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William Sperry

Thanks very much Gerben and good morning, everybody. Appreciate you taking the time to be with us this morning and I need to beg your patience and been fighting a cold this week and my voice is shot. So, I'm sorry that.
I'm going to start my comments on Page 4 of the slides that I hope you found and reiterate with Gerben said, overall, very strong operating performance for Hubbell in the third quarter, 5% sales growth, 14% OP growth, 180 basis points of OP margin expansion, 14% growth in earnings per share and 19% growth in free cash flow. In addition to looking at these variances to prior year, we sometimes look back at sequential and compare to the second quarter we had growth in the OP dollars OP margins and earnings per share all up sequentially.
So, we think signs healthy financial performance and so returning to sales of up 5% that's comprised of organic being down slightly and net M&A, a contributing about six points of net M&A refers to the fact that we sold a lower growth, lower margin business of residential lighting and added some higher margin, higher growth businesses in the utility segment. Most notably systems control, which we'll talk about the strong contributions were getting for that acquisition when we get to the utility segment. Inside of the organic story, we have strong in customer demand across the portfolio are the exception being a particularly weak telecom industry and this curve and had mentioned distribution utility are still working through an overstock situation between the channel and our end customers.
Operationally, you see mid teams' growth of 14% to $4.49 of adjusted EPS. And the operating profit side equal growth for the 180 basis points of margin expansion and that also compares favorably to the second quarter where we had 40 basis points of sequential margin expansion from Q2 to Q2 three and adjusted operating profit. There's improvement across both segments, and we'll talk about those in the next two pages. But structural improvements in the Electrical segment and on the utility side, strong performance as well, i think you'll see a good price cost productivity execution, and you see the impact of successful portfolio transformation by selling some lower growth, lower margin business and adding some higher growth, higher-margin business.
The EPS growth in the mid teams in line with operating profit growth below the line of OPE., there was a little bit more in interest expense due to the acquisition them a little bit lower tax rate that offset each other and the cash flow in line to hits our full year targets. So, on page 5, I will start to disaggregate the company's performance into the two segments, and it will start as we usually do with the utility segment. So, you see double digit sales growth in the third quarter of 11% to 933 million, that's comprised of 15% on the acquisition and minus 4% organic. If we're to unpack that into the different divisions, you'll see growth in both with 15% growth in critical infrastructure and the mid-single digit growth in grid automation, just to remind everybody we have in those two divisions, we have the old transmission and distribution yield of Will Power System in the grid infrastructure as well as specialty, which includes both enclosures, gas components plus systems control that in the grid automation, we've got a clear eye, which has as both meters and comms plus switching infusing as well as some connected to them automation products.
Sequentially, we saw sales growth from Q2 to Q3, which we think is a good sign for us. Healthy seasonality. If we disaggregated a little bit into some of the markets, Telecom continues to be weak, down 30% in the third quarter. It represents modest improvement over the first half as we're starting to flatten sequentially for the remains pretty bumpy month to month, and we're expecting continued softness in to the fourth quarter. Fourth quarter, though, will have easier compares and important, maybe to note that flat from here would imply growth in 2025.
On the T&D side, the real strength on the transmission piece, double digit growth, benefiting from mega trends of electrification and renewables, both requiring new miles and new grid interconnection switches, spending that the benefits of all on the distribution side continuing to work through a channel and customer overstocking. But there continues to be we think healthy demand as more equipment is being installs to harden the grid and for maintenance and repair. So we believe that's obviously a temporary condition. And we get to the end of this morning, Gerben will give you some outlook ideas into 2025. Systems control is worth pausing on. They're off to a really great start for us. This is our third quarter reporting with them. In addition to the very short stub period in December, they are a growing versus prior year at a very healthy levels and delivering very attractive margins, the turnkey solution that they provide is proving to be very attractive for customers from Gerben. I have a chance to go out there visiting team a couple of weeks ago they're all very energized, excited to grow very culturally, consistent with Hubbell and a great to watch our sales force interact with their sales force. I think we can see some long-range growth there as well as our customer base can become systems control, customer base.
