Belden Inc. Aktie

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Reports Second Quarter 2026 Results. Just a reminder, this call is being recorded. [Operator Instructions]

I'd now like to turn the call over to Aaron Reddington. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for Belden's Second Quarter 2026 Earnings Conference Call. With me today are Belden's President and CEO, Ashish Chand; and Executive Vice President and CFO, Jeremy Parks. Ashish will provide a strategic overview of the quarter, and then Jeremy will cover our financial results and third quarter outlook, followed by Q&A.

We issued our earnings release earlier this morning and 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 to slide 2, I'd like to remind everyone that today's call will include forward-looking statements, which are subject to risks and uncertainties as detailed in our press release and most recent Form 10-K. We will also reference certain non-GAAP financial measures; reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website.

I will now turn the call over to our President and CEO, Ashish Chand.

Thank you, Aaron, and good morning, everyone. We appreciate you joining us. Please turn to Slide 4. The second quarter was a strongest quarter in company history, and we are well positioned for what's ahead. Our team achieved record revenue of $750 million, up 12% year-over-year, and Adjusted EPS of $2.34, up 24% year-over-year, both above the high end of our guidance. Please note that our results include a net tariff benefit of approximately $0.25 per share related to the expected recovery of IEEPA tariffs. Jeremy will cover the details.

End market demand is strong, with record orders of $836 million, up 19% year-over-year and up 23% sequentially. Our book-to-bill ratio came in at 1.11 (six) [ 1.11x. ] Order strength is broad-based across our end markets, and we expect that to continue into the third quarter. Organic revenue growth was 8% for the quarter with Discrete, Process, and Enterprise Growth Verticals all up double digits, reflecting a broad improvement in our industrial markets and our AI infrastructure strategy gaining traction with customers.

The second quarter also delivered 2 milestones that I want to highlight, as they are proof of our solutions strategy executing at scale.

First, a contract worth approximately $20 million with a Tier-1 hyperscaler for fiber connectivity inside an AI data center. That order is closed and in production today.

Second, a significant specification win with a leading global retailer, where Belden has been selected to network autonomous elements across their U.S. distribution centers, with first orders already received. This is Physical AI in practice, AI-driven, intelligent, autonomous machines operating in real world industrial environments, requiring the kind of ruggedized, mission-critical connectivity that Belden is uniquely built to deliver. Together, these confirm the direction of our business and the execution of our strategy. I will walk through them both shortly.

Finally, on July 1, at the start of the third quarter, RUCKUS Networks officially joined Belden. The integration is underway, and we are already in market. RUCKUS is immediately accretive to revenue growth, EPS and EBITDA. Our solutions mix crosses 20% at close. Our 2028 goal achieved 3 years ahead of schedule.

Please turn to Slide 5. The numbers on this slide tell you exactly what kind of company Belden is today, and they reflect something more than just a bigger business. With RUCKUS, we are now a full stack networking and automation platform spanning passive infrastructure, active switching, wireless and AI-driven cloud software. Our offerings are broad, our solutions capabilities are deep and our competitive position is stronger than ever.

Note, these figures are management estimates based on hypothetical full year results for the combined business and are not guidance. The financial profile reflects a fundamentally stronger company. Belden is now a $3.6 billion revenue company. Gross margins improved to approximately 43% and adjusted EBITDA margins expand to 18%. Our active product mix reaches 35% of revenue and our solutions mix stands at 20%. From the connector to the switch to the cloud, Belden now delivers every layer of the network from a single source.

Please turn to Slide 6. Let me reiterate what RUCKUS specifically brings to this combination because these metrics reflect real product and market advantages.

First, a gross margin profile north of 60%, and it is worth explaining why. RUCKUS is not a hardware business. It is a platform business. Wi-Fi access points, enterprise switching and cloud network management software sold together as an integrated solution. That differentiated product mix, including software and services is what drives the margin profile. It is structural, not cyclical and accretive to Belden from day 1.

Second, RUCKUS brings high single-digit growth and with it, access to one of the fastest-growing segments of the networking market. Wi-Fi 7 is the first wireless standard reliable enough for industrial use and the enterprise upgrade cycle is just beginning. RUCKUS sits at the front of that wave.

What makes this particularly compelling for Belden is the opportunity to bring RUCKUS into our existing industrial customer base, customers across Discrete manufacturing, Energy and Process industries who are already investing in automation, reshoring and network modernization. We are the only company that can deliver industry-leading wireless alongside the full-wired OT stack from a single source. That cross-sell opportunity is meaningful and a very powerful addition to the combined business.

And third, our solutions mix steps up past 20% immediately. That matters because solutions engagements are larger in scope, earn higher margins, are stickier with customers and structurally more defensible than product-only relationships. Every point of solutions mix we add expands the profitability and durability of this business and RUCKUS accelerates our solutions trajectory.

Please turn to Slide 7. I want to show you what this actually looks like in practice because the product stack behind those financial metrics is what makes this combination genuinely differentiated. Belden now runs every layer of the network, both industrial and enterprise from a single source, cable and connectors, patch panels, edge devices, routers, OT switches, IT switches and Wi-Fi 7 wireless access points, the complete infrastructure stack for AI-driven industrial and enterprise environments.

With RUCKUS One managing the IT network layer and Belden Horizon managing the OT network layer, 2 purpose-built software platforms under one converged solution with one trusted partner. For customers who want one partner accountable for the complete network, Belden is now that partner. Every additional layer we own lifts the value we deliver to customers through our solutions and deepens our relationships. This is the competitive moat we've been building over the past 5 years, and RUCKUS accelerates that. With that context, let me turn to our data center strategy and the specific wins we delivered in the second quarter.

Please turn to Slide 8. Over the past several quarters, we have been building our data center presence with purpose, and the second quarter validated that investment. The wins we are reporting are not isolated events. Let me give you the framework for how we think about this opportunity. Enterprise data centers, hyperscale data centers and Physical AI collectively are one of our highest priority growth vectors. And this is not one opportunity. It is 3 distinct ones, each at a different stage of maturity.

The first is our traditional enterprise data center business; structured cabling, cabinets and fiber connectivity for on-prem enterprise and colocation environments. This is our established foundation in the marketplace with an annual run rate of approximately $75 million today, repeatable, growing and the base from which our hyperscaler relationships developed.

The second is AI and hyperscale data centers, the fastest-growing part of our data center portfolio where momentum is building. We established a hyperscaler presence in the gray space; facility controls, cooling, power and building systems. And in the second quarter, we expanded into the white space, the data hall itself.

To put the second quarter activity in context, we booked approximately $40 million in hyperscaler orders in the quarter alone. That includes the $20 million white space win you will see on the next slide as well as continued gray space wins that demonstrate the breadth of where Belden plays across the data center campus. Combined, this is now $100 million-plus annualized business growing rapidly.

What makes these wins meaningful goes beyond the contract value. When hyperscalers select Belden, it is because we bring something differentiated, solutions engineered for AI infrastructure, operational scale to deliver under urgent time lines and engagement model built around solving real problems. We are winning on the value we bring, and those relationships are expanding.

The third is Physical AI, and this is the opportunity I'm most excited about for the long term. As robots and autonomous systems scale across factories and distribution centers, they require a network that is real-time, deterministic, mobile and mission-critical, wired and wireless, fixed and mobile, managed by software intelligent enough to handle the complexity at scale. That is precisely what Belden and RUCKUS deliver together. Industrial-grade wired infrastructure, Wi-Fi 7 for mission-critical wireless and the management layer that ties it all together. No other company delivers the full stack from a single source.

Taken together and excluding RUCKUS, our data center and AI infrastructure business is at an annual run rate of approximately $175 million or more in revenue today, and we are still at the beginning. Enterprise data centers are growing. Our hyperscaler relationships are expanding and Physical AI is just beginning to scale. We are not chasing this market. We are already inside it with the portfolio, the customer relationships and now with RUCKUS, the complete solution to win.

Please turn to Slide 9. In the second quarter, we closed a contract worth approximately $20 million with a Tier 1 hyperscaler for fiber connectivity in the AI data center white space. Orders are closed and in production today with deliveries expected over multiple quarters. You know the AI build-out story. What is harder to see from the outside is what we've been doing internally to be ready for it.

Over the past several quarters, we've been making sustained investments in the commercial and operational infrastructure required to compete in this marketplace. That means standardized product architecture designed for speed and repeatability, a supply chain built to absorb volume spikes and a go-to-market approach built around delivery confidence rather than price alone. This win is a result of that work.

The solution at the core of this contract is high-density fiber connectivity engineered for AI workloads and deployed across the racks inside the data hall. What allowed us to win here was not price. It was execution. Hyperscalers need suppliers who can deliver qualified product at scale, on schedule every time, including when auto volumes spike unexpectedly. That level of operational reliability is generally scarce in this market. We built it organically quarter-by-quarter, and this is the model we intend to scale going forward.

Now please turn to Slide 10 for a second key milestone this quarter, where Physical AI meets the rail world. A leading global retailer has selected Belden for a specification position in their autonomous network, encompassing docking door automation across U.S. distribution centers. These are vision-intensive AI-driven systems designed for industrial environments, machines that perceive, decide and act in real time alongside human workers and other autonomous elements. This is Physical AI moving from concept towards production.

What this customer required was ruggedized high-performance on-machine networking, purpose-built for autonomous systems, not standard enterprise networking, which cannot meet the reliability and latency demands of this environment. Our industrial networking heritage defined over decades across multiple industrial verticals is precisely what qualified us.

First orders have already been received for initial deployments. The full fleet opportunity for the specification win is approximately $20 million over 4 years across more than 4,500 autonomous installations. As this customer's automation footprint grows, we are positioned as their end-to-end network partner. With RUCKUS, we can extend that relationship into the full facility network, wired, wireless and cloud managed, a natural expansion of what we've already earned.

We win on the robot today, and then we earn the right to the wired and wireless network backbone tomorrow. That is the compounding effect of a full stack AI and automation portfolio. And it is a playbook we intend to replicate across warehouse automation, logistics and our manufacturing customers.

I will now request Jeremy to provide additional insight into our financial performance.

Thank you, Ashish. My comments today will cover our second quarter results; a summary of performance across our markets; our balance sheet and delevering path; and finally, our third quarter guidance. As a reminder, I will be referencing adjusted results throughout. Our second quarter figures reflect Belden on a stand-alone basis. RUCKUS closed July 1 and will be included in our results beginning in the third quarter.

Please turn to Slide 12. Revenue for the quarter was $750 million, up 12% year-over-year and above the high end of our guidance range of $735 million to $750 million. Organic growth was 8% for the period. Orders reached $836 million, our strongest bookings on record, an increase of 19% year-over-year. Book-to-bill was 1.11x, reflecting robust end demand. Adjusted gross profit was $297 million, up 14% with margins of 39.6%. Adjusted EBITDA was $146 million, up 28% year-over-year with EBITDA margins of 19.5%. Adjusted EPS of $2.34 grew 24% compared to $1.89 in the prior year period, above the high end of our guidance.

As Ashish mentioned earlier, during the quarter, the company recognized a net EPS benefit of approximately $0.25 related to the expected recovery of IEEPA tariffs, partially offset by the introduction of new tariffs. The net impact was recorded to gross profit. The core business performed well with our incremental EBITDA margins above 30%, excluding the impact of tariff refunds and copper pass-throughs, reflecting continued operational margin improvement. End demand remains healthy and broad-based, and we are well positioned heading into the third quarter.

Please turn to Slide 13 for a look at performance across our market categories. Automation had a strong quarter with organic growth up double digits year-over-year. Order momentum in this category was particularly strong with orders up 27% sequentially and a book-to-bill of 1.14x. Within this category, Discrete and Process Manufacturing led the way, up double digits year-over-year, reflecting continued acceleration in industrial automation.

Smart Buildings orders were up 11% sequentially with a book-to-bill of 1.08x, pointing to healthy demand heading into the third quarter. Our key growth verticals were up double digits organically, led by strength in data centers and health care. Headline organic growth was flat versus the prior year against a strong comparable in noncore verticals. During the first half of the year in Smart Buildings, organic growth was over 6%, which is a better representation of underlying business conditions.

Broadband was in line with expectations, with orders up 22% sequentially and a book-to-bill of 1.07x. While organic growth in the quarter was flat versus the prior year, we expect improvement in the second half as customers ramp up spending driven by DOCSIS upgrades and share capture related to the launch of new fiber products. Longer term, the broadband landscape is changing in a meaningful way as user behavior is shifting from primarily consuming content to more of a 2-way flow of data driven by AI applications and always-on devices. Our customers and products are positioned to capture this opportunity as the impact of AI continues to expand beyond data centers.

Please turn to Slide 14. Turning to the balance sheet. On a stand-alone basis, we ended the second quarter with $349 million in cash, net leverage of 1.7x and trailing 12-month free cash flow of $212 million, a strong foundation. Reflecting the close of RUCKUS on July 1, we expect leverage will increase to approximately 3.9x net debt to adjusted EBITDA at the end of the third quarter. This is exactly where we expect it to be, and we have a clear path back to our long-term leverage target. The engine that funds that path is free cash flow. Over the next 18 months, we expect the combined business to generate more than $500 million in free cash flow, which will be deployed to reduce leverage.

RUCKUS is a capital-light business with strong cash conversion, which means its contribution to the combined free cash flow profile is significant. Our model is built on modest synergy assumptions, which means there is real opportunity to outperform as we execute on cost and cross-sell opportunities. We expect leverage to follow a straightforward path at or below 3.6x by the end of 2026, approximately 2.9x by the end of 2027, our first full year of combined ownership and at our long-term target of 1.5x by the end of 2029.

Please turn to Slide 15 for our third quarter 2026 outlook. Demand signals entering the third quarter are strong, and our order book supports that view. Our third quarter guidance includes the contribution from RUCKUS Networks for the full quarter. Assuming the continuation of current market conditions, revenue for the third quarter of 2026 is expected to be between $950 million and $970 million.

GAAP EPS is expected to be between $0.69 and $0.84. Adjusted EPS is expected to be between $2.15 and $2.30, representing a 9% to 17% increase over the prior year quarter. For the third quarter, you can assume interest expense of approximately $40.5 million, depreciation of $18.8 million, a tax rate of 20% and a diluted share count of 39.4 million shares.

I will now turn the call back to Ashish for closing remarks.

Thank you, Jeremy. Before we open the call to questions, I want to close with Slide 16. Belden is a networking technology company built on a deep industrial and automation heritage and extended with RUCKUS into every layer of the converged IT/OT network. From passive infrastructure to active switching, enterprise wireless and AI-driven cloud software, we deliver the complete network from a single source.

Our industrial roots give us credibility where it matters most on the factory floor, on the robot and inside the AI data center. The secular trends that have always powered this business, industrial automation, reshoring of manufacturing and IT/OT convergence are strengthening. RUCKUS expands our capability to serve customers across all of them.

Customer response has been immediate. Across both installed bases, customers are asking for this combination. Our integration team was in place at close. Our go-to-market is already aligned and the deal thesis is intact, high single-digit growth, strong margins and a clear path to 1.5x leverage by 2029.

One month into this combination, the early signals are exactly what we expected and in some cases, better. Customers are engaged, teams are aligned, the financial model is performing. We have a clear integration road map, conservative financial assumptions and a free cash flow profile that funds the path forward. We are executing this with the same discipline that has driven our solutions transformation and the results will speak for themselves.

To my approximately 1,700 new colleagues from RUCKUS, who are now part of the Belden family, welcome. You bring our combined workforce to nearly 10,000 strong and the expertise and customer relationships you carry are central to what makes this combination powerful. Together, we are a stronger company with an exciting future ahead.

To close, Belden is a networking technology company built for automation in the AI era. We have the platform, the portfolio and the team to lead it.

That concludes our prepared remarks. Operator, please open the call for questions.

[Operator Instructions] And we'll go right to Mark Delaney with Goldman Sachs for our first question.

Nice to see all the momentum in the business. I'm hoping you can give more context on what led to the fiber connectivity win in the hyperscale market for the white space and the opportunity ahead. For example, was the win driven by a new product introduction from Belden, maybe a different sales effort or changing needs for that customer set? And importantly, if you could also give more detail on the opportunity from here, including the likelihood of additional wins and what that might all mean for how big your hyperscale business could become over the medium term?

Thank you, Mark. So this specific opportunity was a large contract with one hyperscaler. Now we've been working with multiple hyperscalers over time because we have an active enterprise data center business that leads to these conversations. This particular opportunity was around a product bundle. It was not a full solution the way we like to think of it at Belden. But it leads to a conversation with the same hyperscaler where we can offer them a solution that spans the white space and the gray space. We've done that in the past for smaller opportunities. This is a massive introduction to one particular account and allows us to scale.

In general, we've been very selective about our hyperscaler activity. We've focused more on differentiated higher-margin opportunities. We've not really looked for big volume spikes at lower margins. And I think this is basically the differentiator for us. So we have very standardized architecture. We've got a very reliable supply chain, and that's appealing to a number of customers at this point because they are facing all sorts of issues from our competitors. Here, it is really about very high-density MPO connectors and fiber. This is 144, 288 fiber strand count products, so more complicated.

Now if you think about our broader data center business, so first of all, this business is up over 40% versus the same quarter last year. So this is really growing -- it's really our fastest growth business. We think of this as a combination of our basic enterprise data centers plus the hyperscaler engagements we talked about.

And then interestingly, this is all leading to the broader Physical AI, which has not even really started that particular conversation because the same hyperscalers are also providing support to the broader industry as they deploy their own AI and factories and premises. So yes, high growth, very, very differentiated in terms of product execution, and we are being very selective about where we go. So I feel very, very positive. And I think the momentum on this part of our business is going to build up a lot. It's still in low single digits of our total revenue. I think it can go to a point where it becomes double digit, and that will take some time.

That's all very helpful context. You mentioned in trying to be thoughtful on margins in your answer just there. So could you clarify a little bit more on the margin profile of this market, maybe both near term and how you see that evolving? And as you're selling some of these solutions, are these coming in at the kind of incremental margins Belden targets?

Yes. So in general, the gross margins on all of these hyperscale/data center opportunities tend to be well above our current blended gross margin and certainly helps us with our incrementals.

