What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-01 compared with 2024-10-31 · 66 added, 82 removed, 147 unchanged (50% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

(the Company, us, we, or our) is a leading global supplier of network infrastructure and digitization solutions built around 2 global businesses - Smart Infrastructure Solutions and Automation Solutions.

As Belden continues to advance forward with solutions focused on data infrastructure, we renamed our two reportable segments during the three months ended September 29, 2024 from Enterprise Solutions and Industrial Automation Solutions to Smart Infrastructure Solutions and Automation Solutions, respectively.

The composition of the segments did not change as a result of these name changes.

Our mission is to build the foundation for a digital world that makes the digital journey simpler, smarter and secure.

Belden is moving beyond connectivity, from what we make to what we make possible through a performance-driven portfolio, forward-thinking expertise and purpose-built solutions.

We are aligned with attractive secular growth markets, positioned to provide comprehensive solutions that drive customer outcomes, focused on new product innovation and technology leadership, and committed to sustainable ESG practices.

Our current business goals are to:

(the Company, us, we, or our) is a leading global supplier of complete connection solutions built around two global businesses - Smart Infrastructure Solutions and Automation Solutions.

Belden is a leading global supplier of complete connection solutions that unlock untold possibilities for our customers, their customers and the world.

We advance ideas and technologies that enable a safer, smarter and more prosperous future.

Throughout our 120-plus year history we have evolved as a company, but making connections remains our purpose.

Our long-term business goals are to:

• Achieve mid-single-digit annual revenue growth;

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• Execute a disciplined capital allocation strategy while maintaining net leverage around 1.5x;

• Drive Adjusted EPS to at least $8.00 by 2025 with annual growth of 10% to 12% thereafter.

• Realize annual Adjusted EPS growth of 10% to 12%.

Trends and Events

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dollar weakens against foreign currencies, our revenues and earnings are positively impacted.

Approximately 41% of our consolidated revenues during the quarter ended September 29, 2024 were to customers outside of the U.S.

Approximately 41% of our consolidated revenues during the quarter ended March 30, 2025 were to customers outside of the U.S.

In addition to the translation impact described above, currency rate fluctuations have an economic impact on our financial results.

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dollars in a foreign location.

Global Trade Volatility

During 2025, there has been significant volatility in previously stable global trade agreements.

Sharp and sudden increases in tariff rates have the potential to increase the input costs for our products and impact our ability to compete in certain jurisdictions.

We closely monitor the global trade landscape and take appropriate measures in our supply chain and pricing strategies to mitigate the impact of increased tariffs.

D uring periods of inflation, if we are unable to raise prices timely and sufficiently to recover our material costs, our earnings could decline.

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To the extent that we exceed the market growth rates, we consider it to be the result of capturing market share.

Voleatech GmbH Acquisition

On September 16, 2024, we acquired Voleatech for €5.0 million ($5.6 million), net of cash acquired.

The acquisition includes a potential earn-out up to €3.0 million based upon certain targets over three years, which will be accounted for as compensation cost.

Voleatech, based in Germany, is known for their VT AIR Next Gen Firewall and expands Belden's Firewall product portfolio and overall planning of security in OT networking.

Voleatech is reported within the Automation Solutions segment.

Precision Optical Technologies Acquisition

On June 30, 2024, we acquired Precision for $289.6 million, net of cash acquired.

Precision, based in New York, is a leading supplier of value-added optical transceivers with proprietary software, firmware configurations, and related components.

Precision is reported within the Enterprise Solutions segment.

Share Repurchase Program

During the three months ended September 29, 2024 , we repurchased 0.2 million shares of our common stock for an aggregate cost of $20.1 million at an average price per share of $110.84.

During the nine months ended September 29, 2024 , we repurchased 0.9 million shares of our common stock for an aggregate cost of $78.0 million at an average price per share of $90.98.

During the three months ended March 30, 2025 , we repurchased 0.8 million shares of our common stock for an aggregate cost of $84.5 million at an average price per share of $104.28.

Off-Balance Sheet Arrangements

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Critical Accounting Policies

During the nine months ended September 29, 2024:

During the three months ended March 30, 2025:

• We did not change any of our existing critical accounting policies from those listed in our 2024 Annual Report on Form 10-K;

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Consolidated Income before Taxes

Three Months Ended % Change Nine Months Ended % Change

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Three Months Ended % Change

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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Amortization of intangibles (13,275) (10,809) 22.8 %

Gain on sale of assets — 12,056 (100.0) % — 12,056 (100.0) %

Operating income 72,626 53,020 37.0 %

Interest expense, net (10,104) (7,582) 33.3 %

Non-operating pension benefit 286 328 (12.8) % 747 1,462 (48.9) %

Non-operating pension benefit (cost) (441) 231 (290.9) %

Income before taxes 62,081 45,669 35.9 %

Revenues increased $28.1 million and decreased $165.9 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 due to the following factors:

• Acquisitions contributed $34.5 million and $42.1 million in revenues, respectively.

