Belden Inc

Welcome to this morning's Belden Reports first quarter 2023 results 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 touch-tone 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 Mr. Aaron Reddington. Please go ahead, sir.

Thank you. Good morning, everyone, and thank you for joining us for Belden's first quarter 2023 earnings conference call. With me today are Belden's President and CEO, Ashish Chand, and Senior Vice President and CFO, Jeremy Parks. Ashish 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.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 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, Ashish Chand.

Thank you, Aaron. First, I want to take a moment to express my gratitude to the board, our employees, and our business partners. Over the last 21 years, I've held numerous roles at Belden. However, it is my honor to be able to continue my journey as president and CEO. I'm truly excited about where Belden is headed as a company. We are executing upon a strategy, driving more innovation across our business. and adding to our world-class team in our transition to becoming a leading solutions provider. It's an exciting transformation for the company, and I'm humbled by the opportunity. Out of the task at hand are quarterly results. As a reminder, I'll be referring to adjusted results today. Please turn to slide four for a summary of the major accomplishments we achieved in the first quarter of 2023. First, Once again, our team delivered another outstanding quarter with total revenues and EPS that exceeded expectations for the 12th quarter in a row. Our revenue grew, our margins expanded, and our organic growth exceeded our previously issued guidance for the quarter. Revenues increased by 7% organically with positive organic growth in both segments. On top of solid growth, our EBITDA margins improved by 110 basis points to 17.4% for the quarter, driven by leverage on organic growth combined with a favorable product mix. Growth in the quarter was broad-based across our businesses and our regions. As Belden continues to transform from a supplier of trusted products to a value-added solutions provider, we are seeing the results, improved and more consistent organic growth, increasing margins, and deeper customer partnerships. Second, I am pleased to announce that in April, we closed on the acquisition of C-Shirt. I will provide more details later, but at a high level, C-Shirt is a great addition to our broadband solutions portfolio and strengthens our fiber capabilities in key growth markets. Third, I am pleased to announce that the Board of Directors has approved an additional share repurchase plan for $300 million. Combined with the remaining $15 million from a prior authorization, we now have $315 million to deploy towards share repurchases. This vote of confidence by our board is great for our shareholders and will allow us the flexibility to deploy capital towards share repurchases for multiple quarters to come. Further, during the quarter, we repurchased approximately 600,000 shares, utilizing $50 million from a prior authorization. As we have messaged previously, we remain focused on deploying capital towards high return opportunities. Our top priorities include organic investments in new product innovations and solution selling capabilities, strategic bolt-on M&A opportunities like C-Share, and returning capital to shareholders through our share repurchase program. Fourth, as our business continues to grow and we invest the capital towards high return opportunities, Leverage at Belden remains low at 1.3 times, down from 1.6 times a year ago. Our current balance sheet is strong with ample liquidity. Combined with low net leverage, we have significant flexibility to execute our strategic plans while staying below our target net leverage of 1.5 times. Free cash flow for the quarter was up year over year, and our trailing 12-month free cash flow reached $243 million, well on track to achieve the targets we previously articulated. In summary, this was another excellent quarter for Belden and continues to highlight the change our business has undergone over the last few years to produce a growing, more sustainable, and higher margin business than the Belden of the past. Now please turn to slide five. As I mentioned previously, I'm incredibly excited to share that the team at Seashirt joined Belden this past April. Based in Berlin, Germany, Seashirt designs and manufactures a portfolio of polycarbonate street cabinets utilized in outside plant passive optical networks, or PONs, and 5G networks. This acquisition further expands the fiber portfolio and will enable end-to-end solutions in key growth markets. Founded 100 years ago, C-Shirt has demonstrated steady growth in revenue combined with margins consistent with our overall business. In fact, over the last three years, C-Shirt achieved a revenue tagger of nearly 20% with improved EBITDA margins. C-Shirt operates in well-established markets with proven technologies and deep customer relationships. The acquisition is immediately accretive to our financials and came together at an attractive multiple of approximately 11 times current-year EBITDA. T-Shirt is the perfect example of the types of deals that are most attractive to us, as we're always excited to add good people and products to our team that further enable our solutions offerings. Now please turn to slide six for an overview of our solution strategy. First, as we have discussed in the past, Belden is evolving to add more value to our customer relationships through enhanced solutions delivery or solution sales. This strategy was articulated during our investor day last year and has been a key theme internally over the last few years. In my past role leading the industrial automation solution segment, we developed the solutions approach and executed it with much success. Consistent with a long-term strategy, we are well on our way towards building out enhanced solutions delivery capabilities for the smart buildings and broadband markets. Second, to provide more clarity, when we talk about enhanced solutions delivery or solution sales, we are referring to a new way Belden adds value to customer relationships. It starts with dedicated teams who specialize in core verticals, helping customers improve key KPIs through network and data solutions. Customers are increasingly challenged by islands of networks and data across their operations, and our teams work to bring these together so that they can be utilized as intended to add value. Belden has a strong portfolio of differentiated products that enjoy high gross margins. Our solutions offerings further advance our differentiation in the marketplace by becoming a trusted partner that adds value through improved customer results. Often, we help customers optimize operations, improve productivity, or increase safety for their workforce or customers. Our strategy is enabled by our subject matter experts who align around key verticals. As of the end of the quarter, we had over 125 consultants trained specifically to design and implement network and data solutions to maximize customer KPIs in selected verticals and for valuable use cases. Part of a solution sales strategy involves our customer innovation centers, or CICs. Customers are looking for solutions that are difficult to test in the real world where failure is not an option. Consider an auto manufacturer or a hospital, for example. Testing unproven solutions in the real world has meaningful risks. Our CICs allow customers to connect in person with subject matter experts and validate solutions with actual products and networks before implementing them in their businesses. This capability greatly enhances the value our consultants add and differentiates us from peers in the marketplace. And finally, we are still early in our solutions evolution. Much has been accomplished over the last few years and we see greater opportunities ahead. We believe this effort is critical to our future success and will further strengthen our competitive position, reduce sustainable growth, and ultimately higher margins and cash flow. Now, please turn to slide seven for a real-world example of our enhanced solutions delivery in action. Here it is, a subsidiary of global electric distribution system operator, EDP, based in Spain, had a problem. During times when the power went out on the network, it took on average two and a half hours for their crews to manually inspect substations, download data, and make in-field calculations to pinpoint the segment containing the fault. This was costly to e-readers in the form of lost revenue, employee time, and associated regulatory charges for system downtime. By taking time to truly understand the customer's needs, pain points, and expectations before the project began, Belden was able to provide a comprehensive solution instead of merely a component in a broader network upgrade. Our team worked with ERERIS to test various proofs of concept until we found the right solution set. As a result of our efforts, a new advanced fault-located system designed by Belden has drastically reduced the amount of time maintenance crews spend on fault location. two and a half hours before to 40 minutes afterwards. A 70% reduction in response time yielded substantial savings for our customer. This solution example is where Belden is headed. We continue to build out subject matter expertise with consultants at our CICs to solve complex problems for our customers utilizing data and network solutions. We are early in our journey but we are encouraged by the market reaction to our enhanced capabilities. I will now ask Jeremy to provide additional insight into our first quarter financial performance.