Maybe, Jeremy, you can add some color on that.

Yes. I would just say, so this opportunity is primarily fiber connectivity products. And the pricing on this deal is such that it's at the high end of what we would typically see on fiber connectivity. So very healthy margins in line with what we're trying to achieve from an incremental standpoint, very positive, not quite at the margins you would expect for a solution where we have active components involved, but very, very healthy business for sure.

Very helpful. One more for me, if I could, please, and then I'll pass it on. Can you share any more feedback from customers about RUCKUS, including any examples of interest in using that broader set of solutions spanning both traditional RUCKUS and Belden products, either in industrial or enterprise applications? And then as you're including RUCKUS, Jeremy, I don't think I caught this, but what are your assumptions for RUCKUS in the third quarter, both for revenue and EPS?

So maybe I'll start off with a little bit of customer context and then Jeremy can talk about some of the financials. So yes, this is super exciting. A lot of our customers are actually demanding that converged solution. So if you think about convergence from a customer standpoint, they would like to see, first of all, IT and OT simplification, the -- whether the data originates on an IT asset or an OT asset, they want it all seamlessly connected. They would like to see wireless and wireline convergence and they would like to see edge and cloud compute convergence.

And this is something that's really hindering -- the lack of this convergence is hindering better operational outcomes for customers across manufacturing, warehousing, health care, hospitality, et cetera, et cetera. So I think generally, there was an underlying demand for convergence. Now we've gone in with selected customers and started talking about a combined solution offering. There's a lot of excitement.

The biggest excitement I see is in the area of venues, so sports venues and other such campus type infrastructure. I don't know if it is the backdrop of all the sporting events we've had recently in the country or all the other large-format events where artists come and perform at these same venues, but there's a lot of momentum there. So we have some very active cases in the pipeline right now that we should be able to talk about within months.

But there's also a lot of interest and activity going on with both warehousing and Discrete manufacturing because there are genuine challenges in those markets that people are trying to solve. So if you think about the Physical AI case we talked about on this call, that is an example where it's very ripe to bring in Wi-Fi 7. So we've solved for their docking door automation system, and they have requested us now to also solve for seamlessly connecting all the AGVs and robots that they use in that same environment. So that's an active conversation that's going on right now.

And similarly, there's active conversations in Discrete. So very exciting. In fact, on a lighter note, we actually had to hold back a little bit our people because we wanted to be cognizant of any regulatory barriers to working with RUCKUS pre-close. But the level of excitement was so high that we literally had to lay out rules for how do you navigate that. But now, of course, that the close has happened, everything is well aligned. We had a very strong integration team ready to go from day 1. And so yes, very soon, you should see us talking about wins in that combined manner. Jeremy?

In terms of the guidance, Mark, so I don't think we're looking to guide on a revenue, on a segment or a business unit basis. But I can tell you that the third quarter revenue guidance reflects 6% to 8% organic growth for Belden on a year-over-year basis. So you can do the math on what that means in terms of revenue. From an EPS standpoint, the net impact is about $0.12 in guidance right now. That is net of the interest expense on the new debt that we just placed.

[Operator Instructions] We'll move next to William Stein with Truist Securities.

Congrats on the good results and all the details in data center and AI, which is helpful, I think. But I'd like to ask about the strategy in AI data center. Previously, I believe you had been quite focused on gray space wins. And now you're talking about this win in the white space. But I still -- maybe it's just not clear to me what the strategy is? Is it to grow both together? Do they complement each other somehow? Maybe just talk about what the -- what your advantage is in this space relative to the competitors that I think have -- well, just had more history and experience and size in this end market. Yes, that's the question.

Okay. No, well, thank you very much. The strategy we've always articulated is that our differentiation lies in that we can offer solutions that straddle both the white space and the gray space. So when we think of a data center, we think of all the different elements around that, data hall itself, whether that is part of the substation automation around the power supply, whether it's some of the security, whether it's HVAC control, et cetera, et cetera, right? So really, our strategy always is that we want to take any conversation we have and then elevate it to that combined white space, gray space solution discussion.

Now the point of entry into that conversation could be from either side. So in the past, the reason we highlighted some gray space opportunities was because they were bigger and kind of more strategic in nature and some of our white space opportunities were smaller. This time, we talked about a white space opportunity because of the relative size as well as the customer being very strategic and very long term in nature. They have a lot of growth planned ahead of them, and we can partner with them for that.

But nevertheless, the strategy is no matter how we enter, so we might enter through a product offering for cooling control or substation automation or in this case, for fiber connectivity bundles. But we want to then leverage that position and having established that reliability as a supplier, we want to take it very quickly to the second stage, which is how do we help them with the backbone that straddles both those environments.

And I will say this, at this point in time, our conversations on those combined offerings for hyperscalers across the white space and the gray space, those conversations are at a level that we have not seen before. We've -- so it's both because of the market, but also because of how we've built that capability that those conversations, that pipeline is really large at this point.

And I think to answer the last part of your question, so if I think of our competitors, they tend to be very strong in individual product categories. There isn't really a competitor out there that's going in and saying, "Let me help you design a backbone that can efficiently and reliably address challenges across both the gray space and the white space." So I think that's the differentiation. And we've proven that on the automation side with some of our large manufacturing clients. And we're starting to prove that now on the AI data center side.

Maybe if I can turn to RUCKUS for a moment. First, can you discuss with us where RUCKUS stands in the sort of duration of the Wi-Fi 7 upgrade cycle? Is that middle innings or late innings and how that influences the growth? And perhaps you can also address whether the combination with RUCKUS affects the longer-term business model that you outlined at your last Analyst Day, which I think was for mid-single-digit sales growth, 10% to 12% EPS growth and 25% to 30% EBITDA contribution. Should we update those metrics at all?

Yes. In terms of Wi-Fi 7, RUCKUS is kind of -- I would think about it, it's in the middle when it comes to more enterprise-type markets like hospitality, health care, education. And I think it's still at the early stage when it comes to markets that are more industrial in nature, Will. So there's a big opportunity.

I think the real opportunity with RUCKUS is when you combine that whole portfolio into the Belden solution and you take it to some of these markets that have traditionally not embraced wireless to that extent, right? That's really where -- that's the real differentiator.

So I think in terms of technical capability, maturity of the solution, maturity of the platform, I would say RUCKUS is fairly -- I think it's ahead of competitors. By the way, RUCKUS was the first to really have -- the first player to have a commercially available Wi-Fi 7 solution. But again, the opportunity on the more industrial-grade verticals is still early. So I see it as a big growth opportunity for us.

In terms of the model itself, so we kind of see us -- the model doesn't change substantially. However, we see the organic growth going up from the mid-single digits towards the higher single digits. And we will, at some point, articulate a more complete model. But I think at this point, we should think of that same model with more growth.

We'll move next to Steven Fox with Fox Advisors.

A couple of questions from me. I guess, first off, Jeremy, on the incremental margins going forward, it seems like there's a ton of opportunity to get higher incrementals in the business given the RUCKUS has higher margins, given how you are looking at more project business. Can you just sort of give us maybe some breadcrumbs to whether that could be the case? And then I had a follow-up.

Well, I certainly think, Steve, there is opportunity there because, like you mentioned, the variable margins are so high. I think at this point, we're not changing the guidance 25% to 30%, although I would say it's realistic to think that we could be closer to the high end of the range than the lower end of the range. Maybe we'll update that guidance at some point. But for sure, it's incredibly accretive for Belden when RUCKUS grows organically.

Right. And like you said, you're still looking for high single digits, like you said on the -- when you first announced the deal from RUCKUS, right?

Yes. Correct. Yes. Yes.

Okay. All right. That's helpful. And then as a follow-up, Ashish, so I mean, the markets where you're talking about sort of these new run rates in -- within the data center strategy, I mean, you literally went into them like just a few quarters ago, and you're scaling pretty quickly. So I understand you detailed on the AI side specifically.

But on the Physical AI side, starting with a $175 million annual run rate of business before you even get to a Wi-Fi 7 upgrade cycle, like what is the potential there? And how well -- I guess, I'm concerned about how much growth you can handle in the business? And then secondly, how you sort of direct it to make sure you're focused on the right areas.

Yes. So I think if you think of our customers that are looking for -- so a lot of our customers are basically at the stage of fundamental digitization plus some automation at this point, right? And many of those customers now want to go from that stage to what we think of as autonomous operations. That's another way of saying Physical AI.

And -- but there are multiple impediments to that, right? First of all, they need to upgrade some of their basic systems, their culture, and of course, as part of that, their network backbone. And I think this cycle will take at this point, Steve, maybe 2 to 3 years at least before you start seeing the -- reaching that point of inflection where we say that Physical AI is actually happening. So it will happen first with certain verticals that are more mature.

I think there are portions of discrete manufacturing. There are portions of warehouse and automation, material handling. There are portions of process manufacturing where there's more readiness right now. And I think we are very aligned with those subverticals. We have teams right now working with those customers, talking about how to think of the network for autonomous operations.

My feeling is that, that whole Physical AI business would become maybe somewhere like 15%, 20% of our base, our revenue over the next couple of years. But obviously, this is something that it has -- it's not like 0, 1. It happens in grades, right? So they will first have autonomy for certain portions of their operations, and then they will keep adding to that. So I think we are well set for that increase in terms of capacity.

Now overall, what does the market for Physical AI mean, that number runs into multiple billion dollars, but that's beyond the network, right? It's not just the network. And I think right now, we think of it more as how do our existing automation customers take the next step. And again, I think our pipeline looks pretty good. Our customer discussions are pretty encouraging. And I think we are well resourced for that increase.

Our next question comes from Piyush Avasthy with Citi.

Ashish, maybe if I'm thinking about like you kind of -- there was a comment on the slide deck saying that you like for solution mix crossing like 20%, like you achieved it today. I don't know if you want to set a new 2028 target for your solutions mix, maybe you do. But it would be helpful to learn how you're thinking of your solution mix going forward and how RUCKUS contributes to the conversations now?

Yes. So we haven't yet formally laid out a target, and we'll do so shortly, Piyush. But I would be -- I would feel disappointed if we don't keep growing at the same rate, at least and get towards that 30% odd mark by that point. And I think RUCKUS meaningfully helps us with that growth. So you're right about the RUCKUS contribution.

Got it. And one for Jeremy. Can you like help us with your expectations for margin and incrementals in 3Q? I think there is like some benefit sitting in the 2Q margins from the tariff benefits. So maybe if you can parse for us a little bit more on like what you expect for 3Q? And I don't know if there is more of these benefit coming in 3Q or what you got in 2Q was the whole...

Yes, you're right. Yes, you're right. There's lots of moving parts as we move from second quarter to third quarter. So if you look at the second quarter, EBITDA margins, excluding the tariff benefit were about 17.5%. The guidance that we've given for the third quarter has EBITDA margins in that same range, 17.6%, 17.7%.

Now you get RUCKUS, which is a higher-margin business, although I will say in the second half of the year of 2026, we are in integration mode. And so we do have some temporary inefficiencies from TSAs as we move them off the shared service of their prior owner on the Belden shared services. So there's a little bit of temporary inefficiencies there, but that will get wrapped up in short order within a quarter or 2.

The other dynamic that you have sequentially is that we're coming off a very strong quarter in industrial or the automation business, which is our highest margin business. So as you walk sequentially, we expect another strong quarter in industrial or automation, but that -- but the growth in the legacy business on a sequential basis will come more from the Smart Buildings and the Broadband businesses which are slightly less margin. So you have a little bit of an unfavorable mix impact sequentially, just driven by growth in Enterprise and Broadband and then a little bit of temporary inefficiencies related to the integration of RUCKUS.

But overall, I think very solid. And if you do the math on a year-over-year basis, the incrementals, including RUCKUS are something like 35% or higher. So I think they're relatively strong.

Got you. Helpful. If I could sneak one more. Just on like automation, the double digit, like you kind of mentioned like Smart Buildings and Broadband will start to contribute in the second half. But if I'm thinking of just automation double-digit growth, like book-to-bill was pretty strong. So does that double-digit growth continue? Like maybe it's sequentially coming down, but do you still expect like automation to do double digit in 3Q?

Yes. I think automation has been pretty steadily right around 10% year-over-year. And I think that's a decent expectation when you look at the third quarter for that business.

And we'll go next to Chris Dankert with D.A. Davidson.

I guess. just to stick on RUCKUS here, certain market participants have been critiquing RUCKUS, specifically the need for more access points and DDR4 memory kind of relative to some of your competitors. Maybe you could just give a response here and say whether that's a strategic choice? Is that a concern? Is memory availability an issue? Just any comments would be really helpful.

Yes. So Chris, I'll take that one. From an availability standpoint, I think we're in fine shape. It's -- obviously, the market is tight right now, but we think it's relatively manageable. There is inflation. Obviously, it's been going up in price, but we've reflected that in the guidance, and I think we're more or less locked in at this point for the second half. So it's not a major concern of ours. Obviously, it's a dynamic environment, but there's nothing specific to RUCKUS versus the rest of the market that investors should be concerned about. And I think we feel we're in good shape right now in terms of availability.

Got it. That's really helpful. And maybe just as far as market positioning goes, maybe just a couple of lines in terms of how RUCKUS fits versus, say, some of the Juniper, HPEs, the Aruba of the world. My understanding is RUCKUS is a more niche solution for where high fidelity matters, where low latency matters. But maybe how conceptually does the team think about where RUCKUS fits in the market?

Yes. No. So all of those are great companies and we compete with all of them. To be fair, with some of them, we compete even through our automation portfolio with the Hirschmann brand, right? So it's not like RUCKUS is uniquely -- these are not new competitors for us.

But having said that, I think RUCKUS is basically, as you said, engineered for very high-density, high interference environments, venues, hospitality, health care, education and then, of course, industrial sites. I mean you can't think of more high interference than in a typical manufacturing environment.

And I think our RF and antenna technology that we have with the RUCKUS portfolio, it's been validated in third-party testing, and it's a complete differentiator versus those brands in terms of performance and total cost of ownership. We are not really focused as much on price. And I think this is why the combination is great. It really supports the quality of our revenue and our margins.

Some of those brands are strong across the broader enterprise campus. We are not really going head-to-head versus those brands on those opportunities. We really focus on the more specialized high-value verticals. And I think, therefore, the real differentiator here, Chris, is the combined Belden, RUCKUS offering for IT/OT networks, right, where we have a lot of presence and recognition.

And if you take that Belden industrial grade infrastructure combined with the RUCKUS wireless switching and the cloud-based AI-driven operations, that's really a full end-to-end solution for our industrial-grade customers. And when I say industrial grade, I include the customers in hospitality, health care who operate like industrial-grade customers. So that's really the way to think about it as differentiated from the typical Wi-Fi in a broader campus type situation.

That's really helpful color, Ashish. And just one quick clarification, if I could. Jeremy, I think you mentioned that we're still expecting kind of high single-digit organic growth from RUCKUS. Is that what the order book is suggesting right now? And did I hear that correctly?

Yes. Correct.

At this time, we have no further questions. I'll turn the floor back to Aaron Reddington for any additional or closing remarks.

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 [email protected]. Thank you very much.

This concludes today's conference. We thank you for your participation. You may disconnect at this time.

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden's Reports First Quarter 2026 Results. Just a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the call over to Aaron Reddington. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for Belden's First Quarter 2026 Earnings Conference Call. With me today are Belden's President and CEO, Ashish Chand; and Executive Vice President and CFO, Jeremy Parks. Ashish will provide an overview of our first quarter results before turning to a discussion on today's announcement that Belden has entered into a definitive agreement to acquire Ruckus Networks from Vistance Networks. Jeremy will discuss the financing aspects of the transaction and our immediate delivering plans.

We issued press releases related to our earnings and this transaction announcement earlier this morning and have prepared slide decks for both announcements. These materials and a transcript of our prepared remarks are currently available online at investor.belden.com. Please note that the presentation used during today's call is the transaction announcement presentation. The regular earnings presentation is loaded to our website for your reference.

Turning to Slide 2. I'd like to remind everyone that today's call will include forward-looking statements, which are subject to risks and uncertainties as detailed in our press releases and most recent Form 10-K. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website. And now to Ashish.

Thank you, Aaron, and good morning, everyone. This is a significant day for Belden, and we appreciate you joining us. Today, we announced an important step in our solutions journey, an agreement to acquire Ruckus Networks, a market-leading provider of Wi-Fi and enterprise switching solutions. This transaction directly accelerates our evolution into a full stack IT/OT networking solutions provider. Ruckus brings industry-leading wireless and switching technology that our customers in hospitality, education and health care are actively demanding and that we soon will be empowered to deliver as part of a complete end-to-end networking solution.

Equally important, these same capabilities create a compelling opportunity to bring high-performance wireless and switching to our industrial customers who are increasingly looking to converge their IT and OT environments. Together, Belden and Ruckus will offer something no single competitor can match, a complete active and passive networking solution spanning the industrial edge to the enterprise campus. We're excited about what this means for our customers, our partners and our shareholders, and we look forward to sharing more details on the transaction today. Before we do that, let me cover the highlights of our first quarter results on Slide 4.

In short, we had a strong start to the year in the first quarter. Our team executed well, and we continue to build on our momentum with healthy year-over-year organic growth in key verticals. For the first quarter, both revenue and adjusted earnings per share exceeded the high end of our guidance range. Revenue totaled $696 million, up 11% compared to the prior year, and adjusted EPS came in at $1.77, also up 11% compared to the prior year, demonstrating the earnings power of our growing solutions portfolio. Revenue for the quarter increased 7% organically year-over-year with growth across all our markets in major regions.

The Americas were particularly strong with the U.S. up high single digits year-over-year. Across our market categories, automation delivered solid mid-single-digit organic growth with broad-based gains in key verticals, including discrete and energy. Smart buildings grew double digits organically, propelled by momentum in our priority verticals and accelerating solution adoption. Broadband rounded out the quarter with mid-single-digit organic growth during a seasonally slower period. Our profitability continues to strengthen. Adjusted EBITDA was $118 million, up 14% year-over-year, and adjusted EBITDA margins expanded 40 basis points to 17%, reflecting our growing solutions mix and continued operational leverage across the business.