• Copper pass-through pricing had an $10.2 million and $17.1 million favorable impact on revenues, respectively.

• Lower sales volume resulted in a $15.2 million and $218.9 million decline in revenues, respectively.

• Currency translation had a $1.4 million and $5.8 million unfavorable impact on revenues, respectively.

• Divestitures had a $0.0 million and $0.4 million unfavorable impact on revenues, respectively.

Gross profit increased $2.8 million and decreased $76.2 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 primarily due to the changes in revenues discussed above.

Selling, general and administrative expenses increased $8.9 million and decreased $9.0 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023.

The increase in the three months ended September 29, 2024 was primarily attributable to expenses from the operations of companies acquired in 2024.

The decrease in the nine months ended September 29, 2024 was primarily attributable to the benefits realized from our productivity initiatives.

Research and development expenses decreased $2.2 million and $7.1 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 primarily due to the timing of projects.

Amortization of intangibles increased $4.2 million in both the three and nine months ended September 29, 2024 from the comparable periods of 2023 primarily due to acquisitions.

The $12.1 million pre-tax gain on sale of assets during the three and nine months ended October 1, 2023 represents the gain on certain real estate sold in Canada for $13.8 million.

Operating income decreased $20.1 million and $76.3 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 primarily due to the fluctuations in revenues;

selling, general and administrative expenses;

and the pre-tax gain on sale of assets discussed above.

Net interest expense increased $2.3 million and $1.9 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 due to fluctuations in interest income and foreign currency translation.

Income before taxes decreased $22.4 million and $78.9 million in the three and nine months ended September 29, 2024, respectively, from the comparable periods of 2023 primarily due to the changes in operating income discussed above.

Three Months Ended % Change Nine Months Ended % Change

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Revenues increased $89.2 million in the three months ended March 30, 2025, respectively, from the comparable period of 2024 due to the following factors:

• Higher sales volume contributed $59.8 million in revenues.

• Acquisitions contributed $26.7 million in revenues.

• Copper pass-through pricing had a $9.6 million favorable impact on revenues.

• Currency translation had a $6.9 million unfavorable impact on revenues.

Gross profit increased $44.2 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to the changes in revenues discussed above.

Gross profit margins were robust, expanding 170 basis points from 37.6% to 39.3%.

Selling, general and administrative expenses increased $20.8 million in the three months ended March 30, 2025 from the comparable period of 2024.

The increase in the three months ended March 30, 2025 was primarily attributable to expenses from the operations of companies acquired in 2024 and higher incentive compensation.

Research and development expenses remained relatively flat increasing $1.4 million in the three months ended March 30, 2025 from the comparable period of 2024.

Amortization of intangibles increased $2.5 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to acquisitions.

Operating income increased $19.6 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to the increase in revenues, partially offset by the increase in selling, general and administrative expenses discussed above.

Net interest expense increased $2.5 million in the three months ended March 30, 2025 from the comparable period of 2024 due to fluctuations in interest income and foreign currency translation.

Income before taxes increased $16.4 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to the changes in operating income discussed above.

Three Months Ended % Change

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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Effective tax rate 16.3 % 18.3 %

For the three and nine months ended September 29, 2024, we recognized income tax expense of $11.1 million and $30.5 million representing effective tax rates of 17.1% and 17.9%, respectively.

The effective tax rates were primarily impacted by the effect of our foreign operations, including statutory tax rates differences and foreign tax credits.

For the three months ended March 30, 2025, we recognized income tax expense of $10.1 million representing an effective tax rate of 16.3%.

The effective tax rate was primarily impacted by the effect of our foreign operations, including statutory tax rate differences and foreign tax credits.

Consolidated Adjusted EBITDA

Three Months Ended % Change Nine Months Ended % Change

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Three Months Ended % Change

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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as a percent of revenues 16.6 % 15.8 %

Adjusted EBITDA decreased $2.7 million in the three months ended September 29, 2024 from the comparable period of 2023 primarily due to an increase in incentive compensation, partially offset by earnings from acquisitions and benefits realized from our productivity improvement initiatives.

