BDC - Earnings call transcript Q3 2019

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Incorporated Conference Call.

Just as 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. instructions] [Operator

like ahead, call sir. now Maczka. to turn go Please to would over the Kevin I

Kevin Maczka

XXXX CFO, My Thank Chairman, CEO, thank Belden's With us Officer, third-quarter me you Operating Anna. Vice John for conference Henk you, Good Relations Vestjens; are Roel joining Stroup; today morning, President of this for Chief and Maczka. morning is and Kevin name everyone, Derksen. Investor and earnings and I'm call. Treasurer. Belden's President, Belden's

third-quarter will and reference prepared our detailed announcements then of and we segment overview the transcript followed currently presentation online today. operating that this significant an we on of slide provide provide are review will and other performance available by release, that investor.belden.com. and financial Roel We results two this John at a results, have our will these Henk our Q&A. will a review presentation will made of issued The earnings we call. press provide, release Roel remarks and prepared morning, our earlier

to presentation. X the Turning in Slide

forward-looking this safe Reform in will management of make statements call, Litigation provisions certain Securities XXXX. of reliance harbor upon the During Private Act the

review Form information, today's and more report release on please For annual XX-K. our press

website information adjusted GAAP communicate. we a Additionally, to associated Regulation our non-GAAP information. G, Relations reconciliation during our Investor closely or the of the most financial presentation will today's contain call, In financial management of reference section appendix financial the non-GAAP accordance with to and information the

to I John? CEO, and will President, Chairman, our Stroup. over call the John now turn

John Stroup

and Thank good you, Kevin, everyone. morning,

for review and Grass Valley. it Please is program. outcome. Valley and to adjusted in of portfolio best today's referring in and our businesses that completed Grass significant today our an new divest turn We our that two customers, our our to I'll Valley made announcements announcement separate other Grass X shareholders, important marks from performance rigorous our reminder, strategic we today intent of and excluding a be interest of a Belden. of As reduction review third-quarter to cost Slide a regarding presentation concluded cost a to We and structure, the employees results

we a divestiture of Valley. pursuing Grass result, As a are

JP for With significant interested the the as Morgan, discontinued approval with Valley's broad-based and organizational the parties completion, industry. recalibration. of Belden's forward. directors This this opportunity Grass be will an are strategic with a Based financial support broadcast experience action to business going we engaged of also in board of of probability the results divest on operations presented provides

announcing As improve that SG&A million cost a we savings annualized XXX approximately $XX program basis enhancing points. result, are by a EBITDA reduction is performance, our to and margins in designed delivering

to productivity. consolidating and deliver and functional realized optimizing shareholder has in internal IT, satisfied some structure, procurement, HR. performance. unit improvements includes our These track as record XXXX. But these expansion, growth, not our reporting realigning substantial a finance, are with immediately begin the of long benefit value and with in business We and This actions XXXX to other organization areas, the benefit full investing Belden and by margin in intend drive creation. we will and technology streamlining sales our marketing organization, such recent

XX%. our and EBITDA to We are revenue of X% reaffirming CAGR margins total our goals, of to commitment to X% stated financial including XX%

these goals actions. We be well-positioned to after achieve executing will our

than flow the with expected will offset free Grass dilution cost divestiture more of the Valley. savings associated the Importantly, cash

softer the expectations, demand $XXX.X trends near of with the quarter quarter, results. also some quarter, Now markets were business. was range Consistent EPS Grass midpoint of consistent Valley. our third trends improving million expectations of in Valley. the the Grass the our in are but quarter, industrial turning we of expected excluding the remain for for Revenues key by $X.XX to excluding our our in broadband third with encouraged our

from the XXXX the X and a are turn revenue expectations year. continuing operations impact of to discontinued announcements for operations our for full Finally, of since for our be Please of review Grass updating Slide on portfolio. we EPS today's presented Valley as will

predictability Following a the include broadband trends. consist Belden accelerating with remaining portfolio platforms in organic portfolio, smaller, businesses buildings. Grass will and and Valley while automation, attractive This aligned powerful smart enterprise markets, for secular improved cybersecurity, and of industrial and offers XG, divestiture, growth. These strong each revenue multiple industrial

In the be to markets. also The to addition, of in robust profitable opportunities these $XX see cost numerous program. opportunities continue our we after implementation more in will business invest compelling million inorganic