As we discussed last quarter, we continue to pass through copper and tariff-related costs, which modestly diluted our reported margin percentages. Excluding these pass-throughs, adjusted gross margins were flat and adjusted EBITDA margins expanded approximately 100 basis points year-over-year. Incremental EBITDA margins once again aligned with our target range, underscoring the operating leverage in our model. At the same time, we are continuing to invest in the foundation of the business, putting capital into capacity, footprint optimization and our back-end systems to scale solutions delivery and support long-term growth.

Turning briefly to guidance. Assuming a continuation of current market conditions, we expect second quarter revenue of $735 million to $750 million, GAAP EPS of $1.53 to $1.63 and adjusted EPS of $1.95 to $2.05. Underlying demand signals remain encouraging, though near-term visibility is limited and the macro environment remains fluid. Our outlook reflects a balanced, measured view consistent with typical seasonal patterns. This guidance is provided on a stand-alone basis and excludes any contribution from the proposed Ruckus acquisition. Taken together, these results reflect the momentum in our solution strategy. Customer demand for integrated IT and OT networking solutions is accelerating, and we are well positioned to capture that opportunity. This was another quarter of consistent execution, reinforcing our confidence in our outlook and long-term strategy.

Turning to Slide 5. I want to take a moment to reflect on the journey that has brought us to today's announcement because context here is important. When we began our solutions transformation early in 2020, we made a clear commitment to investors that we would systematically transform Belden from a product-centric company into a solutions-driven provider of integrated networking infrastructure, and we would do it in a measured, disciplined way that created lasting value for our shareholders. The results speak for themselves across four clear objectives.

First, we said we would deliver consistent financial results with healthy growth, and we have. Since 2019, we have grown revenue at a 5% CAGR to a record $2.7 billion in 2025. At the same time, we grew adjusted EPS at a 12% CAGR to a record $7.54 in 2025. Second, we said we would advance our solutions offerings to transform the business. Solutions reached 15% of total revenue in 2025, on track to achieve and even exceed our 2028 target, a target that today's announcement accelerates meaningfully. Third, we said we would expand profitability while continuing to invest in growth. Adjusted EBITDA margins continue to expand with incremental margins consistently in the 25% to 30% range, demonstrating the operating leverage embedded in our business model. And fourth, we said we will deploy capital with discipline and purpose. Throughout this journey, we have repurchased over $700 million of outstanding shares while simultaneously executing multiple strategic acquisitions to build out our solutions portfolio.

Each of these steps has been deliberate and interconnected. The solutions mix growth drives margin expansion. Margin expansion generates cash flow. The cash flow enables disciplined capital deployment. And finally, capital deployment, including today's announcement, further accelerates the transformation. This is what executing on a multiyear solution strategy looks like. And today's announcement is a logical next step as we look to strengthen our solutions offerings with active products that have a strong market presence in our priority enterprise verticals.

Now please turn to Slide 6. Before I walk through the details of the Ruckus transaction, I want to be clear about something important. Our strategy has not changed. What you see on the slide is exactly what we committed to on our last Investor Day, and it is exactly what we are executing against today. Four pillars: growing our portfolio of best-in-class networking and data products, advancing our solutions capabilities, enhancing growth with selective M&A and delivering long-term earnings and free cash flow growth. Each of these is progressing. Our product portfolio continues to strengthen. We are seeing increasing adoption of our integrated offerings and our solutions pipeline is growing as customers look for more comprehensive end-to-end capabilities. Our margin profile remains solid, supported by favorable mix and continued operating leverage even as we invest in innovation and go-to-market capabilities. And on Pillar three, selective M&A. This morning's announcement is a direct and deliberate expression of that commitment.

As we've shared previously, our M&A pipeline has been focused on closing key gaps in our technology stack that strengthens our solutions offerings, including wireless capabilities, expanding access to customers pursuing IT/OT convergence and enhancing our software platform. Ruckus advances all three. The Ruckus acquisition is not a departure from our strategy. It is our strategy executed at scale. It fills a critical gap in wireless and enterprise switching capabilities, expands our addressable market and accelerates our ability to deliver the end-to-end IT solutions our customers are asking for. Taken together, these four pillars reinforce that our transformation is on track, our execution is consistent and that we are building a stronger, more durable business. With that foundation in mind, let me now turn to the details of the Ruckus transaction.

Now please turn to Slide 8. This morning, we announced that we are acquiring Ruckus Networks from Vistance's Networks for approximately $1.85 billion in cash. Simply put, this is a pivotal acquisition for Belden and is a major step towards building the most complete IT-OE networking platform in the market. Ruckus Networks is a market leader in enterprise Wi-Fi and switching with 48,000 customers globally across many of our existing target verticals. Ruckus immediately strengthens our financial profile and puts us on a trajectory to exceed our 2028 solutions mix target. The combination creates a unified platform that is well positioned to take advantage of customer demands as IT and OT continue to converge.

Now on to Slide 9. Ruckus is a market leader, and that leadership is what drew us to them. Their technology portfolio is best-in-class, first to market with enterprise Wi-Fi 7, a leading enterprise switching portfolio and unified wired and wireless management offerings. These are not incremental capabilities. They are differentiated and they're exactly what our customers are asking for. Their vertical presence is equally compelling. Hospitality, education, health care, warehousing and manufacturing are also core Belden verticals and align nicely with our existing footprint.

Ruckus has deep roots with 48,000 customers globally and strong channel partnerships built over many years. That installed base represents an enormous opportunity for Belden. And the financial profile speaks for itself. $687 million in revenue last year with gross margins above 60%. That is immediately and structurally accretive to Belden's margin profile and earnings power. Finally, Ruckus has a strong experienced team of over 1,700 employees. I've gotten to know their leadership well, and I look forward to combining our teams to deliver an even more compelling offering for our customers.

Turning to Slide 10. The most powerful long-term driver of this transaction is IT/OT convergence. Today, customers increasingly operate in environments where enterprise and industrial networks must seamlessly work together, and they are looking for partners who can deliver across both worlds. The combination of Belden and Ruckus positions us to do exactly that, creating value in several important ways. First, Ruckus is a significant growth catalyst that meaningfully expands our addressable market. Their industry-leading Wi-Fi and enterprise switching strengthen our solutions momentum across priority enterprise verticals, including hospitality, education and health care, whilst bringing world-class active networking in markets where Belden already has deep customer relationships and trusted brand presence. Second, it extends Ruckus' high-performance platform into our industrial base where demand for converged IT and OD connectivity, including edge capabilities and the enablement of physical AI at scale is accelerating rapidly. And finally, it creates an immediately compelling financial profile with accretion to gross margins, EBITDA margins and adjusted EPS, a meaningful step-up that advances our progress against our long-term financial framework.

Please turn to Slide 11. And I want to spend a moment here because this slide tells you exactly why we believe this is the right transaction. At a high level, the two product portfolios are highly complementary. -- where Belden is strong, passive infrastructure, OT wireless and industrial switching, Ruckus has minimal presence. And where Ruckus leads in enterprise wireless and enterprise switching, we have been actively looking for complementary capabilities to round out our portfolio. This is not an overlap story. It is a completion story.

Our customers in hospitality, health care and education have been clear about what they need, a single trusted partner capable of delivering both the physical infrastructure and the high-performance wireless and switching layer on top of it. Ruckus gives us exactly that capability. Their Wi-Fi and enterprise switching platform is purpose-built for these high-density mission-critical environments, and it maps directly to the customers we've been working to win. The opportunity runs in both directions. Ruckus' technology can also be extended into our extensive industrial customer base, customers who are actively converging their IT/OT environments and need exactly this kind of high-performance wireless capability. Combined, we deliver a complete higher-value end-to-end active networking solution spanning enterprise campuses, high-density public venues and industrial facilities.

Now turning to Slide 12. Why Ruckus and why now? The answer starts with Ruckus itself. As of deliberate investment in sales, technology and go-to-market are now translating into accelerating commercial momentum. Their Wi-Fi leadership positions them at the forefront of a multiyear upgrade cycle across both enterprise and industrial environments. And their AI-driven cloud networking capabilities are increasingly what customers demand. Ruckus is at an inflection point, and we intend to capture it. The strategic fit is equally compelling.

Customers today require secure, interoperable solutions that span both IT and OT environments. Together, Belden and Ruckus deliver exactly that, a complete wired, wireless and software networking solution. As the economics are attractive, we are acquiring a high-growth, high-margin asset at a disciplined entry point, and Jeremy will walk through the financial details in a moment. We are excited about the significant growth opportunity this acquisition provides us with and look forward to closing the transaction in the second half of the year. With that, I'll turn it over to Jeremy to provide insight into the financial aspects of the transaction.

Thanks, Ashish. Turning to Slide 14. This is a disciplined and financially compelling transaction. We are acquiring Ruckus for approximately $1.85 billion in cash, representing 13x projected 2026 adjusted EBITDA. This is an attractive entry point given the company's growth profile and margin structure. Ruckus operates with gross margins of approximately 60%, which are significantly higher than Belden's current margins, reflecting their highly differentiated active product portfolio. This provides an immediate uplift to our consolidated margin profile. The transaction accelerates growth, expands margins and is accretive to adjusted EPS immediately following close. We will share additional details on our expectations at a later date.

To finance the acquisition, Belden has obtained fully committed debt financing from JPMorgan, which provides flexibility to optimize our permanent capital structure between signing and closing based upon market conditions. This transaction has been approved by both Boards of Directors. And as Ashish mentioned, we expect to close in the second half of 2026, subject to customary closing conditions and regulatory approvals. Finally, I want to be clear about our capital allocation priorities post close. Delivering will be our top priority. We have a clear path to rapid reduction in our leverage, which I will walk through when we get to Slide 16.

Turning to Slide 15. The strategic and financial impact of this transaction is significant. And most importantly, it is a leap forward in our solutions transformation. Together, Belden and RUCKUS will deliver high-value differentiated solutions that strengthen our existing offerings and meaningfully expand our addressable market. On a 2025 pro forma basis, RUCKUS represents approximately 20% of combined revenue and importantly, takes our solutions mix from 15% to over 20% of the business, accelerating our progress against our 2028 solutions mix target.

Financially, Ruckus brings a high-quality profile to the combined company with high single-digit revenue growth, gross margins above 60% and EBITDA margins of 20% in the first full year of ownership, each meaningfully above Belden's current profile. As a result, the transaction is expected to be immediately accretive to earnings per share. The combination is a stronger, more differentiated solutions platform that meaningfully strengthens our financial profile.

Now let's discuss the financing behind this transaction and our plan to deliver with Slide 16. As I mentioned earlier, our debt financing is fully committed by JPMorgan. We have a clear and well-defined path to bringing net leverage to approximately 2.9x by year-end 2027 and back to our long-term target of approximately 1.5x by year-end 2029, as illustrated in the chart at the bottom of the slide. That path starts with a strong cash generation profile. The combined business will have an adjusted EBITDA base of approximately $650 million, complemented by Ruckus' low capital intensity, which maximizes free cash flow conversion. Together, these drive a pro forma unlevered free cash flow base of more than $360 million, providing substantial capacity to pay down debt quickly.

As we prioritize delevering, we intend to temporarily pause both share repurchases and strategic M&A until leverage returns closer to our long-term target. Throughout this period, our priorities are clear: disciplined execution of our combined business, continued investment in organic growth and rapid delevering to return to our long-term target capital structure. With that, I'll turn the call back to Ashish for closing remarks.

Thank you, Jeremy. To summarize, we are highly confident in this transaction and the way it accelerates Belden's evolution into a full stack ITOE networking solutions provider across our target verticals and industries. We have strong conviction in our capability to successfully integrate Ruckus into our portfolio and believe that this transaction will create lasting value for our shareholders. I would like to thank the leadership teams at Vistance and Ruckus for their partnership throughout this process. Ruckus' people are central to the value of this business, and we are excited about what we can build together. I look forward to welcoming their more than 1,700 talented employees to the Belden family.

Before we open the line for Q&A, I want to thank our entire team for their hard work and dedication to improving Belden every day. Today's announcement would not have been possible without their commitment to our solutions transformation and their continued execution at the highest level. Thank you all for joining us today. We appreciate your continued interest in Belden. With that, operator, please open the line for questions.

[Operator Instructions] We'll take our first question from Rob Jamieson with Vertical Research Partners.

Congrats on the quarter and the acquisition. So I just want to start on RUCKUS. I mean this is -- sounds like a very highly complementary acquisition that's clearly going to help your acceleration on the Enterprise Solutions side. I just wondered if you could expand a bit more on how this aligns with the solution strategy a bit more. What does this bring to the portfolio? I guess more importantly, like what are some of the secular growth opportunities this will enable you to capture in like the near and medium term?

Sure. And you're right, Rob. It certainly accelerates our strategy in terms of the enterprise markets, but I think it's equally compelling on the industrial side or the overall automation side. So -- the way to think about this is that we have made our vision really to provide our customers with the most comprehensive network solutions that can take them all the way from basic digitization all the way to autonomy, right? And it's digitization followed by harmonization, followed by convergence and then you get to autonomy. And convergence actually has a few aspects. So there's obviously the IT/OT convergence we talk about, which is the kind of big theme. But within that, there is a wired wireless convergence and there's also embedded security.

And I think today's announcement really positions us to be a leader in terms of that IT/OT convergence plus the wired wireless aspect of it. So it's a fairly comprehensive solution. I don't think there's really anybody else in the market that has that full stack, the way we do. Obviously, the vertical markets Ruckus focuses on and Belden focuses on are complementary. So that's another -- it kind of -- it makes it more complete. And when you think about it from a customer's perspective, they are really looking for one single -- I'm going to say a single pane of glass, but one single system all the way from the industrial edge to their, let's say, IT data center. And I think that's the opportunity, right? It's really taking Belden to a different level in those conversations.

And finally, it's the simplification. A lot of our customers don't have the expertise to deal with this complexity that comes from more velocity, variety and volume of data across many different types of pieces of the network. So getting it all together makes it simple, reduces total cost of ownership. So multiple, multiple reasons why this comprehensive IDOD strategy will work for us.

Perfect. That's very helpful. And then just as a follow-up, I know that this is going to accelerate the solutions-based mix. But where should we think about solutions as a percentage of total mix trending in the medium term? Is that going to be closer to like 30% as you look further out? And then also just on the slide of the software exposures here. Can you talk a bit about how and what RUCKUS brings from the software side and how that might align with or enhance the Horizon software platform?

Yes. So on the first question, Rob, we'd articulated a goal of over 20% by 2028 in terms of solutions mix. We were already -- even pre-Ruckus, we were already on track to get there. As you know, we did 15% in 2025. I think in the medium term, it's more the 30-ish percent number that you mentioned. I think that's the right framework to keep in mind. That's what gets us excited about this opportunity, especially. And then in terms of the software, so I think there are 3 aspects of what is going on there.

Let me start with the one that's the most exciting. So if you think about traditional Wi-Fi 6, which is more based on RF technology, as you get to more Wi-Fi 7, Wi-Fi 8, this has to become -- the technology has to become more deterministic and you need AI optimization really to make that happen. Otherwise, it's just too complex. So Ruckus is pretty advanced in terms of how they are working on that entire capability. And that's something we didn't have previously, right? So we had wireless products, but not with that level of AI-driven complexity. So that's an important addition to us. Second, Ruckus has a single Belden Horizon-like approach with their kind of software platform that does unified wired and wireless management.

I think this is a great opportunity for us to combine that platform at some point with Belden Horizon. Horizon has certain vertical-specific capabilities. Ruckus is kind of more horizontally simplified. And I think there's -- there are positives and negatives that both will -- they'll cancel each other out and become more powerful. And then Ruckus obviously also has an offering which is more of a Network as a Service offering. And that's also something that Belden has started at a very basic level. I think Ruckus is at a more advanced stage here. It has more exposure to those IT vertical markets that demand it. So that's the third aspect of software that will come out of this transaction.

We'll take our next question from William Stein with Truist Securities.

Ashish, I'm hoping you can talk a bit about the origin of this transaction relative to other ones. Is this sort of a sales or banking-led transaction? Or -- yes, let me just ask it in sort of an open-ended way. What was the origin of the transaction?

Will, we've admired Ruckus for some time. As you know, we've talked about 3 areas where we need to build capability. One is edge, one is wireless and one is cybersecurity. And in that framework, we've always had a well-developed funnel. We've -- we've liked Ruckus for quite some time. This actually did not originate through a bank process. Really, this is something that at the right time, there was a mutual discussion. I obviously don't want to go into too much detail here in terms of specifics. But really, we saw the benefits of how this can become a big complementary acquisition for us.

At the same time, the leadership at Vistance realized that Belden would be a good home. And I think that conversation progressed very well, matured in a relatively short period of time, and then we started this process. So I think it was more a mutual understanding of what we can bring for each other rather than anything else.

Okay. As a follow-up, I'm wondering, I would expect that Ruckus might have been a customer of your, let's say, the more passive elements of your portfolio. And then by extension, I would assume that Ruckus' competitors are also customers. Is that correct? And does that create -- I don't know if I want to say channel conflict, but some sort of conflict with customers as we consider the competitors to Ruckus? Or do I -- maybe I misunderstand. Any clarity you can provide on that would help.

No, Ruckus, if you think of Ruckus' core offerings, it's enterprise switching and wireless systems and of course, the software portfolio that covers all of that. Ruckus is not actually buying anything from Belden. Now it's possible that some of Ruckus' installers when they deploy Ruckus products and solutions in the field, they may sit on some Belden passive networks. But frankly, that's a choice that changes project to project based on the systems integrator and installers. So no, there isn't really any conflict will hear in terms of Ruckus' competitors buying Belden products.

If you think about Ruckus' competitors today, they actually do not -- I mean, I know this fact. We don't actually trade with them. But of course, they are in the industry. We sometimes work together on standards bodies. We collaborate on certain other things. But we also compete in some -- at some points in time because we have wireless in our industrial portfolio from the legacy Belden side. So it's pretty clean from that perspective, Will.

[Operator Instructions] We'll take our next question from Mark Delaney with Goldman Sachs.

