Good day, and thank you for standing by. Welcome to the Fourth Quarter 2024 Hubbell Incorporated Earnings Conference Call. [Operator Instructions]. 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. Please go ahead.

Thanks, operator. Good morning, everyone, and thank you for joining us. Earlier this morning, we issued a press release announcing our results for the fourth quarter of 2024. The press release and slides are posted to the Investors section of our website at hubbell.com. I'm joined today by 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 our 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 considered incorporated by reference to this call. Additionally, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and slides. Now let me turn the call over to Gerben.

Great. Good morning, and thank you for joining us to discuss Hubbell's fourth quarter and full-year 2024 results. Hubbell delivered strong double-digits growth in adjusted operating profit, adjusted earnings per share, and free cash flow in the quarter. While organic volumes were below our expectations, strong execution drove year-over-year adjusted operating margin expansion of 240 basis points. On a full-year basis, we achieved mid-single-digit sales growth, 9% adjusted operating profit growth, 90 basis points of adjusted operating margin expansion and double-digits growth in free cash flow. 2024 adjusted earnings per share of $16.57 was above the high-end of our initial guidance range as well as our outlook we provided in October. We achieved this strong full-year performance despite having to navigate profits of significant challenges in telecom markets as utility customer destocking, as we executed effectively throughout the year on four key levers within our control. The first of these levers is that we made significant progress in 2024 on our strategy to unify our Electrical Solutions segment. We generated above-market growth in attractive verticals with an integrated solutions-oriented service model for our customers, while at the same time driving business simplification and operational efficiencies to expand margins. These efforts resulted in double-digits adjusted operating profit growth in 2024, despite absorbing the impact of the residential lighting divestiture. Second, we effectively captured opportunities from secular growth trends across our Utility and Electrical markets. Most notably driving double-digits growth in transmission and substation markets in front of the meter, as well as renewables and data center balance of system solutions behind the meter. Third, we proactively manage price cost productivity in 2024. Price realization remains favorable across both segments. We are delivering on accelerated productivity plans in our factories and supply chain and we actively managed our cost structure and discretionary spending. And fourth, our strong balance sheet and differentiated capital deployment strategy contributed significantly to our success, primarily through the acquisition and successful integration of Systems Control. As we look ahead, we expect that the temporary headwinds we faced in 2024 will face going forward, while each of the levers that we have driven our success in 2024 and prior years remain intact for 2025 and beyond. We are introducing our full-year 2025 outlook this morning, which anticipates mid-single-digits organic growth with continued margin expansion and attractive growth in operating profit, earnings per share and free cash flow. This outlook is consistent with our long-term financial framework and demonstrates Hubbell's confidence in our ability to continue compounding off of a strong multi-year base of performance. I will share more details on the outlook at the end of this call, but first let me turn it over to Bill to provide you with some more details on our performance in the quarter.

Thanks, Gurb, and good morning everybody. Appreciate you taking the time to be with us. I'm going to use the slides to guide my comments and I'm starting on Page 4 of those materials. So, this four blocker, you can see the strong performance Hubbell turned in, in the fourth quarter and you can see the business model in action, double-digits growth in operating profit, double-digits growth in earnings per share and 28% growth in free cash flow despite flattish sales. Those flat sales at $1.3 billion were below our expectations. It's not uncommon for year end to have different forms of incentive-driven distortions. Specifically, there are some volume-driven rebates in the system as well as free cash flow-driven bonus formulas. And those kinds of incentives can lead decision makers to not want inventory and put their orders in to be shipped after December. And in particular, in low-volume years, those can be exacerbated a little bit. So, I think we experienced some of that in December, but independent of inorganic side, good contribution on sales from our net M&A efforts. So that includes exiting the residential lighting business, but adding systems control, which is to remind everybody, provides turnkey solutions in the sub-station market and you saw a good contribution to sales inorganically there. The operational performance more than made up for that sales backdrop. In particular, some of the price-cost productivity levers were effectively pulled. We continued to get price, in the quarter. So, I think impressive after a couple years of compounding here between '22 and '23 and now, '24. And on the operational side, those portfolio transformation efforts really benefit the margins as well. So, you saw 2.5 points -- nearly 2.5 points of margin expansion. On the EPS side, an increase of 11% to $4.1…