The selling cycles a little bit longer. So, the backlog actually strong visibility into 2025 already stuff. You'll hit here SP., quite confident about systems control, the grid automation side, the growth of mid-single digits, good tailwinds in grid protection and control solutions as our customers continue to invest in grid resiliency and in particular, switching infusing a doing quite well in substation applications. So some of the right side of the page. Turning to margins, you see very strong margin performance, 18% in dollars to 236 million. You see 130 basis points of margin expansion over 25%, which is a nice benchmark, we think and that represents over a point of sequential expansion from the second quarter. So, you have acquisitions contributing new dollars. You've got really strong price cost management, and you see some returns on prior year investments in productivity at all of that is absorbing some of the decremental from the contraction in telecom. So very strong performance on the utility segment tends.
Let me elaborate a little bit on burdens comments on the storms. So, to the utility segment, the storms had had a neutral impact in the quarter. We have a couple of facilities in Aiken, South Carolina and Largo, Florida that were impacted and to be closed for the last several days and we believe we lost about $5 billion of shipments from those closures, but that was offset by about 5 billion of shipments on storm orders that we got that we had an inventory and represented about a quarter of the 20 million in orders that we received. So net effect is in the third quarter, neutral in the fourth quarter, we'll get those shipments outpaced and including $15 million more in storm orders, which are already party out there.
So, we turn to page 6 and the electrical segment of another nice quarter for the Electrical segment, as they've done in 2024, you see 3% organic growth was 190 basis points of margin expansion and 5% operating profit growth from the 3% organic growth nets out the effect of the disposition of residential lighting. If you also add back the effect of storms on the Electrical segment there, we have a facility in art in North Carolina, near Ashfield, the western part of North Carolina and we're estimating they lost about 5 to 10 million in sales from having to close this last several days of the quarter. Some had those shipments gone out normally you would have seen about 5% sales growth. So, we think electrical, he's got good trends in doing nicely on the sale side of that growth is being driven by data centers and renewables, where we've enacted our vertical sales strategy, which proving to be quite effective. We've unified marketing materials, integrated sales force becoming much more effective, cross-selling the balance of system products and as well becoming more innovative with our new product development and and doing really well with that strategy in those couple of verticals, light industrial continues to be very solid as the critical electrical content is installed in a wide range of products across a wide range of industries. Lesser contributions from heavy industrial and commercial. So decent trends across the portfolio. But the clear strengths is its data centers, renewables and light industrial on the right side of page, operating profit continues the strong performance we've been seeing in 2024, you see a 5% increase in operating profit. That would be double digits if you netted out receipt from last year. So quite healthy growth, 190 basis points margin expansion seen good drop through on that incremental growth effective price cost management. The effect of the portfolio management is seen very clearly, and I think what percent is best for the future is watching. Mark Mike and his team continue to simplify and streamline the business continue to compete, collectively, reorganize the sales force by geography versus product, eliminate functional redundancies and ultimately made the segment more efficient and more effective, so we're excited to see the path ahead market has team have segment on it. I think they're set up for good multiyear performance.
From Page 7. I'm going to give the remainder of 24 outlook, and that is going to ask Gerben to comment on next year. So, we're raising our full-year guidance to 1635 to 1655 that's a mid-single digit growth and just to remind everybody, that's off of a base that over the last two years, 22 and 23 is up about 75% and so to us having what is in effect, a 20% caterers into 2020 levels is what we were trying to convey at Investor Day by describing kind of the new do where we're going to be growing off of this space and we're going to be growing. We take both sales and OP margin, and that's quite important. We belief of the year specifically has evolved a little differently than we expected back in January, namely, we've generated lower sales volume has detailed telecom market weakness has persisted longer than we believe and that utility customers on the distribution side holding more inventory than we believed, so managing through those two headwinds. But we're quite pleased that the whole business model is really performing very nicely and despite those volume challenge, this is delivering at the higher above high end of the original EPS range.
So, we've got multiple levers to pull, obviously this year relying on the acquisition level as well as the price cost productivity lever and those are proving to be very effective and maybe just maybe just a comment on the fourth quarter itself, We're expecting revenues to be a little bit stronger seasonally as that storm shifted some of the sales out of 3Q into 4Q and created some new sales for the utility segment, But we continue we expect the operating performance to continue to incur increased margins in them. So that gets us to the high end or maybe modestly above the high end as a range for the balance of the year. To ask Gerben to give you thoughts as we're thinking about next year at this point.

