Kevin Maczka - Belden, Inc. John S. Stroup - Belden, Inc. Hendrikus Derksen - Belden, Inc..

Noelle Christine Dilts - Stifel, Nicolaus & Co., Inc. Matt McCall - Seaport Global Securities LLC Ashwin X. Kesireddy - JPMorgan Securities LLC Jeffrey Rand - Deutsche Bank Securities, Inc. Robert Cihra - Guggenheim Securities LLC Chip Moore - Canaccord Genuity, Inc. George J. Godfrey - C.L. King & Associates, Inc..

Ladies and gentlemen, thank you for standing by. Welcome to Belden's Third Quarter 2017 Earnings Conference Call. As 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. I would now like to turn the call over to Kevin Maczka. Please go ahead..

Thank you, Matt. Good morning, everyone, and thank you for joining today for Belden's third quarter 2017 earnings conference call. My name is Kevin Maczka, I'm Belden's Vice President of Investor Relations. With me this morning are John Stroup, President, CEO and Chairman; and Henk Derksen, Belden's CFO.

John will provide a strategic overview of our business, and then, Henk will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we've prepared a slide presentation that we will reference on this call.

This release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning to slide 2 in the presentation. During this call, management will make certain forward-looking statements in reliance upon the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

For more information, please review today's press release and our Annual Report on Form 10-K. Additionally, during today's call, management will reference adjusted or non-GAAP financial information.

In accordance with Regulation G, the appendix to our presentation and the Investor Relations section of our website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. I will now turn the call over to our President, CEO and Chairman, John Stroup.

John?.

Thank you, Kevin, and good morning, everyone. As a reminder, I'll be referring to adjusted results today. Please turn to slide 3 in our presentation for a review of our third quarter highlights. Overall, the business performed in line with our expectations during the third quarter.

We are pleased with our continued EBITDA margin expansion, double-digit EPS growth and recent debt refinancing. Total revenues increased 3.2% to a quarterly record $621.7 million, driven by our Industrial and Enterprise Solutions platforms. EBITDA grew 6.9% year-over-year, from $111.5 million to $119.2 million.

EBITDA margins expanded 70 basis points from 18.5% in the prior-year period to 19.2%. Our proven Lean enterprise system continues to drive impressive productivity gains. EPS increased a solid 15.5% in the third quarter from $1.29 in the prior-year period to one $1.49.

We were also extremely pleased with the execution of our debt refinancing and repayment during the quarter. By issuing €450 million of senior subordinated notes at 3.375% and €300 million at 2.875%, the lowest long-term borrowing rates in the history of the company, we have further lowered our cost of capital and extended our maturities.

In total, we expect these actions to be accretive to EPS by $0.47 on a full-year basis. For the full-year 2017, we are increasing the low end of our revenue and EPS guidance. We expect record quarterly revenues and EPS in the fourth quarter. We are also very well positioned with a number of attractive M&A opportunities.

Please turn to slide 4 for a review of our business segment results. Broadcast segment revenues in the quarter were $193.8 million, compared to $196.2 million in the year-ago period. Thinklogical performed in line with our expectations in the first full quarter of ownership. Our Broadband business, however, had a softer-than-expected quarter.

We estimate that the temporary revenue impact from the hurricanes on our Broadband business was approximately $5 million. This business is now recovering nicely with strong order growth in October. Broadcast EBITDA margins were 18.4%, in line with the prior-year period.

Enterprise revenues increased 6.7% to $167.1 million, in line with our expectations, driven by our successful commercial programs and increased pricing. Demand for smart buildings remains healthy, as evidenced by the 67% growth in our Category 6A Cable products, which deliver data and power over Ethernet, and 23% growth in our connectivity products.

EBITDA margins declined 160 basis points year-over-year to 15.8%, as the timing of our pricing actions could not fully offset the steadily rising copper costs. We expect our margins to improve in the fourth quarter.

Revenues in our Industrial Solutions platform increased 7.1% to $160.5 million, with continued strength in discrete manufacturing, our largest vertical. End market demand was very encouraging in the quarter, with orders increasing 12% organically on a year-over-year basis.

EBITDA margins increased a robust 320 basis points from the year-ago period to 19%, driven by solid volume leverage and productivity gains. Network Solutions revenues increased 0.6% from the prior-year period to $100.4 million. EBITDA margins increased 30 basis points year-over-year and 260 basis points sequentially to 24.8%.