Great. Thanks, Bill. I will end our prepared remarks with a brief overview of our 2025 outlook, starting with organic growth expectations on Slide 8. We anticipate 4% to 5% organic growth in 2025. This is consistent with the mid-single-digits, long-term framework we provided at our Investor Day last June. Our expectations by markets are consistent with the early preview we shared with you in October. We anticipate 4% to 6% organic growth in our Utility Solutions segment as we are well-positioned to continue capitalizing on electrification-driven load growth and interconnection projects across transmission, substation and grid protection and controls market. While we expect our meters and AMI business to decline year-over-year in 2025, we are confident that, telecom markets and high-margin utility distribution markets will return to growth. In Electrical Solutions, we anticipate 3% to 5% organic growth in '25 and we continue to make significant progress in our transformation of the HES segment to compete collectively in high-growth verticals and we expect GDP plus growth in 2025. Most notably, we anticipate mid-teens growth in our data center business, as artificial intelligence drives accelerated build-out of large projects and we anticipate solid mid-single-digits growth across renewables and electrical T&D markets. While macroeconomic uncertainty drives a more muted outlook and commercial and heavy industrial markets, we see high visibility to continued electrical mega project activity driving relative strength across light industrial markets. Turning to Slide 9. We anticipate mid-single-digits organic growth and continued adjusted operating margin expansion to drive full-year adjusted earnings per share of $17.35 to $17.85 and free cash flow conversion of at least 90% of adjusted net income. We expect 2025 performance to primarily be driven by volume growth and we are confident that our unique leading positions in attractive end markets will enable us to achieve these targets. We continue to proactively manage price cost productivity across our portfolio and we expect positive contributions from PCP and restructuring benefits, partially offset by a return of investment spending needed to drive further growth and productivity initiatives. From a non-operating standpoint, we anticipate a higher year-over-year tax rate and other expenses to be partially offset by lower net interest expense. I am confident in our ability to deliver on our initial 2025 outlook, which represents continued attractive growth across our key financial metrics and would reflect an adjusted earnings per share and adjusted operating profit CAGR above 20% over a five-year period. With that, let me turn the call over to Q&A.

Thank you. [Operator Instructions]. Our first question comes from the line of Jeffrey Sprague from Vertical Research. Your line is open.

Thank you. Good morning, everyone. Just back to kind of the channel inventory situation. Obviously, been frustrating for us and I'm sure for you how long this has taken on, taken to kind of correct itself. I just wonder, if you could really speak to your level of visibility, because I think when it comes down to it, no one really had that much visibility in the channel, but now you're making a very granular point about IOUs versus muni. So maybe just the significance of that comment, what it portends for how much more inventory might be out there and how much longer to the residual clears?

Jeff, good morning. Let me maybe start with that and you're right to point out, it's been frustrating to try to pinpoint this down. I would say, we break it down between IOU and public market, a, because our visibility is better on the IOU and that's where we believe it to be most pronounced right here. So, if you break down the IOUs within that we have a subset of that, which we call our VIP customers, it's where we have longstanding relationship, where we have perhaps the best visibility that we can have. And after our discussions initially with the channel, where that started to normalize turned over to, let's look at the end customer or the end user where it still exists, that's where we started to look. So, we started to have much better visibility of where they were. They were quite elevated in the year, and they were not at the same level. So, different customers started to go after this more aggressively than other customers, depending on, where they were in the country, other things that affected it when storms hit, we saw certain customers bringing their inventory faster than others. So, that's where we have the best visibility. That's, as we continue to track it, Jeff, we're starting to see that, that's starting to now mute. I would say, it's going to get better from here for sure, as some are now starting to get through this. I would say, this isn't an event that you can call a date from and it's over. So, I think even if we go into this year, we'll see some remnants of it, but the important part if we're starting to see a return to growth. The other thing that I'd point out in the public market that we also measure, actually through 2024 actually we started to see a return to growth and that also through conversation, what these were people that were, much less stocked up and as a result didn't have to destock. So, we've gotten smarter, I would say throughout the year. We've gotten more analytical in trying to call this, it's I would say still imperfect, but what we really feel good about is that, we're starting to see now a return to growth that I think will -- I wouldn't call it an inflection, but I would call it a positive signs that, that's the constructive to why we're providing the outlook for 2025 that we are.

