Belden Inc at UBS Global Industrials and Transportation Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Maybe starting off kind of very high level, we're now 3 years plus removed from COVID, a lot of disruption, a lot of acceleration in secular trends that the company is exposed to. So I'd just be interested if you kind of look back on this kind of 3-year period, what are your long-lasting takeaways?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes, I mean, absolutely. A lot of companies talk about going from being a product supplier to a solutions provider. At Belden, the results are showing now, whether it's the growth rates that we've seen versus historical -- the recent improvement in margins. So when you think about that journey to be a solutions provider. Is it more that you're just making yourself more important to the customer and then you can drive revenue off of that, or does it change the way you price, does it change to price conversation? What are the advantages of being a solutions product?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. Really appreciate that. You mentioned that even before the pandemic, data was proliferating. The pandemic accelerated that. Now everyone is very much focused on AI. It feels like that's going to bring a lot more data into the world. Does investment and development in AI kind of have an impact on Belden. Is there an opportunity there? What does all that mean to you?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Definitely. Maybe moving over to Industrial Automation, an end market that is very much focused at the industrial conference. The performance there has been quite good, outgrowing broader kind of industry benchmarks, the past multiple years, really. Can you just kind of talk about the growth rate that the company is able to achieve, how you'd be able to accelerate that? And then what's the outlook forward? Obviously, a lot of good secular trends for automation, whether it's just labor availability, wages, reshoring, moving to higher-cost regions.

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. I mean on that note, are you sensing or do you see reasons that the industrial automation market will slow? On one hand, the secular trends are very powerful. Based on the jobs report last Friday, it does not feel like there's a ton of [black] coming to the labor market. But on the other hand, automation is a CapEx investment. And kind of historically, there was a good deal of cyclicality with that, how do you see that?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes, absolutely. You talked a bit earlier about the company's ability to kind of navigate a lot of the disruptions that plagued so many over the last couple of years. How do you see supply chains today? And is there -- and what's kind of the outlook there, say, over the next 6 to 12 months?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. It feels like there was a lot of -- whether it was supply chain high grading or just bigger companies have a little bit more leverage over the supply chain, they could take share on that. But as the normalization comes in, what's the ability to defend maybe some of the low-cost kind of competitors didn't have availability now as getting better, assume they come back for the market share. How does the company defend or protect against that?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. I don't mean to leave you over here. The -- on the last conference call, the company seems pretty confident with backlog as supply chains are recovering. Can you just maybe talk a little bit about how you feel about the backlog, how you feel about order rates, obviously, lead times compressing, kind of general headwind orders. How do you feel about kind of that flow...

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : And did the -- is there any expectation for where -- how much backlog can be burned? Is there any -- like is it like getting back to that normalized 1 month, or that's still a bit in...

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Is there any -- I know some of the competitors, some of the headwinds they faced on orders are book-to-bill, is a result of customers or distributors pulling down inventory a little bit -- their lead times are coming in. Maybe there's a little bit more hesitancy on the macro than there was 6, 12 months ago. Anything to kind of call out there is related to inventory in the channel?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. I appreciate that. Maybe shifting gears a little bit to capital allocation. The 1.5x kind of net leverage target running a bit below that. What's kind of the capital allocation priorities? And what should kind of investors expect on that front?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : And maybe just kind of following up on that. Obviously, multiples in the market have gone very high, '21, '22. We've seen a general derating -- now maybe there's less competition for assets out there with liquidity a lot tighter. But just given the balance sheet, given the free cash generation. Has that M&A landscape gotten more attractive? Are you seeing maybe bid-ask spread kind of narrow?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : I appreciate that. We haven't talked much about kind of the fiber business. But what's the -- a lot of government programs kind of going on right now, obviously, the infrastructure plan is a big one, but we also have the rural digital opportunity. Can you just talk about the government programs in place and what that means for fiber business?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. When you think about these infrastructure support programs, have they already started driving activity? Or do you think most of the benefit there kind of is still in looking forward? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 06, 2023 / 6:40PM, BDC.N - Belden Inc at UBS Global Industrials and Transportation Conference

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : And when we kind of think about demand in 2023, obviously, there's a backlog. So that's to driver our growth. Obviously, a lot of secular trends. And when we look at orders, orders can be down, but that doesn't necessarily mean that demand is down. Obviously, everyone, I think, at this point is kind of plugged into lead times and those compressing. When you talk to customers, do you sense any softening in actual demand kind of for the solutions because there is obviously some macro concerns out there.

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes, absolutely. When you see your distribution partners, do you think that they've already brought inventory down to an appropriate level to reflect where lead times are at today and where demand is at today? Or is the expectation that the -- those channel partners, there still may be some level of inventory out?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. Yes. Absolutely. Maybe going to the 2025 targets a little bit. Can you just maybe kind of talk about the high-level 2025 target, kind of progress made to date and kind of where we stand with almost kind of 2 years out.

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. I mean when I kind of compare to peers, the incremental margins stood out to me. Can you just kind of talk about the drivers of that because 30% equates to a lot of margin expansion.

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : I appreciate that. I may turn back to Ashish. Maybe you could ask one on price. Obviously, the whole world has taken outsized price over the last 2 plus years now. And kind of where we are at today, inflation, not gone, but cooling is probably the right kind of tag line. But for kind of a company like yours, and I think you would probably argue the value I'm providing to my customers is maybe higher than it's ever been. So kind of -- kind of taking those 2 sides, how do you feel in -- how do you see price developing from here?

Question: Christopher M. Snyder - UBS Investment Bank, Research Division - Analyst : Yes. It's a great example and certainly kind of speaks to the strategy. When you know the value you're adding, there's a little bit of a legal room for both parties to go ahead. So we're up on time. But thank you to everyone in the room for joining. Thank you to everyone tuning in. And most of all, thank you guys for joining us today. Very much appreciate the conversation in having you here. So thank you, both.