Good day, and thank you for standing by. Welcome to the Fourth Quarter 2022 Hubbell Incorporated Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker presentation, there will be a question-and- answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Dan Innamorato, Vice President, Investor Relations. Thanks, operator. Good morning, everyone. Thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter and full year 2022. The press release and slides are posted to the investor section of our website at hubbell.com. I'm joined today by our Chairman, President, and CEO, Gerben Bakker, and our Executive Vice President and CFO, Bill Sperry. Please note our comments this morning may include statements related to the expected future results of our company and are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Please note the discussion of forward-looking statements in our press release and consider it incorporated by reference into this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures that are included in the press release and slides. Now let me turn the call over to Gerben. Great. Good morning, everyone, and thank you for joining us to discuss Hubbell's fourth quarter and full year 2022 results. 2022 was a strong year for Hubbell. We effectively served our customers through a challenging operating environment, consistently delivering high-quality critical infrastructure solutions which enable grid modernization and electrification in front of and behind the meter. We also delivered strong results for our shareholders with full-year organic growth of 18%, adjusted operating profit growth of 29%, and adjusted earnings per share growth of 32%. We began 2022 by completing the divestiture of our C&I Lighting, successfully positioning the Hubbell portfolio for structurally higher long-term growth and margins. We also stepped up our investment levels to bolster our positions in key strategic growth verticals through acquisitions and organic innovation, expanded our capacity in areas of visible long-term growth, and to improve our manufacturing and distribution footprint for future productivity. Importantly, we've been able to fund these investments while still expanding operating margins, driven by strong execution on price cost in the face of significant inflationary and supply chain pressures. Our employees have worked hard through a challenging environment to sustain a culture of excellence, delivering industry-leading service levels for our utility and electrical customers, along with differentiated financial operating performance. The critical contributions of our employees and partners is what has led to a highly successful 2022 for all of our key stakeholders. Looking ahead, we believe that Hubbell's unique leading position in attractive markets will enable us to continue delivering on each of these fronts in 2023 and beyond. We will talk more in depth on our near-term outlook later in this presentation, but we anticipate continued market growth and strong execution, driving positive price cost productivity to fund investments back into our business, which will generate long-term value for our customers while delivering attractive returns to our shareholders. Turning to page four, our fourth quarter results were generally consistent with year-to-date trends. Utility customers continued to invest in upgrading, hardening, and modernizing aging grid infrastructure. Orders continued to outpace shipments, and we exited 2022 with record backlog levels, which gives us good visibility to continued growth in 2023, though continued investment is required to address areas of capacity constraint. In electrical solutions, orders and volumes softened in the fourth quarter as customers actively managed inventories and cash flow into year-end. These dynamics were anticipated and contemplated in the outlook we provided last October. Operationally, we expanded operating margins by over 200 basis points in the quarter. While the overall environment remains inflationary, easing raw material inflation and continued traction on price drove a net price cost productivity benefit. Finally, we continued to accelerate our investment levels. Most notably, we invested over $60 million in capital expenditures in the fourth quarter as we were able to execute several large capacity and productivity projects. For the full year, we invested just under $130 million in capital expenditures, up $40 million from 2021 levels, and we expect another year of elevated CapEx in 2023 as we believe that these high return investments are the best current use of our shareholders' capital. Overall, the fourth quarter was a strong finish to a strong year for Hubbell. Let me now turn it over to Bill to provide you some more details on our performance. Thanks very much, Gerben, and thank you all for joining us this morning. Looking forward to talking about fourth quarter, full year, and in particular, our outlook for 2023. I'm gonna start my comments on page five of the materials that Dan referenced, and we'll start with the fourth quarter results for the Hubbell enterprise. You see sales growth of 11%, up over $1.2 billion. That 11% is comprised of high single digits of price, low single digits of volume, and one point from acquisition. We look at our sales performance through a few different lenses here. The first is against prior year. This double-digit growth against double-digit growth in last year's fourth quarter, you know, shows good compounding and good robust levels of demand. We also look at it through the lens of comparing it to the third quarter. We're down