Belden Expands on Solutions Transformation Strategy and Provides Long-Term Financial Framework Through 2028

Rhea-AI Summary

Belden Inc. (NYSE: BDC) hosted its 2024 Investor Day, unveiling its Solutions Transformation Strategy and long-term financial framework through 2028. The company aims for mid-single-digit annual revenue growth, 10% to 12% annual Adjusted EPS growth, and free cash flow margin approaching 10%. Belden announced a new $300 million share repurchase authorization, bringing the total to $415 million.

CEO Ashish Chand expressed confidence in achieving the $8.00 Adjusted EPS target for 2025, despite recent destocking headwinds. The company also renamed its segments to Automation Solutions and Smart Infrastructure Solutions, reflecting its focus on data infrastructure solutions.

Positive

• New $300 million share repurchase authorization, bringing total to $415 million
• Targeting mid-single-digit annual revenue growth through 2028
• Projecting 10% to 12% annual Adjusted EPS growth through 2028
• Aiming for free cash flow margin approaching 10% by 2028
• On track to achieve $8.00 Adjusted EPS target for 2025
• Incremental Adjusted EBITDA Margins targeted between 25% to 30%

Negative

• Experiencing destocking headwinds since last year

Insights

Financial Analyst

Belden's strategic shift towards solutions-based offerings is a positive move for long-term growth. The company's new 2028 financial targets, including 10-12% annual Adjusted EPS growth and mid-single-digit revenue growth, demonstrate confidence in their transformation strategy. The $300 million share repurchase authorization signals strong cash flow and commitment to shareholder returns.

However, investors should note the mention of "destocking headwinds" affecting recent performance. This suggests potential near-term challenges in revenue growth. The $8.00 Adjusted EPS target for 2025 relies on "modest improvement in demand next year," indicating some uncertainty in the short-term outlook.

The renaming of segments to Automation Solutions and Smart Infrastructure Solutions aligns with the company's focus on data infrastructure, potentially positioning Belden more attractively in high-growth markets.

Market Research Analyst

Belden's strategic pivot towards solutions-focused offerings is well-timed, capitalizing on strong secular tailwinds in data infrastructure and network complexity. This positions the company to address growing market demands effectively.

The emphasis on customer outcomes through the solutions framework suggests a deeper engagement with clients, potentially leading to more stable, long-term relationships and recurring revenue streams. This approach could differentiate Belden in a competitive landscape.

However, the success of this strategy heavily depends on market reception and the company's ability to execute. The mention of positive customer and partner response is encouraging, but investors should monitor future earnings reports for concrete evidence of this transformation translating into sustained financial growth.

The Solutions Transformation Strategic push lays the foundation to achieve sustainable growth and improved margins

Belden provides new 2028 financial targets, outlines a roadmap to achieving the 2025 Adjusted EPS target, and announces a new $300 million share repurchase authorization

ST. LOUIS--(BUSINESS WIRE)-- Belden Inc. (NYSE: BDC) (the “Company”), a leading global supplier of network infrastructure and digitization solutions, will host its 2024 Investor Day today at the Belden Customer Innovation Center in Chicago, Illinois. Management will provide an update on Belden’s Solutions transformation, key accelerators to drive further growth and margin expansion, and new long-term targets that support enhanced shareholder returns.

Ashish Chand, President and CEO said, “I am thrilled to highlight the tremendous progress we have made as an organization over the past few years by focusing on customer outcomes through our solutions framework. Our transformation has been well received by customers and partners, and I am excited to share how we will continue to evolve the business and drive incremental growth. Strong secular tailwinds combined with growing data needs and complex network challenges provide Belden with the ideal environment to drive solutions growth and differentiate our offerings in the marketplace. As we advance our transformation journey, growth in Belden Solutions will further enable improved operating and financial performance.”