We points and planned portfolio by in will basis significant we be summary, to XXX more accretive actions savings expect EBITDA $X.XX, EPS balanced to that approximately result profitable taking and businesses. the of In a are and growing respectively. margins

in drive to these value We improvements expect turn meaningful shareholder creation.

results. segment now Roel will provide I review Roel? of a ask our business to

Roel Vestjens

of Thank X business segment our review referring enterprise will to segment, excluding results, Slide with Valley. our you, Grass Beginning turn Please for adjusted solutions be John. I results. to

enterprise across transmit As enterprise sound and complex solutions allow data, customers networks. a to our secure reminder, and video

to include and final mile segment $XXX.X million. smart buildings broadband. this in markets Consistent X.X% an declined expectations, on revenues key organic with Our our basis

broadband growth the channel and an approximately offsetting levels, Asia final excluding improved X% the basis expected. decline Revenues basis, inventory share region were to flat increased the in trends smart organic in in the in changes continue. as mile Americas. continued and Demand Pacific year-over-year expect that quarter, and declined the capture building sequentially, market Revenues on with on momentum during we X% a in

Importantly, with in fiber doubling quarter. third products, fiber demand the we optic our than see more for continue revenues robust to

are additional broadband significantly of acquisitions earlier this product and two expanding we Following year, successful fiber the integration capturing our offering share.

first enhanced third a Specifically, multimillion-dollar quarter, resulted our telecom order XG in the to related from large in our operator capabilities infrastructure.

XX%. offering pursue would growth. and of product were segment further number fiber to Enterprise to a substantial continue drive opportunities our compelling that solutions other us We inorganic EBITDA margins allow expand

Much harsh to our allow video, now enterprise, solutions customers and segment. industrial our and environments. like this Turning transmit data, industrial secure industrial case, sound in but to in

and discrete basis facilities, process revenues changes levels. energy. in $XXX.X include X.X% transit, inventory flat, segment mass declined manufacturing, an markets in were this expectations, channel our to approximately key Our with million. excluding organic Consistent on Revenues

benefit We portfolio a from robust organically. businesses. increased energy continue of markets, which at of industrial mass to and balanced process, transit, Demand our least X% remains each in

quarter in the our with However, soft discrete continued Revenues industrial growth market, manufacturing. softness in remained discrete the third rates in Germany. declined the market X% in during largest quarter,

in in our make cybersecurity business, revenues, the industrial manufacturing the leading we with Nonrenewal very pressures fourth in bookings, continue quarter. we uncertainty increased United Given a of increased our and to PMI industrial robust and of customers. global the in Europe, the discrete States indicator best to progress the trends, readings XX% the vertical. persist level in economy In expect recent our industrial the order weak significant

after and However, bookings sales consecutive total double-digit execution. nonrenewal of quarters to declined project X timing growth due

aggressively into Henk I additional appropriate and EBITDA expect quarter. to to the are financial the will margins ask were actions fourth insight in provide performance performance. our Henk? improve third-quarter XX.X%. now Industrial We corrective implementing solutions segment

Henk Derksen

a followed I Roel. performance. my sheet, for close balance our by start discussion and with results, comments Thank of our quarter segment will a the the results cash review of you, with flow

Slide adjusted consolidated Please turn today, X for Valley. be excluding I'll referencing As results detailed a review. a to reminder, Grass

revenues decreasing in $XXX.X $XX.X of the $XX.X X.X% million were impact million acquisitions currency XXXX. the from million X.X% impact channel negative or the inventory, by from Revenues offset was the for a prior-year $XX.X in decreased lower Revenues million and from period third million from a favorable prior X.X% $XXX Adjusted decreased quarter, organically from also copper prices. changes in quarter year. organically translation as

basis compared period were due to XX.X% the XX.X%, lower decreasing in margins in and to year-ago points, inventory profit levels. XXX Gross quarter volumes the

by which Our inventory the as approximately planned, quarter, gross balance impacted XX points. during unfavorably margins basis declined profit

profit sequentially EBITDA EBITDA basis margins the in over $XX.X were prior-year decreasing $XXX.X improve XX.X%, margins period. year We to compared expect gross in $XX.X fourth year. million, to points decreasing the million, million XXX quarter. was

million. year-ago was at expense interest the consistent Net with $XX.X period

current fixed an full X.X%, our down in million no XXXX. XXXX, $XX interest is expense average reminder, rate a the At of expect interest entirely year million exchange we until maturities debt XXXX. from foreign $XX As with XXXX for to at of rates,

effective in tax compared to rate in the XXXX. XX.X% quarter, was quarter Our XX.X% the third

using to $X.XX Earnings the per period. tax of effective purposes, to the an and XX% XX.X% rate in financial quarter, prior-year compared $XX.X in XXXX. year-ago For quarter in we million, the full the Net income was recommend year period. $XX.X million share fourth $X.XX for modeling for the was compared

results turn and Slide by now I will Please X. business revenues discuss operating segments. to

