Hello, welcome to WESCO 's first quarter 2023 earnings call. I would like to remind you that all lines are on listen-only mode throughout the presentation. If you would like to ask a question, please press star, then one followed on your telephone keypad. Please note that this event is being recorded. I will now hand the call over to Scott Gaffner, SVP, Investor Relations, to begin. Thank you. Good morning, everyone. Before we get started, I want to remind you that certain statements made on this call contain forward-looking information. Forward-looking statements are not guarantees of performance and, by their nature, are subject to inherent uncertainties. Actual results may differ materially. Please see our webcast slides as this company's SEC filings for additional risk factors and disclosures. Any forward-looking information relayed on this call speaks only as of this date, and the company undertakes no obligation to update the information to reflect the changed circumstances. Additionally, today, we'll use certain non-GAAP financial measures. Required information about these non-GAAP measures is available on our webcast slides and in our press release, both of which are posted on our website at wesco.com. On the call this morning, we have John Engel, Wesco's, Chairman, President, and Chief Executive Officer, and Dave Schulz, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to John. Thank you, Scott. Good morning, everyone. It's a pleasure to be with you today. We're off to a strong start this year and set new first quarter company records for sales backlog margin and profitability. The power of our increased scale, our industry-leading positions, and our expanded portfolio of products, services, and complete solutions is evident in our continued strong performance. We delivered double-digit organic sales growth driven by secular demand trends, share gains, and ongoing improvements in the supply chain. All three of our business units set new records for first quarter sales as well as gross margin, and we delivered another impressive quarter of cross-sell results, which continue to exceed our expectations. We're confident that 2023 will be another transformational year for Wesco. We're making excellent progress on our digital transformation and expect our strong sales growth and margin expansion to continue. As you saw in our release earlier this morning, we reaffirmed our full-year outlook, we expect to generate significant free cash flow in 2023. As Dave will discuss in more detail later in the call, we are focusing our cash generation on debt reduction in the near term. As a result, we expect to reduce our leverage below 2.75x, which is the midpoint of our target range by year-end. That creates increased capital allocation optionality for us in the second half entering next year. Now turning to page four. The strength of our business model and the success of our integration efforts since closing the Anixter acquisition in mid-2020 have established a track record of superior results for our company. This page highlights our first quarter record results compared to the pro forma pre-pandemic results of legacy Wesco plus legacy Anixter in the first quarter of 2019. As you can see, we've clearly outperformed the market, delivering impressive sales growth and margin expansion. We've achieved record profitability, all while rapidly deleveraging our balance sheet. Most importantly, our dedicated team of Wesco associates continues to provide resilient and critical supply chain solutions for our customers around the world, capturing the benefits of our deep exposure to sustainable secular growth trends that drive our future sales and profitability. With that, I'll now turn the call over to Dave. Thanks, John. Good morning, everyone. I'll start on slide five with a summary of our first quarter results compared to the prior year. As John mentioned, we delivered first quarter record sales, gross margin, Adjusted EBITDA margin, and Adjusted EPS. Our cross-sell program again exceeded our expectations. Our ability to cross-sell Wesco and Anixter products and services contributed approximately $220 million of sales in the quarter. On an organic basis, sales were up 11% in the quarter, driven by a combination of price and volume along with share gains. We estimate pricing added approximately five points to sales growth, with the benefit primarily in our UBS and EES segments. On a reported basis, sales were up 12% as additional sales from Rahi were partially offset by a headwind due to foreign exchange rates in the quarter. Backlog continues to be at historically high levels. In total, backlog was up 21% year-over-year and flat sequentially from the end of December, including backlog associated with the Rahi acquisition. Supply chains have started to heal and, in some instances, have returned to normal. We are still experiencing extended lead times in our EES and UBS segments for critical components such as switchgear, breakers, and transformers. While an improving supply chain is a positive for Wesco, our customers, and suppliers, it has created some near-term timing issues around inventory. Specifically, we are adjusting our order patterns to reflect shorter lead times versus last year. Our current inventory levels support our record backlog and our expectation to deliver 6%-9% revenue growth in 2023. As we start the second quarter, demand has continued to be resilient on top of a tough base period comparison. In the month of April, growth continued to be led by CSS and UBS, which were both up low double digits. Preliminary workday-adjusted April sales were up approximately 6% year-over-year, including the impact of a stronger dollar and the Rahi acquisition. On a preliminary workday-adjusted two-year stack basis, sales were up 28% in April. Recall that comparables in the first half of the year are particularly challenging. Gross margin was a first quarter record at 21.9%, up 60 basis points versus the prior year and in line with the fourth quarter of 2022. This result was again driven by our margin improvement program and the effective passthrough of supplier price increases. Adjusted EBITDA, which excludes merger-related and integration costs, stock-based compensation, and other net adjustments, was a Q1 record and 16% higher than the prior year. Adjusted EBITDA margin was also a Q1 record at 7.6% of sales or 20 basis points above the prior year. Adjusted diluted EPS for the quarter was $3.75, another Q1 record and $0.12 above the prior year. The primary driver of this increase