CommScope previously owned RUCKUS and CommScope also historically had a presence in markets, including structured cabling as well as broadband. So I'm hop to understand if there are synergies available to Belden that weren't there for CommScope or more broadly, why you think the portfolio will perform better with Belden than it did in the past with CommScope before they sold some of their business lines to Amphenol. I think I guess similar to Slide 11 in the deck and some of your prepared comments, but if you could speak more on this topic, it would be helpful.

Mark, that is an interesting question. I think it's got more to do with the maturation of the market and the trends that are emerging now, especially with the more complex demands of Wi-Fi 7, Wi-Fi 8, physical AI and how all of that will manifest, frankly. I think if you think about the CCS division of CommScope which is focused on structured cabling and broadband, they might have had some overlap with Ruckus in terms of end customers or there were very different buying processes at play 3 to 5 years ago and opportunities for synergy were limited from that perspective. I think what we've seen in the last 3 to 5 years is a lot more convergence. And I think it's accelerated significantly over the last, let's say, 18 to 24 months because of the whole idea that customers want to go towards autonomy and they need converged networks for that. So really, this is a more kind of recent phenomenon. That's one.

I think the second thing is you might be right to some extent in that Belden had invested in the solutions selling approach maybe a little sooner than some of our competitors in the basic networking or passive networking area. So to that extent, maybe we are better positioned to benefit from the complementarity of this acquisition. So I think it's more market-driven, frankly, versus any specific capability or inherent weakness that CCS had.

My other question was just on the existing Belden business. You mentioned positive underlying demand signals, but also somewhat limited visibility. I think your guidance is for relatively typical seasonality as you characterized it. So maybe if you could just speak a little bit more on the demand signals you're seeing in the current business and on balance, if it's strengthened or weakened over the last 90 days.

Mark, this is Jeremy. Yes, you're right. I think that we're forecasting or guiding a quarter that looks a lot like Q1 just with typical seasonality. As you know, we're a relatively short-cycle business. But in general, I think the trends in each of our businesses have been positive up to this point. I mean industrial seems like it keeps getting stronger. PMIs continue to go in the right direction. So I think from an end market standpoint, industrial is relatively healthy. Smart buildings has been doing fairly well. That's been growing now for the last 5 quarters or so organically at a pretty decent pace. It was up double digits year-over-year in the first quarter. And I would expect them to have a pretty good second quarter.

And I think broadband will improve as we move throughout the year. So I think broadband will grow as well. I think the good thing is all 3 businesses were up at least mid-single digits organically in the first quarter. And I would expect things to kind of move along at that same pace in the in the second quarter. I think we're obviously always trying to be a little bit cautious when there's so much volatility in the macro environment. But I would say, as we sit here today, we feel good about the second quarter.

And we'll go back to William Stein from Truist Securities.

I'm hoping you can give us any update on your exposure to AI infrastructure demand. A few quarters ago, this was an area that you spoke about with maybe one hyperscaler, one instance of their data center. And we've been hoping to hear about landing elsewhere and expanding in the place you are. So, hoping you can update us on that. And then along with that, any comments as to whether this acquisition would potentially improve your prospects in that end market?

Yes. So, Will, we do see AI data centers as one of our top growth opportunities over the next few years, but of course, along with physical AI. So, I think of both of those as connected. They're not necessarily connected in terms of the sales process. But as you get more AI data center capacity, it enables eventually more physical AI in the field. So, what is FLIR -- so by the way, before I go into that, our AI data center business, it had good growth this quarter too. I think we were up -- data centers as a category was up double digits. So, it's been coming along pretty well.

Our customers keep talking about the need for converged solutions in AI data centers. They don't want to focus on buying pieces and pulling them together. They want us to do that. This is, by the way, one of the reasons why we have integrated with OptiCool. You might have seen that announcement because that brings advanced cooling straight to the rack to support AI workloads. So we are approaching AI data centers with that converged offering. We haven't really focused on just supplying passive networks by competing on price. Those conversations take a little longer. You're really getting into the full build -- design and build cycle there. And we've had -- apart from that one big win we talked about, we've had consistently midsized wins every quarter. So it's a very, very consistent flow.

And then, of course, linked to that will is the whole physical AI opportunity. And this is very exciting. I mean, as you know, at a very -- just as a summary reminder, we do enable closed-loop physical AI systems in collaboration with companies like Accenture, NVIDIA and other select OT technologies where we combine vision, digital twins, some real-time orchestration, et cetera. We talked about the security -- sorry, the safety fence example from the automotive customer. And we are very focused on delivering the full deterministic fully secured network, which will deliver the low latency time synchronized connectivity. So that's the focus.

And there, we are doing a number of pilots right now. So very exciting. A lot of our customers want solutions that will integrate cameras, edge computing, software AI platforms, industrial connect and we've gone forward with a number of companies. Many of them, by the way, in the U.S. focused on bringing manufacturing back. But those pilots are underway right now. And I think between physical AI and the AI data center opportunity, we will see this emerging as one of our top growth opportunities, if not the top one.

And we'll go next back to Mark Delaney with Goldman Sachs.

On RUCKUS, are you able to share a bit more on the end market exposure specifically for that business? I imagine a lot of it is what would be considered enterprise for Belden. But I'm curious to what extent they're also selling into factories and industrial markets? And to what extent there may be an opportunity for Belden to accelerate the growth of the RUCKUS portfolio into industrial and factory settings.

Yes. Mark, so from a vertical market standpoint, you're right. RUCKUS is mostly or primarily focused on enterprise segments. So hospitality, education, those are the 2 biggest verticals, but they sell into a lot of other enterprise verticals as well. They do have some exposure today into what we would consider industrial markets, primarily into automated warehouses and material handling, where we also play today, but that's the only area of overlap. So I think from our perspective, there's actually a lot of opportunity to bring their products into some of our legacy industrial markets and then obviously, to combine their products with some of our passives on the enterprise side.

So, if I can add to that, the short- to medium-term opportunity we see here, Mark, is in discrete manufacturing. At this point in time, as you may know, the majority of data, machine data is transmitted in a wireline format and not wirelessly. But that is expected to take over in the next 3 to 5 years to become more 50-50 and then the majority might move wirelessly. So, a lot of our discrete customers are planning for that change, and they need advice. Right now, they struggle because they don't actually have a company that they can go to for that comprehensive blueprint, which they will need in the next 2, 3 years. So that's the opportunity mainly. So apart from material handling, we see this expanding rapidly into discrete.

Helpful. And then just circling back to the existing Belden business. Maybe you can clarify how much revenue exposure you think Belden has via distribution network to the Middle East and if that's something you try to factor into your outlook. You imagine given the uncertainty there that, that was part of the thought process with guidance, but if you could be a little bit more specific around your exposure and what's included in guidance relative to that region?

Yes, Mark. So our Middle East exposure is relatively small. It's less than 5% of our total revenue. It's primarily in the enterprise side of the business, smart buildings, where we're selling into UAE and a few other countries. I think from our perspective, we've got that business roughly flat sequentially and not significant growth built into the guidance. So I don't view it as a significant risk for second quarter, just given the size of that business. And up to this point, by the way, it's kind of held up. So it's been okay.

Understood. And then just lastly on supply chain. It's been a difficult area for companies globally to manage, especially with certain semiconductor chips and memory. I'm curious if you could speak a bit more to Belden's ability to get the materials that needs to support the business and your confidence in passing on any higher costs and sustaining the margin objectives.

Yes. I think our -- our view is that we'll continue to pass on inflation to the extent it's real true market inflation. I think we've been successful doing that over the past several years. Our exposure is more so on some of the commodities, metals and plastics and things like that, oil-based compounds. But obviously, we do have electronic components. And I think we've been successful passing those on as well. The legacy Belden business does not really have much exposure to some of these memory price increases. So it's not been a major issue for us up to this point. But yes, for sure, to the extent that prices on chips and circuit boards and other components have gone up, we've been able to recover that in price and our expectation is that we'll continue to do so in the future.

And that does end our question-and-answer session. I would now like to turn the call back over to Aaron Reddington. Please go ahead.

Yes. Thank you, operator, and thank you, everyone, for joining today's call. If you have any further questions, please contact the IR team at Belden. Our e-mail address is [email protected]. Thank you very much. Thank you, ladies and gentlemen, and this does conclude our call for today. You may now disconnect from the call, and thank you for participating.

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden reports fourth quarter 2025 results. Just a reminder, this call is being recorded.

[Operator Instructions]

I would now like to turn the call over to Aaron Reddington. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for Belden's Fourth Quarter and Full Year 2025 Earnings Conference Call. With me today are Belden's President and CEO, Ashish Chand; and Executive Vice President and CFO, Jeremy Parks. Ashish 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.

We issued our earnings release earlier this morning and 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 to Slide 2. I'd like to remind everyone that today's call will include forward-looking statements, which are subject to risks and uncertainties as detailed in our press release and most recent Form 10-K. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website.

I will now turn the call over to our President and CEO, Ashish Chand.

Thank you, Aaron, and good morning, everyone. We appreciate you joining us. Let's begin with Slide 4, which highlights our key accomplishments and messages for the fourth quarter and full year. My comments today will refer to adjusted results. We are very pleased to report an outstanding close to 2025 with both our fourth quarter and full year results exceeding expectations and setting new records.

For the fourth quarter, we delivered record revenue of $720 million, which exceeded the high end of our guidance range. Our adjusted EPS came in at a record $2.08, also surpassing the high end of our guidance. The strong finish capped off a truly exceptional year. For the full year 2025, we achieved record revenue of approximately $2.7 billion, up 10% year-over-year and record adjusted EPS of $7.54, a 19% increase year-over-year. These results were driven by continued solutions growth and strong execution across our business.

Our order momentum was also robust with record full year orders. For the fourth quarter, orders were up 12% year-over-year and 5% quarter-over-quarter. A healthy free cash flow generation continued enabling disciplined capital deployment. For the year, we generated $219 million in free cash flow and we repurchased 1.7 million shares for $195 million, further reducing our share count. These record results underscore the success of our strategy. As we look ahead, we will capitalize on market opportunities to ensure this momentum continues.

A key indicator of our strategic progress is the accelerating adoption of our solutions offerings. For the full year 2025, solutions wins as a percentage of total revenue crossed 15%. This represents a meaningful increase from where we stood just a year ago and was a major driver of our success this year. This growing contribution from a solutions portfolio reinforces our confidence in our ability to continue to grow earnings and strengthens our conviction in achieving our 2028 solutions target, which we set on our last Investor Day.

To further accelerate our solutions transformation, enhance the customer focus and unlock even greater future value, we are undertaking a significant strategic evolution at Belden. Effective January 1, 2026, Belden transitioned from a legacy business segment structure to a unified functional operating model that applies across the entire enterprise from executive leadership to our functional teams.

This fundamental shift organizes us around core functions rather than separate businesses to better align resources and accountability with our continued solutions transformation. As IT and OT increasingly converge, realigning our organizational structure enables us to sell and deliver converged solutions more efficiently and consistently. Ultimately, this new model empowers us to leverage our full product portfolio for customers, speed decision-making, clarify accountability and simplify the delivery of customer-centric integrated solutions.

This isn't our first step in this direction. Over the past few years, we've consistently worked to break down internal silos to improve our solutions capabilities, including the successful combination of the sales teams in 2025. The current operating realignment is the next natural evolution of that journey, further enhancing our ability to deliver integrated solutions.

This strategic realignment is the right move for our business, positioning Belden to maximize long-term growth and deliver on our financial targets. For a view of our executive leadership team under the new functional structure, please refer to Page 15 of today's materials.

Now to illustrate the power of this unified approach and the benefits of IT/OT convergence, please turn to Slide 5. We highlight our evolving customer engagement model through our work with a major U.S. grocery store chain. This customer operates a complex network encompassing everything from the retail stores and gas stations to their warehouse, distribution centers and manufacturing facilities.

Historically, Belden [indiscernible] for this customer is primarily as a supplier of cabling products for their IT network. However, as we have proactively worked to break down internal silos, our solutions team has been able to significantly expand this relationship. Our deepen engagement now includes OT products, servicing their manufacturing processes and fiber solutions connecting their fuel stations. This evolution from a component supplier to a more comprehensive solutions partner is precisely what a solution-first strategy is designed to achieve.

This is where our functional operating model and integrated business structure proves so critical. In the past, this customer might have encountered multiple Belden sales teams, creating a fragmented experience. Now our integrated teams are empowered to bring in our full product portfolio to address their most pressing challenges, providing a seamless single point of contact. This not only enhances the customer experience, but also allows us to solve for their most complex IT/OT challenges more effectively. This example powerfully demonstrates how our organizational realignment directly translates into greater value for our customers and underscores its critical importance to Belden's future success.

With that strategic context, I will now briefly highlight another key solutions win for the quarter. Please turn to Slide 6 for another compelling example of a solutions-first approach, highlighting our work with a major urban transit system. The strategic challenge this customer faced was significant, maintaining reliable, real-time high-definition video feeds from trains moving at high speeds, all while navigating complex wireless environments grown to interference. They also required unified control and management across both operational and security networks.

These are the kinds of complex mission-critical problems that demand more than just products, they demand integrated solutions. In our solutions portfolio, WiFi products play a critical role, enabling high performance and reliable connectivity essential for IT/OT convergence across various industries. Belden stepped in with an advanced integrated solution, we leverage the latest WiFi technology and roaming capabilities to ensure seamless connectivity. Further, we provided a proprietary centralized management system, unify all disparate data sources. What truly set Belden apart and secured this win were a superior roaming capabilities which delivered flawless surveillance feeds, even in the most challenging environment.

Complementing this, our holistic unified management platform simplify the entire operational landscape significantly reducing complexity and maintenance demands. This outcome is a testament to our strategy. We've positioned Belden as an end-to-end strategic partner delivering critical value by enhancing passenger safety, security and operational efficiency. This provided simplified, more cost-effective management of their complex infrastructure demonstrating the power of advanced IT/OT converged solutions.

I will now request Jeremy to provide additional insight into our financial performance.

Thank you, Ashish. My comments today will cover our fourth quarter and full year results, a review of our segments, the balance sheet and cash flow; and finally, our outlook. As a reminder, I will be referencing adjusted results today.

Now please turn to Slide 8 for our fourth quarter performance. As Ashish noted, our solid execution this quarter drove consistent top line growth, which translated into record performance for the business. Revenue for the quarter was $720 million, up 8% year-over-year and ahead of expectations set forth in prior guidance. Revenue was up 5% organically on a year-over-year basis with Automation Solutions up 10% and Smart Infrastructure Solutions flat. Orders continued to perform well across the business, up 12% year-over-year and 5% sequentially.

EBITDA was $122 million, up 7% year-over-year. Net income for the quarter was $83 million, up 5% from $79 million in the prior year quarter. And lastly, EPS was a record $2.08, up 8% from $1.92 and ahead of expectations set forth in prior guidance.

Now please turn to Slide 9 for our full year performance. For the full year, we achieved record revenue of approximately $2.7 billion, up 10% compared to last year. Revenue was up 6% organically, driven by Automation Solutions with organic growth of 11% and Smart Infrastructure Solutions with organic growth of 1%. EBITDA was $459 million, up 12% from $411 million last year. Gross profit margins were 38.5%, a 40 basis point improvement versus the prior year and EBITDA margins were 16.9%, a 20 basis point improvement versus prior year.

As we discussed throughout the year, we proactively managed pricing in 2025 to offset the impact of copper inflation and tariffs and protect our overall profitability and earnings per share. Despite a full recovery of these incremental costs, the pass-through actions resulted in some dilution to reported margin percentages and somewhat obscured our strong underlying operating performance. Excluding the impact of these pass-throughs, gross profit margins improved 160 basis points and EBITDA margins improved 80 basis points year-over-year driven by our growing solutions mix. Additionally, again, excluding the impact of pass-throughs, incremental EBITDA margins were approximately 28%, in line with our long-term targets. Net income was $303 million, up 15% from $263 million last year. And lastly, EPS was a record $7.54, up 19% from $6.36 last year.

Before reviewing our historical segment performance, I want to touch on the organizational realignment that Ashish discussed earlier. Turning to Slide 10. You'll see that effective in the first quarter of 2026, we will transition to a single consolidated reportable segment. This reporting change is a direct outcome of our new functional operating model and leadership structure, designed to accelerate our solution strategy and enhance our customer focus.

For modeling purposes, the reporting change has no impact on our historical consolidated financial results. And going forward, while we will no longer report separate segments, we will continue to provide valuable insights and commentary on our performance across our market level categories and key verticals. We are confident the strategic realignment is the right move for our business, and it reinforces our ability to deliver on the long-term financial targets we outlined at our last Investor Day.

So with that context on our future segment reporting structure, let's turn to Slide 11 for a review of our segment performance for the full year 2025. Our Automation Solutions segment delivered another solid year, demonstrating continued recovery and steady execution. Revenue reached nearly $1.5 billion, a 14% improvement compared to the prior year with EBITDA increasing 16%. Margins improved by 50 basis points to 21%, reflecting our effective management of the pass-throughs of tariffs and copper. Order trends also remained robust with orders up 16% compared to the prior year. This strong order activity drove the segment's 11% organic growth, with positive contributions in all regions. This broad-based momentum extended into our core verticals, which all grew for the year, including double-digit growth in discrete manufacturing and energy. Revenue for Smart Infrastructure Solutions topped $1.2 billion, a 7% improvement compared to the prior year with EBITDA increasing 6%. Margins decreased by 10 basis points to 12.1%, reflecting headwinds from the pass-throughs of tariffs and copper.

Within our markets, Smart Buildings grew 5% organically for the year, driven by strength in our key growth verticals as we continue to advance our solutions offering. Broadband experienced a softer back half of the year due to a temporary moderation in MSO capital deployments. However, we anticipate stabilization and a rebound in 2026 driven by the adoption of new fiber products and the acceleration of DOCSIS deployments among our major MSO customers.

Please turn to Slide 12 for our balance sheet and cash flow highlights. Our balance sheet remains a source of significant strength and flexibility, enabling our disciplined capital allocation strategy. Our cash and cash equivalents balance at the end of the year was $390 million compared to $370 million in the prior year. Our financial leverage stood at a reasonable 1.9x net debt to EBITDA, consistent with our expectations. We target approximately 1.5x net leverage over the long term, though this may fluctuate as we pursue strategic opportunities aligned with our capital allocation priorities.