Adjusted EBITDA decreased $53.1 million in the nine months ended September 29, 2024 from the comparable period of 2023 primarily due to the decline in revenues as discussed above, partially offset by favorable mix and benefits realized from our productivity improvement initiatives.

Adjusted EBITDA increased $19.2 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to the increases in revenues discussed above and favorable mix, partially offset by an increase in incentive compensation and strategic investments.

Accordingly, adjusted EBITDA margins expanded 80 basis points to 16.6%.

Use of Non-GAAP Financial Information

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The following tables reconcile our GAAP results to our non-GAAP financial measures:

Three Months Ended Nine Months Ended

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Three Months Ended

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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Adjustments related to acquisitions and divestitures (2) 298 298

Gain on sale of assets — (12,056) — (12,056)

Adjusted EBITDA $ 103,965 $ 84,748

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Smart Infrastructure Solutions

Three Months Ended % Change Nine Months Ended % Change

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Three Months Ended % Change

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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as a percent of segment revenues 11.4 % 11.0 %

Smart Infrastructure Solutions revenues increased $35.7 million and decreased $47.6 millio n in the three and nine months ended September 29, 2024 from the comparable periods of 2023.

The increase in revenues in the three months ended September 29, 2024 was primarily due to acquisitions, higher copper pass-through pricing, and favorable currency translation of $34.4 million, $4.4 million, and $0.3 million, respectively, partially offset by decreases in volume of $3.4 million.

The decrease in revenues in the nine months ended September 29, 2024 was primarily due to decreases in volume and unfavorable currency translation of $95.4 million and $0.7 million, respectively, partially offset by acquisitions and higher copper pass-through pricing of $41.8 million and $6.7 million, respectively.

Smart Infrastructure Solutions EBITDA increased $2.8 million in the three months ended September 29, 2024 from the comparable period of 2023 primarily due to the the increase in revenues discussed above, partially offset by an increase in incentive compensation.

Smart Infrastructure Solutions EBITDA decreased $21.2 million in the nine months ended September 29, 2024 from the comparable period of 2023 primarily due to the decline in revenues discussed above, partially offset by benefits realized from our productivity improvement initiatives.

Smart Infrastructure Solutions revenues increased $40.0 million in the three months ended March 30, 2025 from the comparable period of 2024.

The increase in revenues in the three months ended March 30, 2025 was primarily due to acquisitions, increases in volume, and higher copper pass-through pricing of $26.2 million, $13.2 million, and $3.0 million, respectively, partially offset by unfavorable currency translation of $2.4 million.

Smart Infrastructure Solutions EBITDA increased $5.3 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily due to the the increase in revenues discussed above and favorable mix, partially offset by an increase in incentive compensation and strategic investments.

Accordingly, adjusted EBITDA margins expanded 40 basis points to 11.4%.

Automation Solutions

Three Months Ended % Change Nine Months Ended % Change

September 29, 2024 October 1, 2023 September 29, 2024 October 1, 2023

Three Months Ended % Change

March 30, 2025 March 31, 2024

(In thousands, except percentages)

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as a percent of segment revenues 20.9 % 19.5 %

Automation Solutions revenues decreased $7.6 million and $118.3 million in the three and nine months ended September 29, 2024 from the comparable periods of 2023 .

The decrease in revenues in the three months ended September 29, 2024 was primarily due to decreases in volume and unfavorable currency translation of $11.8 million and $1.7 million, respectively, partially offset by higher copper pass-through pricing and acquisitions of $5.8 million and $0.1 million, respectively.

The decrease in revenues in the nine months ended September 29, 2024 was primarily due to decreases in volume, unfavorable currency translation, and divestitures of $123.4 million, $5.1 million, and $0.4 million, respectively, partially offset by higher copper pass-through pricing and acquisitions of $10.4 million and $0.2 million, respectively.

Automation Solutions EBITDA decreased $5.4 mil lion and $31.4 million in the three and nine months ended September 29, 2024 from the comparable periods of 2023 primarily as a result of the decrease in revenues discussed above, partially offset by benefits realized from our productivity improvement initiatives.

Automation Solutions revenues increased $49.2 million in the three months ended March 30, 2025 from the comparable period of 2024.

The increase in revenues in the three months ended March 30, 2025 was primarily due to increases in volume, higher copper pass-through pricing, and acquisitions of $46.6 million, $6.6 million, and $0.5 million, respectively, partially offset by unfavorable currency translation of $4.5 million.

Automation Solutions EBITDA increased $14.6 million in the three months ended March 30, 2025 from the comparable period of 2024 primarily as a result of the increase in revenues discussed above and favorable mix, partially offset by an increase in incentive compensation and strategic investments.

