Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Inc. 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. [Operator Instructions] I would now like to turn the call over to Kevin Maczka. 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 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 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 2 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 3 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 their 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 de-levered 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 a 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 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 markets. 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 EUR200 million outstanding on our 2026 notes. This lowered our gross leverage level and interest expense and pushed the first debt maturity to 2027. Third, we've 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…

Thank you, Roel. Please turn to Slide 7 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 $610 million in the quarter, increasing $102 million, or 20% from $509 million in the first quarter of 2021. Revenues increased 19% year-over-year on an organic basis. Record incoming order rates increased 33% year-over-year and 7% sequentially compared to the strong orders in the fourth quarter of 2021. This resulted in a book-to-bill ratio of 1.27 times, including 1.4 in Enterprise and 1.16 in Industrial Automation. Gross profit margins in the quarter were 34.6%, increasing 100 basis points compared to 33.6% in the year ago period. We continue to proactively address market inflationary pressures through price recovery and productivity measures to support gross profit margins. EBITDA was $99 million, increasing $23 million, or 30%, compared to $77 million in the prior year period. EBITDA margins were 16.3%, increasing 130 basis points compared to 15% in the year ago period, demonstrating solid operating leverage on higher volumes. We generated healthy incremental EBITDA margins, as our teams continue to execute well in this challenging inflationary and supply chain environment. Net interest expense declined $1 million from the year ago period, reflecting favorable foreign exchange rates. Following the early debt repayment that we completed in the first quarter, we now expect interest expense to be approximately $50 million in 2022 compared to $63 million in 2021. Our effective tax rate was 19.5% in the first quarter. We expect an effective tax rate of approximately 20% for the remainder of 2022. Net income in the quarter was $59 million compared…

Thank you, Jeremy and please turn to Slide 12 for our outlook. The market environment is very dynamic with considerable challenges and uncertainties. However, our demand trends are very robust and our global teams are performing at a high level. We are executing our strategic growth plans and have positioned the company for further solid growth and margin expansion in 2022 and beyond. At current copper prices and foreign exchange rates, we anticipate second quarter 2022 revenues of $625 million to $640 million and EPS of $1.35 to $1.45. We now expect full year 2022 revenues of $2.48 billion to $2.53 billion compared to prior guidance of $2.39 billion to $2.44 billion. We now expect full year 2022 EPS to be $5.55 to $5.85 compared to prior guidance of $5 to $5.35. Our revised guidance now implies consolidated organic growth of 7% to 9% with solid growth in both segments compared to our prior expectation of 4% to 6%. The Macmon acquisition was contemplated in the prior guidance and we now anticipate an incremental $17 million of revenue contribution in 2022 from the NetModule and CAI acquisitions. We also expect an incremental $0.13 from lower interest expense and $0.09 from lower share count following the early debt repayment and share repurchase activity in the first quarter. For the full year 2022, our new guidance implies total revenue growth of 8% to 10%, and EPS growth of 17% to 23%. Please turn to Slide 13. But before we conclude, I would like to reiterate that I am extremely optimistic about our future. We've entered 2022 with significant momentum and delivered an exceptional first quarter. Our strategic growth initiatives continue to gain traction and I am encouraged by our recent order rates and the execution of our teams across the company. Belden is well positioned to benefit from the favorable secular trends in Industrial Automation, Broadband and 5G, and Smart Buildings. I am confident that our team will continue to deliver robust organic growth and margin expansion, driving significant value for our shareholders. And, finally, I would like to announce that we are planning to host Belden's 2022 Investor Day event in person at the New York Stock Exchange on the morning of June 15th. Additional details and registration information will be available shortly on our Investor Relations website. It should be a very informative event, and we look forward to seeing you there. That concludes our prepared remarks. Madison, please open the call to questions.

Thank you. [Operator Instructions] We'll go ahead and take our first question from Reuben Garner with The Benchmark Company.

Thanks. Good morning, everybody. Congrats on the strong results.

Good morning, Reuben. Thank you.

So it looks like, if my math is right, you're raising the full year EPS outlook by not only the beat in Q1 and the beat in Q2, but it looks like a little bit more on top of that and given the uncertainty that there is out there, I just wanted to see if you could hit on the visibility that you guys have into the back half of the year. I know that the recent order strength has been strong, but can you just kind of talk about your own visibility items within your control, some of the strategic initiatives, things that gives you comfort in that second half outlook?

Yeah. Absolutely, Reuben, and I appreciate the question. So first of all your observation is correct. The $0.50 at which we take our EPS forecast guidance up is more than just a beat in Q1 and more than just the previous implied EPS for Q2. We feel good. We feel good about the demand. We feel good about the secular trends in the markets that we play in and obviously what gives us also confidence, Reuben, is our backlog. So let me give you just two numbers, a year ago, our backlog at the end of Q1 was approximately $319 million. Right now, as we exited Q1, it was $828 million. So we have a significant backlog. The total value even more than exceeding a quarter. So obviously that gives us confidence as well.