sequentially about 7%, roughly in line with fewer days and the per-day shipment level reasonably flat to the third quarter sequentially. We also believe that the channel was managing their inventory levels, and we'll talk more about that in a couple of pages when we get to the electrical segment. The operating profit on the upper right of the page, very impressive growth of 27%. Very healthy margin expansion of two points to 16%. When we look at the incremental drop-through on the growth, you see about mid-30s drop-through, which we think is quite good. Price is really a very important part of the success of this financial performance. The price is sticking. Gerben made reference to the critical products, and our customers adding to their structural solutions and having this sticking price is really helping us as inflation is continuing to affect us in the non-material and value-added places. When we talk about next year, we'll give you a little bit more breakdown about how we're anticipating price costs. On the lower left, you see earnings per share growing at 26% in line with the profit growth. On the non-ops side, we had some headwind from taxes as well as from pension. Gerben had referenced that we started last year with the disposal of the C&I ighting business, and we used some of the proceeds of that sale to buy back shares, which partially offset these non-op headwinds. The free cash flow you see is down 9%. That more than explains the CapEx increase that Gerben described. The OCF side here is quite healthy, and we're being quite intentional on making these investments in order to position Hubbell for the future to be successful. Page six, we'll switch to breaking the fourth quarter down between our two segments. Page six starts with the utility segment, and you see a really strong finish to an outstanding year by our utility franchise set up for success for 2023. You see total sales growth here of 17% to about $716 million of sales. That 17% of sales is comprised of a low double-digit increase in price and a mid-single digit increase in volumes. Demand continues to be very robust. Despite high double-digit shipments here, we continued to add to the backlog in the fourth quarter. You'll see that the T&D components, the historical Hubbell Power Systems infrastructure business, showing the most growth at 27%. The trends continue to be driven by the need for grid hardening and for renewables and continues to reinforce the shift that we've seen from near kind of GDP-type replacement levels of spending to the need for our customers to really upgrade the grid. I think you'll see the evidence of our strong positioning as our utilities continue to turn to us with these critical needs, and that's really helping inform and drive some of our CapEx decisions that Gerben had mentioned to continue to support our customers here. On the communications and controls side, you'll see a decrease of 10% in sales. While demand was still strong, there are two drivers to that contraction. Number one is the persistent shortage of chips from the supply chain that's really preventing us from growing, and that's been a persistent problem for the last few quarters and has kept our communications and controls business relatively flat. In addition, we had a one-time event in the fourth quarter, where we recognized the commercial resolution. This was stemming from a legacy dispute that preceded Hubbell's acquisition. It became obvious it was time to resolve that so that we could move forward with a constructive relationship with a big customer and to our mutual benefit, we believe. That had the impact of driving down sales in the quarter for the communications control segment. We expect this chip situation to improve during 2023. While the quarter was down, we have expectations of the comms business growing, that it may still be a little choppy in Q1. We're anticipating getting this chip supply situation to improve during the course of the year, and we're looking forward to returning that business to growth. You can see on the right side of the page, very impressive operating profit growth of 42%, adding three p oints to operating profit margin up over 17% in the fourth quarter by the utility team. That performance being driven by price, which we've really needed to overcome inflation as well as inefficiencies in our plants that coming from some of the disruptions from the supply chain. The mid-single-digit volume growth is also dropping through at attractive levels. Really good year by our utility franchise, and you can see a good quarter setting us up for a good year next year. On page 7, we've got the electrical solutions results, and you'll see 3% sales growth, more modest than on the utility side, but a good 60 basis points margin expansion, 8% OP growth to a 14.3% margin. That 3% is comprised of mid-single digits price and volume compared unfavorably to last year. We think that the fourth quarter results significantly impacted by some of our mix. So you see residential sales down significantly, so strong double-digit decline for resi as consumers continue to struggle with high interest rates. We saw some growth in some of the verticals we've been investing in, namely data centers, renewables and telecom, and the balance being more exposed to the non-res cycle. We also thought that we were able to perceive some destocking activity in the quarter. We've mentioned this before with you all. Some of that observation is based on anecdotes and discussions with our customers. In other places, we have hard data where we can analyze point of sale and point of