Q2 2022 Belden Inc Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Incorporated conference call. Just a reminder, this call is being recorded. At this time, you're in a listen-only mode. Later, we will conduct a question and answer session. If you would like to ask a question, please press star 1 on your touchtone phone.

If you had the question cue and would like to withdraw your question, simply press start 2. I would now like to turn the call over to Jeremy Parks, please go ahead sir.

Thank you, Bettina. Good morning, everyone, and thank you for joining us today for Belden's second quarter 2022 earnings conference call.

This is Jeremy Parks, Releivalman's Chief Financial Officer,

With me this morning is Belden's president and CEO , Rural Vestions.

Rural will provide a strategic overview of our business, and then I will provide a detailed review of our financial and operating results followed by Q&A. The next step is to 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 two slide two 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 in the Investor Relations section of our website contain a reconciliation of the most closely associated and financial information to the non- GAAP financial information we communicate.

I will now turn the call over to our president and CEO , Rule Vestans. Rule. Thank you, Jeremy, and good morning, everyone. As a reminder, I'll be referring to adjusted results today.

Now please turn the slide 3 for a summary of today's presentation.

Before we begin the discussion of our second quarter results, I would like to revisit some of the key themes from the Investor Day event that we hosted at the New York Stock Exchange on June 15th.

As we highlighted during investor day, Belden is a transformed company.

Our portfolio of businesses and our financial performance are significantly improved.

We delivered mid-single-digit revenue growth and double-digit EBITDA and EPS growth over the last three years, a period that included a pandemic-driven recession, extreme inflationary pressures, and lasting supply chain disruptions.

As I discussed, the pandemic and ensuing aftermath accelerated virtually all of the longer-term secular trends in our markets.

Labor shortages, inflation, and supply chain bottlenecks are driving the need for more automation and reassuring.

Remote work and changing workspaces are driving the need for additional bandwidth and for buildings to become smarter.

We are executing a number of specific initiatives to ensure that Bellden benefits from each of these important secular trends.

To that end, we have enhanced our commercial processes and are now providing complete end-to-end solutions focused on customer business outcomes rather than individual products.

We have dramatically revitalized our product portfolio with new integrated hardware and software solutions.

And our recent acquisitions have provided innovative new capabilities to further augment our product roadmap.

We did all of this to better serve our customers and fulfill a much broader corporate purpose.

to build the foundation for a digital world.

We expect this to result in robust and sustainable organic growth and margin expansion, driving EPS to $8 or more, flight 2025.

As we execute our plans, we would expect us to translate into very compelling returns for our shareholders.

Turning to the financial results.

I'm very pleased we delivered another strong quarter, our ninth straight quarter exceeding expectations.

Our capital allocation strategy continues to be balanced and to drive shareholder value.

Accordingly, we executed another $50 million in share we purchased this through July , bringing the year-to-date total to $100 million.

After a strong first half of 2022, we are increasing our guidance for the year.

The revised revenue guidance now represents consolidated organic growth of 12 to 13%.

Compared to a prior expectation of 7 to 9%.

Additionally, we increased our EPS guidance by 25 cents at the high end, resulting in full year EPS growth of 24 to 28 percent.

Now please turn to slide four in our presentation for review of the second quarter highlights.

We delivered meaningful growth and margin expansion again this quarter.

Second quarter revenues increased 16% year-over-year to $667 million, exceeding our guidance range of 625 to $640 million.uft

I am pleased with the revenue performance, which was up 18% organically year over year.

A strong performance was broad-based across both the industrial automation solutions and enterprise solutions segments.

Orders were healthy and we built Backlark again in both segments.

We had another great quarter in industrial.

Industrial automation revenues increased 20% organically in the second quarter.

Market conditions remain healthy and we continue to seek compelling, longer-term demand drivers for automation solutions as industrial customers respond to labour shortages, capacity requirements and reshoring of production.

Enterprise Solutions revenues increased 15% year over year on an organic basis in the second quarter, driven by strong end markets and share capture.

