Belden Inc

Ladies and gentlemen, thank you for standing by, and welcome to this morning's Belden Incorporated conference call. Just a reminder, this call is being recorded. At this time, you are in a listen-only mode. Later, we will conduct a question-and-answer session. If you would like to ask a question, please press star 1 on your touchstone phone. Your questions will be taken in the order they are received. If you are in the question queue and would like to withdraw your question, simply press star 2. I would now like to turn the call over to Kevin Mosca. Please go ahead, sir.

Thank you, Nick. Good morning, everyone. Thank you for joining us today for Belden's fourth quarter 2018 earnings conference call. My name is Kevin Masca. I'm Belden's vice president, treasurer, and investor relations. With me this morning are John Stroop, president, CEO, and chairman, and Hank Dirksen, Belden's CFO. John will provide a strategic overview of our business, and then Hank will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we've prepared a slide presentation that we will reference on this call. The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning to slide two in the presentation, During this call, management will make certain forward-looking statements in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. For more information, please review today's press release and our annual report on Form 10-K. Additionally, during today's call, management will reference adjusted or non-GAAP financial information. In accordance with Regulation G, The appendix to our presentation and the investor relations section of our website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. I will now turn the call over to our president, CEO, and chairman, John Stroup. John?

Thank you, Kevin, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide three in our presentation for a review of our fourth quarter performance. Revenues in the fourth quarter increased 8.1% year-over-year and 6.8% organically to $654.1 million. When adjusted for unfavorable movements in foreign currency rates and copper prices, revenues were consistent with our expectations across most of our portfolio. Recall that we entered the fourth quarter with the expectation that capacity constraints in our industrial segment would continue through the end of the year. I am pleased with the progress we are making on expanding manufacturing capacity and reducing lead times. We expect these efforts to drive significant improvements in customer service and inventory levels going forward. EBITDA in the fourth quarter increased 10.4% year-over-year to $121.6 million. EBITDA margins expanded 40 basis points from 18.2% in the prior year to 18.6%. EPS increased 2.5% in the quarter from $1.62 in the prior year period to $1.66. As a reminder, the fourth quarter 2017 benefited from an unusually low tax rate. Net leverage was reduced from 2.5 times net debt to EBITDA in the third quarter to 2.2 times at the end of the fourth quarter. This is now near the low end of our target range of two to three times. We completed our $200 million share repurchase program by deploying the final $50 million in the fourth quarter. We also announced a new $300 million authorization, which we expect to begin executing in 2019. Please turn to slide four for a brief discussion of our full year 2018 results. In 2018, we generated record revenues, EBITDA, and EPS. Full year revenues increased 8.5% to a record $2.592 billion. On a constant currency basis, revenues grew 7.9%, exceeding our long-term financial goal of 5% to 7%. EBITDA increased 9.2% to a record $474.2 million, driven by robust 24% growth in the enterprise solutions segment. Enterprise solutions benefited from the successful integration of the SAM acquisition within our live media business. EBITDA margins of 18.3% were consistent with the prior year. Lower interest expense and share count resulted in a 13.3% increase in EPS to a record $6.06. Cash flow from operations also increased by 13.3% to $289.2 million. 2018 was also highlighted by balanced capital deployment toward organic growth investments, share repurchases, and acquisitions. We increased net capital expenditures to $98 million to fund a number of attractive organic initiatives that are expected to drive meaningful growth in future periods. This included investments in new hardware and software products, such as our successful cloud-based cybersecurity solutions and a new manufacturing facility in India. This important facility made its first shipments during the fourth quarter. We deployed a record $175 million towards share repurchases, and we also completed two strategic acquisitions for $103 million, and we are very pleased with the successful integrations. The addition of Snell Advanced Media, or SAM, allowed us to significantly improve our live media business, and NT2 complemented the fiber offering in our broadband business. Please turn to slide five for a review of our business segment results. I will begin with our enterprise solution segment. As a reminder, our enterprise solutions allow customers to transmit and secure data, sound, and video across complex enterprise and media networks. Our key markets include smart buildings, final mile broadband, and live media production. Revenues in this segment increased 14.1% year-over-year to $379.4 million, or 7.4% on an organic basis. In-demand in the smart building market increased 2.8% year-over-year in the quarter. This market continues to benefit from healthy, non-residential construction in the United States and increased needs for contractor productivity and building efficiency. This trend is best reflected by our innovative Category 6A cable products, which deliver both data and power over Ethernet. Category 6A cable revenues increased 23% organically in the fourth quarter and 28% for the full year. Revenues in final mile broadband declined approximately 5% on a year-over-year basis relative to our expectation of flat. Recall that broadband order growth slowed in the third quarter due to customer inventory management, and as expected, that trend persisted in the fourth quarter. We continue to drive robust growth with our fiber optic and our outside-the-home products, which benefit from increasing broadband subscribers and network upgrades. But we are seeing softer demand for products used inside the home. As a result, revenues declined modestly on a full-year basis. We expect these trends to continue with growth in the outside network offset by softness in the home. We also see a number of attractive inorganic opportunities in the fiber area that would allow us to further expand our outside-the-home product offering and drive substantial growth. Revenues in the live media production were approximately flat sequentially in the fourth quarter. Importantly, orders increased sequentially and exceeded our expectations. Enterprise Solutions segment EBITDA margins were 17.8%, increasing 320 basis points from the prior year period, primarily due to acquisition integration and improved pricing. Pricing gains throughout the year allowed us to successfully offset input cost inflation. Turning now to our industrial segment. Much like Enterprise, our industrial solutions allow customers to transmit and secure data, sound, and video, but in this case, in harsh industrial environments. Our key markets include discrete manufacturing, process facilities, energy, and transportation. Revenues in this segment increased 6% on an organic basis to $274.7 million, with strong growth in all key verticals. Discrete manufacturing and process facilities, our largest verticals, grew 7.5% and 14.3% respectively on an organic basis. We continue to benefit from strong demand from machine builders and increasing investments in automation, and we expect these favorable trends to continue. Cybersecurity demand trends remain very encouraging. Non-renewal bookings, our best leading indicator of revenues, increased a robust 17% year-over-year in the fourth quarter after increasing 18% in the third quarter. Our new cloud-based solutions continue to gain traction with new and existing customers. Importantly, non-renewal bookings increased 32% in industrial and markets. We are further expanding our reach into this key vertical with the most comprehensive suite of products specifically designed for industrial applications. Industrial solutions segment EBITDA margins were 19.8% in the quarter. I will now ask Hank to provide additional insight into our fourth quarter and full year financial performance. Hank?