Accordingly, adjusted EBITDA margins expanded 140 basis points to 20.9%.

Liquidity and Capital Resources

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Our ability to continue to fund our future needs from business operations could be affected by many factors, including, but not limited to:

economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product mix, and commodities pricing.

economic conditions worldwide, customer demand, competitive market forces, customer acceptance of our product offerings, and commodities pricing.

The following table is derived from our Condensed Consolidated Cash Flow Statements:

Nine Months Ended

September 29, 2024 October 1, 2023

Three Months Ended

March 30, 2025 March 31, 2024

(In thousands)

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Cash and cash equivalents, end of period $ 258,997 $ 506,830

Net cash provided by operating activities totaled $177.4 million in the nine months ended September 29, 2024 compared to $160.0 million in the year ago period.

Despite a decrease in net income, operating cash flows increased $17.4 million compared to the prior year due to a $52.0 million improvement in operating assets and liabilities that was primarily driven by favorable changes in receivables.

During the first nine months of 2023, receivables were a use of cash of $48.9 million compared to a source of cash of $3.2 million in 2024.

Net cash used for invest ing activities totaled $366.2 million for the nine months ended September 29, 2024 compared to $145.5 million in the year ago period.

Investing activities for the nine months ended September 29, 2024 included $295.6 million primarily for the acquisitions of Precision and Voleatech, capital expenditures of $70.8 million, and asset sales of $0.1 million.

Investing activities for the nine months ended October 1, 2023 included $106.7 million primarily for the acquisitions of Sichert and Cloudrail, capital expenditures of $61.9 million, proceeds from asset sales of $13.8 million, and $9.3 million received from escrow for the disposal of a business.

Net cash used for financing activities totaled $84.8 million for the nine months ended September 29, 2024 compared to $167.4 million in th e year ago period.

Financing activities for the nine months ended September 29, 2024 included payments under our share repurchase program of $77.9 million, payments related to share based compensation activities of $8.9 million, cash dividend payments of $6.2 million, financing lease payments of $0.7 million, and proceeds from the issuance of common stock of $8.9 million.

Financing activities for the nine months ended October 1, 2023 included payments under our share repurchase program of $150.0 million, payments related to share based compensation activities of $17.3 million, cash dividend payments of $6.4 million, financing lease payments of $0.3 million, and proceeds from the issuance of common stock of $6.6 million.

Our cash and cash equivalents balance was $323.0 million as of September 29, 2024.

Net cash provided by operating activities totaled $7.4 million in the three months ended March 30, 2025 compared to $2.7 million in the year ago period due to an increase in earnings, partially offset by unfavorable changes in operating assets and liabilities.

While receivables were a use of cash in 2025 as compared to a source of cash in 2024, days sales outstanding remained constant at about 60 days during each of Q1 2025 and Q1 2024.

Net cash used for investing activities totaled $24.2 million for both the three months ended March 30, 2025 and March 31, 2024.

Investing activities for the three months ended March 30, 2025 included capital expenditures of $32.2 million, partially offset by cash from business acquisitions and asset sales of $7.9 million and $0.1 million, respectively.

Investing activities for the three months ended March 31, 2024 included $24.3 million for capital expenditures, partially offset by $0.1 million for asset sales.

Net cash used for financing activities totaled $96.8 million for the three months ended March 30, 2025 compared to $64.9 million in the year ago period.

Financing activities for the three months ended March 30, 2025 included payments under our share repurchase program of $84.5 million, payments related to share based compensation activities of $13.7 million, cash dividend payments of $2.0 million, financing lease payments of $0.4 million, and proceeds from the issuance of common stock of $3.8 million.

Financing activities for the three months ended March 31, 2024 included payments under our share repurchase program of $57.9 million, payments related to share based compensation activities of $7.9 million, cash dividend payments of $2.1 million, financing lease payments of $0.2 million, and proceeds from the issuance of common stock of $3.1 million.

Our cash and cash equivalents balance was $259.0 million as of March 30, 2025.

Of the total cash balance, $181.0 million was held outside of the U.S.

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tax rules and regulations as a result of the repatriation.

Our outstanding debt obligations as of September 29, 2024 consisted of $1,228.0 million of senior subordinated notes.

Additional discussion regarding our various borrowing arrangements is included in Note 10 to the Condensed Consolidated Financial Statements.

Our outstanding debt obligations as of March 30, 2025 consisted of $1,186.6 million of senior subordinated notes.

Additional discussion regarding our various borrowing arrangements is included in Notes 10 and 16 to the Condensed Consolidated Financial Statements.

Forward-Looking Statements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis