Belden. Leading the Way to an Interconnected World. December Belden Inc.

Transcription

1 Belden Leading the Way to an Interconnected World December Belden Inc.

2 Leading The Way to an Interconnected World Delivering highly-engineered signal transmission solutions for mission-critical applications in a diverse set of global markets Business Platforms Applications Vertical Markets Data Industrial Sound Enterprise Video Broadcast 2015 Belden Inc. 2

3 Five Business Platforms Delivering Innovative Connectivity Solutions Broadcast Enterprise Industrial Connectivity Industrial IT Solutions Network Security Routers and Interfaces Broadcast Connectors Broadband Connectivity Multi-Viewers and Monitoring and Control Systems Playout Systems Copper and Fiber Connectivity Racks and Enclosures Ethernet, Fiber Optic and Coaxial Cabling Custom Infrastructure Solutions Industrial and I/O Connectors Industrial Cable Distribution Boxes Customized Connectivity Solutions Ethernet Switches Wireless Systems Routers and Gateways Security Devices Network Management Software Vulnerability Assessment Security Configuration Management Log Intelligence Analytics and Reporting 2015 Belden Inc. 3

4 A Global Signal Transmission Solutions Company Broadcast Enterprise Connectivity Industrial Connectivity Industrial IT Network Security Market Size 1 $4.9B $3.3B $4.0B $1.3B $4.3B 3-Year Market Growth Rate 1-3% 1-3% 0-2% 1-3% 10-12% Market Share 1 19% 14% 16% 20% 4% TTM Revenue 2 $914.3M $446.6M $635.3M $257.5M $165.0M TTM EBITDA Margin % 15.2% 16.1% 18.5% 25.3% Key Markets Broadband Broadcast Studios Mobile Production Finance Healthcare Commercial Buildings Discrete Process Energy Transportation Finance Energy Retail Government Industrial 1. Served addressable market. 2. Based on 12 trailing months. Network Security figures are expected 2015 results Belden Inc. 3. See appendix for additional operating segment information. 4

5 Financial Performance Revenues (M) EBITDA Margin 1 Return on Invested Capital 2 Free Cash Flow $1, % 4.1% $37M 2015E 3 $2, % 11.7% ~$180M Variance 6.6% CAGR Improvement of 860 bps Average of 13.1% 17.1% CAGR Driving best-in-class shareholder value 1. Non-GAAP results. See appendix for reconciliation to comparable GAAP results. 2. Excluding excess cash, Average of Based on midpoint of guidance Belden Inc. 4. See appendix for reconciliation to comparable GAAP results. 5

6 A Disciplined Capital Deployment Strategy Innovation and Market Expansion Invest in growth opportunities Product innovation Productivity improvement Capital expenditure Share Repurchase Repurchase Belden stock at attractive prices Repurchased 7.4 million shares at $47.43 average ~16% of outstanding shares $350M invested since 2011 M&A Identify product and market opportunities, and acquire with a disciplined approach $2.8 billion invested since 2007 >15% Cash ROIC on acquisitions made before ROIC* = 11.7% Deploy capital to highest ROIC project 2015 Belden Inc. * ROIC excluding excess cash based on mid-point of guidance 6

7 A Common Misperception About Belden 50.0% Belden is a Wire and Cable company. Improvement of 1,870 bps 40.0% 30.0% Connectivity Peers 20.0% Cable Peers 10.0% YTD Belden s Gross Profit Margin Exceeds Connectivity Peers 1. Adjusted results. See appendix for reconciliation to comparable GAAP results Belden Inc. 7

8 Consistent Margin Progression 20% 18% Peer Average EBITDA Margin (%) % 2 EBITDA Margin Goal: 18-20% 16% 15.7% 15.5% 14% 13.0% 12% 11.9% 11.7% 10% We have shown the ability to consistently improve margins in a low-growth environment 1. Non-GAAP results. See appendix for reconciliation to comparable GAAP results Belden Inc based on mid-point of guidance 8

9 10 Year EPS Growth 25% 20% Since 2005, Belden has generated upper quartile EPS growth of 22% 15% 10% 5% 0% Peer A S&P 500 Peer B Peer C Peer D Belden 2015 Belden Inc. 9

10 High Quality Earnings: Free Cash Flow Generation FCF per Share $2.47 $3.38 $ % CAGR $3.03 $3.16 $2.41 $4.46 $4.28 $ $ $ Delivering 22% CAGR in free cash flow per share 1. Non-GAAP results. See appendix for reconciliation to comparable GAAP results 2. Excludes the cash payments for the Broadcast restructuring program that began in Q Based on 2015 Belden Inc. management s best estimate. 10

11 The Cost of Capital Has Decreased 4.0x 3.5x 3.0x 2.5x 2.0x 1.5x 12.1% 12.2% 3.0x 10.7% 2.2x 9.3% 2.6x 9.7% 3.6x 3.1x 8.8% 8.8% 13.0% 11.0% 9.0% 1.0x 0.9x 0.7x 7.0% 0.5x 0.0x Net Leverage Ratio WACC 5.0% Belden s cost of capital has benefited from a more balanced capital structure 2015 Belden Inc. 11

12 Net Interest Coverage Ratio Has Been Consistent 6.0x Net Interest Coverage Ratio 5.0x 4.0x 4.2x 4.9x 4.9x 4.7x 4.6x 4.2x 4.4x 3.0x 2.0x Incurrence Covenant 1.0x 0.0x Belden generates more than 2x the required EBITDA 2015 Belden Inc. 12

13 2008 Versus Broadcast Networking Network Security Security Enterprise Connectivity Divested cable Broadcast Networking Acquired software, networking and connectivity Enterprise Connectivity Cable Industrial Industrial Cable Market Product Market Product 2015 Belden Inc. 13

14 Opportunity Exists to Drive Increased Shareholder Value EV/EBITDA Multiple 16x 12x 8x 4x 5% A C B 2008 Legacy Peers A Today 10% 15% 20% 25% 30% EBITDA-Capex Margin Increased free cash flow margin drives multiple expansion B C D E Best In Class Peers F R 2 = Belden Inc. 14

15 Business Model Goals THREE YEAR FINANCIAL GOALS Growth 5-7% EBITDA 18-20% Return on Invested Capital 13-15% Free Cash Flow Exceed Net Income Market Growth 1-3% Share Capture + + 2% Inorganic Activity 2% = Total Growth 5-7% Tailwinds Cybersecurity Broadband demand Strength in enterprise Headwinds Weak global growth Strong US dollar Sustained low oil prices 2015 Belden Inc. 15

16 Continued Focus on Productivity Improvement Industrial Platform Cost Measures Industrial Tailwinds Internet of Things Industrial automation Market-leading portfolio Industrial Headwinds Stronger US dollar Industrial production Continued low oil prices Capacity utilization rates Year Cash Investment Savings EPS Impact 2016 $23M $6M $ $15M $17M $ $22M $ Belden Inc. 16

17 Revenues and EPS Bridge Adjusted Revenue ($M) $2,363 ($68) $0 - $50 $2,295 - $2,345 Adjusted EPS $4.85 $0.08 $0.04 $0.29 $ $0.30 $ $5.40 Current Outlook 2015 (Mid-Point) Copper and Currency Tax, Interest, Share Repurchase Productivity Organic Current Outlook Belden Inc. 17

18 2016 Assumptions Copper price of $2.05 for 2016 versus $2.50 in 2015 Euro of $1.05 in 2016 vs. $1.11 in 2015 Interest expenses of ~$95 million for 2016 Tax rate of 20% for 2016 $0.29 of favorable impact to EPS from productivity improvement programs 2015 Belden Inc. 1: Source: Approximate IMF Crude Oil forecast. 18

19 Outlook Fiscal Year 2016 * Revenues of between $2.295 billion and $2.345 billion EPS of between $5.10 and $5.40 per diluted share Organic Growth of 0 to 2% Growth of 5 to 11% 2015 Belden Inc. *Adjusted results. See appendix for reconciliation to comparable GAAP results 19