was core operations as we recognized higher below-the-line items related to interest and other expenses. Turning to page six, this slide bridges the year-over-year increase in sales and Adjusted EBITDA. Organic sales increased 11% versus the prior year, including a 5% benefit from price in the quarter, along with volume growth in our markets. As expected, the contribution from price moderated in the quarter relative to 2022, as there have been fewer supplier price increases, and the magnitude of these increases has moderated. Adding to this growth was the impact of the $220 million we generated in cross-sell in the quarter, as well as continued share gains. Adjusted EBITDA increased 16% versus the prior year. Higher sales and expanded gross margin drove the majority of the increase, along with the realization of cost synergies in the quarter. Consistent with 2022, we continued to experience higher volume-related operating costs, including shipping and sales commissions. We also recognized higher expenses for employee compensation and benefits due to inflation and higher headcount, as well as cost increases related to the operation of our facilities. SG&A came in above expectations with the majority of the increase incurred in our EES business unit. Finally, in accordance with our plan, we continued our strategic investments in systems and digital tools. These cost increases were partially offset by the realization of integration cost synergies and lower incentive compensation expense. Turning to slide seven. Organic sales in our EES business were up 4% year-over-year and a first quarter record. Recall that beginning in Q1, we transferred certain businesses from EES to CSS and UBS to better align our sales management of certain customer accounts. Excluding the impact of this transfer, EES organic sales would have been 6% above prior year. The year-over-year growth primarily reflects continued double-digit sales growth momentum in our industrial markets and solid construction sales up mid-single digits. OEM sales were down low single digits, driven primarily by lower specialty vehicle and manufactured structures demand. Backlog was flat with the record December level and 14% higher than the prior year. In the first quarter, Adjusted EBITDA was $183 million for EES, down approximately 5% from the prior year. Adjusted EBITDA margin was 8.6%, 60 basis points lower year-over-year. Segment gross margins were up over prior year. Higher SG&A costs in the quarter, specifically related to higher headcount and transportation and logistics costs, drove the decline in EBITDA. We expect EES profitability to improve in the second and third quarters, driven by operating leverage on seasonally higher sales. SG&A reductions initiated in the second quarter will take effect in the second half of the year. Turning to slide 8. Sales in our CSS business were a Q1 record and up 13% versus the prior year on an organic basis. Excluding the impact of the inter-segment business transfer I mentioned a moment ago, CSS organic growth would have been 11%. Of critical importance was the strong sales growth in February and March, the two toughest comparables of the quarter. We saw solid growth in network infrastructure up mid-single digits, driven by data center and cloud applications, as well as very strong growth in security, which was up low double digits, and professional audiovisual installations, which was up more than 30% from prior year. Backlog, including Rahi, was up 10% over the prior year and decreased 2% sequentially as we were able again to release more projects from backlog due to improved availability of product and a return to more normal lead times across most product categories. Profitability was also strong with record Q1 Adjusted EBITDA and Adjusted EBITDA margin of 9%, 40 basis points higher than the prior year, driven by operating leverage, integration cost synergies, and the continued successful execution of our margin improvement initiatives. Turning to slide 9. Record sales in our UBS business were up 18% versus the prior year on an organic basis in the quarter, marking the sixth consecutive quarter of organic growth above 15%. We experienced broad-based growth in our utility and integrated supply business with sales up over 20% and up low double digits respectively. Broadband sales were down low double digits as certain customers worked through higher levels of inventory that were built last year. Backlog was another record in the quarter of 46% over the prior year and up approximately 1% sequentially. Profitability was exceptionally strong with an Adjusted EBITDA margin of 11.3%, up 160 basis points versus the prior year, driven by operating leverage on higher sales, our margin improvement initiatives, and integration synergies. This was the fourth consecutive quarter of Adjusted EBITDA margins above 10%. Moving to page 10. The size of the cross-sell opportunity of combining WESCO and Anixter continues to exceed our expectations. In Q1, we recognized $220 million of cross-sell revenue, bringing the cumulative total to $1.45 billion since the beginning of the program. Our pipeline of sales opportunities remains healthy and expanded again in the quarter. We are capitalizing on the complementary portfolio of products and services, as well as the minimal overlap between legacy WESCO and legacy Anixter customers. As we look at the remaining nine months of the program in 2023, we are increasing our expected cumulative total to $1.8 billion, reflecting the strength of our value proposition against the backdrop of accelerating secular trends. Turning to slide 11. This is a slide that we've shown throughout the integration with the realized cumulative run rate cost synergies of $188 million in 2021 and $270 million in 2022. We remain on track to meet our expected target of $315 million by the end of 2023. Our focus through the balance of the year is on our supply chain network design and field operations to drive cost synergies. Turning to page 12. On this page, you can see a bridge of free cash flow in the first quarter, which was a draw of $266 million. The primary driver was working capital, which more than offset netting. Receivables increased sequentially in Q1 as some customers delayed payments from March into April. However, accounts receivable reserves and bad debt write-offs are at normal levels. The increase in inventory in the quarter was due to a few factors. As we continue to see supply chains normalize, certain suppliers are accelerating their pace of shipments to us. While