For the trailing 12 months, our free cash flow was $219 million. For the full year, we repurchased 1.7 million shares for $195 million, further reducing our share count, which is now more than 11% lower than it was at the end of 2021. At the end of the year, we had $145 million remaining on our existing repurchase authorization. Our capital allocation priorities remain unchanged, investing internally in opportunities to advance organic growth, pursuing disciplined M&A and returning capital to shareholders through buybacks. While the current financial market environment is dynamic, we continue to evaluate M&A opportunities with rigor and remain committed to deploying capital in ways that create long-term value.

Early this year, we completed a successful debt refinancing by issuing EUR 450 million, a 4.25% senior subordinated notes due in 2033. This transaction allowed us to redeem all of our outstanding 2027 notes effectively extending our overall debt maturity profile. Our debt remains entirely fixed with an average rate of approximately 3.9%.

Please turn to Slide 13 for our first quarter 2026 outlook. Following a strong 2025, we are well positioned for the long term, leveraging secular trends like digitization and IT/OT convergence. While there is ongoing market uncertainty, our growing solutions adoption and resilient operating model enable us to effectively manage near-term variability.

Our first quarter guidance reflects these dynamics and our typical seasonality as we remain focused on our solutions transformation and long-term value creation. Assuming the continuation of current market conditions, revenues for the first quarter of 2026 are expected to be between $675 million and $690 million. Adjusted EPS is expected to be between $1.65 and $1.75. That concludes my prepared remarks. I would now like to turn the call back to Ashish.

Thank you, Jeremy. Now please turn to Slide 14. To summarize, 2025 was truly a milestone year for Belden, a record fourth quarter and full year performance clearly reflects the strength and resilience of our business and the accelerating progress of our solutions transformation. We delivered outstanding results in a dynamic environment marked by consistent order activity, record earnings and healthy cash generation. Our performance is not an anomaly. It directly reflects our strategy success in delivering tangible results.

From 2019 to 2025, we achieved a revenue CAGR of 5% and an adjusted EPS CAGR of 12% demonstrating powerful and consistent value creation over multiple years. This strong track record, coupled with the fact that solutions win as a percentage of total revenue crossed 15% for the year, provides clear evidence that our solutions-first strategy is resonating in the marketplace and driving our financial success. Our progress builds a powerful foundation as we continue to execute our strategic evolution.

The transition to a unified functional operating model is the right move for our business. It's designed to further accelerate our solutions-first strategy, enhance the customer focus and unlock even greater future value by aligning our entire enterprise to deliver integrated solutions more efficiently and consistently.

We remain incredibly confident in our long-term trajectory. The fundamental secular trends driving our business, digitization, IT/OT convergence and the increase in demand for data-driven efficiency are intact and building momentum. Belden is exceptionally well positioned to capitalize on these trends. Our solutions transformation is already expanding our addressable market and driving consistent growth and margin expansion.

Through disciplined execution and thoughtful capital allocation, we are committed to ensuring we create lasting value for our shareholders.

Before I conclude, I want to extend my sincere gratitude to the entire Belden team. Your dedication, hard work and commitment to our solutions transformation have been instrumental in achieving these record results and positioning us for continued success. Thank you all for joining us today. We appreciate your continued interest in Belden. That concludes our prepared remarks. Operator, please open the call for questions.

[Operator Instructions]

The first question is going to come from Mark Delaney from Goldman Sachs.

I was hoping first to better understand what Belden has seen with demand trends. You already talked about how orders grew both sequentially and year-on-year in the fourth quarter, but can you share more on your view on demand trends by end market and what you're seeing so far in 2026?

Sure. First of all, if I look at the total solutions pipeline, that's grown by 26% at the end of '25 compared to the end of '24, right? So that itself is a pretty good indicator at an aggregate level. Obviously, there's a lot more demand activity we've seen on the automation side, especially true in energy, discrete as well as process. And then we've seen a fair amount of demand in hospitality, which is more of an integrated IT/OT opportunity for us. These are all typically in the double-digit growth areas, these markets. We saw a little less robust growth in broadband, but we did see fiber growing and the demand for fiber growing there.

So really strong -- some of the fundamental verticals that you would expect energy, discrete process, hospitality, these are doing really well for us. Overall, one quarter growth in our funnel for solutions, so we feel pretty good.

That's very helpful. My second question was about supply chain. And from a few dimensions -- I guess for one, does Belden think it can procure enough metals and also enough semiconductors in DRAM in particular. And then two, as you think about what you're seeing in supply chain and some of the rising input costs, the company did relative to offset the dollar pressure in the fourth quarter. Do you think you can continue to offset the input cost inflation as you think about this year?

Yes. No, I think, Mark, that's a very pertinent question at this point. I think we are well positioned. The way we've looked at manufacturing as a whole and supply chain is we've derisked quite a bit by going more regional. Obviously, we are still dependent on certain commodities and certain electronic components with certain regions. But we've taken certain actions. For example, we are doing internally more surface mount now than we did before.

So we've kind of -- we've removed some of the artificial points of consolidation in that supply chain so that we have more direct control over that. And then, of course, with copper, that's a global commodity. You will see a higher emphasis from our side on both fiber and wireless. I think that was anyway happening as part of changing technologies, but it's getting accelerated.

But at this point in time, just given how we are placed and how copper is not that large portion of our COGS, we feel pretty good about being able to pass on because of the value we offer beyond the commodity. And we've had discussions with some of our customers and our partners about how this scenario might change. And we haven't heard anything that causes us concern right now. So yes, so much like we did in Q4, we remain confident that we will protect our dollar margins by being able to pass on.

Our next question is going to come from William Stein from Truist Securities.

Aside from the rebound in MSO spending that you highlighted in the broadband business, are there any other clues that we should pay attention to when we're contemplating modeling 2026 beyond Q1 that could drive above or below typical seasonality?

So there is a temporary, let's say, slowdown in certain architectural upgrades in that market, Will, that we've dealt with in Q3 and Q4. That we know now has been largely resolved because there were some interoperability issues that those -- the engineering teams are working through. So we expect that to start ramping up.

Second, there was an overall inventory overhang that is even beyond that architectural changes in DOCSIS that were true in that market, which I think have all been -- they've all bled out. And then, of course, there's the BEAD dynamic. We know for sure that BEAD money will flow in 2026. So I think there are kind of 2 more neutral and 1 more positive trend that is there. But the other thing to keep in mind is our fiber content as a percentage of total Broadband revenue has gone from 40% at the end of '24 to 50% at the end of '25, right. Fiber is growing and there is an increasing demand for both fiber connectivity and cabling in that market.

And we've launched some new products that are fairly differentiated that are protected with IP that allow us to take share in that market. So I think there are the 3 kind of more macro items and then there's one Belden specific fiber growth dynamic. And all of these should help us model the growth.

Thank you for that. I was hoping to hear an extension of that into any other end markets or the other segment that might clue us in because I think you said this recovery, I would expect an MSO to drive some above seasonal performance, but what about in the rest of the business as we go through the year?

So just to clarify, are you talking about the Broadband portion of the business or [indiscernible].

No. I'm trying to double the whole thing because I think you gave us the comment on Broadband. So I was looking -- hoping that you might extend that to the rest of the entire business.

Okay. No, I'm sorry. I misunderstood your question. So I think, first of all, automation very, very positive performance in 2025 with 14% growth, 11% organic. We saw double-digit growth even in Germany, the DACH region and China and really strong expansion in verticals like discrete manufacturing and energy. So I think those will continue. We see more and more engagement around physical AI, and this is especially happening in warehousing and smart manufacturing environment, especially in the U.S. And just as a reminder, right, we enable very close loop physical AI systems in collaboration with companies like Accenture, NVIDIA, et cetera, where we combine vision, digital twins, real-time data orchestration. We have a deterministic secure architecture that is based on our time-sensitive networking protocol that delivers very low latency, synchronized connectivity. So these are all being appreciated. We saw very strong interest in those discussions a number of pilots have commenced.

So if I look at just the vertical, let's say, the fact that certain verticals are very robust and that we have this additional layer of IT/OT convergence, including physical AI, we feel pretty good about the demand environment in that space. Interestingly, our smart buildings business has done extremely well once we started offering these IT/OT convert solutions.

So here is an interesting statistic. So our growth verticals in smart -- sorry, smart buildings, which are essentially around hospitality, health care, education and data centers, are now 1/3 of our total smart buildings revenue, while commercial real estate has become 10%. And at some point, it used to be the flip of that, right? So there's been a very marked interest in these converged solutions. So we are obviously doing better in smart buildings environments where it's not plain vanilla office space, but it's more demanding health care, hospitality kind of -- or warehouse kind of environments.

So I think these verticals are the ones that will drive growth. I think the U.S. continues to be the leading market in terms of geographical expansion, but obviously, it's good that China and Germany have also recovered. We see continued growth in infrastructure in India, especially for energy and mass transit rail. So yes, so those are the growth areas we're excited about.

If I can have one follow-up. I was hoping to ask about the organizational realignment you referred to in the press release and in the prepared remarks. Should we anticipate that having any effect on the P&L in terms of either reduced cost overall because of the, I guess, simplification that I'd imagine you get or any restructuring costs that we should prepare for?

So to be fair, when we planned this realignment, one of our goals was not necessarily cost reduction, it was more aligned around the solutions-first strategy. And also, if you notice, we've created a role around digital and operations leadership, which essentially means that we want to drive IT/OT convergence within Belden much the same way we are enabling it for many of our customers. So I expect the benefits of this, first and foremost, to be around us becoming more customer-centric and then really pulling resources to bring functional strength, whether it's in technology development or commercial skills, et cetera.

Having said that, obviously, this is going to lead to efficiency. For example, when we combine all the disparate R&D centers across the world under common leadership, right, or when we bring more commercial resources together. So yes, we will see more efficiency. We will see more leverage on those costs. We feel that we will continue to reinvest some of those efficiency savings. So the goal really is not to model some kind of restructuring savings at this point.

And our next question is going to come from Steven Fox with Fox Advisors.

I guess, first, I had a big picture question. You highlighted how some of the inflation in materials is impacting your business, which is very helpful. And I was just curious there's inflation considerations across a lot of bill of materials and there seems to be some better demand for '26. How concerned are you about just projects being negatively impacted, whether it's just the absolute level of spending dollars available or timing of projects based on what's going on in the supply chain as you think out for the full year? And then I had a follow-up.

So in terms of end demand or inflation impacting end demand, I can't say that we've seen any evidence of that up to this point. Obviously, copper has been particularly volatile. The price of copper has been everywhere from $4 to $6 just over the past maybe 4 or 5 months. So there's been a lot of volatility. We've been dealing with it. The customers are still placing orders. So I think that's positive. We wouldn't expect it to have any material impact on demand, but like Ashish said, we're also concentrated on fiber and wireless and other technologies because we can sell all of those as part of our solution. So I don't think it's a major concern. We'll keep passing it on in terms of price and we don't expect it to have a major impact on end demand.

Great. And then just -- yes, sorry.

Just one point, right, Keep in mind that inflation is what is actually driving a lot of customers to look at automation. And so if anything, when I look at our sales pipeline, I see a lot of cases where even customers who were not initially identified as, let's say, priority markets, so priority customers for higher-end automation have now entered that pipeline, and they're coming in talking about autonomous systems of more convergence. So I think it's actually a bit of a tailwind, frankly, unless you know there's something crazy going on with commodities, which we can't control.

Right. No, that's a good food for thought. And then just from a cash flow standpoint, Jeremy, like you mentioned the price of copper is pretty volatile. Like how do we think about your free cash flow for the year? Is there a working capital impact that comes and goes depending on prices, et cetera. Anything we should keep in mind there?

Yes. I wouldn't expect it to have a material impact on our cash flows as long as we're successful recovering through price. So -- but it does impact inventory. So if you look at our inventories from the end of 2024 to the end of 2025, a significant portion of the inventory growth is just copper getting repriced. And the way it works is, obviously, we're buying copper. We've got a couple of months of inventory of copper at any given point in time, that gives us a few months to raise prices.

So there's always maybe a slight lag between when we raise prices and when we realize higher input costs, it doesn't impact the P&L typically. But you're right, there is maybe a small impact on working capital. But I don't think at this point it's significant enough to really impact our view on free cash flow for the full year.

And our next question is going to come from David Williams at Benchmark.

And thanks for letting me ask a few questions here. I guess maybe first, just kind of thinking about that transition to the solutions approach. You've talked about it being about 15% of the business. But just kind of thinking about the leverage there, but how do you think that the pace of growth in that solutions in terms of mix? How should we think about that maybe through the next 12 to 24 months?

Yes. So David, we had articulated this longer-term goal of being at least 20% by 2028. I think we are well on our way to start achieving that goal, even surpassing that goal. The reality is that the 15% that we've achieved right now has involved a little bit of brute force because we were not organized internally exactly to service customers on a unified basis. I think with this realignment in the org structure and operating model, we are now fully aligned and the biggest benefit we now have is that we can scale. So if you think about the 15% base that we have right now, there's a fair amount of bespoke one-off solutions designs that we've done.

And we haven't necessarily been able to either get both the IT/OT converged portion of the opportunity or kind of repeat and scale the reference architecture once it's been established. And that is what we are changing now. So obviously, you should expect acceleration in that solutions mix. And we should expect leverage on our fixed cost because we've already built the architecture and now we're going to take it out to more customers.

So it's not like we haven't found as we mentioned on the call, we had already started that journey a few years ago, we would combine our go-to-market teams, and we've combined certain other supporting teams. But -- so we've made certain -- we've made progress in that direction, but I think this is very definitive now. And it's clear across the organization to all our customers that we are accountable to them for one combined answer.

Very good. And then maybe just on the physical AI. That is certainly an area that's gained a lot of attention more recently. Just kind of curious what you're hearing in terms of customers and maybe the activity going on from their perspective in terms of physical AI in that transition?

Yes. So at the very basic level, how customers are looking at these solutions are that they integrate cameras, edge computing, AI platforms, industrial Ethernet to enable some real-time perception, simulation and action, real-time root-cause analysis. And they're very interesting for both brownfield and greenfield situations. We have a number of active discussions going on in both categories, especially in factories and warehouses. So a lot of interest. I think the kind of sobering moment for customers comes when they realize that they don't have -- they haven't built the foundation to get to physical AI.

So in our mind, we think of 4 steps required where the ultimate fourth step is autonomy. So you have to start with digitization. Everything is connected, is digital. You then have to go to harmonization where all these connected systems are able to communicate with each other seamlessly using the same protocol, the same language, so to speak.

Then there's convergence where these systems that are more on the operating side and are speaking with these other -- can also speak with historical data and connect to databases on the IT side, and that's a 2-way bidirectional process. And when you get to autonomy, where you can actually have this real-time perception and actuation. So a number of customers come to us now and say, I want an autonomous system in my manufacturing plant or my warehouse.

And then we have to guide them through that journey. And I would say that journey typically can take between 12 to 18 months depending on the existing digital maturity of that customer. But a number of those journeys have started.

Actually, I would say, we've had more interest than even I expected at this stage. And part of that is driven by just the environment around bringing back manufacturing using more automation, dealing with the shortage of labor, et cetera. So I think it's in a very good place, but it's not a market that's going to give results next quarter. And I think we have invested in this for the long term, and our customers clearly have understood that they have to go through these steps.

Our next question is going to come from Rob Jamieson from Vertical Research Partners.

Sorry about that. I was on mute. Just wanted to get a quick update on the data center gray area opportunity and pilot that you mentioned a couple of quarters ago. Just given it's to help automate some of the power and cooling capabilities, we saw huge orders from a liquid cooling provider earlier this week. I'm just curious how conversations are going with maybe some of the other hyperscalers, how that pilot's gone? And then just any kind of color around sizing or how big you all see that opportunity growing over time?

Yes. So we see that integrated white space, gray space opportunity for data center, especially for the AI data centers as a very significant opportunity. It's one of our top growth areas. In fact, we've kind of expanded that team literally by 2, 3x over the last couple of quarters, right? So there's that much demand. The approach we are taking really is to cover both IT and OT. And this obviously includes the critical model of cooling systems that we've previously highlighted.

So that pilot actually went very well. It's now expanded into a larger commercial relationship where they want us to do the same thing for multiple data centers and those negotiations are underway right now and they're really heading in the right direction, very positive. And then since then, we've worked with -- about let's say, half a dozen more large accounts. Some of them are more in the early piloting stage, but some of them have said, you can replicate what you've done in that other case, and we did actually book orders and revenue in Q4. They weren't as big as that first case we talked about. But the pipeline is certainly 3 to 4x larger.

So more to come here, Rob, but very, very positive engagements underway. Again, these discussions because they go across -- they straddle IT and OT, they take a little longer because we're really addressing certain foundational aspects of their infrastructure. But I would expect some positive news in the first half of '26, and we will certainly share that with you.

That's great. Very helpful update. It makes a lot of sense with everything that you discussed today with the simplified reporting structure. And just on the 1Q guide, just one housekeeping item. And sorry if I missed this, just bounced around between calls this morning. What's embedded in there for FX on your top line guide there just given some of the dollar weakness that we saw in early January probably around the time you guys had already finished your guidance and planning. So just curious what's embedded in there for FX at the moment?

Yes. Let me grab that for you, Rob. So FX should be actually a benefit for us year-over-year of, call it, roughly 2% of revenue.

[Operator Instructions]

Our next question is going to come from Chris Dankert from Loop Capital Markets.

I guess with the updated reporting structure here, I think that makes a lot of sense given the solutions approach being very holistic on space. The one maybe sticking point, I guess, I don't generally think of Broadband as being kind of a part of that solution sale. Maybe can you enlighten us? Is there more solutions opportunity inside of Broadband? Is that a bit operated more separately? Just any kind of color you can give us on that structure would be helpful.