Gerben Bakker

Thanks, Will. I'm confident in our ability to deliver on our raised full year 2024 outlook and believe that Hubbell is well positioned for 2025 and beyond. With unique leading positions across the energy infrastructure and from the meter behind the meter and at the edge, we believe that Hubbell will achieve attractive GDP-plus growth through the cycle.
A secular grid modernization and electrification mega trends accelerate utility solutions. We anticipate that robust and the budgets will drive attractive growth across most of our end markets as utility customers continue to invest in making the grid infrastructure, more reliable, resilient and renewable. Project pipelines and interconnection backlogs drive High visibility to continued strength in transmission and substation market, and we are confident that our sales and distribution markets will return to growth levels corresponding with healthy end customer demand.
While our exposure and telecom markets will be reduced headed into next year, easing comparisons and stabilizing markets provide constructive setups in grid automation. We anticipate that meter project roll-offs will be more than offset by strength in protection and control solutions. Electrical Solutions, secular growth markets of data centers, renewables and T&E make up more than 25% of our portfolio and are positioned for continued strength. While macroeconomic conditions drive some uncertainty and pockets of our business, we are well positioned to continue executing on our growth and productivity playbook to achieve differentiated performance. Pulpo has demonstrated over the last several years to collect definitely showed our ability to execute across a wide range of environments and market conditions, driving over 20% compounded growth in adjusted operating profit and earnings per share. We expect to continue building off this strong base of performance in 2025 and beyond, and we look forward to sharing more details with you when we provide our initial outlook next year. With that, let me turn the call over to Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Jeffrey Sprague with Vertical Research.

Jeffrey Sprague

Hey, thanks. Good morning, everyone. Hey, just in terms of getting level on the actual results on Slide 5 its depending on us the organics. I've got some systems controls looks like it to $120 million of revenues than ending the quarter. We could maybe let us know if that's right. And I guess that implies for the grid infrastructure is down on the 6% organic or so, but maybe you could share those numbers?

Gerben Bakker

Yes, you've got you've got systems control that. Yes, that's right, Jeff

Jeffrey Sprague

And how about a grid automation on a little bit M&A in there, too? Or is that 4% a good organic number.

Gerben Bakker

that's organic, yeah.

Jeffrey Sprague

And then on the on the storm impact itself, is there any confidence that this flushes out remaining channel inventory, but I suppose if you made inventory in North Carolina and it's sitting in Arizona, it's not move it across the country. So maybe that maybe you don't really know, but we've been trying to solve this little all year. Where does where do you think we're at on the channel and kind of getting the normalization?

Gerben Bakker

So, Jeff, maybe I'll take that one on the short answer to is yes, this is helping to flush out the inventory. As you well pointed out and with very specific customers in very specific regions. And that would even say within those customers, they prepare for storm of branch. When they see that coming, they're going to play storm orders looking at their inventory not necessarily what existed across the whole enterprise network perhaps. But yes, this is clearly going to help with flush that inventory through it.

Jeffrey Sprague

And maybe just the kind of separate the follow-on Will mentioned strong price cause. Could you give us a sense of how price belonged in the quarter across the two segments?

