Thank you for standing by, and welcome to the Second Quarter 2020 Results Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Dan Innamorato. Thank you. Please go ahead, sir..

Thanks, operator. Good morning, everyone, and thank you for joining us. I'm joined today by our Chairman and CEO, Dave Nord; our President and Chief Operating Officer, Gerben Bakker; and our Executive Vice President and CFO, Bill Sperry. I will announce the second quarter results for 2020 this morning.

The press release and slides are posted to the Investors section of our website at www.hubbell.com. Please note that our comments this morning may include statements related to the expected future results of the company and are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995.

Therefore, please note the discussion of forward-looking statements in our press release and considered incorporated by reference into this call. In addition, comments may also include non-GAAP financial measures. Those measures are reconciled to the comparable GAAP measures and are included in the press release and the slides.

Now let me turn the call over to Dave..

All right. Thanks, Dan, and good morning, everybody. Thanks for joining us to discuss our second quarter results. I appreciate everybody taking the time. It's certainly been an interesting 90-plus days since we were last in front of you. And I think there's a lot to cover today.

So I'll start my comments on Slide 3 with a brief summary of what I think is another strong quarter of operating performance and free cash flow generation for us.

We clearly saw the impact of COVID-19 on the economy, our end markets and our operations, but we continue to focus on what we can control, and we effectively navigated through a quarter of significant volume declines, down 21%, but still ended up with margin expansion and very robust free cash flow.

You'll note that our free cash flow is, at this point in the year, more than halfway to our full year goal, which those of you following us, know that, that's not our typical trend. And Bill will talk more about that in a little while.

Our operational transformation continues to provide benefits with attractive savings on the investments we've been making in our footprint optimization. And we continue to execute on price cost and we were proactive in managing our cost structure in the second quarter.

Looking ahead, while things continue to show signs of improvement, we continue to see some uncertainty in our volume outlook for the second half, with the timing and magnitude of recovery still to be determined. But we think our utility-facing end markets will remain resilient as critical grid infrastructure needs to be upgraded and maintained.

And electrical markets, while challenging, continued to improve. And overall, despite continued market volatility, we're well prepared to manage through a range of scenarios.

You'll recall, we walked you through our recession playbook last quarter and talked about how we've historically performed well through past downturns, given the less cyclical nature of our utility business and our ability to execute on margins and free cash flow.

You saw evidence of that in the second quarter, and we feel well positioned for the second half. Turning to Slide 4. I think it's important to look back on our approach to navigating through COVID-19 and revisit the commitments we made to our employees, our customers and our shareholders.

We successfully implemented a rigorous set of protocols to keep our employees safe while we continued to provide our customers with the essential products they needed to operate critical infrastructure safely, reliably and efficiently.

And I can say even from my own experience being in our offices since the beginning of June, I think our protocols, I feel, are very safe, and I think our employees should feel very safe when they come back into the office.

We did experience disruption in our supply chains in the second quarter as expected, but all of our facilities are currently operational and we're able to continue providing customers with the same level of quality and reliability they've come to expect from Hubbell over decades-long relationships.

Importantly, we're also committed to proactive actions to manage our cost structure as Hubbell employees across the enterprise made sacrifices, recall in reduced compensation and other cost reductions. Finally, we're committed to preserving our strong liquidity position.

And after another strong free cash flow quarter, we believe we're well positioned with approximately $0.5 billion in cash sitting on our balance sheet at quarter end. While we laid out our second quarter financial framework, we believe that a decremental margin in line with our gross margins at around 30% would have reflected solid performance.

And we did significantly better, delivering decrementals of only 14% in the quarter. Looking ahead, while the impact of COVID-19 is significant, we believe there is still a long way to go before this pandemic is behind us. We're proud of our employees for the way they've adapted to a new environment.

Some people say normal environment, but - the new normal, but this is far from normal. It really is just a different environment that we're working through. And we're doing that while still delivering strong execution and performance.

And we're going to continue to take steps to effectively mitigate the near-term impacts of the pandemic while preserving long-term value for Hubbell and our shareholders.

