Q1 2025 Belden Inc Earnings Call
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Speaker Change: I would now like to turn the call over to Aaron Redington. Please go ahead Sir.
Aaron Redington: Good morning, everyone and thank you for joining us for Belden first quarter 2025 earnings conference call.
Speaker Change: With me today are <unk>, President and CEO, Ashish, Sean and senior Vice President and CFO, Jeremy Parks Ashish.
Speaker Change: <unk> will provide a strategic overview of our business and then Jeremy will provide a detailed review of our financial and operating results followed by Q&A.
Speaker Change: We issued our earnings release earlier this morning and have prepared a slide presentation that we will reference on this call the.
Speaker Change: Press release presentation and transcript of these prepared remarks are currently available online at Investor Dot Belden Dot com.
Speaker Change: Turning to slide two in the presentation.
Speaker Change: During this call management will make certain forward looking statements in reliance upon the safe Harbor provisions of the private Securities Litigation Reform Act of 1095.
Speaker Change: For more information. Please review today's press release and our most recent annual report on Form 10-K.
Speaker Change: Additionally, during today's call management will reference adjusted or non-GAAP financial information.
Speaker Change: In accordance with regulation G. The appendix to our presentation in the Investor Relations section of our web site contains a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate.
Speaker Change: I will now turn the call over to our President and CEO Ashish Sean.
Ashish Sean: Thank you Adam and good morning, everyone.
Speaker Change: We appreciate you joining us.
Speaker Change: Let's turn to slide four for a summary of our major accomplishments during the first quarter.
Speaker Change: And key messages I would like to highlight.
Speaker Change: As a reminder, I will be referring to adjusted results today.
Speaker Change: First.
Speaker Change: Let me congratulate our team on another solid quarter and a great start with <unk>.
Speaker Change: We once again executed well and delivered results ahead of expectations.
Speaker Change: The fourth quarter, our revenue and earnings per share both exceeded the high end of our guidance as a solutions transformation continues to progress.
Speaker Change: Revenue totaled $625 million up.
Speaker Change: Up 17% compared to the prior year and earnings per share came in at $1 69.
Speaker Change: <unk>, 9% compared to the prior year.
Speaker Change: Profitability was strong with gross margins of 39, 8%.
Speaker Change: 140 basis points year over year.
Speaker Change: Adjusted EBITDA margins came in at 16, 6% for the quarter.
Speaker Change: Up 80 basis points year over year.
Speaker Change: Before I move on I want to quickly point out the gross margins of nearly 40% are the highest we have achieved.
Speaker Change: Reshaping the business with our strategic solutions transformation in 2020.
Speaker Change: Almost like this highlights the benefits of our solutions transformation and gives a roadmap for future opportunities our solution to expand across the organization.
Speaker Change: Next.
Speaker Change: Demand for the quarter was steady with performance modestly ahead of expectations given the heightened uncertainty.
Speaker Change: Overall, our business grew organically by 11% for the quarter.
Speaker Change: Led by strength in the Americas, we saw organic growth of 14%.
Speaker Change: Orders were up modestly sequentially for the first quarter and up 18% compared to the prior year.
Speaker Change: We finished the period with a book to Bill of 1.0 to five.
Speaker Change: Impaired to 1.03 in the prior year period.
Speaker Change: Finally, our business continues to generate meaningful cash flow and we are deploying capital consistent with our capital allocation priorities.
Speaker Change: Trailing 12 month free cash flow was strong at $220 million aligned with our expectations.
Speaker Change: With the ample free cash flow our team continues to invest in high return opportunities.
Speaker Change: I appreciate the shareholders.
Speaker Change: Continued buying back our stock deploying $100 million to repurchase 1 million shares so far this year.
Speaker Change: Our balance sheet remained strong, allowing us to enhance shareholder returns in multiple ways.
Speaker Change: We'll continue looking for acquisitions that support our solutions transformation and when appropriate returning capital to our shareholders through buybacks.
Now please turn to slide five.
Speaker Change: I'd like to share a customer success story that underscores the long term value of our relationships by illustrating how solutions opened the door with deeper engagement with customers and the power of our broad product portfolio with.