I will now ask Henk to provide additional insight into our third quarter financial performance.

Henk?.

Thank you, John. I will start my comments with results for the quarter, followed by a review of our segment results, a discussion of the balance sheet, and close with our cash flow performance. As a reminder, I will be referencing adjusted results today. Please turn to slide 5 for a detailed consolidated review.

Revenues in the quarter were a record $621.7 million, increasing 3.2% from $602.5 million in the third quarter 2016. Currency translation and higher copper prices increased revenues by $8.1 million and $5.1 million, respectively. The acquisition of Thinklogical contributed $11.6 million in the first full quarter of ownership.

After adjusting for these factors, revenues decreased 90 basis points organically from the prior-year period. Sequentially, revenues increased $11.1 million from $610.6 million. Gross profit for the quarter was $255.4 million, or 41.1% of revenues.

Compared to the prior-year period, gross profit increased 2%, mainly a result of productivity initiatives. Sequentially, gross profit increased 1.3% from $252.1 million. Operating expenses were $149.8 million, or 24.1% of revenues, down $1 million from the prior year.

After adjusting for the impact of currency translation and the acquisition of Thinklogical, operating expenses decreased $4.7 million. This was driven by significant productivity improvements within SG&A, which reduced expenses by $5.6 million year-over-year.

R&D expenses increased $0.9 million from the prior-year levels, as we continue to invest in innovation. EBITDA was $119.2 million, or 19.2% of revenues. Compared to the prior-year period, EBITDA increased $7.7 million, or 6.9%. On a sequential basis, EBITDA increased 6.6% from $111.8 million.

Net interest expense of $19.4 million decreased $4.1 million year-over-year and sequentially, driven by the successful execution of our debt refinancing actions in the third quarter.

As a result of these actions, we now expect our interest expense to be approximately $16.9 million in the fourth quarter and approximately $68 million on an annual basis. The effective tax rate for the third quarter was 16.6%, compared to 19.9% in the prior year. The current quarter benefited from incremental discrete tax planning initiatives.

For financial modeling purposes, we recommend using a 19% effective tax rate for the fourth quarter, resulting in a tax rate of approximately 18% for the full year. Net income in the quarter was $73.9 million, increasing $12.4 million or 20.2%, from $61.5 million in the prior-year period.

Earnings per share was $1.49 in the quarter, increasing 15.5%, from $1.29 in the prior-year period. Please turn to slide 6. I will now discuss revenues and operating results by business segment. Our Broadcast Solutions segment generated revenues of $193.8 million in the third quarter.

Revenues decreased by 1.2% from $196.2 million in the prior-year period. Currency translation had a favorable impact of $1.2 million, and Thinklogical contributed $11.6 million. On an organic basis, revenues declined 7.3% year-over-year. We estimate that the temporary unfavorable impact from hurricanes in the quarter was $5 million.

Broadcast EBITDA margins were 18.4% in the quarter, decreasing 20 basis points from the prior year and increasing 270 basis points sequentially. Our Enterprise Solutions segment generated revenues of $167.1 million during the quarter, increasing 6.7% from the prior year.

On an organic basis, after adjusting for copper and currency translation, revenues increased 3% from the prior-year period. EBITDA margins were 15.8% in the quarter, decreasing 160 basis points from the prior year, driven by the impact of higher copper prices and the timing of price increases.

The Industrial Solutions segment generated revenues of $160.5 million in the quarter, an increase of 7.1% or $149.8 million in the prior-year period. Currency translation and higher copper prices had a favorable impact of $5.2 million. After adjusting for these sectors and the impact of channel inventory movements, revenues grew 6.3% organically.

EBITDA margins of 19% increased 320 basis points year-over-year, driven by solid leverage on volume and productivity gains. Our Network Solutions segment generated revenues of $100.4 million, growing 60 basis points from $99.8 million in the prior-year period. Currency translation had a favorable impact of $2 million in the quarter.

EBITDA margins of 24.8% increased 30 basis points from the prior-year period and 260 basis points sequentially. If you will turn to slide 7, I'll begin with our balance sheet highlights.

Our cash and cash equivalents balance at the end of the third quarter was $461 million compared to $670 million in the second quarter and $748 million in the prior-year period. The sequential decrease reflects the debt repayment completed in the quarter, net of cash flow generation.