the improved availability of product is a positive for our customers, recall that we do not typically ship product to our customers until their entire order is available. As we make progress shipping the backlog of projects, we expect to see a normalization of inventory levels, which will drive cash generation through the rest of the year. Payables were an $87 million use of cash following the $70 million cash generation in Q4, driven by the timing of purchases in Q1 and normal seasonal cash payments based on prior year accruals. CapEx was approximately $14 million in the quarter, and other sources and uses of cash were collectively an $18 million use of cash in the quarter. Moving to slide 13. Reducing our leverage has been a top priority since we announced the acquisition of Anixter. While leverage decreased for 8 consecutive quarters through the end of last year, our leverage increased a tenth of a turn in Q1, driven by the use of cash in the quarter. Leverage remains well within our targeted range of two to three and a half turns. We expect to generate full year free cash flow of $600 million-$800 million. Given our current debt levels and the interest rate environment, our near-term capital allocation priority will be to pay down debt until we reach the midpoint of our target leverage range, which we expect will occur in the second half of the year. Moving to page 14. This slide shows the uniquely strong position of our company to drive growth and profitability in the years ahead. The end-to-end solutions that we provide to our global customer base are directly aligned with the 6 secular growth trends shown on the left side of this page. Our participation in these trends, coupled with increasing public sector investments in infrastructure, broadband, and partnerships with the private sector, make WESCO positioned exceptionally well. As we outlined at our Investor Day last year, we expect to grow 2%-4% above the market due to the combined benefit of secular trend growth and increasing share. In short, we view WESCO as a secular growth company. Moving to page 15. We are reaffirming our 2023 outlook today based on the demand trends and record results in the first quarter. In 2023, market growth is expected to contribute approximately 4%-6% to the top line, which is a combination of volume and price. We expect US GDP to be flat in 2023, with our secular tailwinds providing 1-2 points of volume growth. Price carryover in 2023 will be 3-4 points based primarily on pricing actions in 2022. Recall that our guidance does not incorporate any impact of future pricing actions. In addition to market growth, we believe our scale and continued cross-selling efforts will contribute an additional 1 percentage points - 2 percentage points above the market, driving total organic growth of 5%-8%. After factoring in the additional revenue from Rahi and the impact of working days and foreign exchange, we estimate our reported sales growth will be in the range of 6%-9%. For our strategic business units, we expect EES reported sales to increase by mid-single digits versus 2022, with both CSS and UBS up high single to low double digits. Please note that in the appendix, we have highlighted the account transfers from EES to CSS and UBS we discussed earlier and that began taking effect in Q1. In 2022, these accounts represented approximately $200 million of sales, with 85% moving to CSS and 15% moving to UBS. For Adjusted EBITDA margin, our outlook is for a range of 8.1%-8.4%, which represents approximately 20 basis points of expansion at the midpoint. We expect Adjusted earnings per share between $16.80-$18.30 and free cash flow of between $600 million and $800 million. This free cash flow outlook of $700 million at the midpoint would represent the highest free cash flow in our history. Through the cycle, we still expect the company will deliver free cash flow equivalent to net income. Consistent with the expectations we outlined during our Investor Day in September, we expect to generate $3.5 billion-$4.5 billion of operating cash flow during the period of 2022 through 2026. To note, we expect positive free cash flow in Q2 to return to us net neutral cash generation for the first half and to deliver the rest of our targeted $600 million-$800 million of free cash flow in the second half of the year. We increased our expectation for interest expense for the year from a range of $330 million-$370 million to a range of $350 million-$390 million, primarily driven by higher variable rates and the timing of debt paydown in 2023. We have detailed our expectation for other expense, which captures certain non-operating expenses primarily related to the impact of pensions and foreign exchange. In the first quarter, these expenses were approximately $10 million, and we expect $30 million-$40 million for the full year. This expense reflects the recent devaluation of certain foreign currencies along with slightly higher pension expense. This outlook reflects a revised effective tax rate of about 25%-26% for the year, lower than our prior expectation due to the benefit of certain discrete items in the first quarter. We still expect an effective tax rate of approximately 27% for the remaining three quarters of the year. This is slightly above our ETR of the past few years, primarily due to the implementation of certain rules in our Canadian business related to hybrid debt instruments. 2022 also benefited from certain one-time discrete items, primarily related to a change in U.S. tax law regarding the valuation allowance on certain foreign tax credits and one-time discrete benefits in Canada. In 2023, we continue to expect to spend approximately $100 million on capital, an additional $40 million on capitalized cloud-based computing arrangements related to our digital transformation. On the statement of cash flows, approximately $100 million will flow through capital expenditures, and approximately $40 million will flow through changes in other assets. For the year, the lower tax rate that we experienced in Q1 will be more than offset by higher interest and other expenses, while we continue to expect Adjusted EPS will be within the outlook range. Our outlook assumes an average diluted share count of 52-53 million shares for the year. This outlook reflects our expectation that 2023 will be the third consecutive year of record results, record sales, gross and EBITDA margins, EPS, and a record free cash flow, and is consistent with the long-term financial framework we presented at our Investor Day in September