purchase data and see that our replenishment orders given to us are below what's going out the door. We believe that the way the channel's incentives are structured, whether on the volume side, those incentives may have maxed out, or on the cash flow side, where obviously managing inventories in December becomes very important to our customers. I think there's a little bit of distortion in the fourth quarter. As we've seen, the first several weeks of January, we've seen a nice rebound in orders. We'll continue to watch that quite carefully, obviously. On the operating profit side, you see the nice margin expansion and again, price and material tailwinds enough to overcome the impact of lower volumes and enable us to operate very well through the operating disruptions, but also overcoming some of the drag coming from the resi lighting business. We thought it'd be constructive on page eight to step back and discuss the full year's performance and really illustrate some of the trends that Gerben highlighted in his opening remarks. Sales of 18%, very strong growth, mid-single-digit volume and double-digit price, very robust demand environment for us. You see the 140 basis points of margin expansion to just under 16% on the OP side, 29% growth in OP, diluted earnings per share growing a little bit better than in line with that operating profit. The cash flow being up 20% year-over-year, being held back a little bit with the heavy investment in CapEx that we had mentioned, as well as significant investment in inventory as we continue to try to support our customer service. You really see the trends for the whole year that have persisted. Strong demand, number one. Number two, a tough operating environment where the availability of our people, materials, and transportation has been inconsistent throughout the year and leads to operating inefficiencies. Three is the execution on price, which was excellent job by the Hubbell team, really required to counter inflation, as well as those inefficiencies. The fourth trend was investment. Acquisitions, CapEx, and inventory, all sources of investment. On the acquisition side, we closed on three deals in the year. We invested about $180 million to do so. We were quite intentional about adding exposure to desirable verticals that are exhibiting higher growth and higher margin potential than our average. We added to our utility tool business, we added data center exposure, and we added a nice bolt-on to our BURNDY grounding business and connector business that, again, is supporting high growth, high margin there. We'll switch now from 2022, wrap a bow on that, and start to look forward to 2023 and our outlook. We were proposing to go through this a little bit differently than we have in the past. We've got a little more granularity in our discussion of the different pieces and parts so that we can help provide a little more context to why we're guiding the way we see it. On page 10, we're starting with our markets outlook. You'll see on the yellow call-out box at the bottom of the page a mid-single digit expectation of organic growth. You'll see from that's driven really by the strength of the utility business on the left of the page. Those growth drivers remain intact. We see our customers continuing to need material, continuing to install it at a high rate in response to the need to modernize their grid and respond to renewable needs. We're starting the year with a highly visible backlog. In addition, we've got some support for funding from the policy side here. We've outlined a way where we believe that the IIJA probably gives us a lift of a point or two above what otherwise the markets would give us. We're anticipating the utility markets giving us mid-single digits plus. More modest on the electrical side, we've decomposed our exposure in this pie graph here to try to give you a sense of, you know, residential, really, we think is the starting point of the cycle there in a point of contraction right now. We'll continue to be in 2023, we believe. Consumers dealing with high mortgage rate, high interest rates, affecting demand there. Usually, non-res follows the resi cycle, then into industrial. You see we've added this blue segment where we think our electrical business is exposed in a much less cyclical, much more resilient set of end markets, namely the data centers, renewables, and telecom, as well as some of the enclosures we sell, or as connectors to the utility businesses there. If we continue to believe resi will contract, that gives us a low single-digit outlook for the electrical segment. Our visibility, frankly, is better to the first half than it is the second half, and we'd maybe even argue the first quarter, better visibility than the first half. We've got a little bit of caution built in there for what'll happen second half in the non-res markets. We also on page 11 wanted to peel back our view of price cost productivity. At the bottom, you'll see we're anticipating about $50 million of tailwind coming out of our price cost productivity management scheme here. We'll start on the edges, where it's a little bit more straightforward. On price, we believe we've got about two points wrapping around from our actions we've taken in 2022. We continue to hear feedback from our customers that despite on-time service being below where we typically are, that we're still leading in those service levels. We anticipate that price sticking. On the productivity side, we're anticipating in the ballpark of about one point of contribution from productivity. In this cost pie, you'll see we've disaggregated