Working capital turns was 7.1 turns, increasing 0.1 turns from the second quarter and decreasing 1.8 turns year-over-year. The year-over-year decrease is mainly a result of increased inventory levels. PP&E turnover was 7.7 turns, an improvement of 0.1 turns from the second quarter and 0.3 turns year-over-year.

Our total debt principal at the end of the quarter was $1.55 billion compared to $1.70 billion in the second quarter and $1.71 billion in the third quarter 2016. Net leverage was 2.3 times net debt to EBITDA at the end of the third quarter, in line with prior quarter and prior year.

We're extremely pleased with our refinancing actions and the quality of our balance sheet. We've lowered our cost of debt significantly from 5.3% to 3.9% and extended our maturities to 2023 and beyond. With plenty of capacity available to execute upon our strategic plan and we estimate our dry powder to be approximately $475 million.

Please turn to slide 8 for a few cash flow highlights. Cash flow from operations in the third quarter was $68.8 million compared to $86.9 million in the prior year. Net capital expenditures were $11.2 million for the quarter, increasing $500,000 from the prior-year period.

As a result, free cash flow was $57.6 million in the third quarter 2017 compared to $76.2 million in the prior-year period. Year-to-date, we have generated cash flow from operations of $103.6 million and free cash flow of $70.2 million.

Compared to the prior year, free cash flow is $41.5 million lower, due primarily to three factors impacting our inventory levels. First, corporate inflation has increased the value of our inventory by approximately $20 million.

Secondly, we're holding $10 million in additional inventory as we anticipate customer demand to quickly rebound following the recent hurricanes. And finally, as we approach the final milestone of our manufacturing footprint consolidation, we're holding a higher level of safety stock for a temporary period, with an approximate impact of $5 million.

In addition, we're now planning to increase our commitment to growth initiatives and will increase capital expenditures by approximately $10 million, including a new investment in manufacturing capacity in India. As a result, we expect free cash flow of $225 million for the full-year 2017.

We are pleased with the disciplined capital allocation actions completed in 2017. Year-to-date, we've allocated $167 million towards acquisitions and returned $44 million to shareholders through dividends and share repurchases. When combined with our recent refinancing, we anticipate these actions to be accretive to EPS by $0.76 on a full-year basis.

That completes my prepared remarks. I would now like to turn this call back to our President, CEO and Chairman, John Stroup, for the outlook.

John?.

Thank you, Henk. Please turn to slide 9 for our outlook regarding the fourth quarter and full-year 2017 results. Our consolidated results for the third quarter were in line with our expectations, and we are increasing the low end of our full-year revenue and EPS guidance.

We expect record quarterly revenues, EBITDA margins and EPS in the fourth quarter. Further, we continue to actively pursue a number of attractive inorganic opportunities. We anticipate fourth quarter 2017 revenues to be between $641 million and $661 million, and EPS of $1.71 to $1.81.

For the full-year 2017, we expect revenues between $2.425 billion and $2.445 billion, relative to our prior guidance of between $2.415 billion and $2.445 billion. We now expect full-year EPS of $5.45 to $5.55 compared to our prior guidance of $5.35 to $5.55.

We look forward to providing 2018 guidance and further insights into the business during our Investor Day webcast on December 5. Details can be found at investor.belden.com. That concludes our prepared remarks. Please open the call to questions..

Certainly. Your first question is from Noelle Dilts with Stifel..

Thanks, guys. Good morning, and congratulations on a good quarter..

Thanks, Noelle..

So, first, I just wanted to dig a little bit more into Industrial.

You mentioned that discrete has been trending well, but could you also give us an update on kind of what you're seeing in the oil and gas markets, and some of the other key pieces within Industrial?.

Yeah. So, our Industrial Solutions business, saw organic growth in discrete of about 6%. And if you look at process in total, it was up about 12%. The oil and gas piece was down slightly. But if you exclude oil and gas from process, as I said, it was up about 12%.

If you include Network Solutions, the results are similar, discrete up about 5%, process not up quite as much more like 4%. So, those segments, those verticals continue to be strong. I think we mentioned in our prepared remarks that the organic order rate for our Industrial Solutions was also up about 12% on a year-over-year basis.

So, that part of the business continues to be strong, Noelle. And based on the forward leading indicators of funnel and order run rate, we think that will continue..

Great. That's helpful. Last over – I guess the past couple of quarters, in Broadcast, you talked a bit about the IP transition kind of impacting some timing of work release. It sounded like that maybe wasn't as much of a concern this quarter.

Can you give us some thoughts on what's going on there?.

So, we've had good activity with IP projects. Last time I was with the team, I think they've had more than 50 IP projects installed around the world. And we really have just one other competitor that's at sort of a similar pace to us, maybe slightly ahead. So, I feel like the team is doing well.

The Grass Valley business in the quarter, again, performed as we expected, and we've continued to see a trend where our international business is up quite a healthy amount on a year-over-year basis, and it's our U.S. business that is struggling, and we mentioned that in the second quarter.

Some of that might be just the normal cycle from year four to year one after the U.S. presidential election and the Olympics. But I think a bigger piece of it is this IP transition. We continue to hear customers say that they're cautious about how they invest capital.

One need to be sure they understand the technology, and there's still some work to be done in the industry to confirm the standards of the IP technology in Broadcast. So, we're continuing to fight those headwinds, Noelle, within Grass Valley, particularly in the U.S.

But, as we monitor the activity of our competition, we're confident we'll continue to take share..

Great. And then, one more for me and I'll hop back in queue. But, it was interesting to hear you, guys, talk more about kind of growth initiatives including this manufacturing plant in India.

Can you give us some thoughts first on what you'll be manufacturing in India? And then, maybe what else you're looking at from a growth perspective?.

Sure. So, the facility that we're planning to construct in India will be a Belden manufacturing facility and will manufacture products from all four platforms.

And this is an investment that we're making to support what's been pretty good growth over the last couple three years, and I would say also a fairly bullish view on what's happening in India right now. So, we'll be making all sorts of products; switches, routers, enterprise cable and connectivity, industrial cable and connectivity.

This will truly be a Belden-wide manufacturing facility, and we're also investing in engineering resources in the area as well to support multiple platforms, including Network Solutions. So, we're excited by the investment. We think it's going to pay strong dividends.

And we had originally planned to start it in 2018, but we were positioned to start it sooner. And as a result, we included in our 2017 capital outlook..

Perfect. Thank you..

Welcome..

And your next question comes from Matt McCall with Seaport Global Securities..

Thank you. Good morning, everybody..

Hi, Matt..

Good morning..

So, maybe, John, just continuing on that last question.

So, what's the projected timeframe on seeing some benefit you expected to pay some nice dividends? When should we expect those dividends to commence?.

Well, I don't think there's going to be a lot in 2018, Matt. It's probably more of a 2019 impact. We may see some benefit in 2018. And we've seen nice growth in India without the manufacturing capacity.

And as you can imagine, as India continues to grow, and in my view, make significant progress on reform and their government really, I think, taking seriously the economic opportunity in front of them, just about all of our end markets are benefiting.

Our Enterprise business is especially seeing good growth in India this year, but we're also seeing opportunities with critical infrastructure, which is, of course, beneficial to our Network Solutions business, as well as a variety of different manufacturing initiatives which is good for our Industrial businesses.

But I think that it's going to be, I think, positive to 2018, but I'd say, it's probably more 2019 and beyond..

Okay. And on the Industrial side, a little better than we expected in the quarter. You've cited labor issues in the past, labor availability. I think you also had some positive comments about pricing and pricing expectations there. I think that there were some – you'd have, I guess, lack of follow-through from some competitors.

Are you seeing a better competitor response on the pricing front and are the labor issues easing?.

So, Matt, just to clarify, I believe you're talking about Enterprise.

Is that correct?.

Yes, sir..

Okay. Yeah. So, in the quarter, Matt, I'd say a couple of things happened. One is, we did see some changes in the market as it related to pricing. So, we had attempted to increase prices on a couple of occasions earlier in the year, we were unsuccessful. We put a price increase through in the third quarter.

And I would say, all of our major markets, we did see movement in pricing, which was obviously welcomed. I'm not really sure why we were struggling earlier in the year.

It could very well be that with our inventory turns being so much higher than most of the people we compete with, we, of course, see those higher costs sooner than others, and may be with the benefit of hindsight, we just went a little bit too early. But in any case, we did see an improved pricing environment in the quarter, which is great.

And then, as it relates to some of the other challenges that we've had, labor constraints, I don't really think those have changed. I think what's propelling our growth predominantly is our CAT 6A growth and our connectivity growth.

And again, I think a lot of that has to do with our commercial initiatives, around contractors and around the extended LAN, which I think is performing a lot better than data centers. So, we haven't yet seen our major competitors go yet or talk about their enterprise business, so I don't really know what that's going to look like.

