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 you 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, Madison. Good morning, everyone, and thank you for joining us today for Belden's first quarter 2022 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 Vestjens, 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 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.belvin.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 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?

Thank you, Kevin, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide three for a summary of today's presentation. We delivered another outstanding quarter with total revenues and EPS that exceeded expectations. I'd like to thank our global teams for the extraordinary work to navigate a complex operating environment, support our customers, and execute our strategic plans. Demand trends remained robust in the first quarter. Revenues increased 19% on an organic basis and record incoming order rates resulted in a very strong book-to-bill ratio of 1.27 times. During the quarter, we further strengthened and delevered our balance sheet. Solid EBITDA growth and $350 million in gross proceeds from the tripwire divestiture resulted in a reduction in net leverage to 1.6 times at the end of the first quarter 2022, compared to 4.1 times a year ago. We are very pleased to report such meaningful improvement over the last year. This was also a very active period for capital deployment. Consistent with our balanced capital deployment strategy, we executed the following accretive initiatives. First, we completed three strategic bolt-on acquisitions for a combined purchase price of $85 million including two during the first quarter in the industrial automation market and one subsequent to quarter end in the broadband and 5G market. We are excited about the growth and value creation potential of these acquisitions, and I will provide additional details on them on the following slide. Second, we redeemed the full 200 million euros outstanding on our 2026 notes. This lowered our gross leverage level and interest expense and pushed the first debt maturity to 2027. Third, we repurchased approximately 885,000 shares for $50 million under our existing authorization. And finally, we increased our full year guidance to reflect better than expected performance in the quarter, an improved outlook for the remainder of the year, and the accretive capital deployments. For the full year 2022, we are increasing the high end of our revenue and EPS guidance ranges by $90 million and 50 cents, respectively. We are very well positioned to deliver on our commitments to shareholders and drive sustainable growth. In summary, this was another excellent quarter for Belden, and I'm very proud of the achievement of our teams. We continue to transition Belden from a supplier of trusted products to a value-added partner in the design and implementation of comprehensive networking solutions. We are making great progress, which is reflected in our strong financial performance. Now, before we review our first quarter performance in more detail, let's discuss our recent acquisitions. Now please turn to slide four in the presentation. As I mentioned, we completed three acquisitions year-to-date in 2022. This included Magmont Secure GMBH in January for $42 million, which will be reported in a renamed Industrial Automation Solutions segment. We believe this new name better reflects the configuration of the business following the Trier divestiture. As discussed on the fourth quarter earnings call, MacMon is a leader in advanced network access control software. Its products are complementary to Belden's leading industrial networking portfolio and will be integrated with our Hirschman offering to expand our ability to provide complete end-to-end solutions. Key verticals include automotive manufacturing, food and beverage, utilities, and healthcare. More recently, we acquired NetModule AG, in March for $24 million. NetModule will also be reported in the industrial automation solutions segment. It's a leader manufacturer of wireless communication products for the rapidly growing mass transit market. The company uses the latest wireless technologies, including 5G and Wi-Fi 6, to support hybrid wired and wireless applications in this market. Its products will also be integrated into Belden's industrial networking portfolio to support complete end-to-end solutions. And finally, we acquired Communication Associates Inc., or CAI, subsequent to Quaterend for $19 million. CAI will be reported in the enterprise solution segment. It provides a range of products used in broadband, hybrid fiber coax networks. CAI's products are approved by major cable providers for the upgrade cycle to new DOCSIS 4.0 standards and to support 5G backhaul. This acquisition fills a gap in our broadband and 5G product offering and further expands our strategic partnership with MSO customers. In each case, these acquisitions add important technologies complement our capabilities, and enhance our ability to provide comprehensive solutions to customers. We are very pleased to add these talented teams and innovative technologies to our portfolio. On a combined basis, we expect these businesses to contribute approximately $30 million in revenue in 2022. Once fully integrated, we see numerous opportunities to drive substantial growth and healthy returns on these investments as we leverage our global customer base and solution selling capabilities. We are prioritizing organic growth, but we continue to pursue other strategic acquisitions like these to further enhance our product offering and growth potential. Please turn now to slide five for a review of an innovative new product. We continue to make targeted investments throughout the company to develop new and innovative products that support our solution selling strategy. One new product that I'd like to highlight in the industrial automation market is a new family of next generation network switches called Bobcat. This product is ruggedized and approved for use in the most demanding and mission critical industrial environments. Bobcat combines a compact package with high performance. It incorporates market-leading technology to address expanding networks, real-time control through time-sensitive networking, higher bandwidth and increased security. It is a powerful platform that adapts to customers' evolving requirements in markets such as consumer packaged goods, food and beverage, material handling and automotive manufacturing. 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 the first quarter highlights. We delivered meaningful growth and margin expansion again this quarter. First quarter revenues increased 20% year over year to $610 million, exceeding our guidance range of $558 million. to $573 million. Organic growth is a top priority, and revenues increased 19% year-over-year on an organic basis. Our strong performance was broad-based across both the industrial automation solutions and enterprise solution segments. Orders increased 33% year-over-year to a new record level, resulting in a book-to-bill ratio of 1.27 times. EBITDA increased 30% year-over-year to $99 million. EBITDA margins expanded 130 basis points from 15% in the year-ago period to 16.3%. EPS increased 46% year-over-year to $1.31 compared to $0.90 in the year-ago period and our guidance range of $1.03 to $1.13. We are off to a great start in 2022, and we are increasing our guidance for the year. This revised guidance now implies consolidated organic growth of 7% to 9% compared to our prior expectation of 4% to 6%. We also reduced net leverage to 1.6 times and completed the early redemption of our €200 million Euro 2026 notes. Turning now to our key strategic markets, we had another great quarter in industrial. Industrial automation revenues increased 21% organically in the first quarter. Market conditions remained very healthy, and we continue to see a number of compelling longer-term drivers for automation solutions as industrial customers respond to increasing labor costs, capacity and productivity requirements, and repositioning of manufacturing footprints and supply chains. Belden is highly differentiated in the marketplace, and we expect to deliver solid growth in this market going forward. Enterprise revenues increased 17% year over year on an organic basis in the first quarter, driven by improving end market trends and share capture. Within the segment, revenues in smart buildings increased 17% organically. We are very encouraged by the trends we are seeing in this market, and the strong execution by our teams. We are also benefiting from our commercial focus on growth verticals, such as data centers, government, and healthcare facilities. Revenues in broadband and 5G increased 16% organically, driven by strong demand for our fiber connectivity products. We see long-term secular trends in this market, driven by the ever-increasing demand for high-speed broadband and the investments required to upgrade existing cable networks and build out new wireless networks. 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. I will now ask Jeremy to provide additional insight into our first quarter financial performance. Jeremy?