Before I turn it over to Gerben to talk about in more detail the segment results and our financial performance, I want to give some additional color on the press release from last night announcing a change to our operating structure and the consolidation of our three operating groups within our Electrical segment into a unified Electrical Solutions segment.

Over the last year, Gerben and I have been working closely and as he's got more insight into the rest of the businesses, he's identified opportunities for us to continue to streamline and address our organizational structure.

And we agree that there's significant opportunity in better optimizing our scale across our Electrical offerings to develop integrated solutions for our customers.

The formation of a unified Electrical Solutions segment will benefit our channel partners and customers through increased ease of doing business as well as improved innovation and development of integrated solutions. It's also going to generate a more streamlined organizational structure, which we expect to generate productivity benefits.

Certainly, in evaluating our portfolio, we believe this operating structure best positions us to fulfill our purpose as a company, which is to enable our customers to operate critical infrastructure, safety - safely, reliably and efficiently.

We're uniquely positioned to solve these problems as the only company with leading positions across the energy infrastructure, including behind the meter, in front of the meter and at the edge of the grid.

You'll recall that on Page 5, a slide that we showed at our Investor Day back in March, gives us the unique opportunity to leverage our installed base to generate insights from the transmission and distribution of energy, the consumption of energy and the ability to collect, analyze and control energy data.

Similarly to our integrated operating structure in our Utility Solutions segment, which we described at our Investor Day back in early March, the next phase in our evolution, we believe, is in the unified Electrical Solutions segment.

It's going to allow us to more effectively target attractive new market segments and develop differentiated offerings for our customers with increased speed as the markets evolve at a faster pace through this pandemic environment.

Importantly, we've identified and named a leader, who we think is uniquely capable of delivering on that vision in Peter Lau.

Peter has extensive leadership experience and a strong track record across other multiindustry companies, particularly in the commercial building space, and we're confident he's the right person to help lead this business into the future.

With that, I'll turn it over to Gerben to walk you through some more details, and then Bill will walk you through some of our working capital, cash flow and margin analysis.

Gerben?.

first is the power systems as a higher-margin business held up stronger than Aclara, as I talked about; and secondly, within Aclara, the lower margin installation business was the one most affected by the regulatory delays and project impacts. So let me now turn it over to Bill on Slide 10.

Bill?.

Good morning, everybody. I appreciate you taking time to join us and hope you're being safe. Gerben described for you our margin expansion. On Page 10, we thought it would be informative to go through a bridge because there really are an awful lot of puts and takes.

And there's more to the performance here than just the volume, and there's some structural elements as well as some temporary volume-based variable cost moves. So I wanted to just untangle that and walk everybody through it. So I'm going to start on the right side of the page.

You see we ended at 15.8% operating profit margin, a 30 basis point improvement over the same period last year. The two green bars to the right really represent the work that we do quarter in, quarter out, year in, year out to help work on improving our margins. The first is price cost.

We're constantly evaluating where our costs are and making sure we're getting adequate price to ensure we get margin expansion from that activity. That was a nice contributor again this quarter. And to the right of that, you see the restructuring footprint optimization and you see a very healthy contribution there.

The two of those combined to give us about two points of lift in margin, which, in a flat volume quarter, would have been a really significant standout contributor. Unfortunately, this quarter, you see all the volume-related things to the left, which absorbed all but 30 basis points of that benefit.

I think it's worth pausing on the restructuring just for a second. You'll see that during the first half of 2020, we've invested a comparable amount to what we invest in the first half last year. But we continue to see, and we're increasingly encouraged by the savings that are coming out of these projects. We now are experiencing a run rate.

We estimate to get about $25 million of savings running through 2020. And you'll recall last year, we invested about $37 million. So our payback there, very attractive and very nice returns. So if you go to the left of the page, you'll start to see the impacts of volume.

The first red bar there is the markets we experienced, as Gerben described, a 15% decline in demand and as you lose the profit from that volume, it drags margins down. The next bar, we think we lost an additional 5% to 6% of sales with the supply-chain disruption that Gerben mentioned in Mexico.

