Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Incorporated Conference Call. [Operator Instructions] At this time, you are in a listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] I would like to now turn the conference over to Kevin Maczka. 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 Maczka. 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'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 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 Web site 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 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 million to $550 million. Organic growth is a key priority. And 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 and $0.77 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…

Thank you, Roel. Please turn to slide four for a detailed consolidated review. I will start my comments with results for the quarter, followed by a review of our segment results and a discussion of the balance sheet and cash flow performance. As a reminder, I will be referencing adjusted results today. Revenues were $603 million in the quarter, increasing $178 million or 42% from $425 million in the second quarter of 2020. Revenues increased 28% organically compared to the prior year and 9% sequentially. Importantly, we have not seen material restocking by our channel partners. And so, we believe this revenue performance is consistent with improving end demand. Incoming order rates were also very strong during the quarter, increasing 74% year-over-year and 18% sequentially. This resulted in a book-to-bill ratio of 1.19 times, including 1.22 times in Industrial Solutions and 1.16 times in Enterprise Solutions. Gross profit margins in the quarter were 35.7%, increasing 30 basis points compared to 35.4% in the year-ago period. As a reminder, as copper costs increase, we raised selling prices, resulting in higher revenue with minimal impact to gross profit dollars. As a result, gross profit margins decrease. In the second quarter, the pass-through of higher copper prices had an unfavorable impact of 320 basis points. Excluding the impact of this pass-through, gross profit margins would have increased 350 basis points year-over-year. This exceeded our expectations for the quarter, and we are especially pleased with the performance given the current inflationary environment. We expect that inflationary pressures will likely persist, and we are proactively addressing this through price recovery and productivity measures to support gross profit margins. EBITDA was $93 million, increasing $44 million or 90% compared to $49 million in the prior year period. EBITDA margins were 15.5%, increasing 390 basis points compared…

And thank you, Jeremy. Please turn to slide nine for our outlook. End market conditions continue to improve, and I'm encouraged by our robust recent order rates and solid execution. We are increasing our full-year 2021 guidance to reflect better-than-expected performance in the second quarter and an improved outlook for the remainder of the year while considering the renewed uncertainty related to the global pandemic. We anticipate third quarter 2021 revenues of $590 million to $605 million and EPS of $1.11 to $1.21. For the full-year 2021, we now expect revenues of $2.32 billion to $2.35 billion compared to prior guidance of $2.13 billion to $2.18 billion. This $170 million increase to the high-end of our guidance range includes approximately $140 million from improved operational performance and $30 million from higher copper prices and current foreign exchange rates. Our revised full-year guidance implies consolidated organic growth of approximately 15% to 17% compared to our prior expectation of 6% to 9%. We now expect full-year 2021 EPS to be $4.37 to $4.57 compared to prior guidance of $3.50 to $3.80. Our revised guidance for the full-year 2021 implies total revenue growth of 25% to 26% and EPS growth of 59% to 66%. We expect interest expense of approximately $62 million and an effective tax rate of 19.5% for the full-year 2021. Please turn to slide ten. Now before we conclude, I would like to reiterate our investment thesis. We are taking bold actions to drive substantially improved business performance, and you are seeing that in our much better-than-expected first-half performance and increased full-year outlook. This includes aligning around growth markets, developing innovative networking solutions, and enhancing our commercial capabilities. Our financial leverage improved significantly during the quarter, and we tend to return to our targeted leverage range by year-end 2021. I am confident that we have the management team, strategy, and business system to successfully execute our strategic plans and drive strong returns for our shareholders. That concludes our prepared remarks. Stephanie, please open the call to questions.

Thank you. [Operator Instructions] Our first question comes from Noelle Dilts with Stifel.

Hi, guys. Good morning and congratulations on a really great quarter. I was hoping that, first, you could kind of talk about -- you know, obviously, you saw really strong growth in smart buildings; Roel, you mentioned that you think part of that is share gain. I'm just curious how you're kind of thinking about how much of the growth is coming from market recovery and maybe some catch-up as construction projects start moving again versus what might be share gains?

Yes. Thank you for the kind words, Noelle. So, two comments; first of all, on the commercial real estate market, I think what we're seeing is that some projects that started earlier are now being finished a little bit faster than we had anticipated. And secondly, I think I highlighted on the call that we are successfully reallocating some resources to growth verticals within the Smart Building segment. So, datacenters and healthcare facilities are two of the verticals that I think we pointed out. And we're doing very well there. Just one quick data point, our datacenter business doubled in the quarter compared to a year ago. So, that's how I'd like to see. We're cautiously optimistic on commercial real estate, but it remains a little bit [murky] [Ph] in that segment.

And any thoughts on kind of how you're measuring the success of your commercial initiatives and share gain?

We get point of sale information, which we compare to the public data that is out there, how our competitors are doing, and we are confident that we are better positioned and are gaining share.

Okay. And then, on the broadband business, I was hoping you could give us a little bit more detail on what you're seeing in terms of the inside-the-home business versus outside-the-home, and how you're thinking about those pieces kind of progressing over the next 12 months?