“At our last investor day in 2022, we set ambitious targets for the organization to achieve through 2025. Despite destocking headwinds that started last year, I am pleased to share that our performance is on track to be consistent with our previously articulated value creation framework,” said Dr. Chand. “Importantly, we have a realistic path to achieve $8.00 of Adjusted EPS in 2025, assuming modest improvement in demand next year, consistent with an end to customer destocking. Progress towards this target demonstrates the benefits of our Solutions transformation and that our business can consistently grow and increase earnings. I am extremely proud of our achievements and confident in the future ahead as we advance our Solutions framework.”

Long-Term Financial Targets

Driven by its strategic initiatives, the Company’s financial targets through 2028 are as follows:

• Mid-single-digit annual revenue growth
• Incremental Adjusted EBITDA Margins between 25% to 30%
• Free cash flow margin approaching 10%
• Net leverage around 1.5 times
• Annual Adjusted EPS growth of 10% to 12%

New Share Repurchase Authorization

Belden announced today that its Board of Directors has approved a new share repurchase authorization of $300 million of the company's outstanding common stock. Combined with the $115 million balance remaining from the previous authorization, Belden’s total authorization now stands at $415 million.

"Execution of the Solutions transformation over the last several years, combined with the company's operating discipline, are delivering through-cycle revenue growth, margin improvement and healthy free cash flow," said Jeremy Parks, Chief Financial Officer. "We are focused on advancing our Solutions transformation, and with our robust cash flow, we will continue to be able to invest in the business while returning cash to shareholders through repurchases."

Segments Renamed

As Belden continues to advance forward with solutions focused on data infrastructure, today Belden announced a change to the names of its two reportable segments. The former Industrial Automation Solutions segment will be renamed Automation Solutions and the former Enterprise Solutions segment will be renamed Smart Infrastructure Solutions. The composition of the segments did not change as a result of these name changes.

Webcast

The Company has scheduled a webcast of the 2024 Investor Day for Thursday, September 12, 2024 at 10:00 a.m. Eastern Time. A link to the live webcast can be found on the Company’s Investor Relations website at https://investor.belden.com. A replay of the event and related presentations will remain accessible in the investor relations section of the Company’s website for a limited time.

Non-GAAP Measures

Our financial targets include non-GAAP measures such as Adjusted EPS, Adjusted EBITDA margins, free cash flow margin and net leverage. All references to Adjusted EPS within this earnings release refer to adjusted net income per diluted share attributable to Belden stockholders. We define free cash flow as net cash from operating activities adjusted for capital expenditures net of the proceeds from the disposal of assets. Free cash flow margin is calculated as free cash flow divided by revenues during the comparable period. Net leverage is calculated as (A) total debt less cash and cash equivalents divided by (B) the sum of trailing twelve months Adjusted EBITDA plus trailing twelve months stock-based compensation expense.

Our financial targets are based upon information currently available regarding events and conditions that will impact our future operating results. In particular, our results are subject to the factors listed under "Forward-Looking Statements" in this release. In addition, our actual results are likely to be impacted by other additional events for which information is not available, such as asset impairments, adjustments related to acquisitions and divestitures, severance, restructuring, and acquisition integration costs, gains (losses) recognized on the disposal of assets, gains (losses) on debt extinguishment, discontinued operations, and other gains (losses) related to events or conditions that are not yet known. Therefore we are unable to provide quantitative reconciliations of forward-looking non-GAAP financial measures, such as our financial targets, to the most directly comparable GAAP financial measures, because it is difficult to reliably predict or estimate the relevant components without unreasonable effort due to future uncertainties that may potentially have a significant impact on such calculations, and providing them may imply a degree of precision that would be confusing or potentially misleading.