Speaker Change: Industrial and enterprise applications.
Speaker Change: So this example involves the longstanding solutions customer and the North American automated warehouse space.
Speaker Change: Our relationship began with deploying 40 components.
Speaker Change: Specifically, our industrial wireless products and applications.
Operational efficiencies.
Speaker Change: From the start the customer saw immediate benefits to their most critical kpis and was impressed with our team's expertise capabilities and product portfolio strengths.
Speaker Change: As a partnership deepened our solutions team continued identifying new ways to enhance their operations and drive meaningful improvements to kpis to network infrastructure upgrade.
Speaker Change: The customer face challenges with inconsistent physical infrastructure with less downtime functionality gaps and supply chain disruption.
Speaker Change: <unk> our team engineered a robust physical <unk> that complements the belden products already in place.
Speaker Change: After onsite validation of our solution the customer was so confident in our capabilities that belden has now been officially specified in the physical or the infrastructure.
Speaker Change: As a customer expands the footprint with new automated warehouse deployments across North America, we are well positioned for ongoing and incremental revenue opportunities, which will be meaningful business.
Speaker Change: It is also worth noting that our initial engagement started with traditionally industrial products and has now expanded to include elements more commonly associated with enterprise environment.
Speaker Change: This new spec position and auto illustrate the IP or the convergence opportunity progress Belden is uniquely qualified to supply.
Speaker Change: Combined with our industrial wireless products, a new order for copper cabling and fiber solutions, various connectors and our idea of cabinet positions us as a provider of a nearly complete end to end solution.
Speaker Change: To address our customers' most critical kpis.
Speaker Change: This example highlights two important points.
Speaker Change: First our solutions driven approach allows us to build strong enduring customer relationships that lead to repeat business and strategic spec positioning.
Speaker Change: Second it enables us to deliver comprehensive end to end solutions that drawn the full breadth of our product portfolio the capability unique development.
Speaker Change: As our solution strategy continues to evolve we expect to further bridge the gap between industrial and enterprise applications by offering unified high value solutions across both spaces.
Speaker Change: We are confident that our solutions provide superior value in the marketplace and new and existing customers are increasingly seeing the positive impact on the operation as we grow and expand.
Jeremy: I will now request Jeremy to provide additional insights into our first quarter financial performance.
Jeremy: Thank you Ashish I will start my comments with results for the first quarter, followed by a review of our segments a discussion of the balance sheet and cash flow and finally, our outlook as a reminder, I will be referencing adjusted results today.
Jeremy: Now please turn to slide six.
Jeremy: Revenue for the quarter was $625 million up 17% year over year and exceeding the high end of our guidance of $620 million.
Jeremy: Revenue was up 11% organically on a year over year basis with automation solutions up 16%.
Jeremy: And smart infrastructure solutions up 6%.
Jeremy: Orders for the quarter were up modestly sequentially and up 18% year over year with both segments exhibiting strong growth.
Jeremy: Automation solutions orders were up 22% year over year, and smart infrastructure solutions orders were up 13% year over year.
Jeremy: Gross profit margins were 39, 8%, increasing 140 basis points compared to the prior year.
Jeremy: Margins in the first quarter were strong.
Jeremy: Afflicting, both normal seasonal patterns and a favorable business mix.
Jeremy: First quarter margins are typically higher due to segment mix as our smart infrastructure segment is seasonally slower early in the year, helping lift overall margin.
Jeremy: EBITDA was $104 million with EBITDA margins up 80 basis points year over year to 16, 6%.
Jeremy: Net income was $65 million up from $51 million in the prior year quarter.
Jeremy: And EPS was $1 60 up 29% and above the high end of our guidance of $1 53.
Jeremy: Now please turn to slide seven for a review of our business segment results for the quarter.
Jeremy: Despite policy uncertainty.
Jeremy: <unk> four segments was slightly ahead of expectations.
Jeremy: Revenue in our automation solutions segment was up 16% compared to the prior year period with EBITDA margins of 29% up from 19, 5%.
Jeremy: Orders in automation solutions were up 22% compared to the prior year with a book to Bill of 1.09.