into two halves, the material and the non-material half. On the right, in the blue section, the non-material, mostly labor and manufacturing costs. We're anticipating mid-single digit inflation there. Likewise, on the material side, you'll see that the raw materials we're anticipating there to be benefits and tailwinds as there's deflation in the raws. Our component buy, where there's value add is larger than that, and we're anticipating the same mid-single digit inflation rate there. The netting of all that gets us to about $50 million. On page 12, you'll see we're anticipating investing about half of that benefit in the future success. Page 12 shows our investments starting with footprint and successful multi-year restructuring program that Hubbell has implemented, where we spent about $17 million in 2022, which was an increase from 10 in 2021. Our margin performance absorbed extra expense in 2022. We're anticipating to keep that flat in 2023, so nothing incremental, as far as the income statement's concerned, but still good activities with good projects that typically give us, we find in that three-year average payback range. As for capacity, we continue to find in the utility side, and parts of electrical that we need to invest in our capacity. We've got our CapEx has moved impressively from $90 million in 2021 to about $130 million in 2022, and we're anticipating this year up to about $150 million. That ultimately result in about $15 million incremental operating expense, that we would add another $10 million or so of innovation expense. I know those of you who joined us for our Investor Day saw some of those innovation ideas, and we continue to be encouraged by early results. For us to get impact, it's still gonna take us some time. We've got a good business case of getting about a 0.5 point of growth above our markets from those activities. Those pieces we thought we'd give you the puts and takes and let Gerben on our last page kinda sum it out and net it out in our typical waterfall format that you're used to seeing. Great. Thanks, Bill. As you said, let me summarize it here on page three. Hubbell is initiating our 2023 outlook with an adjusted earnings per share range of $11.00-$11.50. We believe this represents strong fundamental operating performance for our shareholders, and we are well positioned to deliver on this outlook in a range of macroeconomic scenarios. From a sales standpoint, we expect solid mid-single-digit growth organically, driven by 2%-4% of volume growth and approximately two points of price realization. We believe this is a balanced view with good visibility into utility demand and less certainty in electrical markets at this stage. We expect the 2022 acquisitions of PCX, Ripley Tools, and REF to add an additional 1% to 2023 revenues. Operationally, we expect that continued execution on price cost productivity will fund attractive high return investments back into our business. Our outlook range embeds solid margin expansion with high single digit to low double-digit adjusted operating profit growth. This operational growth rate is consistent with the long-term targets we provided at our Investor Day last June, despite the current macroeconomic uncertainty and a higher 2022 base following significant outperformance last year. It puts us well on the path to achieve our 2025 targets. We expect this strong operating performance to enable us to absorb below the line headwinds from pension expense and the previously communicated non-repeat other income from the C&I Lighting divestiture. Overall, our 2023 outlook represents a continuation of the strong fundamental performance that Hubbell demonstrated in 2022. With leading positions in attractive markets underpinned by grid modernization and electrification megatrends, as well as a growing track record of consistent operational execution, I am confident that Hubbell is well positioned to continue in delivering differentiated results for our shareholders over the near and long term. Let me turn it over to Q&A. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from Jeff Sprague with Vertical Research Partners. You may proceed. Thank you. Good morning, everyone. Hey, Jeff. Hey, a couple questions, maybe mostly focused on the utility side. First on the IIJA, and thanks for taking a shot at that. A lot of companies have not been able to quantify or are a little worried to try to quantify it. The nature of my question is really how that interplays with, for lack of a better term, spending that, you know, would have happened, anyway. You are presenting it here like it's incremental, but I just wonder your confidence in that, and whether or not it's, you know, just replacing other investment or using, you know, government stimulus to spend what was gonna be spent regardless. Yeah, I mean, I think, Jeff, ultimately, the dollars ultimately are fungible. Certainly, the customers we've spent a good deal of time talking to have very specifically increased, you know, their CapEx and Assumptions because of it. But that's so for us, it's important to kind of quantify it, though. It's ultimately contributing a point or so, you know, to a mid-single digit. I agree with you. There's a little bit of fungibility there at the end of the day. Just on the, on the capacity, you know, as you know, some of it is tied to efficiency and supply chain resiliency. You know, I mean, it looks like demand will stay at a high level, right? The rate of growth will maybe, you know, settle down to something more normal. Maybe it's mid-single digit plus for a few years. Could you just, you