Chris, that's a very astute observation. And I think you're right. So first of all, we are committed to this functional organization and even Broadband has -- is set up functionally. So within Broadband, it's set up as a functional organization. But we've indeed kept Broadband a little separate because they service OEM customers, which are different to the more solutions-oriented, project-oriented customers we have for the rest of Belden. But having said that, products and technologies on Broadband are available to our solutions teams to take to all their customers. So for example, we talked about this large grocery chain win that we had recently, and we talked about on today's call, that contains a few different products out of Broadband, which are IP-protected fiber products that are pretty unique. And similarly, we've talked in the past about a warehousing win -- warehousing automation when we talked about that 2 or 3 quarters ago, that contained some content from Broadband fiber.

So the way to think about it is Broadband continues to operate fairly independently within that functional organization. They continue to focus on their core customers, which especially in the MSO space. What Broadband technologies are available to our different vertical teams to take to their customers, and this is becoming especially true in hospitality, health care, but a little bit also in warehousing and logistics.

Got it. That's extremely helpful. And then on the solution sales, obviously, this is going to help accelerate that pathway. But I'm curious before everything kind of gets a little bit combined here. Can you give us a percent of solutions sales by automation solutions versus smart buildings kind of as we're heading into this transition because I know we've been seeing extremely strong success on industrial, a little bit tougher conversion on the smart buildings. Maybe just kind of give us some split there?

Yes. So we are in kind of below 20s right now in automation. That's our percentage of solutions in their revenue. It's become mid-single digits for smart building. So that's actually impressive given that they were literally 0 at the beginning of 2025. So they've really ramped up. And a lot of that has come out of hospitality, health care and then taking some of the smart buildings offerings into combined verticals. And then obviously, we don't really think of Broadband -- we don't measure Broadband solutions percentage. So 20% plus for automation, mid-single digit for smart buildings.

Got it. And I guess if I could just sneak one last one in here. It sounds like there's a very nice opportunity pipeline on the data center front. But as we look at it today, it's a fairly small portion of the business, right? We're talking about less than 5% of sales. And please correct me if I'm wrong there.

Yes. No, it is small. And part of that has been our own doing, so to speak, right, which is why I made a remark about the fact that we had to grow the team 2 to 3x. So we may have allocated fewer resources to data centers, let's say, pre-'25, than we should have. Part of it was because the hyperscalers tend to be more cyclical. There's a little bit of margin pressure there. It's only in '25 that we figured out this more integrated white space, gray space opportunity. And we actually were able to build an architecture and pilot it that made sense. So I expect that percentage to grow quite a bit. But you're right, we are starting off a smaller base because we hadn't invested in it in the past.

good luck in 2026 here.

There are no further questions at this time. I'll now pass it back over to Aaron Reddington.

Thank you, operator, and thank you for everyone for joining today's call. If you have any questions, please contact the IR team here at Belden. Our e-mail address is [email protected]. Thank you very much.

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

Great. Thank you, everybody, for joining. My name is Mark Delaney, and I lead coverage of the U.S. auto and industrial tech sector at Goldman Sachs. I'm very pleased to have Belden joining us for this session. With us from Belden, we have Ashish Chand, the President and CEO of the company; and Jeremy Parks, the CFO. I appreciate you both coming again this year.

Thanks, Mark. Good morning, and it's always exciting to be here at this event.

I thought maybe we could start talking about the evolution of the company's portfolio and there's been a shift in your time as CEO, Ashish, to be more of a solutions provider rather than just individual point products.

Maybe talk a little bit about what it means to be a solutions provider and how these solutions are driving value for your customers.

Yes. So if you think about all our customers across verticals, they were using networks with some kind of KPI in mind, and they had an outcome they had to get to.

For example, in a power transmission and distribution company, it was about finding the fault faster if they had a fault in the network, right, or to increase productivity.

And we realized that as long as we were a component supplier, we would not really address that problem directly. But by combining hardware and software and going across IT and OT, we were able to give this comprehensive solution in that we directly address this KPI.

And this obviously came with a number of changes in our own setup and behavior. But it's been going really well, that whole change because now our customers come to us and say, when I move data from point A to point B, this is what I want to do with that data versus help me move the data. And that's really changed the conversation for us.

Maybe you could double-click a little bit on that IT and OT divide. I think a lot of your solutions are helping to address just that situation. Talk a little bit more around how exactly you do help to -- help customers better understand the industrial environment with that IT and OT divide and also leverage insights from the cloud.

Yes. So a lot of people don't realize this, but if you think of a factory or if you think of the back office, for example, of this hotel or a hospital, you have devices there that all speak different languages.

In fact, in a typical factory environment, a large factory, you may have between 200 and 250 different protocols because of legacy equipment, different systems, et cetera. So first of all, if anybody wants to get -- make sense out of all the data, it needs to be harmonized. Then you need to take that OT data and move it seamlessly into your IT systems in real time, not through people making notes on paper and then kind of digitizing that, but really from the sensor directly to the cloud.

And then third, you want to take the insights you develop on the IT side and take them back to the OT side for some kind of actual movement of something.

So this is typically not possible because people have IT networks that are separate from OT networks. So when Belden came in and said, we are able to provide converged networks with a common backbone that have enough granularity for the OT aspect and enough standardization for the IT aspects so that they can be seamless, that solves a big problem. So let me give you one example.

Everybody right now is talking about autonomy. They want some kind of AI in manufacturing or services. Now think about that. To do that, you have to first harmonize all those 250 protocols, move them seamlessly to IT, the IT world in that company, where some kind of model has to make a decision and then move it back, and just with legacy systems, that's not possible.

So the biggest issue around getting autonomy on the ground is not the data center capacity. It's the lack of a converged network. So I think we're solving some very, very interesting problems right now in health care, in manufacturing, in automated warehousing, in autonomous driving with these converged networks.

Maybe you can give us better understand how Belden enables its customers to achieve this in terms of helping them with the design because you guys have your customer innovation centers, but you also sell predominantly through distribution. So help us reconcile that.

Yes. So the process right now is -- and I think this is an interesting evolution for us. So you might remember this, Mark, 5 years ago, we had 0 consultants. There was no professional kind of job at Belden called consultant.

Today, we have over 250 consultants. So it's very interesting. The first stage of that engagement when we know that a customer has some kind of a KPI they're trying to solve is that we have digital automation consultants.

This is a new job type at Belden. They go in, they understand that customer's workflow. They understand the KPIs they are targeting. They help them prioritize the right KPIs and then they design a data flow.

Through this process, they actually are trained not to use the word Belden. They simply work on the customer's behalf to come up with the best data flow recommendation. If the customer then wants to go to the next stage, they work with our solutions consultants who then design a solution based on that data flow, and these are validated in the CICs.

The CICs are pretty powerful. Some people think of them as some kind of a product demonstration center. It's far more than that actually. In fact, we don't have any products hanging off the walls over there. These are validation labs. People come in and say, I'm going to run a nuclear power plant or a train network.

And I want to -- for 2 weeks, I want to test how that train network will respond to different kinds of atmospheric changes or environmental attacks or whatever that is.

And then I want to make sure that my KPIs are being met, whether they are around automated fare collection or fault identification or whatever those are. And they can change the hardware and software in that process, by the way. So we do this big proof of concept.

So really, by the time a customer gets to the CIC with a proof of concept, the chances of us winning are close to 80%. So we have a very, very direct consultant-driven sales approach. At the same time, we appreciate that to deliver at scale, we need to work with our channels because we don't have that kind of logistics capacity.

Also, some of our best leads come from channel partners because customers approach them not just for what Belden can provide, but sometimes they get approached, for example, somebody says, I want to buy a fire alarm.

And then they say, why? And then it turns out that they're planning some kind of expansion. And then the channel partner gets built and involved and then we talk about the whole design process. So really, the CICs have become our way of selling, but the channel partners remain our way of delivering.

Very interesting. Jeremy, maybe I can go to you for this one. Help us understand how much of the company's revenue currently comes from solutions and any splits between the 2 segments and what your longer-term target is?

Yes. Sure, Mark. So from a solutions standpoint, the majority of our solutions revenue today is coming from our Automation Solutions business. So if you look at us on a global basis, total company, probably 12% to 13% of our revenue is coming from solutions that's 2025.

Last year, it was closer to 10%. This year will be 12% to 13% and the majority of that, like I said, is coming from Automation Solutions, which is a little over half of our business.

So right now, Automation Solutions is getting closer and closer to 20% of their revenue, which I think is a great number for them. We're still in the early stages with respect to the smart infrastructure business, building out that solution set, validating certain solutions in vertical markets.

We're running pilots. We're talking to customers. And so I think we've made a lot of progress on smart infrastructure, but we're still in the early innings there at this point. On a longer-term basis, we would like the total company to be over 20% coming from solutions by 2028. So over the next 3 years, I would expect Automation Solutions to continue to grow.

Their solutions business for sure. And at the same time, we expect that smart infrastructure, we can take that business from one that has a very small amount of solutions business today to something more like double digits by 2028.

And I think there's a nice margin uplift on some of these solutions as well, right?

Yes. Yes. So the -- yes, solutions is a great business for us over the long term because when we sell more solutions, we sell more higher-margin products. We sell more switches, we sell more routers, we sell more software because it's a consultative sale, it allows us to differentiate on some of our most profitable products.

The other thing it does is when we engage in this, when we go down the road of a solutions engagement, it allows us to create some additional value and do more value-based pricing versus just responding to RFPs and RFQs because when you're doing a solution sale, you're not really just competing on price like you would in a typical product sale.

When you sell a solution, you're trying to demonstrate value for a customer to help them achieve a certain KPI, like Ashish said, and that gives you more license to do more value-based pricing, which is a great thing for us.

Maybe we can continue on some of the topics related to solutions. And one of the opportunities has been tied to physical AI and Belden has discussed opportunities in that area, including collaborations with NVIDIA and Accenture. Ashish, maybe talk a bit more around what Belden is doing in this area and what your opportunity is.

Yes. So like I said before, Mark, everybody in the industry is looking for some kind of autonomy in their systems. And for a long time now, people have been trying to figure out what's the best way to get autonomy at the physical layer, right?

And so we thought about some use cases that were possible out of this and the one that we piloted with NVIDIA was around a safety fence. So we said there's a large automotive manufacturer.

They have a very complex assembly line. It has robots, human beings, all sorts of moving parts working together. Now usually, if they had to create physical safety for people in that environment, they would need thousands of sensors all sorts of connections from those sensors to some kind of cloud infrastructure, some decision-making process out of that.

And that would be, a, very expensive. It could still have a lot of latency. So it won't guarantee microsecond decision-making. And it would need to be changed all the time as the line changed in terms of shape and size, right? That was the complexity they were dealing with. So we went in, we took this full assembly line.

There were only 3 cameras, no sensors, no data was sent to the cloud. And essentially, it was Belden's Time-Sensitive Networking, which is a very advanced networking protocol versus -- so the regular networking protocols are first come, first served, which don't guarantee that kind of microsecond accuracy in terms of how packets are delivered.

So we came in with a very, very complex and high-end switching protocol. That data from the 3 cameras was orchestrated on the Belden Horizon platform, where Accenture had built a bridge to take it to NVIDIA's Omniverse, which is their digital twin application.

And basically, Omniverse and the application on that were acting like a human being watching those 3 camera feeds in real time triangulated. And essentially, that system can start, stop, red flag, blow a siren, blow an alarm, all sorts of things that a human can do or a number of humans together would sit and do if they had access to that same kind of video feed, right?

So this is a very, very interesting pilot. By the way, all of the compute took place on the edge. Nothing was sent to the cloud. Now this is only video. Now imagine if we added sound, vibration, temperature, pressure, now suddenly, with that multimodal data, the decision-making could expand to many, many other things apart from safety.

And all of that is possible on that same network backbone. So first of all, we proved through this pilot that with very high quality of edge compute, which is why we work with NVIDIA, we can create this decision-making system, which is fully autonomous and doesn't need a very complex kind of infrastructure and it's scalable.

But second, there are more and more use cases that can be based on the same principle. For example, if you can do safety, you can also do quality inspection. You can also, by the way, have -- there's a shortage of skilled workers in the industry right now.

So you could have unskilled workers working on a process that needs skilled workers, but you could have the autonomous system kind of sitting on their shoulder, making them skilled for that process because now you could catch with a camera or with other sources, you could catch all the other data that allows an unskilled worker to become a skilled worker.

You could apply this in passenger safety, the same kind of principle. So really, with this pilot, we've laid the foundation for many, many more use cases. I think for physical AI to really happen, 3 things have to happen. First, across different systems, there has to be harmonization. Second, IT and OT have to converge. And third, most of the data, if not all, must be computed on the edge. There is no time for it to go to the cloud and come back. Now you might still have models in the cloud that get trained, and that's fine as a backup.

And I think if we can provide these 3 things to multiple customers across different verticals, we will see many, many more such cases.

Maybe we can talk about demand. And on -- in your call, you spoke about some nice growth in your Automation Solutions business, but help us better understand how demand trends in automation are trending.

Yes. So automation is, I think, having a very strong year. On a year-to-date basis, that business is up double digits in the third quarter. Automation Solutions was up organically just about 10%. I think orders were up a little bit more. So things are going in the right direction. I will give one caveat.

Last year was a bit of a destocking year, so that helps. But we are seeing good movement in the right direction. Demand is improving. I think every single quarter, which is very positive. The other thing that I would take as a positive is some of these geographies that were drags or vertical markets that have been drags over the past year or so have gotten much better.

Like Europe was down last year pretty significantly. Last few quarters, we've been up year-over-year in Europe in the industrial business. Likewise, with China, and when you look at it from a vertical market standpoint, discrete manufacturing, in particular, has been growing double digits the last few quarters on a year-over-year basis.

So I think things are going in the right direction. We're not quite where we want to be yet. PMIs, although they've improved in most countries around the world, they're still more or less a little under 50% in most of the developed world. So we've come back a long way. Demand is getting better. Our business is growing. We're selling more solutions, which is very positive because I think we've got some of these secular tailwinds at our back, but we haven't seen the market really take off and inflect yet, but I think everything is going in the right direction.

As you think about the demand environment, do you think tariffs have led to incremental automation investments in the U.S.

I think that they -- I think they are leading to incremental conversations. For sure, what we are seeing is some reshoring of manufacturing. It doesn't have to be building a brand-new factory in the U.S. and closing a factory in China. It could be ramping up production in your U.S. factories or your factories in the U.S., Mexico, Canada and other parts of the Western world.

We are seeing that ramp-up in production, and we are seeing some investments happen there. I think on the flip side, tariffs have created a little bit of noise in the demand environment because the tariff environment keeps changing. And so I think that has been something that we've had to work through. But generally speaking, yes, we are seeing investment in the U.S.

And maybe just to add to that, right, I think there are 2 other impacts of tariffs. One is that as there has been more -- and to be fair, even before tariffs, if you think about how the supply chain brittleness became evident post pandemic, right, there was already this feeling that people have to bring manufacturing closer to the point of consumption.

But one thing that's happening is that people are trying to bring more sophisticated manufacturing back because otherwise, it won't be cost efficient. But ironically, if you bring back more sophisticated manufacturing, you don't have the skills, so which is leading to a demand for more automation and maybe potentially more autonomy. So I think tariff has this quantitative, but also a qualitative impact on what's -- where the investments are going to be.

Very helpful. Maybe we can shift gears a little bit and talk more on the smart infrastructure part of your business. I wanted to start on the broadband portion of the smart infrastructure segment. Maybe talk a little bit more around how the company is seeing growth rates in broadband and how the BEAD government program may or may not affect that.

So I'll make a couple of comments and then maybe Jeremy can add some numbers. So first of all, we've really invested a lot both organically and inorganically into fiber. And today, our fiber revenue as a portion of total broadband sales is 50%, right, which is a big milestone for us.

It used to be, I don't know, like 5% a few years ago, so a big change. We continue to see across the board more adoption of fiber with MSOs, with telcos, so that's great. The one thing we did see in -- and it was reflected a little bit in our Q3 situation, Mark, I'm sure you guys noted this.

So different MSOs built different kind of technology stacks on how to get high-speed broadband to different -- to users, right? And so they were not uniform designs. And depending on how they build their stack and how they got interoperability between different vendors, they went faster or slower.

So we noticed a little bit of slower offtake on that DOCSIS upgrade in Q3. We noted that, but we also think that's this timing. Overall, what we see is that broadband quality growth is improving. When I say quality growth, speed and bandwidth.

And of course, the number of nodes, the number of homes passed is increasing at a certain rate. I think BEAD is going to help. I don't see BEAD as fundamentally changing the economics of the broadband market. I see BEAD as supporting what is already happening, but now they have an additional source of capital. And some of our customers, they won pretty big awards in the BEAD process. So we are looking forward to that coming through in 2026.

Yes. I guess what I would add is from a number standpoint, broadband is roughly flat year-over-year on a year-to-date basis right now for us. I think less an indication of the market, generally speaking, and more an indication of what Ashish talked about, which is that there are some technology upgrades happening and there's been stops and starts in terms of the execution of some of our customers.

So they're working through that. I think they're committed to executing on these DOCSIS upgrades. So I think that will happen. I think there's a little bit of some temporary noise going on right now.

With respect to 2026, I would see, like Ashish said, that BEAD is good support for the market, right? BEAD is a program that was passed back in, I think, maybe 2021. It does feel like right now, the administration is making it a priority to get this money allocated and hopefully start to get it spent.

At this point, the last numbers I've seen is something like 90% of the money has been allocated, $38 billion out of the $43 billion has been allocated. So that money will hit the market and that will get spent over the next call it, 5 or 6 years, I think that will be great support.

It will create, I think, a lot of investment in the space. So I view it in general as a nice tailwind in the market, but the overriding story in broadband is what Ashish talked about, which is we've increased the amount of fiber content we can sell into these spaces. We have very deep and intimate customer relationships, and we expect that these customers are going to continue to invest.

How would you characterize inventory levels in the broadband space at customers?

Yes, I think they're fine. They're roughly normal in terms of days of inventory on hand at customers. So there's nothing unusual either high or low.

Maybe we can shift gears to the smart buildings part of the business. And starting with the data center market, I mean we've all seen tremendous growth in the data center CapEx levels.

I think this year, the bottom-up aggregation of CapEx estimates from the GS analysts covering those companies points to about 80% growth in 2025.