Jeremy: For the quarter, we saw strength in our more traditional industrial verticals, including discrete and process manufacturing, which both achieved double digit organic growth.
Jeremy: From a regional perspective in automation solutions, we saw continued strength in the Americas and APAC.
Jeremy: While EMEA was our slowest growing region it did achieve organic growth for the quarter.
Jeremy: A welcome improvement from the prior year.
Jeremy: Revenue in our smart infrastructure solutions segment grew 17% compared to the prior year.
Jeremy: With EBITDA margins of 11, 4%.
Jeremy: Up from 11%.
Jeremy: Orders and smart infrastructure were up 13% compared to the prior year with a book to Bill of 0.98.
Jeremy: For the quarter, we saw strength in targeted verticals, including healthcare education and hospitality.
Jeremy: These verticals presents a compelling opportunity for us going forward as we look to integrate our traditional industrial and enterprise businesses into our combined solutions offering.
Jeremy: Broadband revenue was up year over year led by strength in fiber, which was up 9% organically.
Jeremy: Our markets remain stable with most customers, taking a neutral stance in the short term as they await greater clarity on policy decisions and resulting implications on supply chains and end demand.
Jeremy: Next please turn to slide eight for our balance sheet and cash flow highlights.
Our cash and cash equivalents balance at the end of the first quarter was $259 million.
Jeremy: Compared to $370 million in the fourth quarter of 2024.
Jeremy: Our cash position reflects typical seasonality and capital deployment towards share repurchases during the quarter.
Jeremy: Our financial leverage was a reasonable 2.0 times net debt to EBITDA consistent with our expectation.
Jeremy: We intend to maintain net leverage of approximately one five times over the long term. However, we will fluctuate from time to time as we pursue strategic opportunities consistent with our capital allocation priorities.
Jeremy: For the trailing 12 months, our free cash flow was $220 million.
Jeremy: And 9% of total revenue.
Jeremy: Year to date, we repurchased 1 million shares further reducing our share count, which is now more than 10% lower than it was at the end of 2021.
Jeremy: We currently have $240 million remaining on our repurchase authorization.
Going forward, we see the opportunity to continue deploying capital towards acquisitions and share repurchases.
Jeremy: As our solutions offerings expand our margins continue to strengthen leading to increased cash flow.
Jeremy: The steady flow of capital allows us to make strategic high return investments that further enhance our cash flow generating capacity.
Jeremy: As a reminder, our next debt maturity is not until 2027 and all of our debt is fixed with rates averaging three 5%.
Jeremy: Please turn to slide nine for our second quarter outlook.
Jeremy: We have executed well amid ongoing challenges.
Jeremy: However, our customers still face heightened uncertainty as they navigate this rapidly changing environment.
Jeremy: Assuming the continuation of current market conditions revenues for the second quarter are expected to be between $645 million and $660 billion.
Jeremy: Representing a 7% to 9% increase over the prior year quarter. Adjusted EPS is expected to be between $1 67, and $1 77.
Jeremy: Representing an 11% to 17% increase over the prior year quarter.
Jeremy: We expect a tax rate of 17, 5% in the second quarter and approximately 18% for the full year.
Jeremy: Finally, I want to quickly cover currently enacted tariffs as they relate to our guidance.
Jeremy: First it is important to highlight that our strategy for many years has been to produce within region across our business lines.
Jeremy: This strategy served us well during Covid and has once again proven beneficial as we navigate the current uncertainties.
Jeremy: To date, we have taken a number of mitigating actions, including sourcing changes and pricing adjustments to offset the tariff impact.
Jeremy: While the situation is ever changing we want to assure you that we are on top of the complex environment and will adjust as needed.
Jeremy: That concludes my prepared remarks, I would now like to turn the call back to Ashish.
Speaker Change: Thank you Jeremy.
Speaker Change: To summarize our first quarter performance exceeded expectations and set a strong foundation for the Arrowhead.
Speaker Change: Despite a dynamic and often unpredictable environment, our team executed with focus and consistency delivering impressive results across the board.
Organic growth came in at 11%.
Speaker Change: Auto growth reached 18% adjusted gross margins of nearly 40% and.
Speaker Change: And adjusted EBITDA improved by 80 basis points compared to the prior year.
