Belden (NYSE:BDC) Q2 2026 Earnings Call

0:00 Please stand by, your conference is about to begin. Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Reports Second Quarter twenty twenty six Results. Just a reminder, this call is being recorded. At this time, you are in a listen only mode. Later, we will conduct a question and answer session.

0:29 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 twenty twenty six 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 and 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.

1:22 Turning to slide two. 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 ks. 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 Chan. Thank you, Aaron, and good morning, everyone. We appreciate you joining us. Please turn to slide four. The second quarter was the strongest quarter in company history, and we are well positioned for what's ahead.

2:08 Our team achieved record revenue of $750,000,000 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 IEPA tariffs. Jeremy will cover the details. End market demand is strong with record orders of $836,000,000 up 19% year over year and up 23% sequentially.

2:56 Our book to bill ratio came in at 1.11. 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 two milestones that I want to highlight, as they are proof of our solution strategy executing at scale. First, a contract worth approximately $20,000,000 with a Tier one hyperscaler for fiber connectivity inside an AI data center.

3:46 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 The 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 a 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.

4:37 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 three years ahead of schedule. Please turn to slide five. 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.

5:27 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 $3,600,000,000 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 six.

6:13 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 one. Second, Ruckus brings high single digit growth, and with it, access to one of the fastest growing segments of the networking market.

7:04 Wi Fi seven 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 were already investing in automation, reshoring, and network modernization. We are the only company that can deliver industry leading wireless alongside the full wired OD stack from a single source. That cross sell opportunity is meaningful, and a very powerful addition to the combined business.

7:50 And third, our solutions mix steps up past 20% immediately. That matters, because solutions engagements are larger in scope, on 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 seven. 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.

8:36 Belden now runs every layer of the network, both industrial and enterprise, from a single source, cable and connectors, patch panels, edge devices, routers, 40 switches, IT switches, and Wi Fi seven 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, two 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.

9:22 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 five 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 eight. 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.

10:05 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 three 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 $75,000,000 today, repeatable, growing, and the base from which our hyperscaler relationships developed.

10:55 The second is AI and hyperscale data centers, the fastest growing part of a 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.

11:19 To put the second quarter activity in context, we booked approximately $40,000,000 in hyperscaler orders in the quarter alone. That includes the $20,000,000 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 a $100,000,000 plus annualized business growing rapidly. What makes these wins meaningful goes beyond the contract value. When Hyperscale select Belden, it is because we bring something differentiated. Solutions engineered for AI infrastructure, operational scale to deliver under urgent timelines, and engagement model built around solving real problems.

12:08 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 seven for mission critical wireless, and the management layer that ties it all together. No other company delivers the full stack from a single source.

12:55 Taken together, and excluding Rutgers, our data center and AI infrastructure business is at an annual run rate of approximately $175,000,000 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're not chasing this market. We're already inside it with the portfolio, the customer relationships, and now with Rutgers, the complete solution to win. Please turn to slide nine. In the second quarter, we closed a contract worth approximately $20,000,000 with a Tier one hyperscaler for fiber connectivity in the AI data center white space.

13:43 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.

14:30 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 real world. A leading global retailer has selected Belden for a specification position in their autonomous network, encompassing talking door automation across U. S. Distribution centers.

15:18 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, refined 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 $20,000,000 over four years across more than 4,500 autonomous installations.

16:10 As this customer's automation footprint grows, we are positioned as the 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.

16:56 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 standalone 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 $750,000,000 up 12% year over year and above the high end of our guidance range of $735,000,000 to $750,000,000 Organic growth was eight percent for the period.

17:48 Orders reached $836,000,000 our strongest bookings on record, an increase of 19% year over year. Book to bill was 1.11, reflecting robust end demand. Adjusted gross profit was $297,000,000 up 14% with margins of 39.6%. Adjusted EBITDA was $146,000,000 up 28% year over year with EBITDA margins of 19.5%. Adjusted EPS of $2.34 grew 24% compared to a $1.89 in the prior year period above the high end of our guidance.

18:44 As Ashish mentioned earlier, during the quarter, the company recognized a net EPS benefit of approximately $0.25 related to the expected recovery of IEPA tariffs, partially offset by the introduction of new tariffs. The net impact was recorded to gross profit.

19:08 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 improvements. 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 of double digits year over year. Order momentum in this category was particularly strong with orders up 27% sequentially and a book to bill of 1.14.

19:57 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 1.08 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 healthcare. Headline organic growth was flat versus the prior year against a strong comparable in non core 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.

20:49 Broadband was in line with expectations with orders up 22% sequentially and a book to bill of 1.07. 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.

21:15 Longer term, the broadband landscape changing in a meaningful way as user behavior is shifting from primarily consuming content to more of a two 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 standalone basis, we ended the second quarter with $349,000,000 in cash, net leverage of 1.7 times and trailing twelve month free cash flow of $212,000,000 a strong foundation.