$XX.X copper by by margins decreasing were from X.X% After the and year prior-year favorably of factors, million Our EBITDA $XXX.X revenues organically negatively enterprise XX% and period. the Revenues a acquisitions translation solutions X.X% points from for $X.X year million quarter, points were impacted basis. adjusting sequentially. segment revenues the basis XXX increasing from in prices. over million currency quarter, generated basis and declining XX impacted these during decreased year-over-year on

copper basis segment from lower unfavorable period. decline revenues $X.X organically. translation were revenues XX.X% industrial The the adjusting After the inventory and flat for declining volumes X.X% for quarter, prices channel solutions year-over-year factors, in $XXX.X generated resulted decreased prior- impact of revenues lower prior-year XXX from volumes. flat margins in our decline After from from and million points year-over-year of primarily The product mix. organically. the changes sequentially. a million. partners, the The resulted primarily Currency quarter, period adjusting levels year approximately X.X% decreasing segment had negative at were EBITDA these approximately and in

Slide please highlights. you with sheet begin If as-reported our I'll will X, to balance turn

consistent Inventory outstanding balance X.X million quarter was quarter prior the quarter in prior period. the prior and consistent with capital the to XX to days days from third $XXX Our prior-year sales the prior-year X.X with in prior-year in and was period. turns the days, Day the $XXX X.X million, cash the quarter period. at in of compared X.X cash and prior Working equivalents turns the turns were quarter compared turns the end XX in turns and XX down were turns. at

line Our cash from net with the third the quarter quarter leverage the $X.XX at total quarter quarter Please turn of flow with $X.XX billion, flow XXXX. third three times X $XX.X quarter, was operations year. to billion debt was million Net the of target for third the a million, times. to the $X.XX of highlights. prior end principal two of $XXX.X Slide our in quarter prior in and X.X prior in the end from at debt-to-EBITDA consistent and was the billion to the Cash in in few compared down

by prior-year increased to in XX% from gain trailing a was XXXX XX-month to benefited million million $XX.X for Free flow million nonrecurring That in $XXX.X quarter the in On period. flow XXXX. quarter cash expenditures in increased to the litigation. remarks. On the from $XX million. quarter, $XXX.X prior of a Net cash from XXXX capital $XX.X year The quarter related a basis, million cash the completes from with third free quarter operations trailing million the X% third basis, third my XX-month $XXX.X the quarter XXXX. a million the were flow by $XXX.X patent in third consistent prepared

President, I John now call this turn John? to Stroup, back outlook. for CEO, would the and our to Chairman, like

John Stroup

you, Thank Henk.

periods. Grass EPS year, revenue full-year from $XXX EPS million to new continuing operations As XXXX Valley anticipate between our our and from from and of fourth-quarter we expectations to $XXX updating XXXX guidance the are and excludes $X million, and be all the $X.XX. fourth results quarter revenues mentioned for We and previously,

to to now between We any to year now our cost full-year from full which $X.XX, revenues EPS approximately be $X.XX. we by EPS expect range billion. $X.XXX billion the accretive reduction $X.XXX are This not we, implemented. expected include For EPS of plans, and fully $X.XX expect does once to benefit XXXX, be

please That concludes our remarks. call questions. prepared the open Anna, to

Operator

Stifel. go [Operator you. instructions] question Please ahead. from Noelle from Dilts take We Thank will our first

Noelle Dilts

guys. morning. Hi, Good

John Stroup

Noelle. morning, Good

Noelle Dilts

how us sense could but you on engagement? of a divestiture. about of Could you Grass just maybe timing kind just give thinking little there? give little bit where the you in on bit And a of a terms mentioned So high first, just you are probability, of more you're Valley the us,

John Stroup

quickly resolved so certainly as get Well, to our Noelle, be to possible. able as it's that preference

done been were position working we're announce it of it we to something have but If we while. for not. little course, have a We in would definitively, a on today,

absolutely as So and has it's, quarter, our like for we we're, it Hank. We'd But for it's But it not, can. done then as me quickly top get if to done priority this full we'll possible. get if it attention.