Speaker Change: These results, especially noteworthy given current market conditions and reflects the success of our ongoing solutions transformation.
Speaker Change: We are well positioned to benefit from a major global trends such as re industrialization digitization and automation.
Speaker Change: Trends, we believe are still in the early stages.
Speaker Change: As we look towards the second quarter, our guidance implies that customers maintain a neutral posture.
Speaker Change: And we expect near term uncertainty around trade policy to persist.
Speaker Change: That said.
Speaker Change: Our long term outlook remains optimistic.
Speaker Change: We continue to see meaningful upside once decision makers have grid Academy.
Speaker Change: In fact, we believe belden is positioned to be a winner as this transition plays out.
Speaker Change: While it's early phases, often bring uncertainty and noise companies like belden.
Speaker Change: Well in line with the direction of change are best positioned to succeed.
Speaker Change: There are several reasons why we remain optimistic about the road ahead.
Speaker Change: First orders remained steady and we see promising signals of strength beneath the surface.
Speaker Change: <unk> key regions is healthy, particularly in the Americas, and APAC and we believe that both Europe and China have likely bottomed good news for our business.
Speaker Change: Our end markets are also holding umbrella with positive momentum in both discrete and process manufacturing verticals.
Speaker Change: Second after more than two hours of contraction in global manufacturing PMI. We are finally seeing signs of a recovery.
U S manufacturing PMI recently turned positive and we are encouraged by Europe, as Germany's manufacturing PMI edged closer to positive territory.
Speaker Change: These are early positive indicators of a broader industrial recovery just around the corner.
Speaker Change: Finally, we anticipate that our combination of key trends reindustrialization automation and the integration of <unk>.
Speaker Change: We will have a positive impact on our business.
Speaker Change: As these dynamics gained momentum we have.
Speaker Change: Strategically aligned to capitalize on them.
Speaker Change: The shift towards localized manufacturing will drive increased demand for automation, whilst the ongoing digitization of operations and IP already convergence will unlock new efficiencies and scalability.
Speaker Change: Our portfolio was purpose built to support this transformation.
Speaker Change: And we believe we are uniquely equipped to support our customers as they grow and adapt to these evolving demands.
Speaker Change: Our solutions transformation delivers results.
Speaker Change: Incremental growth and expand margins.
Speaker Change: Strong tailwind from secular trends and our continued push into innovative offerings, we see a significant runway ahead.
Speaker Change: We remain committed to operating the business with discipline and a focus on long term value creation.
Speaker Change: Our capital allocation strategy is guided by the same principles.
Speaker Change: <unk> thoughtful strategic investments and decisions that support our long term commitments.
Speaker Change: As outlined during our Investor day, our long term growth algorithm remains intact.
Speaker Change: We are targeting through cycle EPS growth of 10% to 12% driven by mid single digit organic growth and steady margin expansion.
Speaker Change: Our progress in the first quarter and the opportunity. We see ahead of estimates to our team's dedication and hard work I'm proud of what we've accomplished and even more excited about what's to come.
Speaker Change: As we continue to execute our strategy I have no doubt that we will reach new heights and create lasting value for all our stakeholders.
Speaker Change: Finally, I want to take a moment to recognize the valuable contributions of our associates over the past quarter.
Speaker Change: Your efforts and commitment.
Speaker Change: Really appreciate it.
Speaker Change: And I. Thank you for your unwavering support as we transform belden.
Speaker Change: That concludes our prepared remarks, operator, please open the call to questions.
Speaker Change: And once again, if you would like to ask a question during the Q&A session. Please press star one on your Touchtone phone. If you would like to withdraw your question. Please press star two.
Speaker Change: And our first question is from William Stein with <unk> Securities.
William Stein: Great. Thanks for taking my questions.
Ashish Sean: First ashish.
Sean: Think about the changes that I think this administration wants to.
Ashish Sean: Enable.
Speaker Change: Meaning more manufacturing in the U S. It seems like Belden is very well positioned for that and I Wonder if you could comment as to whether you've seen incremental interest in.
