Hubbell(HUBB) - 2024 Q3 - Quarterly Results

Q3 2024 Performance Highlights Hubbell reported strong Q3 2024 results with increased adjusted EPS and operating margins, driven by strategic market strengths Q3 2024 Key Financial Metrics | Metric | Q3 2024 Value | Year-over-Year Change | | :--- | :--- | :--- | | Diluted EPS | $4.05 | +9% | | Adjusted Diluted EPS | $4.49 | +14% | | Net Sales (in millions) | $1,442.6 | +5% | | Organic Net Sales | - | -1% | | Net M&A Impact on Sales | - | +6% | | Operating Margin | 21.1% | +100 bps | | Adjusted Operating Margin | 23.2% | +180 bps | - The company raised its full-year 2024 adjusted diluted EPS outlook to a range of $16.35-$16.55, while setting the GAAP diluted EPS outlook at $14.20-$14.40[2] - CEO Gerben Bakker highlighted strong operating performance, with strength in Utility Solutions' transmission and grid control markets and Electrical Solutions' datacenter and renewables verticals, partially offset by weakness in telcom markets and inventory normalization in utility distribution[3][4] Segment Performance Review Hubbell's segments showed mixed performance, with Utility Solutions growing through acquisitions and Electrical Solutions achieving organic growth despite divestitures Utility Solutions Segment The Utility Solutions segment reported an 11% increase in net sales, primarily driven by a 15% contribution from acquisitions which more than offset a 4% organic sales decline, achieving year-over-year expansion in adjusted operating margin to 25.3% due to effective price/cost management and acquisition impacts Utility Solutions Segment Performance | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $933 | $838 | +11% | | Organic Net Sales | - | - | -4% | | Acquisition Impact | - | - | +15% | | Operating Income | $211 | $187 | +12.7% | | Adjusted Operating Income | $236 | $201 | +17.6% | | Adjusted Operating Margin | 25.3% | 24.0% | +130 bps | - Performance was led by strength in Grid Infrastructure (net sales +15%) and Grid Automation (net sales +4%), reflecting utility investments in load growth and renewable energy integration[4][8] Electrical Solutions Segment The Electrical Solutions segment saw a 5% decrease in net sales, as a divestiture reduced sales by 8%, yet delivered strong underlying performance with 3% organic sales growth driven by datacenter and renewables verticals, with significant expansion in both GAAP and adjusted operating margins due to volume growth, price/cost management, and portfolio transformation Electrical Solutions Segment Performance | Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | Change | | :--- | :--- | :--- | :--- | | Net Sales | $510 | $538 | -5% | | Organic Net Sales | - | - | +3% | | Divestiture Impact | - | - | -8% | | Operating Income | $93 | $90 | +3.7% | | Adjusted Operating Income | $99 | $94 | +5.3% | | Adjusted Operating Margin | 19.4% | 17.5% | +190 bps | - The strong operating performance was primarily driven by volume growth, effective price/cost/productivity management, and favorable mix from portfolio transformation efforts[4][9] Cash Flow and EPS Adjustments The company generated strong cash flow in the third quarter, with both operating cash flow and free cash flow increasing year-over-year, and Q3 2024 adjusted diluted EPS of $4.49 excludes $0.44 per share in charges, primarily from the amortization of acquisition-related intangible assets Cash Flow Summary | Cash Flow Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $227 | $194 | | Free Cash Flow | $189 | $159 | - Adjusted diluted EPS for Q3 2024 excludes $0.40 for amortization of acquisition-related intangible assets and $0.04 for transaction, integration, and separation costs[10] Full Year 2024 Outlook Hubbell updated its full-year 2024 financial outlook, projecting increased adjusted diluted EPS and continued sales growth Full Year 2024 Financial Outlook | 2024 Full Year Outlook | Range / Value | | :--- | :--- | | Diluted EPS | $14.20 - $14.40 | | Adjusted Diluted EPS (Raised) | $16.35 - $16.55 | | Total Sales Growth | ~6% | | Organic Net Sales Growth | ~1% | | Net M&A Contribution to Sales | ~5% | | Free Cash Flow (in millions) | ~$800 | - The Adjusted EPS outlook excludes approximately $1.75 per share for amortization of acquisition-related intangible assets, a $0.22 loss on the disposition of the residential lighting business, and $0.17 of transaction-related costs[13] - The outlook is based on an anticipated adjusted tax rate of 22.0% to 22.5% and includes about $0.35 per share of restructuring and related investment costs[15] Financial Statements and Reconciliations This section provides detailed consolidated financial statements and reconciliations of non-GAAP measures to their GAAP equivalents Condensed Consolidated Financial Statements The consolidated financial statements detail the company's financial position and performance, showing net sales growth to $4.3 billion and $559 million in cash from operating activities for the nine months ended September 30, 2024, with