20 GAAP to Non-GAAP Reconciliation BELDEN INC. RECONCILIATION OF NON-GAAP MEASURES 2016 REVENUES AND EARNINGS GUIDANCE Adjusted revenues Deferred revenue adjustments GAAP revenues Year Ended December 31, 2016 $ $2.345 billion ($7 million) $ $2.338 billion Adjusted income from continuing operations per diluted share $ $5.40 Amortization of intangible assets ($1.70) Severance, restructuring, and integration costs ($0.61) Deferred gross profit adjustments ($0.11) GAAP income from continuing operations per diluted share $ $2.98 Our guidance for revenues and income from continuing operations per diluted share is based upon the extent of information currently available regarding events and conditions that will impact our future operating results for Our actual results are likely to be impacted by other additional events for which information is not available, such as asset impairments, purchase accounting effects related to acquisitions, severance and other restructuring costs, gains (losses) recognized on the disposal of tangible assets, gains (losses) on debt extinguishment, discontinued operations, and other gains (losses) related to events or conditions that are not yet known Belden Inc. 20

21 Appendix 2015 Belden Inc. 21

22 Q Earnings Release Conference Call Presentation 2015 Belden Inc. 22

23 Q Highlights Generated revenues of $590.1 million; Achieved gross profit margins of 40.8%, increasing 320 basis points from 37.6% in the year-ago period; Expanded EBITDA margins to 16.5%, increasing 80 basis points from 15.7% in the year-ago period; Repurchased approximately 698,000 shares of Belden common stock; and Raised the expected range of full-year adjusted income from continuing operations per diluted share to $ Adjusted results. See Appendix for reconciliation to comparable GAAP results Belden Inc. 23

24 3 rd Quarter Segment Overview Broadcast Revenue $228.1M EBITDA Margin 15.3% Camera Mounted Fiber Solutions Signal Processing Precision A/V & Routing Cable and Connectivity Monitoring Systems Automation Playout & Branding Systems Enterprise Connectivity Revenue $113.8M EBITDA Margin 16.0% Racks and Enclosures Copper and Fiber Connectivity Ethernet, Fiber Optic and Coaxial Industrial Connectivity Revenue $147.7M EBITDA Margin 15.7% Industrial and I/O Connectors Industrial Cables IP/Networking Cables I/O Modules/ Active Distribution Boxes Customer-Specific Wiring Industrial IT Revenue $59.2M EBITDA Margin 17.7% Cables, Security & Routing Wireless Switches Connectivity Network Security Revenue $41.4M EBITDA Margin 27.2% Targeted Attack Detection Vulnerability Assessment Threat Analytics Adjusted results. See Appendix for reconciliation to comparable GAAP results Belden Inc. 24

25 Q Financial Summary Q Q Q Revenue $590.1M $598.5M $613.1M Gross profit $240.7M $249.5M $230.2M Gross profit percentage 40.8% 41.7% 37.6% EBITDA $97.5M $100.1M $96.3M EBITDA percentage 16.5% 16.7% 15.7% Income from continuing operations $48.9M $52.2M $50.4M Income from continuing operations per diluted share $1.14 $1.21 $1.15 Adjusted results. See Appendix for reconciliation to comparable GAAP results Belden Inc. 25

26 Segment Results Q Broadcast Enterprise Connectivity Industrial Connectivity Industrial IT Network Security Consolidated Revenue $228.1M $113.8M $147.7M $59.2M $41.4M $590.1M EBITDA (1) $34.9M $18.2M $23.2M $10.5M $11.2M $97.5M EBITDA Margin 15.3% 16.0% 15.7% 17.7% 27.2% 16.5% Q Revenue $219.4M $117.3M $160.9M $61.3M $39.6M $598.5M EBITDA (1) $31.6M $21.1M $28.7M $10.2M $8.8M $100.1M EBITDA Margin 14.4% 18.0% 17.8% 16.6% 22.1% 16.7% Q (2) Revenue $256.6M $115.3M $171.1M $70.1M $613.1M EBITDA (1) $38.5M $17.7M $26.5M $13.6M $96.3M EBITDA Margin 15.0% 15.4% 15.5% 19.4% 15.7% Adjusted results. See Appendix for reconciliation to comparable GAAP results. (1) Consolidated results include income from our equity method investment. (2) Consolidated results for these periods exclude the impact of Network Security as Tripwire acquisition was completed in Belden Inc. 26