William Sperry

Yes. So, price was positive in both segments. Showed about a point to the enterprise. And I think I didn't want to mention it in my remarks just because I think it's going to; we're pivoting Jeff to a period where it's just going to be a smaller part of the price cost equation versus 22 and 23. It was such a low large thing, but about a point for the enterprise and positive on both.

Operator

Right. Thank you. (Operator Instructions) Steve Tusa with JPMorgan.

Steve Tusa

Hey, good morning. Can hear me okay?

Gerben Bakker

Yes, great.

Steve Tusa

Great. Thanks. I just following up on that on that last question from Jeff, on price thing on how should we think about that next year? I in particular with utility, I mean, is like I'm sure you're talking your customers on how to how does that how are those kinds of negotiations playing out here for you guys, especially in utility for next year?

Gerben Bakker

That maybe got good delivered. So let me provide just some broader comments on the discussions, um, but yes, I'd say our price traction this year in both segments have been good, but the outlier to that is in the telecom. We've given back some price to get specific some targeted projects but if you look at the CMD part of the business and the rest of the business, the price sticks a price, actually additional pricing that we've taken has held, we're coming into what we call blanket season again with utilities are right now and we think about the price will still be a lever for us going forward there's still inflation, in the market it will be much more modest levels.
But we continue to focus on what our true value proposition is, right, which is service for 3M and the storm. The recent storms have again shown our customers why they do business with us. So, we still believe that while much at a much more modest level on that in our customers will value of first and foremost, the quality of service and of course, then at a competitive price. So, as we stated before, our whole construct is not to go backwards. And I think we've proven that in 24, and that's our views and setup for 25 as well.

Steve Tusa

So, we look at kind of at the margin. You guys put up this year pretty strong result. It. Was there anything in the comps as we look to next year on that played out as a bit of a headwind? So, should we assume that the 24 margins are kind of a base to at least, you know, grow off of for next year for utility margins? Could you just keep beating those numbers? Obviously?

William Sperry

Yes. Look, I think, Steve, the way we wanted to set up the future with our Investor Day outlook was kind of shifting the idea of our OP walk to be going from a price cost kind of really big step up in 22 and 23. It's still a little bit in 24 and so in, as you think about us going forward, thinking a little bit more about that volume driving incremental, that's why would you sort of saw in that 25% to 30% dropped through that we're kind of expecting you know, there's a little bit of investment activity still, but I would think of our ability to drive margins next year to be largely driven on incremental from pump.

Gerben Bakker

Yes, maybe the other thing to keep in mind, Steve, we were at the second half of last year, we really stepped up the investment levels to prepare for where we have visible areas of demand and that's a little bit what were, um, um, field. What's driving our mortgage business now is well why it is in the absence of some of those investments.

Steve Tusa

Right. And then, just one last quick one on utility is, should we think next year's like an easy comp because you still have destocking this year, so it should be above kind of your long-term average and on some of these more stock and flow?

William Sperry

I think. Yes. I mean, I think that that we're anticipating transmission to remain really strong and you're right, they should be able to bounce back. And so, I would agree with your statement.

Steve Tusa

Okay. Thanks a lot.

Operator

Thank you. Nigel Coe with Wolfe Research.

Nigel Coe

Thanks. Good morning. Facility, you do something disturbing favorably. So, EBIT going onto Killam's Arthur's question, but the way the web I'm trying to decompose here, I mean, I think the math is right down 6% for the call to the components. Some like telecom at the bulk of that. So, I'm get into sort of ex telecom flattish, maybe down 1% coal, is that correct? And then just kind of go from the site is correct. A couple of things. Number one, what do you estimate to be you're sort of end customer utility customer spending across your across your business? Is that an institution? And maybe in sentiments that then is this the weakness in residential new zones have an impact from that business? So, this is this really just a destocking impact.