But my guess is that those of us, that are more focused on LAN than data centers, are probably going to see better results, and certainly, that's what we saw in the quarter..

Okay. That's helpful. So, I guess the last one is, maybe look at some of the segments, and I'm just looking for some highlights here.

But in the quarter, I think you called out some pressure in Broadband from the hurricanes, but were there any other areas of the business that surprised the upside or downside? And then, it seems like the Q4 guide, I mean, at least the way I'm looking at it, it looks like the best organic growth that you've had in many quarters with our outlook year-over-year or on a two-year stack.

Is there an inflection in any of the business? I know you've had some positive things that shape up pricing Enterprise and things (27:45), but just I'm just curious about deltas to your original expectations in the quarter, and then what's kind of driving that improving organic growth outlook..

Sure. So, within the third quarter, obviously, we had expected to strengthen our Industrial businesses, and I would say that they did as well, if not better than we had expected. I would say within the quarter, our Enterprise business did maybe a little better than we expected.

And as we mentioned in our prepared remarks, we thought our Broadband business would do better than it did in the quarter. Some of that was the hurricane, as we mentioned; we think about a $5 million impact from the hurricane. That's, of course, not an exact science, but we do have visibility into the usage at our customer. We have daily VMI.

So, we think we estimated it pretty well. Going into the fourth quarter, as you look at year-over-year growth, we are expecting organic growth.

That's going to come on the back of continued strength within Industrial Solutions, I would say some improvement in Network Solutions compared to the third quarter, and then also, we're expecting that our Broadband business will have a strong quarter on a year over year basis. And we've already seen strong order rates in October.

So, we feel optimistic about how the Broadband business will finish, we're optimistic about how they'll do next year, and I would say our Enterprise business from what we've seen right now, we would expect it to perform somewhat in line with how it did in the third quarter.

So, I'd say the businesses are generally doing well with a couple of short-term challenges that we mentioned..

Okay. Thank you, John..

You're welcome..

And your next question is from Ashwin Kesireddy with JPMorgan..

Yeah. Hi. Thanks for taking my question. I wanted to ask about Tripwire.

Can you update us on the market share progress in that segment, please?.

Yeah. So, our Tripwire business did well within its core Enterprise market, which has been a primary area of focus for us. So, we saw growth on a year-over-year basis within the Enterprise segment.

Where we saw some challenges, however, was in the federal space, which was down on a year-over-year basis, and the third quarter tends to be the most – the strongest quarter for the fed as it's their year end. And then, also, we had a very difficult comp in the third quarter on a year-over-year basis within the Industrial segment around utilities.

So, I feel really good about the progress we've made in the Enterprise segment, which has been an area of focus for us. We haven't yet seen our competition's results in the third quarter, so I can't say specifically whether we took share in Enterprise or not.

But based on kind of where we think the market growth is, I would expect our market share at Tripwire in the Enterprise segment was probably flat to maybe slightly positive. And I saw weakness in fed, but I think that's mainly timing. We had a project that we thought might close in the third quarter that's now moving into the fourth.

So, the team feels good about their fourth quarter forecast, feels good about the progress they made sequentially in their core Enterprise segment. And I feel like we've made a lot of good progress on the products side. So, maybe not as evident in the results as I would like. Certainly, feel a lot better about where that business is..

Thank you. And I want to ask about the Q4 guidance. Seasonally, it's probably one of the strongest you have seen.

If you think about various segments, where do you expect to see most of the sequential upside? Is it all driven by Thinklogical or are there segments which will drive this better than seasonal growth in Q4?.

So, sequentially, the segment that's probably going to grow the most is Broadcast. So, first of all, our Grass Valley business tends to have a stronger fourth quarter than they do the first three.

And then, we're also expecting that our Broadband business is going to grow nicely sequentially somewhat, maybe predominantly as a result of the weakness in the third quarter around the weather and some of the other customer consolidation initiatives that have been happening. So, that's probably the strongest.

And then, probably followed by Network Solutions, both our Tripwire and our Industrial IT businesses typically have stronger fourth quarters than third. So, I would expect both those platforms sequentially are going to have high-single-digit growth to maybe low-double-digit growth.

And then, our Industrial business and our Enterprise business sequentially would be flat to up a few points..

Got it. Thanks a lot..

You're welcome..