know, address the concern that, you know, maybe it's the wrong time to add the capacity and, you know, how you see the capacity being used or what bottlenecks it might be uncorking for you? Yeah. I think it's important that it is uncorking bottlenecks. One of our specific areas has been on enclosures, you know, Jeff, which has been a really high growth, high margin area. We feel very good that the return on capital of that is gonna be because we have such good visibility on that demand is gonna be there. We feel real good about it and excited about being able to serve our customers better, and I think they're rewarding us relationship-wise as we're doing that. Yeah. Maybe, Jeff, I can provide a little bit of addition to what Bill said. Specifically, he's referring to our utility enclosures in the utility business. This is a business. These enclosures don't only serve utility market, but they serve communications markets, and they serve water markets that all have these applications. Not only do we see the visibility on the utility side, but these other markets have been high growth markets. We're very confident here that this is a more sustained growth level. If you think about this investment, we talked about this is a new facility that we're opening up in Oklahoma City, expanding not only the capacity of enclosures, but at the same time, we're consolidating some factories as well. There's an element of productivity in these moves as well. You know, we believe, and this is just one example of, you know, high return investment that we believe will serve, you know, our customers well and will serve our shareholders well, long term. Just one last one from me, if I could? Could you just elaborate a little bit more what happened with the Aclara in the quarter? I guess I tend to think of a quote, unquote, "commercial resolution" being a cost item, not a revenue item. The way you're laying it out here, it's some kind of adjustment to revenues or headwinds to revenues. I don't expect you to name the customer, but maybe you could give us a little bit more color on what actually happened and what you resolved? Yeah. Just the nature of it, resulted ultimately, Jeff, in the character of a, of a price concession. It hits the top line and drops through, to the OP line as well. Great. Thank you. Thank you. As a reminder, please limit your questions to one question and one follow-up. Operator? Our next question comes from Steve Tusa, JPMorgan. You may proceed. Hi, guys. Good morning. Morning, Steve. Can you just talk about your price assumptions like first half and second half? You said, I think 2% embedded in the numbers. Maybe I'm thinking about a different call. Been on about five this morning. Any color on kind of that first half to second half price? No. It's, you're right on the 2%. That's basically been, you know, layered in throughout 2022. As it wraps around, it sort of does have a tapering effect. When you think about price cost, some of the commodities are coming down, too. Really how it nets, it does net a little more favorable early, and a little bit more favorable first quarter, first half. But that's, you know, Steve, ultimately the net will be determined. I mean, we have a little more confidence in what we see in the price, but the cost side is obviously kind of what we'll have to react to. Yeah. On the price side, I guess you're not embedding any quarter where it's actually negative? No. Okay. Where would you look, within your product lines, to, you know, as the kind of canary in the coal mine on that front? Where you see the most price pressure? Yeah. Where would you expect... You're not seeing it today. I don't think anybody's really seeing it today. Where would you be watching for that? Where would you be most concerned if there were to be some pressure, some pushback? Yeah. My guess is it would show up maybe on our electrical side and maybe some of the more, you know, first of all, resi products. You know, they're sort of seeing contracting demand there. With commercial, that would maybe be most cyclical responsive to that. You know, some of the more rough in electrical, that might be where we'll be paying a lot of attention, Steve. Yeah. I think it's less about the certain product lines are gonna see more cost deflation. I think that's pretty spread, and especially with the chart that Bill shows, the raw material is actually a fairly small percentage. I think all of our product lines are exposed fairly similar to that other inflation. I think it has more to do with the market dynamics and, you know, if there is a potential slowdown in the second half, that could put then additional pressure, and that would be indeed, you know, more in the electrical side than the utility. Great. thanks for all the color. As always, all these details are helpful. I echo what Jeff said on the IRA stuff, giving us a little bit of precision on that versus other companies that just say it's great. We appreciate it. Thanks. Thank you. Thanks, Steve. Thank you. One moment for questions. Our next question comes from Tommy Moll with Stephens. You may proceed. Good morning, and thanks for taking my questions. Morning, Tommy. Really appreciate the price cost productivity slide you provided with all the details, especially 'cause now we get to keep asking you about it. Yeah, that's what we knew you would. Jokes aside here, the pie chart is very helpful and you called out two and the larger two of the components there on your cost side, you continue to expect inflationary pressure. On the raws, obviously there's some easing anticipated there, and my suspicion might be that would be the most visible and most talked about from the customer standpoint. My question is, if you're gonna realize the two points of wrap, which is really, I think, just to hold price, through the year, have you had to reframe or provide any, increased visibility to your customers? 