We lost similarly the margin from those sales, but also, there are costs in there of absorption from temporary closures and furloughed factories. There's appreciation pay. There's emergency paid leave and there's extra PPE expenditures, all of that contributing and dragged.

But the next green bar is really the business model's variable response to that lower volume. We took salaries down. We imposed furloughs that reduced compensation expense, T&D spending way down as no one was getting on airplanes, medical down as people were delaying their visits to doctors, and we spent less money on supply.

So you see the very natural variable response of the business model. But I think the real story of the margin bridge is the two points that we got through price costs as well as restructuring investing that we've done. On Page 11, we've put the two quarters together here and shown you the first half.

The two quarters are remarkably different, a pre-COVID quarter and a COVID quarter, but I still thought it was instructive to put them together and show you where we are on a summary basis that half time. So you see our net sales down double digits to just over $2 billion. The Utility business doing better than the Electrical in terms of sales growth.

And within Utility, the Power System actually growing in the first half. The margins on operating profit are comparable. And so you see a profit decline in line with the sales level of decline. And the resulting earnings per share of that of $3.51. Dave is going to walk you through our guidance in just a minute.

And as the Utility business is giving us some strength and the confidence to give you the guidance, you'll see that we've achieved about half the earnings we anticipate here at halftime. Similarly, with cash flow, and I'll go into cash flow as we turn more deeply as we turn to Page 12.

So you see, we generated in the first half just under $270 million of free cash flow, 66% increase over the comparable period last year. And despite having a lower contribution of income, because of the sales decline, we had a lower demand and requirement on working capital investments. So I think we managed quite well the inventory side.

We recognized very early in March that we were headed to a volume decline quarter and that affected how we looked at raw material purchases. And so inventories were very well-managed in a source of cash in the quarter. Additionally, receivables, our collection experience has been quite positive.

We think the industry is behaving quite responsibly, vendors are paying and customers are paying us. And so that's all managed to the point of allowing us to get to a point, as Dave highlighted, that's greater than half of our target of $0.5 billion of free cash flow for the year.

And we typically have some seasonality in the fourth quarter that allows us to have a large collection. So we're feeling quite good about the cash flow. And the right side of the page and a look at liquidity helps describe why that's so important to us. So you see there. The cash build up to $485 million. You see our debt levels.

We typically rely for our short-term and floating rate debt, we typically rely on the commercial paper market. That market for a moment dried up on us in the quarter. And so we relied on our banking relationships. We borrowed from our revolver, $100 million tranche and then a second of $125 million.

I'm happy to say the CP market has come back in a very liquid and responsive way, and we have paid back the banks and are back to our more normal arrangement of funding ourselves in the short-term in the CP market. So we feel very comfortable with our credit stats. You'll see the net debt-to-capital improving in the first half of the year to 32%.

Our debt-to-EBITDA on an adjusted debt basis - net debt basis being less than 2x. And so we feel like that's doing a good job of supporting our capital allocation ambitions, which is worth ticking through quickly. So on the dividend side, we continue to be focused on a payout ratio and that 40% to 50% of net income.

So as we can grow our income, we'd like to keep growing dividends. On capital expenditure side, in the second quarter, with an abundance of caution, we tamped down our CapEx a little bit. But for the second half of the year, and you'll recall last year, we were at about $100 million of CapEx.

So we think the second half will return to about a $50 million run rate. We're very happy with the projects and the returns that we get on those capital projects in terms of productivity. Share repurchasing, we still are authorized to be in the market and continually look to be opportunistic there.

And on the acquisition side, we see the pipeline starting to fill up. So we're happy that the balance sheet is repaired itself. As we look back last year to the acquisitions we did, we invested about $70 million in three different deals.

It's interesting to see those deals are performing and contributing more than the sales in OP than we originally estimated and modeled to justify their valuation.