And your next question comes from Sherri Scribner with Deutsche Bank..

Hi. This is Jeff Rand for Sherri.

In Broadband, can you talk a little about your PPC business and what trends you saw during the quarter?.

Yeah. So, when we refer to Broadband, we're also referring to our PPC brand. So, it's equivalent. It's the same business. So, the business started off pretty good in the quarter and then, was really impacted by the hurricanes. And it wasn't just in the areas of the country where the hurricanes had impacted or had landed.

Obviously, you saw a big weakness in that area as people were switching their priorities away from bringing on new customers, to bringing the network back up again. But, even in other areas of the country, it was impacted, as technicians were moving to the affected areas of the country.

So, it was a very weak September, much weaker than what the team had thought entering the quarter. But, as I mentioned, we saw or we've seen orders in the month of October. If I'm not mistaken, on a month-to-date basis, orders in our PPC Broadband business are up 30% year-over-year..

Great. Thank you.

And on your M&A pipeline, can you compare it to how it looked about 90 days ago on your last earnings call?.

I'd say similar. There's a couple of opportunities that have fallen out, that we've elected not to pursue, and there's a couple of opportunities that have come in. So, I would say very similar to where it was 90 days ago..

Great. Thank you..

And your next question comes from Shawn Harrison with Longbow Research..

Hey. Good morning. This is Chris (35:02) calling in for Shawn. Just had a question. I wanted to clarify cash flow dynamic. How do you plan to use free cash flow going forward? That'd be more in buying back shares or in M&A? If you can then talk to that..

So, I had a hard time hearing you, but I think the question had to do with priorities around free cash flow and how we deploy it, is that correct?.

Yes..

Okay..

Yeah. Just looking into the future..

Yeah. So, I would suggest that there's really no change in strategy. We would expect that our – our first priority always, of course, is to fund our organic plan.

And there will be times I think where the investments in our organic plan might be slightly higher than what it has been historically, like for example today, Henk shared with everybody our plans to construct a facility in India, and we have other product initiatives where we're making capital investments.

But in general, our organic investments have been somewhere around $60 million a year or so. And then, 50% to 60% tends to be allocated towards M&A, with a emphasis and a priority on bolt-ons for existing platforms.

And then, the remainder has been used for either share repurchases, or in some cases, retiring debt, if in fact the balance sheet can't permit it. So, I would say over the next three years, I would expect that allocation to be similar..

Okay. Thank you. And just a follow-up. I know we kind of heard you talk a little bit about this earlier in terms of networking solutions (sic) [Network Solutions] in that branch of the business. We saw with your peers some shortfall and weakness, and of course, you guys grew sequentially.

Could you just give a little more color on, I guess, how you think you will perform in the fourth [indiscernible] (36:58)?.

Sure.

Was your question around Enterprise?.

Specifically, the Network Solutions business..

Okay. So yeah, the Network Solutions business, it was, I would say, pretty much as we thought it was going to be. It was not stronger or weaker than what we had thought. I would say from third to fourth quarter, we are expecting nice growth in our Network Solutions business. As I mentioned earlier, I think, high-single digits.

And I would expect strength in both the core or Industrial IT piece as well as our Tripwire business. And both of those businesses tend to be project-related business and therefore, we look at the strength of the funnel of opportunities to construct our forecast..

Chris (37:59)?.

Thank you. That's all..

Okay..

Okay. Thank you..

And your next question comes from Rob Cihra with Guggenheim..

Great. Thank you very much. Two, if I could. One, just, I know you already talked a bit more on metrics in your Industrial business, which has been reaccelerating nicely.

But, can you give me an idea of sort of almost macro? I mean, do you think that the reacceleration there, is it just sort of macro, cyclical spending by manufacturers and that sort of thing, or are there kind of new technologies like automation, IoT, that sort of thing that you think is driving that reacceleration in the Industrial?.

I think it's both. I mean, we're seeing broad-based growth. So, we're certainly seeing our discrete business grow consistently and usually grow faster than the other three segments.

And within discrete, we're seeing very strong growth in our connectivity piece of the business, which tends to benefit from not just automation, but more importantly intelligent automation. So, the connectors that go on sensors or I/O (39:13) boxes that connect PLCs to sensors and actuators is growing very nicely.

So, I think it's exactly what we thought it was going to be. I mean, you look at the investment in manufacturing automation as a result of labor shortages, age of equipment, the low cost of capital. When we talk to customers, that resonates. And I think that's why we're seeing strong growth, especially in discrete.

