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Hello, and welcome to WESCO's 2025 Third Quarter Earnings Call. [Operator Instructions] 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, and 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 uncertainties. Actual results may differ materially. Please see our webcast slides and the company's SEC filings for additional risk factors and disclosures. Any forward-looking information speaks only as of this date, and the company undertakes no obligation to update the information to reflect changed circumstances. Additionally, today, we will use certain non-GAAP financial measures. Required information about these measures is available on our webcast slide and in our press release, both of which you can find 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, and good morning, everyone. Thank you for joining our call today. We delivered very strong results in the third quarter, and we again outperformed the market with our leading portfolio of product services and solutions. Sales growth has accelerated throughout the year with organic sales up 6% in the first quarter, 7% in the second quarter and now 12% in the third quarter. And that marks 4 consecutive quarters of accelerating momentum. Our positive business momentum has continued in October. We're happy to say with month-to-date preliminary sales per workday up approximately 9% year-over-year, and that's what 3 days left in the month. Our record quarterly sales and was an all-time record for any quarter sales of $6.2 billion were led by 18% organic growth in Communications and Security Solutions, 12% organic growth in our Electrical and Electronic Solutions business and a return to growth in utility and broadband solutions. And that was driven by strong high single-digit growth with investor-owned utilities and strength in broadband. Also of note, all 3 SBUs delivered sales growth in this quarter, and that's the first time that's occurred since Q1 of 2023. Total data center sales were again very strong at $1.2 billion. They set another quarterly record. They were up 60% year-over-year and now represent 19% of our total Q3 company sales. On a trailing 12-month basis, our data center sales are now close to $4 billion. Adjusted EPS, earnings per share grew 9.5% versus prior year and 16% versus Q2 sequentially, with both gross margin and EBITDA margin improving sequentially. We are building on our positive business momentum as we enter the fourth quarter and as we prepare for continued market-leading growth in 2026. Now turning to our full year 2025 outlook. We are raising our full year outlook for organic sales growth, adjusted EBITDA and adjusted EPS based on our increasing business momentum in the third quarter. At the same time, we're reducing our full year free cash flow outlook to reflect an increase in working capital dollars. And that's associated with our rising demand curve and the increased sales growth rates we've been experiencing. We're executing very well, and we remain firmly focused on accelerating our cross-selling initiatives. Continuing to drive our enterprise-wide margin improvement program and delivering operational improvements enabled by our technology-driven business transformation. As the market leader, it's really the strength of our portfolio and the enduring secular growth trends of digitalization that includes AI-driven data centers and automation, electrification that includes increased power generation and reliability and supply chain resiliency, which includes reshoring. All of these secular trends fuel my confidence that WESCO will continue to outperform our markets and deliver exceptional customer and shareholder value in 2026 and beyond. Looking ahead specifically to 2026, our midterm targets for annual sales growth and margin expansion that we provided at our Investor Day are the appropriate starting point for the outlook that we will provide in conjunction with our earnings release in February. So with that, I'll turn it over to Dave to walk you through our Q3 results and our outlook for the remainder of the year. Dave?