Within the segment, revenues in smart buildings increased 14% organically. I continue to be pleased with the strong execution by our teams as we benefit from our commercial focus on growth verticals, such as data centers, government and healthcare facilities.

Revenues in broadband and 5G increased 16% organically, given by strong demand for a fiber connectivity products. Revenues in broadband and 5G increased 16% organically, given by strong demand for a fiber connectivity products. Revenues in broadband and 5G increased 16% organically, given by strong demand for a fiber connectivity products.

We see long-term secular trends in this market, driven by the ever-increasing demand for high-speed broadband and the resulting investments required to upgrade networks.

We continue to invest in our business to drive growth and support our strategic plans.

Now one great example is the recent grand opening of our new manufacturing and R&D facility in Cochie, India, which serves as a key hub for global product development in broadband and 5G.

In addition to expanding our fiber manufacturing capacity, the facility also features an R&D testing laboratory for cutting-edge fiber technologies that has been certified to meet the most strict quality standards of our key customers.

This new facility exemplifies our continued commitment to growth.

EBITDA in the second quarter increased 19% year over year to $111 million.

Even the margins expanded 50 basis points from 16.1% in the year ago period to 16.6%.

EBS increased 31% year-over-year to $1.60 compared to $1.22 in the year-ego periods. EBS increased 31% year-over-year to $1.22

and our guidance range of a dollar and 35 to a dollar and 45 cents.

Additionally, we ended the quarter well positioned with net leverage of 1.4 times. Now below our target of 1.5 times.

In summary, this was another excellent quarter for Belden, and I'm very proud of the achievement of our teams. And I'm very proud of the achievement of our teams.

We continue to transition Belden from a supplier of trusted products to a value-added partner in the design and implementation of networking infrastructure solutions.

We are making great progress, which is reflected in our strong financial performance.

I will now ask Jeremy to provide additional insight into our second quarter financial performance.

Jeremy?

Thank you, Rural. Please turn to slide five 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 $667 million in the quarter, increasing $90 million or 16 percent from $577 million in the second quarter of 2021.

Revenue increased 18% year over year on an organic basis.

Incoming order rates remained healthy and were over $700 million for the third quarter in a row.

Our book to bill ratio was 1.06 times, including 1.04 in enterprise and 1.08 and industrial automation.

Gross profit margins in the quarter were 34.4%, increasing 60 basis points compared to 33.8% in the year-ago period.arantines are Out-of-the-?arp

We continue to proactively address inflationary pressures through price recovery and productivity measures to support gross profit margins.

EBIDA was $111 million, increasing $18 million or 19% compared to $93 million in the prior year periods.

EBITDA margins were 16.6% increasing 50 basis points compared to 16.1% in the year ago period. Demonstrating solid operating leverage on higher volumes.

Net interest expense declined $4 million from the year ago period, benefiting from the early debt repayment that we completed in the first quarter as well as favorable foreign exchange rates.

At current foreign exchange rates, we expect interest expense to be approximately $48 million in 2022 compared to $63 million in 2021. In 2022 compared to $63 million in 2021.

Our effective tax rate was 19% in the second quarter.

We expect an effective tax rate of approximately 20% for the second half of 2022, resulting in a full year effective tax rate of approximately 19.6%.

Net income in the quarter was $72 million compared to $55 million in the prior year period. Compared to $55 million in the prior year period.

and earnings per share was $1.60, increasing 31% compared to $1.22 in the second quarter of 2021.

We were very pleased to deliver such robust growth and margin expansion again this quarter.

Turning now to slide six in the presentation for a review of our business segment results.

I will begin with our industrial automation solutions segment.

As a reminder, our industrial solutions allow customers to transmit and secure audio, video, and data in harsh industrial environments.

Our key markets include discrete manufacturing, process facilities, energy, and mass transit.

The industrial automation solution segment generated revenues of $359 million in the quarter, increasing 16% from $309 million in the second quarter of 2021.