22:05 Reflecting the close of Ruckus on July 1, we expect leverage will increase to approximately 3.9 times net debt to adjusted EBITDA at the end of the third quarter. This is exactly where we expected to be and we have a clear path back to our long term leverage target.

22:27 The engine that funds that path is free cash flow. Over the next eighteen months, we expect the combined business to generate more than $500,000,000 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 3.6 times by the end of twenty twenty six, approximately 2.9 times by the end of twenty twenty seven, our first full year of combined ownership and at our long term target of 1.5 times by the end of twenty twenty nine.

23:32 Please turn to slide 15 for our third quarter twenty twenty six 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 twenty twenty six is expected to be between $950,000,000 and $970,000,000 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.

24:29 For the third quarter, you could assume interest expense of approximately $40,500,000 depreciation of $18,800,000 a tax rate of 20% and a diluted share count of 39,400,000 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 Rutgers into every layer of the converged ITOD network.

25:15 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, reassuring of manufacturing, and IT OD convergence are strengthening.

25:43 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 1.5 times 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 roadmap, conservative financial assumptions, and a free cash flow profile that funds the path forward.

26:35 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 Rutgers, who are now part of the Belden family, welcome. You bring a 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.

27:23 Operator, please open the call for questions. Thank you. And we'll go right to Mark Delaney with Goldman Sachs for our first question.

27:54 Good morning. Thank you very much for taking my question and 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?

28:28 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

28:54 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 you know, big volume spikes at at lower margins. And I think this is basically the differentiator for us. So we have very standardized architecture. We've got very reliable supply chain, and that's appealing to a number of customers at this point, because they're facing all sorts of issues from our competitors.

29:56 Here, it was really about very high density MPO connectors and fiber. This is a 144, two eighty eight fiber strand count products, so 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, You know, it's 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.

30:42 And then interestingly, this is all leading to the broader physical AI, which is, you know, which is not even really started that particular conversation, because the same hyperscalers are also providing support to the broader industry as they deploy their own,

31:01 you know, AI and factories and premises. So so, yeah, high growth, you know, very, very differentiated in terms of product execution, and we are being very selective about where we go. So I feel very, very, you know, positive, and I I think the momentum on this part of our business is gonna 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'll take some time.

31:40 It's all very helpful context. You mentioned trying to be thoughtful on margins and 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, build in targets? Yes. So in general, the gross margins on all of these hyper scaledata 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

32:27 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 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?

33:10 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 to revenue and EPS? Thanks. So maybe I'll start off with a little bit of customer context, and then, Cheryam, you can talk about some of the financials. So, yes, this is super exciting. Know, a lot of our customers are actually demanding that converged solution. So so if you think about convergence from a customer standpoint, they would like to see, first of all, IT and OT simplification. They would 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, healthcare, hospitality, etcetera, etcetera.

34:18 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 was the backdrop of all these 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.

35:08 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 seven. So we've solved for their talking to 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 there are active conversations in Discrete. So so very exciting. In fact, you know, on a lighter note, we actually had to hold back a little bit our people, because we wanted to be cognizant of any regulatory, you know, barriers to, you know, working with Rakkas pre close.

36:15 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 one. And so, yeah, 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 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.

37:05 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. Thank you. Queue by pressing star two. We'll move next to William Stein with Truist Securities. Great. Thanks for taking my question, and 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 in AI data center.

37:51 Previously, I believe you had been quite focused on gray space wins. 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.

38:38 Okay. No, well, thank you very much. The 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, you know, data hall itself, whether that is part of the, you know, substation automation around the power supply, whether it's some of the security, whether it's HVAC control, etcetera, etcetera. Right? So, really, our strategy always is that we wanna take any conversations we have and then, you know, elevate it to that combined white space, gray space solution discussion.

39:27 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, you know, 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.

40:16 But we want to then leverage that position and, you know, 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 a backbone that straddles both 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 you know, 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.

41:05 And I think to, you know, 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'll you know, we've 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.

41:53 First, can you discuss with us where ruckus stands in the sort of duration of the Wi Fi seven 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? Thank you. Yes. In terms of Wi Fi you know, 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.

42:52 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. 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 player to have commercially available Wi Fi seven solution.

43:46 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.

44:33 Thank you. We'll move next to Steven Fox with Fox Advisors. Please go ahead. Yes. Hi, good morning. 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 bread crumbs to whether that could be the case? Then I had a follow-up. Well, I certainly think Steve, there's opportunity there because like you mentioned, their variable margins are so high.