Just maybe to clarify, Gerben's use of the word public there is referring to muni and co-ops, where we actually grew mid-single-digits. Jeff, we're kind of distinguishing between those two, because you could kind of see that market segment kind of buying and installing at the same rate. And so, we can really isolate it to the IOUs.

Great. Thanks for that. And then, given that people are still drawing inventory. It certainly follows that no one is pre-buying inventory, because of tariff concerns and that sort of thing. But I wonder if you could give us a little bit of updated perspective on what percent of your COGS might be exposed to Mexican, Canadian, Chinese tariffs if things do happen, as volatile that we've seen this week.

Yes. I think, Jeff, as you can imagine, we've been spending a lot of time planning both commercially and operationally around the tariff question. I think starting with the Chinese parts, back in 2018 when the first tariff regime came through, we had some exposure there, that was largely driven by our lighting businesses, both the C&I lighting as well as the resi lighting. We've since disposed of both of those, and hence dramatically reduced our Chinese exposure. We've also been one of the industrials, who's been affecting some reshoring, so further reducing the Chinese exposure. At this point, quite small exposure there. I guess we could argue of the moving pieces that's maybe the piece that has some clarity and it would have a very small impact to us that we would navigate through a combination of price and productivity. With Canada, Mexico, obviously still a very fluid situation from our perspective. You had executive orders signed on Saturday. You had discussions with presidents and premiers on Monday that put a delay on things. But as you kind of ask, we've been working really hard on our commercial side, developing pricing regime by kind of business unit by product, to ensure that, we would be able to navigate any effects from the tariff. We're obviously calculating other productivity moves and supply chain moves, as well as calculating currency moves. And so, ultimately, Jeff, while it's very unclear to us, what actually is going to happen here. I mean, again remind us in 2018, the initial tariffs that were announced ended up having exceptions and moving around quite a bit. We have a Commerce Secretary is not confirmed, the Trade Ambassador is not confirmed, right? So, our assessment, Jeff, is quite a fluid situation and we're preparing ourselves to absorb and neutralize any effects that would ultimately be landed on by the policy people. The effects that...

Go ahead.

Yes. Go ahead.

No. I was just going to say, understood. We don't know if it's going to be 0% or 10% or some other number, but can you give us a sense of maybe just what percent of your COGS come out of Mexico?

Yes. I mean, we haven't quantified it, Jeff. It's number two after the US and we'll give that data as come in and don't want to provide any false precision at this point.

Yes. We are predominantly U.S.-centric company, maybe that's too early, but it did both in our sales, both in our footprint. We do have a few facilities in Mexico. One is a pretty sizable one, very, very efficient to our operation, but the vast majority of manufacturing happens in order to manage. The other thing that I would say and Bill alluded to a little bit, our preparedness for this, I can tell you, we will be taking a very aggressive approach in the timing of when these things hit to react it. Of course, we're working on productivity as well. If you see currency devalue or the dollar strengthen, that will lead us to start discussions with suppliers on that front, but there is no doubt that, when this happens to the magnitude that was on the table here up until yesterday, that's going to require pricing and we're going to act with speed on that.

Thank you. [Operator Instructions]. Our next question will come from the line of Nigel Coe from Wolfe Research. Your line is open.

Hi, guys. Good morning. Bill, respectful of the answer you gave to Jeff, it is sort of a key topic in the market right now. I mean, there are some out there with like a mid-teens proportion of Mexico COGS. Is that in the right ballpark? Too high, too low? I mean, any sense would be helpful.

Yes. You're in the right ballpark.

Okay. That's helpful. And then just thinking about the Electrical margins in the fourth quarter, 20%, I think that's the first time you've ever had a two handle on that in that segment. I know lighting is a mix benefit year-over-year, but just think about that sequential improvement from 3Q to 4Q, normally margins are down. Just wondering is there anything unusual, in that four-quarter number? And then thinking about the 2025 view, is it two handles for the full year 2025 on the table here?