So they're performing very well through the pandemic and provides good underlying support for our acquisition thesis that there are opportunities out there to add to our brands, continue to invest the two most significant contributors from last year. One is on the power side and the other on the Burndy on the connectors and grounding side.

So they're in markets that are doing well and performing well. So we're looking forward to - in the second half, getting a few typical Hubble-size acquisitions done. And with that, I'll turn it back to Dave to talk about outlook and guidance from here..

All right. Great. Thanks, Bill. So turn to Page 13, and I'll give you just some of our insights to the extent or the way we're looking at some of our end markets. You start at the upper right on the pie there, the electrical transmission and distribution markets, certainly been resilient for T&D components.

Particularly on the transmission side, has continued investment in renewable. Renewable generations, creating the need for transmission projects. But T&D is not immune to some macro near term, but all of the secular drivers around grid hardening, aging infrastructure certainly remain intact and support our continued multiyear runway for solid growth.

Moving down to the Utility, comms and meters. Obviously, as Gerben talked about some headwinds near-term from restrictions on installations, which require our access to homes and buildings other than in emergency situations. Longer term, Utilities continue to demand smart grid technology that modernize the grid.

So I think there's plenty of opportunity there. On the gas distribution side, gas utilities continue to replace their aging infrastructure, but replacing components in the system that carry gas from main to meter can be limited in some cases near-term because of that same access issue in homes and buildings.

On the oil side, markets continue to be weak there with limited activity off an early low base. Obviously, that's a good margin business for us, but fortunately, it's a smaller proportion of our business. So I think we can navigate through that. The residential side, as Gerben mentioned, some bright spots in the second quarter.

We've seen some very strong results on the housing front, and we've experienced some of that on the e-commerce and retail side. On the industrial, we continue to see weakness in the heavy with some pockets of resilience in the light industrial. Second half trends will obviously be dependent on timing and shape of the economic recovery.

And of course, last is the nonresidential markets continue to follow broader economy on a lag.

And while we've seen some projects get completed, some that were put on hold as things were shutdown, we're certainly cautious on the near-term outlook there, but the level of activity seems to be positive, okay? I mean what does all that mean? Well, let's turn to Page 14, and we can talk about our outlook and the framework.

We reported our first quarter results in April. We withdrew our annual guidance. There was so much uncertainty around the COVID situation. But as we've navigated the second quarter with a strong execution and at least what now looks like, there'll be some stabilization in volumes even though they're down as well as some other supply chain dynamics.

We thought it would be helpful to not only walk you through our framework for expectations, but how we're managing through this and also give you our best thinking on how that rolls up into an annual earnings per share range. So certainly, on the macroeconomic environment remains volatile.

And these expectations come with the obvious caveats, which a higher level of uncertainty around them, but as of now, we see ourselves being able to deliver in the range of $7 to $7.25 EPS on an adjusted basis.

We look - talked about the markets on the prior page, continue to expect pressure in Electrical end markets for the balance of the second half. We are seeing stabilization in orders with sequential improvement from May to June and into July. But certainly, no tangible signs that might support a V-shape recovery, but at least there's improvement.

Orders so far in July are down about 15%, and our base case is that the balance of third quarter looks somewhat similar for what we've seen on the order front. Certainly, opportunity to - if things continue to improve, but we're going to plan conservatively right now.

On the Utility Solutions side, we exited the second quarter with a strong backlog position in our Power Systems business. Continue to see the resilience in the T&D demand, particularly transmission. Gives us confidence that we can see some modest growth here in the third quarter.

Aclara is a little more dependent on when some of their projects can get fully ramped back up. And we continue to see delays in certain projects, as we've talked about. These are moderating our base case assumes, we'll probably see low double-digit declines here in the third quarter. Overall, our third quarter base case is down about 10%.

On the margin front, our facilities are all currently operational. We certainly have learned a lot and continue to navigate through pockets of challenge, whether it be an individual test positive that may require a 24-hour, a 72-hour or in worst case, 14-hour quarantine. And so there's pockets.

We've been able to manage that into specific - for the most part, specific cells or departments. And so we've navigated it. But we continue to expect some productivity challenges as we manage through it. And we - but we expect the inefficiencies we experienced in the second quarter to improve in the second half.

We certainly see sustainable savings from the restructuring actions we've taken. And expect the full year savings of $25 million, which is above the $20 million we were targeting as of last quarter as we've taken some additional actions in the second quarter.

We also expect price cost to remain positive in the second half, although at a more modest level than the first half as we - we're going to lap some of our prior year price compares. The compensation reductions that Bill and Gerben referred to that we took in the second quarter, obviously, won't repeat in the second half.

We've committed to take those off and get back to normal. We also expect some of the operating costs, which we think were at unnaturally low levels in the second quarter to return. However, we do have control over some of these costs, and we've taken some actions to appropriately manage based on our order patterns and volume level.

The net of all these moving part is, we expect our decremental margins to tick back up into the 25% to 30% range in the second half, still below our gross margin levels. And on the cash front, we're actively managing our CapEx, but with a strong liquidity position, as Bill referred.

Having seen the benefit of our recent investments in productivity, we continue to invest in things like automation within our factories to drive future productivity. In terms of working capital, continue to manage our inventories down prudently.

Obviously, one of the things we've learned in the supply chain challenges is to make sure some of the critical components we might have to have some additional inventory, but we're contemplating that in our working capital management.

So the net of all of that is, we expect free cash flow for 2020 to be at the $500 million or better than we generated in 2019. So all in all, I think we're all very pleased. I have to tell you that when you think about where we were 90 days ago, we were just heading into the storm.

We had been through most of April, but the worst was yet to come as we found out in May. It's a daily challenge to slog your way through it. But I couldn't be more proud of how the organization, the leadership team, all the way down to the factory floor has really navigated that.

And I think that's what gives us confidence that despite the volatile markets, we're going to find our way and fight our way through to perform at the levels and execute at the levels that we are expecting. So with that, let me turn it over to the operator, open it up to Q&A..

[Operator Instructions] Our first question comes from Jeffrey Sprague. Your line is open..

First, just on the supply disruption on the top line, the 5 to 6 points, I'm sure, on the Electrical side, it was probably centered on lighting.

But the question is really, would that have impacted both segments equally? So you lost 5 to 6 points on the top line in both?.

Yes. Roughly, it was made-to-order products inside of lighting, so it couldn't be serviced out of the inventory, Jeff. And for the for the power business, also made-to-order product. So - and affecting both segments, as you said..

And just on the order front, do you see - I mean the orders still sound like you're somewhat suppressed, Bill, there's not a kind of a refill catch-up element or maybe there is, and it's just - there's other pressures that kind of mask that?.

Yes. I think as Dave said, the shape that we've seen was in April that deteriorated in May and some improvement since then. So - and that's carried into July month-to-date, but it's obviously something we're watching closely daily. And - but that - where orders are now in July, it's really the basis for how we've guided the second half..

And then for Gerben. Gerben, since you spearheaded this kind of reevaluation of the electrical structure and how the assets are performing, what do you think is the biggest opportunity? Is it just kind of a raw cost-out opportunity around inefficiencies? It does sound like you're suggesting there's some cross-sell that's been left on the table.

And I guess, to make it a further multi-part question, was there kind of a further evaluation of how lighting fits in the puzzle as part of this exercise?.

Yes. So let me start with your first part, Jeff. The - I was indeed highly involved in this.

And I would say the primary motivation for this actually wasn't cost, but more the efficiency of running this business and how we could better serve our customers, a, in just servicing them, which a lot of times, we would go to the same customer to different brands rather than taking a more holistic approach and go into the customer representing all of Hubbell.

We see cross-selling, absolutely. And we saw some of these benefits already when we put in play, and we talked about this, our VP of Strategic accounts are our very largest accounts, we put people in place that represent all of Hubbell. But there's still a lot of customers beyond the 10 largest. And that's really where the opportunity lies.