Gerben Bakker

Maybe let me take the first on the new, take the revenue on a bit. So, your math is correct. As you issue a pointed those out with both what was the closure or so of Telecom contributes and then with the rest of the T&E, and I'd say end demand is mid-single digit. What we've been talking about. So, I think you have at all strike.

William Sperry

Yes, no and I think of the resi side, you continue to who are we at or if you think about read these impacts on us at a rate regulated business, we got rid of or the electrical side, we still have some exposure through the big boxes that goes into rosy applications. But that's I think your question was how as it affects utility, we still think that it out the maintenance and repair. It's really the way to drive that, that that that is still strong in the easy. If the effect of what's happening in new developments, we would be a smaller effect pricing.

Nigel Coe

Okay. Then a quick one on the margins. Ebit margins were very impressive, especially given the mix impact, et cetera. SG&A came in a lot lighter than what we had. I think SG&A was down 4% now. Obviously, we've got some portfolio changes here on here, but is that a is that a sustainable level of SG&A? Is there were some one-timers in there? And did that land primarily within utility components in terms of the SG&A impact.

William Sperry

I would say the SG&A was spread. I would say the level of spending is sustainable as curve and I was saying there was some elevated investments happening at the end of last year. So between last year's SG&A in this year's, I think this year's is kind of the durable maintainable level

Gerben Bakker

and maybe as a Nigel as a percentage wise, certainly with the addition of systems control that both in sales growth, that reduces SG&A as a percentage. And then I'd say the other area in some of the business, particularly in the telecom and enclosure business, we think are some actions to address cost appropriately for more color there. The decline in volume.

Nigel Coe

Okay. That's very helpful. Thanks.

Operator

Thank you. (Operator Instructions) Julian Mitchell with Barclays.

Julian Michelle

Hi, good morning. And just wanted to circle back on the HUS. sales outlook again. So perhaps some maybe help us understand the telecom piece. We know how much are you thinking that's going to be down this year? I think before you said maybe down in the mid 20 here. I'm wondering, is that still how and when we're thinking about 2025, yes, we'll slope of sort of telecom bounce. Should we see. And on the transmission side of utility, is that kind of steady growth next year beyond any kind of acceleration because of what's going on in backlogs? Maybe help us on a good handle naturally as well.

William Sperry

Yes. I'd say on the YouTube and the Telcom and kitchen vehicle and I'm sorry, on the telecom side, it's more like 30% this year. It was, of course, stronger deeper in the first half. We're at this, but our goal is not to tried to recapture that volume, but to grow that profitably go going forward. And the reason even now as we see some projects come back and we're quoting, you know, some pretty sizable projects for next year. We're just being very, very thoughtful to not come capture that volume at any price. So on. So, I wouldn't expect that to bounce back at those kinds of verticals that have declined, but more steady growth from here going forward. And I think your second half was around transmission and transmissions been cranking, you know, at double digits. And we're anticipating that to continue. And I wouldn't think your question was whether there were some accelerations and I would say we're expecting it to continue to crank in double digits.

Julian Michelle

That's helpful. Thank you. And then I'm just kind of following up on that on the inventory aspect of the customers realize the visibility is perhaps not as high as one would like is your impression that the inventory issue, we weren't still talking about it early next year? Do you have some sense of where those inventory levels by end of the major customers?

Gerben Bakker

Yes. Let me give some comments and insights onto that. As we think about the destock, what we see is that is driven mainly by our large IOU customers. In many cases, these are VIP. relationship, long term strategic alliances. And this is an area where we actually prioritize them when we started to see the supply chain normalize, Bart, helping to create to it. It's in other areas like the smaller munis co-ops in a public power where this overstock had been less for now. Now we're actually seeing very nice growth in line with what is demand. But we see as demand. You know, certainly the as we've said, the storms have helped this a little bit. We continue to have conversations with our customers. We continue to analyze the sell through data with conversations with these customers. And I'd say that provides a constructive outlook for us for distribution growth in 25. Now, of course, the timing of precise unite the turn of a year is it overdose dose are just very hard to call. But I'd say what's for us encouraging that were also right now starting to see some of these customer's sign. It placed 25 orders specifically for projects that they sort of visibility to. So that gives us confidence that that demand is strong. So, what I would say calling a specific date is very hard. We anticipate that this situation will be much, much improved exiting this year. And return. It is growth and CMO and more importantly,

Julian Michelle

that's great. But and just to clarify, sort of what proportion roughly of your utility revenue is that type of customer where the inventories have been high? Any rough sense of proportion?