Noelle Dilts

you in cost million. that Thanks. coming a shifting of then of you out? mentioned of that over where And sense much next you program, you and year, of a from us some just some $XX give you'll then you reduction kind to And see and recognize SG&A some generally? XXXX. within sense us second, breaks how And of the how think you better cost costs Can the give Could how those reduction through? comes see may quickly

John Stroup

all, were first that is you correct Well, it SG&A. of

Noelle Dilts

Yes.

John Stroup

to I that just underscore not want it's R&D.

we're another, expecting which changes We total. not any R&D do in to reallocate So normally. from make our in to might we one spend business

to about it reduce expense going IT, thoughtful us opportunities expenses opportunity come to by finance. it's we be to reduce We to the so sales be structure. SG&A. the is where to So go in how streamlining organizational going by It's taking our G&A areas, our more opportunities all for see to market,

based. is project working So for a we've some been quite time. This broad it's on

We've some of benefit benchmarking. done work a with external the lot of

So we'll be without of we've any lot revenue. done got able a get to confidence to impact that

December, half But would I in how cost of in and much say that going early that our million $XX have to probably of, just $XX seen thumb, we regard in of if the see XXXX. specifics more of benefit actually of implementing then the you're or would terms with investor you would be full rule As exclude we in XXXX. to XXXX, get the it program, day, million of when

Noelle Dilts

may. I Okay, great. if question, last one And

business? off because to to sense the you Just I guidance in challenging across in a a stripping little expectations estimates. down took look looking correctly you're that that But could core bit your It a out right about the sounds you about industrial, maybe versus of it's maybe little make way just the sure bit Is now a that? a broadband, like Grass little bit it? we're and bit gauging give when enterprise maybe your Valley, same. just us at think am cybersecurity, Or you on standing

John Stroup

We're me you all so let that with some perspective. given are you. It complicated give things the moving, is

of all, in this adjust about build the the on what guiding the a think high QX, channel ago for year and growth be we QX So year, of we if end, destocking X%. for first actually in adjust will we we're

to consolidated inventory We adjusting enterprise We've it's about around got levels after think guidance this partners channel And So roughly to X%. That's our going X% going going our we X% to implying two growth industrial between about business. is basis. X% organic at up our X%. be for that changes be to a got the up to is on in balanced business platforms. we've be think

our Valley what, year business. going broadband if to Grass disc and organic that, in also So obviously benefits from about but we're we're trends from the more right exiting momentum ops, be with growth than then stronger have considerably it benefits we

well Our subvertical, saw of aside the our I as three And business, which as high smart industrial single again put building lot this with other grew which our verticals America. business consistent a is discrete quarter. digits all well companies, the in other quarter, in continued if you weakness think to our prior, do

if results. for year-over-year reflects for which guidance growth the the consolidated big basis, organic is So this channel, healthy a you on adjust

Noelle Dilts

Thanks much. so

John Stroup

Yes.

Operator

from Please McCall Seaport ahead. Matt from go question next our take We instructions] [Operator Global Securities.

Matt McCall

you. Thank morning everybody. Good

John Stroup

Good morning, Matt.

Matt McCall

EBITDA that to of visibility or allowing your or margins, you a do have the get goal EBITDA you revenue then over going And these revenue guess, the moves? visibility margins So be result targets John, better visibility? I period? be more? Can How little kind the I said, to maybe into is what think moves moves post is, is, bit of What reach. these the where stand maybe long margin of within EBITDA will that you these and

John Stroup

Yes.

course, reasons. So lot is the One, turbulence. us without lot of of forecast for question, business difficulty, of a itself Valley going a that's Grass hardest of number been is for market through a the the been to has

question, And it's You then most thing see that our that all nonlinear. businesses, without with of competitors. is the our other the

So difficult forecast very more something were and substantially investors. we that and to enter a with the and the of results, our lot that a good month and orders lot our we us lot of quarter, us come for frustrating pre it is And a quarter accurately backlog. revenue of last don't made Valley Grass of been that's the and our that our in at typically something for for

So will we Valley us believe substantially Grass there. help divesting

understandable a more turbulent, we to Now of think know, but less will conditions improve. ability businesses and far either, course, the of forecast as backlog don't you our are and have other necessarily our market therefore, lot

it the the improve. profile organic we're to As of growth business, relates the profile to expecting