So our primary driver for this was really to service the customers and to drive incremental future growth. Of course, there is an efficiency related to this as well that we can benefit from. I would also say we're absolutely looking to reinvest part of those efficiency back in our business.

And if you look what we're trying to achieve from a technology perspective and innovation perspective and what we want to accomplish with digital commerce going forward, those things are absolutely needed, but they also require investments in the business. So we see this as an opportunity to fund some of those efforts as well.

And your second question was regarding lighting. We see for lighting absolute opportunity to fold in. With this Electrical segment as well, we see benefits. I mean if you just, again, look at - we sell lighting in two out of the three groups today. And certainly, I think lighting can help the others as well with those products.

There's again common customers there.

We're structuring this segment very similar to what we've done in the Power business, with market-focused or product-focused groups underneath so that you still have a level of intimacy with your customers because the one thing that I always feared when I ran the power business that as I got larger and larger, that would I eventually become slower and lose touch with our customers.

And so there's a structure in place that - where we would retain pieces of the business. And I see lighting folding in under that. So we'd always look at our portfolios. I'd say our focus right now is to improve the performance of our lighting business..

Our next question comes from Steve Tusa of JPMorgan. Your line is open..

Can you just maybe talk about where you stand as we kind of turn the corner into next year, assuming some degree of recovery, what you have from a kind of temporary or structural cost perspective? And then is the cash this year? Would you plan to be able to grow that cash next year, that $500 million-plus base? Or is there kind of similar to this temporary cost dynamics, some temporary working capital benefits that kind of flip back the other way?.

Well, I would say, Steve, a couple of things. One, you're right, there are some temporary costs things that are contributing to this year. But as we've mentioned, as those - some have come back, the salary adjustments that we've specifically limited to the second quarter because of the severity of the second quarter.

Those come back, but offsetting that with ongoing productivity, things that we have been focused on continually around our staffing levels, making sure that we're driving a level of productivity. I think some of that will be a function of how the markets recover and at what level.

And we certainly don't have any visibility into next year, but one of the things we're prepared for is to continue to take whatever actions are necessary to rightsize our cost structure around that. So that's the cost side.

And, Bill, maybe you want to comment on the cash side?.

Yes, Steve, I think that you're right that as sales growth comes back, we're going to need to invest in inventory and receivables to support that.

But I do think the restructuring work that we're doing and getting our footprint and square footage down is going to help us be better at inventory management and I still think there are opportunities for us to improve in days across our system. And as we benchmark ourselves, it appears evident that we do have opportunities.

So I think you're right that there's naturally going to be a requirement to invest a little working capital in that growth, but we will work hard to offset that by being more efficient now in days..

Right.

But I mean, that $500 million we should think about that as kind of a base?.

Yes..

Performance, not like some onetime, like benefit - I do just want to kind of make sure that I understand kind of all the moving parts? I think that's all..

Yes. I think you understand it right. So we achieved that in '19. We'd do better than $500 million in '20. And I agree, there's some working capital tailwind in that. But we should be better than that still in '21. Absolutely, you're looking at '19 base - we're improving on that 2019 base. Yes..

Right. Makes that kind of sense. Good execution in - on the margin. Congrats..

Dave Nord:.

Our next question comes from Deepa Raghavan of Wells Fargo Securities. Your line is open..

Dave, is your view of nonres slightly more optimistic in the context of what some of the peers have noted? You especially called out improvement in activity level.

Can you please expand on that and perhaps even offer your views if you think nonres - your nonres business at least can grow next year or even bottom out next year? And I have a follow-up..

Yes. Deepa, I'm not sure that you may interpret my tone versus the substance of what's underneath it. I don't - and some of it, and I've said internally, to our team, the one thing that's in this new environment is you declare victory when things are down 18% versus an expected 20%, like, wow, that's success. So improvement is relative.

We still think that there is work to be done, particularly, as I said, some of the things that we've seen have been as a result of projects getting restarted or completed, not new projects, I think the question is going to be what happens. And I think we would all agree that the uncertainty is around new projects, what new projects might occur.