Speaker Change: It may be reassuring not just for ensuring your near shoring, but re shoring to the U S. Among manufacturers or perhaps the current environments had the opposite effect in <unk>.
Speaker Change: Your customers and potential customers feel.
Speaker Change: I don't know a bit.
Speaker Change: Trapdoor unsure as to what to do given the changing policies any any sort of comment clarifying this would be helpful.
Speaker Change: So I think it's more of the former.
Speaker Change: Across our large customers, we see a lot more.
Speaker Change: Evidence about the long term.
Speaker Change: Especially in the U S, bringing back more manufacturing capacity closer to the points of consumption.
Speaker Change: And therefore, we see discussions around.
Speaker Change: Longer term plans.
Speaker Change: This whole ITT convergence.
Speaker Change: Topic has been.
Speaker Change: Kind of pending for some time people have talked about it for some time. This is kind of a catalyst terrible because.
Speaker Change: So.
Speaker Change: If you are manufacturing offshore.
Speaker Change: The urgency around bringing in order together was lower because you have cheaper labour and outsourcing a lot of that headache to somebody else.
Speaker Change: Now as companies think about how do they manufacture in the U S with a lack of skilled labor.
Higher costs there.
Speaker Change: They are really discussing this converged backbone solution with us so we see a lot of interest in that our funnel for solutions.
Speaker Change: <unk> gone up.
Speaker Change: Now I will say in the near term there is some uncertainty around.
Speaker Change: Certain sectors thinking whether they will be able to continue friend shoring are not therefore there.
Speaker Change: While spooning certain decisions in the near.
Speaker Change: Near term so.
Speaker Change: But I think overall the.
Speaker Change: <unk>.
Speaker Change: Trends, we see in terms of our discussions in terms of the funnel and also I think in terms of our initial bookings.
Is that overwhelmingly people are thinking about investing in IP already converged backbones to enable reassuring in the U S.
Speaker Change: Okay.
Speaker Change: As a follow up.
Speaker Change: Like to ask about the book to Bill in <unk>.
Speaker Change: Infrastructure, which was a little bit below parity can you maybe dig one level deeper in.
Speaker Change: I forget if you still call it the smart buildings versus broadband.
Speaker Change: Between those two.
Speaker Change: Are you seeing.
Speaker Change: Noticeable strength or weakness.
Speaker Change: In one or the other.
Yes.
Speaker Change: Yes, let me let me take that.
Speaker Change: So in terms of orders on a year over year basis Smart buildings orders were up about 8% broadband orders were up 18%. If you adjust for the acquisition that we did within broadband I think orders were still up 12%, 13% within broadband so I'd say, a little bit stronger in that business than in smart buildings.
Speaker Change: <unk>.
Speaker Change: Thank you.
Speaker Change: Sure.
Speaker Change: Yes, the one thing I'll add here will is so.
Speaker Change: Whilst we have seen.
The traditional smart buildings.
Speaker Change: Infrastructure is too little.
Speaker Change: Now slowly they've been.
Speaker Change: Portfolio out how they invest we are seeing more and more cases, and we've talked about one example, today on the call.
Speaker Change: We are able to take smart buildings products into or.
Speaker Change: What we previously thought of as automation solutions. So for example in material handling for example, and mass transit. So we do expect that to keep improving in spite of the general environment, but yes, smart buildings has been a little quiet.
Speaker Change: Thank you.
David Williams: And our next question comes from David Williams.
Speaker Change: With benchmark.
Speaker Change: Hey, good morning, Thanks for taking my question and congratulations on the really solid execution here.
Speaker Change: Maybe stepping back to Will's question, just now but on the Reindustrialization clearly is a positive and can you talk a little bit about that but is there a way maybe quantify the level or number of discussions and kind of the activity I guess, just trying to size how much.
Speaker Change: The how much is being delayed and how much is actively ongoing in terms of maybe that potential to move back to the U S.
Speaker Change: Yes, I think first of all thank you.
Speaker Change: It is difficult right now to quantify.
Speaker Change: <unk>.
Speaker Change: From an exact.
Speaker Change: Bookings perspective.
Speaker Change: I will say this that.
Speaker Change: Okay.
Speaker Change: Within our overall sales funnel, we look at.
