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 would like to ask a question, please press star 1 on your touchtone phone. 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, David. Good morning, everyone, and thank you for joining us today for Belden's third 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, Ruel Vestians, and senior vice president and CFO, Jeremy Parks. Ruel 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 have 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. For more information, please review today's press release and our most recent quarterly report on Form 10-Q. 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?

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 summary of the third quarter takeaways. We delivered another outstanding quarter with total revenues and EPS that exceeded the high end of our guidance ranges. I'd like to thank our global teams for diligently executing our strategic plans to accelerate growth and expand margins. Demand trends remained robust and I'm encouraged by our order rates. We continue to strengthen our relationships with customers and capitalize on opportunities across our business. We are increasingly benefiting from our focus on solution selling and new product innovation. Our strong financial performance demonstrates that our initiatives are gaining momentum with customers who recognize us for our design, engineering, and service capabilities. We are successfully navigating the challenging operating environment. Our teams are supporting our customers and taking proactive steps to expand margins despite the significant inflationary pressures and supply chain challenges in our industry. During the quarter, we further strengthened our balance sheet. As we increased EBITDA and generated free cash flow, net leverage declined to 2.8 times at the end of the third quarter. are pleased to report that this is back within our targeted range of two to three times for the first time since the outbreak of the pandemic. Finally, we are increasing our full year 2021 revenue and EBS guidance once again to reflect better than expected performance in the quarter and an improved outlook for the remainder of the year. In summary, This was another excellent quarter for Belden, and I'm very proud of the achievements of our global teams. Now, before we review our third quarter performance in more detail, I would like to update you on some important strategic initiatives. Please turn to slide four. As you know, Belden's senior leadership team and I have been pursuing a number of compelling strategic initiatives to drive solid and sustainable organic growth. One key initiative is to enhance our value-added solution selling capabilities. Beyond individual product sales, Belden is uniquely positioned to offer complete and differentiated solutions, including cable, connectivity, networking, and software products and services. Given our product breadth and application expertise, customers are increasingly turning to Belden to solve their complex networking issues and enable them to collect and analyze vast amounts of data. Our sales and engineering teams are engaging with customers to optimize their operations, increase productivity, and improve safety. I would like to highlight two recent project wins in industrial automation that illustrate our solution selling capabilities. First, in the logistics area, we recently engaged with a world leader in warehouse automation systems that provides conveyors, material handling racks, and other equipment to large warehouse operators. This is a lifetime Belden customer that recently expanded our engagement to include a complete factory floor network assessment. As a result of this milestone award, we expect to deploy a comprehensive networking solution across more than 20 facilities for this customer. In a second recent project, we engaged with a rapidly growing provider of robotic supply chain systems that utilizes automated guided vehicles, or AGVs, in large-scale warehouses. This application will include the design and implementation of next generation wireless AGV communication networks, optimizing the operation for hundreds of AGVs at each site. This represents a significant new revenue opportunity with this customer. These are just two examples of recent customer engagements that illustrate how Belden is transitioning from a product supplier to a value-added partner in the design and implementation of advanced solutions. We are very excited about the progress we are making on this important growth initiative. Please turn now to slide five for a review of an innovative new product. We are making targeted investments throughout the company to develop new and innovative products that support our value-added solutions strategy. And one new product that I'd like to highlight in the industrial automation market is a new cellular communications gateway called ProLink Edge. This product is designed to help customers establish remote connection to their machines and monitor data via a secure cloud-based network. Customers will now be able to use this single integrated device whereas multiple components were previously required to provide the same functionality. We expect to continue developing innovative new products and complete networking solutions to support our customers and increase our growth opportunities. Now please turn to slide six in our presentation for a review of third quarter highlights, as I mentioned. we delivered meaningful growth and margin expansion again this quarter, with total revenues and EPS that exceeded our expectations. Third quarter revenues increased 33% year over year to $631 million, compared to our guidance range of $590 to $605 million. Organic growth is a key priority. and revenues increased 24% year-over-year on an organic basis. The Better Than Expected performance was broad-based, with contributions from both the industrial solutions and enterprise solutions segments. EBITDA increased 54% year-over-year to $101 million. EBITDA margins expanded 230 basis points from 13.7% in the year-ago period to 16%. EPS increased 82% year-over-year to $1.31 compared to $0.72 in the year-ago period and our guidance range of $1.11 to $1.21. We are increasing our guidance once again For the full year 2021, we are increasing the high end of our revenue and EPS guidance ranges by $50 million and 20 cents respectively. Turning now to our key strategic markets. We had another great quarter in industrial. Industrial solutions revenues increased 30% organically in the third quarter. Market conditions remained very healthy. 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 and productivity requirements, and other factors. Belden is highly differentiated in the marketplace, and we expect to deliver solid growth in this market moving forward. Turning now to enterprise. Enterprise Solutions revenues increased 18% year-over-year on an organic basis in the third quarter, driven by improving end-market trends and significant share capture in broadband and 5G and smart buildings. Within the segment, revenues in broadband and 5G increased 6% organically. We see strong secular trends in this market, driven by the ever-increasing demand for high-speed broadband and the desire to provide greater access. We have sustainable competitive advantages in this market, and we are ideally suited to support both MSO and telco customers as they continuously upgrade and expand their networks. Revenues in smart buildings increased 32% year-over-year and 13% sequentially on an organic basis, substantially exceeding our expectations. We are very encouraged by the improvements we are seeing in this market and the strong execution by our teams. We are benefiting from our 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 another great quarter. We are committed to driving robust organic growth and are encouraged that our strategic initiatives are gaining traction. I will now ask Jeremy to provide additional insight into our third quarter financial performance.