Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Belden Inc (BDC, Financial) reported third-quarter revenue of $655 million, exceeding the high end of their guidance and marking an 8% sequential increase.
- Earnings per share for the quarter were $1.70, surpassing expectations and reflecting a 13% sequential growth.
- The company achieved a fourth consecutive quarter of order growth, with orders up 28% year-over-year.
- Belden Inc (BDC) successfully acquired Voleatech, enhancing their cybersecurity capabilities and accelerating their active product portfolio.
- The company continues to generate strong free cash flow, with trailing-12-month free cash flow at $211 million, allowing for strategic investments and share repurchases.
Negative Points
- Organic revenue growth was down 2% year-over-year, with automation solutions declining by 3% and smart infrastructure solutions by 1%.
- Gross profit margins decreased by 40 basis points sequentially to 37.8%.
- The automation solutions segment saw a 2% revenue decline compared to the prior year, with EBITDA margins dropping from 22.5% to 21.4%.
- The company's cash and cash equivalents decreased significantly from $597 million at the end of 2023 to $323 million, partly due to acquisition costs.
- Belden Inc (BDC) continues to face challenges in the discrete automation market, with no significant recovery observed yet.
Q & A Highlights
Q: Can you provide details on the Precision Optical acquisition and its revenue contribution for the quarter?
A: The Precision deal closed at the end of the second quarter, giving us a full quarter of ownership during Q3. Revenue was approximately $34.5 million, consistent with our expectations. - Jeremy Parks, CFO
Q: Why is the acquisition of Vuliyatech, a small $6 million purchase, being highlighted?
A: Vuliyatech is strategic because it accelerates our ability to unify the security layer across all our active devices, which is crucial for our customers concerned about security. The revenue from Vuliyatech is less than $1 million, but it saves us from higher organic development costs. - Ashish Chand, CEO
Q: How should we think about gross margins as volume recovers in the smart infrastructure business?
A: Expect gross margins to improve by 50 to 75 basis points per year, assuming mid-single-digit growth. We aim for 25% to 30% incremental EBITDA margins, driven by gross margin improvements. - Jeremy Parks, CFO
Q: What is the status of inventory levels in distribution, and how do you see this evolving?
A: Inventory levels at distribution are consistent with long-term trends. We are still waiting for significant acceleration in point-of-sale (POS) as end customers work through their inventory. We believe we are nearing the end of this destocking phase. - Jeremy Parks, CFO
Q: Can you discuss the potential to achieve the $8 earnings target for 2025?
A: We outlined a path to $8 EPS at our Investor Day, which includes mid-single-digit organic growth, 30% incremental EBITDA margins, and $200 million in capital deployment. We are currently annualizing at $6.80 EPS, and our path remains unchanged despite macroeconomic uncertainties. - Jeremy Parks, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