Absolutely. So, the ratio of revenue in Q2 insight versus outside was about 60% outside-the-home and 40% inside, which is pretty consistent, where we have been tracking, as I'm sure you know. What's interesting is that within the quarter, the growth rates for outside-the-home on an organic basis were 17%, which was consistent with what they were in last quarter. But even inside-the-home grew, so inside revenue grew 7%. And last quarter, inside growth was flat. And as you may remember last year and even in 2019, that actually declined inside-the-home revenue declined. We expect now for the full-year to grow inside-the-home revenue at about the same rate as we did in Q2, so approximately 7%.

Great, thank you.

You are welcome.

Thank you. Our next question comes from William Stein with Truist Securities.

Great. Thanks for taking my questions. Congrats on the very strong results, particularly in the Enterprise segment. I'm hoping you can give us a little bit of a more [robust update] [Ph] on the planned sale of copper cable wire business. It sounds like you sold a small piece of it. Where are you on the rest of it? And to what degree is that contemplated in guidance?

Thank you. Thank you, Bill, for the nice comments. So, we did indeed successfully conclude one part of the transactions. So, what we're seeing is that potential buyers have shifted their priorities a little bit. So, with the global economic research, the surge that we're seeing, they have shifted their priorities to fighting their own supply chain issues and optimizing their demand in their own factories, make sure they're able to supply that demand. So, we see a little bit of a shift in priorities of potential buyers. These projects and these products remained non-strategic. They are not of a solution. They are growing. These businesses are growing right now. So, we'll see how the market develops and how the priorities or potential buyers develop. But in the meantime, we just will continue to run them, and we will only transact valuations that make sense to us.

Okay. It sounds like maybe that sales are on hold then. Let me turn to the other topic, I wanted to ask about, which you just mentioned a moment ago, which are capacity constraints in some of the other technology companies that cover the capacity constraints are much more front and center. I haven't really heard Belden mention these. I'm not sure if there is a meaningful constraint at all, but maybe you can help us understand to what degree you're seeing any sort of extended lead times or trouble meeting customer demand?

So, we're obviously not immune to supply chain constraints and inflationary pressures on input costs. But indeed, as the numbers shown, we have been quite successful in managing those. So, I think the teams have done a good job at securing capacity from our suppliers, which includes chipsets for our networking switches. I think they've done a good job at ensuring and locking in supplies for resins and all kinds of material that is required to produce our cable. So, we're not immune to them, but the teams have done a decent job in securing those demand. So, therefore, able to post the results that we did and increase our outlook to the extent that we did. We are also obviously experiencing a little bit longer lead times on our products than typical, but we have pretty sound data that we are able to deliver significantly faster than our competitors do. So, we feel good about how the teams have been managing that so far.

Great. Thanks, and congrats again.

Thank you, Bill

Thank you. [Operator Instructions] Our next question comes from Steven Fox with Fox Advisors.

Hi, good morning, I was wondering if you could maybe talk a little bit about the dynamics behind raising prices for copper. It sounds like -- first question on that is, it sounds like all the material pass-through that impacted margins was on the enterprise side, even though you have, obviously, industrial carries some of that weight as well? And then secondly, are you passing it through quicker than you expected as well in the quarter? Just maybe a little bit of dynamics around that would help. And then I have a follow-up.

Yes, sure. I'll tee it off, and then I'll ask Jeremy to provide a little bit more comments. We have robust processes in place. So, for a significant part of our revenue, a significant part of our customer base, we pass through automatically. We have certain bands. And if copper increases above that band, then automatically, the prices are being raised. We've been dealing with this for decades, right? So the processes that we built are pretty robust. For the part of the revenue and part of our customers, where we do not have such agreements, we have conversations, and we point out. And since we are a trusted brand that delivers such good delivery performance and excellent quality performance in virtually all of the cases, we're just able to pass them on. So, that's all I would answer the question.

Yes. And I think just going back to your other point, Steve, the copper impact, the pass-through impact affects both enterprise and industrial. So, both have some copper content and both are managing in the same way, which is very aggressively, as Roel said. So, I think from a timing impact, we're not really getting a benefit in terms of EBITDA, and we don't have much headwind on the EBITDA side because the price increases are coming at the same time, the higher cost is hitting the P&L. I think from a margin standpoint, that pass-through impact is affecting both segments.

That's helpful. It sounds advantage in terms of just the timing pastures being in line. And then just as a second question. On the enterprise side, obviously, there's -- you broke down the business year-over-year, and there's different comparison services a year-ago that you're matching up against. Can you talk a little bit sequentially about broadband fiber and smart buildings, how they did quarter-over-quarter? And how maybe directionally you're thinking of them into Q3 and Q4?

Yes. So, I'll give you those numbers, Steve. So, sequentially, from Q1 to Q2, smart buildings was up 14%, and broadband was up 19%, so, strong growth in both of those sub-segments. Looking forward to Q3, we guided a revenue number that is more or less flat at a consolidated level to Q2, and I would say that's roughly what we expect for both of those enterprise businesses as well.

Thanks. That's helpful. Thank you.

Yes.

Thank you. There are no further questions at this time.

Okay. Thank you, Stephanie, and thank you everyone for joining today's call. If you have any questions, please reach out to the IR team here at Belden. Our email address is investor.relations@belden.com. Thanks, and have a great day.

Thank you. Ladies and gentlemen, this concludes today's presentation. You may now disconnect.