Thank you, John. Good morning, everyone. Turning to Slide 4. Organic sales in Q3 were up 12% year-over-year. This growth was driven by volume gains across all 3 SBUs supported by an estimated price benefit of less than 3%. Reported sales increased 13% with sequential growth of 5%, which was better than historical seasonality. The strong performance was broad-based, with continued momentum in our data center business and solid contributions from all 3 business units. As John mentioned, CSS delivered 18% organic growth, EES grew 12% and UBS organic sales increased by 3%. Adjusted EBITDA margin was 6.8%, down 50 basis points versus the prior year, but was up 10 basis points sequentially. Gross margin contracted 80 basis points to 21.3%, reflecting consistent project and product mix dynamics experienced over the last 4 quarters. Importantly, gross margin increased sequentially by 20 basis points, driven by mix, higher supplier volume rebates and execution of our enterprise-wide margin improvement program. Adjusted SG&A increased approximately 11% year-over-year, driven by the higher levels of sales growth, along with higher employee and facility costs. Specifically, over 1/3 of the increase in SG&A dollars year-over-year was related to higher volume, with the balance coming from increased incentive compensation, merit increases, employee benefits and facilities costs. SG&A as a percentage of sales improved due to operating leverage on our sales growth. Finally, adjusted EPS was up 9.5% year-over-year driven by the improved operating performance and the absence of the preferred stock dividend following the redemption in Q2. I'll walk you through our business unit results, beginning with EES on Slide 5. In the third quarter, EES delivered very strong results with organic sales up 12% year-over-year driven by growth across all 3 operating groups, construction, industrial and OEM. Construction grew mid-teens, driven by robust wire and cable demand and ongoing infrastructure projects, including sales to data centers. Industrial was up mid-single digits, supported by improved day-to-day demand in the U.S. and increased project activity in Canada. And OEM sales grew mid-teens, reflecting strong momentum in both the U.S. and Canada. Notably, data center sales were up 60% year-over-year now representing approximately 6% of EES sales. Backlog remained flat year-over-year with healthy quoting activity and a strong pipeline of opportunities. Profitability improved with adjusted EBITDA margin of 8.4%, up 30 basis points sequentially, driven by improved gross margin and stable operating cost leverage. Gross margin was 23.3%, down 100 basis points year-over-year, but up 30 basis points sequentially. Lower gross margin year-over-year was primarily due to project and product mix. SG&A remained stable at 14.9% of sales and adjusted EBITDA increased to $198 million, up 9% year-over-year. Looking ahead, EES remains well positioned to capitalize on secular trends in electrification, data center expansion and infrastructure modernization. Turning to Slide 6. In the third quarter, CSS, again delivered very strong results with organic sales up 18% and reported sales up 21% year-over-year. This growth was driven by continued strength in WESCO data center solutions, which was up over 50% from large project activity with hyperscale and multi-tenant data center customers. Enterprise network infrastructure also contributed to growth with sales up mid-single digits year-over-year. E&I growth was due partially to the timing of project activity during the quarter and a favorable year-over-year comparison. Security sales were up low single digits, including data center-related sales, security growth was up mid-single digits. CSS backlog increased 17% year-over-year reflecting continued strength in data center project activity. Profitability improved with adjusted EBITDA margin at 9.1%, up 30 basis points sequentially, driven by improved gross margin and stable operating cost leverage. Gross margin was 21.2%, down 80 basis points year-over-year, but up 30 basis points sequentially. Lower gross margin year-over-year was primarily due to business and project mix, included elevating volume from large hyperscale projects. Significant operating leverage year-over-year drove 90 basis points of EBITDA margin improvement and adjusted EBITDA increased to $221 million, up 22% year-over-year. Overall, CSS continues to demonstrate strong growth and profitability, supported by sustained demand in AI-driven data center projects and security markets, along with disciplined cost management. We remain focused on improving margins with our large customers by expanding the scope of services we provide to them throughout the entire data center life cycle. Turning to Slide 7. I want to take a moment to discuss the continued momentum we're seeing in the broader data center space and WESCO's role in that growth. Customers continue to rely on WESCO and our supplier partners to meet their evolving needs, including our expanding portfolio of services we provide across the data center life cycle. From a total company perspective, data center sales were about $1.2 billion in the quarter. Data center represented approximately 19% of WESCO sales in the third quarter and 17% on a trailing 12-month basis. This growth was driven by strong performance in both the white space and the gray space with CSS representing the majority of the sales contribution. The top of the slide outlines the 2 key stages of the data center construction cycle, time to power and the construction period. The key takeaway projects announced and funded today typically take 4 to 7 years to become operational. Our solutions now span the full spectrum of the data center life cycle. From power and electrical distribution systems and advanced AI and IT infrastructure to on-site services and solutions that support ongoing operations. This ensures we can deliver value throughout every phase of the data center life cycle. On the lower left of this slide, you can see the substantial and accelerating growth in our total data center business over the past 7 quarters. Total data center sales on a trailing 12-month basis were approximately $4 billion. This growth has been driven by organic initiatives along with tuck-in acquisitions that have expanded our services capabilities. We remain committed to partnering with our suppliers to service our customers from cradle to cradle. Supporting everything from initial builds, on-site services and solutions, ongoing upgrades, retrofits, life cycle upgrades and modernization. Turning to Slide 8. This provides additional information of our data center products, services and solutions offerings. Our offerings span both gray space and white space delivering a comprehensive portfolio that