Belden Broadcast Solutions John Quealy, Equity Research Analyst, Canaccord Genuity Roel Vestjens, Broadcast Solutions President, Belden June 2016 2016 Belden Inc. belden.com @BeldenInc
Safe Harbor Statement Our commentary and responses to your questions may contain forward-looking statements, including our outlook for the 2016 second quarter and full year. Forwardlooking statements include projections of sales, earnings, general economic conditions, market conditions, working capital, market shares, free cash flow, pricing levels, and effective tax rates. Belden undertakes no obligation to update any such statements to reflect later developments, except as required by law. Information on factors that could cause actual results to vary materially from those discussed today is available in the press release announcing 2016 first quarter results, our most recent Annual Report on Form 10-K as filed with the SEC on February 25, 2016 (including those discussed under Risk Factors in Part I, Item 1A and in Management s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7), and our subsequent filings with the Securities and Exchange Commission. Non-GAAP Measures On this call we will discuss some non-gaap measures (denoted by footnote) in discussing Belden s performance, and the reconciliation of those measures to the most comparable GAAP measures is contained within this presentation or available at our investor relations website, investor.belden.com. 2016 Belden Inc. belden.com @BeldenInc 2
Live Q&A Participant Access US/CAN Toll Free: 888-417-8465 Int l Toll: 719-457-2627 Conference ID: 7949138 2016 Belden Inc. belden.com @BeldenInc 3
Featured Speakers John Quealy Equity Research Analyst, Canaccord Genuity Roel Vestjens Broadcast Solutions President, Belden 2016 Belden Inc. belden.com @BeldenInc 4
Belden: Leading The Way to an Interconnected World Delivering highly-engineered signal transmission solutions for mission-critical applications in a diverse set of global markets Business Platforms Applications Vertical Markets Data Industrial Sound Enterprise Video Broadcast 2016 Belden Inc. belden.com @BeldenInc 5
Financial Overview* Business Overview Broadcast Solutions Overview Leading provider of production, distribution and connectivity systems for television broadcast, cable satellite and IPTV industries From Creation Key Markets Outside Broadcast Sport Venues Broadcast Studios To Consumption Multi-service operators 2015 Revenue Geographic $740M Revenue 50% APAC 15% Latin America 4% Europe 14% Canada 3% MEA 3% 50% US 61% *Reflects the transfer of A/V cable to the Enterprise platform as 2016 Belden Inc. belden.com @BeldenInc discussed during our 2016 Q1 earnings call, available at investor.belden.com 6
Understanding our customers needs Stability Scale Support Belden s investment in the Broadcast industry means stability for our customers Innovative end-toend solutions to keep customers Future-Ready Global customer service and support Capacity for investment, holistic product solutions and exceptional service provide the framework for customer loyalty and leading performance 2016 Belden Inc. belden.com @BeldenInc 7
AIMS for the webcast Why is Broadcast Top-of-Mind? Changing consumption Competitive pressure on our customers Changing business dynamics Broadcast Technology Broadband Connectivity Webcast Agenda Overview Market trends How is Belden supporting customers? Q&A to help our investment community understand our perspective of both the opportunities and challenges in the broadcast industry. 2016 Belden Inc. belden.com @BeldenInc 8
Customers Product* Geographic* Introduction to Grass Valley Worked with broadcast and media customers for over 55 years around the world MEA 6% APAC 24% Technology leadership Europe 23% 21 EMMY Awards Sales, service & engineering centers across the globe LATAM 3% Canada 3% US 41% Services & Support 23% Editing Systems 6% Monitoring & Control 10% Production Switchers 8% Digital Media & Workflow 18% Routers & Interfaces 20% Cameras 15% Grass Valley has a long history of providing high quality, innovative solutions to broadcasters and content creators across the world 2016 Belden Inc. belden.com @BeldenInc * Based on 2015 Revenues 9