Gerben Bakker

We haven't disclosed that, Julian.

Julian Michelle

Understood. Thanks very much.

Operator

Thank you. Joseph O'Dea with Wells Fargo.

Joseph O'Dea

Hey, good morning. Thanks for taking my questions. And I wanted to circle back about, given your comment on telecom and being selective in the volume go after is interesting on just any perspective on kind of margin mix within HUS. as we think about sort of transmission distribution substation versus like telco and gas distribution, trying to think about just as telco comes back, but you're more selective with it, just some of the margin considerations there as well as the growth contributions may be changing a little bit next year. Any margin mix considerations,

William Sperry

It's interesting. I'm thinking about mix specifically with Telecom. The margins had didn't really high. And as we've worked through this volume decline, they've come down. But you'd expect as it comes back the margins to return to attractive levels? I wouldn't get too. I don't think there's a ton of mix drivers in all those different pieces are much more much more consistent. I would say.

Joseph O'Dea

Got it. And then just anything on tariff scenario considerations in particular, as it relates to sourcing, I think that the portfolio moves would have diminished at some of the direct exposure that you have. But I'm not sure in terms of the portfolio as it exists today and just as we're mindful of sort of scenario considerations, anything on that on the tariff front.

Gerben Bakker

Yes, I think you're right to point out, their exposure has been reduced, particularly the lighting businesses were highly exposed to that. But I'd also say during the last couple of years, as part of our resiliency and strengthening during the supply chain crunch, we've also reduced our exposure to give us certainly one of those regions that were exposed to theirs in the best I'd say today to Hubbell, it's a lower exposure that was. And I'd say the second thing is we've learned a lot from the earlier days of when we perhaps were self-critical of not going after that fast enough. And I think we've proven over the last couple of years, whether it's thereof or other inflation that we're much better reacted to those, I'd say. And I'm confident that that when when tariffs if and when tariffs do happen, that it's a US, a smaller impact to our business would be to go manage it.

Joseph O'Dea

I appreciate it. Thank you.

Operator

Thank you. Chris Snyder with Morgan Stanley.

Chris Snyder

I wanted to follow up on the utility organic growth commentary. It seems like at least based on my kind of back-of-the-envelope math; it seems like utility is up low single digits organic in Q4. And really all of that is driven by the storm, whether it's the deferments out of Q3 or just the storm orders you guys got. So, I guess my question is, how fast do you think that this business can get back to that in a mid-single digit kind of plus target? It sounds like you guys think next year at or above 50. It is that more of a back half that we get there. Or do you think you could start the year at that level? It just seems like a big step up from what's implied on Q4.

William Sperry

Yes. I mean, I think, Jim, I think that our view is that it could bounce back when this inventory levels are finding their natural level and that we think you know, at the end market levels and materials getting installed at a level higher than our shipments are right now. So, it was driven said, I think the everyday there is a mathematical point at which you can still grow even if customers are still destocking. And so that's we haven't given you our guidance for 25 yet, but we do anticipate its organic utility growth starting at the beginning of next year.

Chris Snyder

Appreciate that. Thank you. Then maybe just following up on that, can you maybe talk a little bit about what's expected for our Clara? We know that came out of a period of really strong growth, but a lot of that was driven by kind of working down the backlogs on the expectation that Clara kind of flatlined or should we expect to clear out to enter a period of timeline? And so, given unless something comes our Banco?