of last year. We will complete our integration with Anixter at the end of the year and expect the results in 2023 to substantially outperform the expectations we set and raised since the time the transaction closed. Moving to slide 16 and before opening the call for questions, let me provide a brief summary of what we covered this morning. The first quarter was a great start to the year. We had record first quarter sales in all 3 of our business units, along with record gross margin, operating profit, Adjusted EBITDA, and Adjusted EBITDA margin. We again took share through sales execution in our cross-sell program. We are again increasing our cross-sell synergies outlook for 2023. Profitability was also strong in the quarter as gross margin and EBITDA margin both expanded versus the prior year. We continue to expect 2023 will be a transformational year with continued execution of our digital initiatives, strong sales growth, and continued margin expansion. We remain on track to deliver record free cash flow of $600 million-$800 million to support our capital allocation priorities. We'll open the call to your questions. We will now begin the question-and-answer session. If you would like to ask a question, please press star followed by one on your telephone keypad. Please limit your questions to one question and one follow-up. Our first question today comes from Deane Dray with RBC Capital Markets. Please go ahead. Thank you. Good morning, everyone. Morning, Deane. We're hearing lots of consternation about channel inventory and customer inventories and whether there's destocking going on. I was hoping you could just take us through from your perspective, you know, supply chain normalization is allowing companies and customers to be able to release buffer inventory. They're all talking about that. Anytime you see or hear about destocking, it raises concerns. Is that the early sign of a slowdown? You're right in the ground zero of all of this because you're getting inventory, you know, from the suppliers taking that in, you're seeing the pace with the customers as well. Please share with us what you're seeing, you know, with regard to that question. Thanks. Deane, very good question. I think we had a very strong quarter. We, you know, we built a plan for the year. We essentially delivered our plan. The mix was a little different than what we thought. UBS and CSS a bit stronger than and EES, you know, had a little bit of headwinds there, but still grew in the quarter. Overall, you know, we're seeing very strong demand levels still. You know, backlog was held flat in the quarter. We do expect, 'cause our backlog's running at over 2x a normalized rate, and that was built over the last couple years, and we're running with elevated inventories as well. We expect backlog to start to come down. That's working our business back to a more normalized state. We did not see that yet in Q1, even with the 12% reported, 11% organic growth. That's a reflection of, you know, very strong demand levels. Bid activity levels remain at a record high. Our opportunity pipeline continues to grow. The cross-sell synergies we took up meaningfully again had terrific cross-sell results in the quarter. You know, this is really a strong quarter. In terms of the destocking, the only area where we're seeing material destocking at the customer level is in broadband. I think if you look at some companies that are heavily exposed to broadband value chain, you'll see that in their, in their results, the other publicly traded companies. You know, there was very strong growth last year, and what customers did was run with higher levels of inventory, knowing that the secular growth trends are there, but also concerns about the overall supply chain, which was very constrained through the pandemic. They're working through that a bit, this is for broadband. It's our anticipation it'll take 1 quarters- 2 quarters for customers to work down those inventory levels, and we expect broadband to return to growth in the second half. I remain very bullish on broadband over the mid to long term, driven by strong secular growth trends, 24/7 connectivity, automation, IoT applications, as well as government spending in both U.S. and Canada, ARPA and IIJA, to name two drivers of that. That's really the only other area, Deane. I think the other point I will make, which is incredibly important I think many folks are missing, remember that our purchases are our suppliers' sales. Our purchases are our suppliers' sales. We grew our inventories over 30% in Q1 2023 versus Q1 2022, and that's because our suppliers have been recovering quickly. Their production rates have been coming up, you know, their past dues have been coming down, and their shipments to us accelerated. I think that's incredibly important to understand because their shipments to us, which is reflected in our inventory growth, is their out-the-door sales. With that, our out-the-door sales, you know, are, you know, had strong double-digit growth, and we've got, again, maintaining this record backlog. Very highly confident as we look through the, you know, through the second quarter through the second half of this year, and that's why we reaffirm the guide. All right. Hopefully that gives you the color. It's really helpful. I appreciate you taking us through all of that. Just if we could drill down a bit on EES, I like hearing the expectations that second quarter and third quarter are projected to be better. We don't often hear about specialty vehicle and manufactured housing as verticals. Take us through the extent that that's meaningful, but more importantly, what you're seeing in the construction markets. Thanks. Yes. Well, we've got three really parts of that business, industrial construction and OEM comprise our EES business. I'll start with industrial because up mid-teens, very strong. We're seeing, you know, a large number of mega CapEx projects. We've got a record backlog. That backlog includes construction, but it also includes big industrial projects that we do with the end user customer. The secular trends are very strong and intact, especially reshoring. Remember, we sell to 90% of the Fortune 500 companies directly. I can tell you all our customers are looking at, you know, reshoring, nearshoring as supply chains begin shifting structurally back to North America. I believe fundamentally, and we're seeing this, we're in the early innings of a multi-year industrial upcycle or even super cycle. Industrial, strong momentum, Dean. That's in EES. Again, double-digit