Segment revenues increase 20% on an organic basis with double-digit growth in each of our primary market verticals. Segment revenues increase 20% on an organic basis

Industrial Automation Segment EBITDA margins were 19% in the quarter.

increasing 110 basis points compared to 17.9% in the year ago period.

due to solid operating leverage on volume growth and favorable pricing.

Turning now to our enterprise segment, our enterprise solutions allow customers to transmit and secure audio, video and data across complex enterprise networks.

Our key markets include smart buildings and broadband in 5G.

The Enterprise Solution Segment generated revenues of $307 million during the quarter, increasing 15% from 268 million in the second quarter of 2021.

Segment revenues increased 15% organically with similar growth in both smart buildings and broadband in 5G.

Revenues in the smart buildings market increased 14% year over year on an organic basis.

Our continued focus on growth verticals, including data centers, health care, and government, contributed to the strong revenue performance.

Revenues in broadband and 5G increased 16% year-over-year on an organic basis due to solid share capture and especially strong demand for our fiber connectivity products.

In the quarter revenues for our fiber products represented approximately 45% of the broadband 5G business. 5G business.

For the full year, we expect fiber products to represent approximately 35% of broadband in 5G, up from approximately 15% only 3 years ago.

Enterprise solutions segment EBITDA margins were 13.6% in the quarter, compared to 13.5% in the prior year period and 11.5% in the first quarter.

As expected, sequential FEDA margins improved significantly after facing temporary cost pressures in the first quarter.

If you will please turn to slide seven for our balance sheet highlights.

Our cash and cash equivalence balance at the end of the second quarter was $528 million, compared to $500 and 60 million in the first quarter and 421 million in the second quarter 2021. And 421 million in the second quarter 2021.

Days sales outstanding of 59 days were in line with 58 days in the prior year period and 57 days in the prior quarter.

Inventory turns were 4.5 compared to 4.1 in the prior order and 5 in the prior year period.

I'm pleased with the sequential improvement in inventory turns after we strategically increased inventory levels during the first quarter to support the robust growth expected throughout 2022. With a full automatic????? check detection o ID Check it will set up weather as it will abilities Peace would not be the cause of the much increased delivery likely to be implemented otherwise Thank you.

Our financial leverage of 1.4 times net debt to EBITDA is now below our target level of 1.5.

This compares to 1.6 times in the first order and 3.5 times a year ago.

As we communicated in our recent investor day, we intend to maintain net leverage of approximately 1.5 times going forward.

During the second quarter and through fiscal July , we repurchased approximately 920,000 shares for $50 million for an average price of $54.34 cents.

This brings our total year-to-date share repurchases to $100 million.

Following these repurchases, we have $115 million remaining on our existing authorization.

Going forward, we intend to maintain a disciplined financial policy. Our capital allocation priorities will be balanced, emphasizing organic growth initiatives while also considering strategic M&A and additional share with our representatives.

Please turn to slide eight for a few cash flow highlights.

Total cash flow from operations in the second quarter was $49 million compared to $68 million in a prior year period. $48 million in a prior year period.

Net capital expenditures were $19 million for the quarter, up slightly from $16 million in the prior year periods.

Re cashflow in the quarter was $31 million compared to $52 million in the prior year period.

Free cashflow was impacted by investment investments in working capital.

accounts receivable increased by $50 billion compared to first-order levels due to the strong growth in revenues sequentially.

We expect working capital levels in the second half of the year to improve following technical seasonal patterns.

As such, for the full year 2022, we continue to expect free cash flow to exceed $200 million.

That concludes my prepared remarks. I would now like to turn the call back to our president and CEO , rule of questions for the outlook. Rule, thank you Jeremy. Rule, thank you Jeremy.

Please turn to slide 9 for outlook.

We are increasing our revenue and EBS guidance for 2022.

While the market environment is very dynamic with considerable challenges and uncertainties, we enter the second half of the year with record backlog and stable end markets.

We expect underlying value volume in the third and fourth quarters to be essentially in line with the second quarter.