'Cause you're facing, you know, more than three-quarters of your cost is inflationary, they're not gonna see that as much. How do you- Yeah. How do you get confident you can hold? You know, Tommy, we have to use very similar visuals as what we're sharing with you. I think it's, you know, our customers are very alive, for example, to labor inflation and wage inflation. I think that they kind of relate to where they see the inflation. As you point out, when you look on a futures market and you see the raw metals, you know, getting cheaper, that's really only a small part of the whole picture. We've had to have that be part of a conversation, part of a relationship discussion, right? It's not, it's not pure transactional. It's not sending people letters, right? It's about having conversations and sharing the kind of analysis that you're looking at today. Appreciate that, Bill. As a follow-up here on the electrical solutions and market visibility you provided, it sounds very similar to the early peak you gave us for 2023 a quarter ago, at least in terms of the direction. Has anything changed versus a quarter ago? It sounds like your visibility is pretty limited first quarter, maybe first half. Is there any change versus what we heard from you last? Yeah. I think the part that we gained insight was, you know, the inventory management actions that appeared to us to have taken place in the fourth quarter. If those are the new, Tommy, you know, you could argue it might be a little softer than we had communicated. That's why so important to us to see the pickup in orders in the first three-plus weeks here in January. I know it's, you know, a month is not the largest set of data points, but at least it's been sustained through the month. I think that those two offsets, yeah, probably do get us back to where we were when we talked to you in October. You know, they're kinda equal and opposite reactions, I think. That's helpful. Thank you, and I'll turn it back. Thank you. One moment for questions. Our next question comes from Joshua Pokrzywinski with Morgan Stanley. You may proceed. Hi, good morning, guys. Morning, Josh. Not to look a gift horse in the mouth with the IIJA disclosure there, and I'll echo what everyone else has said on how helpful that is. Maybe just to wonder if you could, you know, maybe estimate IRA, is that, in your mind, bigger, smaller, longer duration, shorter duration? Like, how do you feel about that relative to what you put out there with IIJA? Yeah. I would say, Josh, the IRA infects us to a lesser extent, but it does benefit us as well. Here, rather than direct funding, this is more about tax credits. If you think about it, they extended the renewable tax credits for solar and wind, and that's an area that both our utility and electrical businesses benefit from. The EV incentives, and while we're not directly in EV, the balance of systems that goes around with this infrastructure, we benefit well as well. I would say it does affect. Coming back to it's so difficult to pinpoint what exactly what percentage of our growth will be tied to this. I would say it's helpful as well. Got it. That's helpful. Then Bill, your comment there on the destock and then the order rebound, you know, seems like a lot of that is maybe washed out, but any more detail you could give on, you know, kind of portfolio breadth that was impacted and, you know, sort of order of magnitude on size? Was it like a five-point correction on inventory or like a 20 that, you know, came down sharply and then came right back up? Yeah, I mean, I think it, I think it was fairly broad-based. I think if you know, interviewed our customers, they were feeling, you know, a little overstocked. I think, you know, Josh, some of that's driven by when promised dates were extended. You know, they had customers who wanted materials, so they were just, you know, making sure their shelves were stocked. I think there's also been places where they may be bundling or kitting something, and they may have a decent chunk of inventory that needs one last, you know, part to the bundle, and then that'll get shipped. I think what we care a lot about is, you know, are orders gonna, you know, come to a sustainable level through a nice, orderly, over time process as promised delivery dates get shorter? Or is there gonna be something a little more, you know, sharp or reactionary? I think, you know, through the fourth quarter and now through one month in the first quarter of the new year, you know, that feels. It just feels manageable. The breadth that you're talking about is preventing, you know, any real spiky kind of problematic situation right now. For us, the way that it's kind of evolving here is, it feels manageable, you know, to us right now. Got it. It's helpful. Thanks for talking. Thank you. One moment for questions. Our next question comes from Brett Linzey with Mizuho. You may proceed. Hi. Good morning, all. Morning. Morning. Hey, I just wanna come back to the communications controls business, down 10% driven by chip supply. Could you just talk about the, you know, the timing of the chip situation improving and really anything the team is doing, you know, in terms of redesigns or re-engineering to help monetize some of that backlog? Yeah, let me provide some comment. Maybe Bill will