As would I channel on we're high the market mentioned with in excluding or say changes say strong. environment, I this end we're X% organic growth, guiding should I quite that's Noelle, forecasting, inventory. in

$XX the flow. share to that EBITDA cost cash million to points and XXX $X.XX basis be margins, reduction expecting per to neutral We're accretive earnings accretive will of free

think shareholders. So that, is of point flow we improved, view that a we these ought from growth and think changes, those organic a more business view, get free we an improved, cash through margin all that's we a received predictable. have from from to we point things And view, well is business once be far have by a equivalent, of our point of is

Matt McCall

Okay. for Thank that. you

guess next multiple question, parts. I the also So

the move And made, cash the cost that plans sheet balance So the extent Is of for flow, are we just initiatives the comment savings this of on finished, about cash you the really announcement? forward? are the then the the what flow portfolio finished? kind moves impact as thinking on

John Stroup

the regard driving either the to with never this activities is productivity. would any end I pruning say portfolio So or of

today, our certainly to cost we a pruning also and margins. But improve would would the our to is reduction. or enhance reserve announcements productivity enhance that with this substantial growth margin regard to and announcement have further the So that right

So it. regard and this I'm There range. could still sheet, we're to to planning not flow leverage near by going balance to the within is the cash have future. come With be more to that to come, there could be commit more year-end the in on our

of mentioned the cash earlier, flow cost Valley. free offsets I this As reduction Grass

get our very the the is about generation be cash in free XXXX moving together going when the So We'll flow XXXX and business sheet specific investor to balance we're analyst shape. I what with feel but you'll at of sheet's good December the into day, you and more look the going to annual balance you just in in think should, about growth EBITDA margins. the good as like,

Matt McCall

John. Thanks, Perfect. Okay.

John Stroup

Yes.

Operator

next take We Longbow from Chowdhury our Research. go ahead. question from Gausia Please

Gausia Chowdhury

good on go Harrison. the Hi, just to guidance Gausia question. Shawn I of behalf morning. back This is wanted to

to apples for sure, to what changed where? comps, just And make So continuing apples exactly?

John Stroup

Well, Valley. Grass of excluded so we, course,

conversations continuing So, operations us QX and for results since as based our data, for include changed to discontinued forecast. operations, actual outlook with was on our only we prudent our our QX that I say would it had destocking to partners it's for updated updated contemplated. outline originally also sell-through related also meaningfully with in the in than in we that QX their channel a larger and it what thing

Gausia Chowdhury

then cash updated free give? could there for second, that you forecast then for And XXXX flow, Okay. an is

Henk Derksen

as moving as Grass around, commented, flow $XXX A for question That under as in million. was the free the And sure. actions things could project That's estimates. of quarter, way. couple impact the around potentially are cost our that TTM third approximately timing, I of Valley a moving cash that's at Yes. well around a couple things are

else EBITDA $XXX channel TTM year guidance. QEC, Everything to in down So over a implied upon the impact bit year come million. equal little based being in

of So being flow, million, free cash equal. $XXX everything $XXX million else

Gausia Chowdhury

plans from would then you And the, Anything Okay. do? with for the proceeds the divestiture? any that else

John Stroup

No strategy on in proceeds. change

the at I have undervalued. broadband buybacks. authorization continue industrial our acquisitions, should both obviously, initiatives. allocation We'll at and We space. already stock share if look is And the think bolt-on you prioritize an will We'll expect balanced. within the our that organic be look we'll capital to

no change in terms in allocation. strategy of So capital

Gausia Chowdhury

you. Thank

John Stroup

you. Thank

Operator

are there further at this time. Please continue. questions Maczka, Kevin no

Kevin Maczka

you, call. joining Okay. for Thank everyone, thank Anna, and you, today's

December The analyst be inform IR update for New for via Before we we for hosting event lookout details and event a Please on be also company's with Belden Belden's accessed close, formal everyone live at of York can the I'd the to be the like XXXX shareholder us website. investor like creating we that value. will Tuesday, morning event, Stock join Xrd. At on the the that of those to Exchange day will detailed this person. and be would invitations registration of strategy webcasted you will in provide

the questions, any please IR Belden. at out reach have team to you here If

investor.relations@belden.com. a is email Our day. address Thanks, great and have

Operator

This Thank call you, gentlemen. ladies today. and concludes our for

the disconnect now call and from thank may you participating. You for

Belden (BDC) 30 Oct 192019 Q3 Earnings call transcript