However, compared to second quarter revenues, third quarter revenues are expected to be lower by approximately $25 million due to a stronger US dollar and lower copper pass through pricing, with minimal impact to EBS.

Accordingly, we anticipate third quarter 2022 revenues of 625 million to 640 million US dollars and EPS of a dollar and 50 cents to a dollar and 60 cents.

For the full year, we now expect revenues of $2.52 billion to $2.55 billion compared to prior guidance of $2.48 billion to $2.53 billion.

Our revised guidance now represents consolidated organic growth of 12 to 13%.

with solid growth in both segments.

compared to a prior expectation of 7 to 9%.

We expect full year 2022 EPS to be $5.90 to $6.10.

compared to our prior guidance of $5.55 to $5.85.

For the full year 2022, our new guidance represents EPS growth of 24 to 28%.

Please turn the slide down.

Before we conclude, I would like to reiterate our value creation framework.

The commitment is to drive EPS to $8 or more by 2025.

The $8 of EPS is built on a financial framework consisting of revenue growth greater than GDP over the cycle

Healthy incremental EBITDA margins.

significant free cash flow generation, and a disciplined capital allocation strategy targeting net leverage at 1.5 times.

In summary, we delivered another exceptional quarter.

Our strategic growth initiatives continue to gain traction and I'm encouraged by 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'm confident that our teams will continue to deliver robust organic growth and margin expansion driving significant value for our shareholders. Driving significant value for our shareholders.

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

Thank you. Again, if you would like to ask a question, during the question and answer session, please press star one on your touchtone phone.

If you would like to withdraw questions, please press star 2.

Please limit yourself to one question and a follow-up question.

Our first question today comes from Chris Dunkard of Loop Capital.

Hey, morning guys, thanks for taking the questions.

Morning.

I guess starting off here, impressive sales growth, when I'm looking at the key drivers behind that growth, can you break down it all once, market growth versus internal share game initiatives and what growth in the better than expected growth in the quarter here? I guess I'm looking at growth in the better than expected growth in the quarter here. I guess I'm looking at growth in the better than expected growth in the quarter here.

Yeah, I appreciate the question. So first of all, I want to reiterate that the growth was broad-based.

So in all platforms and within the enterprise solutions platform in both businesses. From a geographical perspective the growth was also very broad-based. We had growth, significant growth in all three regions as we defined them. So the Americas, Europe , Middle East and Africa, and even in Asia Pacific. Asia Pacific had close to 10% organic growth. So if I then look at, try to see, digest what is market and what is share capture.

Then I think it's pretty clear that we are taking share. If I compare the numbers or growth numbers compared to some of the numbers that have been issued by some of other competitors and people in the market space, then I think it's fair to say that we're growing faster. So I do believe that our strategic growth initiatives are in deep gaining traction and that we're gaining share in the market.

Yeah, thanks for that. And then just to dig in a bit, pretty clear secular drivers behind, the industrial business and the broadband business, you highlighted the analyst day. Thank you again for that. And I think about smart buildings going forward here with the book to build in that specific business above one. And kind of what's your outlook for smart buildings will be kind of moving to the back half of the year here. I think I'll be kind of moving to the back half of the year here.

Yes it was. I think it was 1.0. Yeah it was 1.04 in smart buildings. Yeah. So it was still above one. And the expectation in the second half of the year is that growth in smart buildings will be roughly missing all digits.

Yes, so what we're doing there for the last year is we've been reallocating resources.

from commercial real estate to other high-growth verticals. And we've been reporting those numbers, sometimes explicitly, sometimes when asked.

But for example in Q2, the growth verticals that we are investing in are data centers, government and healthcare, just as a reminder. And those three combined grew 26.5% in Q2.

So those are the verticals within smart buildings that we're investing in.

And the secular trends there are pretty much the same. So more automation, more need for bandwidth with hospitals and data centers getting smarter and smarter, more use of data by doctors, et cetera, et cetera. So we continue to gain traction in those segments.

Got it, very exciting stuff. I think I can crash on a break-order, guys. I think I can crash on a break-order, guys.

Thank you. I very much appreciate it.

Thank you.

Our next question comes from Mark Delaney of Goldman Sachs. Please go ahead.

Yes, good morning. Thank you very much for taking the question and congratulations on the good results. Thank you very much for taking the question and congratulations on the good results. Thank you very much for taking the question

Thank you, Mark. Appreciate it.

I think first to better contextualize guidance for next quarter, if I add back the FX and copper pass through impact, I think on a more constant currency basis revenue is down just a little bit sequentially, which I think is pretty consistent with more normal seasonality, but hoping you can elaborate a little bit more on what you're seeing in terms of markets that are maybe getting better or weaker as you go into the third quarter. So, Mark just put it in the context.

impact.

I guess in terms of an end mark it's getting better or weaker, you know, sort of feeding into that.

Yeah, I think the guidance assumes roughly flat growth sequentially, volume wise and in all three businesses. volume wise and in all three businesses.

So, no significant changes in the trajectory of shipments in any of the three end markets.

Got it. My second question was just on the broader demand environment. In role, you mentioned in both the pressure lease as well as your comments that highly uncertain times. Bookings obviously still very strong. I think 1.06 book to bill implies still north of 700 million in bookings. But I think perhaps bookings did tick down slightly quarter on quarter. So I'm curious, do you think you're seeing any? I'm curious, do you think you're seeing any?

you know signs of macroeconomic weakness in those two key bookie numbers or is that more just noise and you're just trying to say it's uncertain but you're not seeing it in the business. Thanks.

Yeah, I appreciate it Mark, you know, not yet. No, we're not seeing it. I mean, at some point, the year-to-year comparisons, because we have been booking so strongly, don't make a lot of sense anymore. Although in Q2, that 700 plus million that we booked was still growth compared to Q2 a year ago, we highlight the fact that these are third, three quarters in a row, our bookings have been more than $700 million. So if I take, yeah, I don't even...

If I take a magnifying glass, I don't find anything. Maybe if I take a microscope, I see slight sequential delays from one quarter to another, from one business to the other, but it's it's miniscule. Orders were very, very strong in Q2. Revenue exceeded expectations and our orders even exceeded that. So, no, we still feel good, Mark.

magnifying glass, I don't find anything. Maybe if I take a microscope, I see slight sequential delays from one quarter to another from one business to the other, but it's, it's milliseconds. Orders were very, very strong in Q2. Revenue exceeded expectations and our orders even exceeded that. So, no, we still feel good, Mark. Very helpful. Thank you.

Our next question comes from Stephen Fox of Fox Advisors. Please go ahead.

Thanks, good morning. First question, I was curious on the revenues if we could zoom out. If we could zoom out. If we could zoom out.

versus where you started the year. As you mentioned, you started thinking, the year thinking you'd grow seven and 9%. Now you're talking 12 to 13% organically, seven months later. What would be the biggest drivers of the difference in your thinking now versus them? And then I had to follow up.

Yeah, I think the markets will continue to hang in there stronger. I, you know, like I said, I'm reiterating, we feel good about our share capture programs, we feel good about our strategic growth initiatives, but I think the main difference in all honesty is that our markets are hanging in there. I think after we've... I think after we've...

clean up the portfolio and after we significantly stepped up our R&D investments and increased our innovation rate we're able to benefit from the secular trends within those markets better we feel better positioned and I think that's that's by far the biggest driver so within smart buildings it's the emphasis on the growth verticals that I highlighted within broadband and 5G it's the continued effort of our fiber investments and our outside of the home investments

And with industrial automation, it's just broad-based. If I look at the verticals that we serve within that segment, they're all growing significantly faster than we had previously anticipated. And then we had previously anticipated.