The one area that I've talked to a couple of people on, particularly in the commercial space that's interesting, they refer to, they have a reference to what had been a vertical move has now become a horizontal move. Meaning, and others might describe it as the deurbanization of America with everybody moving out of the cities.

You've seen that in residential real estate market. Well, if that's a long-term trend and it happens meaningfully, there needs to be some investment in those communities around nonresidential construction, whether it's retail, whether it's hospitals, that's still a big uncertainty to see how that dynamic plays out.

But I don't know that I would say that I'm more optimistic than the market..

My follow-up is, as you've manage through COVID at Hubbell, did you end up finding that some of your businesses were more resilient than you might have thought and perhaps not so much? And if you can also talk to any - if you discovered any new areas of opportunity where you could consider organic or inorganic growth opportunities going forward? That will be helpful..

Well, I'd have to say that all our businesses are resilient, at least our people addressing the - some of the really volatile markets, they've been very resilient. I don't know that there's any particular market or business that I would point to that has been surprisingly weak. At best, they've either been as expected or maybe slightly better.

Other than some of the implications, as Gerben talked about, when you think about the Utility business and where it requires you to get into a home, that's not something that we can control, and that's something that's unique to this environment. So what's otherwise a resilient business deals with some other implication.

I mean this terms of future growth opportunities, and I look to Bill or Gerben to comment on that because there's a lot of areas that I know they're working on..

I think, Deepa, we continue to see good opportunity in utility markets. We continue to think that, that infrastructure that requires upgrading and strengthening. We continue to believe that making the grid smarter is going to allow utilities to run those power grids more efficiently and more safely.

I think the - so it's kind of reinforced this last 90 days, has reinforced the essential nature of what we do there. I also think that inside of buildings, you see different pockets, distribution or retail has been an interesting bright spot as people have been forced to live at home or be at home more frequently than they're used to.

And so they're kind of investing in their homes.

As Dave said, does that have a longer tail to it as people's behavior changes, I think, will be interesting? On the commercial side, data centers and the role of data and information are playing in all of our lives, we think is going to continue to drive opportunity for us to connect, and we continue to think that we have a unique positioning across the utility grids of electrical gas and water and how that crosses through the meter into buildings and how that gets used and so we feel really good about that.

And I think some of the org design that Gerben is talking about is looking to take advantage of that unique positioning that we see..

One question for Gerben, if I may? Gerben, as you've been working through this reorganization, did you end up finding there were - if there were any businesses that did not fit with this overall Hubbell portfolio?.

I'd say the short answer to that is no. But that said, we absolutely have a focus in our business on evaluating our portfolio. One of the big things, and we've actually gotten great success out of that, is what we call it, our SKU rationalization or optimization evaluation.

And what we literally do is we put it in 4 quadrants of how they contribute to growth and how they contribute to margin contribution. And then the focus is on those that don't contribute well to either, to either move them up or rationalize them out. So we've seen actually a trimming of our SKU portfolio.

And we're doing that on a SKU on a product line and even at different level. So I'd say we'll continue to see that going forward. I do believe that these businesses and the key is that they have common customers that they have common markets.

And if you look at the pie chart that we have, we have some diversification, but we're still pretty focused on a few attractive end-markets. So I'd say the short answer probably is no, but I would expect, as we have seen over the last couple of years, continued trimming where it doesn't make sense and additions as well.

And that's the other thing I would say that in a market like this, and Bill talked about the second half perhaps seeing some more activity in deals, and I would say a lot of these deals, especially the size that fit Hubble, these $30 million to $50 million privately owned businesses, a lot of those owners through COVID are really reevaluating their continued interest to run those businesses and then we become more attractive as an acquirer for so.

So I'd say that that's pretty active for us right now to add to the portfolio on the other side..

[Operator Instructions] There are no further questions, please continue..

All right. If there are no other questions, that will conclude today's call. I'll be around all day for follow-ups, and thanks for joining us. Bye, everyone..

Thank you very much..

Thank you..

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