Okay. That's very helpful. And I think it kind of maybe will help with my next question or my next question will help with the backlog. The book-to-bill number in Enterprise, I think it's the strongest I remember hearing from you guys, If I heard it right at 1.4. Can you just talk about what's going on there? Are these orders that you're just unable to ship because you're going -- it's that because you can't? Is it orders that do you feel like there is some pull-forward because products slowed, come to market or projects just not ready for you, just talk about why the backlog is building at the rate that it is and maybe specifically within Enterprise what you're seeing?

Yeah. Sure. So, first of all, our lead times are not going out. So yes, I'm sure there is a part of the bookings that we've received is from customers that wanted to secure demand, no doubt. But our lead times are not going out. So the bullwhip effect, if you will, we're not further seeing in Q1. Two is, book-to-bill was strong in both businesses, so the Broadband and 5G as well on the Smart Buildings business. If you look at the indicators that we track, both are very favorable, so the ABI Index that as you know, Reuben, we track for Smart Buildings is very favorable. So that gives us great encouragement. And on Broadband and 5G that business has continued to do well throughout the recession, so -- sorry, throughout the pandemic, grown in 2019, ‘20 and ‘21 after a great start in 2022 and actually, we're now seeing the first RDOF, the Rural Development Funds, being deployed providing extra tailwind for that business. So we just feel good about the markets that we're in and the indicators that we watch.

All right. We'll go ahead and take our next question from William Stein with Truist Securities.

Great. Thanks for taking my question and congrats on these really good results, especially the capital allocation in the quarter. But I do want to talk about some things that look like minor blemishes or just questions about results and outlook. First is on gross margin. That looks to come -- was a little bit lower than my expectation, maybe my model wasn't calibrated properly, but I think you mentioned that you might have paid some expedite fees or higher cost to get material in. And I'm wondering if you can dig one layer deeper on that. Why do you have higher expenses? Is it just input cost rising? Were you not able to pass them on to the customers? And then I do have a follow-up.

Sure. Let me start and then I'll hand it over to Jeremy. So, first of all, as we've demonstrated over the last quarters, we're in a pretty good position to pass on inflationary costs. So our input costs for passing on the inflation that we're seeing and in our workforce we're passing on, so the net result is actually favorable. We've demonstrated that, like I said, for quite a few quarters in a row. What we've seen in Q1 was, because of this extraordinary bookings number and our relentless commitment to our customers and delivering on our customers' commitments, we decided to pay higher expediting -- higher fees to expedite raw material coming in, so that we can fulfill that demand over the coming quarters. It is temporary. It is one-time and hence, we feel good about the -- further expanding of margins both gross as well as EBITDA margins for remainder of the year.

Yeah. And just to add on to that. This is Jeremy. So on a year-over-year basis, gross profit margins did improve by 100 basis points. Adjusted for copper pass-throughs, that would have been closer to 200 basis points. So I think we're doing the right things, I think we made good progress on a year-over-year basis. And, as Roel mentioned, we had a little bit of one-time expedite charges in the first quarter related to the inventory build within Enterprise and you can see that on our balance sheet. Inventory came up about $50 million from Q4 to Q1, but that also gives us confidence as we look to our sales forecast in Q2 and Q3.

Great. One other question and it's sort of challenges that outlook at least a little bit notwithstanding your very good backlog, which I'm sure is very reliable. You had this very significant backlog in Broadband and 5G, you have positive things to say about spend there, but there are some things going on, sort of, outside of your company both macro and at other companies that suggest that maybe we could be headed for a slowdown. You could look at the Netflix mess, lower subs, you could look at what's going on with the airlines and hotels. We people are -- as the economy opens up, people are shifting from online activities to real-world activities. That I would imagine could challenge your growth in that market and maybe there is some sort of overbuild or overbooking going on. Sorry for that elaborate question, but maybe you can comment on how that factors into your full year outlook and maybe your longer-term view? Thank you.

Yeah. I appreciate and I very much understand your question. I just had to come back to the secular drivers. So in the Broadband and 5G business, yes, as I indicated, throughout the pandemic that business has been performing well, but additional tailwinds include some of the additional funding out of the Infrastructure Act that the United States is contemplating as well as RDOF, which was already approved a few years back. Plus that business is benefiting from an increased mix between outside the home and inside the home. So, let me just give you one number. That mix was -- 72% of Q1 revenue was outside the home, which was a record and 28% only inside, as well as from the continued favorable mix from fiber over copper. So if you look at that ratio, fiber was 43%, again that's a record this quarter, compared to 57% in iron, copper products. So not only do we feel good about the stimulus packages that are being deployed right now, we also feel good about the secular trends within that business or within our portfolio of that business.

All right. We'll go ahead and take our next question from Noelle Dilts with Stifel.