growth in the quarter. Moving to construction. Up mid-single digits in the quarter, both in U.S. and Canada. Record backlog, as I mentioned. The secular trends give us great confidence. Remember, we're non-resi, essentially, very little residential construction exposure. The secular trends of electrification, IoT, and automation, again, the reshoring, very positive drivers of our business. It's important to understand, too, the big infrastructure spending and investments that have been approved through various bills in Congress, that's not in our numbers yet. That's not driving the market yet. That's 2024, 2025, and beyond. Really solid start, I think, on construction. It's also important to remember that construction overall for the company is only 17% of our total sales now. The cyclicality of construction is only 17%. When you look at the balance of our business, just incredibly strong secular growth driving most aspects of the business. Then for OEM, that's our value-added assemblies business. You know, that's traditionally been a lumpy business. No structural issues. It has been lumpy over time if you were to look at that historically. We remain bullish on OEM, though, ultimately, and our value-added assembly capabilities, 'cause when you look at the fundamental drivers for industrial, they also apply to OEM. When you think about OEM being value-added assemblies that feed a variety of end markets, including industrial. That takes you through the pieces, Steve. Thank you. The next question is from Sam Darkatsh, and he's with Raymond James. Please go ahead. Good morning, John. Good morning, Dave. How are you? Morning, Sam. Couple two, three questions, I suppose. First, I'm trying to reconcile your flat sequential backlogs with the commentary from some of your primary suppliers. Eaton, as an example, was talking about their backlogs sequentially being up high single digit sequentially. Are there certain mega projects that your vendors are seeing that are not going through distribution per se, that they're more vendor direct? What else might explain that delta? I mean, the short answer is no, Sam. you know, I think what I'd suggest is take a look at the, you know, look across the entire electrical channel of value chain space. There's a number of suppliers, they have different performance levels, and there's a number of distributors. You look at us versus our competitive peers, we think we had a very strong quarter, outperformed the market. You look at the suppliers, there's a range of performance. Again, I think what's most important is remembering that, you know, our suppliers-- our purchases are supplier sales. you know, I'm not gonna speak to a specific supplier with respect to how they measure order, their, you know, kind of their front-end pipeline or order book. I can tell you what our pipeline looks like. It's at record levels. It continues to expand. Our bid activity levels are very strong. Again, we remain bullish, on the secular growth trends as they impact the construction end market vertical and our mix, which is non-resi, predominantly. My second question is, I guess, more high level and piggybacks on, I think, what Deane might have been getting at. I mean, as it stands right now, are you expecting organic sales growth in 2024? I mean, we're seeing obviously EES softening a bit, and that's your most economically sensitive segment, but your backlogs are obviously very large and stable. What would have to realistically happen in 2024 not to show organic sales growth? We'd have to go into a severe economic down cycle. That's, you know. You know, we're not out there with a 2024 guide, except I will tell you that or outlook. I'll tell you, these strong secular growth trends that we're facing into, are deep, and they're enduring. These are not short term, midterm. We believe these are long term. We believe they're structural. We also believe fundamentally, we've mixed shifted this company to a higher growth set of end markets, and we are a growth company now. You look at the portfolio evolution and what the mix of our businesses are today and end market exposure today versus pre-Anixter, and then go back longer term, look at 10, 15, 20 years ago, this has been a fundamental portfolio shift in the higher growth market. I remain very bullish on the secular growth trends and our market outperformance. We've done an exceptional job of cross-sell. We raised it again this quarter. You know, that's the hardest thing to get when you get put two companies together. I think that speaks to the power of the combination, which is unique to us. That's a special cause driver. Plus the rigor of the process we put in place in our operating model that we're figuring out to really leverage our sales force to pull in other aspects and capabilities of our company in each and every customer opportunity to sell a much more complete solution in a more complete basket. You know, I think, and I've made this statement, I think that's the largest value creation lever as a result of putting these two companies together, and that has tremendous links to it. It's the hardest thing to get, and we're still building momentum there with tremendous opportunity for upside execution. Dave, if I can sneak a real quick one in here. The April up six by my math, or at least my notes, I think May and June are considerably easier comparisons, maybe like five or 10 points or so. Does that hold? Just to ground everyone on the call, when you take a look at our second quarter of 2022, you know, we had organic sales growth that was up 21%. Again, as we've talked about, you know, if you go back to what we said for April of 2022 on this call a year ago, you know, we were up 22% in the month of April. By the math, yes, the comparisons get slightly easier as we progress through May and June. Thank you both. Appreciate it. The next question is from Nigel Coe with Wolfe Research. Please go ahead. Oh, hi. Thanks, John. Thanks, Dave. Thanks, Scott. Good morning. Morning. Yeah. Just going back to your questions, Dave, on so the second quarter free cash flow. It looks like we're back to neutral, which is sort of I think where we were initially. Roughly $3 million of free cash flow in the second quarter. Maybe just, I mean, obviously, you know, I'm assuming AR will unwind through the second quarter, but what is your ambition on inventory? Do you expect to be cutting inventory through the quarter? Or is that still more a second half phenomenon? We do anticipate making progress on inventory primarily as the supply chains