Forward-Looking Statements

This release contains, and any statements made by us concerning the subject matter of this release may contain, forward-looking statements, including our outlook for the remainder of 2024 and beyond. Forward-looking statements also include any statements regarding future financial performance (including revenues, growth, expenses, earnings, margins, cash flows, dividends, capital expenditures and financial condition), plans and objectives, and related assumptions. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “forecast,” “guide,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions. Forward-looking statements reflect management’s current beliefs and expectations and are not guarantees of future performance. Actual results may differ materially from those suggested by any forward-looking statements for a number of reasons, including, without limitation: the impact of a challenging global economy, including the impact of inflation, or a downturn in served markets; volatility in credit and foreign exchange markets; the competitiveness of the global markets in which we operate; the inability of the Company to develop and introduce new products; competitive responses to our products; the inability to execute and realize the expected benefits from strategic initiatives (including revenue growth, cost control, and productivity improvement programs); difficulty in forecasting revenues due to the unpredictable timing of orders related to customer projects as well as the impacts of channel inventory; foreign and domestic political, economic and other uncertainties, including changes in currency exchange rates; the impact of disruptions in the global supply chain, including the inability to timely obtain raw materials and components in sufficient quantities on commercially reasonable terms; the inability to achieve our strategic priorities in emerging markets; the impact of changes in global tariffs and trade agreements; the presence of substitute products in the marketplace; disruptions in the Company’s information systems including due to cyber-attacks; inflation and changes in the price and availability of raw materials leading to higher input and labor costs; the possibility of future epidemics or pandemics; changes in tax laws and variability in the Company’s quarterly and annual effective tax rates; the increased prevalence of cloud computing; the inability to successfully complete and integrate acquisitions, in furtherance of the Company’s strategic plan, as well as the inability to accurately forecast the financial impacts of acquisitions; the inability to retain key employees; disruption of, or changes in, the Company’s key distribution channels; the presence of activists proposing certain actions by the Company; perceived or actual product failures; the impact of regulatory requirements and other legal compliance issues; inability to satisfy the increasing expectations with respect to environmental, social and governance matters; assertions that the Company violates the intellectual property of others and the ownership of intellectual property by competitors and others that prevents the use of that intellectual property by the Company; risks related to the use of open source software; the impairment of goodwill and other intangible assets and the resulting impact on financial performance; disruptions and increased costs attendant to collective bargaining groups and other labor matters; and other factors.

For a more complete discussion of risk factors, please see our Annual Report on Form 10-K for the period ended December 31, 2023, filed with the SEC on February 13, 2024. Although the content of this release represents our best judgment as of the date of this report based on information currently available and reasonable assumptions, we give no assurances that the expectations will prove to be accurate. Deviations from the expectations may be material. For these reasons, Belden cautions readers to not place undue reliance on these forward-looking statements, which speak only as of the date made. Belden disclaims any duty to update any forward-looking statements as a result of new information, future developments, or otherwise, except as required by law.

About Belden

Belden Inc. delivers the infrastructure that makes the digital journey simpler, smarter and secure. We’re moving beyond connectivity, from what we make to what we make possible through a performance-driven portfolio, forward-thinking expertise and purpose-built solutions. With a legacy of quality and reliability spanning 120-plus years, we have a strong foundation to continue building the future. We are headquartered in St. Louis and have manufacturing capabilities in North America, Europe, Asia, and Africa. For more information, visit us at www.belden.com; follow us on Facebook, LinkedIn and Twitter.

BDC-Financial

View source version on businesswire.com: https://www.businesswire.com/news/home/20240912943543/en/

Belden Investor Relations

Aaron Reddington, CFA

(317) 219-9359

Investor.Relations@Belden.com

Source: Belden Inc.

FAQ

What are Belden's (BDC) new financial targets for 2028?

Belden's 2028 financial targets include mid-single-digit annual revenue growth, 10% to 12% annual Adjusted EPS growth, free cash flow margin approaching 10%, and incremental Adjusted EBITDA Margins between 25% to 30%.

How much is Belden's (BDC) new share repurchase authorization?

Belden announced a new $300 million share repurchase authorization, bringing the total authorization to $415 million when combined with the previous balance.

What is Belden's (BDC) Adjusted EPS target for 2025?

Belden is targeting an Adjusted EPS of $8.00 for 2025, which the company believes is achievable despite recent destocking headwinds.

How has Belden (BDC) renamed its business segments?

Belden renamed its segments to Automation Solutions (formerly Industrial Automation Solutions) and Smart Infrastructure Solutions (formerly Enterprise Solutions) to reflect its focus on data infrastructure solutions.