Yes. Let's start with the sequential comment. And I would say, Nigel, nothing particularly unusual. I would agree with you. It's historically a good benchmark for us to hit. I do think, we had some lower growth, lower margin lighting businesses that were, frankly, obscuring a little bit some of the strength of the balance of our electrical products. Again, I think you saw some great growth in areas like data centers, like renewables, like light industrial areas, and I think you saw some good drop-through in some high-margin areas of those products help. And so, as we think about '25, I think those are the areas that are continue to be strong. And so, I don't see any kind of mix pullback or anything that would work against this Nigel.

Maybe the only thing I could add Bill in the fourth quarter that we saw is the mix between PCX and Boerne, right, so that we saw decline a little bit as we go over to that design change going into '25 and that actually strengthened and that creates a little bit of a favorable mix for the quarter. But I agree with your point is that, that segment as a whole still has opportunity to drive margin expansion over the next few years, and that's what they're focused on.

One moment for next question. Our next question comes from the line of Steve Tusa from JPMorgan. Your line is open.

Good morning, guys. Would you say it's closer to 20% or no? I'm just kidding. On pricing, what was price in the quarter for each of the segments and what are you assuming for each end of this year?

It's a positive in both segments, Steve. Less than a point overall, a little bit more in Electrical than Utility.

And then in those discussions with these utilities, first of all, how big like as a percentage of those VIP customers? Is there any -- how did those pricing discussions play out? And then just lastly, if you guys could give a little bit of color on the seasonal dynamics for earnings. I think last year you were around 22% of the year in EPS. Should we be in and around that number in the first quarter this year just to calibrate us?

Maybe let me start with the seasonality question first, and then we'll go back to the utility customer questions to you. But, yes, we would anticipate that the Q1 of '25 would contribute in the same sort of low 20s ballpark to the EPS of 2025 same as 2024, but also pretty similar seasonality-wise. It is, I think just to note that we would be anticipating growth in the first quarter over prior year to be a little bit less than Gerben's 4% to 5% full-year growth. So just kind of thinking about the first quarter, I do think, it's going to be normal seasonality and the growth rate on a compare basis will be better in the next three quarters.

And maybe to your question around pricing and the discussions around pricing, I mean, this is certainly a topic that's front and center to our customers. Actually, the positive is, they're reaching out and they want to proactively find out what our approach is going to be to it. We've seen actually some of our distributor partners actually already with letters out to the market, kind of providing some insight of kind of what there are possibilities are coming. From that perspective, Steve, I'd say, it's very much something that's expected to happen. What generally our partners and our customers ask for is a little bit of time, so that they can pass it through and in two-step distribution as you can imagine, right, we pass it to our distributor partners, who then have to pass it on to their customers. So, it's generally much more about discussions around the timing and kind of the magnitude than it is whether it's coming up. We feel good about, a, the need is absolutely there, especially at this kind of magnitudes to get price. We've proven to be able to be successful at it. I'd say, the discussions that are -- that we're having with VIPs though those would be, I'd say perhaps more transparent and they're just closer partners to us than to the general market. I'd say, it's constructive to the actions that we would have to take.

And just on price in 4Q, more than a point in the quarter.

Okay. Thanks for the color. Great charts, Dan. Thanks.

One moment for next question. Next question comes from the line of Julian Mitchell from Barclays. Your line is open.

Hi, good morning. Maybe I just wanted to focus on the operating margin guide, that's kind of embedded. I think adjusted margins are up about 95% in the year just finished. For 2025, is it sort of 50 bps or so of increase? And any color around what we should expect in terms of operating margin performance at each of the two segments?

Yes, I think you've got the calculation right. I think, if you did incrementals on the growth, you could develop a model that could get a little more margin expansion than that, and we wanted to be explicit with our investment expectations and some of the non-op stuff to make it clear that, not all of that incremental would land. I think when you think about it between the segments, I think that, as Nigel was getting at, I think on the Electrical side, you've got this question of good margin products being high growth areas and that's positive to the story. But also, they're doing a lot of investing in efficiency areas and taking up some disparate businesses and having them compete collectively and things like unifying the sales force and simplifying back-office steps. And so, there's some sort of good old-fashioned grinded out margin work in Electrical as well as good margin growth and mix benefits. I think on the Utility side, it's much more driven around getting this volume back and delivering the incremental. So, it's -- I think you're right to point out that, that kind of margin expansion, it kind of comes it comes through the volumes coming back.