continue to heal and our order lead times, you know, return back to normal. Our expectation is that we're going to begin seeing our inventory reduce month-over-month. We actually did see the inventory in the month of March did come down sequentially versus February. March? March. Exactly. March versus February came down sequentially. Right. Okay, that's helpful. Thanks. Then on SG&A, you mentioned the pickup in SG&A investment, particularly within EES, and it looks like we're making some or rather you're making some adjustments in the second quarter that's gonna have second half benefits. Just maybe just talk about some of the investment spending you made there. You know, it sounds like maybe sales, maybe you're overstaffed or overinvested there. Maybe just talk about some of the adjustments you're making, and it will be a good runway for SG&A in the back half of the year. Thanks. Significant SG&A increase in EES, we did have across the entire company. We did have both year-over-year and sequential increases. I think the issue that we saw across the entire company was a little bit more severe in EES, primarily as, you know, we did have to increase some headcount to support the high sales growth. We've also been investing in some new capabilities as well, which has come through. And of course, across the entire company, we've continued to invest in our IT and digital transformation. You know, not necessarily at the EES level, but you're seeing that at the enterprise level. You know, the other thing I'll highlight is in the first quarter, we did experience some unexpectedly high costs we would consider one time in nature, particularly related to benefits. We're not expecting that to continue as we enter the second quarter. Great. Thanks, Dave. The next question is from Tommy Moll with Stephens. Please go ahead. Good morning. Thanks for taking my questions. Morning, Tommy. Don't wanna make a mountain out of a molehill here on EES, but just do wanna clarify 1 point. I mean, your full year outlook on revenue is unchanged in the mid-singles, and then there was some commentary just around the margin compression and adjustments to the cost structure there. If we think about any change to the revenue trajectory, was it really limited to that weakness in the OEM piece of the business there, or was there anything else you would call out for us? That was it, Tommy, in Q1. Great. Thank you. One other point. One other point, Tommy, just to amplify it, and I know it's clear, but I wanna. The costs are increases a little bit, got ahead a little bit of where the sales ended up coming in, and I said those sales came in a bit lower. Gross margins, record level. Gross margins, record level for all three SBUs, including EES in Q1. Yep. Very important point. Fundamentally, you know, the margin expansion improvement program is enterprise-wide. I know that's been a question many have had, you know, the proverbial over-earning question. We're thrilled with our gross margin trajectory and we continue to do a great job executing that enterprise-wide program. John, that's where I was headed for my next question, just on price cost. It sounds like there's little or maybe even no incremental price assumed in your guide for the year. How would you characterize the environment there on price? Also on any inflationary pressures or lack thereof, what can you give us for an update on that side of the equation? Thank you. Yeah. Tommy, it's Dave Schulz. We did see the number of supplier price increase notifications came down in the 1st quarter, and the average percentage increase also came down substantially of what was published in the 1st quarter. As we took a look at, you know, how pricing impacted each of our business units, you know, we mentioned both UBS and EES experienced most of the benefit, much less so within our CSS business. I also wanna highlight that the pricing benefit that we saw in the 1st quarter for EES moderated versus what we saw in 2022. You know, we were reporting, you know, 8s and 6s as a price benefit throughout the quarters in 2022. That came down to a five and, you know, that came down even more so within our EES business, which of course is impacting the sales growth. Overall, we continue to work closely with our suppliers to understand, you know, what is their expectation for price increases. There have been some of our large suppliers that have announced that they expect to take additional price increases, but again, we have not included that until we actually see it impacting our revenue. We just didn't see a lot of incremental pricing in our first quarter results. Thank you, Dave. I'll turn it back. The next question is from Christopher Glynn with Oppenheimer. Please go ahead. Thank you. Good morning. There's been a lot of demand questions. Just wanted to talk about some of the kinda non-operating cost items. On the $30 million-$40 million other expense range, sounds like foreign exchange is a big part of that. You know, in my experience, non-operating FX adjustments are often very unpredictable, period-specific, and even end of quarter marked. Curious what's going on there with that $30 million-$40 million. On interest, you know, with the quarter in the books and better view on the cash flow linearity, curious why that's still a $40 million range interest line item. Chris, let me address the other non-operating. In the first quarter, we recorded $10 million, which was primarily related to the Egyptian pound, where we saw a significant devaluation occur in the beginning of January, and then another devaluation 10 days later. That is the balance sheet revaluation of the assets and liabilities that we have within that market. To put that into context, all of 2022, we had a $10 million other expense not operating. We've matched the full year 2022 in just the first quarter. You know, it is an estimate at this point that we are going to continue to see additional devaluation, particularly upon that Egyptian pound currency. Again, it's our estimate at this point that will be impacting. As you mentioned, Chris, it is extremely volatile and very difficult to predict. We at least wanted to call that out, if this continues, you know, we have at least $10 million already in the first quarter. There could be additional risk. We've included that in our assumptions for the outlook. On the interest expense, when you take a look at, you know, where we were relative to the guidance we provided in February, we have borrowed more money here in the first quarter. We've also seen interest rates