Next year, they're looking for 36% growth at the moment. And just over the course of 3Q earnings season, the CapEx estimates for '26 were revised up by 17%. So the trends there have been pretty positive. Talk a little bit more around what Belden has seen and maybe more importantly, what you're doing to participate in that market.

So let me talk more broadly about smart buildings, and then we'll go to data centers within that. Our goal, Mark, is to be able to provide IT and OT converged solutions to all sorts of verticals, right? And that includes traditional smart buildings markets like health care, education, hospitality, et cetera.

And what we figured out is that whenever there is some kind of a KPI, so for example, in health care, they have a KPI around patient health or -- in fact, it's interesting in health care, the KPI they really follow is how soon can they get a patient out because apparently, that has the longest -- that has a correlation with long-term health.

Similarly, in hotels, they have KPIs around turning rooms, et cetera. So whenever there's a KPI, which is measurable in an operational sense, that's where we are differentiated when we come in and provide these IT/OT converged solutions. And similarly, in data centers, we participate in the white space plus gray space.

So if you were only in the white space, which is inside the data center, the network hardware, it's growing very fast. But to be fair, it's also a little standardized, and it will come under price pressure over time. But if you think of the white space and the gray space together, which means you are now participating in the substation automation, in the cooling, in the security and all of the services that surround the white space, there is an IT/OT convergence there, which is more differentiated and unique.

So that's where we are participating. In fact, I think last quarter, we announced, not in Q3, but in Q2, we had announced a big win for a cooling use case in a large hyperscaler AI data center.

So we are seeing more and more inquiries and engagements around this converged set of applications. We are also seeing more demand for our fiber products and our connectivity products in the white space.

So as a combination, I think data centers are doing pretty well for us. I think in Q3, we had double-digit growth in data centers. It's not the 36% level for us because it's not really our focus to do only that white space. But on a balanced combined approach with that IT/OT converged approach, I think it's far more than it used to be for the old smart buildings business. But again, maybe -- I'm sorry, I'll add one more point. Commercial real estate, plain vanilla office space, is now less than...

Less than 15%, 12%, 13%.

Of the smart buildings portion, so less than 2%, 3% of Belden, which is a big change over the last 5 years.

Yes. The only thing, maybe just 1 or 2 things I would add. First of all, smart buildings is having a good year for us. I think in general, when people looked at this business for us, they would think investors would think nonresidential construction. And nonresidential construction has been weak for several years. Smart buildings is up 5% year-to-date. So it's growing kind of mid-single digits because the strategy here is to focus on the right verticals, health care, hospitality, data centers to some extent, -- and I think that's working for us in differentiating ourselves with customers by trying to sell solutions and pitching solutions, which has been helpful.

In terms of data centers, I would say it's a very small portion of our Smart Buildings business, and we've traditionally focused not so much on the hyperscalers. But we do sell, like Ashish said, into the white space and the gray space.

And that gray space win that we had in Q2 was a great proof point for us, and I think a lot of opportunity going forward. So I think there's a lot of opportunity here over the next couple of years as we develop and sell more solutions into the space.

One other area of investment in secular growth I wanted to touch on was in the grid, right? There's been a lot of investment around power transmission and distribution, modernizing the grid to support things like data center and other uses of electricity. Maybe talk a little bit more around what Belden can do in that area.

Yes. We love that market, by the way. That is one of our favorite markets. We announced a big win in Q3, $14 million, $15 million worth contract. So if you think about that space, there are 2 interesting things. First, a lot of people don't appreciate this, but there is actually more generation capacity than actually reaches users. A lot of it gets lost during transmission and distribution.

In fact, in certain parts of the world, there is a surplus in generation, but still a deficit in usage because of that dynamic. And if you then drill down the biggest pareto around why are there losses is because the grid infrastructure is still largely analog, in fact, to get technical, most grid systems are still based on SONET/ SDH. It's like using the old telephone system, the dial-up system, which we don't use nowadays, right? We all use smartphones.

So Belden's role here is to upgrade all those systems from that old push button telephone or dial telephone to a smartphone. So we bring in -- we have this product range called XTran, which essentially is an MPLS-TP or an IP-based backbone solution to connect all these systems in the grid.

It basically improves grid efficiency dramatically. It allows for bidirectional communication. And right now, I think only about 10% to 15% of all the grids are like that. So there's like an 85% more kind of white space available for us to go and modernize these grids. I think this is going to be one of the biggest building blocks to more AI usage because right now, one of the biggest bottlenecks is the availability of power, right?

And so really, a very exciting market. Belden has a very unique solution. Again, it goes across IT/OT. It's a backbone solution. We feel very well positioned in this space.

Jeremy, I want to touch on the financials and the profitability of the company, if I could, please. There's been so many factors on cost and supply chain. You've got tariffs. We've also seen what's happened with copper pricing. Maybe talk a little bit more around how you're managing the business? And do you think Belden can stay price/cost positive as you look into next year?

Yes. I think to answer your question, yes. I think you're right, there's been a lot of noise over the past really several years in terms of inflation, tariffs, logistics costs, freight, labor inflation, things like that, which I think we've worked through.

And I think, in general, we've been fairly successful. We have good processes around pricing. We sell -- we use a lot of copper. Copper is a very volatile asset in terms of pricing. And so we have a lot of practice in passing on copper price changes to customers, either good or bad, that's sort of an expectation in the market we play in.

And so we have good processes around that. I think we've been able to extend that into other things like tariffs. I would say we're not the most probably impacted by tariffs of all companies because we do tend to manufacture in region for the most part.

So we're not generally manufacturing on the other side of the world for customers over here in the U.S., for instance. So I think that helps us. But to your point, Mark, we've -- I think we've dealt with it.

We've not really had major issues up to this point. And I would expect going forward, we've learned a lot on pricing, and we're selling more solutions. And so from my perspective, we've got to keep doing the things we do to manage our own cost productivity going forward, finding opportunities to reduce costs on purchase goods, reduce logistics costs and so forth.

On the flip side, there's a lot of opportunity on pricing, especially value-based pricing as we do more solutions and solve more customer problems. I think that allows us to differentiate.

Ashish, maybe for the last question, I can go to you. I mean we talked a lot about the business already. But as you think out over the next, say, 3 to 5 years, what are some of the most exciting things in your mind for Belden? And anything you think the company needs to do to better position to address those?

Sure. I think, first of all, if I look at the macro trends, right, so reindustrialization, reshoring, big plus for us. The idea around physical AI and more autonomy on the shop floor in the back office, it's something we can enable. This needs, as I said, IT/OT and hardware/software convergence. You need to be able to get the data through the hardware, but also orchestrate it so that it's ready for use, and that's something unique.

I think we will also continue to see more -- Belden will have to position itself more and more in that solution space. This will need, again, more partnerships with the Accenture and the NVIDIA and other companies in that space so that we can provide a full solution.

The one thing I will say that we are working on, which is the fine balance we have to find is how do we simplify enough so that customers can adopt our solutions more easily without losing the complexity that you need per vertical, right?

And I think this is where we have to improve. Belden Solutions can still be a little complex to understand and adopt. And as we simplify more, I think we'll see adoption rates going up dramatically.

Great. Well, unfortunately, we are out of time. Jeremy, Ashish, thank you so much for joining.

Thank you very much. Appreciate it.

Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden reports third quarter 2025 results call. Just a reminder, this call is being recorded. [Operator Instructions]

I would now like to turn the call over to Aaron Reddington, Vice President of Investor Relations. Please go ahead, sir.

Good morning, everyone, and thank you for joining us for Belden's third quarter 2025 earnings conference call. With me today are Belden's President and CEO, Ashish Chand; and Senior Vice President and CFO, Jeremy Parks. Ashish 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.

We issued our earnings release earlier this morning and 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 to Slide 2. I'd like to remind everyone that today's call will include forward-looking statements, which are subject to risks and uncertainties as detailed in our press release and most recent Form 10-K. We will also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures can be found in the appendix to our presentation and on our website.

I will now turn the call over to our President and CEO, Ashish Chand.

Thank you, Aaron, and good morning, everyone. We appreciate you joining us.

Let's begin with Slide 4, which highlights our key accomplishments and messages for the third quarter. My comments today will reference adjusted results. First, I want to recognize the dedicated efforts of our team. Their focus enabled us to deliver another solid quarter, building on our steady momentum. We executed well, delivering record results that surpassed our expectations.

For the third quarter, both revenue and earnings per share came in above the high end of our guidance, reaching new quarterly records for Belden. This achievement underscores the ongoing progress of our solutions transformation, which continues to expand across the organization. Revenue reached $698 million, up 7% year-over-year, and adjusted earnings per share grew to $1.97.

We delivered continued organic growth with overall organic revenue up 4% for the quarter. Positive contributions came from key markets, including Germany and China, confirming the favorable turn we experienced earlier this year in these major automation markets. This trend was further validated in our Automation Solutions segment, which demonstrated particular strength, achieving 10% organic revenue growth driven by broad momentum, including double-digit gains in discrete manufacturing.

Order activity remained healthy for the quarter with orders up 7% year-over-year. We ended the quarter with a book-to-bill ratio of 1.0 compared to 0.99 in the prior year period, positioning us well as we look ahead.

Despite headwinds from tariff and copper pass-throughs, our margins for the period performed well. We achieved healthy adjusted gross margins of 38.2%, up 40 basis points year-over-year, reflecting continued strength in our solutions offering even with the impact of these pass-throughs. Our business continues to generate healthy cash flow with trailing 12-month free cash flow at $214 million. We maintained our disciplined capital deployment, repurchasing approximately 400,000 shares in the third quarter for $50 million, bringing our year-to-date total to 1.4 million shares for $150 million.

Overall, this was a quarter of solid execution, and I'm pleased with our record performance. The progress we are making with our solutions transformation is clear in our results, and we are well positioned to build on this momentum going forward.

Now please turn to Slide 5. I'd like to highlight another key win this quarter that demonstrates the power of our solution strategy and our ability to drive digital transformation in critical infrastructure.

We recently secured a $14 million multiyear solutions award with a leading utility provider to modernize their communications infrastructure, a key element of their operational technology platform. This project involves replacing aging legacy systems with a future-ready network to support mission-critical applications.

The challenge for this utility was to transition from outdated systems to a modern packet-based network that could meet stringent demands for reliability, security and low latency, essential for grid resiliency and efficiency. Leveraging a deep vertical market knowledge and solutions approach, our team collaborated with the customer, culminating in a successful on-site Proof of Concept. This POC effectively showcased Belden's advanced technologies and service capabilities, validating our proposed solution.

Our XTran platform was selected as the core of this modernization effort. Purpose-built for utility networks, XTran delivers connectivity to large complex networks that include new and legacy systems and protocols. This hybrid capability is crucial for easing migration and future-proofing critical network infrastructure. This win underscores Belden's deep expertise in utility networks and our proven capability to deliver secure, resilient OD communication systems.

Our end-to-end delivery model, including products, services and support ensures seamless implementation and solution delivery. This project is a clear testament to how our solutions-driven approach combined with our specialized portfolio and deep market understanding allows us to capture opportunities in vital sectors. We are establishing a repeatable model for similar large-scale modernization projects within the utility market, further solidifying our position as a trusted partner in critical infrastructure. We are confident in the momentum this creates and the long-term value we provide for our customers.

Now please turn to Slide 6. I'd like to shift our focus to an area where Belden is making strategic advancements, positioning us well for the next wave of industrial innovation, Physical AI.

Earlier this week, we announced a collaboration with Accenture and NVIDIA. This partnership combines our industrial networking expertise with their advanced AI capabilities to deliver integrated Physical AI solutions. We've already secured commercial traction with an initial pilot program and are scheduled for commercial deployment later this year.

This pilot, a virtual safety fence solution designed to improve worker safety in manufacturing environments was successfully tested and is now being commercially deployed at a major U.S. manufacturer. This test and commercial deployment demonstrate the real-world impact and market readiness of our Physical AI solutions as modern manufacturing increasingly integrates autonomous systems alongside human operators. Let's take a moment and consider the broader opportunity in this emerging space. First, Physical AI represents an evolution in automation where AI directly interacts with the physical world. It enables intelligent automation and real-time decision-making, offering massive opportunities to improve safety, efficiency and further digitize industrial environments.

Belden is uniquely positioned to play a foundational role in the emerging world of Physical AI. Advanced applications demand an industrial-grade network capable of real-time synchronized precision. Our time-sensitive networking capabilities are crucial enabling microsecond precision for data streams essential in environments where safety and quality are critical. This strategic push underscores Belden's successful evolution into a solutions company within the industrial market. It serves as clear proof that we are moving beyond simply providing connectivity products to enabling advanced solutions that drive significant value for our customers.

Given our strengths in intelligent edge deployment in converging IT/OT environments, we believe that Belden is well positioned to be a key enabler of Physical AI in manufacturing and material handling, driving safer, smarter and more productive environments globally. Physical AI represents an emerging growth opportunity for our business as we continue to advance ideas and technologies.

I will now request Jeremy to provide additional insight into our third quarter financial performance.

Thank you, Ashish.

My comments today will cover our third quarter results, a review of our segments, the balance sheet and cash flow and finally, our outlook. As a reminder, I will be referencing adjusted results today.

Now please turn to Slide 7. As Ashish noted, our solid execution this quarter drove consistent top line growth, which translated directly to margin expansion and improved profitability. Revenue for the quarter was $698 million, up 7% year-over-year and ahead of expectations set forth in prior guidance.

Revenue was up 4% organically on a year-over-year basis. Our Automation Solutions segment saw organic revenue growth of 10%, while Smart Infrastructure Solutions organic revenue was down 1%. Orders for the quarter were up 7% year-over-year. As a result, gross profit margins were 38.2%, increasing 40 basis points compared to the prior year. EBITDA was $118 million with EBITDA margins at 17%, down 20 basis points year-over-year. We successfully maintained our overall profitability for the quarter through proactive management of tariff and copper price changes, leveraging strategic sourcing and effective pricing actions. Our margin percentages for the period reflect the necessary pass-through of these costs. Going forward, you can expect us to deliver incremental margins in line with our long-term targets. Net income was $79 million, up from $71 million in the prior year quarter, and EPS was $1.97, up 16% and ahead of expectations set forth in prior guidance.

Now please turn to Slide 8 for a review of our business segment results for the quarter. Our Automation Solutions segment delivered another solid quarter, demonstrating continued recovery and steady execution. Revenue grew 14% year-over-year with EBITDA up 10%. Margins remained healthy at 20.8%, impacted by the pass-through of tariffs and copper. Order trends also remained robust with orders up 14% year-over-year. This strong order activity drove the segment's 10% organic growth with positive contributions across all regions.

As Ashish highlighted, we saw continued strength in Germany and China with ample year-over-year growth, albeit from a lower base. This broad-based momentum extended into our core verticals, which saw double-digit expansion in discrete manufacturing and mass transit. Revenue in Smart Infrastructure Solutions was down 1% year-over-year with margins for the segment steady at 12.6%. Within our markets, smart buildings was up 3% year-over-year, driven by strength in our key growth verticals as we continue to advance our solutions offerings.

Broadband Solutions was down 4% year-over-year, but up 7% sequentially. While technology upgrades in the broadband space have seen some temporary moderation in the back half of 2025, we are encouraged by the adoption of new fiber products and also to see the early BEAD awards as many of the top recipients are major customers for Belden.

Next, please turn to Slide 9 for our balance sheet and cash flow highlights. Our balance sheet remains a source of significant strength and flexibility, enabling our disciplined capital allocation strategy. Our cash and cash equivalents balance at the end of the third quarter was $314 million compared to $370 million in the fourth quarter of 2024. Our cash position reflects typical seasonality and the deployment of $150 million towards share repurchases so far this year.

Our financial leverage was a reasonable 2.1x net debt to EBITDA, consistent with our expectations. We intend to maintain net leverage of approximately 1.5x over the long term. However, this may fluctuate as we pursue strategic opportunities consistent with our capital allocation priorities. For the trailing 12 months, our free cash flow was $214 million. Year-to-date, we repurchased 1.4 million shares, further reducing our share count, which is now more than 12% lower than it was at the end of 2021. We currently have $190 million remaining on our repurchase authorization.

Our capital allocation priorities remain unchanged, investing internally in opportunities to advance organic growth, pursuing disciplined M&A and returning capital to shareholders through buybacks. While the current financial market environment is dynamic, we continue to evaluate M&A opportunities with rigor and remain committed to deploying capital in ways that create long-term value. As a reminder, our next debt maturity is not until 2027, and all of our debt is fixed with rates averaging 3.5%.

Please turn to Slide 10 for our fourth quarter outlook. Our team has executed well in the current environment, as shown in our record third quarter results. We are encouraged by the strong and consistent trends in our Automation Solutions segment, which provides a solid foundation for our outlook.

In the fourth quarter, we anticipate that sequential growth from Automation Solutions will be mostly offset by a more muted quarter in Smart Infrastructure Solutions, resulting in overall performance that is roughly flat sequentially. Assuming the continuation of current market conditions, revenues for the fourth quarter are expected to be between $690 million and $700 million, representing a 4% to 5% increase over the prior year quarter. Adjusted EPS is expected to be between $1.90 and $2, representing a 1% decrease to 4% increase over the prior year quarter. For the fourth quarter, we are projecting a tax rate of 14% as we continue to execute our planning strategies.

That concludes my prepared remarks. I would now like to turn the call back to Ashish.

Thank you, Jeremy.

Now please turn to Slide 11. To summarize, our third quarter performance reflects the strength and resilience of our business and the continued progress of our solutions transformation. We delivered solid results in a dynamic environment with consistent order activity, record earnings and healthy cash generation. It is important to reflect on the journey that has brought us to this point.

Over the past few years, our industry has faced significant headwinds, including periods of destocking, ongoing tariff challenges and a muted manufacturing environment. Despite these external pressures, our team's dedication and strategic focus have allowed Belden to not only navigate these periods, but to emerge stronger.

This resiliency is clearly demonstrated in our current performance. Not only did we achieve record quarterly revenue and EPS, but our trailing 12-month performance also reached new highs. We are proud to report trailing 12-month revenue reaching nearly $2.7 billion and record trailing 12-month adjusted EPS of $7.38. This exceptional performance, especially in a year that presented its share of challenges, truly underscores our team's focused execution and the inherent resilience of our business model.