a reduction in total debt compared to year-end 2023 Statement of Income The statement of income presents the company's revenues, costs, and net income for the reported periods Condensed Consolidated Statement of Income | (in millions) | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $1,442.6 | $1,375.8 | $4,294.2 | $4,027.1 | | Gross Profit | $497.1 | $487.4 | $1,453.5 | $1,431.9 | | Operating Income | $303.8 | $276.3 | $833.5 | $812.9 | | Net Income Attributable to Hubbell | $219.4 | $200.1 | $580.8 | $588.8 | Balance Sheet The balance sheet provides a snapshot of the company's assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet | (in millions) | Sep 30, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $435.7 | $336.1 | | Total Current Assets | $2,319.1 | $2,167.2 | | Goodwill | $2,523.5 | $2,533.4 | | Total Assets | $6,935.0 | $6,914.0 | | Total Debt (Short & Long-term) | $1,931.5 | $2,140.6 | | Total Liabilities | $3,706.2 | $4,024.7 | | Total Equity | $3,228.8 | $2,889.3 | Statement of Cash Flows The statement of cash flows details the sources and uses of cash from operating, investing, and financing activities Condensed Consolidated Statement of Cash Flows | (in millions) | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $558.8 | $535.3 | | Net cash provided by (used in) investing activities | $20.0 | $(161.4) | | Net cash used by financing activities | $(476.4) | $(241.7) | Non-GAAP Reconciliations This section provides detailed reconciliations from GAAP results to the non-GAAP measures used by management, including Adjusted EPS, Organic Net Sales, and free cash flow Earnings Per Share (EPS) Reconciliation This reconciliation details adjustments made to GAAP diluted EPS to arrive at the non-GAAP adjusted diluted EPS Earnings Per Share Reconciliation | (in millions, except per share) | Q3 2024 | Q3 2023 | Change | | :--- | :--- | :--- | :--- | | Diluted EPS (GAAP) | $4.05 | $3.70 | +9% | | Amortization of acq. intangibles (in millions) | $28.1 | $18.4 | - | | Transaction, integration & separation costs (in millions) | $2.9 | - | - | | Adjusted Diluted EPS (Non-GAAP) | $4.49 | $3.95 | +14% | Organic Net Sales Growth Reconciliation This reconciliation illustrates the impact of acquisitions, divestitures, and foreign currency on net sales growth Organic Net Sales Growth Reconciliation | Q3 2024 vs Q3 2023 | Hubbell Inc. | Utility Solutions | Electrical Solutions | | :--- | :--- | :--- | :--- | | Net Sales Growth (GAAP) | +4.9% | +11.3% | -5.3% | | Impact of Acquisitions | +9.4% | +15.3% | 0.0% | | Impact of Divestitures | -3.3% | 0.0% | -8.5% | | Foreign Currency Exchange | -0.2% | -0.2% | -0.2% | | Organic Net Sales Growth (Non-GAAP) | -1.0% | -3.8% | +3.4% | Debt and Liquidity Metrics This section presents key metrics related to the company's debt levels, leverage, and cash flow generation - The company improved its leverage profile, with the Net Debt to Total Capital ratio decreasing to 27% at the end of Q3 2024, down from 34% at the end of 2023[61] Free Cash Flow Calculation | (in millions) | Nine Months Ended Sep 30, 2024 | | :--- | :--- | | Net cash provided by operating activities | $558.8 | | Less: Capital expenditures | $(112.4) | | Free cash flow (non-GAAP) | $446.4 | Other Information This section provides important context regarding non-GAAP definitions, forward-looking statements, and investor communication details Non-GAAP Definitions This section defines the non-GAAP financial measures used in the report, such as 'adjusted' operating metrics, 'organic net sales', and 'free cash flow', explaining their purpose in understanding underlying business performance - Key exclusions from GAAP measures to arrive at 'adjusted' non-GAAP metrics include amortization of intangible assets from business acquisitions, transaction, integration, and separation costs related to M&A, and gains or losses from the disposition of a business, such as the residential lighting business[25][26] - Organic net sales is a non-GAAP measure that excludes the impact of acquisitions and divestitures for the first twelve months, as well as the effects of foreign currency fluctuations, to show underlying operational trends[33] Forward-Looking Statements This section contains standard safe harbor language, cautioning that statements about future expectations are subject to numerous risks and uncertainties that could cause actual results to differ materially - Identified risks include geopolitical conditions, economic slowdowns, inflation, interest rates, ability to manage costs, trade tariffs, and the successful integration of acquired businesses like EI Electronics and Systems Control[19][21] Conference Call Information Hubbell announced it will host an earnings conference call on October 29, 2024, at 10:00 a.m. ET to discuss the third-quarter results, with a live audio webcast and replay available - The conference call to discuss Q3 2024 results is scheduled for October 29, 2024, at 10:00 a.m. ET, with access via the company's website[17]