increase about 35 basis points. You know, from that perspective, you know, we've assumed that we will be carrying higher debt levels in our initial assumption, also, the interest rate environment continues to be volatile and has been increasing. We've reflected that appropriately in our assumptions. Thanks for that, Dave. Just to stick with the other expense, are you hedging against additional Egyptian pound devaluations during the year, essentially? At this point, we are not because it's extremely expensive in order to provide that, and in some cases the instruments are not even available, is our current view of the market. Sorry, sorry. So we- Sorry, I meant does guidance hedge against that risk? No, I wasn't talking about a financial hedge instrument. Yeah. We've provided you with what we believe is the appropriate range, given that risk. The additional non-operating other expense is a headwind to our EPS guide at the midpoint. We believe we've got the right outlook for EPS for the full year. Not changing it this early in the year. Thank you. The next question is from David Manthey with Baird. Please go ahead. Good morning. Thank you. First I was wondering if you could outline the puts and takes-. Good morning. Good morning. Could you outline the puts and takes relative to the 60 basis points year-over-year gross margin increase? Specifically, can you address, do you think there's any inflationary inventory benefit in the first quarter gross margin? Secondarily, could you discuss the contribution there from rebates and, what's the typical high-low range? I know that's a lot, but hopefully you can touch on those. Certainly. The 60 basis point improvement in gross margin year-over-year was, only had a benefit of about 10 basis points from supplier volume rebates versus the prior year. Remember when we, when we booked our supplier volume rebates in the first quarter of 2022, we had a much different forecast for the full year, and that contribution of supplier volume rebates as a percentage of sales was increasing throughout the back half of the year. As we think about our, the synergies that we've built in to 2023, particularly as it relates to supply chain, and we've built in the expectation on our supplier volume rebates, we've got about a 10-point benefit versus Q1 of 2022. The real driver of the gross margin enhancement has been the gross margin improvement program. We have continued to push that across our organization, make adjustments and improvements to how our field is able to better understand how to price for value for the products and services that we're providing. It was really much more of that transactional margin improvement. You know, going back to your question on are we seeing any of the, you know, profit and inventory being one of the drivers? We're not. You know, I think one of the reasons that our pricing came down is we did see some commodity costs come down in the back half of 2022 and in the beginning of 2023. Actually we had a headwind on some of our pure commodity categories. Again, very small% of our business, maybe mid-single digits. You know, that was a headwind on those commodity-based products given, you know, the global market environment. You know, we don't believe that this is a profit and inventory issue. It's really the benefit we're getting from our margin improvement program. Okay. Thank you for that. Second, to hit on the cash conversion cycle here, by my calculation, something like 84 days, it looks like historically they've been in the 60 to 70 range. I mean, how many days do you think you can take out by year-end? Is there a target? Do you suppose you get back to that previous range? Maybe you could just discuss where that might come from, where the days will come from, whether it's, you know, DSO, DPO, inventory days. Yeah. Let me address specifically on inventory. Depending on, you know, the calculation that you're looking at, you know, we essentially saw our inventory days increase by 11 days in 2022. We don't believe it's prudent to assume that we can get all of that back in 2023, given some of the challenges with the supply chain. What we are expecting, though, is that we will get about half of that improvement back, and we will continue to grow net working capital at less than half the rate of sales. Our primary focus when it comes to net working capital is really on the inventory. When I take a look at our receivables and our payables days, they've been relatively stable. We know that there were some higher accounts receivable balances through the end of March. You know, just looking at our collections the last two weeks of March versus the first two weeks of April, we saw a nice pickup in our collections in April. Our primary focus when it comes to net working capital is inventory. I appreciate it, Dave. Thank you. The next question is from Christopher Dankert with Loop Capital. Please go ahead. Hey, morning, guys. Thanks for taking the question. Yep. I guess looking at the comments you guys have had on UBS specifically, I mean, still expecting, you know, high single-digit organic growth for the year. I mean, pretty hot start in the first quarter. I mean, you're implying a pretty sharp deceleration, you know, mid-singles for the rest of the year kind of a thing. Is it the broadband piece? Can you kind of walk us through what you're expecting shape of the year in UBS maybe just a little bit because the deceleration is so dramatic? Yeah. I think what we said specifically, Chris, was you know, high single to low double. Clearly we're at a nice double-digit start. It would have been much stronger had it been, you know, had we not had a low double-digit decline in broadband. Now that's not a large piece of the portfolio, but it's very attractive secular growth trends and as we're very bullish on that mid to long term. You know, I don't wanna guide our guide and tell you where we are in those ranges, but just to put a fine point on it, we have outstanding momentum in our UBS business overall, driven by the U part of UBS right now. We're incredibly bullish on utility. Believe it's a secular growth end market now. Never used to be if you go a decade ago. Clearly is going forward. So is broadband. We also have our integrated supply business inside UBS, which technically serves in the industrial end market. We've taken you through this before. Why is it there? Because it's that business model we took as a starting point and evolved it on how we serve these utility IOU customers and public tower customers directly with a customized