fill in as well. You know, chip availability has been the Achilles' heel throughout the pandemic, and we're all aware of that. You know, we pretty early on realized that this wasn't gonna be a short-term turnaround. To your point of redesign, we've been very active in that. As a matter of fact, it's what you have taken a good part of the engineering resources of Aclara to do. This isn't a, you know, simple chip replacement and you go. There's a, you know, ton of design in it, and then a lot of testing to make sure that this product functions in the field. You know, we right now have a product out in the field that's being tested. If that continues as we expect, we'll be able in the second quarter to substitute chips. That's part of the reason we believe that even if the supply chain still is challenged, we should be able to start seeing growth back into that business. The other thing is, you know, we read about chip availability getting better and of course we track this very closely as well with our suppliers. It's really the types of chips that matter. I've learned a lot about chips over the last year, but, you know, the memory chips, those kind of chips that are used in phones have become much more available. The types of chips, the microprocessor types of chips that we use in our products have been the ones that have been still more challenged from our supply perspective. We do anticipate that to improve throughout this year. The combination of just the general improvement with our redesign is why, you know, optimistic and confident we can grow throughout 2023. Thanks for that. I guess just a follow-up, I imagine there's a lot of, you know, labor underutilization, factory inefficiencies, and so on in that business. You know, have you tried to size what that magnitude could be? Really if you could uncork some of the backlog, you know, improve, you know, continuity of supply and so on, you know, what the earnings power, you know, could be as part of the Aclara recovery? Yeah. I maybe talk more generally to efficiency in the factories and, you know, certainly this business has felt it, although to this business there's also a component of contract manufacturing that happens to a certain extent then we're shielded. In our business in general, that's absolutely a right comment to make that with all the disruption, it's driven more inefficient factory. I would say if 2022 was all about pricing and managing price cost productivity, 2023 will continue to be that, but a high focus of us in returning to higher productivity in our footprint. Okay, great. Pass it along. Thank you. One moment for questions. Our next question comes from Nigel Coe with Wolfe Research. You may proceed. Thanks. Good morning, everyone. Morning, Nigel. Nigel, how are you? Hi, guys. just wanna go back to the commercial resolution of the Aclara. Did I hear that right, Bill? It came through as a price concession so that impacted the headline price, in utilities? Yeah. Okay. That okay, that explains that. I'm sorry, is that about $20 million-$25 million? Is that in the right zone? No, that's too high. Too high. That would've impacted EBIT as well. That was both a revenue and EBIT impact, correct? Correct. Okay, great. Okay, those are my clarification questions, now moving on to my real questions. On the inventory, did you see that hidden primarily within residential products, or was it much more sort of generalized, you know, inventory clearance? Yeah, I would say much more generalized. You know, utility, which is had very impressive growth, but we invested in utility inventory too, right? Trying to, you know, we're still don't have our double A items, you know, on time delivery performance levels where we want them, you know, Nigel. That inventory's been, you know, kind of across the board. It skews at this point, if you looked at our year-end balance sheet, it skews, you know, raw versus finished good or whip, and maybe that's obvious because if it was finished, we would've shipped it. That still has to work its way through the factories and get converted and, that's kind of part of what Gerben's saying. We should be able to run the factories a little bit hotter and get some efficiencies as we burn through a lot of that raw material. Right. Okay. Then just a quick one on below line items. I mean, pension, any kind of big swings on pension, and I think there's some TSA income rolling off this year, so in any impact there would be helpful. Both of those, you saw when Gerben walked through the waterfall, we've got this red bar at the end. The non-recurrence of the TSA is part of it. You know, the pension, while we benefited from our liabilities going down with higher interest rates, the gap between return, expected return on assets and discount rates has narrowed. That creates a cost headwind, you know, for next year. That's it's pension math. It's not cash, but it does create an income statement headwind for us in that other. Okay. Thanks, Bill. Yep. Thank you. One moment for questions. Our next question comes from Christopher Glynn with Oppenheimer. You may proceed. Thanks. Good morning, guys. Morning, Chris. Morning. Morning. Just curious your thoughts on the acquisition pipeline. Couple angles. Anything in electrical or focused pretty much on utility? Part of the thought there is maybe more premium on the utility side deals, but obviously you can add lots of value. Should we be thinking exclusively along the lines of the typical bolt-on sizes? Yeah. You know, I would say, Chris, the pipeline is equal opportunity. You know, two of the three deals we closed in 2022 