. The next question coming from the line of Amit Mehrotra from UBS, your line is open. Great. Thanks. Morning. Can you just talk about the opportunity for data center orders to actually re-accelerate given the changes, obviously, that are happening in rack density from the transition to Hopper to Blackwell? I mean, we're talking about 60 KW to over 100 KW per rack. Is that transition already reflected in the backlog, or can we actually see orders actually tick up in absolute dollar terms to reflect that opportunity in terms of total energy intensity? Thanks. Everything you described in terms of the rack power, it goes right into our alley and what we are good at. Of course, it benefits our business. I would say this. For the long run, I would say it's logical to think this market will continue to be stronger for longer. It's very difficult to make order forecasting on the quarter. That's why we always point to 12-month rolling. Even 12-month rolling, given some oversized orders, can be lumpy as well. I would invite you to think about the negotiation pipeline we have. Once again, if I go back to the answer I gave earlier in the Q&A, our data center business grew over that 45% I talked about last quarter. Our negotiation pipeline is up 18% even to last quarter. Yes, definitely it's a trend. Difficult to predict orders, but we are negotiating the next designs with our customers. That is a trend that we embrace and we are going to benefit from. If you go back to what we said not too long ago during Investor Days, we have said that this market, we expect this market to grow at 15%. By the way, that number was considering the constraints due to power, which is the business we are in. Without these constraints, you could argue that the level of business would be maybe double of that. If you look at all the calls we have had this week, all the hyperscalers have confirmed the level of CapEx. We believe that this 15% CAGR for data center is still intact. Okay. It is a fast-moving technology and market, so things can change, which is what I'm trying to figure out. The question is, when we think about this $1.5 million of content per megawatt that you guys have put out there, is there a difference if the AI data center proliferation is done via retrofit versus greenfield? Maybe also related, do you expect Electrical Americas backlog to be up this year, or maybe do we start burning some of that just as the capacity comes online? To the first part of your question, I would say this: that the AI data centers will increase our dollar per megawatt content because of the reasons you just described before in terms of the power density, how much of electrical equipment goes within it, but also because you need UPSs even for the liquid cooling part of the portfolio. There is definitely a growth in that area. The second part of your question was once again on what? Can you repeat the second part? It was just about the retrofit versus the greenfield part of the equation in terms of content if it matters. And the EA backlog. Yeah. No. EA backlog growing year on year. Okay. That's the part I was missing, the backlog. On the retrofit versus new builds, we try to find solutions for our customers that are modular. Think about building blocks. They'll feel and look the same whether you're doing inference or whether you're doing training AI. If we—and we are working on that very closely—when we get these designs done with customers, then it becomes a very good opportunity for us to do retrofit. It's not a disconnected effort. It's a very well-connected effort. To your question on the backlogs for Electrical Americas, again, it's difficult to predict order development, but we see that our book-to-bill will continue to be above one. That's what we are aiming for. Wonderful. Thank you. Have a good weekend. Appreciate it. Same to you. Thank you. Next question coming from the line of Tim Thein from Raymond James. your line is open. Oh, great. Thank you. Just going back to the Electrical Global discussion earlier, and nice to see maybe we've got some tailwinds there from an organic growth perspective. I'm just thinking about the implications for profitability. I think since the restructuring has been underway, there's been just over $100 million of restructuring charges that that segment has incurred. How should we think about kind of the timing and the realization of some of the associated savings in that particular business? The improvement of the margin in our global business has been a focus for the management team. That is why we have most of the restructuring targeted at this business. We see the second half of our—the second half being impacted by restructuring programs more than the first half, indeed. Meaning the savings with that, or? I'm sorry. Both. The impact of the program and the associated savings. Correct. Got it. Got it. Okay. All right. Maybe, Olivier, while you have the mic, just a comment on cash conversion. Specifically, I'm just—obviously, there's a typical seasonality in terms of your cash collection, but the Days Sales Outstanding did seem to kind of jump out. I'm just curious if that's a reflection, or should we think about, as you're doing more and more business with some of the hyperscalers, does that have an implication in terms of ultimate collection, or is there something else going on there? Thank you. No. If you look at the performance of the cash in the quarter, the big variable impacting our cash was actually inventory, and that was intentional. We build, like other companies, we build inventory to manage tariff. That was about four days, give or take, of inventory. It's about $150 million. And the inventory was built in parts, which are going to be more targeted by tariff. We haven't changed our free cash flow guide for the year. To answer your question on DSO, DSO should be relatively flat year on year. Nothing specific going on. You could have a phasing in a quarter because how the sales are phased in a particular quarter, but nothing happening on DSO. It's an inventory story. Okay. Very helpful. Thank you, sir. Thank you. Thank you. The next question coming from the line of Scott Davis from Melius Research. your line is open. Hey. Good morning, guys. I think most of the questions have been asked that are relevant. I wanted to back up a little bit and just talk about lead times and your own capacity in the context of where are we now? I mean, I'm sure transformers are still a pretty long ways out, maybe even still 23-24 months. As far as the rest of your offering, are we back to normalized lead times for the most part? No. We are not back to normal. We see improvement in our lead times, think about 20%-25% depending on the product line. We keep pretty loaded. In terms of the investment and the capacity to the first part of your question, we said before that we do not have one or two projects. We have two dozen of projects happening. Think about expansions that are already in play. That is supporting the print that Electrical Americas team could put on the table, right? Strong 13% growth. A vast majority, if not all, is volume, right? It is not very little pricing today on that. That starts to show. Nevertheless, we continue to invest. We have projects in early stages. We should expect more of a capacity coming online in the second half and beginning of next year. That's a good way to model. Okay. That makes sense. I think you said something in your prepared remarks, Paulo, about capacity adds in North America just above and beyond perhaps what you had planned for before, but maybe I'm misreading that. Can you comment? Are you actually accelerating some plans to build local to local in light of the tariff announcements, or am I overreading that? No. As I said before, we made this $1.2 billion additional investment in growth public much before tariffs. We are just executing on that plan. We do not depend on that plan. We continue to monitor if things will change. We have a plan. We feel really good about capacity adds for a number of reasons. We felt good before because the markets are very strong, number one. Number two, as questioned before, some of our customers give long-term commitments, so we felt good about it. Number three, we have in our business something really particular to Eaton that our capacity is fungible. If you think about a power transformer, I can sell it to a data center. I can sell it to commercial institutions. I can sell it to industrial, so on and so forth. Very few companies have that opportunity, so we feel good about it. Ultimately, our investments are on assembly. Do not think about this heavy machinery, high capital intensive. We can get a lot of output for the dollar we invest. We feel good about it. We continue to monitor it. If needed, we will expand it, but we do not see the need as of today. Okay. Helpful, Paulo. Thank you. Best of luck this year, guys. Thank you. Thank you. Hey, guys. I think we have reached the end of the call. Appreciate everybody's questions. As always, our team will be available to address your follow-up questions. Have a good rest of your day. Bye. Thanks, everyone. This concludes today's conference call. Thank you for your participation, and you may now disconnect.