That's helpful. And then as a follow-up question, could we talk to you in a little bit more detail about broadband and 5G? Looking at some of the earnings to date, there's a combination of unmet demand because of capacity issues, expansion going on like you mentioned with your India plant. And then there's a range of sort of ramps, whether it's world broadband versus...

five G, et cetera. Can you just sort of part and parcel how you're seeing the world today and where you're maybe benefiting the most from all that?

role. We didn't thank you appreciate that. So let me answer the question on a few different dynamics.

So our growth is broad-based across the world, but very strong in the United States, as you would expect, because the Ardau funds are now being deployed, we're seeing those. So we feel very good about our position there. So that's one, two is...

across the world, but very strong in the United States. As you would expect, because the Ardau funds are now being deployed, we're seeing those, so we feel very good about our position there. That's one, two is...

Our outside of the home grew even faster than we had anticipated. Now, our inside the home declined a little bit more than anticipated. Overall, growth was higher. So we see investments that the MSOs and also more and more the telcos are making.

payoff and they come to to build and to broaden and 5G to help them with that infrastructure build.

And then our fiber continues to grow and the mix continues to grow. So I'll just throw it one number. I think we mentioned it on the call. For the year we expect 36% of our revenue is now to become fiber. And that was like 27% in 2021 and only 16% in 2019. And that was like 27% in 2021 and only 16% in 2019.

So a lot of the drivers are secular, if you will, so either inside, outside or copper versus fiber, are brought based, but very strong in the United States. So a lot of the drivers are not brought based, but very strong in the United States.

The great, that's super helpful. And one piece of the puzzle just to close that out, can you just talk about your capacity expansion in India and how that sort of fits into the mix of everything else that you just talked about?

Yeah, of course. Yeah, I appreciate the question. So we feel bullish about India. We feel bullish. There is significant expansion, a lot of need for broadband, whether it's directly through 5G or whether it's through what we in America call the difficult MSOs. So,

We've been eyeing that part of the country. There's a lot of talent, fiber talent in Kochi. So we combined two thoughts and build one significant facility, so manufacturing expansion to serve the local market and potentially the rest of Asia, as well as R&D facilities, so testing facilities specifically tailored for fiber. So it's not so much as that we try to alleviate current bottlenecks so that we cannot keep up in the other factories. you

because our lead times are stable and actually coming down.

But it's more for future capacity expansion as we are very bullish on the Indian market.

Great. That's all very helpful. Thank you.

If there are any additional questions, please press the one on your touchtone phone.

We will now take a question from Noelle Dills of Stiefel. Please go ahead.

Hi guys, thanks for taking my question.

I was hoping you could just comment a bit on how you're thinking about margin expectations by segment for 2022.

Yeah, sure. So, if you look at the consolidated company, right now the guidance would imply roughly 100 basis points of margin expansion. And I would view both segments as improving close to that number on a year over year basis, I would say. Both will be in the range of 80 to 110 basis points.

So I think there's good opportunities and good leverage that we're going to get in both businesses because of the growth.

Okay, great. And then at the investor day, you kind of laid out this multi-year, mid-simil digit growth guidance. Any thoughts on, as you look at the current macro environment, any thoughts on how that sort of looks over 2023 and over 24 and 25, I guess my question is really, would you expect 23 to be a little bit lower, just directionally given the current macro environment? Thanks.

Yeah, I understand that I appreciate the question well, but obviously it's a little bit tough, right? I mean, if I follow the economic news in the morning, then I'm positive, in the afternoon I'm negative. So it's still highly uncertain out there. So we're taking a very prudent approach. We are investing, but we're investing in a very thoughtful manner and only in areas where we...

believe the secular trends will will keep hold and even if or when there is a recession that we are responsible in terms of our investments in our cross structure. It's a little bit hard to look at 2023. We feel good about the second half of 2022 and we'll can remember that we are 23 and beyond at the end of the year.

Okay, great. And then last, I was just hoping, you know, again, software and tasks were kind of a big topic at the investor day because you give us an update on what you're seeing there and how things are progressing. Thanks.