45:20 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 twenty eighth first announced the deal from Ruckus. Yeah, correct. Yep. Yep. Alright. That's helpful. And then as a follow-up, Ashish, so I mean, the the mark 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 I understand you you detailed, you know, on the AI side specifically, but on the physical AI side, starting with a $175,000,000 annual run rate of business before you even get to a WiFi seven 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?

46:43 Yes. I think if you 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 wanna go from that stage to what we think of as autonomous operations. That's another way of saying physical AI. And but there is there are multiple impediments to that. Right? First of all, they need to upgrade some of their basic systems, their culture, you know, and, of course, as part of that, their network backbone. And I think this cycle will take, at this point, Steve, maybe two to three years at least before you start seeing the it's reaching that point of inflection where you say that physical AI is actually happening.

47:41 So it'll 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 sub verticals. We have teams right now, know, 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.

48:41 But obviously, this is something that it has it's not like a zero one, 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? You know, that number, you know, runs into multiple billion dollars, but that's beyond the network. Right? It's not just the network. And I think right now, we've we think of it more as how do our existing automation customers take the next step.

49:30 And, I think our pipeline looks pretty good. Our customer discussions are pretty encouraging, and I think we are well resourced for that increase. Great. That's really helpful. Sounds like a great opportunity. Thank you very much. Our next question comes from Piyush Avasti with Citi. Your line is open. Good morning, guys. Thanks for taking my questions. Morning. Ashish, maybe, you know, if I'm thinking about, like, you know, you kinda there was a comment on the slide deck saying that are you like, for solution mix crossing, like, 20%, like, achieved it today. I don't know if you wanna set a new 2028 target for your solutions mix. Maybe you do. But it would be helpful to learn how how you you're thinking of your solution mix going forward and how Rutgers contributes to the conversations now.

50:33 Yeah. So we haven't we haven't yet formally laid out a target, and we'll we'll do so shortly, Piyush. But, you know, I would be I would feel disappointed if we don't keep growing, you know, at the same rate at least, and get towards that 30% odd mark, you know, by that point. And I I think Ruckus meaningfully helps us with that with that growth. So you're right about the Ruckus contribution. Got it. And one for Jeremy. Can you, like, help us with, you know, your expectations for margin and incremental incrementals in 3Q? I think there is, like, some benefit sitting in the two 2Q margins from from the from the the tariff benefits.

51:27 So maybe if you can parse for us a little bit more on, like, what you expect for 3Q. I don't know if there's if there's more of these benefits coming in 3Q or, you know, what you got in 2Q was was, you know, the whole Yeah, 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, 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 onto the Belden shared services. So there's a little bit of temporary inefficiencies there, but that'll get wrapped up in short order within a quarter or two.

52:32 The other dynamic that you have sequentially is that we were 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 the growth in the legacy business on a sequential basis will come more from the the smart buildings and the broadband businesses where 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.

53:17 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. Gotcha. Helpful. If I could sneak one more. Just on automation, the double digit, like you kind of mentioned, smart buildings and broadbands 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 automation to do double digit in 3Q? Yeah, 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.

54:04 Got it. Helpful. Thank you. Yep. Yep. And we'll go next to Chris Dankert with D. A. Davidson. Hey, good morning, guys. Thanks for taking the question. I guess just stick on RUCUS here, certain market participants have been critiquing RUCUS, specifically the need for more access points and NDDR for 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.

54:53 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 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 lines in terms of how Ruckus fits versus, say, some of the Juniper, HPs, the Arubas of the world? My understanding is Ruckus is a more niche solution for where high fidelity matters, where low latency matters.

55:53 But maybe how constructive does the team think about where Ruckus fits in the market? Yeah. No. So all of those are great companies, you know, and we compete with all of them. To be fair, you know, with some of them, we compete even through our automation portfolio with the Hirschman 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've said, engineered for very high density, high interference environments, venues, hospitality, health care, education, and then, of course, industrial sites. Mean, I you can't think of more high interference than in a typical manufacturing environment. And I think RF and antenna technology that we have with the Ruckus portfolio, it's been validated in third party testing.

56:42 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 for revenue in 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 ITOD networks, right, where we have a lot of presence and recognition. And if you take if you take that Belden industrial grade infrastructure combined with the Ruckus wireless switching and the cloud based AI driven operations, that's that's really a full end to end solution for our industry grade customers. And when I say industrial grade, I include here customers in hospitality, health care who operate like, you know, industrial grade customers. So that's that's really the way to think about it as differentiated from the typical Wi Fi in a broader campus type situation.

58:05 Got it. That's really helpful color, Ashish. Thanks. Thanks so much for kind of digging into that a bit. 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. Perfect. Thank you. Sure. At this time, we have no further questions. I'll turn the floor back to Aaron Redington 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 email address is investor. Relationsbelden dot com. Thank you very much. This concludes today's conference. We thank you for your participation.

58:56 You may disconnect at this time.