That's great. And then just following up on the Utility growth outlook. So, you have a lot of good color on Slide 6 and Slide 8 on that. Maybe just to hone in a little bit on that Utility meters and AMI portion. So, we're right in thinking that, that piece slash grid automation is down maybe low double-digits still in the first quarter, the year as a whole down high single and you're sort of stable-ish exiting the year. Is that the right way to think about it? And any way to parse out sort of is it just outright customer spend cuts versus destock type activity?

Maybe I'll break it down, because I think what you said is grid automation, which is the larger base, particularly within grid automation, where we've been talking is the meters and AMI. So, I think what the numbers kind of you quoted are, they're actually correct for that part of the business, but we still expect despite those challenges from those product lines, grid automation as a whole, that has some very attractive areas that are growing double-digits to still slightly grow for the full year in 2025. But what you quoted is correct for the subset of grid automation.

One moment for our next question. Our next question will come from the line of Chris Snyder from Morgan Stanley. Your line is open.

Thank you. I appreciate the question. It sounds like the company expects to be organic growth positive in Q1 and probably solidly so, albeit below the 4% to 5% for the full year. Is the expectation that the four-point Electrical headwind from the PCX design change is totally gone in Q1? And then, is there any way to size the headwinds in Q4 related to some of the year-end inventory availability or variability, I should say, that you referenced in the opening remarks? Thank you.

Yes, Chris, let's start with your PCX question. Yes, we're anticipating that to be bouncing in Q1. And sorry, what was the -- can you just remind me your...

The variability on inventory into year one, it sounds like the destock was maybe a little bit sharper due to some maybe customer specific reasons. So, yes, if you could size that?

Yes. I mean, I don't think we would size it for you. I'd just say, I'm just hoping that, this may be our last earnings call where we spent a lot of time on the word destock or customer inventory management, because I do think that, as we see the order book in the fourth quarter and through January, I think we're seeing that issue fading.

Yes. I think maybe to reiterate, as I stated for it's a gradual right now incline. It's not everybody is done on the same date, and then it inflects, but it's definitely a positive move into '25.

Thank you. And then maybe just to follow-up on the point about inventory, I mean, orders are getting better in the back half of Q4 and continuing that into January with book-to-bill going back above one. This might be a hard one, but kind of when you kind of see the orders come through, is there any way or visibility to determine kind of what's true demand, coming from the market versus potential tariff pre-buy or customers trying to get ahead of some of the tariff inflation that may come? Thank you.

Yes, I'd say that, that's hard. I would say on tariffs, the one thing that we do is, when those come, we really watch the order patterns, because what we don't want to have happened is, for our customers to get ahead of us, because that, of course, would have implications to capturing the tariffs. So, we look at typical order patterns by customer and if they start exceeding and we start to unless there's a real project that's happening, we watch over that. Can you have some of that? Of course, it could, but I don't believe that, that we're going to do the things we need to do to prevent that from being a big bubble ahead of tariffs.

One moment for our next question. Our next question comes from the line of Tommy Moll from Stephens. Your line is open.

Good morning and thank you for taking my questions.

Good morning, Tommy.

I wanted to start on the topic of inventory management and Electric distribution. A lot has been discussed already. But one item we haven't explored is, with these VIP customers that you referenced, are you able to tell, let's say, in 2024, what their, I'll call it consumption rate or install rate of these SKUs was? If we're really trying to get to what the market demand looks like last year, do you feel like that was still a positive trend?

Yes. I'd say, one of the things that we have discussed and maybe not on an SKU basis of what they're installing, but we look at their CapEx and OpEx budgets, those are generally the conversations we have with them, on what they're installing. Oftentimes, what the discussions there are, they give us kind of the plans of projects that they're going to be implementing in the year ahead and are we prepared with our capacity to support that. The other thing is, in the not with the IOUs within the public power market, we actually saw growth in 2024. So that gives us confidence that the markets are growing. While not at an SKU level, between the CapEx budgets, the more general discussions and what we're seeing in parts of the markets, we feel that the install rate is growing.

