Belden Inc

Ladies and gentlemen, thank you for standing by. 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'd like to ask a question, please press the star key followed by the one key on your touchstone phone. If you are in the questioning queue and would like to withdraw your question, simply press star 2. I would like to now turn the conference over to Kevin Mosca. Please go ahead.

Thank you, Stephanie. Good morning, everyone, and thank you for joining us today for Belden's second quarter 2021 earnings conference call. My name is Kevin Masca. I'm Belden's Vice President of Investor Relations and Treasurer. With me this morning are Belden's President and CEO, Roel Vestians, and Senior Vice President and CFO, Jeremy Parks. Roel will provide a strategic overview of our business, and then Jeremy 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.belvin.com. Turning now to slide two in the presentation, during this call, management will make certain forward-looking statements. 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 and CEO, Roel Vestjens. Roel?

Roel Vestjens 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 second quarter highlights. We performed well again this quarter, and I'm pleased to report total revenues and EPS that exceeded the high end of our guidance ranges. Our end markets continue to recover, and our global teams are meeting the robust demand levels and successfully navigating the inflationary environment. This resulted in meaningful growth and margin expansion during the quarter. Second quarter revenues increased 42% year-over-year to $603 million, compared to our guidance range of $535 to $550 million. Organic growth is a key priority. Revenues increased 28% year-over-year on an organic basis. The upside relative to our expectations was broad-based. with contributions from both the industrial solutions and enterprise solutions segments. Incoming order rates were strong during the quarter, increasing 74% year-over-year and 18% sequentially. This resulted in a healthy book-to-bill ratio of 1.19 times. EBITDA increased 90% year-over-year to $93 million. EBITDA margins expanded 390 basis points from 11.6% in the year-ago period to 15.5%. EPS increased 163% year-over-year to $1.21 compared to $0.46 in the year-ago period and our guidance range of $0.88 to $0.98. We are increasing our full year guidance to reflect the better than expected performance in the second quarter and an improved outlook for the second half of the year. For the full year 2021, we are increasing the high end of our revenue and EPS guidance ranges by $170 million and 77 cents respectively. Turning now to our key strategic markets, we had another great quarter in industrial. Industrial solutions revenues increased 32% organically, with broad-based strength in each of our primary market verticals and regions. Market conditions are clearly improving, and we continue to see a number of compelling longer-term demand drivers for automation solutions as industrial customers respond to increasing labor costs, increasing capacity requirements, the need to pandemic-proof operations, and other factors. Belden is extremely well positioned and highly differentiated in the marketplace, and we expect to deliver solid growth in this market going forward. As we shared with you previously, we are making targeted investments throughout the company to support our customers by driving innovation and strengthening our product roadmap. As just one example of our recent innovations in industrial automation, we launched an expanded suite of advanced connectivity solutions during the second quarter called LionX. The LionX solutions provide manufacturers with a faster and more reliable approach to transmitting sensor and actuator data in automated production environments. This is a state-of-the-art, future-ready connectivity solution that is core to providing secure communication from the sensor to the cloud in industrial environments. These enhanced capabilities reflect our leadership position in this important growth market. We are also sharpening our commercial excellence in a number of areas, such as solution selling. Beyond individual product sales, Belden is uniquely positioned to offer differentiated solutions to our customers, including cable, connectivity, networking and software products, and services. I would like to highlight a recent success story in industrial automation that illustrates our capabilities in solution selling and resulted in a significant new business wind. During the second quarter, we received a $6 million award for a project with a large investor-owned utility in the United States for the implementation of a critical communications network. This is an important strategic win. Over the course of the project, we will be providing an expanded solution from the combined Belden and OTN systems, which we acquired in January, to a long-time Belden customer that previously purchased our industrial automation and cybersecurity offerings. It showcases our product and commercial synergies and is a great example of the opportunities we are now positioned to secure in this market. This is the first phase of the project. and significant future expansion is expected beyond this initial award. Beyond this project, the continued upgrade of grid infrastructure by other utilities throughout the United States is expected to provide many other opportunities to deploy our technologies. We also continue to make progress involving our portfolio and aligning with growth markets. During the second quarter, we completed the divestiture of our copper cable product lines serving the oil and gas market in Brazil, which we do not view as a strategic priority. These products previously contributed approximately $15 million in annual revenue with an immaterial contribution to EBITDA and cash flow, and we were pleased with the $11 million sales price. I would like to thank the team in Brazil for their efforts and wish them all the best. Turning now to enterprise. Enterprise solutions revenues increased 23% year-over-year on an organic basis in the second quarter. Within the segment, revenues in broadband and 5G increased 13% organically. We see strong secular trends in this market, driven by the increasing demand for high-speed broadband and the desire to provide access to every household. Broadband networks will need to be upgraded continuously to support high definition video streaming, work from home, virtual learning, and many other applications. We have sustainable competitive advantages in this market, and we are ideally suited to support both MSO and telco customers as they upgrade and expand their networks. Broadband fiber revenues increased 28% organically year-to-date in 2021 after similar growth in 2020. We expect further robust growth going forward as we continue to strengthen our patent-protected fiber R&D capabilities, add engineering resources, and reduce our time to market for new offerings. revenues in smart buildings increased 36% year-over-year on an organic basis, substantially exceeding our expectations. We are very encouraged by the improvement we are seeing in this market and the strong execution by our teams. We entered the year with an expectation that smart buildings revenue would decline in 2021, but we now expect to deliver solid growth in this market. We are benefiting from commercial focus on growth verticals, such as data centers and healthcare facilities. In addition, our improved operational performance and superior lead times are enabling continued share capture. To summarize, we had a great second quarter and first half of the year. We are committed to driving robust organic growth in 2021 and beyond, and are encouraged that our strategic initiatives are gaining traction. I will now ask Jeremy to provide additional insight into our second quarter financial performance.