Looking at our long-term trajectory, these results are no accident. From 2019 through the trailing 12 months ending in the third quarter, we delivered a revenue CAGR of 5% and an adjusted EPS CAGR of 12%. This powerful and consistent value creation over multiple years clearly demonstrates the impact of our strategic initiatives and how our solutions transformation has repositioned Belden in the minds of our customers.

Further, our transformation is validated in the marketplace as evidenced by the multiyear utility modernization project we discussed earlier, where we are replacing aging infrastructure with a future-ready network. It's also clearly evident in our strategic advancements in Physical AI, where we are enabling safer, smarter factories and other work environments with real-time precision. These are tangible examples of us moving beyond just products to enabling advanced solutions that drive significant value for customers.

We remain mindful of the ongoing operating environment. However, the fundamental trends driving our business, reindustrialization, automation, digitization and the convergence of IT and OT are intact and building momentum.

We believe Belden is well positioned to benefit as these secular trends play out. Our solutions transformation is delivering tangible results, expanding our addressable market and positioning us for consistent growth and margin expansion. We remain committed to disciplined execution and thoughtful capital allocation, ensuring we create lasting value for our shareholders.

That concludes our prepared remarks. Operator, please open the call for questions.

[Operator Instructions] We'll move to our first question from Steven Fox with Fox Advisors.

I guess for my first question, obviously, the utility market is a massive opportunity in general. And so, I'm wondering how we think about how you attack it? Like what's the go-to-market strategy? And then how quickly you can sort of penetrate different parts of it? And then I had a follow-up.

Sure, Steve. So, across the market in power transmission and distribution because that's the specific area that we want to focus on within the broader utility market. We have a fairly mixed landscape. So, we have networks that are still using SONET SDH systems for their telecoms. And as a result, they can only transmit a certain kind of data, which is very limited. They can't -- for example, the networks don't lend themselves to smart grid type bidirectional transmission.

So the first fundamental opportunity really is to upgrade all of these to a packet-based what we call MPLS-TP, packet-based IP-based network. That is where the core XTran offering that we have, which is engineered over many decades in Belgium. This is an acquisition we made about 5 years ago.

But the way we differentiate ourselves in that market, apart from just offering that core MPLS-TP switching portfolio is really through the whole services and support process, right? So the win we talked about today really hinged on us being able to go in with our consultants at the outset and do a very deep study across their network, come up with very tangible savings for them or productivity opportunities for them in terms of things that would impact their P&L. For example, reducing the time it takes to find a fault, which therefore reduces any SLA-based fines they have to pay or it could be simply making the equipment procurement process more efficient through more predictability.

So, there are multiple use cases. But basically, with that approach, we were able to give them not just the packet switching backbone, but a fully integrated design. And we -- these professional services include by the way, multiyear software training and management. They include helping them with future expansion as their networks grow. So that's how we are attacking that market.

And in terms of scale, Steve, I think at this point, especially if I focus on the U.S. and Western Europe, where there is a huge demand, especially given the surge in data centers. I think we are currently penetrating maybe 7% to 10% of the market. So, the scale opportunity is pretty big. And I think that's reflected in our growth rates in PT&D, which have tended to be double digit.

Great. That's helpful. And I'm pretty sure from looking at your picture on Slide 5, the New Jersey grid doesn't look like that, but that's my problem. Anyway, the second question, Jeremy, I was just curious, there's a lot of puts and takes in terms of like outside forces on the margins and then the mix. Can you just be a little more specific thinking about year-over-year and quarter-over-quarter, how much -- I just want to make sure I understand the pass-through impact on margins versus the more solutions? And then any other things we should be thinking about relative to like copper and sourcing and things like that?

Yes. Sure, Steve. So, if you look at gross margins on a year-over-year basis, the change in copper prices impacted margins by about 50 basis points, and it's literally just the pass-through of higher copper. So maintaining EPS and EBITDA covering that fully, but a little bit of margin degradation. So that's 50 basis points year-over-year. There is an impact from tariffs. It would be maybe slightly less than the copper impact. And then maybe a little bit of mix on a year-over-year basis, but nothing substantial. If you bridge sequentially from Q2 to Q3, the copper impact is not as extensive. I would say probably the pass-through impact from both copper and tariffs together are maybe 30 or 40 basis points. And then there's also a little bit of unfavorable mix sequentially, just driven by strength in our industrial construction cable that seems to be coming back, partially because of some of these energy applications.

We'll move to our next question from William Stein with Truist Securities.

Ashish, you talked about Physical AI today. That was pretty exciting for us. I'm hoping if you can extend that conversation to what was posted by, I think, one of your customers or perhaps customers, customers, NVIDIA posted something about your involvement in a gray space application and data center. So I'm hoping you can update on us -- update on that topic, maybe combined with the Physical AI to sort of size your position in those opportunities today and maybe give us a view as to what we should expect in the future?

Yes. Well, I think this is a very exciting topic. So I'm going to start -- bear with me, I'm going to start with a little bit of basic information and then build it up. So, as we think about AI for the last 3 to 4 years, the first 2/3 of that journey has been more around Chatbots really. And then over the last, let's say, 1 year or so, we are now seeing the whole phenomenon around agents. But a lot of those agents still exist in the digital world, right, inside a data center. Now those agents are emerging into the physical world, and they need a fair amount of orchestration. And those agents could take the form of robots, humanoids, different kinds of equipment, AGVs, et cetera, et cetera. So really, the idea that in workplaces, whether they are manufacturing workplaces or other workplaces, you might have employees that are human and employees that are actually agents working together. You might even have agents and agents working together, right? So that's the kind of future workplace scenario.

So, the announcement we -- you, I think, are referring to was actually made as a combination of NVIDIA, Accenture and Belden. And there was a different announcement, I think, about the gray space, which is also relevant, but let me focus on the first one. So, we announced the successful completion of a pilot and we are on the cusp of commercializing this with a very large automotive customer in the U.S., but this was essentially a virtual safety fence application. And it leveraged a few things from each of us. So from Belden at the core, it was the time-sensitive networking portfolio. And I just want to differentiate time-sensitive networking, which is very prevalent in the high-end mission-critical spaces like industrial manufacturing or process is different to the conventional best effort networking, which is more relevant in enterprise spaces, right?

So, we used our time-sensitive networks. We use Belden Horizon as the orchestration platform. Accenture built an application on top of Horizon that took that data into the NVIDIA Omniverse and used their libraries to build this entire autonomous system for virtual safety. And I think there were some interesting highlights. So first of all, we did not have any data going to the cloud for safety. Everything was on the site on the edge so that it was very low latency. Now the data stream itself was raw video from a camera versus thousands of sensors on the floor, right? So, it was a camera feed. In fact, it was 3 cameras. So, there was kind of triangulation and spatial depth created in that process. And just from the feed of 3 cameras, this autonomous system was able to analyze and review that data and really as a human being, act as a traffic cop for safety.

And I think the third thing this did was it basically removed any ambiguity that network is actually the fourth critical technology to make this digital transformation successful. The other 3 being AI, data engineering and cloud. And although in this case, we didn't send any data to the cloud, obviously, over time, models have to be trained on the cloud. And so data will go to the cloud, but it will be selective data.

Now in terms of scaling, there are different studies available. There's one that says -- that's pretty prominent that says that in about -- by 2030, so let's say, in 5 years, the number of physical devices that need network connections will reach close to 1 trillion IoT connections. So 4 to 5x of what we have today. And all of these will need some kind of edge compute capability because all the data will not go to the cloud. And I can easily see another aspect here that, that data will be multimodal. It will be vision, sound, vibration, temperature, pressure, et cetera. Remember, now we have agents in the physical world who are dealing with these kinds of data streams, right, different kind of variety and volume of data versus simple digital data in the data center. And the applications that we are currently exploring or actually piloting include quality inspection, passenger safety, asset location and these go across a few different vertical markets.

So sorry, we'll give you a long-ish answer because I want to start with the fundamentals, but the core finding for us here is that without time-sensitive networking and without an orchestration platform like Belden Horizon, it is very difficult to make that edge and IT/OT convergence convert into Physical AI. And I think that's what we've successfully proven here. We are being obviously modest in terms of where all this can go, but really, there is no limit.

And anything on the white space project that was also highlighted that was one that's more, I think, not necessarily cloud, but certainly data center related.

Yes. So, we have been building out a data center practice that combines the technologies from both what you think of as previously industrial or automation portfolio and the smart infrastructure portfolio. And we've been fairly successful. I think we spoke about this on our last call, we had a large win with an AI hyperscaler in the cooling space. And then since then, we've had more success deploying these converged IT/OT solutions into a combination of white space and gray space. And our data center growth this quarter is up double digits because of that initiative.

Again, our focus, frankly, is less on building the data center capacity itself, but it's more on the long-term sustainable use of applications that come out of the data center. But obviously, right now, there is a big phenomenon around building capacity. And I think there's a big concern around the heating electrification aspects, which allow us to step in with these technologies will that we previously used on the automation and industrial side. So that's the win we -- one of our customers highlighted. And again, we appreciate working with Accenture and their customers because we are finding a lot of convergence here given their -- so the commonality of our installed base and their customer base is turning out to be very scalable for us.

We'll take our next question from Mark Delaney with Goldman Sachs.

First on broadband, I was hoping you could share more with respect to your outlook over the near and medium term for the broadband segment and how helpful the BEAD awards that the company cited in its prepared remarks may be for growth?

So I'll make a couple -- thanks, Mark. I'll make a couple of comments and then maybe Jeremy can add to that. So, in general, if you think about the upgrades that the MSOs have been working on for the last few years, different customers have different technology stacks that they use to deliver those DOCSIS upgrades to consumers.

And based on those different technology stacks and there's different electronic components, interoperability, et cetera, we sometimes see a little more -- there are some ups and downs in that process. And we've seen a little bit of that moderation in the back half of '25. I think it's basically timing. But on the other hand, there's a lot more clarity in the market since the BEAD announcements came. In fact, our accounts -- the accounts we serve in the MSO market are big beneficiaries of BEAD. We've also seen a lot more adoption of new fiber technology from Belden across these accounts. So on a net basis, I think the -- we are very positive about that space other than some technical interoperability based slowdown that we have seen in the short term.

Yes. Just in terms of the Q4 guide, Mark, broadband, you should expect broadband to be down year-over-year in the fourth quarter, roughly the same as what we did in the third quarter, so maybe down 1% or 2% sequentially, down roughly 4% on a year-over-year basis.

Looking forward into 2026, we're not guiding at this point. So we'll probably have more of a perspective for you in 90 days. But I think at this point in time, we're optimistic, like Ashish said, about growth in 2026. Some of these upgrades still need to happen. MSOs still need to spend some money, I think, on their networks, and it feels like we're getting a little bit of certainty over the BEAD funding, which should be a helper. So, I think we're optimistic going into 2026. We just have to work through the fourth quarter here.

Very helpful. And kind of dovetails my other question was just some early thoughts on 2026, just qualitatively, and Jeremy, you just spoke a bit on broadband. But as you think about the business more generally, you spoke about bookings and orders being up 7%. And just based on some of the conversations you're having with customers, some of the drivers like what you just spoke about tied to automating factories and supporting some of the data center build-out. I mean, qualitatively, do you think that revenue next year has the potential to grow?

Yes, absolutely. I think if you look at the automation business, the industrial markets, they continue to get a little bit better every quarter. PMIs are close to 50, almost everywhere, even Germany, which I think is positive. So for sure, we bottomed out in a lot of places, and we're seeing more and more strength on the industrial side of the business. And Ashish talked in great detail about some of the opportunities with respect to technology and Physical AI and some of those aspects. So I think we feel very positive about the automation business and industrial markets.

With respect to Smart Buildings, we've got opportunities in data center, both in the white space and the gray space, and we're doing more and more with respect to these converged solutions that bring to bear both smart buildings and automation solutions products. And so, I think we feel pretty good about those markets as well.

So, like I said, we'll have more to say in 90 days about our outlook for 2026 or at least first quarter 2026. But as we sit here today, I think we're optimistic.

[Operator Instructions] We'll take our next question from David Williams with Benchmark.

Congratulations on the really solid quarter here. I guess maybe my first question, just want to talk a little bit about the reshoring trends that we've talked about in the past. And this quarter, it feels a lot different than we've had in the past in terms of just your cautious tone and maybe even your discussions around hesitancy of some of the customers. But just kind of curious if you could maybe share what you're seeing on the reshoring side and if your thoughts are still maybe the same as they've been in the past in terms of maybe we'll see some of that going into next year.

Yes, Dave. I think one of the reasons we feel good about the automation business, we've talked about that multiple times on this call is that phenomenon of reshoring. So, we are having conversations right now with multiple customers who are looking to bring manufacturing back into the U.S. This includes pharmaceutical customers, consumer packaged goods, logistics, automotive process, semi. I mean, the list is fairly long. Without taking names, I can just tell you that this is pretty much a list of the top players in the industry. And we have seen already results from that in Q3. That's, I think, part of the reason why automotive has grown in 10% this quarter. Part of it is really the U.S. reshoring trend.

Now what we do see here is that it's not necessarily a hasty build. People are planning very carefully a 3-to 5-year journey as they think about their facilities. And therefore, they're also asking us to plan with them on a 3-to 5-year basis, the whole network and data infrastructure, which I think plays well to Belden's strengths because it's not really driven by price, but it's driven more by total cost of ownership. So yes, very bullish on the reshoring trend, and we are seeing tangible results and numbers as we speak.

Great. And then just maybe from the smart infrastructure side, as you kind of look out and see everything that's developed there, and you've been making some investments for some time. Just kind of think about how should we think 2026 should trend on the smart infrastructure side? And is there anything, I guess, that is more positive, more negative as you kind of enter the fourth quarter here?

Yes. So first of all, we've seen within the buildings portion of that business, which we now -- as you know, Dave, we combine that go-to-market with our automation business, and we are going with this IT/OT converged offering. So we've seen -- we saw strength there, especially in our growth verticals, which were almost at 10%, right, which is kind of high for that business. And we see a lot of activity in -- obviously, in health care and data centers, we've talked about that. But we also see growth in areas like stadiums and hospitality and other such more KPI-focused networks versus the old plain vanilla commercial real estate. So our dependence on that portion has gone down and our focus on these other markets is really paying off right now.

So I think as I look forward, obviously, we're not guiding '26 right now, but similar to what we said on the broadband space, we are optimistic about those verticals. We feel we have a differentiated offering because we are able to solve an integrated problem. So typically, when we go in for example, to a stadium, we talk about the whole thing, including the HVAC control, the packet substation, the network, the audio/video aspect, safety, drones, et cetera. So that really differentiates us from our competitors. So yes, I would kind of classify that as similar to automation in those markets, the same kind of positive feeling.

We'll move to our next question from Chris Dankert with Loop Capital Markets.

I guess I've noticed the R&D investment has stepped up a bit. I assume is that to support this kind of edge compute and time-sensitive feedback network opportunity that's out there? Should we expect that R&D to kind of continue being up at an accelerated pace? Does it moderate into '23? Just any color you can provide around that investment?

Absolutely. So indeed, Chris, we've obviously been upgrading some of these critical elements of our portfolio, right, the time-sensitive networks. There's been work done on the XTran side with MPLS-TP. There are more edge devices being released. But a big part of the R&D investment has really been on the development of the Belden Horizon orchestration platform. So, the one thing that we were missing, if you go back 4 to 5 years, we had all these devices that were operating as kind of stand-alone islands of excellence, but we were not orchestrating the data for our customers in one place. And the effort required to build that orchestration platform, which is called Belden Horizon and to keep upgrading it, especially now as we build applications on it that can take raw data and analyze it without going to the cloud, that's required a fair amount of investment.

Now I do expect, based on where we have reached, I do expect that rate of investment to slow down because I think we've reached some kind of a critical point here now in terms of capability. But I would think of the bulk of the increase in 2025 in R&D more around that software capability and of course, a little bit around the upgrade of hardware.

Got it. That's really great color. And then you just touched a moment ago on the adjusted go-to-market. I guess any additional color you can give us there in terms of have you changed the sales structure to support that adjusted go-to-market? Are you thinking about kind of products versus solutions as almost 2 separate approaches to sales at this point? Maybe just any kind of color you can give us on how you're thinking about that changing paradigm.

Yes. I think there are 3 fundamental things here, Chris. The first is we've built a fairly comprehensive consulting organization, right? So if you go back again, 3, 4 years, we didn't have consultants working with customers directly. They were more internal consultants. But now we have, first of all, digital automation consultants who go in and talk about the entire workflow that the customer has and design a data flow to support that workflow that helps the customer get to their KPIs. And this is a good -- the example we shared today is a good illustration of that.

Then we have in step 2 solutions consultants who go in and then help the customer create a solution to support that data flow that they've approved. After which we really have commercial sales get in and do the more conventional selling, negotiating, et cetera. And during this process, often, we have people asking for validation in our CIC, right? So, we can prove that data flow will get them to the KPIs they need. In some cases, it's savings. In some cases, it's more capacity, more productivity, more safety, whatever that P&L item is.

So first of all, that sales process is far more expanded with this consulting front end. We didn't have that previously. Second, we are going to market now for solutions with a whole ITOT converged approach, and we are saying you have multiple use cases and applications that can exist on the same backbone -- so why don't we design a comprehensive backbone that is future-proof and allows you to keep adding more use cases as you go. And by the way, some of those use cases will at some point become autonomous use cases. Not everybody is ready for that yet, but I think they all want to be -- they want to see that come up in the future.

And then, yes, the third thing is we do have a solutions-oriented sales organization, which is where most of our investments are going in, but we are still maintaining -- we have a healthy aftermarket and product revenue also. So we are still maintaining a product-oriented sales team. Now these teams report into the same senior management, so they are well orchestrated. But yes, so there are these 3 changes, the more consulting-driven front end, the converged IT/OD or industrial plus enterprise approach and yes, a specialist solutions sales force. And it's worked out pretty well for us, and it's differentiated us dramatically in the market.

There are no further questions at this time. I'd like to turn the conference back over to Aaron for closing remarks.

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 [email protected].

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