And now, we're beginning to see pretty good growth in process as well. So, our Industrial businesses are really set up very nicely..

Great. Thanks. And then, this may be is something you're looking to save for your Analyst Day.

But I mean, if you're looking at 2018, is there any reason to think that you wouldn't be able to probably see growth in all of your business segments?.

Well, we certainly don't want to remove any anticipation for our meeting in December. But if you look at general macro trends, I would say on a macro basis, all the businesses are in good shape. We'll have to get obviously a lot more specific about secular trends next year.

But I would comment that the biggest headwind we've had this year has been in the Broadband business. And I would expect that things would be far healthier next year than they were this year..

Great. Thank you very much..

You're welcome. Thank you..

And your next question is from Chip Moore with Canaccord..

Good morning. Thanks. I think we touched most of them.

Maybe with a full quarter of Thinklogical, maybe you can give us an update on what you're seeing now that you've been in it a little more deeply, how the accretion targets look?.

Yeah. So, the business, as Henk said – maybe I said it in my prepared remarks, the business performed in the quarter exactly as we thought it would. Obviously, that's one quarter in a row. So, we're not going to declare victory. But it's a project business. When we acquired the company, we had good visibility into the projects they were working on.

It is a business, by the way, where predicting timing can be a little challenging. But as a percentage of our total revenue, it's not a lot. So, if something slips from one quarter or another, or moves in, it's not going to have a huge impact on Belden's overall consolidated results. But so far, the team is strong. The technology is good.

The projects are real. The competitive advantage is good. The margins are good. And so, financially, I think they were right on where we expected them to be, and they submitted a forecast for fourth quarter that was right where we thought they would be. So, so far, so good..

Okay. And then, maybe just one more, and then there might be another one for December. But, given you've taken your cost of capital down quite nicely here, back to that dry powder, does that change your thinking on sort of return rate hurdles, or how do you think about that strategically? Thanks..

Yeah. So, yeah, obviously, we love the fact that we've been able to lower our WACC, but we certainly haven't come off our 13% to 15% ROIC as a company. And as we fold acquisitions into the company, we have to have a clear path of getting that acquisition within that 13% to 15% range.

Obviously, the time it takes to get there is something we've always considered depending on the attractiveness of the asset, the size of the asset, and we would continue to be flexible in that respect. But certainly, no change in our goal around 13% to 15% ROIC.

And although I just said I didn't want to ruin suspension for December, I can almost guarantee you that we'll reaffirm 13% to 15% ROIC when we're together in December..

Great. Look forward to it. Thanks..

Thanks..

And your next question is from George Godfrey with CLK Brokers.

Thank you and good morning. Thank you for taking my question. Just wanted to ask about the organic growth rate. If you gave this, I'm sorry, I missed it.

If we go to the midpoint of your fourth quarter guidance, $651 million, what does that imply for the organic growth rate for the full year?.

So, on a full year basis, the organic growth at the high end would be just about 50 bps, and on the low end would be down maybe 30 bps. So, at the midpoint, full-year organic growth, with the guidance we've just given you, would be roughly flat year-over-year..

Got it. And then, again, probably something for the Investor Day. Do you think the organic growth rate for next year is a more challenging, easier, the same, or how do you think about the level of difficulty on the organic growth as we look out to 2018? Thank you for taking the question..

Yeah. So, I think organic growth in 2018 is going to be relatively easier compared to 2017, predominantly because of the challenges we had in 2017 with both our Broadband business which we did not expect, and our Grass Valley business that we expected, albeit it was tougher than we thought.

So, I would expect entering 2018, we would continue to see tailwind in our Industrial businesses, I would expect the headwind to subside at our Broadband PPC business, I would expect conditions in Grass Valley to be improved, and I would expect the Tripwire business to continue to improve as well.

So, I think we enter 2018 in a better spot from a growth perspective than we entered 2017..

Got it. Thank you for taking the question..

You're welcome..

And there are no further questions at this time..

Okay. Thank you, Matt, and thank you, everyone, for joining today's call. We hope you'll join us again on December 5 for our Investor Day webcast. If you have any questions, please reach out to the IR team here at Belden. Our e-mail address is investor.relations@belden.com. Have a great day. Thank you..

Thank you. Ladies and gentlemen, this concludes your call for today. You may now disconnect from the call and thank you for your participating..