Speaker Change: The portion that is related to these full solutions.
Speaker Change: Firstly around how we are.
Speaker Change: Focused on the re shoring of the infrastructure build here in the U S.
Speaker Change: And that has gone up.
Speaker Change: Sure.
Speaker Change: Like more in the high teens.
Speaker Change: We see that.
Speaker Change: We see that progressing pretty well so.
I think there is a lot more discussion taking place now.
Speaker Change: And then there was even.
Speaker Change: Six months ago.
Speaker Change: So the leading indicators tell me.
Speaker Change: Within the Americas the solutions business.
Speaker Change: Should continue to grow in.
Speaker Change: In the high teens.
Speaker Change: Bart.
Speaker Change: Sure.
Speaker Change: Because of this short term uncertainty and some friction.
Speaker Change: It's difficult to say exactly when that land in terms of bookings.
Speaker Change: Okay, great. Thanks, Thanks, so much for the color there and then maybe secondly, just on the demand pull forward do you feel like you're you're seeing a significant demand pull forward or is there any way to kind of think about what youre seeing there and maybe even into the second quarter.
Speaker Change: Anything specific.
Speaker Change: We haven't seen any anything thats material.
Speaker Change: So remember our products and solutions are more engineered.
Speaker Change: They're not really impulse driven or consumer type.
Speaker Change: There are certain markets, where that is happening more on the consumer side.
Maybe on mobile.
Speaker Change: Technology et cetera, but we haven't seen anything really.
Speaker Change: When customers think about deploying relevant solutions.
Speaker Change: They typically work those schedule, let's say, it's very well plan.
Speaker Change: Now we don't see like I said before we do see a lot more people coming and talking to us about.
Speaker Change: Hey, if we had to do some things quickly would you guys be able to support us as we go forward.
Speaker Change: So while we haven't seen demand pull and then we've seen kind of interest will in more people are talking.
Speaker Change: Great. Thanks, so much.
Speaker Change: And our next question comes from Mark Delaney with Goldman Sachs.
Speaker Change: You have Oman Gupta on for Mark Delaney. Thank you for taking the questions and I appreciate the color you gave.
Oman Gupta: On being in region for region, and the tariff exposure, but could you maybe give a little more detail around what exposure you do have if there is anything.
Oman Gupta: That's being done outside the U S. That's coming into the U S and how much of that have you been able to offset today and how much longer will it take to offset the rest.
Oman Gupta: Yes.
Oman Gupta: Sure I'll take that one in terms of our exposures our largest exposure right now in the U S is Mexico.
But.
Oman Gupta: The majority of the product that we're importing from Mexico at the moment have exemptions under the U S. MCA. So.
Oman Gupta: So I think we're well covered with respect to those imports we don't manufacture anything in China for the U S.
Oman Gupta: Do have a couple of third party suppliers that we utilized.
Oman Gupta: They do source products from China.
Oman Gupta: But we are in the process right now of getting that sourcing changed or in rare cases, increasing prices, where we need to with our customers to pass those costs on so I think as you could tell from our guidance the net impact.
Oman Gupta: As roughly zero or neutral in the second quarter.
Speaker Change: I appreciate that color and then as a follow up.
Speaker Change: I know longer term you are still targeting that 10% to 12% EPS CAGR, but you had spoken previously to our goal of $8 in 2025 any thoughts on where that stands I know margins came in pretty strong in <unk>, but it sounds like some of that was maybe a bit of help from mix.
Speaker Change: Yes. So we gave a detailed update on that the path to $8 last quarter I don't think we really have anything further to add at this point.
And we're not guiding beyond the second quarter.
Speaker Change: Okay.
And we'll move to our next question from Rob Jimmi Sue with vertical research partners.
Speaker Change: Hey, good morning, guys congrats on the quarter.
Speaker Change: But a little bit of a sequential step down and smart infrastructure.
Speaker Change: Just curious if there's anything outside of normal seasonality, there and anything else that you can kind of provide some light onto that.
Speaker Change: Solid performance overall.
Speaker Change: Yes, Hey, Rob So agreed the performance within industrial I think was fairly strong I think gross margins have held up very well in that business.