Hi, guys. Thanks again. Congrats on the impressive results. I was hoping that you could maybe break down the 19% organic growth in the quarter in a little bit more detail, I'm not sure if you have. When you look at that, how much really came from price, how much came from volume, and if you were to look at that volume, if you have an estimate for maybe how much share you picked up in the quarter, I'd be curious to your thoughts on how we should think about the breakdown in the quarter and sort of how you're thinking about those dynamics for organic growth for the remainder of the year? Thanks.

Yeah, I think -- thank you, Noelle, and appreciate the kind remarks. So before I ask Jeremy to answer specifically in the angle that you asked for, maybe it's also helpful if we give you the regional growth percentages. So in the Americas, our revenue in Q1 grew 23%, in EMEA, so Europe, Middle East and Africa, almost 17%, and we did see a slowdown in Asia. So our Asian business only grew 5%. And outside of China, our business grew 20%, but China itself can track this, as you probably can imagine based on the information that we receive on the lockdowns, which also affected our own factory, for example and its inability to produce and deliver products. But outside of China, also double-digit growth in Asia.

Yeah. And just to round out the answers. So on a year-over-year basis, we grew 19%. The majority of that was volume. We did have some pricing, roughly 5% growth, I would say, it came from pricing and the rest was driven by volume. I think, from a market share standpoint or a market versus share split out, I'm not sure we would try to estimate that for you on the call, but I think if you compare us relative to our competitors, I think, you'll find we performed pretty favorably in all markets.

Sure. That makes sense. And then hoping that you could just expand on how you're thinking about Enterprise versus Industrial growth and margin performance when you look at the full year guidance?

Yeah. So I'll give that to you. So Industrial, I think, you can expect will grow roughly 10% year-over-year for the full year, and then the Enterprise business and I think it's the same for both Smart Buildings and Broadband and 5G, those both grow mid-single digits, call it 4% to 6%. From a margin standpoint, if you do the math, you'll see we wind up with 70 basis points to 80 basis points of margin expansion on a year-over-year basis as a consolidated company and I would expect roughly the same margin expansion for both Enterprise and Industrial on a year-over-year basis. So 70 basis points to 80 basis points for each platform.

[Operator Instructions] We'll take our next question from Mark Delaney with Goldman Sachs.

I guess -- good morning and thank you very much for taking the question, and let me add my congratulations on the strong results. I had a follow-up on the Broadband outlook and you touched on the -- some of the federal funds that are available, you said you're starting to see some benefit from the Rural Development Opportunity Fund and I think the Bipartisan Infrastructure Bill is maybe -- still to come. So can you elaborate on what that opportunity could mean for Belden in terms of potential revenue that may be addressed and when do you start to see the full run rate of these various programs?

Yeah. That's appreciated, Mark and thanks again for your positive remark. So that's obviously a little tricky, right. So RDOF, as you rightfully pointed out and as we stated, we're seeing the first deployments now with our customers, so that provide some tailwind. We're hopeful that, indeed as you indicated, the Bipartisan part of the Infrastructure Bill, that will include Broadband, we are hopeful. So we haven't obviously seen that yet. So that will only provide future opportunities for growth. And all I can do then in addition to that is go back to our improved mix and our positioning within that space. We just -- we feel we have a very good sustainable competitive advantages, so whenever there are growth opportunities, which there clearly are in the United States and in other parts of the world, we will benefit from it the most. So we don't expect that business to slowdown. We expect it to continue to grow mid-single digits. I think, during our last Investor call, we indicated that that's what we foresee in the short to medium term and that's exactly what we're seeing and that's exactly what we continue to expect.

That's helpful. And I just had a follow-up on China. You mentioned your operation there had some impact from the COVID restrictions and obviously a number of companies are dealing with that. I realize it's not the biggest market for Belden, but can you elaborate on what you're seeing in your own factory and what your expectations are for revenue trends through the balance of the year in China? Thank you.

Yeah. I appreciate that. Appreciate the question. So we indeed -- we operate in a region that was affected in the Greater Shanghai region, that was affected by these lockdowns. So our factory was, I think, in lockdown for about three weeks, but it's operational now, still not at a fully 100%, but its operational now and just remains to be seen what the government dictates in terms of their COVID policy. But it's operational now, we're running and the employees are healthy. So we feel good about the remainder of the year. I think, roughly, our China revenue for the year is approximately…

It's about $30 million a quarter. $120 million for the year.

So what you should expect, Mark is that, China will be a little bit depressed. It was depressed in Q1, a little bit depressed in Q2 as we ramp production back up. Our expectation though is that we get back to around $30 million in the second half of the year per quarter.

All right. Mr. Maczka, it appears there are no further questions at this time. Please continue.

Okay. Thank you, Madison 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. Thank you.

Thank you. Ladies and gentlemen, this concludes our call for today. You may now disconnect from the call and thank you for participating.