integrated supply model for utility. We're attempting to bring that into the broadband value chain too, which we think has tremendous upside. That integrated supply business grew double digits in the quarter. That's industrial. I kinda guided the guide even though I'm not gonna technically officially guide the guide. There you go. No, I really appreciate the color there. Thanks so much for that. Just, you know, secondly, on the digital investment cost, it looks like, you know, those were up, you know, $30-ish million year-over-year, give or take. Can you just kinda talk us through some of the key priorities on the, on the digital investment side and kind of where you're really focusing the investment there? Yeah, Chris, it's Dave Schulz. You know, we have some enterprise programs that we're implementing. We've talked about some of those already. You know, that includes some of the, you know, our financial systems along with some of our HR systems. We also have a series of digital applications that we have been working on. Think about this as, you know, not only improvements to our margin improvement program, which is heavily digitalized, but there are some other applications that we're providing to our field reps to allow them to better sell our value proposition. There are a series of investments that we have continued to make in that area. I know we gave you a little bit of an overview of that during the Investor Day. you know, as we learn more and we're able to provide you more details as they begin to launch, we intend to do so. Arshad, thanks so much. The next question is from Kenneth Newman with KeyBanc Capital Markets. Please go ahead. Hey, good morning, guys. Thanks for squeezing me in. Morning, Ken. Hi. Morning. Dave, curious if you could just talk a little bit about, you know, in the past on past calls, you talked about the margin profile of some of the new orders that were taken into backlog. I'm curious, any color on whether the orders taken in the first quarter are at or above 1Q corporate margin average? Hey, Ken. I would say that the margins in our backlog are consistent with how we just reported our results. Again, there's some volatility there, depending on the end unit and the type of project. For the most part, I mean, we're not seeing any significant change of the margin in the backlog. Got it. You know, just to clarify on some of the inventory challenges you mentioned earlier, I'm curious if we could just dig into, you know, what you're seeing specifically relative to the backlog portion of your business versus the stock and flow portion. Any change in momentum across those, whether it be in the quarter or even on, you know, April today? We haven't seen any significant change in the composition of our inventory between stock and flow versus, you know, project. I would tell you that our expectation is that, you know, as these supplier lead times normalize, we will be able to be holding less inventory for fewer months in order to ship a complete order. A lot of the spike that we've been seeing in our inventory, you know, going back to late 2021, has really been as we have built our backlog, which a reminder, our backlog is a firm customer order. As we built that backlog, and we've got a stage kit in store for some of those larger projects, we've had to hold inventory for a longer period of time just to ensure that we could meet the customer service metrics. As those supply chains normalize, our expectation is that we'll be holding inventory for fewer weeks, and therefore our net inventory will be coming down. We are always looking at what is the right mix between, you know, stock and flow inventory by location, by business, and we are tweaking that all of the time. Right now, I would tell you that our inventory issue is, you know, a large number because we have a large backlog. Those are customer orders that we expect to ship. You know, that is a key driver of our inventory days reduction plan going through 2023. Right. That's very helpful. Maybe if I could just squeeze one more in, more higher level. You know, John, looking at slide 14 of the deck, I think this is helpful to kinda see, you know, just the drivers from secular trends. I'm curious if, Dave, if you guys have done any work on just quantifying the actual exposure or benefit you expect from these secular drivers either in, you know, 2023 or 2024. You kinda mentioned, you know, none of the benefit from infrastructure hitting quite yet. How do you guys think about that opportunity going forward? Ken, it's a great question. Thanks for that. I'd point you back to our investor day because what we didn't show you the detail by secular trend, but we did show in aggregate what our outlook was in terms of market growth and market outgrowth, i.e., market outperformance driven, and that was a result of the secular growth trends as well as our cross-sell execution. We gave a framework where we increased our expectation of market outperformance, i.e., how much will we outperform the market by? We've done substantial work and continue to do substantial work internally. you know, we haven't detailed and taken that externally yet. I will tell you that was behind and supporting what we outlined at our investor day last year. Good question. Thanks. These are long-term in nature, too, Ken. I think, you know, just to give you a sense, they are secular. I think just as we continue to move forward into 2024, 2025, 2026, the secular trends are enduring, they're strong, they're expanding. We have the increased infrastructure investments that are not in our value chain yet. You look at where we play in the value chain, I'll put a fine point on it. You know, when ground is broken, our packages go in typically, 12, 18 months later, depending on the size and complexity of the project. That's helpful. Thank you. This concludes our question and answer session. I'll now turn the conference back over to John Engel for any closing remarks. I think we're at the top of the hour. I'll bring the call to a close. Thank you all for your support. It is, it's greatly appreciated. We do have a robust calendar this quarter in engagement. We look forward to speaking to many of you. We will be participating in the Oppenheimer Industrial Growth Conference, the Wolfe Research Global Transportation & Industrials Conference, as well as the KeyBanc Industrials & Basic Materials Conference during the second quarter. With that, I know we've got a lot of follow-up calls scheduled. We look forward to engaging with you. Thanks. Have a great day.