Thank you, Gerben. That's helpful. I also wanted to touch on M&A today. Just going back to your most recent Investor Day, deploying more dollars in the form of M&A was one of the key themes there. And so, it's a two-part question. What can you tell us in general about the pipeline for this year? And then, also maybe just to hit on the recent rumors of a rather large transformer deal on the market, any comment you can make on appetite or lack thereof for transformers would be appreciated as well?

Thanks. Yes, Tommy. As coincidence would have it, we closed on a deal yesterday. It is a add-on to the Electrical segment, small in size, sort of in the 70-ish million purchase price area. It helps with both powering and controlling around wireless networks. It's just a bolt-on for an acquisition we did a few years ago, a company called AccelTex. And so, a good example of a kind of maybe typical Hubble size, not moving the needle of balance sheet or earnings per share per say, but the kind of deal that we think we can add a lot of value to and something that we're trying to invest in high growth situation with high margins and that's something that we just landed, yesterday. You're asking about the pipeline. I would say, again, the balance sheet is really well poised to support investing. The team is really busy. We're looking at a variety of sizes, variety of sources from whether they be private equity sellers or corporate sellers or families. So, it's still continued to be robust dialogue, across opportunities in both segments, Electrical and Utility, and we'd like to continue, as you pointed out, to be an active investor here. And I think I would decline to comment on any specific target that you mentioned.

Fair enough. Thank you. And I'll turn it back.

Thank you. One moment for our next question. Our next question comes from the line of Christopher Glynn from Oppenheimer. Your line is open.

Thank you. Good morning, guys. You've talked a bit about the Hubbell unification process for ATS and multi-year of efficiencies coming ahead. We could see it very visibly in the renewables and data center growth trends. Curious, if you could comment on where you're seeing other benefits play through, or maybe the balances coming through, but I'm thinking in terms of pricing power realization, service levels, what other instances of yield are you seeing on the unification currently?

Yes. I think you're mentioning some of it. It's what we call competing collectively. So not just in the high growth verticals, but overall in our portfolio, where you have strong positions with some of our really leading brands and can those help pull through other brands of Hubbell. We've seen that happen. We'll continue to drive simplification in our business systems in the back office. It's not one thing. I mean, our restructuring will continue to be elevated in that area over the next couple of years with site consolidations. I see this as a maybe we've harbored some low-hanging fruit early on, but, I'd say over the next few years, we still have benefits both on growth from these efforts and on efficiency in on the cost side.

Okay. And then one on pricing, just I think you've had some discovery the past few years on your pricing power as a business with your market positions. And would you say, you're at kind of a new normal of sustainable pricing power posture that's different from where you were a few years ago, just based on understanding of the business that has developed over the past few years?

Yes, I'd say so. I mean, certainly the magnitude of the pricing that we've been active over the last couple of years, we haven't been anticipating that's going forward. Now of course, when tariffs hit and to the extent that magnitude, we're going to have to. But yes, I would say, certainly the success that we've had in that over the last few years, not just in the magnitude of it, but in the speed by which we've acted on those, we've learned a lot. I'd say, yes, we've gone to become a -- and we've organized around it better. So, I think we're more capable in that area today than we would have been in a number of years ago.

Thank you. One moment for our next question. Our next question comes from the line of Joseph O'Dea from Wells Fargo. Your line is open.

Hi, good morning. Can you talk about the again on the kind of electrical distribution, but thinking through the mid-single-digits growth expectation in 2025? And if you could just frame, how much it was down in 2024. It would seem like you've got a relatively easy comp in that mid-single-digits growth is something that, we think about as potentially being more like through cycle growth. And so, just trying to think through the upside potential to that, but also some of the dynamics in the market, and if you're still seeing kind of budget prioritization toward T and more sophisticated D that could be a pressure point?

That's an interesting question, because I do agree, there's something sort of in the long-term mid-single-digits and the compare is easier. Is there a path to do better? Certainly, if the market and orders are there, we think we'll, get our fair share. So, it's an interesting question.

Okay. And then also on telecom, I thought that, the comps are going to be easier in the fourth quarter, so still down 20%, maybe just kind of missed that. But did that come in a little softer-than-expected? And similar kind of question like, why wouldn't the growth be better than low single, maybe just some historical perspective on how strong 2023 was perhaps, just understand kind of telecom dynamic?