Grass Valley has the largest breadth of products Cameras Captures the Action Multiviewer/Monitoring Shows Camera Angles Signal Processing Keeps Audio/Video in Sync Replay Stores Video for Slow Motion Replay Production Switcher Produces the Show Playout Turns Content into a Show...and touches each phase of the broadcast to ensure interoperability and quality of service 2016 Belden Inc. belden.com @BeldenInc 10
Grass Valley has the largest breadth of products Cameras Captures the Action Multiviewer/Monitoring Shows Camera Angles Signal Processing Keeps Audio/Video in Sync #2 GV Market Share #2 GV Market Share #2 GV Market Share #2 GV Market Share Replay Stores Video for Slow Motion Replay #1 GV Market Share #1 GV Market Share Production Switcher Produces the Show Playout Turns Content into a Show...and a strong position in each product category 2016 Belden Inc. belden.com @BeldenInc 11
What is driving the change in consumption? Rapid adoption expected of 4K / UHD compatible TV sets across the globe 2015 preferred device for consumption 2 Connected 4K / UHD TV Sets (Million) 1 TV screen, and desktop Smartphone, tablet, laptop 600 500 400 300 200 100 0 38 70% CAGR 544 2015 2016 2017 2018 2019 2020 IP video traffic will be 82% of all traffic by 2020 1 Increased demand for higher quality, multi-platform broadcasts 1.Cisco VNI Global IP Traffic Forecast, 2015 2016 Belden Inc. belden.com @BeldenInc 12 2 Ericsson ConsumerLab, TV and Media, 2015
Bandwidth Mb/s And why is IP the solution? Broadcaster s Challenges IP bandwidth outpaces SDI 1 Current infrastructure unable to flexibly support 4K or future formats Consumer and competitive pressures to improve productivity 100000 IP 10000 1000 100 SDI Increasing complex delivery model 10 1 1973 1980 1990 1995 1998 2004 2015 2019 How does IP help? Leverage IT Pace of Innovation Multiple streams over one cable Format agnostic facility (SD, HD, 4K or OTT) Ability to integrate video from different facilities 2016 Belden Inc. belden.com @BeldenInc 1. Grass Valley, The Path to IP: The right approach for your IP migration 13
And why is IP the solution? Broadcaster s Challenges IP allows broadcasters to rethink set-up and structure. Current infrastructure unable to flexibly support 4K or future formats Consumer and competitive pressures to improve productivity Increasing complex delivery model How does IP help? Leverage IT Pace of Innovation Multiple streams over one cable Format agnostic facility (SD, HD, 4K or OTT) Ability to integrate video from different facilities 2016 Belden Inc. belden.com @BeldenInc 14
And why is IP the solution? Broadcaster s Challenges Complexity of the infrastructure and delivery model. Current infrastructure unable to flexibly support 4K or future formats Consumer and competitive pressure to improve productivity Increasingly complex delivery model is driving the need for automation How does IP help? Leverage IT Pace of Innovation Multiple streams over one cable Format agnostic facility (SD, HD, 4K or OTT) Ability to integrate video from different facilities IP infrastructure is more adaptable, future-proof and cost effective 2016 Belden Inc. belden.com @BeldenInc 15
Where are we today in the IP transition? History of IP adoption 100% 80% 60% 40% 20% 0% 1985 1990 1995 2000 2005 2010 2015 2020 Enterprise Industrial Broadcast Today 130 +33% #2 Deployment to-date Partial deployments of IP across the industry Broadcasters started using IP in live production 1 Most important industry trend 2 Innovators Early Adopters Early Majority Late Majority Laggards Willing to take a risk on a good idea Waits for a few good anecdotes Needs solid anecdotal evidence Waits for at least three good case studies for similar companies Wants solid proof that something works 1. Nevion & FutureSource Consulting, Broadcasters set to complete move to IP by 2025 2016 Belden Inc. belden.com @BeldenInc 16 2.Survey of +10,000 Broadcasters by Devoncroft partners