William Sperry

Yes, I mean, I think I think Clara has got the ability to grow its comms half of its business. And so, the question is really pointed, I think, at the meter per second. So, there is a couple of big projects that are rolling off in the business has become a little bit more a maintenance and repair type business when new projects get added back. Hopefully that would provide the next surge of growth. I would say it,

Gerben Bakker

but maybe put a finer point on it. I think as we look to 25, we expect meters to be down, but more than offset by the AMI and protection and controls growth. And then that's how we kind of that business and Haus grid automation.

Chris Snyder

Thank you.

Operator

Thank you. Christopher Glynn with Oppenheimer.

Christopher Glynn

Thanks. Good morning and feel better. Bill, just that wanted to ask about the heavy industrial and commercial markets said a little softer. It didn't sound like it was particularly maybe it's flattened. Does that feel like just kind of lumpiness in end market or some fundamental slowing and maybe the facility impact to hit those products?

William Sperry

Yes. I think it's an interesting one as we look at it, Chris, you know, if you start on the heavier industrial side, we're serving, for example, steel plants. Would you still see steel prices down? That tells you something about demand. And it gives us an indication of of demands that strong of steel cut suggesting that copper is kind of been running in different direction from that sale that so it's a little bit the contributions. He has been very modest comparatively and become something that to keep our eye on. As we give you guidance for 25 would work together in January. We'll have, I think, more to say about what we're expecting there.

Christopher Glynn

Okay. And commercial markets Nornes.

William Sperry

So again, it's interesting. We used to have with the big lighting business. There are ways to have a lot of exposure, and we have a lot less now, but it's been again, pretty modest for us right now.

Christopher Glynn

Okay. And then just kind of a final question on the distribution products discussions and anything interesting in the third quarter book to bill versus the first half.

William Sperry

I don't think anything terribly enlightening. No, I think Gerben comments on how you're sort of peeling away, where where would there be destocking of the distribution side? It's not and co-ops and VOD is in public power anymore. I think I think we just started rolling out in our private from Houston through Florida, the Southeast, the hurricanes have probably flush that out, right? So, if we keep, we just keep getting better on that side, I will say.

Christopher Glynn

Great. Thank you.

Operator

Thank you. Brett Linzey with Mr. Hill.

Brett Linzey

Hey, good morning. This is Peter Coss on for Bret. More than just one of the beads program there. Any update to how you're thinking about that at the impact of the funding? And then are you worried about any political risk there, just to be a Trump presidency, particularly with Musk trying to cut costs and there is more outspoken, the opposed the program? Thanks.

Gerben Bakker

Yes. I mean what we've said, what we've said here is some limited contribution this year and probably not until later next year until the funding starts to flow. There's been a couple of approvals recently for money to float in terms of big project visits associated with data. It's not something we've seen yet. I'm citing later next year. What sort of the base case of when some of that could start to contribute?

Brett Linzey

Thanks. And just on the M&A pipeline, anything on deal velocity, general sizing, whereas white spaces you're looking to fill up? Thanks.

William Sperry

Yes, I think the M&A pipeline is pretty robust right now. A couple of things swirling around. And I would say, of the traditional sizes in our there, there's a more in our typical 50 to $100 billion size range, but there is also the fee was 1 billion ish range where you've seen us to a couple of things recently. So, it's an it's something we continue to feel that there will be opportunities for us to strengthen both the electrical utility segments. There continues to be good brands out there. We can buy ways to strengthen our product and solution suites. You know, we continue to look for growth rates and margin potential that's additive to us. So, one of the interesting implications of that is I think we are seeing higher multiples. And yet because of the higher margin, higher growth rates were still able to deliver the same or even often better rates of return. So, it's an interesting outcome that the bulk I feel like the multiples have tripped us up on us to last year or two, but that I think it's at. Do you think there is warranted and justified given the return potential?