Yes. 2023 was really strong. That part is there. I do think your point; the comps were getting easier in 4Q and so we've kind of had 40% and 30% and 20% kind of percent declines. And so, we're layering into a much easier situation. So, as you pointed out, we're starting to look at orders, look at getting the flattening of that and then enabling the growth which is what we're seeing. So, I do agree with you, we're coming off very strong growth in 2023, which makes the compares hard -- the compares are easier. But the facts are we're going to be running a smaller Enclosures business than we were before and we should be able off of this lower base as you point out, we should be able to grow it. And there's lots of active RFQs and RFPs and et cetera out there. So, we're trying to gauge all that. Yes.

And I would say for debt, we want to remain very disciplined in how we grow that and how fast we grow that because that's an area that in this decline we've seen pricing decline and that's maybe an outlier from the rest of our business. As that grow, we want to make sure that, we capture attractive business and not just capture sales growth. That drives a little bit on why we're more muted on what the growth rate could be as we want attractive growth.

Thank you. One moment for our next question. Next question comes from the line of Brett Linzey from Mizuho. Your line is open.

Hi, good morning all. Wanted to come back to the large meter in the AMI project roll off that you noted in the release. Can you frame the size of the exit backlog in terms of months or weeks? And then, was the softness more a comparison issue or have you actually seen the inbound orders in those larger meters AMI slow commensurately with the decline in sales?

Yes. I mean, I think if you thought about, the comp. I think you basically need to start backfilling the orders. And so, you can see what's out there, what RFPs are coming. And so, we can just see that, there's going to be a first quarter that's kind of feels and looks a lot like the fourth quarter. And then, with the visibility that we think we have, Brett, it feels like the balance of the year can start to improve from there.

Okay, great. Got it. And then just a follow-up on the growth and the productivity initiatives within the guide and the bridge. Certainly, a bigger figure relative to last year, able to parse out that between growth and productivity? And then, how do the paybacks look on those investments? And is there any hedge in that? Thanks.

Yes. The paybacks on the projects are really good. The growth have slightly better paybacks than the productivities, but even the productivities can be kind of in the three years and there's a mix and balance. And we will continue to make specific go no go decisions on specific projects as the year unfolds. So, I wouldn't want to give you a mix right now because it could change once we green light. In other words, we have more projects on the board than we'll do. But we're very happy with the returns. It's a good use of capital for us for sure.

Thank you. One moment for next question. And our final question comes from the line Chad Dillard from Bernstein. Your line is open.

Hi. Good morning guys. Thanks for taking my question.

Good morning.

So, my question is on the telecoms business. Just trying to get a sense for how much margin pressure you've seen since that business was at its height. And then, I guess what are your thoughts on potentially rightsizing the business versus keeping scale to capture incremental growth?

Yes. I would say, at its height the margins were at the high end of our portfolio. Now they're still attractive and we have been rightsizing throughout 2024. And so, we feel where we sit at this split second is rightsized and we're looking forward to as that volume comes back being able to grow off of our current base, which is a substantially lower cost structure than we started the year with.

Yes. It's actually -- and it's constructive to what I said that our goal is not to grow it right back to what it was and we've been very deliberate with our businesses to say scale the business back down to the current volume, because otherwise what happens, you get destroyed in your decrementals from it if you have all that fixed costs. So, what you're alluding to is exactly what we've done with that business to now be able to grow it profitable and be selective in what we know without the pressure of sitting on a ton of idle capacity.

Got it. And I want to go back to a prior question on price. I think you mentioned that the pricing for the entire portfolio was less than 1% overall. Just want to confirm, was that a 4Q comment or was that more about 2025? And then, secondly, I was hoping you could comment on the breadth of positive price, that you're seeing across your portfolio. I'm just trying to understand just like how concentrated pricing tailwind is across the portfolio.

Yes, Chad. 4Q price was a little bit more than a point overall and a little bit more in electrical than utility. And I think broadly we're seeing favorable price across the portfolio with the exception of the telecom markets, which we've been talking about. So, it's really just concentrated in that one area.

Thank you. And that concludes our question and answer session. I would now like to turn the call back over to Dan for any closing remarks.

Great. Thanks, everybody. Thanks for joining us, and I'll be around all day for follow-ups. Thank you.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.