positions WESCO as a trusted partner for hyperscale, multi-tenant colocation and enterprise data center customers. In the gray space, which accounts for approximately 20% of our overall data center sales, serviced by our EES business, we deliver extensive power, electrical, automation and MRO solutions that support the build-out of high-performance, reliable and scalable data centers. Some of our product offerings include electrical infrastructure, such as medium voltage cables and cable trays, alongside mechanical and cooling products like automated switches and sensors. Additionally, we supply MRO and safety products to help ensure safe, efficient and reliable data center operations. In the white space, which accounts for approximately 80% of our total data center sales through our CSS business, we deliver next-generation infrastructure and services for always-on connectivity. Our white space products include communications equipment, advanced IT infrastructure such as racks and enclosures, wireless technologies, access controls and video surveillance equipment. Beyond products, we offer extensive services and holistic solutions spanning the entire data center life cycle from planning and design through installation and commissioning to ongoing operations through on-site services and decommissioning. We are there every step of the way, moving with speed to help our customers quickly adapt and thrive in a rapidly evolving environment. With a global ecosystem of suppliers and partners, WESCO offers a leading portfolio and complete solutions, providing customers with a single source for their evolving data center needs. WESCO enables seamless global execution, moving products and solutions across borders to support our customers. We believe our combination of products, services, solutions and expertise uniquely positions WESCO to capture the accelerating demand for data center capacity, driven by cloud, AI and edge computing trends. Turning to Slide 9. In the third quarter, organic and reported sales in UBS increased 3% year-over-year, marking a return to growth after 7 quarters of declines. This improvement was led by high single-digit growth in our investor-owned utility customer base, partially offset by continued softness in public power. We expect the utility market to continue to improve as greater clarity is obtained on tariff impacts and as interest rates are reduced. Additionally, we expect public power customers to return to growth in 2026. Broadband performance accelerated in the third quarter with sales up over 20% year-over-year, driven by increased demand in the U.S. This marks a significant improvement from Q2 where broadband growth was up mid-single digits. Backlog increased 11% year-over-year, reflecting stronger customer order rates. Adjusted EBITDA margin for UBS was 10.4% flat sequentially, reflecting disciplined cost management and sustained profitability. Adjusted EBITDA margin was down 90 basis points year-over-year, primarily driven by lower gross margins due to competitive pressures within public power markets, partially offset by improved operating cost leverage. We remain confident in the long-term growth potential of our utility business. supported by secular trends in electrification, green energy and grid modernization. These drivers are expected to accelerate demand for our utility services and solutions and we anticipate further margin improvement in Q4 as mix improves and utility growth continues. Turning to Slide 10. In the third quarter, free cash flow was a use of $89 million. Recall that our distribution model requires investment in working capital, especially in times of significant growth, which we have experienced year-to-date. The third quarter was the highest growth quarter of the year with organic sales up 12%. In addition, you will see later in the presentation that September organic sales were up mid-teens, which is the highest growth month of the year and represents an all-time record for monthly sales per workday. Given the top line strength in the quarter and in September, we generated significant increases to accounts receivable, resulting in a use of cash of $270 million. I'll provide you with an update on our free cash flow outlook shortly. Turning to accounts payable. We've had strong performance over the trailing 12 months and a third quarter period with cash generation of $526 million on a trailing 12-month basis and $100 million in the third quarter. Inventory has increased in 2025 to support customer projects and to ensure supply chain disruptions are minimized as we work to meet our customers' needs and a rising demand curve. On the right side of this slide, you can see that net working capital intensity has steadily improved over the past 3 years. This quarter, we saw a 60 basis point year-over-year improvement on a trailing 12-month basis with net working capital intensity declining from 20.4% to 19.8%. That follows a 50 basis improvement in 2024 over 2023. We remain confident in our ability to drive stronger cash generation through the cycle. Turning to Slide 11. We redeemed our $540 million Series A preferred stock in June, the first opportunity to do so at face value. This high-cost instrument carried a 10.5% dividend rate and its redemption marked a significant milestone in our capital structure optimization. To fund the redemption, we utilized proceeds from our $800 million issuance of 6.38% senior notes due 2033, which we completed earlier in the year. This refinancing action reduced our total financing costs and created a substantial benefit to our net income, EPS and cash flow rates. The estimated annualized benefit from this transaction is approximately $32 million or $0.65 per diluted share. In addition, with the financing completed in the first quarter, we extended the maturities of our accounts receivable facility and revolver to 2028 and 2030, respectively. As a result, we now have no significant debt maturities until 2028, providing enhanced financial flexibility and stability. Turning to Slide 12. On this slide, we provided an overview of the actions we've taken to manage the impacts on our business from tariff announcements. The chart lists the potential impacts in our response to protect our margins. An update on the tariff environment. In the third quarter, supplier price increase notifications were up over 100% in count, but the impact on results was limited due to the timing of notifications and effective dates. We estimate a price benefit of less than 3% for the quarter, and this includes about 1 point from commodity price increases. Through October, supplier price increase notifications are up over 60% in count versus all of Q4 2024 with an average increase in the mid-single-digit range. This remains an evolving and dynamic situation