Brett Linzey

Perfect. Thank you.

Operator

(Operator Instructions) Nicole DeBlase with Deutsche Bank.

Nicole DeBlase

Yes. Thanks, guys. Good morning. And my questions have been asked already, but I guess maybe just on channel inventory. I mean, obviously a lot of discussion around what's happening at the end customer level. But just want to confirm that you guys still feel comfortable with where channel inventories today?

Gerben Bakker

So I'd say yes, yes, it's certainly not as clear.

Nicole DeBlase

Okay. Cool. And then I guess and on the 4Q outlook, we should be kind of assuming a normal seasonal outcome and then just layer on the impact of the storm push out from 3Q to 4Q. So, if you guys expect to recapture all of that in the fourth quarter?

Gerben Bakker

Yes, that's a better way. I think I said better than seasonal, but it's probably you said it better, which is it will be seasonal plus a pickup from the storms. You said it better than I did.

Nicole DeBlase

Okay, perfect. Thank you, guys. I'll pass it on.

Operator

Thank you. Scott Graham with Seaport Research Partners.

Scott Graham

Yes, hi, and good morning. Thank you for taking my question. The two questions, really the renewables and the data center businesses, were those up sort of in the 1520 territory or was it actually 20?

Gerben Bakker

are up strong double digits.

Scott Graham

Fair enough. Okay.

Gerben Bakker

There was a comment made earlier about POS. utility level be sort of running up mid-single. Is that across both great infrastructure and automation? Or was that just to comment on just infrastructure, as I commented, distribution markets within utility and some of the customers that are not in an overstock position.

Scott Graham

Great. Thank you.

Jeffrey Sprague

(Operator Instructions) Jeffrey Sprague with Vertical Research.
Thanks for letting me back. Then I just want to come back. The systems control I would think that we're working with the assumption that it was a 400 million business last year on a kind of confirm you just have 21st and revenues here in Q three. I'm sure there's some seasonality development. I mean at this business growing 15, 20 percent organically, I'm currently maybe maybe you could just give us a sense. You mentioned in the quarter strong monetization and offering getting traction this kind of a little bit more color on how that the cases performance?

William Sperry

Yes. So first of all, we didn't have it last year. So, I'm comparing nine out of letting out whatever the Phase two was not that big yet. Growth rate is strong. It isn't perfectly linear. I would say the third quarter was particularly strong, um, but I think you're right to and for tenants growing very handsomely and at nice margins in that, I believe over the long term. But this would require investment on our part. But I think with our sales force and our relationships, I really think we can grow that business over the long term. Yes, Jeff, in a really, really important ways. So we're really, really pleased to have systems control and the family.

Jeffrey Sprague

Just a point of clarification, 400 million was the expectation for revenues here. Jeff,
it was. Okay.

Gerben Bakker

Thanks, Jeff. And can you run I think somebody might divest the tariff question. I'm going back and forth a little bit between calls, but um, can you give us a sense now of what percentage of your COGS are U.S. based? I don't know that I have that off the top of my head. The question was asked, and we said it's smaller. We it was the in-person was it was what exposure would you have and it's smaller a because we sold off to lighting businesses that have a lot of exposure. Second, we had done some redundancy planning and pulled some volume back domestically. And then secondly, the fact that we have a lot more confidence in our ability to manage whatever tariff headwinds via price and productivity. So, um, we are we'll keep our eyes very closely on the tariff question, but that's where we're pretty significant. Majority of us of our COGS are US-based. Now here you can get out ahead of us who don't have the number, but I'd say it's a significant portion of our boxes is in North American based.

Jeffrey Sprague

Appreciate it. Thanks.

Operator

Thank you. I'm showing no further questions at this time. I would now like to turn it back to Dan Marotta for closing remarks.

Dan Innamorato

Thanks, everybody, for joining us will be around all day for calls. Appreciate it.

Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.