were electrical, so I would not think about it being exclusively utility. If you thought about activity, you know, doing the 180 in 2022, for me is slightly disappointing. You know, I would have rather had a fourth, you know, and get us into the mid twos as an annual kind of investment rate. We've got, you know, the cash to keep doing that. You know, I think the year was a little challenged for us in getting, I think sellers, you know, to accept, you know, sort of the uncertainty of the macro. I think it was a little harder to get buyers and sellers to agree at the end of the day. We had a couple that we thought maybe could get done that ultimately didn't. We're looking to be more active. The pipeline, though, is supportive of that activity level. You know, you're asking about is the size, you know, gonna be more typical, traditional, historical levels? I would say yes, but I would think about there being opportunities in both electrical and utility, Chris. Great. Thanks for that. Other question was on the electrical margin. Historically, you have a little bit more of a seasonal margin tailoff in the fourth quarter over the third quarter, but last year was moderate too. Were there any particular sequential factors that eased that, or is the last couple years really a better guidepost to your margin than historically? No, I mean, look, I think the seasonality can be driven by fewer days in the fourth quarter, and then if the weather, you know, prevents construction, right? Those are the two factors I'd say. I do think we've been operating with backlogs such that maybe you'd see less of that weather impact maybe. The days are there and at the electrical side has less, you know, backlog than the utility side right now. I think the biggest sequential factor continues to be price costs, you know, tailwinds and contributions from that help lift margins. Great. Thank you. Thank you. As a reminder, to ask a question, you will need to press star one one on your telephone. Our next question comes from Chris Snyder with UBS. You may proceed. Thank you. Guidance puts electrical at low single digit organic growth in 2023, so flat to up versus the 1% in Q4. With price fading, would think the guide is for volumes to increase from here. Is this solely the result of moving past this customer inventory digestion period, or is something else driving volumes higher from this point? Thanks. Yeah, I mean, I think the that sequential fact from the fourth quarter, I do think the fourth quarter is a little distorted by that. There very well could be destocking throughout 2023, though, as well. Hopefully, that's kinda measured. I think that, you know, if you just look year-over-year, you know, and you go kinda buy and market, we're anticipating resi contracting significantly. That's creating ultimately a drag. We think those blue markets that line up that are we think are gonna be quite resilient to a consumer-led recession and some of the inflation and interest rate problems that consumers are having. We think those are a little more secularly driven right now. The balance of non-res and industrial, we see industrial being in slightly, probably stronger shape and the non-res, you know, being a little more maybe quick to follow resi. I think we have, we have kind of a range like that, you know, Chris, of kinda confidence and that's, you know, you'll hear us maybe be a little bit more confident in the first half, a little more visibility and a little more uncertainty in the second half, I think. Yeah, I really, really appreciate that color and obviously a tough macro. I guess just to follow up, does this guide on electrical include incremental destocking for 2023? I'm sorry, hearing background noise. Anything to worry about on data center or telecom? Some other companies have kinda flagged some slowdown concerns there. Thank you. I think when you talk about data centers, you think about the 2 segments of that market, the mega centers and being run by the FANGs and the big tech world, you know, you certainly see them reacting with headcount reductions, for example. You know, could that lead to some slowing of growth on the capital side? I think that's possible, and it could. I think the telecom side, we still see the build out. We're still. I'd say in the medium term, we're very bullish on both of those factors. Even though I do agree there could be. Because the second side of data centers outside of the mega, all these colos, you know, I think there's probably gonna be demand at that part of it. Could be maybe a reshaping of mix inside of data centers and, I do think your question's important to figure out what net effect it has, but I think we're still anticipating growth out of both of those. Yeah, maybe to your second part of is there further destocking, you know, we would say there probably is especially if you look at still that some of our distributor partners are still struggling with getting supply. They have a lot of the materials they need for a project. They're missing something. When that comes in, that will naturally cause inventories to come down a little bit further. We believe our products are less exposed to that because we've, you know, we've certainly performed relatively well through it. We would say there's still probably some destocking in the early part of 2023. Thank you. Thank you. I would now like to turn the call back over to Dan Innamorato for any closing remarks. Great. Thanks, everybody, for joining us. I'll be around all day for questions. Thank you. Thank you. This concludes today's conference call. Thank you for participating.