Yeah, yeah, I very much appreciate the question. Yeah, we're very excited. We launched this Bellden Horizon product with Indian industrial automation business. We feel very good about the demand that we received. We feel very good about the reactions of our customers. As you may or may not recall, we visualized all of our products in this pyramid. And we now have products on that product, on top of the period, which provides visibility into the data that we're collecting through our...

connectors and through our cable and our active products. So we're very excited about that. And I can honestly say that our customer expectations, following June 15th, even exceeded our expectations. So we feel very bullish about not just being able to provide a complete solution on the industrial floor or on the machine from sensor to the cloud, but now also a platform through which our customers can analyze the data that we capture and that we present for them.

to further improve their efficiency of the factory of further improved the efficiency of the machine. So yeah, we're very happy.

Great, thank you.

You got it.

I want...

Our next question comes from William Seen of Tourist Securities. Please go ahead.

Great, thanks for taking my question. And congrats on the very good results. I'm hoping you can remind us about the mechanisms through which pricing and margins are influenced by copper. So on the way up, I think we know there's a bit of a struggle to pass that along to customers. And as it's fallen,

I wonder whether that...

Action and action.

is more driven by sort of contractual things, or marketplaces, or dual customer donations. And then I go to power.

Okay, well first of all I appreciate the comment. Secondly, it's not really a struggle on the way up.

Half of, I'm saying about half of our gopper.

Our cable is, contractually, agreed upon beforehand. So that's, quote, unquote, automatic. There's a quite narrow band. And if copper exceeds that band, then automatically prices are adjusted, same as on the way down.

For the other half, I think since we've been dealing with copper price swings for so long...

I don't want to say it's a walk in the park, but it's not really a negotiation. I mean, our customers understand. And we'll leave it fully transparent.

which means that on the way up, yeah, we expect to pass it on, but on the way down, we adjust our prices also. So we don't play the games of trying to hold on for another month or another quarter to get a little bit of a benefit. We don't do that. So we build this credibility and this transparency over the years. So our customers understand.

That helps. Thank you.

The next I think I'll ask about is data center trends. You know, I understand you've guided for the quarter and. You know, I understand you've guided for the quarter and.

for a full year and that's helpful. And I'm sure you're not gonna provide guidance for next year, but I wonder how you're thinking about demand for data centers specifically for next year. You know, one could build still very...

positive case for growth. However, you know, we've also heard about

lower investments, at least in operating expenses, some of these web scale companies, hiring freezes and things like that. And it's not clear that that's making its way into their CAPEX plans. And so I'm hoping you might shed some light so we can set expectations for the coming year for that part of your business. Thank you.

Yeah, of course.

Here's where I would answer it.

Firstly,

Please.

Remember that we serve first and foremost.

Enterprise owned and co-load data service.

And the outlook for that is still pretty good for next year. That's according to the reports that we receive. That's according to the reports that we receive.

I think what you're referring to, the big guys are the cloud providers. And we don't sell to a hyper-scale data source. So that's a deliberate choice that we made a few years back. And that is continuing to serve us well. So we're not affected by the big cloud players slowing down or hiring, and they're issuing the hiring freezes that they have most recently done. And they're issuing the hiring freezes that they have most recently done.

Great. Thank you.

Sharing we park, there are no further questions at this time. Please continue.

Thank you, Batita, and thank you everyone for joining today's call. If you have any questions, please reach out to the IR team here at Belden. Their email address is investor.relationsfeldon.com.

Thank you ladies and gentlemen. This concludes our call for today. You may now disconnect from the call and thank you for participating. Thank you for participating.

An event specialist will join you shortly. If you're a speaker or presenter, please notify the event specialist. You may be asked to provide a confirmation code, speaker's name, or the title of your event. Please be prepared to provide that information. Once you have provided that information, you'll be placed on hold with music or placed into your event. Hello, and welcome to the event center. An event specialist will join you shortly. If you're a speaker or presenter... Thank you for calling. May I have a... Are you dialing in for the bell and conference? Yes, thank you. Perfect. And may I have a name, please? Rachel Smith.