What is the expected timeframe for IP adoption? Initial IP facility Full IP facility Gateway Cameras Cameras Replay & Storage Generic IP Switching Replay & Storage Generic IP Switching Production Switcher Production Switcher Signal Processing Signal Processing Playout Monitoring Playout Monitoring Specialized IP Switching SDI Routing (Real Time Video) IP Fabric (Files & Control) IP Fabric (Files & Control) Full adoption expected by 2025 Each phase of the broadcast will transition to IP 2016 Belden Inc. belden.com @BeldenInc 17
How is Grass Valley helping the transition? An independent trade association for members to promote open protocols and standards to ensure the transition to IP in the broadcast business. Grass Valley is a founding member of AIMS 2016 Belden Inc. belden.com @BeldenInc 18
How is Grass Valley best positioned for this change? We spoke with other vendors, but Grass Valley s product roadmap offered the most complete IP product solution to meet our needs and provide the production capabilities to scale in the future. How does GV help? Expertise & Innovation Peer A Grass Valley Open standards Peer B Multiple vendor systems Third Party Control Flexibility & Agility COTS integration Vertically Accurate /deterministic Future Ready Solutions Proprietary Quiet Audio* Balanced Generic Grass Valley combines its expertise in complex live production workflows with Belden s IP migrations to deliver the ideal path to IP 2016 Belden Inc. belden.com @BeldenInc * Using Grass Valley s NODE product 19
How is Grass Valley best positioned for this change? Broadcaster s Challenges Capturing lost revenue... VOD processing time results in a lost revenue opportunity Increased OpEx supporting VOD Broadcasters have to become more productive and reducing increased costs How does Grass Valley help? VOD available instantly Eliminate duplicated workflows Protect from increased vulnerability 2016 Belden Inc. belden.com @BeldenInc 20
How is Grass Valley best positioned for this change? Broadcaster s Challenges VOD processing time results in a lost revenue opportunity Essential productivity creates network vulnerability Increased OpEx supporting VOD Broadcasters have to become more productive How does Grass Valley help? VOD available instantly Eliminate duplicated workflows Protect from increased vulnerability New product helps customers capture revenue opportunities, eliminate OpEx challenges and secure the studio 2016 Belden Inc. belden.com @BeldenInc 1. Grass Valley, The Path to IP: The right approach for your IP migration 21
Grass Valley solutions align with industry imperatives Industry imperatives Create More Content, Air It Faster Grass Valley strengths Innovative Infrastructure Improve Content Production Quality Glass-to-Glass IP Reduce OpEx Automated Processes Future Ready Intensive R&D Innovative, end-to-end broadcast solutions enables customers to improve quality, reduce costs and be future-ready 2016 Belden Inc. belden.com @BeldenInc 22
Customers Product Geographic Introduction to PPC Global leading supplier of broadband connectivity solutions 5 state-of-the-art global manufacturing facilities Recognized as the #1 innovator by The Patent Board TM 1 Canada 3% APAC 6% LATAM 6% Europe 4% US 81% Revenue growth in every year since Belden ownership Entry Amplifiers 7% Traps / Filters 8% Other 8% Drop Connectors / Jumpers 48% Hardline Connectors 13% Coaxial Cable 16% High-Quality, innovative and reliable products 2016 Belden Inc. belden.com @BeldenInc 1) 2014 Industrial Components & Fixtures Industry 23