Speaker Change: And from a total company level, we get favorable mix in the first quarter, because remember seasonality disproportionately impacts the smart infrastructure business, which has lower margin I think when you look at the particular segments smart infrastructure in the first quarter. They have a larger drop in revenue from Q4 to Q.
Speaker Change: One which is really.
Speaker Change: The main impact to their margins is just leverage on revenue at the same time, we are continuing to make some targeted investments in that business as Ashish said.
Speaker Change: We are working to.
Accelerate solutions in that business and bring solutions into even some of our traditional.
Speaker Change: Industrial markets in a converged fashion, so we'll make investments, but the biggest impact sequentially from Q4 to Q1 is just leverage on volume.
Speaker Change: Great that's helpful and actually.
Speaker Change: On the point on the combined sales force and what Youre doing there it sounds like the customer win that you highlighted.
Speaker Change: Collective of that decision that you made last year that combined solution sales forces from both segments.
Speaker Change: Can you maybe expand on some of the learnings that <unk> had so far.
Speaker Change: How this may have already started to help the opportunity funnel for solutions as we look ahead.
Yes, Rob So I think when we started this process.
Speaker Change: Our ingoing hypothesis was that.
Speaker Change: Some of our customers will upgrade their entire.
Speaker Change: And one goal.
Speaker Change: Wonderful learnings as being that it's that's how it's going to it's going to be.
Speaker Change: <unk> step journey.
Speaker Change: And typically a lot of our customers are now saying that they're worn.
Speaker Change: Autonomy and this systems.
Speaker Change: So an example of an autonomous system would be rare.
Speaker Change: Two different subsystems communicate with each other and without human intervention decision is made.
Speaker Change: Like a pipeline being shut down because the earthquake monitoring system detected.
Speaker Change: At a certain kind of a tremor or the <unk>.
Speaker Change: Air conditioning, and a hospital emergency ward increasing.
Speaker Change: There was an.
Speaker Change: An accident was reported in the vicinity and people knew that traffic to the emergency work will increase with stuff like that.
Speaker Change: Which is which we think of as autonomous systems. So so people want that but they also appreciate that it is a two three step journey to get there and typically it starts with first.
Speaker Change: Digitizing the operations like that example, we talked about on the warehouse automation and then second is extending that whole data infrastructure to between <unk> and then third bringing in some software capability to start orchestrating that data out.
Speaker Change: And we have to kind of redesign our process as we reflected on that learning.
Speaker Change: And it's a little slower it's not the big Bang approach.
Speaker Change: But it's far more sticky and we have a number of customers now where we have installed base positions.
Speaker Change: Positions.
Speaker Change: We have been able to take them to steps two and three in that in that process and this is going to be a big deal in the U S, especially because.
Speaker Change: There isn't a lot of skilled labor available both for manufacturing, but also for maintaining networks.
Speaker Change: So we see a lot a lot of traction here we.
Speaker Change: We are being more.
Speaker Change: Modest about it in terms of just not necessarily.
Highlighting it all the time.
Speaker Change: <unk> going on.
Speaker Change: Great. Thank you.
Speaker Change: Then just one last one on free cash flow Jeremy.
Speaker Change: Solid quarter, you would make a lot of progress here last.
Speaker Change: A couple of years, just curious are you seeing that.
Speaker Change: Youre working on in terms of managing working capital and just kind of some puts and takes on.
Speaker Change: Driving.
Speaker Change: Better conversion as we as we look ahead.
Speaker Change: Yes so.
Speaker Change: I think we continue to try to find improvements in our supply chain and managing inventory and inventory turns were down a little bit sequentially that that's typical in the first quarter, but on a year over year basis.
Speaker Change: We had nice improvement in inventory turns I think the key driver. This year is going to be EBITDA growth.
Speaker Change: And just responsible capital investments that we're trying to be again very targeted in the investments that we make.
Speaker Change: In manufacturing and R&D.
Speaker Change: But I think the key driver will be EBITDA on a year over year basis, but our goal right now is to continue to improve their free cash flow margin or free cash flow as a percentage of revenue. We were I think eight 5% a couple of years ago last year, we were a little over 9% and we're working to continue to <unk>.