27 Balance Sheet Highlights Q Q Q Cash and cash equivalents $241.9M $208.4M $449.1M Inventory turns 6.7x 6.0X 7.0 x Days sales outstanding 63 days 64 days 62 days PP&E turns 7.4x 7.3x 7.6x Total debt principal amount $1.91B $1.92B $1.54B 2015 Belden Inc. 27

28 Cash Flow Highlights Q Q Q Cash flows from operating activities $ 86.9M $ 53.3M $ 63.2M (1) Less: Net capital expenditures (2) $ 11.8M $ 11.7M $ 8.3M Free cash flow (3) $ 75.1M $ 41.6M $ 54.9M Cash used to acquire businesses (4) $ 0.0M $ 0.0M $ 1.6M Share repurchases and dividends $ 41.2M $ 2.1M $ 33.2M (1) Adjusted for cash payment of $9.0M in Q related to the integration of Grass Valley. See Appendix for reconciliation to comparable GAAP results. (2) Capital expenditures, net of proceeds from the disposal of tangible assets. See Appendix for reconciliation. (3) Free cash flow is not a term defined by generally accepted accounting principles (GAAP) and our definition may or may not be used consistently with other companies that define this term. See Appendix for reconciliation to comparable GAAP results. (4) Net of cash acquired Belden Inc. 28

29 2015 Broadcast Market Conditions 2015 Belden Inc.

30 Broadcast Platform Broadcast Platform Broadcast Cable 18% Software & Services 15% 21% Grass Valley 20% Digital Media & Workflow (i.e. Content manager, graphics, branding) 40% Broadband Connectivity Editing Systems 35% 6% 10% 20% Broadcast IT Monitoring & Control 50% 8% 16% Routers and Interfaces 42% Content Creation 68% Switchers, Cameras, Editing, DM&W, Routers & Interfaces, S&S Playout 32% Monitoring & Control, Routers & Interfaces, S&S, DM&W 2015 Belden Inc. 30

31 Changes Within the Grass Valley Market Macro- Economic Headwinds Impacting International Demand Decreasing U.S. Advertising Spend Impacts Capex Decisions Increased Digital/OTT Viewing Impacts Capex Decisions Combined, these dynamics have created a perfect storm in Belden Inc. 31

32 Macro-Economic Headwinds Impact International Demand What is happening? What does this mean for Grass Valley? International Revenues ~60% of Grass Valley (20%) Stronger USD reducing purchasing power Govt-sponsored broadcasters impacted by austerity measures and oil prices Long- Term Short- Term Restructured the business for regional outlook $30M of annual savings Upgrade cycle is elongated USD/EUR Oil Prices 2015 Belden Inc. 32

33 Decreased U.S. Advertising Spend Impacts Capex Decisions What is happening? What does this mean for Grass Valley? National TV Advertising Growth 1 Short- Term Live 48% News 20% Playout 32% 68% of product portfolio to Live Environment Long- Term Content creation continues in high demand Live 48% News 20% Playout 32% 1. Standard Media Index 2015 Belden Inc. 33

34 Increased Digital/OTT Viewing Impacts Capex Decisions What is happening? What does this mean for Grass Valley? Short- Term Live 48% News 20% Playout 32% 70% Percent of Video Over Internet 1 58% 61% 64% Investment shifted to OTT platforms by current GV customers 50% 43% 49% Organic investment in Digital Media applications 30% 30% Long- Content creation continues in high demand 10% E Term Live 48% News 20% Playout 32% 2015 Belden Inc. 1. Sandvine Global Internet Phenomena Report 34

35 However, OTT Consumption Requires Faster Internet Speeds 2 p.m. 10 a.m. 6 p.m. 10 p.m. 2 a.m. Current Home Infrastructure r Streaming 64% Online M Not Belden Average Broadband Speed is 16 Mbps 48 Mbps Average Fixed Broadband speed by 2018 Belden Entry We provide unique, patented solutions for in-home connectivity. As consumption increases, the home and distribution network will need upgrades Belden Inc. 35