with modifications to effective dates based on finalized tariff agreements and timing. WESCO has a long operating history and has successfully navigated similar global supply chain challenges. We're continuing to execute our playbook to effectively manage our business in the current volatile environment. Turning to Slide 13. This slide shows our updated 2025 outlook by strategic business unit and the individual operating groups. As John mentioned, we are revising our 2025 outlook and increasing organic sales growth to up 8% to 9%. This is significantly higher than our prior guidance of up 5% to 7%. Sales into data centers continue to exceed our initial expectations as do broader electrical sales trends. For EES, we are benefiting from data center growth, along with broader positive trends in electrical end markets. We continue to expect growth in the fourth quarter across all 3 markets we serve. Construction, industrial and OEM supporting our revised EES outlook of mid-single-digit plus growth. For CSS, due to the continuation of exceptionally high growth in our data center business, we are increasing our full year outlook for reported sales growth of WESCO data center solutions from up about 40% to up approximately 50%. This supports our revised CSS outlook of mid-teens growth, up from our prior growth expectation of low double-digit growth. And lastly, within UBS. We expect further utility growth in Q4, driven by our investor-owned utility customers. We anticipate public power customers won't return to growth until 2026, which leaves our total full year outlook for the utility market unchanged. Broadband is now expected to be up for the full year versus our prior expectations for approximately flat sales versus 2024. Moving to Slide 14. We are raising and narrowing our ranges for organic and reported sales growth, increasing adjusted EBITDA and increasing and narrowing the range for adjusted EPS. Our expectation for free cash flow has been lowered due to the significant top line growth in 2025, which requires net working capital investments, principally accounts receivable. We are revising our 2025 sales outlook based on the accelerated growth we are experiencing. Organic sales are expected to be up 8% to 9% versus our prior forecast of 5% to 7%. I want to emphasize that our outlook does not include the impact of future pricing actions, including tariffs. This is consistent with our past practice, given the lag between when a supplier announces a price increase and when it begins to impact our revenue. While we have seen a significant uptick in price increase notifications as we move through the year, our outlook does not include any additional benefit to sales beyond what we realized in the third quarter and the rollover impact of those price increases. Turning to EPS. We are raising our outlook by $0.10 at the midpoint to a range of $13.10 to $13.60. Improved operating results are the primary driver of the increased EPS outlook, which is partially offset by higher estimates for interest expense. In terms of free cash flow, we now expect to deliver between $400 million to $500 million in 2025. As a percentage of adjusted net income, this implies a range of approximately 60% to 75%. Our strategy for how we deploy cash flow remains unchanged. The use of available cash will be allocated to the highest return opportunity, and we will continue to make decisions in the best interest of the shareholders over the long term. Our top priority is to invest organically in the business to drive growth and operational efficiency, including the completion of our digital business transformation. In the near term, given the current economic environment, we expect to prioritize delevering the balance sheet. However, we will continue to be opportunistic regarding share repurchases and acquisition opportunities. We continue to seek acquisitions that expand our capabilities and better serve our customers, particularly those engaged in our high-growth end markets. We have also included updated modeling assumptions on the right-hand side of the slide. Most notably, interest expense is now forecast to be about $10 million higher. This is largely driven by the reduction in free cash flow for the full year, along with increased borrowings intra quarter to support the current level of growth. Turning to Slide 15. This slide shows the year-over-year monthly and quarterly sales growth comparisons over the past year and our expectations for the fourth quarter. You can see the return to growth in the last quarter of 2024 and the acceleration throughout 2025. As mentioned, preliminary month-to-date October sales per workday are up approximately 9% with 3 days to go in the month. We expect fourth quarter reported sales will be up high single digits plus with growth across all 3 business units. We expect organic sales will be up a similar amount as there is no difference in workdays year-over-year and FX impacts have moderated. We expect adjusted EBITDA margins will be up approximately 30 basis points versus the prior year, with improved gross margin driven by higher supplier volume rebates and SG&A headwinds due to higher incentive compensation. Moving to Slide 16. Let me briefly recap the key points before we open the call to your questions. We delivered another very strong quarter, with sales up 12% year-over-year marking 4 consecutive quarters of accelerating sales momentum. CSS went away, up 18%, EES grew 12% and UBS was up 3%. Utility returned to growth driven by investor-owned utilities and total data center sales were approximately $1.2 billion, up about 60% year-over-year. Adjusted EBITDA margins expanded 10 basis points sequentially, supported by improved gross margin and strong operating leverage. Adjusted EPS was up 9.5% year-over-year. We've raised our full year organic growth outlook, adjusted EBITDA and adjusted EPS to reflect this strength. We remain very well positioned to benefit from secular growth trends including AI-driven data centers, power generation, electrification, automation and reshoring. As John noted earlier, when looking ahead to 2026, our midterm targets for annual growth and margin expansion that we provided at our Investor Day are still appropriate and would be the starting point for any outlook that we will provide in February. Based on the strength of the secular trends, we would expect mid-single-digit organic sales growth in 2026 with continued strength in our electrical markets, a return to full year growth in utility with a recovery in public power and mid-teens growth in data center. We are also targeting annual adjusted EBITDA margin improvement of 20 to 30 basis points, with the majority of the improvement being generated by operating leverage. With that, operator, we can now open the call to questions.

[Operator Instructions]. And our first question today will come from David Manthey with Baird.

Just a quick question here on -- I think you mentioned it right at the end there, Dave, you said that you expect to see some EBITDA margin improvement into 2026. So I'll put that one on the side. Could you tell us approximately how much price contributed to growth by segment or at least ballpark to give us an idea?

Certainly. So overall, our pricing benefit in the third quarter was just under 3%. And that was primarily driven by our EES segment, which was about 4% and that's where we saw the largest benefit from commodity pricing on our pure commodity products. Our CSS business saw a price benefit of about 2% and UBS about 1%.

Okay. And then maybe on outside of data center, could you just talk about whether it's industries or applications where you're seeing some strength there. It's great to see a return to growth, nice growth in EES. And maybe you could just help with a little bit of color there.

Thanks for that question, Dave. This is John. Yes, we're really pleased. I think it's a highlight of the quarter, actually. I mean CSS, the beat goes on. That's clear. The strong performance due to AI-driven data centers. But for EES, this is the fourth consecutive quarter of improving sales growth. I'll just remind everyone, we returned to growth in the fourth quarter of last year, grew 3% in Q1, 6% in Q2. Now this is a significant step up to 12% growth in Q3. All 3 operating groups in the business, Dave, as construction, industrial and OEM, all 3 grew particularly for construction, I'll double click. I mean that was up mid-teens. And it's not just growth in data center projects. There's also growth in other big projects, infrastructure related. We saw growth in water -- wastewater, hospitals, public transit. They're just a really nice step-up in construction. Very pleased with that. In terms of industrial, also pleased with that performance, up mid-single digits. We had improved day-to-day demand in the U.S. We had increased project activity in Canada, and our stock sales increased each month of the quarter. That's our stock and flow business, which is a good indication of what kind of the daily demand in the market is. So we feel good about that. And then OEM up mid-teens, really strong growth again across the U.S. and Canada. That's being driven by semiconductor and other infrastructure markets. So that's the business in EES that has our most semiconductor exposure. And that would be, again, you're seeing -- that's driven kind of the semiconductor expansion big mega projects and such. We have some terrific semicon relationships there. So all in all, I think we feel good about EES' top line momentum. Also EBITDA margins are above 8% for the second quarter in a row. And I do want to mention, because I didn't mention it in my prepared remarks, we do have a new leader on board, Danny Castillo, terrific leader, returns to the electrical industry, has a long history and was part of Cooper when Eaton bought Cooper, worked for some other companies since -- post that combination. And he's off to a great, great start. Thanks for that question, Dave.

Your next question today will come from Sam Darkatsh with Raymond James.

I wanted to follow up on Dave Manthey's last question. I mean we're -- you're right. I mean, the 10% EES growth, excluding data center, just really notable. We're hearing a lot of reports about just general AI and tech spending by customers crowding out other sorts of CapEx. And it doesn't look like you're seeing that in your results. Are you not seeing that crowd out effect? Or is the EES growth, excluding data center, more so via share gains, John?

Sam, we're not seeing it crowd out based on our activity levels. But I do think it's pretty clear that this quarter's results there was overall market outperformance across our 3 businesses. And if we stay on EES in particular, there's enough other data points out there in terms of market surveys and competitors who have reported that this is a very strong outperformance versus market. So I'll tell you, this did surpass our expectations. We did expect EES to pick up pace in Q3 and Q4, and we outlined that. And we did have improving momentum vector, but this was a more meaningful step up, Sam, to your point, getting north of -- get a 12% growth and double-digit growth ex data centers than we expected.

Yes. My last question, looking at data center itself. I know the margins are a little bit lower than fleet average because of all the large projects, but I'm also -- I imagine that since it's a lot of direct ship special order that asset velocity is also better than fleet average. Can you talk to that, put a little bit of clarification in terms of what your ROA is for that data center business?

Yes. So we haven't been public on that yet, Sam. I think at some point in the future, we may do that. So I appreciate the question. I will -- maybe I'll focus on it this way, which is another dimension of your question. DS, direct ship margins inherently have lower gross margin, but we have significant lower operating costs to execute those transactions. We've always said that it represents very good operating profit pull-through. I'm really pleased that CSS has a third quarter in a row of sequential EBITDA margin expansion. And we're getting it with gross margin and operating cost leverage. This quarter, CSS' gross margins were up 30 basis points sequentially. And I'll remind everyone that -- we did have a big shift in our kind of margin mix in Q4 last year when CSS really started to drive outsized growth. Data centers grew 70% in Q4 last year. And I mentioned that we're going to work margins up over time. If you look at that, CSS has -- their margins or gross margins are 40 basis points higher than they were in Q4. So we're walking those margins up and we're getting operating cost leverage on the growth. So I, at least, wanted to hit that point, Sam, on your question. In terms of ROIA, yes, it is much better asset velocity to your point. We just haven't put a number out there by SBU.

And your next question today will come from Guy Hardwick with Barclays.

With volumes so strong, I was wondering whether the -- as a company as a whole is hitting levels in terms of where volume rebates, which have been kind of declining as a percentage of EBITDA but may start to recover, whether this sets you up for them becoming a positive tailwind to margins next year?

Yes. Guy, thank you for the question. So year-over-year in the third quarter, some of the increase in our gross margin was driven by better supplier volume rebates. That does include the benefit we're getting this year from reaching some of those higher volume tiers, which is translating to a better rate with certain suppliers. We also expect that we will continue to see that in the fourth quarter. So year-over-year, we do expect to see supplier volume rebates contributing to gross margin expansion. I do believe it is a good setup as we go into 2026. We'll provide you more details on that in February when we do our next earnings call.

And just as a follow-up. I didn't hear you mentioned much about the digitalization investment. Are you beginning to see benefits in terms of cross-selling yet? Or is that more of a story for out years?

Guy, it's a great question. Thanks for asking. Look, I think that first, on cross-selling, I don't want to link that to our enterprise-wide digital transformation because that will help accelerate it and improve our execution across the global enterprise. But I'll take all the investors back to this has been really one of the most significant value creation levers that we've been executing exceptionally well against since we put Anixter and WESCO together. And we had significantly overdelivered the sales synergies that we committed to. We had committed to 1% of pro forma sales, which would be $170 million a year. We ended up delivering over $2.3 billion cumulative of cross-sell sales. So that process we put in place and the incentive structure supporting it that's deployed across our sales force and the way we're executing, we're gaining better traction every day on our cross-selling, and we're seeing that in our results. The digital transformation, when it's done, will result in, I think, even further acceleration of improved execution there. With respect to the overall digital transformation since you touched on it, at least I'll make a comment. We're making very good progress. All 3 SBUs are running the initial build of our new digital platform and at least 1 location, that's call that baseline set of capabilities. In the second half of 2025, we've been focused on continuing to build out additional capabilities while beginning deployment. And in 2026, deployment will really start to scale up. As we outlined at our last Investor Day, our check enabled business transformation is on track and with the time lines we outlined at our last Investor Day in 2024. More on that as we move into next year, we'll be providing more robust updates.

And your next question today will come from Deane Dray with RBC Capital.

I appreciate all the clarity on the revised outlook, especially the change in free cash flow guidance, which we consider to be a high-quality problem given all the growth.

Thank you, Deane. Yes, it's -- we don't like the printed number of free cash flow, but our sales for workday in September were the highest monthly sales per workday we've ever had in our history, in the 15-plus percent range. And all that AR result in growth of AR. AR grew $271 million. So this is -- you said it well, very high-quality problem because that AR will get collected.

Yes. And your working capital intensity continues to improve. So you're not losing anything on the receivables, payables, et cetera?

Yes. That's an important point, which is why we include that page, Deane, the net working capital as a percentage of sales, which is obviously AR plus inventory minus payables. We're showing improved efficiency. And so this is just a high-quality problem on the AR growth. And so we're doing that now still with all the various "ERP" instances we're running in the company. We do expect, as we outlined at Investor Day, when our digital transformation is done to get really substantial benefits in overall net working capital.

Exactly. All right. Just a couple of quick ones for me here. First, I'll echo all the previous comments about EES and I was a little surprised not to see some backlog build there. So was it all really short, quick turn business that was done? That would probably be the explanation, but would love to hear your color.

Yes. I think your backlog is still very healthy. We just didn't grow it, and it was just the exceptional step-up in sales growth, as I talked earlier, but versus normal historical seasonality, we're -- it's intact. It's very -- it's strong, it's high quality. The opportunity pipeline continues to increase. So we're seeing more opportunities. We're putting more shots on goal to use that analogy. And so that's what's encouraging. And again, we're not giving a full guide for '26 yet. But we did make some commentary, Dave, did just around stronger electrical markets in '26. So I think that gives some indication of the confidence level we have given backlog plus sales execution.

That's really good to hear. And since you opened the door on the 2026 kind of data points that Dave shared, the one on data center, the mid-teens growth, that would be what we consider to be industry growth, the kind of footprint rollout given the multiyear backlog. You've been outgrowing that significantly for the past year plus and increasing your share of wallet, do you see where that ramps down? And just what's your visibility on this outgrowth in data center heading into '26?

All indications are the data center market remains incredibly strong. Again, we have a unique and very strong set of end-user customers. We're in dialogue with them. We get good insights into their multiyear investment and deployment plans for data centers. We're helping them execute globally. So the market is strong and robust, I will say it this way. I wouldn't get -- again, we're not giving the guide for '26 yet. We are focused and committed to and confident that we will continue to outperform the market in data centers. And it's driven by the strength of -- we have this tremendous strength in the white space. It's extensive. We've added services. We have increasing strength in the gray space, and we talked about that the last several calls. We wanted to provide some more details on our mix. You see that in today's webcast materials. And increasingly, too, our UBS business is getting pulled in and engaged on the front end because really the #1 driver of what's going to support data center growth is power. And so it's why I'm so bullish on utility turning into a secular growth industry because fundamentally, it's increased power generation that's going to be driven, required to support the data center build-out, and that bodes very well for us. So a final point, our white space capabilities, our gray space capabilities, our power and utility capabilities, coupled with the global footprint and increasing services, we think, puts us in a very unique position. to continue to outperform the market for data centers.

Your next question today will come from Nigel Coe with Wolfe Research.

We covered a lot of ground already, but I'm just wondering, I'm sorry if I missed this, 30 basis points of margin expansion for 4Q. How should we think about that between gross margin and SG&A?

Nigel, the one thing I'll emphasize is that given the increase in our top line, part of that 30 basis points of expansion will be improvement to our supplier volume rebates. And so when you think about the 30 basis points, you should assume a modest increase in the supplier volume rebates, and we're confident we'll be able to get to the 30 basis points through a combination of that supplier volume rebate, other gross margin actions, but then also operating leverage.

Okay. Great. And then on the price increases, I think we understand how you're layering those in now for 4Q. Would that be gross margin accretive as well? Because normally, when you raise prices, you normally have a maybe a temporary benefit on inventory. So just wondering if that's having an impact as well.

It will have a slight impact because we are averaged with inventory. So as market prices increase, our inventory has not caught up to that market increase. What I would tell you what we experienced in Q3 was it was a very modest impact. We're not seeing that pricing translate from our suppliers into the market and into our sales yet. So we had rough round just under 3% pricing benefit, that's after seeing these high single-digit price increase notifications in Q1 and into Q2. So all of that pricing is not translating to the market yet. As we do get pricing traction, we should see a modest benefit to our gross margin.

Okay. And then a quick one on cash flow. If we do get into that mid-single-digit zone on growth in 2026, would you expect conversion to be, if not 100% pretty darn close?

Yes.

And your next question today will come from Ken Newman with KeyBanc Capital Markets.

First, Dave, could you just talk about, obviously, the implied acceleration in UBS organic sales growth in fourth quarter. Just talk a little bit about the color and the confidence there. If there's any comment you have on how much of that revenue is already secured in backlog just versus an easier comparison math there?

Well, I'll start with the easier comparison. So if you take a look at our overall utility and broadband solutions business in the fourth quarter of 2024, we do have an easier comp, particularly within the utility space. So utility was down high single digits in Q4 2024. And given the acceleration that we've seen, particularly with the investor-owned utilities, we're confident that we will have significant growth here in the fourth quarter of 2025. Again, some of that's just the trends that we're seeing, not only the backlog, but the day-to-day activity primarily, again, in those investor-owned utilities, some of the project work that we're doing, but we also are getting some benefit from an easier comp.

Got it. Okay. And then -- sorry if I missed it, but did you disclose how much gray space revenue was up this quarter versus white space? It was nice to see the stronger margins in both the ESS and CSS this quarter. I'm just trying to see if there's a way to think about the longer-term margin trend as we balance the mix impacts from growth in those 2 channels.

Yes. The data center sales in our EES business, those gray space sales were up approximately 60% in the third quarter.

And the white space was up over 50%.

Over 50%. Correct.

So we did mention that, Ken. So both 50% plus.

And then any comments on that -- how you think about mix kind of normalizing into '26?

I don't know that, that mix normalizes. Again, the dynamic there is we've talked about it at prior earnings calls and also at the investor conferences. We have deep and long-standing strength in white space, these end-user relationships. We're adding services and we're managing -- helping manage the global deployments for hyperscalers and global MTDC customers. So that -- think of the market and because of our unique value proposition and execution ability globally, we're outperforming the market with that white space strength. The gray space, a big good portion that historically has been served direct. But we're now picking up pieces that are moving into distribution because we become the one overall supply chain management manager on behalf of our end-user customers. So that's what's driving some of that growth there. So I would expect we will continue to see very strong growth in both white and gray space, again, outperforming the market is our expectation.

And your next question today will come from Patrick Baumann with JPMorgan.

I wanted to start off on utility, if we could, and to focus a little bit on the public power side. I think that's, I guess, 1/3 of your utility sales, correct me if I'm wrong. Wondering what -- how much it was down in the quarter? And then what gave you confidence that it returns to growth next year? And along those lines, you mentioned something about, I guess, competitive price in that side of the world and maybe that led to some of the gross margin compression quarter-on-quarter. Maybe if you could flesh that out a little bit.

Yes. So maybe just the level set, again, if you think of our utility business, the U of UBS, 90% of that is U.S., 10% Canada. So when you take the U.S. now, that 90%, 60-plus percent investor-owned utilities, 10% or so is direct to specialty utility contractors that leaves about 30% in public power. Our sales to our IOU customers, our investor-owned utility customers were up high single digits in the third quarter, and we're very pleased with that momentum. Our strength in IOUs is really carrying the day with -- for the utility return to growth. Public power softness continued. And I mentioned this last quarter, and I'll just go back and double-click on it because it's the same situation. When you look at what occurred across the pandemic, it really was the IOU customers that were prioritized and they were delivered material as the supply chain started coming on back online and the public power customers started building inventory much later than the IOU customers. Those inventory builds for public power continue through 2024. And that's as the manufacturers switched from serving the IOUs to building up for the public power customers. So that's really what we're seeing. We're seeing that kind of customer stocking issue. And it's not across the board. Categorically, it's distribution transformers and wire and cable for public power, but not for line construction materials. So we're seeing it getting healthier. We've got overall improving customer order rates. That's a positive leading indicator. And public power, we do expect will absolutely return to growth in 2026. I think the thing I'd focus investors on are the breadth and strength and diversity of the rest of our utility business. And obviously, the IOUs and those multiyear agreements we have in place where we are essentially the supply chain management partner, solutions partner for them is exceptionally strong and good to see them with high single-digit growth. But we're also seeing very strong opportunities and growth not just in the D of transmission and distribution, but transmission and substation portions of the market. And that we're seeing kicking in this year. We've got a strong set of capabilities there. And we expect that to be a very strong growth driver in 2026. So there's the public power story. It is more competitive. Because, again, of the current stocking situation, that's more locally market-driven. Some of our competitors are also not for profits, the so-called cooperative distributors. So -- but that's been the nature of the beast for decades, quite frankly.

Got it. Helpful. On the 2026 margin outlook, the 20 to 30 basis points of expansion on, I guess, mid-single-digit organic top line growth. Can you walk through us like the confidence you have in getting leverage. And I ask just in respect to 2025 when you're growing high single-digit organically and not getting leverage. Maybe remind us of the moving parts on why you're not getting leverage in 2025 and why that turns in 2026?

Yes, Patrick, one of the things I'll highlight is relative to incentive compensation. We still have about a 20 basis point headwind to adjusted EBITDA margin with the expected payouts for incentive compensation in 2025. So that's a headwind in 2025. Obviously, we've been able to drive significant sales growth but that's also come with some product mix and project mix impact on the gross margin line. The other thing I'll highlight is like many companies, we're also continuing to invest in our IT capabilities. And so we've made significant investments in that area. We do believe that, that is part of our continued investment into our digital transformation and new capabilities to service our customers. And one of the other things that we'll highlight is we've made sequential improvement as we progress through the year. That leaves us to a good setup for 2026. We'll provide you the full outlook for 2026 when we do our call in February.

Understood. So it's a better jumping off point at the end of the year, combined with less incentive comp headwind, maybe less project mix year-over-year. Those are some of the factors. I'd imagine you're going to keep investing.

Correct.

That concludes our question-and-answer session. I'll now turn the conference back over to John Engel for any closing remarks.