Speaker Change: Move that closer to 10%. So hopefully we will see some nice improvement in 2025 as well.
Speaker Change: That's great. Thank you Scott.
Speaker Change: And if there are any additional questions. Please press star one on your Touchtone phone will.
Speaker Change: We will move to our next question Steven Fox from Fox expires.
Steven Fox: Hi, good morning, guys.
Steven Fox: Some of the stuff that you already talked about with the potential to benefit on U S. Re shoring I was wondering is as we think about how that plays out in the future, which I think it is going to happen with or without tariffs anyway, but like.
Speaker Change: What's the low hanging fruit looked like I mean, ashish talk about sort of what seemed like a multi year process to sort of improving on your content at one customer, but when what would be like sort of an initial reactions from customers and how would it drive specific product sales for you guys and then I had a follow up.
Steven Fox: Sure.
Speaker Change: I think the low hanging fruit is essentially the first layer, which is the complete digitization of operations.
Speaker Change: Across multiple verticals, so whether it's in manufacturing whether it's in hospitality health care process.
Speaker Change: All right now.
Speaker Change: If you look across the U S. There's a lot of legacy infrastructure that is sometimes analog sometimes it's a combination.
Speaker Change: <unk> come from different suppliers. They are not really on the same system.
Speaker Change: So that's the low hanging fruit.
Speaker Change: Hey, Jamie it's happening it started happening even before the whole tariff discussion came up.
Speaker Change: But I think it's accelerated because.
Speaker Change: Everybody appreciates that.
Speaker Change: Whilst they might have.
Speaker Change: Have some kind of a reassuring plus friend showroom strategy. The reassuring element is 100% definite yes.
Speaker Change: And that part is going to happen. So that's what we are seeing right now.
Speaker Change: I think the next step for some of these customers will be when the stock combining.
Speaker Change: That.
Speaker Change: Digitized <unk> with Baird.
Speaker Change: And some of our customers are already at that stage. So that's why we called it out and I think the bulk of our customers.
Speaker Change: Austin, let those stage, one where they're digitizing operations.
Speaker Change: Great. That's very helpful. And then for a follow up I was just curious I understand the numbers now and broadband but any other color you can add on just how that broadband markets are tracking.
Speaker Change: To date and your expectations for spending for the rest of the year.
Speaker Change: Yes, so I think broadband has been.
Speaker Change: They did very well on a rate basis.
Speaker Change: Across the board I think we've seen a little bit of.
Speaker Change: Channel inventory digestion. So there has been that at play too, but if you look at our customers they have talked about.
Speaker Change: Continuing with their DOCSIS rollouts.
Speaker Change: Those programs are fairly.
Speaker Change: In fact, theres been some talk about will there be.
Speaker Change: Release of beat funds et cetera, now remember that is not really part of our.
Speaker Change: Our 2025 model.
Speaker Change: We expect that.
Speaker Change: That program will continue with some modifications as early announcements come out of that space.
Speaker Change: So I think in broadband.
Speaker Change: Our goal is to continue increasing our fiber content.
Speaker Change: And then we know that more of a channel.
Speaker Change: From an access perspective water with Johnny is required to get to the user we will remain part of that.
Speaker Change: <unk>.
Speaker Change: As you might remember, Steve we acquired precision optical that allows us to be more involved in the electronics portion.
Speaker Change: All of that.
Speaker Change: Full end to end channel that goes to the user.
Speaker Change: So that allows us more visibility.
Speaker Change: Yes, it's a little bit of a mixed bag.
Speaker Change:
Speaker Change: Partly because of the channel Destocking, but I think that phase is over now and.
Speaker Change: From here onwards, we should see steady growth.
Speaker Change: Great. That's all very helpful. Thank you.
Speaker Change: Sure.
Speaker Change: And there are no further questions at this time please continue.
Speaker Change: Yes. Thank you operator, and thank you everyone for joining today's call. If you have any questions. Please contact the IR team here at Belden, Our E Mail address is investor relations at Belden Dot com.
Speaker Change: Thank you ladies and gentlemen, this concludes the call for today.
Speaker Change: You may now disconnect and have a great day.