PPC has the largest breadth of products in the industry Design characteristics Headend Connectors Headend Cable Universal Closure Fiber Duct Hardline Connectors Fiber Drop Cable Drop Coax Cable Fiber Cable Coax Cable Drop Connectors Installer Friendly Products Universal Closure OpEx savings Entry Amplifier Drop Connectors Headend Cable Headend Connectors Hardline Connectors Fiber Duct Fiber Cable Universal Closure Entry Amplifier Coax Cable Growing from a connector business to a full-solutions provider 2016 Belden Inc. belden.com @BeldenInc 24
Revenue CAGR 2013-2015 What is PPC s position in the market? Continued innovation Largest breadth of products 64% revenues from patent protected products 22% Vitality in 2015 B A Best-in-class innovation 3 2 1 Product Breadth (Rank #1 - #3) A market leader with best-in-class innovation and growth 2016 Belden Inc. belden.com @BeldenInc 25
What has been driving the demand for bandwidth? Number of U.S broadband subscriptions (millions) 1 Percentage of Bandwidth Consumed by Video 2 Average U.S fixed broadband speeds 1 81.36 84.35 87.34 90.46 58% 61% 64% 70% 22 Mbps 26 Mbps 2012 2013 2014 2015 2012 2013 2014 2015 2014 2015 Cord-cutters generate 2x the amount of internet traffic 1 14% Increase in video crossing the internet each month from 2014 1 End-User Demand for High Quality Content on Any Device 1. Cisco, VNI June 2016 2016 Belden Inc. belden.com @BeldenInc 2. Sandvine Global Internet Phenomena Reports 26
Exabytes per month What are expectations for demand? Consumption changes will drive increased U.S. bandwidth requirements 1 4K 70% CAGR for 4K / UHD TV sets globally for 2015 2020 1 80 70 60 4K / UHD Traffic Other Video Traffic Other IP Traffic Global OTT market value expected to be $62B, a 17.2% CAGR 2015-2020 2 50 40 30 US video traffic will be 82% of all internet traffic by 2020 1 20 10-2015 2016 2017 2018 2019 2020 Continued consumption changes will drive increases in bandwidth requirements 1. Cisco, VNI June 2016 2016 Belden Inc. belden.com @BeldenInc 27 2. MarketsandMarkets, Press Release 2016
And how are multi-service operators reacting? Revenue opportunity U.S. average MSO revenue per high speed data user 1 8.5% $55.31 is increasing competition Comcast to introduce world s first DOCSIS 3.1 powered gigabit internet service 2 and driving investment Google s fiber begins 1 Gbps service rollout in Huntsville, Alabama 3 U.S average fixed broadband speeds 4 2x faster 52 Mbps $50.98 26 Mbps 26 Mbps 2014 2015 2015 2016 2017 2018 2019 2020 Customer demand and increased competition will drive new installations 1.SNL Kagan 2..Comcast Press Release, Feb 2 2016 2016 Belden Inc. belden.com @BeldenInc 3. Fierce Telecom, May 9 2016 4. Cisco VNI Global IP Traffic Forecast, 2015 28
Subscribers (million) How is PPC best positioned for this demand? 50 45 40 35 30 25 20 U.S. FTTH Subscribers 62.3% CAGR 24 33 43 Challenges Skills Gap & High Labor Costs for Installation Contractor CapEx 15 10 5 16 10 6 1 4 2 2015 2016 2017 2018 2019 2020 2021 2022 2023 Customer Consolidation How does M2FX help? Quick Installation Easy-to- Install Lower Equipment Requirements System Solution for Customers M2FX complements PPC solutions to support MSOs efficiently manage increased bandwidth consumption 2016 Belden Inc. belden.com @BeldenInc 29
How is PPC best positioned for this demand? Customer Challenges Financial and brand implications with broadband failure Patented Product Solutions Undiminished quality of service Complications launching new technologies and services Enables higher performance of new technologies Signal interference impacting data speeds New industry standard for performance New technology reduces OpEx and increases the performance of customers networks 2016 Belden Inc. belden.com @BeldenInc 30
AIMS for the Webcast Why is Broadcast Top-of-Mind? Changing Consumption Broadcast Technology Webcast Agenda Overview Competitive Pressure on our Customers Changing Business Dynamics Broadband Connectivity Market Trends How is Belden supporting customers? Q&A to help our investment community understand our perspective of the opportunities and challenges in the Broadcast industry 2016 Belden Inc. belden.com @BeldenInc 31